<PAGE>   1
                                                                 EXHIBIT 10.31.7


                              AMENDED AND RESTATED
                       COLLATERAL ASSIGNMENT OF OPERATING
                      AGREEMENTS AND MANAGEMENT CONTRACTS
                                    (MASTER)

         THIS AMENDED AND RESTATED COLLATERAL ASSIGNMENT OF OPERATING
AGREEMENTS AND MANAGEMENT CONTRACTS (this "Collateral Assignment") is made this
23rd day of December, 1997, by SUNRISE EAST ASSISTED LIVING LIMITED
PARTNERSHIP, a Virginia limited partnership (the "Borrower"), and SUNRISE
ASSISTED LIVING MANAGEMENT, INC., a Virginia corporation, formerly known as
Sunrise Terrace, Inc. (the "Management Company"; the Borrower and the
Management Company being hereinafter referred to collectively and individually
as the "Assignor"), to NATIONSBANK, N.A. as agent (the "Agent") for itself and
for certain additional lenders (collectively with the Agent, the "Lenders") who
are participating in a bank group pursuant to an Amended and Restated Agency
Agreement of even date herewith (as amended, restated or substituted from time
to time, the "Agency Agreement").

                                R E C I T A L S

         A.      The Borrower obtained from the Agent and certain other lenders
(collectively, the "Original Lenders") a credit facility in the maximum
principal sum of $90,000,000 (the "Original Credit Facility") which was a
non-revolving line of credit pursuant to which the Borrower could obtain
certain construction/interim loans (each a "Facility Loan;" collectively, the
"Facility Loans") for assisted living facilities and independent living
facilities.  The Original Credit Facility has been evidenced by a Master
Promissory Note dated June 13, 1996 as amended pursuant to a First Amendment to
Master Promissory Note dated September 5, 1996 and by a Second Amendment to
Master Promissory Note dated March 31, 1997 (collectively, the "Master Note").

         B.      In connection with the making of each Facility Loan, the
Borrower executed a promissory note in the maximum principal sum of each
Facility Loan (each a "Facility Note" and collectively, the "Facility Notes").
Availability under the Master Note was reduced by the principal sum of each
Facility Note.  In connection with the Original Credit Facility, the Management
Company executed a Collateral Assignment of Operating Agreements and Management
Contracts dated June 13, 1996 for the benefit of the Original Lenders (the
"Original Collateral Assignment").

         C.      The Borrower has applied to the Lenders to increase the
maximum principal sum of the Original Credit Facility to $250,000,000 or such
greater amount as the Lenders may from time to time commit to lend pursuant to
the Agency Agreement (such
<PAGE>   2
increased and modified credit facility being hereinafter referred to as the
"Credit Facility" or the "Loan") and to provide that the Credit Facility will
be revolving.  Advances or readvances are to be made pursuant to, and secured
by, the provisions of that certain Amended and Restated Financing and Security
Agreement dated the same date as this Agreement by and between the Agent and
the Borrower (as amended, restated or substituted from time to time, the
"Financing Agreement") and that certain Amended and Restated Master
Construction Loan Agreement dated the same as this Agreement by and between the
Agent and the Borrower (as amended, restated or substituted from time to time,
the "Construction Agreement").

         D.      The Loan will be evidenced by an Amended, Restated and
Increased Master Promissory Note (as amended, restated, renewed or
resubstituted from time to time, the "Note").  The Note will be secured by,
among other things, certain Deeds of Trust (as defined in the Financing
Agreement) from the Borrower or a Guarantor Subsidiary in favor of the Lenders
covering the Borrower's or the Guarantor Subsidiary's interest in the Land and
the Improvements for the applicable Facility (as defined hereinafter) and such
other real and personal property as shall be therein more particularly set
forth (collectively, the "Property").  The Credit Facility is evidenced,
secured and guaranteed by certain Financing Documents (as defined in the
Financing Agreement).

         E.      The Management Company is one hundred percent (100%) owned by
Sunrise Assisted Living, Inc., a Delaware corporation.

         F.      The Lenders have agreed to make the Loan to the Borrower with
the condition precedent that, to the extent permitted by Laws (as hereinafter
defined) and the applicable Operating Agreements (as hereinafter defined) and
Contracts (as hereinafter defined), the Assignor collaterally assigns to the
Agent on behalf of the Lenders and their respective successors and assigns, all
of their right, title and interest in, under and to any and all contracts and
agreements previously, now or hereafter at any time executed and delivered by
the Assignor with respect to the acquisition, operation, maintenance, and
management of and employment of those assisted living facilities and/or
independent living facilities owned by the Borrower or a Guarantor Subsidiary
which are encumbered by a Deed of Trust (individually, the "Facility",
collectively, the "Facilities"), or otherwise concerning the operations and
business of the Facilities, including, without limitation:  (i) any and all
agreements entered into by the Assignor in connection with the operation of the
Facilities (hereinafter collectively referred to as the "Operating Agreements")
and (ii) any and all service and maintenance contracts, any and all employment
contracts, any and all management contracts, consulting agreements, medical
service agreements, transfer agreements, laboratory servicing agreements,





                                     - 2 -
<PAGE>   3
physician, other clinician or other professional services provider contracts,
resident agreements, food and beverage service contracts, pharmaceutical
contracts and all other contracts for the maintenance of, or provision of
services to the Facilities, and including, but not limited to, the Management
Agreement to be entered into on or before the issuance of the first certificate
of occupancy for the Facilities (the "Management Agreement"), by and between
the Borrower and the Management Company (all as amended, restated, supplemented
or modified, collectively the "Contracts" and singularly, a "Contract"), and
collaterally assigns and grants to the Lenders a security interest in, and lien
on, all right, title and interest of the Assignor in, to, and under such
Operating Agreements and Contracts as collateral and security for the Loan and
other Obligations.

         G.      In accordance with, and pursuant to, that certain management
agreement by and between the Management Company and the Borrower dated
September 5, 1996 pertaining to the Facilities known as Sunrise of Morris
Plains, Sunrise of Old Tappan and Sunrise of Wayne and pursuant to other
agreements to be executed for other Facilities, the Management Company has
agreed or will agree to manage and operate each of the Facilities (all of such
management agreements, together with any and all amendments thereto, extensions
thereof and substitutions therefor are herein collectively referred to as the
"Management Agreement").

         H.      The Management Company and the Borrower have requested that
the Agent enter into the Financing Agreement with the Borrower and have
requested that the Lenders make the Loan to the Borrower pursuant thereto.

         I.      The Lenders have required, as a condition precedent to the
execution and delivery of the Financing Agreement and the making of the Loan
thereunder, the execution and delivery of this Agreement by both the Management
Company and the Borrower.

         J.      All capitalized terms used in this Agreement and not defined
herein shall have the meaning given to such terms in the Financing Agreement.

                                   AGREEMENTS

         NOW, THEREFORE, in consideration of the premises, of the respective
representations, covenants and agreements hereinafter contained, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Lenders to make the Loan to the
Borrower and as security for the Obligations, the Assignor hereby covenants and
agrees with the Agent and amends and restates the Original Collateral
Assignment in its entirety as follows:





                                     - 3 -
<PAGE>   4
                                   ARTICLE 1

                          DEFINITIONS AND CONSTRUCTION

         SECTION 1.1      Recitals.  The Recitals set forth hereinabove are
incorporated herein by reference.

         SECTION 1.2      Definitions.  All capitalized terms used in this
Collateral Assignment shall have the respective meanings specified in the
Financing Agreement, unless the context clearly indicates otherwise.

         SECTION 1.3      Rules of Construction.  (a) The words "hereof",
"herein", "hereunder" "hereto", and other words of similar import refer to this
Collateral Assignment in its entirety.

         (b)     The terms "agree" and "agreements" contained herein are
intended to include and mean "covenant" and "covenants".

         (c)     References to Articles, Sections, and other subdivisions of
this Collateral Assignment are to the designated Articles, Sections, and other
subdivisions of this Collateral Assignment as originally executed.

         (d)     The headings of this Collateral Assignment are for convenience
only and shall not define or limit the provisions hereof.

         (e)     All references made (i) in the neuter, masculine or feminine
gender shall be deemed to have been made in all such genders, and (ii) in the
singular or plural number shall be deemed to have been made, respectively, in
the plural or singular number as well.

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

         SECTION 2.1.  Operating Agreements and Contracts.  The Assignor
represents and warrants to the Lenders that (a) the Operating Agreements and
Contracts will be at the time of execution and delivery thereof valid and
binding on the parties thereto, will be at the time of execution and delivery
thereof in full force and effect, and will not be evidenced by any chattel
paper or instrument, (b) the Assignor has not made any previous collateral
assignment of the Operating Agreements or Contracts to any person except for
collateral assignments which have been terminated prior to or as of the date
hereof, and (c) no financing statement covering any of the Operating Agreements
or Contracts is on file in any public office except financing statements in
favor of the Lenders and except those which have





                                     - 4 -
<PAGE>   5
been terminated prior to or as of the date hereof.

                                  ARTICLE III

                             COLLATERAL ASSIGNMENT

         SECTION 3.1.  Collateral Assignment.  As security and collateral for
the payment and performance of, and compliance with, all of the Obligations,
and to the extent permitted under Laws or by the applicable Operating
Agreements or Contracts, the Assignor hereby collaterally assigns to the
Lenders, and grants to the Lenders, a lien on, and security interest in, all
right, title and interest of the Assignor in, to, and under the Operating
Agreements and Contracts (as Operating Agreements and Contracts are defined in
Recital F of this Collateral Assignment, which Operating Agreements and
Contracts shall specifically include, but shall not be limited to, the
Management Agreement), together with all cash and non-cash proceeds thereof;
provided, however, that nothing contained herein shall impose upon the Lenders
any of the obligations or liabilities of the Assignor under any of the
Operating Agreements or Contracts and provided further that the Lenders shall
not exercise any rights under such Operating Agreements or Contracts unless and
until an Event of Default under the Financing Documents has occurred.  The
Lenders also acknowledge that, in connection with any exercise of such of the
security interests or other rights created herein, it may be necessary to
obtain approvals of, consents from, or new agreements with, various third
parties.

                                   ARTICLE IV

                                   COVENANTS

         Until payment and performance in full of all of the Obligations, the
Assignor hereby covenants and agrees as follows:

         SECTION 4.1.  Further Assurances.  The Assignor shall promptly upon
request execute, acknowledge and deliver any financing statement, renewal,
affidavit, deed, collateral assignment, continuation statement, security
agreement, certificate or other document as the Agent may reasonably require in
order to perfect, preserve, maintain, protect, continue and/or extend the
collateral assignment, lien or security interest of the Lenders under this
Collateral Assignment and its priority.  The Assignor shall pay to the Agent on
demand all taxes, costs and expenses incurred by the Lenders in connection with
the preparation, execution, recording and filing of any such document or
instrument mentioned aforesaid.  Such taxes, costs and expenses shall
constitute and become a part of the Obligations.

         SECTION 4.2.  Performance under and Amendments to Operating Agreements
and Contracts.  The Assignor shall fully, promptly and





                                     - 5 -
<PAGE>   6
faithfully comply with and perform all of its obligations and duties under all
terms of the Operating Agreements and Contracts in accordance with the terms
thereof, and will make no changes or amendments to the Operating Agreements and
Contracts which are not customarily made in the ordinary course of business and
which result in a material adverse effect on the financial condition or
operations of the Assignor, or terminate or cancel any of the Operating
Agreements and Contracts, other than in the ordinary course of business.
Copies of all amendments to the Operating Agreements and Contracts will be
delivered by the Assignor to the Agent.

         SECTION 4.3.  Information and Notifications.  The Assignor shall
promptly notify the Agent in writing of the modification of any of the material
provisions of any of the Operating Agreements or Contracts which would result
in a materially adverse change in the financial condition or operations of the
Assignor.

         SECTION 4.4.  Books and Records; Inspections.  The Assignor shall at
all times keep accurate and complete records of performance by the Assignor
under the Operating Agreements and Contracts, and the Agent, or any of its
respective agents, shall have the right to call at the place or places of
business of the Assignor at reasonable intervals to be determined by the Agent,
during normal business hours, and without hindrance or delay, to inspect,
audit, check and make extracts from the books, records, journals, orders,
receipts, correspondence and other data relating to the Operating Agreements
and Contracts.

                                   ARTICLE V

                             DEFAULTS AND REMEDIES

         SECTION 5.1.  Remedies upon Default.  Subject to the provisions and
understandings of Section 3.1 of this Collateral Assignment, upon or at any
time after the occurrence and during the continuance of an Event of Default,
the Agent may, without notice, without regard to the adequacy of security for
the Obligations and in addition to any other remedy which the Lenders may have
at law or in equity under the Financing Documents, either in person or by agent
with or without bringing any action or proceeding, or by a receiver to be
appointed by a court, enforcing any and all rights and remedies of the Assignor
under and in connection with any of the Operating Agreements or Contracts, to
the extent permitted by Law, and subject to the provisions of the Financing
Agreement, Section 3.1 of this Collateral Assignment, the Operating Agreements
and the Contracts, make, cancel, enforce or modify any of the Operating
Agreements or the Contracts and do any acts which the Agent deems proper to
protect the security hereof, including, without limitation, the collateral
assignment of any such Operating Agreements or Contracts to third parties, and
either with or





                                     - 6 -
<PAGE>   7
without taking possession of the Facilities, in its own name as agent for the
Lenders sue for or otherwise collect and receive such fees, issues and profits,
including those past due and unpaid, and apply the same, less costs and
expenses of operation and collection, including just and reasonable
compensation for all of its employees and other agents, to the Obligations.
The Assignor agrees that the failure of the Assignor to comply with any of the
covenants contained herein for a period of thirty (30) days after the date the
Agent notifies the Assignor in writing shall constitute an immediate Default
under the Financing Agreement.

         SECTION 5.2.  Indemnification.  The Assignor shall and does hereby
agree to indemnify and to hold the Lenders harmless of and from any and all
liability, loss or damage which it may or might incur under any of the
Operating Agreements or the Contracts or by reason of this Collateral
Assignment, except those arising from any fraud, willful misconduct or gross
negligence of the Lenders, and of and from any and all claims and demands
whatsoever which may be asserted against the Lenders, by reason of any alleged
obligations or undertaking on its part to perform or discharge any of the
terms, covenants or conditions contained in any of the Operating Agreements or
the Contracts, except those claims arising by reason of any such alleged
obligations or undertakings on the part of the Lenders subsequent to the date
on which the Borrower has no legal title or any other interest in the
Facilities.  Should the Lenders incur any such liability, loss or damage under
any of the Operating Agreements or the Contracts or under or by reason of this
Collateral Assignment, or in the defense of any such claims or demands, the
amount thereof, including costs, expenses and attorneys' fees, shall be secured
hereby, and the Assignor shall reimburse the Lenders therefor immediately upon
demand, with interest at the Post-Default Rate.

                                   ARTICLE VI

                                 MISCELLANEOUS

         SECTION 6.1.  Continuation of Collateral Assignment.  Upon the payment
and performance in full of all of the Obligations, this Collateral Assignment
shall become and be void and of no effect, but the affidavit of any officer of
the Agent showing any part of the Obligations to remain unpaid or unperformed,
shall be and constitute conclusive evidence of the validity, effectiveness and
continuing force of this Collateral Assignment, and any Person may and is
hereby authorized to rely thereon.  A demand on any party under any of the
Operating Agreements or Contracts by the Agent for the payment of any moneys to
be paid to the Assignor in connection with or under any one of the Operating
Agreements or Contracts, upon any Event of Default claimed by the Agent shall
be sufficient to warrant such party to make future payments of such moneys to
the Agent without the necessity for





                                     - 7 -
<PAGE>   8
further consent by the Assignor.

         SECTION 6.2.  Successors and Assigns.  The rights, powers, privileges
and discretions (hereinafter collectively called the "rights") specifically
granted to the Lenders are not in limitation of, but in addition to, those to
which the Lenders are entitled under any general or local law relating to such
collateral assignments.  The rights to which the Lenders may be entitled shall
inure to the benefit of their successors and assigns.  All the rights of the
Lenders are cumulative and not alternative and may be enforced successfully or
concurrently.  Failure of the Lenders to exercise any of their rights shall not
impair any of their rights nor be deemed a waiver thereof and no waiver of any
of their rights shall be deemed to apply to any other such rights nor shall it
be effective unless in writing and signed by the Agent.

         The terms and conditions agreed to by the Assignor and the covenants
of the Assignor shall be binding upon its successors and assigns, but this
provision does not waive any prohibition of assignment or any requirement of
consent to an assignment.

         SECTION 6.3.  Waiver of Acceptance by Assignor.  The Assignor hereby
waives acceptance of this Collateral Assignment by the Lenders.

         SECTION 6.4.  Illegality; Severability.  If fulfillment of any
provision hereof or any transaction related hereto, at the time transcending
the limit of validity prescribed by law, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provision herein contained operates or would prospectively operate to
invalidate this Collateral Assignment in whole or part, then such clause or
provision only shall be void as though not herein contained, and the remainder
of this Collateral Assignment shall remain operative and in full force and
effect.

         SECTION 6.5.  Amendments.  Neither this Collateral Assignment nor any
term, condition, representation, warranty, covenant or agreement hereof may be
changed, waived, discharged or terminated orally, but, rather, only by an
instrument in writing by the party against whom such change, waiver, discharge
or termination is sought.

         SECTION 6.6.  Governing Law.  This Collateral Assignment shall be
governed and construed in accordance with the laws of the Commonwealth of
Virginia.

         SECTION 6.7.  Duplicate Originals.  This Collateral Assignment may be
executed in any number of duplicate originals, each of which shall be an
original but all of which together shall constitute one and the same
instrument.





                                     - 8 -
<PAGE>   9
         IN WITNESS WHEREOF, each Assignor has executed this Collateral
Assignment by its duly authorized partner or officer, under seal, as of the day
and year first above written.

                                    ASSIGNOR:

                                    BORROWER:

WITNESS OR ATTEST:                  SUNRISE EAST ASSISTED LIVING LIMITED
                                    PARTNERSHIP, a Virginia limited partnership

__/s/ Wayne G. Tatusko _    By:     Sunrise Assisted Living
  ---------------------             Investments, Inc., general partner


                                             By: /S/ James S. Pope (SEAL)
                                                ------------------
                                                James S. Pope
                                                Vice President


                                    MANAGEMENT COMPANY:

WITNESS OR ATTEST:                  SUNRISE ASSISTED LIVING MANAGEMENT, INC.,
                                    a Virginia corporation


__/s/ Wayne G. Tatusko      By: /S/ James S. Pope          (SEAL)
  --------------------         ----------------------------
                                       James S. Pope
                                       Vice President





                                     - 9 -