MCLEAN, Va. - Sunrise Assisted Living Inc. and a co-bidder are in talks to buy Marriott International Inc.'s senior living division, Sunrise said yesterday.
The co-bidder would own the properties and Sunrise would manage them, said Charles Post, a senior vice president at Sunrise. He declined to identify the co-bidder. The business provides assisted-living housing for the elderly. The unit may sell for about $450 million, based on the value of the real estate, said Marc Falcone, an analyst with Deutsche Bank.
Sunrise is expanding by selling its properties while retaining the management contracts to raise cash for the development of new communities. Bethesda-based Marriott, the largest U.S. hotel company, said this year that it may sell or spin off its senior living unit to focus on its lodging business.
For Marriott, "the proceeds they can get can be deployed in growing the brand," including opening new hotels, Falcone said.
Sunrise's Post said there are other bidders for the Marriott unit, which earned $17 million in the third quarter, or about 17 percent of Marriott's net income. Marriott manages 153 facilities with about 26,000 units. The company owns about 50 of the units.
Marriott spokesman Roger Conner confirmed that the company is in talks with Sunrise and others for a sale of the unit, without elaborating. The company has said it wants to reach an agreement to sell the business by year's end.
Marriott entered the senior living business in 1984, and is withdrawing after a glut of development crimped profit in the industry. Marriott is also leaving a business that distributes food and other services to hotels and restaurants.
Five Star Quality Care Inc., an owner and operator of senior living centers, said last week that it wanted to terminate Marriott's management agreement covering 31 of its facilities. Five Star alleged that Marriott improperly profited from the purchase of goods for the centers through its Avendra LLC venture and overcharged Five Star for insurance costs.
Five Star said it filed a lawsuit in Massachusetts Superior Court to block Marriott from transferring management contracts as part of a sale of the senior living unit. Sunrise said it doesn't believe the litigation will prevent a sale of the unit.
Marriott is facing four lawsuits from hotel owners who allege that the company is taking kickbacks from suppliers through the Avendra venture. Marriott has denied the allegations.
Sunrise shares fell 13 cents to $27.90 on the New York Stock Exchange composite trading while those of Marriott fell 6 cents to $35.69. Sunrise owns, manages or is developing about 220 senior living centers.