The following discussion should be read together with the information contained in our consolidated financial statements, including the related notes, and other financial information appearing elsewhere herein. This management's discussion and analysis contains certain forward-looking statements that involve risks and uncertainties. Although we believe the expectations reflected in such forward looking statements are based on reasonable assumptions, there can be no assurance that our expectations will be realized. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to:

• the risk that we may not be able to successfully execute our plan to sell certain assets mortgaged pursuant to our German restructure transaction or the net sale proceeds of the mortgaged North American properties may not be sufficient to pay the minimum amount guaranteed by Sunrise to the lenders that are party to the German restructure transactions when such payment is required in October 2012;

• the risk that we may be unable to reduce expenses and generate positive operating cash flows;

• the risk that, as a result of our fully drawn line of credit with KeyBank National Association, we may be unable to generate sufficient cash from operations to fund our operations;

• the risk of future obligations to fund guarantees to some of our ventures and lenders to the ventures;

• the risk of further write-downs or impairments of our assets;

• the risk that we are unable to obtain waivers, cure or reach agreements with respect to existing or future defaults under our loan, venture and construction agreements;

• the risk that we will be unable to repay, extend or refinance our indebtedness as it matures, or that we will not comply with loan covenants;

• the risk that our ventures will be unable to repay, extend or refinance their indebtedness as it matures, or that they will not comply with loan covenants creating a foreclosure risk to our venture interest and a termination risk to our management agreements;

• the risk that we are unable to continue to recognize income from refinancings and sales of communities by ventures;

• the risk of declining occupancies in existing communities or slower than expected leasing of newer communities;

• the risk that we are unable to extend leases on our operating properties at expiration;

• the risk that some of our management agreements, subject to early termination provisions based on various performance measures, could be terminated due to failure to achieve the performance measures;

• the risk that our management agreements can be terminated in certain circumstances due to our failure to comply with the terms of the management agreements or to fulfill our obligations thereunder;

• the risk that ownership of the communities we manage is heavily concentrated in a limited number of business partners;

• the risk that 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 risk related to operating international communities that could adversely affect those operations and thus our profitability and operating results;

• the risk from competition and our response to pricing and promotional activities of our competitors;

• the risk of not complying with government regulations;

• the risk of new legislation or regulatory developments;

• the risk of changes in interest rates;

• the risk of unanticipated expenses;

• the risks of further downturns in general economic conditions including, but not limited to, financial market performance, downturns in the housing market, consumer credit availability, interest rates, inflation, energy prices, unemployment and consumer sentiment about the economy in general;

• the risks associated with the ownership and operation of assisted living and independent living communities.

and other risk factors detailed in our 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2012, as amended on March 15, 2012, and as may be amended or supplemented in our Form 10-Q filings. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Unless the context suggests otherwise, references herein to "Sunrise," the "Company," "we," "us" and "our" mean Sunrise Senior Living, Inc. and our consolidated subsidiaries.

Overview

Operating Communities and Segments

We are a Delaware corporation and a provider of senior living services in the United States, Canada and the United Kingdom.

At March 31, 2012, we operated 308 communities, including 266 communities in the United States, 15 communities in Canada and 27 communities in the United Kingdom, with a total unit capacity of approximately 30,264.

The following table summarizes our portfolio of operating communities:

                                                                     As of                 Percent
                                                                   March 31,               Change
                                                                                          2012 vs.
                                                              2012           2011           2011
Total communities
Owned                                                             28              8           250.0 %
Leased                                                            26             26             0.0 %
Variable Interest Entity                                           1              1             0.0 %
Consolidated New York communities leased from a venture            6              6             0.0 %
Consolidated venture                                               1              1             0.0 %
Unconsolidated ventures                                          107            131           -18.3 %
Managed                                                          139            144            -3.5 %

Total                                                            308            317            -2.8 %

Unit capacity                                                 30,264         31,052            -2.5 %

We have three operating segments: North American Management, Consolidated Communities and United Kingdom Management. The operations of the communities we own or manage are reviewed on a community by community basis by our key decision makers. The communities managed for third parties, communities in ventures or communities that are consolidated but held in ventures or variable interest entities, are aggregated by location into either our North American Management segment or our United Kingdom Management segment. Communities that are wholly owned or leased are included in our Consolidated Communities segment.

North American Management includes the results from the management of third party and venture senior living communities, including six communities in New York owned by a venture but whose operations are included in our consolidated financial statements, a community owned by a variable interest entity and a community owned by a venture which we consolidate, in the United States and Canada.

Consolidated Communitiesincludes the results from the operation of wholly-owned and leased Sunrise senior living communities in the United States and Canada.

United Kingdom Management includes the results from management of Sunrise senior living communities in the United Kingdom owned in ventures.

2012 Developments

Overview

In 2012, we expect to continue to focus on (a) operating high-quality assisted living and memory care communities in the United States, Canada and the United Kingdom; (b) increasing occupancy and improving the operating efficiency of our communities; (c) restructuring certain of our venture, leasing and lender relationships to further stabilize our revenue stream and cash flow; (d) seeking strategic investments in attractive real estate opportunities; (e) improving the operating efficiency of our corporate operations; and (f) reducing our operational and financial risk.

Santa Monica and Connecticut Avenue

On February 28, 2012, we closed on a purchase and sale agreement with our venture partner who owned 85% of the membership interests (the "Partner Interest") in Santa Monica AL, LLC ("Santa Monica"). We owned the remaining 15% membership interest. Pursuant to the purchase and sale agreement, we purchased the Partner Interest for an aggregate purchase price of $16.2 million. Santa Monica indirectly owns one senior living facility located in Santa Monica, California. As a result of the transaction, effective February 28, 2012, the assets, liabilities and operating results of Santa Monica are consolidated.

Simultaneously, with the closing of the transaction, we entered into a new loan with Prudential Insurance Company of America to pool Santa Monica with Connecticut Avenue, and senior debt financed the two assets. The principal amount of the new loan in the aggregate is $55.0 million with an interest rate of 4.66%. It is a seven year loan that matures on March 1, 2019. The proceeds of the new loan were used (i) to pay off $27.8 million of debt on Connecticut Avenue; (ii) to pay off $13.4 million of debt on Santa Monica; and (iii) towards the $16.2 million purchase price of the Partner Interest.

Asset Transfer from Master MetSun Two, LP and Master MetSun Three, LP

On March 20, 2012, two of our existing joint ventures transferred their ownership interest in two venture subsidiaries to us for no cash consideration. The transferred venture subsidiaries indirectly own five senior living facilities and one land parcel (the "Facilities"). Prior to the transfer, we had a 20% indirect ownership interest in the Facilities. As a result of the transfer, the Facilities are now 100% indirectly owned by us and are consolidated in our financial results commencing March 20, 2012.

The Facilities are currently encumbered by approximately $119.7 million of existing Facility level mortgage debt which is consolidated in our financial results commencing March 20, 2012. This mortgage debt is non-recourse to us with respect to principal repayment, and no new obligations will be required by the mortgage lenders as a result of the transfer. The Facilities are separated into two loan pools, with one lender financing a pool of three Facilities ("Pool A") and another lender financing a pool of two Facilities plus the land parcel ("Pool B"). The Pool A mortgage debt had an outstanding balance of approximately $62.5 million as of March 31, 2012, and a weighted average interest rate of 5.0%. The Pool A mortgage debt is currently under maturity default, but the lender has agreed to a forbearance that effectively extends the term of the loan through January 2013 and imposes a cash sweep on the Facilities net of a working capital reserve. The Pool B mortgage debt had an outstanding balance of approximately $57.2 million as of March 31, 2012, and a weighted average interest rate of 6.5%. The Pool B mortgage debt has an initial maturity date of October 2012, but does contain an extension provision, subject to the properties meeting certain conditions. We were, prior to the transfer, and continue to be obligated to the lender on an operating deficit guarantee with respect to the Pool B mortgage debt.

Land Sale

In April 2012, we closed on the sale of a land parcel held within the liquidating trust (refer to Note 7). The proceeds from the sale of $1.5 million were applied towards the liquidating trust note. We also paid an additional $0.3 million and reduced our guarantee on the note to $24.4 million.

Sale of Venture Interest in 16 Communities

On May 1, 2012, the subsidiaries of ventures between an institutional investor and us sold 16 communities to Ventas Inc. for a purchase price of approximately $362 million. We received approximately $28 million of cash at closing. We are remaining the manager of the 16 communities under the pre-existing terms relating to management fees and contract length, which range from 18 to 27 years.

Paydown of Credit Facility

On April 27, 2012, we paid down by $10.0 million the outstanding draws against our Credit Facility. The outstanding balance of the Credit Facility after the payment was $29.0 million.