1011064--3/2/2009--SUNRISE_SENIOR_LIVING

related topics

{investment, property, distribution}

{financial, litigation, operation}

{debt, indebtedness, cash}

{cost, operation, labor}

{operation, international, foreign}

{loss, insurance, financial}

{acquisition, growth, future}

{regulation, change, law}

{capital, credit, financial}

{cost, regulation, environmental}

{provision, law, control}

{interest, director, officer}

{loan, real, estate}

As described in Significant 2008 and 2009 Developments, we are currently in discussions with our lenders and venture partners to implement a restructuring of our financial obligations. However, there can be no assurances that these efforts will prove successful and we could be forced to seek reorganization under the U.S. Bankruptcy Code. Risks Relating to Our Business Operations Recent disruptions in the financial markets could affect our ability to obtain financing for development of our properties and other purposes, including any refinancing of our Bank Credit Facility or other debt due in 2009 or 2010, on reasonable terms and could have other adverse effects on us and the market price of our common stock. Due to the dependency of our revenues on private pay sources, events which adversely affect the ability of seniors to afford our monthly resident fees or entrance fees (including downturns in housing markets or the economy) could cause our occupancy rates, revenues and results of operations to decline. Our international operations are subject to a variety of risks that could adversely affect those operations and thus our profitability and operating results. Our failure to lease up or sell all or some of our Germany facilities may negatively impact our results of operations and cash flows. 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. Early termination or non-renewal of our management agreements could cause a loss in revenues. Ownership of the communities we manage is heavily concentrated with three of our business partners. Our operations and the operations of entities that we have acquired or may acquire, directly or through an ownership interest in a venture, may not be integrated successfully or the intended benefits of such transactions may not be realized or may be subject to unforeseen liabilities, any of which could have a negative impact on our revenues, expenses and operating results. 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. The refinancing or sale of communities held in ventures may not result in future distributions to us. Liability claims against us in excess of insurance limits could adversely affect our financial condition and results of operations. 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. 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 obligations contained in debt instruments could result in the acceleration of the debt extended pursuant to such debt instruments, trigger other rights and restrict our operating and acquisition activity, and in the case of ventures, may cause acceleration of the venture s debt repayment obligations and any of our correlated guarantee obligations. 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. Our accounting policies and methods are fundamental to how we report our financial condition and results of operations and they may require management to make estimates about matters that are inherently uncertain. Termination of resident agreements and vacancies in communities could adversely affect our revenues and earnings. The discovery of environmental problems at any of the communities we own or operate could result in substantial costs to us, which would have an adverse effect on our earnings and financial condition. Unionization may impact wages rates and work rules. Comments from SEC staff review may require that we amend our periodic reports filed with the SEC, which could lead to significant changes in our past and current disclosure. Risks Related to the Pending SEC Investigation and Pending Litigation Arising Out of the Prior Announcement of Our Restatement of Historical Financial Statements for 2005 and Prior Periods, Other Pending Government Proceedings and Other Pending Litigation The SEC s formal investigation and pending putative securities class action and derivative litigation have resulted in significant costs and expenses, diverted resources and could have a material adverse effect on our business, financial condition and results of operations. We are involved in other litigation matters that will continue to divert our resources and attention, and could result in substantial monetary damages that could have a material adverse effect on our financial condition and results of operations if we do not prevail. The Trinity OIG investigation and IRS audit may result in substantial fines and penalties, which could harm our financial condition, results of operations and cash flow. Our potential indemnification obligations and limitations of our director and officer liability insurance may have a material adverse effect on our financial condition and results of operations. Risks Related 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. The need to comply with government regulation of senior living communities may increase our costs of doing business and increase our operating costs. Risks Related to our Organization and Structure Anti-takeover provisions in our governing documents and under Delaware law could make it more difficult to effect a change in control.

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1011064--3/2/2009--SUNRISE_SENIOR_LIVING_INC