McLEAN, Va. - Sunrise Assisted Living Inc. said yesterday that it has agreed to buy Bethesda, Md.-based Marriott International Inc.'s senior living unit for $150 million in cash and assumed debt to become the largest manager of senior living centers in the United States.
Sunrise will pay $89 million in cash and assume $38 million in liabilities and $23 million of life care endowment obligations, Paul Klaassen, chairman and chief executive, said on a conference call with analysts and investors.
The McLean-based company will take over managing 126 centers housing the elderly, boosting its management business to 350 properties with 40,000 residents.
The company has sold about $1 billion worth of properties since 1998 while retaining management contracts, to get more of its profit from set fees rather than from the income that the centers generate.
"We are insulating our shareholders from the property risk that comes with owning large portfolios of real estate," Klaassen said during the call.
Sunrise shares rose 80 cents to $24.81 yesterday during New York Stock Exchange composite trading, while Marriott shares rose 41 cents to $32.57.
Separately, CNL Retirement Properties Inc. will buy nine of the centers from Marriott and to be managed by Sunrise for $170 million.
The purchase is in addition to the 12 centers Marriott sold to CNL last week for $89 million.
The sale of the management business and the 12 centers will lower fourth-quarter results by $123 million, or 48 cents a share, to $133 million, or 52 cents, Marriott said.
Marriott said it expects to have a gain of $23 million, or 9 cents a share, in the first quarter of next year when the sale of the nine centers is completed.
Marriott, the biggest U.S. hotel company, said this year that it would sell the unit to focus on owning, managing and franchising Marriott, Ritz-Carlton and Fairfield Inn hotels. Marriott entered the senior living business in 1984, and is exiting after a glut of development hurt profit in the industry.
With the purchase Sunrise will enter such states as Texas, Arkansas, Utah and Tennessee and expand its managed properties in California and Florida.
Sunrise will acquire 12 land parcels with the acquisition.