##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 Commission File Number 1-16499
 SUNRISE SENIOR LIVING, INC.
  Delaware
    
    54-1746596(State or other jurisdiction
incorporation or organization)
    
    (I.R.S. Employer 5
Identification No.)
 7902 Westpark Drive
McLean, VA
    
    22102(Address of principal
executive offices)
    
    (Zip Code)
   Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon stock, $.01 par value per share
    
    New York Stock Exchange
  þ o
 o þ
 þ o
 o
  þ o o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    12Item 1B.
    
    Unresolved Staff Comments
    
    
    21Item 2.
    
    Properties
    
    
    21Item 3.
    
    Legal Proceedings
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    23Item 6.
    
    Selected Financial Data
    
    
    24Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    45Item 8.
    
    Financial Statements and Supplementary Data
    
    
    46Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    80Item 9A.
    
    Controls and Procedures
    
    
    80Item 9B.
    
    Other Information
    
    
    80PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    80Item 11.
    
    Executive Compensation
    
    
    81Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    81Item 13.
    
    Certain Relationships and Related Transactions
    
    
    81Item 14.
    
    Principal Accountant Fees and Services
    
    
    81PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    81SIGNATURES
 2




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This Form 10-K contains forward-looking statements that involve risks and uncertainties.
Although we believe the expectations reflected in such forward-looking statements are based on
reasonable assumptions, there can be no assurance that our expectations will be realized. Our
actual results could differ materially from those anticipated in these forward-looking statements
as a result of various factors, including, but not limited to, our ability to successfully
integrate Greystone Communities, Inc. and The Fountains into our operations, development and
construction risks, acquisition risks, licensing risks, business conditions, competition, changes
in interest rates, our ability to manage our expenses and our growth, market factors that could
affect the value of our communities, the risks of downturns in general economic conditions,
satisfaction of closing conditions and availability of financing for development and acquisitions.
Some of these factors are discussed elsewhere herein. We assume no obligation to update or
supplement forward-looking statements that become untrue because of subsequent events. Unless the
context suggests otherwise, references herein to Sunrise, the Company, we, us and our
mean Sunrise Senior Living, Inc. and our consolidated subsidiaries.
 
 PART I
 
 Item 1. Business
 Overview
     2005 Developments
 Acquisitions
  3




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Termination of Management Contracts
   Redemption of Convertible Notes
  The Senior Living Industry
  
    
    Independent livingis 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 livingmeets 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 nursingmeets 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).
   Senior Living Services
  4




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Assisted Living
   Basic Assisted Living
  
    
    assistance with activities of daily living, such as eating, bathing, dressing, personal hygiene, and grooming;
    
    three meals per day served in a common dining room;
    
    coordination of special diets;
    
    emergency call systems in each unit;
    
    transportation to stores and community services;
    
    assistance with coordination of physician care, physical therapy and other medical services;
    
    health promotion and related programs;
    
    housekeeping services; and
    
    social and recreational activities.
 Assisted Living Extended Levels of Care
  Reminiscence Care
  Medication Management
  5




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Independent Living, Skilled Nursing and Other Services
   Managed Communities
  Properties
  Operating Communities
 Number of Communities
    
    Total Resident CapacityUnconsolidated
    
    
    
    
    
    
    
    
    
    UnconsolidatedLocation
    
    Consolidated
    
    Ventures
    
    Managed
    
    Consolidated
    
    Ventures
    
    ManagedAlabama
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    194Arizona
    
    
    2
    
    
    
    1
    
    
    
    3
    
    
    
    257
    
    
    
    390
    
    
    
    971Arkansas
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    163California
    
    
    5
    
    
    
    29
    
    
    
    18
    
    
    
    715
    
    
    
    2,739
    
    
    
    2,543Colorado
    
    
    1
    
    
    
    7
    
    
    
    3
    
    
    
    74
    
    
    
    623
    
    
    
    479Connecticut
    
    
    2
    
    
    
    1
    
    
    
    3
    
    
    
    168
    
    
    
    102
    
    
    
    518District of Columbia
    
    
    
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    343
    
    
    
    136Delaware
    
    
    
    
    
    
    1
    
    
    
    4
    
    
    
    
    
    
    
    82
    
    
    
    677Florida
    
    
    6
    
    
    
    2
    
    
    
    8
    
    
    
    1,687
    
    
    
    795
    
    
    
    2,281Georgia
    
    
    3
    
    
    
    5
    
    
    
    13
    
    
    
    98
    
    
    
    630
    
    
    
    1,084Hawaii
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    392Illinois
    
    
    1
    
    
    
    14
    
    
    
    10
    
    
    
    303
    
    
    
    1,508
    
    
    
    1,032Indiana
    
    
    4
    
    
    
    
    
    
    
    3
    
    
    
    279
    
    
    
    
    
    
    
    624Kansas
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    164Kentucky
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    335Louisiana
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    161
    
    
    
    98Maryland
    
    
    3
    
    
    
    2
    
    
    
    11
    
    
    
    513
    
    
    
    233
    
    
    
    1,277Maine
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    185
    
    
    
    Massachusetts
    
    
    
    
    
    
    8
    
    
    
    7
    
    
    
    
    
    
    
    603
    
    
    
    575Michigan
    
    
    1
    
    
    
    8
    
    
    
    3
    
    
    
    77
    
    
    
    1,045
    
    
    
    300Minnesota
    
    
    
    
    
    
    4
    
    
    
    12
    
    
    
    
    
    
    
    364
    
    
    
    590Missouri
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    77
    
    
    
    296
    
    
    
    179Nebraska
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    166Nevada
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    94
 6




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##### 



Number of Communities
    
    Total Resident CapacityUnconsolidated
    
    
    
    
    
    
    
    
    
    UnconsolidatedLocation
    
    Consolidated
    
    Ventures
    
    Managed
    
    Consolidated
    
    Ventures
    
    ManagedNew Jersey
    
    
    1
    
    
    
    15
    
    
    
    13
    
    
    
    124
    
    
    
    1,255
    
    
    
    1,977New Mexico
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    New York
    
    
    
    
    
    
    14
    
    
    
    3
    
    
    
    
    
    
    
    1,399
    
    
    
    473North Carolina
    
    
    2
    
    
    
    1
    
    
    
    7
    
    
    
    166
    
    
    
    207
    
    
    
    750North Dakota
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    94
    
    
    
    
    
    
    
    Ohio
    
    
    13
    
    
    
    4
    
    
    
    6
    
    
    
    840
    
    
    
    229
    
    
    
    822Oklahoma
    
    
    
    
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    291
    
    
    
    240Pennsylvania
    
    
    4
    
    
    
    14
    
    
    
    1
    
    
    
    765
    
    
    
    1,135
    
    
    
    188South Carolina
    
    
    1
    
    
    
    
    
    
    
    7
    
    
    
    39
    
    
    
    
    
    
    
    741Tennessee
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    115Texas
    
    
    1
    
    
    
    
    
    
    
    16
    
    
    
    145
    
    
    
    
    
    
    
    3,274Utah
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    168Virginia
    
    
    6
    
    
    
    7
    
    
    
    14
    
    
    
    1,462
    
    
    
    765
    
    
    
    1,115Washington
    
    
    
    
    
    
    2
    
    
    
    5
    
    
    
    
    
    
    
    221
    
    
    
    407West Virginia
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    167United Kingdom
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    511
    
    
    
    Germany
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    198
    
    
    
    Canada
    
    
    
    
    
    
    2
    
    
    
    9
    
    
    
    
    
    
    
    175
    
    
    
    899Total
    
    
    61
    
    
    
    156
    
    
    
    198
    
    
    
    7,980
    
    
    
    16,485
    
    
    
    26,208
 Communities Under Construction
 Number of Communities
    
    Total Resident CapacityUnconsolidated
    
    
    
    
    
    
    
    
    
    UnconsolidatedLocation
    
    Consolidated
    
    Ventures
    
    Managed
    
    Consolidated
    
    Ventures
    
    ManagedArizona
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    95
    
    
    
    75
    
    
    
    California
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    77
    
    
    
    198
    
    
    
    Florida
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    60Illinois
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    751Kansas
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    Maryland
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    407
    
    
    
    Massachusetts
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    219Michigan
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    91
    
    
    
    129
    
    
    
    Nevada
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    212New Jersey
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    91
    
    
    
    85New York
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    94
    
    
    
    
    
    
    
    246Oklahoma
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    174Pennsylvania
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    Texas
    
    
    2
    
    
    
    4
    
    
    
    1
    
    
    
    303
    
    
    
    331
    
    
    
    265Utah
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    Virginia
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    72Wisconsin
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    192United Kingdom
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    930
    
    
    
    Germany
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    630
    
    
    
    Canada
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    
    
    
    
    Total
    
    
    8
    
    
    
    31
    
    
    
    11
    
    
    
    1,011
    
    
    
    3,151
    
    
    
    2,276
 New Community Development
  
    
    market area demographics (population, income, age, etc.);
    
    market area demand and competitive supply;
    
    target site characteristics (visibility, etc.);
    
    probability of obtaining zoning approvals; and
    
    the ability to cluster our communities to optimize management resources.
 Development
  7




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
    
    site selection and contract signing;
    
    zoning, site plan approval and building permits;
    
    construction; and
    
    community opening.
     Community Acquisitions
  
    
    location, construction quality, condition and design of the community;
    
    current and projected community cash flow;
    
    the ability to increase revenue, occupancy and cash flow by providing a full range of senior living services;
    
    costs of community repositioning, including any renovations; and
    
    the extent to which the acquisition will complement our development plans.
 8




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Company Operations
 Operating Structure
   Community Staffing
    Staff Education and Training
   9




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Quality Improvement Processes
  Family and Resident Feedback.
 Regular Community Inspections.
 Third-Party Reviews.
 Sales and Marketing
    Competition
  10




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Government Regulation
  
    
    personnel education, training, and records;
    
    administration and supervision of medication;
    
    the provision of limited nursing services;
    
    admission and discharge criteria;
    
    documentation and reporting requirements;
    
    staffing requirements;
    
    monitoring of resident wellness;
    
    physical plant specifications;
    
    furnishing of resident units;
    
    food and housekeeping services;
    
    emergency evacuation plans; and
    
    resident rights and responsibilities.
      11




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Employees
  Website
  
 Item 1A. Risk Factors
  Risks Relating to Our Business
 We may be unable to manage effectively our growth and expansion, which may harm our financial
condition and operating results
  12




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The operations of Sunrise and other entities that we have or may acquire may not be integrated
successfully, and the intended benefits of such transactions may not be realized, each of which
could have a negative impact on our revenues, expenses and operating results.
  
    
    the acquired portfolios may not perform as well as we anticipate due to various factors,
including disruptions caused by the integration of operations with us and changes in
macro-economic conditions;
    
    the diversion of management attention to the integration of the operations of the
acquisitions could have a material adverse effect on the continued operation and expansion
of our existing business;
    
    we may not effectively integrate the operations of Greystone and The Fountains;
    
    we may experience difficulties and incur greater than anticipated expenses related to
the assimilation and retention of Greystone and The Fountains employees; and
    
    following the transaction, we may not achieve expected cost savings and operating
efficiencies in connection with the acquisition of Greystone and The Fountains, such as the
elimination of redundant administrative costs and community management costs.
  We are a promoter of Sunrise REIT under Canadian securities laws and, as such, are jointly and
severally liable with Sunrise REIT for any misrepresentation in Sunrise REITs prospectus.
  Liability claims against us in excess of insurance limits could adversely affect our financial
condition and results of operations.
    13




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We may not be successful in identifying suitable development projects or acquisitions that meet our
criteria, which may impede our growth.
  Any delays we experience in developing new communities could impede our growth and adversely affect
our revenues and results of operations.
   
    
    difficulties or delays experienced in obtaining zoning, land use, building, occupancy,
licensing and other required governmental permits for the construction of new communities;
    
    failure to complete construction of new communities on budget and on schedule;
    
    failure of third-party contractors and subcontractors to perform under their contracts;
    
    shortages of labor or materials that could delay projects or make them more expensive;
    
    adverse weather conditions or acts of God that could delay construction projects;
    
    difficulties in developing new types of senior living products with which we have less experience;
    
    difficulties in finding suitable sites for future development activities at acceptable prices;
    
    increased costs resulting from changes in general economic conditions or increases in the costs of materials; and
    
    increased costs as a result of addressing changes in laws and regulations or how existing laws and regulations are applied.
  14




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Our failure to attract partners for developing senior living communities in the future could
adversely affect our revenues and results of operations, and harm our ability to finance the
construction of new communities.
  Our current and future investments in ventures could be adversely affected by our lack of sole
decision-making authority, our reliance on venture partners financial condition, any disputes that
may arise between us and our venture partners and our exposure to potential losses from the actions
of our venture partners.
  
    
    we may share decision-making authority with our venture partners regarding major
decisions affecting the ownership or operation of the venture and the community, such as
the sale of the community or the making of additional capital contributions for the benefit
of the community, which may prevent us from taking actions that are opposed by our venture
partners;
    
    prior consent of our venture partners may be required for a sale or transfer to a third
party of our interests in the venture, which restricts our ability to dispose of our
interest in the venture;
    
    our venture partners might become bankrupt or fail to fund their share of required
capital contributions, which may delay construction or development of a community or
increase our financial commitment to the venture;
    
    our venture partners may have business interests or goals with respect to the community
that conflict with our business interests and goals, which could increase the likelihood of
disputes regarding the ownership, management or disposition of the community;
    
    disputes may develop with our venture partners over decisions affecting the community or
the venture, which may result in litigation or arbitration that would increase our expenses
and distract our officers and/or directors from focusing their time and effort on our
business, and possibly disrupt the day-to-day operations of the community such as delaying
the implementation of important decisions until the conflict or dispute is resolved; and
    
    we may suffer losses as a result of the actions of our venture partners with respect to
our venture investments.
 Our failure to secure additional financing to fund our development and acquisition activities could
slow our growth and could adversely affect our revenues and results of operations.
  15




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##### 



Our failure to generate sufficient cash flow to cover required interest, principal and operating
lease payments could result in defaults of the related debt or operating leases.
  Our failure to comply with financial covenants contained in debt instruments could result in the
acceleration of the related debt and may restrict our operating and acquisition activity.
  
    
    require us to meet certain financial tests. For example, our $250 million corporate
credit facility requires us to not to exceed certain leverage ratios, to maintain certain
fixed charges coverage ratios and have a consolidated net worth of at least $450 million as
adjusted each quarter and to meet other financial ratios;
    
    require consent for a change in control; and
    
    restrict our ability and our subsidiaries ability to borrow additional funds, dispose
of all or substantially all assets, or engage in mergers or other business combinations in
which we are not the surviving entity without lender consent.
  Our results of operations could be adversely affected if we are required to perform under various
financial guarantees or support arrangements that we have entered into as part of our operating
strategy.
  16




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##### 



Interest rate increases could adversely affect our earnings because a portion of our total debt is
floating rate debt.
  We may be adversely affected by fluctuations in currency exchange rates.
  Early termination or non-renewal of our management service agreements could cause a loss in
revenues.
  Due to the dependency of our revenues on private pay sources, events which adversely affect the
ability of seniors to afford our daily resident fees could cause our resident fee revenues and
results of operations to decline.
  Termination of resident agreements could adversely affect our revenues and earnings.
  Departure of our key officers could harm our business.
  17




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##### 



We are subject to risks associated with complying with Section 404 of the Sarbanes-Oxley Act of
2002.
  The discovery of environmental problems on any of the communities we own or operate could result in
substantial costs to us.
   Risks Relating to the Senior Living Industry
 Competition in our industry is high and may increase, which could impede our growth and have a
material adverse effect on our revenues and earnings.
  Our success depends on attracting and retaining skilled personnel, and increased competition for or
a shortage of skilled personnel could increase our staffing and labor costs, which we may not be
able to offset by increasing the rates we charge to our residents.
  18




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##### 



The need to comply with government regulation of senior living communities may increase our costs
of doing business and increase our operating costs.
  
    
    personnel education, training, and records;
    
    administration and supervision of medication;
    
    the provision of limited nursing services;
    
    admission and discharge criteria;
    
    documentation and reporting requirements;
    
    staffing requirements;
    
    monitoring of resident wellness;
    
    physical plant specifications;
    
    furnishing of resident units;
    
    food and housekeeping services;
    
    emergency evacuation plans, and
    
    resident rights and responsibilities.
     19




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##### 



Anti-takeover provisions in our governing documents and under Delaware law could make it more
difficult to effect a change in control.
  
    
    Board authority to issue preferred stock without stockholder approval.Our Board of
Directors is authorized to issue preferred stock having a preference as to dividends or
liquidation over the common stock without stockholder approval. The issuance of preferred
stock could adversely affect the voting power of the holders of our common stock and could
be used to discourage, delay or prevent a change in control of Sunrise;
    
    Staggered board and board size fixed within range.Our Board of Directors is divided
into three classes. The total number of directors is fixed by a two-thirds vote of the
board within a range of a minimum of two and a maximum of 11. These provisions may make it
more difficult for a third party to gain control of our Board of Directors. At least two
annual meetings of stockholders, instead of one, would generally be required to effect a
change in a majority of our Board of Directors;
    
    Filling of Board vacancies; removal.Any vacancy occurring in the Board of Directors,
including any vacancy created by an increase in the number of directors, shall be filled
for the unexpired term by the vote of a majority of the directors then in office, and any
director so chosen shall hold office for the remainder of the full term of the class in
which the new directorship was created or the vacancy occurred. Directors may only be
removed with cause by the affirmative vote of the holders of at least a majority of the
outstanding shares of our capital stock then entitled to vote at an election of directors;
    
    Other constituency provision.Our Board of Directors is required under our certificate
of incorporation to consider other constituencies, such as employees, residents, their
families and the communities in which we and our subsidiaries operate, in evaluating any
proposal to acquire us. This provision may allow our Board of Directors to reject an
acquisition proposal even though the proposal was in the best interests of our
stockholders;
    
    Call of special meetings.A special meeting of our stockholders may be called only by
the chairman of the board, the president, by a majority of the directors or by stockholders
possessing at least 25% of the voting power of the issued and outstanding voting stock
entitled to vote generally in the election of directors. This provision limits the ability
of stockholders to call special meetings;
    
    Stockholder action instead of meeting by unanimous written consent.Any action required
or permitted to be taken by the stockholders must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in writing by such
holders, unless such consent is unanimous. This provision limits the ability of
stockholders to take action by written consent in lieu of a meeting;
 20




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##### 




    
    Supermajority vote of stockholders or the directors required for bylaw amendments.A
two-thirds vote of the outstanding shares of common stock is required for stockholders to
amend the bylaws. Amendments to the bylaws by directors require approval by at least a
two-thirds vote of the directors. These provisions may make more difficult bylaw amendments
that stockholders may believe are desirable;
    
    Two-thirds stockholder vote required to approve some amendments to the certificate of
incorporation.A two-thirds vote of the outstanding shares of common stock is required for
approval of amendments to the foregoing provisions that are contained in our certificate of
incorporation. All amendments to the certificate of incorporation must first be proposed by
a two-thirds vote of directors. These supermajority vote requirements may make more
difficult amendments to these provisions of the certificate of incorporation that
stockholders may believe are desirable; and
    
    Advance notice bylaw.We have an advance notice bylaw provision requiring stockholders
intending to present nominations for directors or other business for consideration at a
meeting of stockholders to notify us no later than 60 days before the meeting or 15 days
after the date notice of the meeting is mailed or public notice of the meeting is given, if
less than 75 days notice of the date of the meeting is given or made to stockholders. This
provision limits the ability of stockholders to make nominations for directors or introduce
other proposals that are not timely received for consideration at a meeting.
  Our Board of Directors has adopted a stockholder rights plan that could discourage a third party
from making a proposal to acquire us.
  Our management has influence over matters requiring the approval of stockholders.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
  21




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##### 



Item 4. Submission of Matters to a Vote of Security Holders
  22




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##### 



PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
   Quarterly Market Price Range of Common Stock
 Quarter Ended
    
    High
    
    LowMarch 31, 2004
    
    $
    21.56
    
    
    $
    17.05June 30, 2004
    
    $
    19.73
    
    
    $
    15.00September 30, 2004
    
    $
    19.68
    
    
    $
    16.50December 31, 2004
    
    $
    23.25
    
    
    $
    17.54
 Quarter Ended
    
    High
    
    LowMarch 31, 2005
    
    $
    24.93
    
    
    $
    21.40June 30, 2005
    
    $
    27.58
    
    
    $
    23.15September 30, 2005
    
    $
    33.50
    
    
    $
    25.80December 31, 2005
    
    $
    37.47
    
    
    $
    30.37
 Issuer Purchases of Equity Securities
  23




---



##### 



Item 6. Selected Financial Data
  December 31,2005 (1)
    
    
    2004
    
    
    2003 (2)
    
    
    2002
    
    
    2001(dollars in thousands, except per share amounts)STATEMENT OF OPERATIONS DATA (3):Operating revenue (4)
    
    $
    1,819,479
    
    
    $
    1,446,471
    
    
    $
    1,096,260
    
    
    $
    421,639
    
    
    $
    366,065Net income (5)
    
    
    79,742
    
    
    
    50,687
    
    
    
    62,178
    
    
    
    54,661
    
    
    
    49,101Net income per common share (6):Basic
    
    
    1.92
    
    
    
    1.25
    
    
    
    1.46
    
    
    
    1.22
    
    
    
    1.13Diluted
    
    $
    1.67
    
    
    $
    1.12
    
    
    $
    1.32
    
    
    $
    1.12
    
    
    $
    1.04BALANCE SHEET DATA (3):Cash and cash equivalents
    
    $
    225,279
    
    
    $
    141,883
    
    
    $
    102,548
    
    
    $
    173,119
    
    
    $
    50,275Working capital
    
    
    74,863
    
    
    
    78,144
    
    
    
    48,678
    
    
    
    139,639
    
    
    
    38,803Total assets
    
    
    1,328,276
    
    
    
    1,105,756
    
    
    
    1,009,798
    
    
    
    1,116,151
    
    
    
    1,177,615Total debt
    
    
    202,789
    
    
    
    191,666
    
    
    
    198,122
    
    
    
    456,969
    
    
    
    630,756Stockholders equity
    
    $
    632,677
    
    
    $
    523,518
    
    
    $
    490,276
    
    
    $
    465,818
    
    
    $
    410,701OPERATING AND OTHER DATA (3):Ratio of earnings to fixed charges (7)
    
    
    5.11
    x
    
    
    3.30
    x
    
    
    2.97
    x
    
    
    2.50
    x
    
    
    2.49
    xNet cash provided by (used in) operating activities
    
    $
    198,750
    
    
    $
    86,225
    
    
    $
    (15,754
    )
    
    $
    23,085
    
    
    $
    59,584Net cash (used in) provided by investing activities
    
    
    (149,307
    )
    
    
    (5,637
    )
    
    
    291,630
    
    
    
    287,667
    
    
    
    (10,617
    )Net cash provided by (used in) financing activities
    
    
    33,953
    
    
    
    (41,253
    )
    
    
    (346,447
    )
    
    
    (187,908
    )
    
    
    (41,566
    )Cash dividends declared per common share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Communities (at end of period):Owned
    
    
    217
    
    
    
    185
    
    
    
    187
    
    
    
    181
    
    
    
    162Managed
    
    
    198
    
    
    
    195
    
    
    
    186
    
    
    
    28
    
    
    
    24415
    
    
    
    380
    
    
    
    373
    
    
    
    209
    
    
    
    186Resident capacity:Owned
    
    
    24,465
    
    
    
    18,872
    
    
    
    19,100
    
    
    
    14,278
    
    
    
    12,607Managed
    
    
    26,208
    
    
    
    24,237
    
    
    
    23,651
    
    
    
    2,322
    
    
    
    2,190Total
    
    
    50,673
    
    
    
    43,109
    
    
    
    42,751
    
    
    
    16,600
    
    
    
    14,797
 24




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##### 



(1)
    
    In May 2005, we acquired 100% of the equity interests in Greystone Communities, Inc.
(Greystone), a developer and manager of continuing care retirement communities (CCRCs).
The operating results of Greystone are included in our consolidated statement of income for
the period from May 10, 2005 to December 31, 2005.(2)
    
    In March 2003, we completed the acquisition of all of the outstanding stock of Marriott
International, Inc.s wholly-owned subsidiary, Marriott Senior Living Services, Inc. (MSLS),
which owns and operates senior independent full-service and assisted living communities.(3)
    
    Certain prior period amounts have been reclassified to conform to the 2005 presentation. See
Note 1 to the consolidated financial statements.(4)
    
    In November 2005, Five Star Quality Care, Inc. terminated 12 management contracts and we
received $81.5 million related to their buyout.(5)
    
    Net income in 2001 included a $2.3 million non-recurring item ($1.4 million after tax), which
consisted of a $9.0 million cash payment, net of expenses, received by us in connection with a
settlement of a lawsuit filed by Karrington prior to our acquisition of Karrington Health,
Inc. and $6.7 million of non-recurring charges associated with writing down project costs as a
result of our decision not to proceed with our planned development of five sites.(6)
    
    In October 2005, we completed a two-for-one stock split in the form of a 100% stock dividend.
As a result of the stock split, each stockholder of record at the close of business on
September 20, 2005 received one additional share of common stock for each share on that date.
All per share amounts have been adjusted to reflect the stock split for all periods presented.(7)
    
    Computed by dividing earnings by total fixed charges. Earnings consist of earnings from
continuing operations excluding unusual charges or extraordinary items, plus fixed charges,
reduced by the amount of unamortized interest capitalized. Fixed charges consist of interest
on debt, including amortization of debt issuance costs, and a portion of rent expense
estimated by management to be the interest component of such rentals. 25




---



##### 



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read together with the information contained in our
consolidated financial statements, including the related notes, and other financial information
appearing elsewhere herein. This managements discussion and analysis contains forward-looking
statements that involve risks and uncertainties. Although we believe the expectations reflected in
such forward looking statements are based on reasonable assumptions, there can be no assurance that
our expectations will be realized. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors, including, but not
limited to, our ability to successfully integrate Greystone Communities, Inc. and The Fountains
into our operations, development and construction risks, acquisition risks, licensing risks,
business conditions, competition, changes in interest rates, our ability to manage our expenses and
our growth, market factors that could affect the value of our communities, the risks of downturns
in economic conditions generally, satisfaction of closing conditions and availability of financing
for development and acquisitions. Some of these factors are discussed elsewhere herein. We assume
no obligation to update or supplement forward-looking statements that become untrue because of
subsequent events. Unless the context suggests otherwise, references herein to Sunrise, the
Company, we, us and our mean Sunrise Senior Living, Inc. and our consolidated subsidiaries.
 Overview
     Management of Communities
  26




---



##### 



Development of Communities
     Off-Balance Sheet Arrangements
   27




---



##### 



Consolidation of Variable
Interest Entities
 2005 Developments
 Acquisitions
 Greystone Communities, Inc.
   Net working capital deficit
    
    $
    (1.8
    )Property and equipment, net
    
    
    0.6Management and development contracts
    
    
    13.8Goodwill
    
    
    33.9Total purchase price (including transaction costs)
    
    $
    46.5
  The Fountains
   Net working capital deficit
    
    $
    (0.5
    )Property and equipment, net
    
    
    21.4Management contracts
    
    
    1.4Goodwill
    
    
    6.4Other assets
    
    
    0.3Total purchase price (including transaction costs)
    
    $
    29.0
 28




---



##### 



Termination of Management Contracts
   Redemption of Convertible Notes
  New Corporate Credit Facility
  Critical Accounting Policies
  Basis of Presentation
  Consolidation of Variable Interest Entities
  29




---



##### 



Long-Lived Assets
 Property and Equipment
    30




---



##### 



Intangible Assets and Goodwill
     Loss Reserves For Certain Self-Insured Programs
   Workers Compensation and General/Professional Liability Insurance
   31




---



##### 



Employee Health Benefits
  Revenue Recognition
 Operating Revenue
     Other Income  Operating Communities
  Other Income  Pre-opened Communities
  32




---



##### 



Results of Operations
  
    
    Management and professional services provided to operating and pre-opened communities
for unconsolidated ventures and other third-party owners;
    
    Community contract services reimbursement which represents the reimbursement of
community contract services expense; and
    
    Resident fees for the delivery of senior living services to our consolidated communities.
  
    
    Reimbursable community contract services from unconsolidated ventures and other third-party owners;
    
    Management and professional services  pre-opened communities for site selection,
zoning, community design, construction management and financing incurred for development communities;
    
    Community operating expense which includes labor, food, marketing and other direct
community expenses for our consolidated communities;
    
    Community lease for rental expenses at our consolidated communities;
    
    General and administrative expense related to headquarters and regional staff expenses and other administrative costs; and
    
    Depreciation and amortization.
  (dollars in thousands, except earnings per share)
    
    Year Ended December 31,
    
    % Change2005
    
    2004
    
    2003
    
    2005 vs. 2004
    
    2004 vs. 2003Operating revenue:Management and professional services  operating communities (1)
    
    $
    188,005
    
    
    $
    90,184
    
    
    $
    67,560
    
    
    
    108
    %
    
    
    33
    %Community contract services reimbursement
    
    
    1,235,608
    
    
    
    996,726
    
    
    
    676,359
    
    
    
    24
    %
    
    
    47
    %Management and professional servicespre-opened communities
    
    
    40,715
    
    
    
    16,775
    
    
    
    11,566
    
    
    
    143
    %
    
    
    45
    %Resident fees
    
    
    355,151
    
    
    
    342,786
    
    
    
    340,775
    
    
    
    4
    %
    
    
    1
    %Total operating revenue
    
    
    1,819,479
    
    
    
    1,446,471
    
    
    
    1,096,260
    
    
    
    26
    %
    
    
    32
    %Operating expenses:Reimbursable community contract services
    
    
    1,235,608
    
    
    
    996,726
    
    
    
    676,359
    
    
    
    24
    %
    
    
    47
    %Management
and professional servicespre-opened communities
    
    
    31,541
    
    
    
    14,638
    
    
    
    14,852
    
    
    
    115
    %
    
    
    (1
    )%Community operating
    
    
    272,616
    
    
    
    258,667
    
    
    
    254,203
    
    
    
    5
    %
    
    
    2
    %Community lease
    
    
    48,401
    
    
    
    47,085
    
    
    
    38,511
    
    
    
    3
    %
    
    
    22
    %General and administrative
    
    
    90,716
    
    
    
    72,362
    
    
    
    72,120
    
    
    
    25
    %
    
    
    
    %Depreciation and amortization (1)
    
    
    43,432
    
    
    
    21,378
    
    
    
    16,406
    
    
    
    103
    %
    
    
    30
    %Total operating expense
    
    
    1,722,314
    
    
    
    1,410,856
    
    
    
    1,072,451
    
    
    
    22
    %
    
    
    32
    %Other operating income:Operating communities
    
    
    411
    
    
    
    24,330
    
    
    
    75,579
    
    
    
    (98
    )%
    
    
    (68
    )%Pre-opened communities
    
    
    8,819
    
    
    
    10,354
    
    
    
    10,098
    
    
    
    (15
    )%
    
    
    3
    %Other non-operating income (expense):Interest income
    
    
    6,977
    
    
    
    8,533
    
    
    
    8,869
    
    
    
    (18
    )%
    
    
    (4
    )%Interest expense
    
    
    (3,518
    )
    
    
    (7,069
    )
    
    
    (25,440
    )
    
    
    (50
    )%
    
    
    (72
    )%Gain on sale of investment in Sunrise REIT debentures
    
    
    3,939
    
    
    
    
    
    
    
    
    
    
    
    
    %
    
    
    
    %Equity in earnings and return on investment in unconsolidated senior living communities
    
    
    13,235
    
    
    
    9,394
    
    
    
    5,343
    
    
    
    41
    %
    
    
    76
    %Minority interests
    
    
    (815
    )
    
    
    (701
    )
    
    
    (1,105
    )
    
    
    16
    %
    
    
    (37
    )%Provision for income taxes
    
    
    (46,471
    )
    
    
    (29,769
    )
    
    
    (34,975
    )
    
    
    56
    %
    
    
    (15
    )%Net income
    
    $
    79,742
    
    
    $
    50,687
    
    
    $
    62,178
    
    
    
    57
    %
    
    
    (18
    )%Basic net income per common share
    
    $
    1.92
    
    
    $
    1.25
    
    
    $
    1.46
    
    
    
    54
    %
    
    
    (14
    )%Diluted net income per common share
    
    $
    1.67
    
    
    $
    1.12
    
    
    $
    1.32
    
    
    
    49
    %
    
    
    (15
    )%Total communities:Consolidated
    
    
    61
    
    
    
    60
    
    
    
    66
    
    
    
    2
    %
    
    
    (9
    )%Unconsolidated
    
    
    156
    
    
    
    125
    
    
    
    120
    
    
    
    25
    %
    
    
    4
    %Managed
    
    
    198
    
    
    
    195
    
    
    
    187
    
    
    
    2
    %
    
    
    4
    %415
    
    
    
    380
    
    
    
    373
    
    
    
    9
    %
    
    
    2
    %Resident capacity
    
    
    50,673
    
    
    
    43,109
    
    
    
    42,751
    
    
    
    18
    %
    
    
    1
    %
 33




---



##### 



(1)
    
    In 2005, Five Star Quality Care, Inc. terminated 12 management contracts and we received
$81.5 million related to their buy-out and wrote-off the remaining $13.8 million unamortized
management contract intangible asset.      Operating Revenue
 Management and professional services  operating communities
   
    
    $80.2 million received from Five Star for the termination of 12 management contracts in
December 2005 and $1.5 million received for the termination of a management contract in the
third quarter of 2005;
 34




---



##### 




    
    $8.6 million from 31 management contracts obtained in 2005 from the Greystone and The Fountains acquisitions;
    
    $5.2 million from increased average daily rates and increases in occupancy associated with existing communities; and
    
    $2.2 million from 23 new communities managed in 2005 for unconsolidated ventures and
third parties (other than the Greystone and The Fountains acquisitions).
   
    
    $14.4 million from management contracts obtained in March 2003 from the MSLS acquisition
which contributed 12 months of revenue in 2004 but only 9 months of revenue in 2003;
    
    $5.7 million from increases in occupancy and average daily rates from existing
communities;
    
    $4.5 million from the sale of 36 wholly-owned communities to unconsolidated ventures and
other third-party owners in 2004 and 2003. Revenue from these communities was previously
included in Resident fees;
    
    a reduction of $2.5 million related to credit support payments; and
    
    $1.3 million from 13 new communities managed for unconsolidated ventures.
 Community contract services reimbursement
  Management and professional services  pre-opened communities
   
    
    $20.4 million from 17 development contracts obtained in 2005 from the Greystone acquisition;
    
    $8.1 million from an additional 13 communities under development in 2005 compared to 2004;
    
    a decrease of $2.5 million in 2005 for development completion guarantees for five development communities; and
    
    a decrease of $2.1 million from financing fees received in 2004 for securing debt on behalf of Sunrise REIT.
   
    
    $3.1 million from seven additional communities under development in 2004 compared to 2003; and
    
    $2.1 million from financing fees received in 2004 for securing debt on behalf of Sunrise REIT.
 Resident fees
   
    
    $20.9 million from existing consolidated communities resulting from increases in
occupancy, average daily rates and other ancillary services;
 35




---



##### 




    
    a decrease of $10.2 million from the sale of four wholly-owned communities to Sunrise
REIT in December 2004. Revenue from these communities is now included in Management and
professional services  operating communities;
    
    $6.3 million from the acquisition of two consolidated communities and other ancillary services in 2005 and 2004; and
    
    a decrease of $4.6 million from the closing of four consolidated communities in 2004.
   
    
    a decrease of $56.6 million from the sale of 33 consolidated senior living communities
in the third quarter of 2003 that are now managed for unconsolidated ventures or third
parties and included in Management and professional services  operating communities;
    
    $49.3 million from the acquisition of MSLS communities with operating leases;
    
    $8.2 million from the acquisition of other consolidated communities in the second quarter of 2003;
    
    $9.6 million from existing consolidated communities resulting from increases in occupancy and average daily rates;
    
    a decrease of $5.8 million from the closing of four communities in 2004; and
    
    a decrease of $2.7 million from the sale of ten consolidated communities in the first
quarter of 2003 that are now managed for unconsolidated ventures or third parties and
included in Management and professional services  operating communities.
 Operating Expenses
 Management and professional services  pre-opened communities
   
    
    $16.5 million from the post acquisition activity of Greystone;
    
    $3.6 million from European development. There were 28 European communities under
development in 2005 compared to 17 communities under development in 2004; and
    
    a decrease of $2.6 million related to Canadian development and the completion of one
Canadian community in 2005.
   
    
    $2.6 million in labor costs from continued growth in development projects. There were 76
communities under development in 2004 compared to 67 communities under development in 2003;
    
    $1.2 million from international development costs; and
    
    a corresponding increase of $3.1 million in capitalized costs associated with the increased development activity.
 Community operating
   
    
    $14.7 million from existing consolidated communities resulting primarily from increases in occupancy;
    
    a decrease of $6.9 million from the sale of four wholly-owned communities to Sunrise REIT in December 2004;
    
    $3.8 million from the acquisition of one consolidated community and other ancillary services from The Fountains;
    
    $3.4 million from costs associated with hurricanes in 2005;
 36




---



##### 




    
    a decrease of $3.6 million from the closure of four consolidated communities in 2004; and
    
    $2.4 million from the acquisition of a consolidated community in the second quarter of 2004.
   
    
    a decrease of $36.7 million from the sale of 33 consolidated communities in the third
quarter of 2003 and a decrease of $1.9 million from the sale of ten consolidated
communities in the first quarter of 2003. All of these communities are now managed for
unconsolidated ventures or third parties;
    
    $34.4 million from the acquisition of MSLS communities with operating leases;
    
    $7.4 million from existing consolidated communities resulting primarily from increases in occupancy;
    
    $6.3 million from the acquisition of other consolidated communities since December 31, 2003; and
    
    a decrease of $5.0 million from the closing of four communities in 2004.
 Community lease
     General and administrative
   
    
    $15.4 million in salaries, employee benefits (net of actual insurance program costs
reimbursed by benefit plans), travel and related costs associated with additional employees
to support the increased number of communities we manage;
    
    $4.8 million from software maintenance and enhancements;
    
    $3.3 million from transition expenses from the Fountains acquisition; and
    
    a decrease of $2.0 million related to the implementation of Sarbanes-Oxley internal control requirements in 2004.
   
    
    a decrease of $10.2 million from transition expenses for the MSLS acquisition in 2003;
    
    $7.3 million in salaries, employee benefits, travel and related costs associated with
additional employees to support the increased number of communities we manage; and
    
    $3.0 million related to the implementation of Sarbanes-Oxley internal control
requirements.
 37




---



##### 



Depreciation and amortization
   
    
    $14.5 million from the write-off of contract intangibles from 13 management contracts that were terminated in 2005;
    
    $5.9 million from the amortization of intangible assets associated with the Greystone acquisition; and
    
    $1.7 million from fixed assets and software placed in service.
   
    
    $2.9 million from the amortization of MSLS leasehold intangibles acquired in March 2003; and
    
    $1.7 million from fixed assets placed in service.
 Other Operating Income
   
    
    In 2005, we recognized $0.4 million related to the satisfaction of certain operating
contingencies for a community sold in 2002.
    
    In 2004, we recognized $24.3 million from the satisfaction of certain operating
contingencies for communities sold in 2003. Additionally, we sold four communities and
deferred approximately $1.8 million related to the satisfaction of certain operating
contingencies.
    
    In 2003, we sold 43 communities and recognized $42.9 million. In addition, we deferred
$24.6 million until certain contingencies were met. We recognized $36.0 million in 2003
related to the satisfaction of certain contingencies for communities sold in 2002.
  
    
    In two related transactions consummated in September and December 2005, we sold a
development community to an unconsolidated venture in which we have a combined 21.6%
ownership interest and recognized $3.8 million.
    
    In 2005, we sold six development communities to two unconsolidated ventures and
recognized $2.5 million.
    
    In 2005, we sold one development community to an unconsolidated venture with Sunrise
REIT in which we have a 20% ownership interest and recognized $0.5 million and a foreign
currency exchange gain of $1.9 million while holding the related
intercompany loans and advances.
    
    In 2004, we sold 13 development communities to six unconsolidated ventures and
recognized $6.9 million. We also sold three communities to third-party owners and
recognized $3.5 million.
    
    In 2003, we sold five development communities to three unconsolidated ventures and
recognized $3.3 million. We also sold five communities to third-party owners and
recognized $6.8 million.
 Other Non-operating Income
   38




---



##### 



Equity in Earnings and Return on Investment in Unconsolidated Senior Living Communities
    
    
    $8.8 million return on our investment pursuant to the terms of a venture agreement;
    
    a decrease of $4.9 million from our portion of start-up losses associated with two
international development ventures. In 2005, these two ventures opened four communities
which incurred losses in 2005;
    
    $2.9 million return on our investment whereby an unconsolidated venture sold two senior
living communities to Sunrise REIT;
    
    $3.0 million return on our investment whereby an unconsolidated venture sold its three
senior living communities and distributed the proceeds to its members. We recognized the
$3.0 million of cash received in excess of our investment.
    
    a decrease of $3.6 million from the write-down of our interest in Sunrise At Home; and
    
    a decrease of $2.5 million from the results of operations from other unconsolidated
ventures, including our portion of start-up losses from development ventures.
   Provision for Income Taxes
   Liquidity and Capital Resources
 Overview
  
    
    $68.5 million increase in cash and cash equivalents and short-term investments,
primarily from termination fees received in 2005;
    
    $13.6 million increase in the current portion of notes receivable  affiliates; and
 39




---



##### 




    
    $1.5 million net increase in prepaid expenses and other current assets and deferred income taxes;
  
    
    $71.0 million increase in accrued expenses related to increased accrued salaries and insurance reserves; and
    
    $16.1 million in current maturities of long-term debt, primarily from borrowings from Sunrise REIT.
   Long-Term Debt
     40




---



##### 



Debt Guarantees and Financing Obligations
   Number ofAmount
    
    
    CommunitiesDebt guarantees:Development ventures
    
    $
    31,925
    
    
    
    10Other ventures
    
    
    14,573
    
    
    
    746,498
    
    
    
    17Other obligations:Entrance fees
    
    
    69,197
    
    
    
    2Other
    
    
    1,201
    
    
    
    470,398
    
    
    
    6$
    116,896
    
    
    
    23
    Development Completion Guarantees
   Number ofCommunities
    
    Expected Payout (2006)Development completion guarantees
    
    
    36
    
    
    $
    2,000
 41




---



##### 



Operating Deficit Credit Facilities
    Number ofCommunities
    
    Expected Payout (2006)Operating communities
    
    
    20
    
    
    $
    5,796
 Other Commitments
  Number ofCommunities
    
    
    Expected PayoutCredit support agreements
    
    
    13
    
    
    $
    1,929Commitments to advance funds
    
    
    24
    
    
    
    1,588Liquidity support agreement
    
    
    16
    
    
    
    53
    
    
    $
    3,517
     42




---



##### 



Contractual Obligations
   Payment due by periodMoreLess than
    
    
    
    
    
    
    
    
    
    
    than 5Contractual Obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    yearsLong-term debt (1)
    
    $
    215,156
    
    
    $
    57,179
    
    
    $
    26,609
    
    
    $
    121,598
    
    
    $
    9,770Operating leases
    
    
    528,239
    
    
    
    56,812
    
    
    
    113,568
    
    
    
    114,038
    
    
    
    243,821Land purchase contracts
    
    
    124,666
    
    
    
    117,716
    
    
    
    6,950
    
    
    
    
    
    
    
    Land lease commitments
    
    
    153,104
    
    
    
    1,237
    
    
    
    2,635
    
    
    
    2,796
    
    
    
    146,436Total
    
    $
    1,021,165
    
    
    $
    232,944
    
    
    $
    149,762
    
    
    $
    238,432
    
    
    $
    400,027
 
 (1)
    
    Long-term debt includes maturities and interest obligations.  Cash Flows
     43




---



##### 



Stock Repurchase Programs
   Repurchase ofCommon StockShares
    
    

Average
Price2002
    
    
    1,162,800
    
    
    $
    12.812003
    
    
    7,918,800
    
    
    $
    13.422004
    
    
    3,497,336
    
    
    $
    18.072005
    
    
    347,980
    
    
    $
    25.03Total at December 31, 2005
    
    
    12,926,916
    
    
    $
    14.94
 Market Risk
   Maturity Date through December 31,
    
    
    
    
    
    Total Carrying
    
    Estimated Fair Market(dollars in thousands)
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    Value
    
    ValueAssetsNotes receivable:Fixed rate
    
    $
    13,842
    
    
    $
    1,972
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,853
    
    
    $
    17,667
    
    
    $
    17,667Average interest rate
    
    
    8.0
    %
    
    
    8.0
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.6
    %
    
    
    7.9
    %
    
    
    Variable rate
    
    $
    2,619
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,500
    
    
    
    
    
    
    $
    5,119
    
    
    $
    5,119Average interest rate
    
    
    7.3
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.1
    %
    
    
    
    
    
    
    7.2
    %
    
    
    Investments:Mill Run bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,710
    
    
    $
    5,710
    
    
    $
    5,710Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11.0
    %
    
    
    11.0
    %
    
    
    LiabilitiesDebt:Fixed rate
    
    $
    43,110
    
    
    $
    13,595
    
    
    $
    3,117
    
    
    $
    151
    
    
    $
    162
    
    
    $
    3,693
    
    
    $
    63,828
    
    
    $
    63,810Average interest rate
    
    
    8.9
    %
    
    
    6.9
    %
    
    
    8.4
    %
    
    
    6.9
    %
    
    
    6.9
    %
    
    
    6.9
    %
    
    
    8.8
    %
    
    
    Variable rate
    
    $
    8,258
    
    
    $
    200
    
    
    $
    6,766
    
    
    $
    200
    
    
    $
    300
    
    
    $
    3,300
    
    
    $
    19,024
    
    
    $
    19,024Average interest rate
    
    
    5.6
    %
    
    
    4.4
    %
    
    
    6.6
    %
    
    
    4.4
    %
    
    
    4.4
    %
    
    
    4.4
    %
    
    
    5.7
    %
    
    
    Convertible notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    119,937
    
    
    
    
    
    
    
    
    
    
    $
    119,937
    
    
    $
    225,481Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.3
    %
    
    
    
    
    
    
    
    
    
    
    5.3
    %
    
    
    
 Impact of Changes in Accounting Standards
 Share-Based Payment Accounting for Stock Issued to Employees Statement of Cash Flows
 44




---



##### 



Determining
Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or
Similar Entity When the Limited Partners Have Certain Rights
 Impact of Inflation
   
 Item 7A. Quantitative and Qualitative Disclosure About Market Risk
  45




---



##### 



Item 8. Financial Statements and Supplementary Data
  PageManagements Report on Internal Control Over Financial Reporting
    
    47Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
    
    48Report of Independent Registered Public Accounting Firm
    
    49Consolidated Balance Sheets
    
    50Consolidated Statements of Income
    
    51Consolidated Statements of Changes in Stockholders Equity
    
    52Consolidated Statements of Cash Flows
    
    53Notes to Consolidated Financial Statements
    
    54
 46




---



##### 



MANAGEMENTS REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
        
 
 47




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 
     .
   
 48




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 49




---



##### 



SUNRISE
SENIOR LIVING, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except per share amounts)
 December 31,2005
    
    
    2004ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    225,279
    
    
    $
    141,883Short-term investments
    
    
    
    
    
    
    14,900Accounts receivable, net
    
    
    59,384
    
    
    
    61,999Notes receivable  affiliates
    
    
    16,461
    
    
    
    2,875Deferred income taxes
    
    
    20,721
    
    
    
    25,412Due from unconsolidated senior living communities
    
    
    58,358
    
    
    
    55,823Prepaid expenses and other current assets
    
    
    36,569
    
    
    
    27,803Total current assets
    
    
    416,772
    
    
    
    330,695Property and equipment, net
    
    
    458,546
    
    
    
    369,632Notes receivable  affiliates
    
    
    6,325
    
    
    
    40,700Management contracts and leaseholds, net
    
    
    86,241
    
    
    
    83,336Goodwill
    
    
    165,028
    
    
    
    123,713Investments in unconsolidated senior living communities
    
    
    137,905
    
    
    
    93,016Investments
    
    
    7,589
    
    
    
    7,416Investment in Sunrise REIT Debentures
    
    
    
    
    
    
    20,757Other assets
    
    
    49,870
    
    
    
    36,491Total assets
    
    $
    1,328,276
    
    
    $
    1,105,756LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable and accrued expenses
    
    $
    256,173
    
    
    $
    185,219Deferred revenue
    
    
    8,415
    
    
    
    6,202Entrance fees
    
    
    25,953
    
    
    
    25,866Current maturities of long-term debt
    
    
    51,368
    
    
    
    35,264Total current liabilities
    
    
    341,909
    
    
    
    252,551Long-term debt, less current maturities
    
    
    151,421
    
    
    
    156,402Deferred income taxes
    
    
    165,957
    
    
    
    148,790Other long-term liabilities
    
    
    32,131
    
    
    
    22,915Total liabilities
    
    
    691,418
    
    
    
    580,658Minority interests
    
    
    4,181
    
    
    
    1,580Stockholders Equity:Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value, 60,000,000 shares authorized, 43,468,462 and 41,152,550 shares
issued and outstanding at December 31, 2005 and 2004, respectively
    
    
    435
    
    
    
    412Additional paid-in capital
    
    
    294,400
    
    
    
    247,999Retained earnings
    
    
    351,538
    
    
    
    271,796Deferred compensation  restricted stock
    
    
    (12,323
    )
    
    
    (4,535
    )Accumulated other comprehensive (loss) income
    
    
    (1,373
    )
    
    
    7,846Total stockholders equity
    
    
    632,677
    
    
    
    523,518Total liabilities and stockholders equity
    
    $
    1,328,276
    
    
    $
    1,105,756
  50




---



##### 



SUNRISE
SENIOR LIVING, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (in thousands, except per share amounts)
 Year Ended December 31,2005
    
    
    2004
    
    2003Operating revenue:Management and professional services  operating communities
    
    $
    188,005
    
    
    $
    90,184
    
    
    $
    67,560Community contract services reimbursement
    
    
    1,235,608
    
    
    
    996,726
    
    
    
    676,359Management and professional services  pre-opened communities
    
    
    40,715
    
    
    
    16,775
    
    
    
    11,566Resident fees
    
    
    355,151
    
    
    
    342,786
    
    
    
    340,775Total operating revenue
    
    
    1,819,479
    
    
    
    1,446,471
    
    
    
    1,096,260Operating expenses:Reimbursable community contract services
    
    
    1,235,608
    
    
    
    996,726
    
    
    
    676,359Management and professional services  pre-opened communities
    
    
    31,541
    
    
    
    14,638
    
    
    
    14,852Community operating
    
    
    272,616
    
    
    
    258,667
    
    
    
    254,203Community lease
    
    
    48,401
    
    
    
    47,085
    
    
    
    38,511General and administrative
    
    
    90,716
    
    
    
    72,362
    
    
    
    72,120Depreciation and amortization
    
    
    43,432
    
    
    
    21,378
    
    
    
    16,406Total operating expenses
    
    
    1,722,314
    
    
    
    1,410,856
    
    
    
    1,072,451Other income:Operating communities
    
    
    411
    
    
    
    24,330
    
    
    
    75,579Pre-opened communities
    
    
    8,819
    
    
    
    10,354
    
    
    
    10,098Income from operations
    
    
    106,395
    
    
    
    70,299
    
    
    
    109,486Other non-operating income (expense):Interest income
    
    
    6,977
    
    
    
    8,533
    
    
    
    8,869Interest expense
    
    
    (3,518
    )
    
    
    (7,069
    )
    
    
    (25,440
    )Gain on sale of investment in Sunrise REIT debentures
    
    
    3,939
    
    
    
    
    
    
    
    Total other non-operating income (expense)
    
    
    7,398
    
    
    
    1,464
    
    
    
    (16,571
    )Equity in earnings and return on investment in unconsolidated senior living communities
    
    
    13,235
    
    
    
    9,394
    
    
    
    5,343Minority interests
    
    
    (815
    )
    
    
    (701
    )
    
    
    (1,105
    )Income before provision for income taxes
    
    
    126,213
    
    
    
    80,456
    
    
    
    97,153Provision for income taxes
    
    
    (46,471
    )
    
    
    (29,769
    )
    
    
    (34,975
    )Net income
    
    $
    79,742
    
    
    $
    50,687
    
    
    $
    62,178Earnings per share data:Basic net income per common share
    
    $
    1.92
    
    
    $
    1.25
    
    
    $
    1.46Diluted net income per common share
    
    $
    1.67
    
    
    $
    1.12
    
    
    $
    1.32
  51




---



##### 



SUNRISE
SENIOR LIVING, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (in thousands)
 AccumulatedShares of
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherCommon
    
    
    Stock
    
    
    Additional
    
    
    Retained
    
    
    Deferred
    
    
    ComprehensiveStock
    
    
    Amount
    
    
    Paid-in Capital
    
    
    Earnings
    
    
    Compensation
    
    
    Income (Loss)
    
    
    TotalBalance at January 1, 2003
    
    
    44,688
    
    
    $
    446
    
    
    $
    312,729
    
    
    $
    158,931
    
    
    $
    (3,333
    )
    
    $
    (2,955
    )
    
    $
    465,818Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,178
    
    
    
    
    
    
    
    
    
    
    
    62,178Interest rate swaps, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,511
    
    
    
    2,511Foreign currency translation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,587
    
    
    
    2,587Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,276Issuance of common stock to employees
    
    
    4,816
    
    
    
    50
    
    
    
    53,027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,077Repurchase of common stock
    
    
    (7,918
    )
    
    
    (80
    )
    
    
    (106,153
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (106,233
    )Issuance of restricted stock
    
    
    390
    
    
    
    4
    
    
    
    4,828
    
    
    
    
    
    
    
    (4,832
    )
    
    
    
    
    
    
    Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,601
    
    
    
    
    
    
    
    1,601Tax effect from the exercise of non-
qualified stock options
    
    
    
    
    
    
    
    
    
    
    8,737
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,737Balance at December 31, 2003
    
    
    41,976
    
    
    
    420
    
    
    
    273,168
    
    
    
    221,109
    
    
    
    (6,564
    )
    
    
    2,143
    
    
    
    490,276Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,687
    
    
    
    
    
    
    
    
    
    
    
    50,687Foreign currency translation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,703
    
    
    
    5,703Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,390Issuance of common stock to employees
    
    
    2,679
    
    
    
    26
    
    
    
    29,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,726Repurchase of common stock
    
    
    (3,498
    )
    
    
    (34
    )
    
    
    (63,159
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63,193
    )Conversion of convertible debt
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Issuance of restricted stock
    
    
    22
    
    
    
    
    
    
    
    400
    
    
    
    
    
    
    
    (400
    )
    
    
    
    
    
    
    Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,119
    
    
    
    
    
    
    
    2,119Forfeiture of restricted stock
    
    
    (26
    )
    
    
    
    
    
    
    (310
    )
    
    
    
    
    
    
    310
    
    
    
    
    
    
    
    Tax effect from the exercise of
non-qualified stock options
    
    
    
    
    
    
    
    
    
    
    8,192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,192Balance at December 31, 2004
    
    
    41,153
    
    
    
    412
    
    
    
    247,999
    
    
    
    271,796
    
    
    
    (4,535
    )
    
    
    7,846
    
    
    
    523,518Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,742
    
    
    
    
    
    
    
    
    
    
    
    79,742Foreign currency translation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,850
    )
    
    
    (9,850
    )Equity interest in investees other
comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    631
    
    
    
    631Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,523Issuance of common stock to employees
    
    
    2,248
    
    
    
    22
    
    
    
    29,043
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,065Repurchase of common stock
    
    
    (348
    )
    
    
    (3
    )
    
    
    (8,709
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,712
    )Conversion of convertible debt
    
    
    3
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55Issuance of restricted stock
    
    
    412
    
    
    
    4
    
    
    
    10,996
    
    
    
    
    
    
    
    (10,998
    )
    
    
    
    
    
    
    2Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,210
    
    
    
    
    
    
    
    3,210Tax effect from the exercise of
non-qualified stock options
    
    
    
    
    
    
    
    
    
    
    15,016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,016Balance at December 31, 2005
    
    
    43,468
    
    
    $
    435
    
    
    $
    294,400
    
    
    $
    351,538
    
    
    $
    (12,323
    )
    
    $
    (1,373
    )
    
    $
    632,677
  52




---



##### 



SUNRISE SENIOR LIVING, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands)
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Operating activitiesNet income
    
    $
    79,742
    
    
    $
    50,687
    
    
    $
    62,178Adjustments to reconcile net income to net cash provided by operating activities:Other income  operating communities
    
    
    (411
    )
    
    
    (24,330
    )
    
    
    (75,579
    )Other income  pre-opened communities
    
    
    (8,819
    )
    
    
    (10,354
    )
    
    
    (10,098
    )Gain on sale of investment in Sunrise REIT debentures
    
    
    (3,939
    )
    
    
    
    
    
    
    Equity in earnings and return on investment of unconsolidated senior living
communities
    
    
    (13,235
    )
    
    
    (9,394
    )
    
    
    (5,343
    )Distributions of earnings from unconsolidated senior living communities
    
    
    8,293
    
    
    
    7,501
    
    
    
    6,030Minority interests
    
    
    815
    
    
    
    701
    
    
    
    1,105Provision for bad debts
    
    
    1,531
    
    
    
    1,364
    
    
    
    2,610Provision for deferred income taxes
    
    
    21,858
    
    
    
    17,843
    
    
    
    24,964Depreciation and amortization
    
    
    43,432
    
    
    
    21,378
    
    
    
    16,406Amortization of financing costs
    
    
    1,483
    
    
    
    2,018
    
    
    
    6,517Amortization of deferred compensation
    
    
    3,210
    
    
    
    2,119
    
    
    
    1,601Changes in operating assets and liabilities:(Increase) decrease:Accounts receivable
    
    
    13,196
    
    
    
    (12,835
    )
    
    
    (23,368
    )Prepaid expenses, due from unconsolidated senior living communities and
other current assets
    
    
    (22,207
    )
    
    
    (26,310
    )
    
    
    (15,255
    )Other assets
    
    
    2,671
    
    
    
    (2,517
    )
    
    
    (10,664
    )Increase (decrease):Accounts payable, accrued expenses and other liabilities
    
    
    68,755
    
    
    
    66,926
    
    
    
    6,833Entrance fees
    
    
    87
    
    
    
    997
    
    
    
    (406
    )Deferred revenue
    
    
    2,288
    
    
    
    431
    
    
    
    (3,285
    )Net cash provided by (used in) operating activities
    
    
    198,750
    
    
    
    86,225
    
    
    
    (15,754
    )Investing activitiesAcquisition of property
    
    
    (134,291
    )
    
    
    (110,662
    )
    
    
    (104,721
    )Acquisition of business and assets
    
    
    (75,532
    )
    
    
    
    
    
    
    (93,407
    )Cash obtained in consolidation of Sunrise At Home
    
    
    1,138
    
    
    
    
    
    
    
    Disposition of property
    
    
    56,246
    
    
    
    146,139
    
    
    
    415,577Purchases of short-term investments
    
    
    (62,825
    )
    
    
    (26,350
    )
    
    
    Proceeds from short-term investments
    
    
    77,725
    
    
    
    11,450
    
    
    
    Increase in investments and notes receivable
    
    
    (158,697
    )
    
    
    (159,825
    )
    
    
    (60,240
    )Proceeds from investments and notes receivable
    
    
    187,042
    
    
    
    141,082
    
    
    
    140,395(Increase) decrease in restricted cash and cash equivalents
    
    
    (3,908
    )
    
    
    12,762
    
    
    
    7,281Contributions to investments in unconsolidated senior living communities
    
    
    (64,080
    )
    
    
    (27,987
    )
    
    
    (17,226
    )Distributions of capital from unconsolidated senior living communities
    
    
    27,875
    
    
    
    7,754
    
    
    
    3,971Net cash (used in) provided by investing activities
    
    
    (149,307
    )
    
    
    (5,637
    )
    
    
    291,630Financing activitiesNet proceeds from exercised options
    
    
    29,065
    
    
    
    29,726
    
    
    
    53,077Additional borrowings of long-term debt
    
    
    149,539
    
    
    
    112,781
    
    
    
    266,423Repayment of long-term debt
    
    
    (137,296
    )
    
    
    (119,451
    )
    
    
    (555,750
    )Capital contributed by At Home stockholders
    
    
    5,000
    
    
    
    
    
    
    
    Distribution to minority interest
    
    
    (1,021
    )
    
    
    (724
    )
    
    
    (556
    )Financing costs paid
    
    
    (1,622
    )
    
    
    (392
    )
    
    
    (3,408
    )Repurchases of common stock
    
    
    (8,712
    )
    
    
    (63,193
    )
    
    
    (106,233
    )Net cash provided by (used in) in financing activities
    
    
    33,953
    
    
    
    (41,253
    )
    
    
    (346,447
    )Net increase (decrease) in cash and cash equivalents
    
    
    83,396
    
    
    
    39,335
    
    
    
    (70,571
    )Cash and cash equivalents at beginning of period
    
    
    141,883
    
    
    
    102,548
    
    
    
    173,119Cash and cash equivalents at end of period
    
    $
    225,279
    
    
    $
    141,883
    
    
    $
    102,548
  53




---



##### 



Sunrise Senior Living, Inc.
 
 Notes to Consolidated Financial Statements
 1. Organization and Presentation
    Stock Split
  Reclassifications
  Short-Term Investments
  Allowance for Doubtful Accounts
  Entrance Fees
  54




---



##### 



Credit Support Payments
  Other Income  Pre-Opened Communities
  Distributions of Earnings from Unconsolidated Ventures
  2. Significant Accounting Policies
  Cash and Cash Equivalents
  Investments
   Allowance for Doubtful Accounts
  Year Ended December 31,2005
    
    
    2004
    
    
    2003Beginning balance
    
    $
    2,497
    
    
    $
    4,495
    
    
    $
    3,406Provision for bad debts
    
    
    1,531
    
    
    
    1,364
    
    
    
    2,610Accounts written off
    
    
    (1,058
    )
    
    
    (3,362
    )
    
    
    (1,521
    )Ending balance
    
    $
    2,970
    
    
    $
    2,497
    
    
    $
    4,495
 55




---



##### 



Notes Receivable
  Due from Unconsolidated Senior Living Communities
  Property and Equipment
    Deferred Financing Costs
  Intangible Assets
    Investments in Unconsolidated Senior Living Communities
 Consolidation of Variable Interest Entities
 56




---



##### 



Loss Reserves For Certain Self-Insured Programs
   Workers Compensation and General/Professional Liability Insurance
   Employee Health Benefits
  57




---



##### 







Income Taxes




Revenue Recognition










Other Income  Operating Communities




Other Income  Pre-opened Communities




Stock-Based Compensation




58



---



##### 



Accounting for Stock Issued to Employees
 Accounting for Stock-Based Compensation
 Year ended December 31,2005
    
    
    2004
    
    
    2003Net income:As reported:
    
    $
    79,742
    
    
    $
    50,687
    
    
    $
    62,178Add: Compensation expense, net of tax
    
    
    2,022
    
    
    
    1,383
    
    
    
    1,014Less: Total stock-based employee compensation expensed determined
under fair-value method for all awards, net of tax effect
    
    
    (9,359
    )
    
    
    (10,215
    )
    
    
    (15,826
    )Pro forma
    
    $
    72,405
    
    
    $
    41,855
    
    
    $
    47,366Basic net income per share:As reported
    
    $
    1.92
    
    
    $
    1.25
    
    
    $
    1.46Pro forma
    
    $
    1.75
    
    
    $
    1.03
    
    
    $
    1.11Diluted net income per share:As reported
    
    $
    1.67
    
    
    $
    1.12
    
    
    $
    1.32Pro forma
    
    $
    1.52
    
    
    $
    0.94
    
    
    $
    1.03
  2005
    
    2004
    
    2003Risk free interest rate
    
    
    4.4
    
    
    
    3.5
    
    
    
    3.6  4.3Dividend yield
    
    
    
    
    
    
    
    
    
    
    Expected life (years)
    
    
    5.4
    
    
    
    3.9
    
    
    
    10Volatility
    
    
    62.0
    %
    
    
    48.7
    %
    
    
    50.8
    %
 Share-Based Payment Statement of Cash Flows
 Continuing Care Agreements
   59




---



##### 



Interest
on Receivables and Payables
 Regulatory Considerations
  Foreign Currency Translation
   Year ended December 31,2005
    
    
    2004
    
    
    2003Beginning balance
    
    $
    7,845
    
    
    $
    2,142
    
    
    $
    (445
    )Foreign currency translation, net of tax
    
    
    (9,850
    )
    
    
    5,703
    
    
    
    2,587Ending balance
    
    $
    (2,005
    )
    
    $
    7,845
    
    
    $
    2,142
 Variable Interest Entities
    60




---



##### 



Other Recent Accounting Standards
 Determining Whether
a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights
 3. Acquisitions
 Greystone Communities, Inc.
   Net working capital deficit
    
    $
    (1.8
    )Property and equipment
    
    
    0.6Management and development contracts
    
    
    13.8Goodwill
    
    
    33.9Total purchase price (including transaction costs)
    
    $
    46.5
  The Fountains
   61




---



##### 







Net working capital deficit
    
    $
    (0.5
    )Property and equipment, net
    
    
    21.4Management contracts
    
    
    1.4Goodwill
    
    
    6.4Other assets
    
    
    0.3Total purchase price (including transaction costs)
    
    $
    29.0






Marriott Senior Living Services








Revenue
    
    $
    1,288.3Net income
    
    
    61.6Basic earnings per share
    
    
    2.89Diluted earnings per share
    
    $
    2.61


Other Unconsolidated Ventures








4. Dispositions and Termination of Management Contracts


Sunrise Senior Living Real Estate Investment Trust




62



---



##### 



Other Dispositions
    Termination of Management Contracts
   63




---



##### 



5. Prepaid Expenses and Other Current Assets
  December 31,2005
    
    
    2004Prepaid insurance
    
    $
    20,877
    
    
    $
    13,887Deposits
    
    
    5,141
    
    
    
    2,735Interest receivable
    
    
    1,178
    
    
    
    329Prepaid taxes
    
    
    964
    
    
    
    1,156Other
    
    
    8,409
    
    
    
    9,696$
    36,569
    
    
    $
    27,803
 6. Property and Equipment, Net
  December 31,Asset Lives
    
    
    2005
    
    
    2004Land and land improvements
    
    15 years
    
    $
    64,893
    
    
    $
    46,281Building and building improvements
    
    40 years
    
    
    259,343
    
    
    
    246,756Furniture and equipment
    
    3-10 years
    
    
    100,636
    
    
    
    78,783424,872
    
    
    
    371,820Less accumulated depreciation and amortization
    
    
    
    
    
    
    (90,628
    )
    
    
    (70,392
    )334,244
    
    
    
    301,428Construction in progress
    
    
    
    
    
    
    124,302
    
    
    
    68,204Property and equipment, net
    
    
    
    
    
    $
    458,546
    
    
    $
    369,632
  7. Notes Receivable  Affiliates
  December 31,Interest Rate (1)
    
    
    2005
    
    
    2004Note III with international venture
    
    
    12.50
    %
    
    $
    
    
    
    $
    1,074Note IV partner loan with international venture
    
    
    15.00
    %
    
    
    
    
    
    
    245Note V with international venture
    
    
    4.37
    %
    
    
    915
    
    
    
    1,095LLC Note VI, revolving credit agreement
    
    
    10.00
    %
    
    
    2,596
    
    
    
    9,160Promissory Note IV
    
    
    (2
    )
    
    
    2,576
    
    
    
    2,630Promissory Note VI
    
    LIBOR + 3.00%
    
    
    
    
    
    
    1,304Promissory Note VII
    
    LIBOR + 2.50%
    
    
    
    
    
    
    1,038Promissory Note VIII, revolving credit agreement
    
    
    15.00
    %
    
    
    
    
    
    
    3,505Promissory Note IX
    
    
    8.00
    %
    
    
    1,972
    
    
    
    1,836Promissory Note X
    
    LIBOR + 3.50%
    
    
    
    
    
    
    2,125Promissory Note XI
    
    LIBOR + 3.00%
    
    
    
    
    
    
    7,143Promissory Note XII
    
    LIBOR + 2.75%
    
    
    
    
    
    
    558Subordinated Loan Agreement I
    
    
    10.75
    %
    
    
    938
    
    
    
    849Promissory Note XIII
    
    
    7.5
    %
    
    
    11,246
    
    
    
    10,483Promissory Note XIV
    
    Euribor + 4.25%
    
    
    2,500
    
    
    
    Other notes receivable
    
    
    
    
    
    
    43
    
    
    
    53022,786
    
    
    
    43,575Current maturities
    
    
    
    
    
    
    (16,461
    )
    
    
    (2,875
    )$
    6,325
    
    
    $
    40,700
 
 (1)
    
    Interest rate at December 31, 2005(2)
    
    Higher of 6% or LIBOR plus 3.0%  64




---



##### 



65




---



##### 



8. Management Contracts and Leaseholds, Goodwill and Other Assets
  December 31,
    
    
    Estimated2005
    
    
    2004
    
    
    Useful lifeManagement contracts, less accumulated amortization of $13,238 and $6,580
    
    $
    81,105
    
    
    $
    77,785
    
    
    1-30 yearsLeaseholds, less accumulated amortization of $2,747 and $2,440
    
    
    5,136
    
    
    
    5,551
    
    
    10-29 years$
    86,241
    
    
    $
    83,336
   December 31,2005
    
    
    2004Goodwill
    
    $
    165,028
    
    
    $
    123,713
   9. Investments in Unconsolidated Senior Living Communities
   December 31,2005
    
    2004
    
    2003Assets, principally property and equipment
    
    $
    3,372,483
    
    
    $
    2,241,246
    
    
    $
    1,915,403Liabilities, principally long-term debt
    
    
    2,531,305
    
    
    
    1,512,953
    
    
    
    1,343,956Equity
    
    
    841,178
    
    
    
    728,293
    
    
    
    571,447Revenue
    
    
    647,156
    
    
    
    487,913
    
    
    
    420,520Net income
    
    $
    19,222
    
    
    $
    175,188
    
    
    $
    14,353
    Year ended December 31,2005
    
    
    2004
    
    
    2003Equity in earnings in unconsolidated senior living communities
    
    $
    (1,163
    )
    
    $
    9,394
    
    
    $
    5,343Return on investment in unconsolidated senior living communities
    
    
    14,398
    
    
    
    
    
    
    
    $
    13,235
    
    
    $
    9,394
    
    
    $
    5,343
  66




---



##### 



10. Accounts Payable and Accrued Expenses
  December 31,2005
    
    
    2004Accounts payable
    
    $
    22,956
    
    
    $
    9,033Self insurance program
    
    
    84,419
    
    
    
    62,274Accrued salaries
    
    
    64,483
    
    
    
    49,974Employee health benefits
    
    
    20,168
    
    
    
    23,171Other accruals
    
    
    64,147
    
    
    
    40,767$
    256,173
    
    
    $
    185,219
 11. Long-Term Debt
  December 31,2005
    
    
    20045.25% convertible subordinated notes due 2009
    
    $
    119,937
    
    
    $
    119,992Corporate credit facility
    
    
    
    
    
    
    18,000Borrowings from Sunrise REIT
    
    
    44,078
    
    
    
    11,186Mortgages, notes payable and other
    
    
    38,774
    
    
    
    42,488202,789
    
    
    
    191,666Current maturities
    
    
    (51,368
    )
    
    
    (35,264
    )$
    151,421
    
    
    $
    156,402
  67
                68




---



##### 



2006
    
    $
    51,3682007
    
    
    13,7952008
    
    
    9,8832009
    
    
    120,2882010
    
    
    462Thereafter
    
    
    6,993$
    202,789
  12. Income Taxes
   December 31,2005
    
    
    2004Deferred tax assets:Operating loss carryforwards  federal
    
    $
    
    
    
    $
    10,956Operating loss carryforwards  state
    
    
    4,786
    
    
    
    2,063Operating loss carryforwards- foreign
    
    
    1,328
    
    
    
    1,501Credits
    
    
    9,858
    
    
    
    3,805Accrued expenses
    
    
    2,433
    
    
    
    5,309Other
    
    
    2,316
    
    
    
    1,778Total deferred tax assets
    
    
    20,721
    
    
    
    25,412Deferred tax liabilities:Investments in ventures
    
    
    (93,835
    )
    
    
    (93,714
    )Property and equipment
    
    
    (72,122
    )
    
    
    (55,076
    )Total deferred tax liabilities
    
    
    (165,957
    )
    
    
    (148,790
    )Net deferred tax liability
    
    $
    (145,236
    )
    
    $
    (123,378
    )
     Year Ended December 31,2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    16,547
    
    
    $
    7,728
    
    
    $
    7,447State
    
    
    5,165
    
    
    
    2,198
    
    
    
    2,564Foreign
    
    
    2,901
    
    
    
    2,000
    
    
    
    Total current
    
    
    24,613
    
    
    
    11,926
    
    
    
    10,011Deferred:Federal
    
    
    23,543
    
    
    
    16,187
    
    
    
    23,018State
    
    
    (1,858
    )
    
    
    1,921
    
    
    
    3,182Foreign
    
    
    173
    
    
    
    (265
    )
    
    
    (1,236
    )Total deferred
    
    
    21,858
    
    
    
    17,843
    
    
    
    24,964$
    46,471
    
    
    $
    29,769
    
    
    $
    34,975
 69




---



##### 



Year Ended December 31,2005
    
    
    2004
    
    
    2003Statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State taxes, net
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0Other
    
    
    (2.2
    )
    
    
    (2.0
    )
    
    
    (3.0
    )36.8
    %
    
    
    37.0
    %
    
    
    36.0
    %
 13. Stockholders Equity
 Stock Option Plans
    2005
    
    2004
    
    2003Weighted-
    
    
    
    
    
    Weighted-
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseOptions
    
    Shares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding-beginning of year
    
    
    5,930
    
    
    $
    12.15
    
    
    
    8,654
    
    
    $
    10.82
    
    
    
    12,822
    
    
    $
    11.04Granted
    
    
    578
    
    
    
    29.91
    
    
    
    428
    
    
    
    17.92
    
    
    
    1,214
    
    
    
    9.66Exercised
    
    
    (2,050
    )
    
    
    11.98
    
    
    
    (2,304
    )
    
    
    10.94
    
    
    
    (4,674
    )
    
    
    10.82Canceled
    
    
    (141
    )
    
    
    14.08
    
    
    
    (848
    )
    
    
    13.33
    
    
    
    (708
    )
    
    
    12.17Outstanding-end of year
    
    
    4,317
    
    
    
    14.54
    
    
    
    5,930
    
    
    
    12.15
    
    
    
    8,654
    
    
    
    10.82Options exercisable at year-end
    
    
    3,527
    
    
    
    
    
    
    
    4,292
    
    
    
    
    
    
    
    5,152Weighted-average fair value of options granted during the year
    
    $
    12.44
    
    
    
    
    
    
    $
    7.44
    
    
    
    
    
    
    $
    8.31
  Options Outstanding
    
    Options ExercisableWeighted-Average
    
    Weighted-
    
    
    
    
    
    Weighted-Remaining
    
    Average
    
    
    
    
    
    AverageRange of
    
    Options
    
    Contractual
    
    Exercise
    
    Options
    
    ExerciseExercise Prices
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Price$4.01 - $10.00
    
    
    1,047
    
    
    
    4.69
    
    
    $
    8.61
    
    
    
    1,047
    
    
    $
    8.6110.01 - 12.82
    
    
    1,451
    
    
    
    4.81
    
    
    
    12.16
    
    
    
    1,170
    
    
    
    12.1512.83 - 22.28
    
    
    1,248
    
    
    
    6.07
    
    
    
    15.23
    
    
    
    800
    
    
    
    15.05$22.29  $34.50
    
    
    571
    
    
    
    9.68
    
    
    $
    29.98
    
    
    
    510
    
    
    $
    30.514,317
    
    
    
    
    
    
    
    
    
    
    
    3,527
 70




---



##### 



Restricted Stock
   Repurchase of Outstanding Shares
  Shares
    
    Average Price2002
    
    
    1,163
    
    
    $
    12.812003
    
    
    7,918
    
    
    $
    13.422004
    
    
    3,498
    
    
    $
    18.072005
    
    
    348
    
    
    $
    25.03Total at December 31, 2005
    
    
    12,927
    
    
    $
    14.94
  Stockholder Rights Agreements
     71




---



##### 



14. Other Income  Pre-opened Communities
      15. Net Income Per Common Share
  Year ended December 31,2005
    
    
    2004
    
    
    2003Numerator for basic net income per share:Net income
    
    $
    79,742
    
    
    $
    50,687
    
    
    $
    62,178Numerator for diluted net income per share:Net income
    
    $
    79,742
    
    
    $
    50,687
    
    
    $
    62,178Assumed conversion of convertible notes, net of tax
    
    
    4,376
    
    
    
    4,386
    
    
    
    4,584Diluted net income
    
    $
    84,118
    
    
    $
    55,073
    
    
    $
    66,762Denominator:Denominator for basic net income per common share weighted average shares
    
    
    41,456
    
    
    
    40,604
    
    
    
    42,596Effect of dilutive securities:Employee stock options and restricted stock
    
    
    2,234
    
    
    
    1,958
    
    
    
    1,248Convertible notes
    
    
    6,695
    
    
    
    6,696
    
    
    
    6,904Denominator for diluted net income per common share 
weighted average shares plus assumed conversions
    
    
    50,385
    
    
    
    49,258
    
    
    
    50,748Basic net
income per common share:
    
    $
    1.92
    
    
    $
    1.25
    
    
    $
    1.46Diluted net income per common share:
    
    $
    1.67
    
    
    $
    1.12
    
    
    $
    1.32
  16. Commitments
 Leases
  72




---



##### 



Minimum Lease Payments
 2006
    
    $
    56,8122007
    
    
    56,7212008
    
    
    56,8472009
    
    
    56,9222010
    
    
    57,116Thereafter
    
    
    243,821$
    528,239
  Purchase
    
    
    Lease2006
    
    $
    117,716
    
    
    $
    1,2372007
    
    
    6,950
    
    
    
    1,2372008
    
    
    
    
    
    
    1,3982009
    
    
    
    
    
    
    1,3982010
    
    
    
    
    
    
    1,398Thereafter
    
    
    
    
    
    
    146,436$
    124,666
    
    
    $
    153,104
  Guarantees
 Debt Guarantees and Financing Obligations
  73




---



##### 



Number ofAmount
    
    
    CommunitiesDebt guarantees:Development ventures
    
    $
    31,925
    
    
    
    10Other ventures
    
    
    14,573
    
    
    
    746,498
    
    
    
    17Other obligations:Entrance fees
    
    
    69,197
    
    
    
    2Other
    
    
    1,201
    
    
    
    470,398
    
    
    
    6$
    116,896
    
    
    
    23
    Development Completion Guarantees
   Number of
    
    Expected PayoutCommunities
    
    (2006)Development completion guarantees
    
    
    36
    
    
    $
    2,000
 Operating Deficit Credit Facilities
  74




---



##### 



Number of Communities
    
    Expected Payout (2006)Operating communities
    
    
    20
    
    
    $
    5,796
 Other Commitments
  Number ofCommunities
    
    
    Expected PayoutCredit support agreements
    
    
    13
    
    
    $
    1,929Commitments to advance funds
    
    
    24
    
    
    
    1,588Liquidity support agreement
    
    
    16
    
    
    
    53
    
    
    $
    3,517
     Legal Proceedings
  75




---



##### 



17. Related-Party Transactions
 Sunrise REIT
  Year ended December 31,2005
    
    2004Management
and professional services  operating communities revenue
    
    $
    7,700
    
    
    $
    100Community contract services reimbursement and reimbursable community contract services
    
    
    129,000
    
    
    
    2,300Other operating income  pre-opened communities
    
    
    500
    
    
    
    Interest income received from Sunrise REIT convertible debentures
    
    
    1,300
    
    
    
    Interest incurred on borrowings from Sunrise REIT
    
    
    2,300
    
    
    
    Equity in earnings in unconsolidated senior living communities
    
    $
    800
    
    
    $
    
 Sunrise Senior Living Foundation
   76




---



##### 



Ground Lease
  Ground Lease to the Klaassens
  Unconsolidated Ventures
  77




---



##### 



18. Employee Benefit Plans
 401K Plan
  Executive Deferred Compensation Plan
  Chief Executive Officer Deferred Compensation Plan
  19. Fair Value of Financial Instruments
     20. Information about Sunrises Segments
  21. Subsequent Events
  78




---



##### 



22. Quarterly Results of Operations (Unaudited)
  Q1
    
    Q2
    
    Q3
    
    Q4
    
    Total2005Operating revenue as previously reported
    
    $
    389,798
    
    
    $
    412,886
    
    
    $
    463,213
    
    
    $
    554,748
    
    
    $
    1,820,645Reclassifications (1)
    
    
    (1,506
    )
    
    
    335
    
    
    
    5
    
    
    
    
    
    
    
    (1,166
    )Operating revenue
    
    
    388,292
    
    
    
    413,221
    
    
    
    463,218
    
    
    
    554,748
    
    
    
    1,819,479Net income
    
    
    8,013
    
    
    
    10,338
    
    
    
    11,049
    
    
    
    50,342
    
    
    
    79,742Basic net income per common share (2)
    
    
    0.20
    
    
    
    0.25
    
    
    
    0.27
    
    
    
    1.19
    
    
    
    1.92Diluted net income per common share
    
    $
    0.19
    
    
    $
    0.23
    
    
    $
    0.24
    
    
    $
    1.01
    
    
    $
    1.672004Operating revenue as previously reported
    
    $
    350,989
    
    
    $
    353,938
    
    
    $
    366,779
    
    
    $
    383,252
    
    
    $
    1,454,958Reclassifications (1)
    
    
    (1,363
    )
    
    
    (1,851
    )
    
    
    (1,136
    )
    
    
    (4,137
    )
    
    
    (8,487
    )Operating revenue
    
    
    349,626
    
    
    
    352,087
    
    
    
    365,643
    
    
    
    379,115
    
    
    
    1,446,471Net income
    
    
    13,931
    
    
    
    15,132
    
    
    
    8,912
    
    
    
    12,712
    
    
    
    50,687Basic net income per common share (2)
    
    
    0.34
    
    
    
    0.38
    
    
    
    0.22
    
    
    
    0.32
    
    
    
    1.25Diluted net income per common share
    
    $
    0.30
    
    
    $
    0.33
    
    
    $
    0.21
    
    
    $
    0.28
    
    
    $
    1.12
 
 (1)
    
    Amounts reflect the reclassifications as discussed in Note 1.(2)
    
    The sum of per share amounts for the quarters may not equal the per share amount for the year
due rounding. 79




---



##### 



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 (a)
    
    Evaluation of Disclosure Controls and Procedures. At December 31, 2005, an evaluation was
performed by the Companys management, under the supervision of and with the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of
Sunrises disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of
the end of the period covered by this Annual Report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that these disclosure controls and
procedures were effective.
 (b)
    
    Managements Report on Internal Control Over Financial Reporting. Managements annual report
on internal control over financial reporting is set forth under Item 8 of this annual report
and is incorporated herein by reference.
 (c)
    
    Attestation Report of the Independent Registered Public Accounting Firm. The attestation
report of Ernst & Young LLP, the Companys independent registered public accounting firm, on
managements assessment of the Companys internal control over financial reporting is set
forth under Item 8 of this annual report and is incorporated herein by reference.
 (d)
    
    Changes in Internal Control Over Financial Reporting. There were no changes in the Companys
internal control over financial reporting that occurred during the quarter ended December 31,
2005 that have materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.
 
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant
   80




---



##### 



Item 11. Executive Compensation
  
 Item 12. Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    List of documents filed as part of this Annual Report on Form 10-K:
 (1)
    
    Financial statements:Managements Report on Internal Control Over Financial ReportingReport of Independent Registered Public Accounting Firm on Internal Control Over Financial
ReportingReport of Independent Registered Public Accounting FirmConsolidated Balance Sheets  December 31, 2005 and 2004Consolidated Statements of Income  Years Ended December 31, 2005, 2004 and 2003Consolidated Statements of Changes in Stockholders Equity  Years Ended December 31, 2005,
2004 and 2003Consolidated Statements of Cash Flows  Years Ended December 31, 2005, 2004 and 2003Notes to Consolidated Financial Statements
 (2)
    
    Financial Statement Schedules:
  (3)
    
    Exhibits:
 (b)
    
    Exhibits.
  81




---



##### 



SIGNATURES
  SUNRISE SENIOR LIVING, INC.By:
    
    /s/ Paul J. KlaassenPaul J. Klaassen, Chairman of the Board andChief Executive Officer
  PRINCIPAL EXECUTIVE OFFICER
    
    
    
    PRINCIPAL FINANCIAL OFFICERBy:
    
    /s/ Paul J. Klaassen
    
    
    
    By:
    
    /s/ Bradley B. RushPaul J. Klaassen, Chairman of the Board and
    
    
    
    
    
    Bradley B. Rush, Chief Financial OfficerChief Executive OfficerPRINCIPAL ACCOUNTING OFFICERBy:
    
    /s/ J. Barron Anschutz

J. Barron Anschutz, Chief Accounting OfficerDIRECTORSBy:
    
    /s/ Ronald V. Aprahamian
    
    
    
    By:
    
    /s/ Paul J. KlaassenRonald V. Aprahamian, Director
    
    
    
    
    
    Paul J. Klaassen, Chairman of the Board andChief Executive OfficerBy:
    
    /s/ Craig R. Callen
    
    
    
    By:
    
    /s/ Teresa M. KlaassenCraig R. Callen, Director
    
    
    
    
    
    Teresa M. Klaassen, DirectorBy:
    
    /s/ Thomas J. Donohue
    
    
    
    By:
    
    /s/ William G. LittleThomas J. Donohue, Director
    
    
    
    
    
    William G. Little, DirectorBy:
    
    /s/ J. Douglas HolladayJ. Douglas Holladay, Director
 82




---



##### 



Exhibit Index
 ExhibitNumber
    
    Description2.1
    
    
    Amended and Restated Operating Agreement of Sunrise First Assisted Living Holdings, LLC by and between Sunrise
Assisted Living Investments, Inc., as the Managing Member and US Assisted Living Facilities, Inc., as the Investor
Member dated as of March 22, 2002 (incorporated herein by reference to Exhibit 2.1 to Sunrises 2001 Form 10-K).2.2
    
    
    Amended and Restated Transaction Agreement by and among Sunrise Assisted Living Investments, Inc., Sunrise
Development, Inc., Sunrise Assisted Living, Inc. and certain Sunrise property owning entities and US Assisted
Living Facilities, Inc. dated as of January 30, 2002 (incorporated herein by reference to Exhibit 2.2 to Sunrises
2001 Form 10-K).2.3
    
    
    Stock Purchase Agreement dated as of December 30, 2002 by and among Marriott International, Inc., Marriott Senior
Holding Co., Marriott Magenta Holding Company, Inc. and Sunrise Assisted Living, Inc. (incorporated by referenced
to Exhibit 2.3 to Sunrises 2002 Form 10-K).2.4
    
    
    Amendment No. 1 to Stock Purchase Agreement, dated as of March 28, 2003, by and among Marriott International, Inc.,
Marriott Senior Holding Co., Marriott Magenta Holding Company, Inc. and Sunrise Assisted Living, Inc. (incorporated
by reference to Exhibit 2.2 to Sunrises Form 8-K filed on April 9, 2003).2.5
    
    
    Transaction Agreement by and among Sunrise Senior Living Investments, Inc., Sunrise Third Senior Living Holdings,
LLC and Other Parties Named Therein dated as of June 30, 2003 (incorporated by reference to Exhibit 2.1 to
Sunrises Current Report on Form 8-K dated June 30, 2003).2.6
    
    
    Transaction Agreement by and among Sunrise Senior Living Investments, Inc., Sunrise Fourth Senior Living Holdings,
LLC and Other Parties Named Therein dated as of June 30, 2003 (incorporated by reference to Exhibit 2.2 to
Sunrises Current Report on Form 8-K dated June 30, 2003).2.7
    
    
    Form of Loan Agreement by and between certain Limited Liability Companies (each as a Borrower) and Sunrise Senior
Living Investments, Inc. (as Lender) dated as of June 30, 2003 (incorporated by reference to Exhibit 2.3 to
Sunrises Current Report on Form 8-K dated June 30, 2003).2.8
    
    
    Form of Note by and between certain Limited Liability Companies (each a Borrower) and Sunrise Senior Living
Investments, Inc. (as Holder) dated as of June 30, 2003 (incorporated by reference to Exhibit 2.4 to Sunrises
Current Report on Form 8-K dated June 30, 2003).2.9
    
    
    Promissory Note dated June 30, 2003 by and between Sunrise North Naperville Assisted Living, L.L.C., the Borrower
and Sunrise Senior Living Investments, Inc., the Lender in the principal amount of $1,299,686 (incorporated by
reference to Exhibit 2.5 to Sunrises Current Report on Form 8-K dated June 30, 2003).2.10
    
    
    Promissory Note dated June 30, 2003 by and between Sunrise Third Plainview SL, LLC, the Borrower and Sunrise Senior
Living Investments, Inc., the Lender in the principal amount of $296,588 (incorporated by reference to Exhibit 2.6
to Sunrises Current Report on Form 8-K dated June 30, 2003).2.11
    
    
    Promissory Note dated June 30, 2003 by and between Sunrise Third Schaumburg SL, LLC, the Borrower and Sunrise
Senior Living Investments, Inc., the Lender in the principal amount of $2,125,326 (incorporated by reference to
Exhibit 2.7 to Sunrises Current Report on Form 8-K dated June 30, 2003).2.12
    
    
    Purchase and Sale Agreement by and among Sunrise Assisted Living Limited Partnership, Sunrise Farmington Hills
Assisted Living, L.L.C., Atlantic-Sunrise LLC, Sunrise Poland Assisted Living, L.L.C., Sunrise Raleigh Assisted
Living, LLC, Sunrise Assisted Living Limited Partnership VIII, L.P., and ADG on Sheepshead Bay, LLC, as Seller and
CNL Retirement Corp., as Purchaser and Twenty Pack Management Corp. as Tenant dated September 29, 2003
(incorporated herein by reference to Exhibit 2.1 to Sunrises Form 8-K filed with the S.E.C. on October 15, 2003).2.13
    
    
    Form of Purchase and Sale Agreement, dated September 30, 2003, by and among Sunrise Madison Senior Living, L.L.C.,
Sunrise Edmonds Assisted Living, Inc., Sunrise Cresskill Assisted Living, L.L.C. and Sunrise Beverly Hills Assisted
Living, L.L.C., as Sellers, CNL Retirement Corp., as Purchaser, and other named parties therein as Tenant
(incorporated herein by reference to Exhibit 2.2 to Sunrises Form 8-K filed with the S.E.C. on October 15, 2003).2.14
    
    
    Purchase and Sale Agreement by and among Sunrise Five Forks Assisted Living, L.L.C., as Seller and CNL Retirement
Corp., as Purchaser and Sunrise Five Forks Assisted Living, L.L.C. as Tenant dated September 30, 2003 (incorporated herein by reference to Exhibit 2.3 to Sunrises Form 8-K filed with the S.E.C. on October 15, 2003).
 83




---



##### 



ExhibitNumber
    
    Description2.15
    
    
    Master Agreement (CNL Q3 2003 Transaction) dated as of the 30th day of September, 2003 by and among (i) Sunrise
Development, Inc., (ii) Sunrise Senior Living Management, Inc., (iii) Twenty Pack Management Corp., Sunrise Madison
Senior Living, L.L.C. and Sunrise Development, Inc. (collectively, as the Tenant), (iv) CNL Retirement Sun1
Cresskill NJ, LP, CNL Retirement Edmonds WA, LP, CNL Retirement Sun1 Lilburn GA, LP and CNL Retirement Sun1 Madison
NJ LP, and (v) Sunrise Senior Living, Inc. (incorporated herein by reference to Exhibit 2.4 to Sunrises Form 8-K
filed with the S.E.C. on October 15, 2003).2.16
    
    
    Securities Purchase Agreement by and among Sunrise Senior Living, Inc., Greystone Partners, Ltd., Concorde Senior
Living, LLC, Mahalo Limited, Westport Advisors, Ltd., Greystone Development Company, LLC, Michael B. Lanahan, Paul
F. Steinhoff, Jr., Mark P. Andrews and John C. Spooner, dated as of May 2, 2005 (incorporated herein by reference
to Exhibit 2.1 to Sunrises Form 10-Q for the quarter ended June 30, 2005).2.17
    
    
    Asset Purchase Agreement by and among Sunrise Senior Living Investments, Inc., Fountains Continuum of Care Inc. and
various of its subsidiaries and affiliates, and George B. Kaiser, dated as of January 19, 2005 (incorporated herein
by reference to Exhibit 10.1 to Sunrises Form 10-Q for the quarter ended March 31, 2005).2.18
    
    
    Facilities Purchase and Sale Agreement by and among Sunrise Senior Living Investments, Inc., and Fountains
Charitable Income Trust and various of its subsidiaries and affiliates, dated as of January 19, 2005 (incorporated
herein by reference to Exhibit 10.2 to Sunrises Form 10-Q for the quarter ended March 31, 2005).2.19
    
    
    Purchaser Replacement and Release Agreement by and among Sunrise Senior Living, Inc. and various of its
subsidiaries and affiliates and Fountains Charitable Income Trust and various of its subsidiaries and affiliates,
dated as of February 18, 2005 (incorporated herein by reference to Exhibit 10.3 to Sunrises Form 10-Q for the
quarter ended March 31, 2005).3.1
    
    
    Restated Certificate of Incorporation of Sunrise (incorporated herein by reference to Exhibit 3.1 to Sunrises Form
S-1 Registration Statement No. 333- 13731).3.2
    
    
    Certificate of Amendment to Restated Certificate of Incorporation of Sunrise regarding name change (incorporated
herein by reference to Exhibit 3.1 to Sunrises Form 10-Q for the quarter ended June 30, 2003).3.3
    
    
    Amended and Restated Bylaws of Sunrise, as amended (incorporated herein by reference to Exhibit 3 to Sunrises Form
10-Q for the quarter ended September 30, 1997).4.1
    
    
    Form of common stock certificate (incorporated herein by reference to Exhibit 4.1 to Sunrises Form S-1
Registration Statement No. 333-13731).4.2
    
    
    Stockholder Rights Agreement (incorporated herein by reference to Exhibit 4.2 to Sunrises Form S-1 Registration
Statement No. 333-13731).4.3
    
    
    Amendment No. 1 to Rights Agreement, dated as of December 17, 1998, between Sunrise and First Union National Bank
of North Carolina (incorporated herein by reference to Exhibit 99(a) to Sunrises Form 8-K dated December 18,
1998).4.4
    
    
    Indenture, dated as of January 30, 2002, between Sunrise and First Union National Bank, as Trustee (incorporated
herein by reference to Exhibit 4.1 to Sunrises Form S-3 Registration Statement (No. 333-85622)).10.1
    
    
    +Amended and Restated Employment Agreement dated as of November 13, 2003 by and between Sunrise and Paul J.
Klaassen (incorporated herein by reference to Exhibit 10.1 to Sunrises 2003 Form 10-K).10.2
    
    
    +2000 Stock Option Plan (incorporated herein by reference to Exhibit 10.4 to Sunrises 2003 Form 10-K).10.3
    
    
    Assignment and Contribution Agreement, effective as of January 4, 1995, by and between Paul and Teresa Klaassen and
Sunrise (incorporated herein by reference to Exhibit 10.1.1 to Sunrises Form S-1 Registration Statement No.
333-2582).10.4
    
    
    Letter Agreement, dated January 4, 1995, from Paul J. Klaassen and Teresa M. Klaassen to the Series A Preferred
Stockholders regarding cash distributions from Sunrise Retirement Investments, Inc., Sunrise Terrace of Gunston,
Inc., Sunrise Terrace of Countryside, Inc. and Sunrise Atrium, Inc. (incorporated herein by reference to Exhibit
10.19 to Sunrises Form S-1 Registration Statement No. 33-2852).
 84




---



##### 



ExhibitNumber
    
    Description10.5
    
    
    Amended and Restated Lease Agreement and Assignment of Leasehold Right, dated June 6, 1994, by and among Barbara M.
Volentine and Teresa M. Klaassen, the Executor of the Estate of Eldon J. Merritt, Sunrise Assisted Living Limited
Partnership Assisted Living Group  Fairfax Associates, and Sunrise Foundation, Inc., as amended (incorporated
herein by reference to Exhibit 10.15 to Sunrises Form S-1 Registration Statement No. 333-2582).10.6
    
    
    Ground Lease, dated June 7, 1994, by and between Sunrise Assisted Living Limited Partnership and Paul J. Klaassen
and Teresa M. Klaassen (incorporated herein by reference to Exhibit 10.16 to Sunrises Form S-1 Registration
Statement No. 333-2582).10.7
    
    
    Amended and Restated Agreement of Sublease, Indemnification and Easements dated February 5, 1995 by and between
Assisted Living Group  Fairfax Associates and Sunrise Foundation, as amended (incorporated herein by reference to
Exhibit 10.17 to Sunrises Form S-1 Registration Statement No. 333-2582).10.8
    
    
    +1995 Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.20 to Sunrises 1997 Form 10-K).10.9
    
    
    +1996 Directors Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.21 to Sunrises 1997
Form 10-K).10.10
    
    
    +1996 Non-Incentive Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.8 to Sunrises
Form 10-Q for the quarter ended March 31, 2000).10.11
    
    
    +1997 Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.25 to Sunrises 1997 Form 10-K).10.12
    
    
    +1998 Stock Option Plan, as amended (incorporated herein by reference to Exhibit 10.41 to Sunrises 1998 Form 10-K).10.13
    
    
    +1999 Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to Sunrises Form 10-Q for the quarter
ended March 31, 1999).10.14
    
    
    +Executive Deferred Compensation Plan, effective June 1, 2001 (incorporated herein by reference to Exhibit 10.14 to
Sunrises Form 10-Q for the quarter ended June 30, 2001).10.15
    
    
    +Amendment to Sunrise Assisted Living Executive Deferred Compensation Plan (incorporated herein by reference to
Exhibit 10.2 to Sunrises Form 10-Q for the quarter ended June 30, 2003).10.16
    
    
    +2001 Stock Option Plan (incorporated herein by reference to Exhibit 10.15 to Sunrises Form 10-Q for the quarter
ended June 30, 2001).10.17
    
    
    +Sunrise employee stock purchase plan, as amended (incorporated herein by reference to Exhibit B to Sunrises Proxy
Statement for the 2005 Annual Meeting of Stockholders).10.18
    
    
    +2002 Stock Option and Restricted Stock Plan (incorporated herein by reference to Exhibit 10.1 to Sunrises Form
10-Q for the quarter ended June 30, 2002).10.19
    
    
    +2003 Stock Option and Restricted Stock Plan (incorporated herein by reference to Exhibit 10.1 to Sunrises Form
10-Q for the quarter ended June 30, 2003).10.20
    
    
    +Chief Executive Officer Severance Plan (incorporated herein by reference to Exhibit 10.5 to Sunrises Form 10-Q
for the quarter ended March 31, 2000).10.21
    
    
    +Senior Executive Officer Severance Plan (incorporated herein by reference to Exhibit 10.6 to Sunrises Form 10-Q
for the quarter ended March 31, 2000).10.22
    
    
    Loan and Security Agreement dated as of May 8, 2001 by and among Sunrise Fairfax Assisted Living, L.L.C. and Chevy
Chase Bank, F.S.B. (incorporated herein by reference to Exhibit 10.1 to Sunrises Form 10-Q for the quarter ended
June 30, 2001).
 85




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##### 



ExhibitNumber
    
    Description10.23
    
    
    Guaranty of Payment dated as of May 8, 2001 by Sunrise Assisted Living, Inc. in favor of Chevy Chase Bank, F.S.B.
for loan to Sunrise Fairfax Assisted Living, L.L.C. (incorporated herein by reference to Exhibit 10.2 to Sunrises
Form 10-Q for the quarter ended June 30, 2001).10.24
    
    
    +Form of Sunrise At-Home Senior Living, Inc. Restricted Stock Agreement (incorporated herein by reference to
Exhibit 10.88 to Sunrises 2001 Form 10-K).10.25
    
    
    +Form of Sunrise Assisted Living Holdings, L.P. Class A Limited Partner Unit Agreement (incorporated herein by
reference to Exhibit 10.89 to Sunrises 2001 Form 10-K).10.26
    
    
    Master Credit Facility Agreement by and between Sunrise Riverside Assisted Living, L.P., Sunrise Parma Assisted
Living, L.L.C., Sunrise Wilton Assisted Living, L.L.C., Sunrise Wall Assisted Living, L.L.C., Sunrise Weston
Assisted Living, Limited Partnership and Glaser Financial Group, Inc. dated as of November 29, 2001, as amended
(incorporated herein by reference to Exhibit 10.6 to Sunrises Form 10-Q for the quarter ended March 31, 2002).10.27
    
    
    Transaction Agreement by and among Sunrise Assisted Living Investments, Inc., Sunrise Second Assisted Living
Holdings, LLC and the Other Parties Named Therein dated as of September 30, 2002 (incorporated herein by reference
to Exhibit 2.1 to Sunrises Form 10-Q for the quarter ended September 30, 2002).10.28
    
    
    +Sunrise Assisted Living, Inc. Long Term Incentive Cash Bonus Plan effective August 23, 2002 (incorporated herein
by reference to Exhibit 10.1 to Sunrises Form 10-Q for the quarter ended September 30, 2002).10.29
    
    
    +Amendment 1 to the Sunrise Assisted Living, Inc. Long Term Incentive Cash Bonus Plan (incorporated herein by
reference to Exhibit 10.48 to Sunrises 2004 Form 10-K).10.30
    
    
    Limited Liability Agreement of AL U.S. Development Venture, LLC dated as of December 23, 2002 by and between
Sunrise Assisted Living Investments, Inc. and AEW Senior Housing Company, LLC. (incorporated herein by reference to
Exhibit 10.98 to Sunrises 2002 Form 10-K).10.31
    
    
    ROFO Agreement dated as of December 23, 2002 by and between AEW Capital Management, L.P., Sunrise Assisted Living,
Inc., Sunrise Assisted Living Investments, Inc., Sunrise Assisted Living Management, Inc., and Sunrise Development,
Inc. (incorporated herein by reference to Exhibit 10.99 to Sunrises 2002 Form 10-K).10.32
    
    
    Second Amended and Restated Operating Agreement of Sunrise Second Assisted Living Holdings, LLC dated as of
December 20, 2002 by and between Sunrise Assisted Living Investments, Inc. and US Assisted Living Facilities II,
Inc. (incorporated herein by reference to Exhibit 10.100 to Sunrises 2002 Form 10-K).10.33
    
    
    Revolving Credit Agreement dated as of December 23, 2002 by and between AL U.S. Development Venture, LLC, as
Borrower and Sunrise Assisted Living, Inc. as Lender (incorporated herein by reference to Exhibit 10.101 to
Sunrises 2002 Form 10-K).10.34
    
    
    Development Agreement dated as of December 23, 2002 by and between Sunrise Development, Inc. and certain Sunrise
affiliates (incorporated herein by reference to Exhibit 10.102 to Sunrises 2002 Form 10-K).10.35
    
    
    Amended and Restated Master Owner/Manager Agreement dated as of December 20, 2002 by and between Sunrise Second
Assisted Living Holdings, LLC, together with its subsidiaries, and Sunrise Assisted Living Management, Inc.
(incorporated herein by reference to Exhibit 10.103 to Sunrises 2002 Form 10-K).10.36
    
    
    Operating Deficit Loan Agreement dated as of December 23, 2002 by and between Sunrise Assisted Living Management,
Inc. and certain Sunrise affiliates (incorporated herein by reference to Exhibit 10.104 to Sunrises 2002 Form
10-K).10.37
    
    
    Pre-Opening Services and Management Agreement dated as of December 23, 2002 by and between Sunrise Assisted Living
Management, Inc. and certain Sunrise affiliates (incorporated herein by reference to Exhibit 10.105 to Sunrises
2002 Form 10-K).
 86




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##### 



ExhibitNumber
    
    Description10.38
    
    
    Financing Agreement dated as of March 24, 2003 by and between Sunrise Assisted Living, Inc. as Borrower and Bank of
America, N.A. as Lender (incorporated herein by reference to Exhibit 10.1 to Sunrises Form 10-Q for the quarter
ended March 31, 2003).10.39
    
    
    Guaranty of Payment dated as of March 24, 2003 by Sunrise Development, Inc., Sunrise Assisted Living Investments,
Inc. and Sunrise Assisted Living Management, Inc. in favor of Bank of America, N.A. (incorporated herein by
reference to Exhibit 10.2 to Sunrises Form 10-Q for the quarter ended March 31, 2003).10.40
    
    
    Revolving Credit Note dated as of March 24, 2003 by Sunrise Assisted Living, Inc. as Borrower and Bank of America,
N.A. as Lender in the principal amount of $50 million (incorporated herein by reference to Exhibit 10.3 to
Sunrises Form 10-Q for the quarter ended March 31, 2003).10.41
    
    
    Assumption and Reimbursement Agreement made effective as of March 28, 2003, by and among Marriott International,
Inc., Sunrise Assisted Living, Inc., Marriott Senior Living Services, Inc. and Marriott Continuing Care, LLC
(incorporated herein by reference to Exhibit 10.4 to Sunrises Form 10-Q for the quarter ended March 31, 2003).10.42
    
    
    Assumption and Reimbursement Agreement (CNL) made effective as of March 28, 2003, by and among Marriott
International, Inc., Marriott Continuing Care, LLC, CNL Retirement Properties, Inc., CNL Retirement MA3
Pennsylvania, LP, and CNL Retirement MA3 Virginia, LP (incorporated herein by reference to Exhibit 10.5 to
Sunrises Form 10-Q for the quarter ended March 31, 2003).10.43
    
    
    Purchase and Sale Agreement dated as of December 10, 2004, by and among Sunrise of Lynn Valley Limited, Sunrise of
Beacon Hill Limited, Sunrise of Mississauga Limited, Sunrise of Markham Limited, Sunrise of Windsor Limited,
Sunrise of Richmond Hill Limited, Sunrise of Oakville Limited, S.A.L. Operations B.H. Inc., S.A.L. Operations
(Canada) Inc. and S.A.L. Operations B.N.S. Inc., as Sellers, and Sunrise Senior Living, Inc., as Purchaser
(incorporated herein by reference to Exhibit 10.48 to Sunrises 2004 Form 10-K).10.44
    
    
    +Form of Executive Restricted Stock Agreement under the Sunrise Senior Living, Inc. [2002][2003] Stock Option and
Restricted Stock Plan (incorporated herein by reference to Exhibit 10.4 to Sunrises Form 10-Q for the quarter
ended March 31, 2005).10.45
    
    
    +Form of Non-Executive Restricted Stock Agreement under the Sunrise Senior Living, Inc. [2002][2003] Stock Option
and Restricted Stock Plan (incorporated herein by reference to Exhibit 10.5 to Sunrises Form 10-Q for the quarter
ended March 31, 2005).10.46
    
    
    +Summary of Certain Compensation Arrangements for Named Executive Officers (incorporated herein by reference to
Exhibit 10.6 to Sunrises Form 10-Q for the quarter ended March 31, 2005).10.47
    
    
    +Employment Agreement by and between Sunrise Senior Living, Inc. and Michael B. Lanahan, dated as of May 10, 2005
(incorporated herein by reference to Exhibit 10.1 to Sunrises Form 10-Q for the quarter ended June 30, 2005).10.48
    
    
    +Restricted Stock Agreement by and between Sunrise Senior Living, Inc. and Michael B. Lanahan, dated as of May 10,
2005 (incorporated herein by reference to Exhibit 10.2 to Sunrises Form 10-Q for the quarter ended June 30, 2005).10.49
    
    
    +Non-Employee Director Fees and Other Compensation (incorporated herein by reference to Exhibit 10.1 to Sunrises
Current Report on Form 8-K filed on September 14, 2005).10.50
    
    
    +Form of Stock Option Agreement for Sunrise Senior Living, Inc. [Year] Stock Option [and Restricted Stock] Plan
(incorporated by reference to Exhibit 10.2 to Sunrises Current Report on Form 8-K filed on September 14, 2005).10.51
    
    
    +Summary of Compensation Arrangement for Chief Financial Officer (incorporated herein by reference to Exhibit 10.3
to Sunrises Form 10-Q for the quarter ended September 30, 2005).10.52
    
    
    Credit Agreement, dated as of December 2, 2005, by and among Sunrise Senior Living, Inc. and certain subsidiaries,
as the Borrowers, the subsidiaries of the Borrower as identified therein, as the Guarantors, Bank of America, N.A.,
as the Administrative Agent, Swing Line Lender and L/C Issuer, Wachovia Bank, National Association, as Syndication
Agent and other lender parties thereto (incorporated by reference to Exhibit 10.1 to Sunrises Current Report on
Form 8-K filed on December 8, 2005).
 87




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##### 



ExhibitNumber
    
    Description10.53
    
    
    +Sunrise Senior Living, Inc. Senior Executive Severance Plan.10.54
    
    
    +Form of Indemnification Agreement.10.55
    
    
    +Form of Restricted Stock Unit Agreement for Sunrise Senior Living, Inc. 2003 Stock Option and Restricted Stock
Plan (incorporated by reference to Exhibit 10.1 to Sunrises Current Report on Form 8-K filed on March 14, 2006).10.56
    
    
    +Bonus Deferral Programs for Certain Executive Officers (incorporated by the reference to Exhibit 10.2 to Sunrises
Current Report on Form 8-K filed March 14, 2006).12
    
    
    Statements Regarding Computation of Ratios.21
    
    
    Subsidiaries of the Registrant.23
    
    
    Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.31.1
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 +
    
    Represents management contract or compensatory plan or arrangement.(c)
    
    Financial Statement Schedules.Not applicable. 88




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##### 



SIGNATURES
  SUNRISE SENIOR LIVING, INC.By:
    
    /s/ Paul J. KlaassenPaul J. Klaassen, Chairman of the Board andChief Executive Officer
  PRINCIPAL EXECUTIVE OFFICER
    
    
    
    PRINCIPAL FINANCIAL OFFICERBy:
    
    /s/ Paul J. Klaassen
    
    
    
    By:
    
    /s/ Bradley B. RushPaul J. Klaassen, Chairman of the Board and
    
    
    
    
    
    Bradley B. Rush, Chief Financial OfficerChief Executive OfficerPRINCIPAL ACCOUNTING OFFICERBy:
    
    /s/ J. Barron Anschutz

J. Barron Anschutz, Chief Accounting OfficerDIRECTORSBy:
    
    /s/ Ronald V. Aprahamian
    
    
    
    By:
    
    /s/ Paul J. KlaassenRonald V. Aprahamian, Director
    
    
    
    
    
    Paul J. Klaassen, Chairman of the Board andChief Executive OfficerBy:
    
    /s/ Craig R. Callen
    
    
    
    By:
    
    /s/ Teresa M. KlaassenCraig R. Callen, Director
    
    
    
    
    
    Teresa M. Klaassen, DirectorBy:
    
    /s/ Thomas J. Donohue
    
    
    
    By:
    
    /s/ William G. LittleThomas J. Donohue, Director
    
    
    
    
    
    William G. Little, DirectorBy:
    
    /s/ J. Douglas HolladayJ. Douglas Holladay, Director
 89