Millennium Partners Demands Changes at Sunrise Senior Living

Business Wire, June 14, 2007

Jan. 15, 2007--only one month later--the Company stated that it would not be able to have the restated 2005 10-K filed by March 31, 2006 after all, so it withdrew its promise to be current with the SEC by that date. With this announcement, it became clear that the 2005 10-K would not be filed before the 2006 10-K was due--over a year past its due date. The Company did not provide any timeframes at that time as to when it might be in a position to meet any of its legal filing obligations. The best management could do was to state (erroneously, again, as it turned out) that they were "close--weeks and not months--to submitting the financial information to the SEC."

Feb. 27, 2007--the Company reported Selected Operating metrics for the 4th quarter and full year 2006. The Company had not yet filed any information with the SEC, but provided a new range for the cumulative effect on Net Income of the accounting adjustments, from $65-$100M to $98M-$107M, and expanded the time period for which management would be required to restate the Company's financials.

March 2, 2007--the Company announced that the Board of Directors had expanded the scope of the previously-established Special Independent Committee of the Board. The expanded scope was to include investigating the facts and circumstances related to the historical accounting practices that led to the current financial restatement difficulties, as well as to come up with recommendations and remedial measures.

April 25, 2007--the Company announced the unexpected suspension, with pay, of its CFO because he did not comply with the document retention directives.

May 2, 2007--the Company announced that it had terminated its CFO.

May 8, 2007--the Company announced operating statistics, and refrained from providing any guidance or comment on the state of the investigation into options accounting, the firing of the CFO, or the accounting review.

May 29, 2007--the Company announced that the SEC has commenced a formal investigation into its accounting and stock option practices.

There are two fundamental maxims for public company managements in dealing with investors and the securities markets. The first is to avoid surprises. The second is to "under-promise and over-deliver." Both have been violated time and again by this Company's management.

We do not necessarily blame management for poor stewardship of the Company's assets. While we don't know all the relevant facts, it seems entirely plausible that management has been continuously surprised and disappointed by these developments, just as we and the other shareholders have been. We do blame management for failing to have fostered the right corporate culture and team designed to avoid this situation. The securities markets demand, above all else, respect. This management has shown them none, and as a result the Company faces the possibility of having its shares de-listed from the NYSE within the next few months.

Additionally, there are serious questions regarding the state of the Company's system of internal controls. To date, based on the Company's public disclosures, we do not have reason to believe that failures in the internal controls system have led to actual losses or actual diminution in the value of the Company's assets (beyond, of course, the expense--not inconsiderable--of investigation and litigation resulting from those failures). It is clear to us, however, that the Company has not taken seriously its internal controls obligations (either under Sarbanes-Oxley SS404 or under normal good management practices) and as a result is unable to satisfy an increasingly skeptical market that the internal controls failures have not resulted in actual losses. In the present environment, we are surprised that the Board has accepted these failures as readily as appears to be the case. We do not necessarily believe that the requirements of Sarbanes-Oxley SS404 are cost-benefit warranted and, in this respect, are in accord with some of the suggestions of Mr. Donohue's organization. We do believe (and believe that Mr. Donohue likely agrees) that sound internal controls are an essential element of prudent fiscal management; they appear to have been substantially ignored by the Company.