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MCLEAN, VA-The cancellation of 12 long-term management contracts will leave Sunrise Senior Living with an $80-million payment of buyout fees now that Newton, MA-based Five Star Quality Care Inc. says it will exercise its right to terminate Sunrise's management of the dozen properties. The option to cancel the contracts was stipulated as part of Sunrise's 2003 acquisition of Marriott Senior Living Services. That purchase transferred 30 management contracts from Marriott to Sunrise.

Sunrise's release on the impending transaction notes that, "Five Star's right to terminate these contracts is not related to Sunrise's performance at any of these communities." According to Sunrise's second quarter 2005 earnings report, "revenues under management increased 10% to $482.2 million in the second quarter of 2005 from $436.7 million in the second quarter of 2004." Those revenues included properties owned by third parties such as Five Star, as well as Sunrise's consolidated communities and co-owned communities.

In its 2004 annual report issued in March 2005, Five Star reported that "Sunrise's management of 30 of our communities may have adverse consequences to us." In March 2003, Marriott sold its subsidiary which managed 30 communities for Five Star to Sunrise. "We believe Sunrise's financial condition and reputation as an operator of senior living communities is weaker than the financial condition and reputation of Marriott. The operations and the financial results which we realize from the communities managed for us by Sunrise have declined and become more volatile since this sale and this decline and volatility may continue in the future."