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Six analysts and top management from seven sector firms examine the Health Care Facilities sector in this special 64-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info386.htm

TWST: What will it take for this to become a viable sector for investment? I am aware that some people would question whether it ever really was.

Mr. Kumpel: Yes, I think that’s fair to say. Back in 1996, 1997, there were a lot of very, very early-stage immature companies, including Sunrise, which raised money in the public markets, talked about significant growth opportunities and convinced investors that this is a hyper-growth arena in health care. The allure of private pay and also 20%-25% year-over-year growth made for a good story. But there’s a significant real estate component, which is to say that supply/demand dynamics are huge concerns. Moreover, the industry is really not oriented to 25% year-over-year growth. With 5% growth on the top line and 10% on a same-store cash flow basis, companies can generate perhaps 15%-20% annual growth. Way back in 1997 we were early in identifying just how dangerous these black box, gray box, and other nonconventional financing structures were, and how careful investors needed to be. Sunrise (NYSE:SRZ) was at the forefront. They built their own assets and kept them on-balance-sheet. The company depreciated these assets and derived most of their earnings from operations, not management and development fees. They did not try to grow frenetically, but at a steady 20-25 facilities a year. To our mind, they were growing within their means. Unfortunately, no provider was completely insulated from the supply/demand concerns in local markets. Sunrise took some significant hits in 1999 and 2000 from exposure to areas that were maybe overbuilt and that were experiencing slow fill rates. Furthermore, Sunrise is an example of a company that has shifted a number of its accounting practices, making the income statement less transparent than before. I would say that assisted living is a sector worthy of public investments at the right price. A 25,000 Buick may be a very good car, but I wouldn’t pay 50,000 for it.

TWST: You said earlier that you were concerned about the valuation for Sunrise. What would be a more appropriate entry point for Sunrise?

Mr. Kumpel: Sunrise has been building, developing, filling, stabilizing, and then selling their assets. The more that you have a fluid portfolio, the more that you have to rely on net asset value as the means by which to assess valuation. A net asset value approach is similar to how mutual funds, which have fluid portfolios characterized by buying and selling stocks, are valued on a daily basis. From a net asset value perspective, Sunrise has stated that they believe they are worth 42 a share. Our NAV analysis is below the current stock price, perhaps in the mid- to high teens.

TWST: And what is it trading at currently?

Mr. Kumpel: They’re trading at 25 a share. So there’s a significant bifurcation in the market.

This special issue includes:

1) Health Care Facilities - In an in-depth (12,400 words) Analyst Roundtable, Adam Feinstein, Vice President in Equity Research at Lehman Brothers, Leslie Henshaw, Managing Director at ING Asset Management, Gary Taylor, Vice President of Equity Research at Banc of America Securities LLC, examine the outlook for the sector including, volume trends in hospitals, demographics and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance at seventeen sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Investing in Health Care Facilities - In an in-depth (4,700 words) Analyst Interview, James Kumpel, Health Care Services Analyst at Raymond James & Associates, examines the outlook for the sector and shares specific stock recommendations .

4) Specialty Healthcare Providers - In an in-depth (3,500 words) Analyst Interview, Peter Emch, Director-Equity Research at Credit Suisse First Boston, examines the outlook for the sector and shares specific stock recommendations.

5) Hospital Management Stocks - In an in-depth (3,300 words) Analyst Interview, Leo Murphy, Vice President-Senior Analyst at Pioneer Investment Management USA, Inc., examines the outlook for the sector and shares specific stock recommendations.

6) CEO interviews (average 2,500 words). Top management of seven sector firms examine the outlook for their firm and the sector.