With New Ownership, Sunrise Senior Living Doubles Down on Luxury, Bespoke Experiences

The senior living operator announced Tuesday that BDT & MSD Partners is acquiring a majority stake in Sunrise from the Public Sector Pension Investment Board as part of a reportedly billion-dollar deal. Sunrise’s senior leadership team will own the remaining stake.

With a development pipeline of more than 50 communities expected to total $7.5 billion in costs, Sunrise is embarking on what CEO Jack Callison Jr. said is likely “the largest actionable development pipeline in the entire industry” today.

New ownership era

The ownership change marks a new era in Sunrise’s history, which began in 1981 with Paul and Terry Klaassen. The company’s last major test, which Callison coined Sunrise “2.0,” came in the form of the Covid-19 pandemic response and recovery. Now, Sunrise’s leaders are forging ahead with a new chapter and a strategy centered on operating and developing luxury, hospitality-oriented senior living communities, including in high-barrier-to-entry markets.

“This is now the 3.0 era of Sunrise, which is hyper growth,” Callison told Senior Housing News Tuesday morning.

Sunrise today operates more than 230 communities across the United States and Canada and serves about 22,000 residents. Most of the operator’s communities are at or above 90% occupancy and many have growing waitlists.

Formed in part by an investment management company founded by Dell Technologies Founder Michael Dell, BDT & MSD has backed businesses including Greystar, Speed Bay, and Auberge Collection. The company’s owned and operated assets include Four Seasons Hualalai, The Boca Raton, and Four Seasons Jackson Hole.

As Callison noted, the ownership change to BDT & MST and the company’s senior leadership is the start of a new period for the McLean, Virginia-based operator. The company spent the last five years bolstering its culture and operating platform, and it’s now ready to play a big role in the industry’s current era of high demand and little supply.

Industry growth prospects

According to NIC MAP, the senior living industry faces a growing “investment gap” that will require an additional 576,000 units by 2030 to meet demand. With dozens of development projects in the works in high-barrier-to-entry markets like New York City, Boston, Los Angeles and the Washington D.C., area, Callison believes the company has multiple paths to success ahead of it.

The company’s bread-and-butter lies in luxury-focused communities, which can command the kind of rates needed to make development projects pencil out. According to a Green Street senior housing market outlook from September, Class A properties with higher rent profiles are more likely to pencil out, while properties with more of an average revenue profile are still not viable from a development standpoint.

The company’s development strategy is selective, data-driven and strategic as opposed to being a “volume game,” Callison said.

The company is developing communities in locations where it already has a strong operational footprint, such as Manhattan Beach, California.

The company studies local senior living rent, wages and other market conditions to gain confidence that each new growth project is a good move.

“Every potential site that we evaluate is really scored against over 23 weighted average metrics, and we cover demographic density, growth momentum and existing market supply,” Callison said.

That process is selective. The company’s leaders may underwrite 200 sites only to actually move forward with construction at five or 10 of them. That selectivity has aided Sunrise as it has grown and is reflected in the company’s growth plans in tough markets in which to develop, such as in Manhattan Beach and Long Beach and in Tarrytown, New York.

Future development plans

“We’re already on pace to do six to seven new developments in the next year, ramping up to 10 new starts every single year by 2030.

Now that it has a new majority owner, Sunrise is “open for business,” and expects more growth with new partners in the future, he added.

“We want to grow with multiple partners throughout multiple cycles,” Callison said.

Part of the thinking behind the new investment in Sunrise is that the company is well-positioned to reap demand from prospective residents ahead. The operator’s focus on high-end senior living will serve it well as it begins to serve a new, more discerning customer base, Callison said.

“Lifestyle, wellness and hospitality are what we’re going to double-down on,” he said. “We think our differentiated approach in operations, premium hospitality, world-class care and bespoke experiences that these seniors want and deserve are really going to be the name of the game for the next decade-plus.”

Callison believes that Sunrise has two customers – its prospective residents and their adult children – and the company is focused on wowing both.

“We’ve got to create something different and unique and bespoke, where the adult daughter doesn’t feel guilty about transitioning Mom into a senior living community, and she’s actually envious that she’s not old enough to move in herself,” he said.

To achieve that, Sunrise seeks to create the “preferred lifestyle” for older adults. The company works with residents and their families to accomplish goals, like attending a child’s wedding or helping someone remember a late spouse with flowers and other touches. Flourishes like that often cost “nothing” for senior living operators but mean “everything” to residents and their families, Callison said.

“Everybody hears luxury and they think it’s fancy, that it’s champagne or something like that.” Callison said. “But no, it’s listening to your customer and creating these unique experiences that are very meaningful to them. That creates loyalty and it drives our brand.”