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Eight analysts and top management from eight sector firms examine the healthcare facilities sector in this special 73-page Healthcare Facilities issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info547.htm

TWST: Moving on to the other aspects of senior care, isn’t there an intermediate level between assisted living and nursing homes?

Mr. Doctrow: Maybe we should just talk terminology for a second. The stock market talks sometimes about long-term care meaning, nursing home care, or it talks about assisted living. Under what the market calls assisted living, there are really at least two things going on, and I think it’s important to understand that distinction. One is what we would call independent living, which is a full-sized apartment with a real kitchen with hospitality, or hotel-like services — these may include the provision of meals, a social program, that sort of thing — but the resident has a real apartment. Then there’s assisted living with something more like an efficiency apartment that probably doesn’t have full kitchen facilities, with all the hospitality services but also assistance with daily living — getting up, getting dressed — and that can step up; as the resident’s needs increase, a higher level of assistance is available. One subset of assisted living is Alzheimer’s care for people who have dementia. Many of the providers, but not all, also do that as a component of their facilities. So those two or three levels of care are offered within assisted living as Wall Street uses the term, and there are some companies that specialize more in one service than the others.

TWST: Which of the assisted living companies do you focus on?

Mr. Doctrow: We actually cover two at the present time: Sunrise Assisted Living (SRZ, 27, Buy/Above-Average risk) and Alterra Healthcare (ALI, 0.14, Underperform/Speculative risk). Assisted living is an area, if I can just talk generally about the sector for a second, that we are increasingly interested in, particularly as we look into late this year and into 2003. Assisted living, again, has had its own sort of recession, if you will, driven not by reimbursements (because assisted living and independent both are 100% private pay) but basically because of overbuilding. The sector is very young. I think you can date the assisted living business probably from the early 1980s. But it really began to mushroom in the mid-1990s when, I think, 13 companies actually went public. What happened there was simply too much capital, too much construction, and the sector just got overbuilt. We now have construction levels dropping off — not ending, but dropping off rather dramatically and we are in the early stages of that industry bottoming and thus are looking toward more of a turnaround as we go into 2003. So it’s an interesting time to be looking at the industry. There is one clear industry leader, Sunrise Assisted Living (NYSE:SRZ), which is over a 500-million market cap. Everybody else in the sector is really tiny, so it’s hard for public investors and institutional investors to find much of size to invest in. But we do think that the fundamentals are such that you’ll see an upturn in that sector later this year and into 2003. And our best guess, or our expectation, is that as you go into 2003 and beyond, you’ll end up with the assisted living industry maturing and, much as you have in the nursing sector, there will be three, four or five decent-size public assisted living companies. Some of those could emerge from the existing public players — Sunrise, I certainly expect to still be there — but others could come out of what are a large number of venture-capital-backed private companies that are out there.

This special issue includes:

1) Healthcare Facilities - In an in-depth (13,700 words) Analyst Roundtable, B. Kemp Dolliver, Managing Director at SG Cowen Securities Corp., Adam Feinstein, Vice President in Equity Research at Lehman Brothers, John Hindelong, Managing Director of Credit Suisse First Boston, Frank G. Morgan, Managing Director at Jefferies & Company, Inc. and Michael Yellen, Senior Portfolio Manager at AIM Capital Management Group, examine the outlook for the sector including earnings guidance, stock performance and share specific stock recommendations.

2) Hospitals & Healthcare Facilities - In an in-depth (3,500 words) Analyst Interview, Gary Taylor, Vice President, Equity Research at Banc of America Securities LLC, examines the outlook for the sector and shares specific stock recommendations.

3) Assisted Living & Healthcare REITs - In an in-depth (5,200 words) Analyst Interview, Jerry L. Doctrow, Managing Director, Equity Research at Legg Mason Wood Walker, Inc., examines the outlook for the sector and shares specific stock recommendations.

4) Long-Term Care & Specialized Service Providers - In an in-depth (6,700 words) Analyst Interview, Matthew Ripperger, Vice President and Equity Research Analyst at JP Morgan, examines the outlook for the sector and shares specific stock recommendations.

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