UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ______________________

                                    FORM 10-Q

(Mark  One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT  1934

                 For the quarterly period ended March 31, 2004.

[  ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(D) OF THE SECURITIES
EXCHANGE  ACT  OF  1934

                        Commission file number   1-14012

                              EMERITUS CORPORATION
             (Exact name of registrant as specified in its charter)

             WASHINGTON                                     91-1605464
    (State  or other jurisdiction                        (I.R.S Employer
    of  incorporation  or  organization)                 Identification  No.)

                         3131 Elliott Avenue, Suite 500
                                Seattle, WA 98121
                    (Address of principal executive offices)

                                 (206) 298-2909
              (Registrant's telephone number, including area code)
                          ____________________________

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.  [X]  Yes   [  ]  No

Indicate  by  check  mark  whether  the  Registrant  is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Act).  [  ]  Yes   [X]  No

As  of  April  30, 2004, there were 10,566,238 shares of the Registrant's Common
Stock,  par  value  $.0001,  outstanding.

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                                      EMERITUS CORPORATION

                                              INDEX


                                 Part I.  Financial Information


<S>                                                                                     <C>

                                                                                        Page No.
                                                                                        --------
Item 1.  Financial Statements: . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1

         Condensed Consolidated Balance Sheets as of March 31, 2004 and
         December 31, 2003. . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .         2

         Condensed Consolidated Statements of Operations for the Three
         Months ended March 31, 2004 and 2003. .. .. . . . .... .. . . . . .. . . . ..         3

         Condensed Consolidated Statements of Cash Flows for the Three
         Months ended March 31, 2004 and 2003 . . . . . . . . . . . . .. .. . . . . . .        4

         Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . .        5

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations . . . .. . . . . . . . . . . . .. . . . .. .  . . . . . . . .  .       13


Item 3.  Quantitative  and  Qualitative  Disclosures  About  Market  Risk . . . .  . . .      25


Item 4.  Controls  and  Procedures  . . . . . . . . . . . .. . . . .. .  . . . . . . . .      25



                                 Part II.  Other Information

Note:     Items 1 through 4 of Part II are omitted because they are not
          applicable.

Item  5.  Other Information . . . . . .  . . . . . . . . . . . . . . . . . . .. ... . .  . .  26

Item  6.  Exhibits  and  Reports  on  Form  8-K  . . . . . .  . . . .  . . . .  . . . .  . .  27


          Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    29

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<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS

               [The rest of this page is intentionally left blank]

                                        1
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<TABLE>
<CAPTION>

                                                  EMERITUS CORPORATION
                                          CONDENSED CONSOLIDATED BALANCE SHEETS
                                                       (unaudited)
                                            (In thousands, except share data)
                                                         ASSETS
                                                                                              March 31,    December 31,
                                                                                                2004           2003
                                                                                             -----------  --------------
<S>                                                                                          <C>          <C>
Current Assets:
 Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    2,290   $       6,368
 Trade accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,687           2,769
 Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       3,524           1,961
 Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . . . . . .       9,366           6,663
                                                                                             -----------  --------------
 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      17,867          17,761
                                                                                             -----------  --------------
Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       6,884           7,678
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     116,677         117,546
Property held for development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1,254           1,254
Notes receivable from and investments in affiliates . . . . . . . . . . . . . . . . . . . .       1,835           2,409
Restricted deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       7,888           7,306
Lease acquisition costs, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      19,052          19,052
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5,785           5,581
                                                                                             -----------  --------------
 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  177,242   $     178,587
                                                                                             ===========  ==============

                                         LIABILITIES AND SHAREHOLDERS' DEFICIT

Current Liabilities:
 Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    4,934   $       4,750
 Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5,142           6,774
 Accrued employee compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . .       6,300           5,885
 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1,555           1,888
 Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,254           2,702
 Accrued dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . .       8,798           8,228
 Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       9,572           7,941
 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5,918           6,075
 Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       8,726           6,879
                                                                                             -----------  --------------
 Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      53,199          51,122
                                                                                             -----------  --------------
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . .     134,963         136,388
Convertible debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      32,000          32,000
Deferred gain on sale of communities. . . . . . . . . . . . . . . . . . . . . . . . . . . .      38,055          37,389
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         205             263
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         433             519
                                                                                             -----------  --------------
 Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     258,855         257,681
                                                                                             -----------  --------------
Commitments and contingencies
Shareholders' Deficit:
Preferred stock, $.0001 par value. Authorized 5,000,000 shares.
    Series B, Authorized 70,000 shares; issued and outstanding 35,178 and 34,830 at
    March 31, 2004, and December 31, 2003, respectively . . . . . . . . . . . . . . . . . .           -               -
Common stock, $.0001 par value. Authorized 40,000,000 shares; issued and outstanding
    10,548,903 and 10,297,449 shares at March 31, 2004, and December 31, 2003, respectively           1               1
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      72,716          71,703
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (154,330)       (150,798)
                                                                                             -----------  --------------
 Total shareholders' deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (81,613)        (79,094)
                                                                                             -----------  --------------
 Total liabilities and shareholders' deficit. . . . . . . . . . . . . . . . . . . . . . . .  $  177,242   $     178,587
                                                                                             ===========  ==============

       See accompanying Notes to Condensed Consolidated Financial Statements and Management's
             Discussion and Analysis of Financial Condition and Results of Operations

</TABLE>

                                        2
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<TABLE>
<CAPTION>


                               EMERITUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
                      (In thousands, except per share data)

                                               Three Months ended March 31,
                                              --------------------------------
                                                   2004             2003
                                              ---------------  ---------------
<S>                                           <C>              <C>
Revenues:
   Community revenue . . . . . . . . . . . .  $       63,538   $       43,087
   Other service fees. . . . . . . . . . . .           1,365              993
   Management fees . . . . . . . . . . . . .           1,633            3,097
                                              ---------------  ---------------
           Total operating revenues. . . . .          66,536           47,177
                                              ---------------  ---------------

 Expenses:
   Community operations. . . . . . . . . . .          42,456           28,646
   General and administrative. . . . . . . .           6,232            5,404
   Depreciation and amortization . . . . . .           2,063            1,846
   Facility lease expense. . . . . . . . . .          14,691            8,604
                                              ---------------  ---------------
           Total operating expenses. . . . .          65,442           44,500
                                              ---------------  ---------------
           Income from operations. . . . . .           1,094            2,677

 Other income (expense):
   Interest income . . . . . . . . . . . . .             153              156
   Interest expense. . . . . . . . . . . . .          (3,793)          (3,274)
   Other, net. . . . . . . . . . . . . . . .             (66)              48
                                              ---------------  ---------------
           Net other expense . . . . . . . .          (3,706)          (3,070)
                                              ---------------  ---------------

           Net loss. . . . . . . . . . . . .          (2,612)            (393)

 Preferred stock dividends . . . . . . . . .            (920)          (1,870)
                                              ---------------  ---------------
           Net loss to common shareholders .          (3,532)          (2,263)
                                              ===============  ===============

 Loss per common share:
     Basic and diluted . . . . . . . . . . .  $        (0.34)  $        (0.22)
                                              ===============  ===============
 Weighted average common shares outstanding:
     Basic and diluted . . . . . . . . . . .          10,310           10,247
                                              ===============  ===============

       See accompanying Notes to Condensed Consolidated Financial Statements and Management's
             Discussion and Analysis of Financial Condition and Results of Operations

</TABLE>

                                        3
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<TABLE>
<CAPTION>

                                              EMERITUS CORPORATION
                                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (unaudited)
                                                 (In thousands)

                                                                                  Three Months Ended March 31,
                                                                                      2004            2003
                                                                                 --------------  --------------
<S>                                                                              <C>             <C>
Cash flows from operating activities:
          Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      (2,612)  $        (393)
Adjustments to reconcile net loss to
          net cash provided by (used in) operating activities:
    Minority interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . .              -              50
    Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .          2,063           1,846
    Amortization of deferred gain . . . . . . . . . . . . . . . . . . . . . . .           (714)            (99)
    Equity investment losses . . . . . . . . . . . . . . . . . . . . . . . . .             794               -
    Changes in operating assets and liabilities . . . . . . . . . . . . . . . .         (3,241)         (1,176)
                                                                                 --------------  --------------
          Net cash provided by (used in) operating activities . . . . . . . . .         (3,710)            228
                                                                                 --------------  --------------

Cash flows from investing activities:
  Acquisition of property and equipment . . . . . . . . . . . . . . . . . . . .           (846)           (484)
  Proceeds from sale of property and equipment. . . . . . . . . . . . . . . . .            165               -
  Management and lease acquisition costs. . . . . . . . . . . . . . . . . . . .           (302)           (189)
  Advances to affiliates and other managed communities. . . . . . . . . . . . .             13             (43)
  Collection of notes receivable. . . . . . . . . . . . . . . . . . . . . . . .          2,657               -
  Investment in affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . .           (303)            (14)
  Distributions to minority partners. . . . . . . . . . . . . . . . . . . . . .              -            (299)
                                                                                 --------------  --------------
          Net cash provided by (used in) investing activities . . . . . . . . .          1,384          (1,029)
                                                                                 --------------  --------------

Cash flows from financing activities:
  Proceeds from sale of stock under employee stock purchase and incentive plans            321              46
  Increase in restricted deposits . . . . . . . . . . . . . . . . . . . . . . .           (582)              -
  Debt issue and other financing costs. . . . . . . . . . . . . . . . . . . . .           (101)           (232)
  Repayment of long-term borrowings . . . . . . . . . . . . . . . . . . . . . .         (1,390)         (1,019)
                                                                                 --------------  --------------
          Net cash used in financing activities . . . . . . . . . . . . . . . .         (1,752)         (1,205)
                                                                                 --------------  --------------

          Net decrease in cash and cash equivalents . . . . . . . . . . . . . .         (4,078)         (2,006)

Cash and cash equivalents at the beginning of the period. . . . . . . . . . . .          6,368           6,960
                                                                                 --------------  --------------

Cash and cash equivalents at the end of the period. . . . . . . . . . . . . . .  $       2,290   $       4,954
                                                                                 ==============  ==============

Supplemental disclosure of cash flow information - cash paid during the period
    for interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $       4,127   $       3,691

Noncash investing and financing activities:
  Unrealized holding gains in investment securities . . . . . . . . . . . . . .  $           -   $         144
  Accrued and in-kind preferred stock dividends . . . . . . . . . . . . . . . .  $         920   $       1,870


 See accompanying Notes to Condensed Consolidated Financial Statements and Management's
             Discussion and Analysis of Financial Condition and Results of Operations

</TABLE>

                                        4
<PAGE>
                              EMERITUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  AND  USE  OF  ESTIMATES

The preparation of condensed consolidated financial statements requires Emeritus
to  make  estimates  and  judgments  that affect the reported amounts of assets,
liabilities, revenues and  expenses, and related disclosure of contingent assets
and  liabilities.  On  an  ongoing  basis,  Emeritus  evaluates  its  estimates,
including  those  related  to  resident  programs and incentives such as move-in
fees,  bad  debts,  investments,  intangible  assets,  impairment  of long-lived
assets, income taxes, restructuring, long-term service contracts, contingencies,
self-insured retention, insurance deductibles, health insurance, and litigation.
Emeritus  bases  its  estimates  on  historical  experience and on various other
assumptions  that  are  believed  to  be reasonable under the circumstances, the
results  of  which form the basis for making judgments about the carrying values
of  assets  and  liabilities  that  are not readily apparent from other sources.
Actual  results  may  differ from these estimates under different assumptions or
conditions.

Emeritus  believes  the  following  critical  accounting  policies  are  most
significant  to  the  judgments  and  estimates  used  in the preparation of its
condensed  consolidated  financial  statements.  Revisions in such estimates are
charged  to  income  in  the  period  in  which  the facts that give rise to the
revision  become  known.

*    For  commercial  general liability and professional liability insurance for
     2004, Emeritus formed a wholly owned captive insurance company domiciled in
     the  U.S.  The  insurance  policy  issued by the captive is claims-made and
     insures liabilities associated with general and professional liability. The
     policy insures on a per occurrence and aggregate-limit basis in excess of a
     self-insured  retention.  Estimated  losses  covered  by the policy and the
     self-insured  retention  are  accrued based upon actuarial estimates of the
     aggregate  liability  for  claims  within  the  policy year. The captive is
     funded  solely  through  contributions made by Emeritus, which is funded at
     set intervals based on expected timing of losses. To the extent the captive
     is  required  to pay claims in excess of Emeritus's contributions, Emeritus
     is  required  to  fund  any shortfalls on demand. To the extent that claims
     exceed the policy issued by the captive, Emeritus will be required to cover
     all  losses  above  the captive limits set per occurrence and in aggregate.
     The  captive  is  subject  to  regulatory  agency  control  and reviews for
     compliance  with statutes. Results from these reviews may change the timing
     or  amount of subsequent funding. Should losses exceed actuarial estimates,
     additional  expense  may  be  accrued  at  the  time  of  determination.

*    For  health insurance, Emeritus self-insures up to a certain level for each
     occurrence  above  which  a  catastrophic  insurance  policy  covers  any
     additional costs. Health insurance expense is accrued based upon historical
     experience  of  the  aggregate  liability  for  claims  incurred.  If these
     estimates  are  insufficient,  additional  charges  may  be  required.

*    Workers'  compensation  insurance  coverage  applies for specific insurable
     states  (excluding  Texas, New York, and the compulsory State Funds States)
     through  a  high  deductible,  fully  collateralized  insurance policy. The
     policy  premium  is  based  upon standard rates applied to estimated annual
     payroll. The collateral requirement is determined by annual expected losses
     for  the policy year. The Company contracts with an independent third-party
     administrator  to administer the program; and paid claim expenses are drawn
     from  the  collateral  account.  The  sum of the premium and related costs,
     estimated  administration  costs,  and  actuarial  based  estimated  losses
     ("Estimated  Total  Costs")  is  accrued on a monthly basis. The difference
     between  the  Estimated Total Costs and the posted collateral is carried as
     an  asset  on  the balance sheet. At policy expiration, an insurer audit is
     conducted to adjust premiums based on actual, rather than estimated, annual
     payroll.  Any  premium adjustment for the differences between estimated and
     actual  payroll  will  first  be  applied to the accrued asset and then, if
     needed,  as an adjustment to workers' compensation expense at the time such
     adjustment  is determined. The insurer also audits the claim total incurred
     amount  at  least  annually  and  may  adjust  the  applicable  policy year
     collateral  requirement.  There  is a reasonable expectation that the total
     incurred  losses  will  be  less than the posted collateral, resulting in a
     release of collateral back to the Company. The adjustment to the collateral
     will  be  applied  first  to  the  accrued asset and then, if needed, as an
     adjustment to the workers' compensation expense at the time such adjustment
     is determined. The Company insures occupational injuries and illness in New
     York  through  participation  in  a group pool insured

                                        5
<PAGE>
                              EMERITUS CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                   (unaudited)


     through a guaranteed cost insurance  policy, with  the premium payable on a
     monthly  basis. The insurer group contracts with an independent third-party
     administrator  on  behalf  of  its  members to manage the claims; and claim
     expenses  are  paid by the insurer. For work-related injuries in Texas, the
     Company  insures  through  a  qualified "Non-Subscriber Employee Retirement
     Income  Security  Act  Occupational Injury and Illness Benefit Plan" and an
     insurance  policy  is  in place to cover losses in excess of the deductible
     amount. The Company contracts with an independent third-party administrator
     to  manage  the  claims.  Claim expenses are paid as incurred and estimated
     losses  within  the  deductible  are  accrued  on  a  monthly  basis.

*    Emeritus  accounts for stock option awards to employees under the intrinsic
     value-based  method of accounting prescribed by APB No. 25, "Accounting for
     Stock  Issued  to Employees". Under this method, no compensation expense is
     recorded,  provided  the  exercise  price  is  equal to or greater than the
     quoted  market  price of the stock at the grant date. The Company makes pro
     forma  disclosures  of  net  income  and  earnings per share as if the fair
     value-based  method of accounting (the alternative method of accounting for
     stock-based  compensation)  had  been  applied  as required by FAS No. 123,
     "Accounting  for  Stock-Based  Compensation".  The  fair value-based method
     requires  the  Company  to make assumptions to determine expected risk-free
     interest  rates,  stock  price  volatility,  dividend  yield,  and
     weighted-average  option  life.  To  the  extent  such  things  as  actual
     volatility  or  life  of the options is different from estimated, pro forma
     amounts  expensed  will  be  more  or  less  than would have been disclosed
     otherwise.

*    Emeritus  maintains  allowances  for doubtful accounts for estimated losses
     resulting from the inability of its residents to make required payments. If
     the  financial  condition  of  Emeritus's  residents  were  to deteriorate,
     resulting  in  an  impairment of their ability to make payments, additional
     charges  may  be  required.

*    Emeritus records a valuation allowance to reduce its deferred tax assets to
     the  amount that is more likely than not to be realized, which at this time
     shows a net asset valuation of zero. Emeritus has considered future taxable
     income  and  ongoing  prudent  and  feasible  tax  planning  strategies  in
     assessing  the  need  for  the  valuation  allowance. However, in the event
     Emeritus  were  to  determine that it would be able to realize its deferred
     tax  assets  in  the  future  in  excess  of  its  net  recorded amount, an
     adjustment  to  the  deferred tax asset would increase income in the period
     such  determination  was  made.

RECENT  ACCOUNTING  PRONOUNCEMENTS AND PROPOSED STATEMENTS

In  January  2003,  the  FASB  issued  Interpretation  No.  46  (FIN  No.  46),
"Consolidation  of Variable Interest Entities".  This Interpretation was revised
in December 2003 and addresses consolidation by business enterprises of variable
interest  entities (VIE's).  A VIE is subject to the consolidation provisions of
FIN  No.  46  if  it  cannot support its financial activities without additional
subordinated  financial  support from third parties or its equity investors lack
any  one  of the following characteristics:  the ability to make decisions about
its  activities  through  voting  rights, the obligation to absorb losses of the
entity  if they occur, or the right to receive residual returns of the entity if
they  occur.  FIN  No.  46  requires  a  VIE  to  be consolidated by its primary
beneficiary.  The  primary  beneficiary  is  the  party  that holds the variable
interests  that  expose  it to a majority of the entity's expected losses and/or
residual  returns.  For  purposes  of  determining  a  primary  beneficiary, all
related  party  interests  must  be  combined  with  the actual interests of the
Company  in  the  VIE.  The  application of this Interpretation is immediate for
VIE's  created or altered after January 31, 2003, and is effective at the end of
the  first  quarter of 2004 for variable interest entities that existed prior to
February  1,  2003.

The  Company  has  evaluated  the  impact  of  FIN  No.  46  on  all its current
related-party  management agreements, including those more fully discussed under
the  section  denoted  as  "Emeritrust Transactions" as well as other management
agreements  and  other  arrangements with potential VIE's.  The Company does not
believe  it  has  any  VIE's  that  require  consolidation.

On  March  31,  2004,  the  Financial Accounting Standards Board (FASB) issued a
proposed Statement, Share-Based Payment, an amendment of FASB Statements No. 123
and  95, that would require companies to account for stock-based compensation to
employees  using  a  fair  value  method  as  of  the  grant date.  The

                                        6
<PAGE>
                              EMERITUS CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                   (unaudited)

proposed  statement addresses the accounting for transactions in which a company
receives  employee  services  in  exchange  for equity instruments such as stock
options, or liabilities that are based on the fair value of the company's equity
instruments  or  that  may  be  settled  through  the  issuance  of  such equity
instruments,  which  includes  the accounting for employee stock purchase plans.
This  proposed  statement  would  eliminate  a  company's ability to account for
share-based  awards  to  employees  using  APB  Opinion 25, Accounting for Stock
Issued  to  Employees  but  would  not change the accounting for transactions in
which  a  company issues equity instruments for services to non-employees or the
accounting  for  employee  stock  ownership  plans.  The  proposed statement, if
adopted, would be effective for awards that are granted, modified, or settled in
fiscal  years  beginning  after  December  15,  2004.

BASIS  OF  PRESENTATION

The  unaudited interim financial information furnished herein, in the opinion of
the  Company's management, reflects all adjustments, consisting of only normally
recurring  adjustments,  which  are  necessary  to  state  fairly  the condensed
consolidated  financial  position,  results  of  operations,  and  cash flows of
Emeritus as of March 31, 2004, and for the three months ended March 31, 2004 and
2003.  The  results  of  operations for the period ended March 31, 2004, are not
necessarily  indicative of the operating results for the full year.  The Company
presumes that those reading this interim financial information have read or have
access  to  its  2003 audited consolidated financial statements and Management's
Discussion  and  Analysis  of Financial Condition and Results of Operations that
are  contained  in  the  2003  Form  10-K  filed March 30, 2004.  Therefore, the
Company  has omitted footnotes and other disclosures herein, which are disclosed
in  the  Form  10-K.

STOCK-BASED  COMPENSATION

The Company applies APB Opinion No. 25, Accounting for Stock Issued to Employees
and related interpretations in measuring compensation costs for its stock option
plans.  The  Company  discloses  pro forma net loss and net loss per share as if
compensation  cost  had  been  determined consistent with Statement of Financial
Accounting  Standards  (SFAS)  No. 123, Accounting for Stock-Based Compensation.

Had  compensation  costs  for  the  Company's  stock option plan been determined
pursuant  to  SFAS  123, the Company's pro forma net loss and pro forma net loss
per  share  would  have  been  as  follows:

<TABLE>
<CAPTION>

                                                               Three  Months  ended March  31,
                                                            ----------------------------------------
                                                                   2004                 2003
                                                            -------------------  -------------------
                                                             (In thousands, except per share data)
<S>                                                         <C>                  <C>
Net loss to common shareholders
As reported. . . . . . . . . . . . . . . . . . . . . . . .  $           (3,532)  $           (2,263)
Add:  Stock-based employee compensation expense
  included in reported net income (loss) . . . . . . . . .                   -                    -
Deduct:  Stock-based employee compensation
  determined under fair value based method for all awards.                (278)                (286)
                                                            -------------------  -------------------
Pro forma. . . . . . . . . . . . . . . . . . . . . . . . .  $           (3,810)  $           (2,549)
                                                            ===================  ===================

Net loss per common share:
As reported - Basic and diluted. . . . . . . . . . . . . .  $            (0.34)  $            (0.22)
                                                            ===================  ===================

Pro forma - Basic and diluted. . . . . . . . . . . . . . .  $            (0.37)  $            (0.25)
                                                            ===================  ===================
</TABLE>


                                        7
<PAGE>
                              EMERITUS CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                   (unaudited)

The  Company  estimates  the  fair  value of its options using the Black-Scholes
option value model, which is one of several methods that can be used to estimate
option  values.  The  Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable.  Option valuation models require the input of highly
subjective  assumptions,  including  the  expected  stock price volatility.  The
Company's  options  have  characteristics  significantly different from those of
traded  options,  and changes in the subjective input assumptions can materially
affect  the  fair value estimates.  No options were granted in the first quarter
of 2004.  The fair value of options granted and employee purchase plan shares in
the three months ended March 31, 2003, were estimated at the date of grant using
the  following  weighted  average  assumptions:

<TABLE>
<CAPTION>
                                          Three Months
                                             Ended
                                           March 31,
                                              2003
                                         --------------
<S>                                      <C>
Expected life from vest date (in years)              4
Risk-free interest rate . . . . . . . .            2.5%
Volatility. . . . . . . . . . . . . . .           89.3%
Dividend yield. . . . . . . . . . . . .              -
Weighted average fair value (per share)  $        2.58
</TABLE>

EMERITRUST  TRANSACTIONS

Since  1999, Emeritus has managed 46 communities under arrangements with several
related  investor  groups  that  involved  (i) payment of management fees to the
Company,  (ii)  options  for  the Company to purchase the communities at a price
determined  by  a  formula,  and  (iii)  obligations to fund operating losses of
certain  communities.  As  of  October 1, 2003, the 21 Emeritrust II Communities
Managed  were  acquired via operating leases and the results are included in the
Company's  condensed  consolidated  financial  statements.

Emeritrust  I  Communities  Management.  During  2003,  Emeritus  managed  the
Emeritrust  I  communities,  which  included  25  of the 46 communities, under a
management  agreement providing for a base fee of 3% of gross revenues generated
by  the  communities  and  an additional management fee of 4% of gross revenues,
payable  to  the extent of 50% of cash flow from the communities. The management
agreement  also  required  the  Company  to  fund  cash  operating losses of the
communities.  In each of April and August 2003, the Emeritrust I owners disposed
of  a  community,  reducing  the number of managed communities to 23. Under this
arrangement,  the  Company  received  management  fees  (net  of  its  funding
obligations)  of  approximately  $837,000  in  the  first  quarter of 2003. This
management  agreement,  as  extended several times, was to have expired June 30,
2003,  but was extended to January 2, 2004, although the Company was indemnified
by  the  investor  group  against  liability  under  its obligation to fund cash
operating  losses  for  the  extension  period.  In January 2004, the management
arrangement  was  informally  extended  through  March  31,  2004, at the stated
management  fee  and without any funding obligation. The options to purchase the
communities  expired  at the end of 2003. In March 2004, the Emeritrust I owners
disposed  of  a  community,  reducing  the  number of managed communities to 22.
Subsequently,  effective  April  1,  2004,  the Emeritrust I owners extended the
underlying  financing  on  the  Emeritrust I communities. In connection with the
financing  extension, the management agreement was amended to provide for a flat
management  fee  of  5%  of  gross  revenues. This amendment also terminated the
opportunity  for  supplemental  management  fee  revenues  based  upon operating
performance  and  extended  the  term of the agreement to March 31, 2005, with a
one-year  extension  available  under  certain  circumstances.  The Company also
expects  that the Emeritrust I owners could sell additional communities, thereby
reducing  the number of communities subject to the management agreement. Because
this  management  agreement  can  be terminated by either party on short notice,
there  can be no guarantee that the management arrangement will continue for its
full  term.  Under the new management agreement, the Company received management
fees  of  approximately  $640,000  in  the  first  quarter  of  2004.

                                        8
<PAGE>
                              EMERITUS CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                   (unaudited)

Emeritrust  II  Communities  Management.  Through  September  30, 2003, Emeritus
managed  the Emeritrust II communities, which included 21 of the 46 communities,
under  management  agreements providing for a base management fee of 5% of gross
revenue  generated  by  the  communities and an additional management fee of 2%,
payable if the Company met certain cash flow standards. The management agreement
for  five  of  the  communities also required the Company to fund cash operating
losses  of  those  communities.  Under  this  arrangement,  the Company received
management  fees  (net  of its funding obligations) of approximately $675,000 in
the  first  quarter  of  2003.

Emeritrust II Communities Lease. On September 30, 2003, Emeritus acquired the 21
Emeritrust  II communities for a cash purchase price of $118.6 million, financed
through  a  combination of lease and mortgage financing with an independent real
estate  investment  trust  in  the  aggregate amount of $121.5 million. A master
operating  lease covers the Emeritrust II communities and four other communities
originally leased from the real estate investment trust in March 2002. The lease
is  for  an  initial  15-year  period,  with one 15-year renewal, and grants the
Company  a  right  of  first  opportunity  to  purchase any of the Emeritrust II
communities  if the trust decides to sell. The lease is a net lease, with annual
base  rent  of  $14.7  million  (of  which  $10.5 million is attributable to the
Emeritrust  II  communities  and  $4.2  million  is  attributable  to  the  four
previously  leased  communities),  and  periodic  escalators.  The  real  estate
investment  trust  also  provided $11.5 million of debt financing secured by the
Company's  leasehold  interests  in the Emeritrust II communities. This debt was
consolidated  with  other debt held by the real estate investment trust. As part
of  the  purchase  price,  the Company also agreed to issue to the Emeritrust II
investors  warrants  to  purchase  500,000  shares of its common stock, of which
warrants  to  purchase  400,000  shares  have  been  issued. The warrants expire
September  30,  2008,  and  have  an exercise price of $7.60 (subject to certain
adjustments).  The  holders  have limited registration rights. Emeritus included
the  fair value of these warrants, totaling approximately $1.4 million, as lease
acquisition  costs  that  it  will  amortize  over  the  life  of  the  lease.

ACCRUED  DIVIDENDS  ON  PREFERRED  STOCK

Since  the  third quarter of 2000, the Company has accrued its obligation to pay
cash  dividends  to  the  Series  B  preferred  shareholders,  which amounted to
approximately  $8.8  million  at  March  31,  2004,  including all penalties for
non-payment.  Because the Company has not paid these dividends for more than six
consecutive  quarters,  under  the  Designation of Rights and Preferences of the
Series  B preferred stock in the Company's Articles of Incorporation, the Series
B  preferred  shareholders  may  designate one director in addition to the other
directors that they are entitled to designate under the shareholders' agreement.
As  of  January  1, 2002, the Series B preferred shareholders became entitled to
designate  an  additional  director under the Articles, but thus far have chosen
not  to  do  so.

Series  B preferred dividends are to be paid in cash and in additional shares of
Series  B  preferred  shares. As of March 31, 2004, an additional 5,178 Series B
preferred shares had been issued as paid-in-kind dividends for all periods prior
to  the  first  quarter  of  2004,  of which 348 shares were issued in the first
quarter  of  2004.  As  of  April  1, 2004, an additional 351 shares of Series B
preferred  stock  were issued as paid-in-kind dividends for the first quarter of
2004.

ALTERRA  TRANSACTIONS

In December 2003, Emeritus invested $7.3 million, net of transaction costs, in a
limited  liability company (LLC) that acquired Alterra Healthcare Corporation, a
national  assisted living company headquartered in Milwaukee, Wisconsin that was
the  subject  of a voluntary Chapter 11 bankruptcy. The investment represents an
11%  interest in the total invested capital of the LLC and includes an excess of
approximately  $3.6 million over the underlying net book value. Alterra operated
304 assisted living communities in 22 states. The purchase price for Alterra was
$76  million  and the transaction closed on December 4, 2003, following approval
by  the  Bankruptcy  Court.  The  members of the LLC consists of an affiliate of
Fortress  Investment Group LLC (Fortress), a New York based private equity fund,
which is the managing member, an entity controlled by Mr. Baty, and the Company.
Under  the LLC agreement, distributions are first allocated to Fortress until it
receives  payment  on  a  $15.0  million loan to the LLC at 15% interest and its
original  investment  of  $49  million together with a 15% preferred return, and
then  are  allocated  to  the  three

                                        9
<PAGE>
                              EMERITUS CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                   (unaudited)

investors  in  proportion  to percentage interests, as defined in the agreement,
which  are  a  50% interest for Fortress and a 25% interest each for the Company
and  the  entity  controlled  by  Mr.  Baty.

Through January 31, 2004, the investment was structured as an ownership interest
in an LLC, which is a pass-through entity for tax purposes, similar to a limited
partnership.  Under  generally  accepted  accounting principles, the Company was
required  to use the equity method of accounting for its LLC membership interest
and  record  a  portion  of  Alterra's  results  of  operations in its financial
statements.  As  a  consequence,  equity losses of approximately $794,000, which
are  recorded  on  a  quarter  lag, are included under the caption "Other, net",
which  represents  the Company's portion of Alterra's net loss for December 2003
and  January  2004.

The  LLC  made  an  election  to  be  treated  as a corporation for tax purposes
effective January 31, 2004, and is no longer a pass-through entity.  As a result
of  this  election,  beginning  February  1,  2004, the Company will account for
Alterra  on  a  cost  basis  under  APB  18 "The Equity Method of Accounting for
Investments  in  Common Stock" until Fortress's investment falls below a certain
level  and/or  there  is  a change in structure such that the Company would have
significant influence over the operations of Alterra.  If and when such an event
occurs,  Emeritus  will  resume  using  the  equity method of accounting for its
investment  in  Alterra.

CPM-JEA  TRANSACTIONS

On  April  1,  2004,  the  Company  completed  the first stage of its previously
announced lease acquisition of up to 24 assisted living facilities in 13 states,
including  up  to  10  stand-alone  dementia care facilities, for an approximate
$190.5  million  investment,  inclusive of transaction fees. The completed first
stage  involved  17 of the 24 senior housing and long-term care properties for a
total investment of about $140.7 million, inclusive of transaction fees. Nine of
the  communities,  all  of  which  the  Company  managed  in 2003, were owned by
entities  that  Daniel  R.  Baty,  the  Company's  Chairman  and Chief Executive
Officer, controls and in which he has financial interests ("Baty Entities"). The
remainder  of  the  communities  were owned by entities in which Mr. Baty had an
indirect  ownership  interest  (the  "JEA  Entities").  With  respect  to  the
communities  formerly  owned  by  the  JEA  Entities, the Company entered into a
management  agreement  with  JEA  Senior  Living  ("JEA"),  a partner in the JEA
Entities,  which  is not affiliated with Mr. Baty, to provide certain management
services to the communities for a period of three years. Under the terms of this
management  agreement,  JEA is entitled to a monthly management fee of 5% of the
gross  revenues  of the communities and to a termination payment of $100,000 per
year  for  a  period  of  ten  years  after  the  termination  of the management
agreement. The Company also agreed to an earn-out payment to the JEA Entities of
up  to  $2.0 million based on the improvement in the net operating income of the
communities  during  the  three-year  period  after  the  closing. Of the $140.7
million  purchase  price  paid  at  closing,  approximately  $137.0  million was
financed  through  a  real  estate  investment  trust through an operating lease
agreement.  The  balance  of the closing purchase price was paid $2.7 million in
cash  and  $1.0  million  by  the  execution  and delivery by the Company of its
promissory  notes to two of the Baty Entities, which provide for interest at the
rate  of  8%  and  a  maturity date of April 1, 2007. The communities are leased
under  two  master  leases,  each with a 15-year term, with three 5-year renewal
options. The initial lease rate is 9% with Consumer Price Index based inflators.
The  initial  lease  payment  is  expected  to be approximately $1.0 million per
month.  Of  the  up  to $49.8 million balance of the transaction, at least $37.2
million  is  expected  to  close  during  the second quarter of 2004, or shortly
thereafter,  subject  to  customary  closing  conditions.

LINE  OF  CREDIT

In  March 2004, the Company secured a revolving line of credit with U.S. Bank in
the  amount  of  $3.0  million,  pledging  certain  of  the  Company's assets as
collateral and bearing interest at 1% above U.S. Bank's prime rate or LIBOR plus
3.5%  for  loans  up to 3 months, at the Company's option.  The current maturity
date  on  the  line  of  credit  is  June  30,  2004.

 LOSS  PER  SHARE

The  capital  structure  of  Emeritus  includes  convertible  debentures,  and
redeemable  and  non-redeemable  convertible  preferred  stock,  common  stock
warrants,  and  stock  options.  Basic  net  loss per share is computed based on
weighted average shares outstanding and excludes any potential dilution. Diluted
net

                                       10
<PAGE>
                              EMERITUS CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                   (unaudited)

loss  per  share  is  computed  based  on  the weighted average number of shares
outstanding  plus  dilutive  potential  common  shares. Options and warrants are
included  under  the  "treasury  stock  method" to the extent they are dilutive.
Certain  shares  issuable  upon  the  exercise of stock options and warrants and
conversion of convertible debentures and preferred stock have been excluded from
the  computation  because  the effect of their inclusion would be anti-dilutive.
The  following  table  summarizes those that are excluded in each period because
they  are  anti-dilutive  (In  thousands):

<TABLE>
<CAPTION>
                                             Three Months
                                                 Ended
                                               March 31,
                                             2004    2003
                                             -----  ------
<S>                                          <C>    <C>
Convertible Debentures. . . . . . . . . . .  1,455   1,455
Options . . . . . . . . . . . . . . . . . .  1,884   2,030
Warrants - Senior Housing Partners I, L.P..    400       -
Warrants - Saratoga Partners. . . . . . . .  1,000   1,000
Series A Preferred (1). . . . . . . . . . .      -   1,374
Series B Preferred. . . . . . . . . . . . .  4,872   4,636
                                             -----  ------
                                             9,611  10,495
                                             =====  ======
</TABLE>

(1)  Repurchased  in  July  and  August  2003.

OTHER  COMPREHENSIVE  LOSS

Other comprehensive loss includes the following transactions for the three-month
periods  ended  March  31,  2004  and  2003,  respectively  (In  thousands):

<TABLE>
<CAPTION>

                                     Three Months ended March 31,
                                         2004            2003
                                    --------------  --------------
<S>                                 <C>             <C>
Net loss to common shareholders. .  $      (3,532)  $      (2,263)
Other comprehensive income:
     Unrealized holding gains
          on investment securities              -             144
                                    --------------  --------------
Comprehensive loss . . . . . . . .  $      (3,532)  $      (2,119)
                                    ==============  ==============
</TABLE>

LIQUIDITY

The  Company  has  incurred significant operating losses since its inception and
has  a  working  capital  deficit  of  $35.3  million,  although  $11.4  million
represents  deferred  revenue  and  unearned  rental income, and $8.8 million of
preferred dividends is due only if declared by the Company's board of directors.
At  times in the past, the Company has been dependent upon third-party financing
or disposition of assets to fund operations.  If such transactions are necessary
in the future, Emeritus cannot guarantee that they will be available on a timely
basis,  on  terms  attractive  to  the  Company,  or  at  all.

Throughout  2002  and  continuing  in  the  first  quarter  of 2003, the Company
refinanced  substantially  all of its debt obligations, extending the maturities
of  such  financings  to  dates in 2005 or thereafter, at which time the Company
will need to refinance or otherwise repay the obligations. Many of the Company's
debt instruments and leases contain "cross-default" provisions pursuant to which
a  default  under  one  obligation  can  cause a default under one or more other
obligations  to  the same lender or lessor. Such cross-default provisions affect
17  owned  assisted  living properties and 104 properties operated under leases.
Accordingly,  any  event of default could cause a material adverse effect on the
Company's  financial

                                       11
<PAGE>
                           EMERITUS CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                   (unaudited)

condition  if  such  debt  or leases are cross-defaulted. At March 31, 2004, the
Company  complied  with  all such covenants, except for a portfolio of 23 leased
buildings.  The  Company has obtained a waiver from the lessor and is considered
to  be  in  full  compliance  as  of  March  31,  2004.

Management  believes that the Company will be able to sustain positive operating
cash  flow  on  an  annual  basis  and will have adequate cash for all necessary
investing  and  financing activities including required debt service and capital
expenditures  through  at  least  March  31,  2005.

              [The rest of this page is intentionally left blank]

                                       12
<PAGE>


ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
OVERVIEW

Emeritus  is  a Washington corporation organized by Daniel R. Baty and two other
founders  in  1993.  In November 1995, we completed our initial public offering.

From  1995  through  1999,  we expanded rapidly through acquisition and internal
development  and  by December 31, 1999, operated 129 assisted living communities
with  11,726  units.  We  believe,  however,  that  during  this  expansion, the
assisted living industry became significantly overbuilt, creating an environment
characterized  by  sluggish  or  falling occupancy and market resistance to rate
increases.  As  a  result of these difficult operating circumstances, we limited
further  growth  and  in  2000  began  an  increasing focus first on raising our
occupancy  and  later  on  operating  efficiencies  and cost controls as well as
implementing  a  systematic  rate  enhancement  program.

We  believe  that  the  health  of  the  assisted  living  industry is currently
improving  and  that there are developing opportunities to improve occupancy and
adjust  rates.  It is apparent that the assisted living industry is experiencing
increased  regulation,  increased  insurance  costs, and limited availability of
capital  for smaller local and regional operators.  In this type of environment,
we  believe  that we will continue to witness consolidation of smaller local and
regional  operators  into  the  larger  national  operators.  Because  of  these
circumstances,  we  have  been able to complete several acquisitions in the last
two  years  and  have  converted communities we managed to communities we own or
lease.  Going  forward,  we  will  attempt  to  identify  additional acquisition
opportunities.  In  2000  and  2001,  we  continued to operate approximately 130
communities, but in 2002 and 2003, we increased that to 180 and 175 communities,
respectively, primarily through the lease of 24 communities formerly operated by
Marriott  and  through other selected acquisitions.  From the end of 2000 to the
end of 2003, the communities we manage decreased from 69 to 47 and the owned and
leased  communities  increased  from  61  to 128, reflecting both our increasing
confidence  in  the  assisted  living  industry and the availability of capital.

In  2004,  we expect to continue reviewing acquisition opportunities and seeking
to take ownership or lease positions in communities that we manage. To this end,
on  April 1, 2004, we executed the first stage of the previously announced lease
acquisition  of  up  to  13 communities that we formerly managed, a second lease
acquisition  of  nine  memory  loss  facilities,  and  two  other  communities.

The  following  table  sets  forth  a  summary  of  our  property  interests:

<TABLE>
<CAPTION>


                                           As  of  March 31,       As of December 31,       As of March 31,
                                                  2004                    2003                    2003
                                         ----------------------  ---------------------  ---------------------
                                         Buildings     Units     Buildings     Units     Buildings    Units
                                         ----------  ----------  ----------  ----------  ---------  ---------
<S>                                      <C>         <C>         <C>         <C>         <C>        <C>
Owned (1) . . . . . . . . . . . . . . .          19       1,813          19       1,813         17      1,687
Leased (1). . . . . . . . . . . . . . .         109       8,303         109       8,303         67      5,279
Managed/Admin Services. . . . . . . . .          45       4,454          46       4,589         94      8,577
Joint Venture/Partnership . . . . . . .           1         140           1         140          2        219
                                         ----------  ----------  ----------  ----------  ---------  ---------
     Operated Portfolio . . . . . . . .         174      14,710         175      14,845        180     15,762

     Percentage increase (decrease) (2)      (0.6%)      (0.9%)      (2.8%)      (5.8%)          -          -
</TABLE>

--------
(1)  Included  in  our  consolidated  portfolio  of  communities.

(2)  The  percentage  increase  (decrease)  indicates  the change from the prior
     year, or, in the case of March 31, 2004 and 2003, from the end of the prior
     year.


                                       13
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

Two  of  the  important factors affecting our financial results are the rates we
charge  our residents and the occupancy levels we achieve in our communities. We
rely  primarily  on  our residents' ability to pay our charges for services from
their  own  or  familial  resources  and  expect  that  we  will  do  so for the
foreseeable  future.  Although care in an assisted living community is typically
less  expensive  than  in  a skilled nursing facility, we believe that generally
only  seniors with income or assets meeting or exceeding the regional median can
afford  to  reside  in our communities. In this context, we must be sensitive to
our residents' financial circumstances and remain aware that rates and occupancy
are  often  interrelated.

In  evaluating  the  rate  component,  we  generally rely on the average monthly
revenue per unit, computed by dividing the total revenue for a particular period
by  the  average  number of occupied units determined on a monthly basis for the
same  period.  In  evaluating  the  occupancy component, we generally rely on an
average  occupancy  rate,  computed  by  dividing  the  average  units occupied,
determined  on a monthly basis, during a particular period by the average number
of  units  available,  determined  on  a  monthly  basis, during the period.  We
evaluate  these  and  other operating components for our consolidated portfolio,
which  includes  the  communities we own and lease, and our operating portfolio,
which  also  includes  the  communities  we  manage.

In  our  consolidated  portfolio,  our  average monthly revenue per unit for the
three months ended March 31, 2004, increased to $2,779 from $2,756 in 2003. This
change  represents an increase of $23, or 0.8%, for the three months ended March
31,  2004,  compared  to the comparable period of 2003. This limited increase is
the  result  of  repositioning several of our acquired communities over the past
year  to  be  more  rate-competitive  and  to  establish a new presence in their
respective  markets.

In our consolidated portfolio, our average occupancy rate increased to 78.4% for
the  three  months  ended  March 31, 2004, from 77.1% for the three months ended
March 31, 2003.  We believe that this increase in occupancy rates, after several
years  in  which rates have declined, reflect industry-wide factors, such as the
declining supply of available units as well as our own actions and policies.  We
believe  that  our  rate  enhancement  program  has adversely affected occupancy
growth  in  some  markets  in  past  years and that rate adjustments in selected
markets  referred  to above has helped our occupancy rates during the last year.
We  continue  to  evaluate the factors of rate and occupancy to find the optimum
balance.

We  have  incurred operating losses since our inception in 1993, and as of March
31,  2004,  we  had  an accumulated deficit of approximately $154.3 million.  We
believe  that  these  losses have resulted from our early emphasis on expansion,
financing  costs  arising  from  multiple financing and refinancing transactions
related  to  this  expansion,  administrative  and  corporate  expenses  that we
incurred  in  anticipation  of  further  expansion that did not materialize, and
occupancy rates that have declined and remained lower for longer periods than we
anticipated.

SIGNIFICANT  FIRST  QUARTER  2004  TRANSACTIONS

In  2003  and  continuing  in  2004,  we  substantially  increased the number of
communities  we  lease,  reduced  the  number  of communities we manage, and, in
connection  with  these  changes,  increased  and  restructured  portions of our
long-term  financing  obligations.  The  transactions  associated  with  these
developments  are  summarized  below.

EMERITRUST  TRANSACTIONS

Since  1999,  we  have  managed  46  communities under arrangements with several
related investor groups that involved (i) payment of management fees to us, (ii)
options  for  us to purchase the communities at a price determined by a formula,
and  (iii)  obligations  to fund operating losses of certain communities.  As of
October 1, 2003, we acquired 21 Emeritrust II Communities that we had previously
managed  via  operating  leases  and  the  results are included in our condensed
consolidated  financial  statements.

Emeritrust  I  Communities  Management. During 2003, we managed the Emeritrust I
communities,  which  included  25  of  the  46  Emeritrust  communities, under a
management  agreement providing for a base fee of 3% of gross revenues generated
by  the  communities  and  an additional management fee of 4% of gross revenues,
payable  to  the extent of 50% of cash flow from the communities. The management
agreement  also required us to fund cash operating losses of the communities. In
each  of  April  and  August  2003,  the


                                       14
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

Emeritrust  I  owners  disposed  of  a community, reducing the number of managed
communities  to 23.  Under this arrangement, we received management fees (net of
our funding obligations) of approximately $837,000 in the first quarter of 2003.
This  management  agreement, as extended several times, was to have expired June
30,  2003,  but was extended to January 2, 2004, although we were indemnified by
the investor group against liability under our obligation to fund cash operating
losses  for  the  extension period.  In January 2004, the management arrangement
was informally extended through March 31, 2004, at the stated management fee and
without any funding obligation.  The options to purchase the communities expired
at  the  end  of  2003.  In  March  2004,  the Emeritrust I owners disposed of a
community,  reducing  the  number  of  communities  that  we  managed  to  22.
Subsequently,  effective  April  1,  2004,  the Emeritrust I owners extended the
underlying  financing  on  the Emeritrust I communities.  In connection with the
financing  extension, the management agreement was amended to provide for a flat
management  fee  of  5%  of  gross revenues.  This amendment also terminated the
opportunity  for  supplemental  management  fee  revenues  based  upon operating
performance  and  extended  the  term of the agreement to March 31, 2005, with a
one-year  extension  under  certain  circumstances.  We  also  expect  that  the
Emeritrust  I  owners  could  sell  additional communities, thereby reducing the
number  of  communities  subject  to  the  management  agreement.  Because  this
management  agreement  can  be terminated by either party on short notice, there
can  be  no guarantee that the management arrangement will continue for its full
term.  Under  the  new  management  agreement,  we  received  management fees of
approximately  $640,000  in  the  first  quarter  of  2004.

Emeritrust II Communities Management. Through September 30, 2003, we managed the
Emeritrust  II  communities, which included 21 of the 46 Emeritrust communities,
under  management  agreements providing for a base management fee of 5% of gross
revenue  generated  by  the  communities and an additional management fee of 2%,
payable if we met certain cash flow standards. The management agreement for five
of  the  communities  also  required  us  to fund cash operating losses of those
communities.  Under  this  arrangement,  we received management fees (net of our
funding  obligations)  of  approximately  $675,000 in the first quarter of 2003.

Emeritrust  II  Communities  Lease.  On  September  30, 2003, we acquired the 21
Emeritrust  II  communities that we had previously managed, for a purchase price
of $118.6 million, which we financed through a combination of lease and mortgage
financing  with  an  independent  real estate investment trust for approximately
$121.5  million.  A  master  operating  lease  covers  the  21  Emeritrust  II
communities  plus  four  other  communities  that we leased from the real estate
investment  trust  in  March 2002.  The master operating lease is for an initial
15-year  period,  with  one  15-year  renewal,  and  grants  us a right of first
opportunity  to  purchase  any  of  the  Emeritrust  II communities if the trust
decides  to  sell.  The  lease  is  a  net lease, with annual base rent of $14.7
million (of which $10.5 million is attributable to the Emeritrust II communities
and  $4.2  million  is  attributable to the four previously leased communities),
with  periodic  escalators.  The  real  estate investment trust also provided us
$11.5  million  of  debt  financing  secured  by  our leasehold interests in the
Emeritrust  II  communities.  This debt was consolidated with other debt held by
the real estate investment trust.  As part of the purchase price, we also agreed
to  issue  to the Emeritrust II investors warrants to purchase 500,000 shares of
our common stock, of which warrants to purchase 400,000 shares have been issued.
The  warrants  expire  September  30,  2008, and have an exercise price of $7.60
(subject  to certain adjustments).  The holders have limited registration rights
for  the  shares  of common stock underlying the warrants.  We included the fair
value  of  these  warrants,  totaling  approximately  $1.4  million,  as  lease
acquisition  costs  that  we  will  amortize  over  the  life  of  the  lease.

ALTERRA  TRANSACTIONS

In  December  2003,  we  invested  $7.3  million, net of transaction costs, in a
limited  liability company (LLC) that acquired Alterra Healthcare Corporation, a
national  assisted living company headquartered in Milwaukee, Wisconsin that was
the  subject  of a voluntary Chapter 11 bankruptcy. The investment represents an
11%  interest in the total invested capital of the LLC and includes an excess of
approximately  $3.6 million over the underlying net book value. Alterra operated
304 assisted living communities in 22 states. The purchase price for Alterra was
$76  million  and the transaction closed on December 4, 2003, following approval
by  the  Bankruptcy  Court.  The  members of the LLC consists of an affiliate of
Fortress  Investment Group LLC (Fortress), a New York based private equity fund,
which  is  the  managing member, an entity controlled by Mr. Baty, and us. Under
the  LLC  agreement,  distributions  are  first  allocated  to Fortress until it
receives  payment  on  a  $15.0  million loan to the LLC at 15% interest and its
original

                                       15
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           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

investment  of  $49  million  together with a 15% preferred return, and then are
allocated  to  the  three  investors  in  proportion to percentage interests, as
defined  in  the  agreement,  which  are  a  50% interest for Fortress and a 25%
interest  each  for  the  entity  controlled  by  Mr.  Baty  and  us.

Through January 31, 2004, the investment was structured as an ownership interest
in an LLC, which is a pass-through entity for tax purposes, similar to a limited
partnership.  Under  generally  accepted accounting principles, we were required
to  use  the  equity  method  of  accounting for our LLC membership interest and
record a portion of Alterra's results of operations in our financial statements.
As a consequence, equity losses of approximately $794,000, which are recorded on
a quarter lag, are included under the caption "Other, net", which represents our
portion  of  Alterra's  net  loss  for  December  2003  and  January  2004.

The  LLC  made  an  election  to  be  treated  as a corporation for tax purposes
effective January 31, 2004, and is no longer a pass-through entity.  As a result
of  this  election, beginning February 1, 2004, we will account for Alterra on a
cost  basis  under  APB  18  "The Equity Method of Accounting for Investments in
Common  Stock"  until  Fortress's  investment falls below a certain level and/or
there  is  a  change  in structure such that we would have significant influence
over  the  operations  of  Alterra.  If  and  when such an event occurs, we will
resume  using  the  equity  method  of accounting for our investment in Alterra.

CPM-JEA  TRANSACTIONS

On April 1, 2004, we completed the first stage of our previously announced lease
acquisition of up to 24 assisted living facilities in 13 states, including up to
10  stand-alone  dementia  care  facilities,  for  an approximate $190.5 million
investment, inclusive of transaction fees. The completed first stage involved 17
of the 24 senior housing and long-term care properties for a total investment of
about  $140.7  million,  inclusive of transaction fees. Nine of the communities,
all of which we managed in 2003, were owned by entities that Daniel R. Baty, our
Chairman  and  Chief  Executive  Officer, controls and in which he has financial
interests  ("Baty  Entities").  The  remainder  of the communities were owned by
entities  in  which  Mr.  Baty  had  an  indirect  ownership  interest (the "JEA
Entities").  With respect to the communities formerly owned by the JEA Entities,
we entered into a management agreement with JEA Senior Living ("JEA"), a partner
in  the  JEA Entities, which is not affiliated with Mr. Baty, to provide certain
management  services  to  the communities for a period of three years. Under the
terms  of this management agreement, JEA is entitled to a monthly management fee
of  5%  of the gross revenues of the communities and to a termination payment of
$100,000  per  year  for  a  period  of  ten  years after the termination of the
management  agreement. We also agreed to an earn-out payment to the JEA Entities
of  up  to  $2.0 million based on the improvement in the net operating income of
the  communities  during  the three-year period after the closing. Of the $140.7
million  purchase  price  paid  at  closing,  approximately  $137.0  million was
financed  through  a  real  estate  investment  trust through an operating lease
agreement.  The  balance  of the closing purchase price was paid $2.7 million in
cash  and  $1.0  million  by  the execution and delivery by us of our promissory
notes  to two of the Baty Entities, which provide for interest at the rate of 8%
and  a  maturity  date  of  April  1, 2007. The communities are leased under two
master  leases, each with a 15-year term, with three 5-year renewal options. The
initial  lease rate is 9% with Consumer Price Index based inflators. The initial
lease  payment is expected to be approximately $1.0 million per month. Of the up
to  $49.8 million balance of the transaction, at least $37.2 million is expected
to  close  during  the second quarter of 2004, or shortly thereafter, subject to
customary  closing  conditions.


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           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

RESULTS  OF  OPERATIONS

SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  AND  USE  OF  ESTIMATES

Our discussion and analysis of our financial condition and results of operations
are  based upon our condensed consolidated financial statements, which have been
prepared  in  accordance  with  accounting  principles generally accepted in the
United  States.  The  preparation  of  these financial statements requires us to
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities, revenues and  expenses, and related disclosure of contingent assets
and  liabilities.  On  an  ongoing  basis,  we evaluate our estimates, including
those  related  to  resident  programs  and incentives such as move-in fees, bad
debts,  investments,  intangible assets, impairment of long-lived assets, income
taxes,  restructuring,  long-term service contracts, contingencies, self-insured
retention,  health  insurance,  and  litigation.  We  base  our  estimates  on
historical  experience  and on various other assumptions that are believed to be
reasonable  under  the  circumstances,  the  results of which form the basis for
making  judgments  about  the carrying values of assets and liabilities that are
not  readily  apparent from other sources.  Actual results may differ from these
estimates  under  different  assumptions  or  conditions.

We  believe  the  following critical accounting policies are most significant to
the  judgments  and  estimates  used  in  the  preparation  of  our  condensed
consolidated  financial  statements.  Revisions in such estimates are charged to
income  in  the  period in which the facts that give rise to the revision become
known.

*    For  commercial  general liability and professional liability insurance for
     2004,  we  formed a wholly owned captive insurance company domiciled in the
     U.S.  The insurance policy issued by our captive is claims-made and insures
     liabilities  associated with general and professional liability. The policy
     insures  on  a  per  occurrence  and  aggregate-limit  basis in excess of a
     self-insured  retention.  Estimated  losses  covered  by the policy and the
     self-insured  retention  are  accrued based upon actuarial estimates of the
     aggregate  liability  for  claims  within  the  policy year. The captive is
     funded  solely  through  contributions  made  by us, which is funded at set
     intervals  based on expected timing of losses. To the extent the captive is
     required  to  pay claims in excess of our contributions, we are required to
     fund  any shortfalls on demand. To the extent that claims exceed the policy
     issued  by  the  captive, we will be required to cover all losses above the
     captive  limits set per occurrence and in aggregate. The captive is subject
     to  regulatory  agency  control  and  reviews for compliance with statutes.
     Results  from  these  reviews may change the timing or amount of subsequent
     funding.  Should  losses exceed actuarial estimates, additional expense may
     be  accrued  at  the  time  of  determination.

*    For  health  insurance,  we  self-insure  up  to  a  certain level for each
     occurrence  above  which  a  catastrophic  insurance  policy  covers  any
     additional costs. Health insurance expense is accrued based upon historical
     experience  of  the  aggregate  liability  for  claims  incurred.  If these
     estimates  are  insufficient,  additional  charges  may  be  required.

*    Workers'  compensation  insurance  coverage  applies for specific insurable
     states  (excluding  Texas, New York, and the compulsory State Funds States)
     through  a  high  deductible,  fully  collateralized  insurance policy. The
     policy  premium  is  based  upon standard rates applied to estimated annual
     payroll. The collateral requirement is determined by annual expected losses
     for  the  policy  year.  We  contract  with  an  independent  third-party
     administrator  to administer the program; and paid claim expenses are drawn
     from  the  collateral  account.  The  sum of the premium and related costs,
     estimated  administration  costs,  and  actuarial  based  estimated  losses
     ("Estimated  Total  Costs")  is  accrued on a monthly basis. The difference
     between  the  Estimated Total Costs and the posted collateral is carried as
     an  asset  on  the balance sheet. At policy expiration, an insurer audit is
     conducted to adjust premiums based on actual, rather than estimated, annual
     payroll.  Any  premium adjustment for the differences between estimated and
     actual  payroll  will  first  be  applied to the accrued asset and then, if
     needed,  as an adjustment to workers' compensation expense at the time such
     adjustment  is determined. The insurer also audits the claim total incurred
     amount  at  least  annually  and  may  adjust  the  applicable  policy year
     collateral  requirement.  There  is a reasonable expectation that the total
     incurred  losses  will  be  less than the posted collateral, resulting in a
     release  of collateral back to us. The adjustment to the collateral will be
     applied first to the accrued asset and then, if needed, as an adjustment to
     the  workers'  compensation  expense  at  the  time  such  adjustment  is
     determined. We insure occupational injuries and illness in New York

                                       17
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           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

     through  participation  in  a  group  pool  insured  through  a  guaranteed
     cost  insurance policy, with the premium payable  on a monthly basis.  The
     insurer  group contracts with an independent third-party  administrator on
     behalf of  its members to manage the claims; and claim expenses are paid by
     the  insurer.  For  work-related  injuries  in  Texas, we insure through a
     qualified  "Non-Subscriber  Employee  Retirement  Income  Security  Act
     Occupational  Injury and Illness  Benefit  Plan" and an insurance policy is
     In  place  to cover losses in excess of the deductible amount. We  contract
     with  an  independent  third-party  administrator  to  manage  the claims.
     Claim  expenses  are paid  as  incurred  and  estimated  losses  within the
     deductible  are  accrued  on  a  monthly  basis.

*    We account for  stock  option  awards  to  employees  under  the  intrinsic
     value-based  method of accounting prescribed by APB No. 25, "Accounting for
     Stock  Issued  to Employees". Under this method, no compensation expense is
     recorded,  provided  the  exercise  price  is  equal to or greater than the
     quoted  market  price  of  the  stock  at the grant date. We make pro forma
     disclosures of net income and earnings per share as if the fair value-based
     method  of accounting (the alternative method of accounting for stock-based
     compensation)  had been applied as required by FAS No. 123, "Accounting for
     Stock-Based  Compensation". The fair value-based method requires us to make
     assumptions  to  determine  expected  risk-free interest rates, stock price
     volatility, dividend yield, and weighted-average option life. To the extent
     such  things  as actual volatility or life of the options is different from
     estimated,  pro forma amounts expensed will be more or less than would have
     been  disclosed  otherwise.

*    We maintain allowances for doubtful accounts for estimated losses resulting
     from  the  inability  of  our  residents  to make required payments. If the
     financial  condition  of our residents were to deteriorate, resulting in an
     impairment  of  their  ability  to make payments, additional charges may be
     required.

*    We  record  a  valuation allowance to reduce our deferred tax assets to the
     amount  that  is  more  likely  than not to be realized, which at this time
     shows  a  net  asset  valuation  of zero. We have considered future taxable
     income  and  ongoing  prudent  and  feasible  tax  planning  strategies  in
     assessing  the  need  for the valuation allowance. However, in the event we
     were  to determine that we would be able to realize our deferred tax assets
     in  the  future  in excess of our net recorded amount, an adjustment to the
     deferred  tax  asset would increase income in the period such determination
     was  made.

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                                       18
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           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED


COMMON-SIZE  INCOME  STATEMENTS  AND  PERIOD-TO-PERIOD  PERCENTAGE  CHANGE

The  following  table  sets forth, for the periods indicated, certain items from
our  Condensed  Consolidated  Statements  of Operations as a percentage of total
revenues  and the percentage change of the dollar amounts from period to period.
<TABLE>
<CAPTION>


                                                               Period to Period
                                                                 Percentage
                                                                  Increase
                                      Percentage of Revenues     (Decrease)
                                     ------------------------    Three Months
                                        Three Months ended         ended
                                             March 31,            March 31,
                                     -------------------------  --------------
                                         2004          2003       2004-2003
                                     ------------  ------------ --------------
<S>                                  <C>           <C>           <C>
Revenues: . . . . . . . . . . . . .        100.0%        100.0%         41.0%
Expenses:
     Community operations . . . . .         63.8          60.7          48.2
     General and administrative . .          9.4          11.5          15.3
     Depreciation and amortization.          3.1           3.9          11.8
     Facility lease expense . . . .         22.0          18.2          70.7
                                     ------------  ------------  ------------
         Total operating expenses .         98.3          94.3          47.1
                                     ------------  ------------  ------------
Income from operations. . . . . . .          1.7           5.7         (59.1)
Other income (expense)
     Interest income. . . . . . . .          0.2           0.3          (1.9)
     Interest expense . . . . . . .         (5.7)         (6.9)         15.9
     Other, net . . . . . . . . . .         (0.1)          0.1        (237.5)
                                     ------------  ------------  ------------
          Net other expense . . . .         (5.6)         (6.5)         20.7
                                     ------------  ------------  ------------
          Net loss. . . . . . . . .        (3.9%)        (0.8%)        560.0%
                                     ============  ============  ============
</TABLE>
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           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

Comparison  of  the  three  months  ended  March  31,  2004  and  2003
----------------------------------------------------------------------

Total  Operating  Revenues:  Total operating revenues for the three months ended
March  31,  2004, increased by $19.4 million to $66.5 million from $47.2 million
for  the  comparable  period  in  2003,  or  41.0%.

Community  revenue  increased by approximately $20.5 million in the three months
ended  March  31,  2004, compared to the three months ended March 31, 2003. This
increase  was  primarily due to additional revenue related to acquisitions of 42
communities  between March 31, 2003, and March 31, 2004, of which eight occurred
in  the  second quarter of 2003 and 36 occurred in the fourth quarter. Of the 42
communities,  we  had  formerly  managed  36.  These acquired communities, which
represent  revenue  of  approximately  $19.5  million,  were  included  in  our
consolidated  portfolio  in  the first quarter of 2004, but were not included in
the  comparable quarter of 2003. The remaining increase in revenue is attributed
to  the  net  effect  of  an increase in average monthly revenue per unit and an
increase  in the occupancy rate. Average monthly revenue per unit was $2,779 for
the first quarter of 2004 compared to $2,756 for the comparable quarter of 2003,
an  increase  of  approximately  $23,  or  0.8%.  This relatively small increase
reflected  effects of our rate enhancement program during 2003, partially offset
by  marketing  incentives; e.g., rate discounting and reduction of move-in fees,
implemented  in  the  first quarter of 2004 to encourage increases in occupancy.
The  occupancy  rate  for  the  three months ended March 31, 2004, increased 1.3
percentage  points  to 78.4% from 77.1% primarily from our marketing emphasis in
the  first  quarter  of  2004.

Management  fee  income  decreased by approximately $1.5 million to $1.6 million
from  $3.1  million  for  the  three  months  ended  March  31,  2004  and 2003,
respectively.  This  decrease  was  primarily  due  to  termination of 13 Regent
managed  communities  in  July  and  August  of  2003, and the acquisition of 29
communities  that  were  previously  managed but are now leased.  Regent related
management  fee income recognized for the three months ended March 31, 2004, was
approximately  $24,000 compared to $352,000 for the three months ended March 31,
2003.  Management fees related to the previously managed buildings for the three
months  ended  March  31,  2003,  were  approximately  $870,000.  The  remaining
decrease  in management fee income for the first quarter of 2004, was related to
the  change  in the Emeritrust I communities (change in the management agreement
and a decrease of three buildings compared to March 31, 2003, as discussed above
in  "Emeritrust  I  Communities  Management").

Community  Operations:  Community  operating expenses for the three months ended
March  31,  2004, increased by $13.8 million to $42.5 million from $28.6 million
in  the  first  quarter  of  2003, or 48.2%. The change was primarily due to the
acquisition  of  42  communities  referred to above. These acquired communities,
which  account  for approximately $12.7 million of expense, were not included in
our consolidated portfolio in the first quarter of 2003, but are included in the
comparable  quarter of 2004. The remaining increases were primarily attributable
to  increases  in  personnel  costs,  property  taxes,  and utilities. Community
operating expenses as a percentage of total operating revenue increased to 63.8%
in  the first quarter of 2004 from 60.7% in the first quarter of 2003, primarily
attributable  to  higher  expense  levels  of new acquisitions and startup costs
associated  with  opening  memory  loss  units.

General  and  Administrative:  General and administrative (G&A) expenses for the
three  months ended March 31, 2004, increased $828,000 to $6.2 million from $5.4
million  for  the  comparable period in 2003, or 15.3%. As a percentage of total
operating  revenues,  G&A  expenses decreased to 9.4% for the three months ended
March  31,  2004,  compared  to 11.5% for the three months ended March 31, 2003,
primarily  as  a  result of increased revenue arising from the acquisition of 42
communities referred to above. G&A expenses increased primarily due to increases
in  the number of employees to accommodate new acquisitions and normal increases
in employee salaries. Additionally, an expansion of program offerings has led to
additional  employees. Since approximately 25% of the communities we operate are
managed  rather  than  owned or leased, G&A expense as a percentage of operating
revenues  for  all  communities,  including  managed  communities,  may  be more
meaningful  for  industry-wide  comparisons.  G&A  as  a percentage of operating
revenues  for  all  communities increased to 6.6% from 5.5% for the three months
ended  March  31,  2004  and  2003,  respectively,  primarily as a result of the
increased  personnel  costs  described  above.


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           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

Depreciation  and  Amortization:  Depreciation  and  amortization  for the three
months  ended  March 31, 2004, was $2.1 million compared to $1.8 million for the
comparable  period  in  2003,  reflecting  the  purchase  acquisition  of  five
communities  in  the  fourth  quarter  of  2003.  In  2004,  depreciation  and
amortization  represents  3.1% of total operating revenues, compared to 3.9% for
the comparable period in 2003. This decrease as a percentage of revenue reflects
the  increased  revenue  arising  from  the  2003  acquisition  of 42 additional
communities,  most  of  which  were  leased.

Facility Lease Expense:  Facility lease expense for the three months ended March
31,  2004,  was $14.7 million compared to $8.6 million for the comparable period
of  2003, representing an increase of $6.1 million, or 70.7%.  This increase was
primarily due to the lease acquisition of 37 communities in 2003.  We leased 109
communities  as of March 31, 2004, compared to 67 leased communities as of March
31,  2003.  The  additional  facility  lease  expense  related  to  the acquired
communities  is approximately $4.8 million.  The remaining increase was due to a
three-community sale-leaseback in the second quarter of 2003 and the re-lease of
four  communities  in  the  third  quarter of 2003.  Facility lease expense as a
percentage  of revenues was 22.0% for the three months ended March 31, 2004, and
18.2%  for  the  three  months  ended  March  31,  2003.

Interest Income:  Interest income for the three months ended March 31, 2004, was
$153,000  versus  $156,000 for the comparable period of 2003.  This decrease was
primarily  attributable  to  lower  returns  on  certain  restricted  deposits.

Interest  Expense:  Interest  expense for the three months ended March 31, 2004,
was  $3.8  million  compared  to $3.3 million for the comparable period of 2003.
This  increase  of  $519,000,  or  15.9%,  was  primarily  attributable  to  the
additional  secured  mortgage  financing  related to the five community mortgage
assumption  acquisition  in  December 2003, partially offset by a sale-leaseback
transaction  in  the second quarter of 2003.  As a percentage of total operating
revenues,  interest  expense  decreased  to  5.7% from 6.9% for the three months
ended  March  31,  2004  and  2003,  respectively.

Other,  net:  Other,  net expense for the three months ended March 31, 2004, was
approximately  $66,000  compared  to $48,000 income for the comparable period in
2003.  The  $66,000  for the current year quarter is primarily the result of our
portion  of  Alterra's  net  loss  for December 2003 and January 2004 (discussed
above  under  "Alterra  Transactions")  totaling  $794,000,  partially offset by
amortization of deferred gains related to Emeritrust I of approximately $278,000
and  deferred  gains  related to the refinance of seven buildings related to the
Series  A  Preferred  Stock  repurchase  in  the  second  quarter  of  2003  of
approximately  $303,000,  and  other  smaller  miscellaneous  items. The $48,000
income  for  the  first  quarter  2003 is comprised primarily of amortization of
deferred  gains  related  to  the  sale-leaseback  of  three  communities  of
approximately  $87,000  offset  by  smaller  miscellaneous  items.

Preferred  dividends:  For  the  three  months  ended  March  31, 2004 and 2003,
preferred  dividends  totaled  approximately  $920,000  and  $1.9  million,
respectively.  The primary reason for the $950,000 decrease is the repurchase of
the Series A preferred shares in July and August 2003.  Because we have not paid
the  Series  B preferred dividends for more than six consecutive quarters, under
the Designation of Rights and Preferences of the Series B preferred stock in our
Articles of Incorporation, the Series B preferred shareholders may designate one
director  in addition to the other directors that they are entitled to designate
under  the  shareholders'  agreement.  As  of  January  1,  2002,  the  Series B
preferred shareholders became entitled to designate an additional director under
the  Articles,  but  thus  far  have  chosen  not  to  do  so.


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                                       21
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

Same Community Comparison

We  operated  84  communities on a comparable basis during both the three months
ended  March  31, 2004 and 2003.  The following table sets forth a comparison of
same  community  results  of  operations,  excluding  general and administrative
expenses,  for  the  three  months  ended  March  31,  2004  and  2003.

<TABLE>
<CAPTION>
                                                          Three Months ended March 31,
                                                                (In thousands)
                                             --------------------------------------------------
                                                                          Dollar     % Change
                                                 2004          2003       Change   Fav / (Unfav)
                                             ------------  ------------  --------  -------------
<S>                                          <C>           <C>           <C>       <C>
Revenue . . . . . . . . . . . . . . . . . .  $    45,132   $    44,057   $ 1,075            2.4%
Community operating expenses. . . . . . . .      (29,212)      (28,650)     (562)          (2.0)
                                             ------------  ------------  --------  -------------
    Community operating income. . . . . . .       15,920        15,407       513            3.3
Depreciation & amortization . . . . . . . .       (1,448)       (1,613)      165           10.2
Facility lease expense. . . . . . . . . . .       (9,661)       (8,595)   (1,066)         (12.4)
                                             ------------  ------------  --------  -------------
    Operating income. . . . . . . . . . . .        4,811         5,199      (388)          (7.5)
Interest expense, net . . . . . . . . . . .       (2,212)       (2,591)      379           14.6
                                             ------------  ------------  --------  -------------
    Operating income after interest expense  $     2,599   $     2,608   $    (9)         (0.3%)
                                             ============  ============  ========  =============
</TABLE>


These  84 communities represented $45.1 million or 67.8% of our total revenue of
$66.5  million  for the first quarter of 2004. Same community revenues increased
by  $1.1  million  or  2.4%  for  the  quarter  ended  March  31, 2004, from the
comparable  period  in  2003, primarily due to the effect of move-in fee revenue
recognition;  i.e.,  the  recognition  of  previously  deferred move-in fees was
greater  .in the current quarter due to a higher level of move-in fees that were
charged  over  the  past year Average revenue per occupied unit increased by $77
per  month or 2.8% for the three months ended March 31, 2004, as compared to the
three  months  ended  March  31,  2003.  Average  occupancy  remained relatively
unchanged  at  approximately 77.7% in the first quarter of 2004 and 77.4% in the
first  quarter  of  2003.

Community  operating  expenses increased approximately $562,000 primarily due to
an  increase  in  personnel  expenses  related  to  program  expansion and other
employee costs of $554,000.  Occupancy expenses, which consist of facility lease
expense,  depreciation  and  amortization,  and  interest  expense, increased by
approximately  $522,000  as  a  result  of  a change in the composition of "Same
Communities"  to reflect more leased buildings compared to owned buildings.  The
change  in  composition was attributable to previously acquired communities that
we  have  operated  for  more than a year combined with the change from owned to
leased  communities  in  connection  with  sale-leaseback  transactions from the
second  quarter  of  2003.  The  net  effect  of  this change was an increase in
facility  lease  expense  of $865,000, partially offset by decreases in interest
expense of $322,000, and depreciation and amortization expense of $194,000.  The
balance  of the increase in occupancy expenses was due to rental increases based
on  community  performance  under certain of our leases.  For the quarters ended
March  31,  2004  and  2003,  operating  income  after interest expense remained
relatively  unchanged  at  approximately  $2.6  million.

LIQUIDITY  AND  CAPITAL  RESOURCES

For the three months ended March 31, 2004, net cash used in operating activities
was  $3.7 million compared to $228,000 net cash used in operating activities for
the  comparable  period  in the prior year.  The primary components of operating
cash  used  in  operating  activities were the net loss of $2.6 million, the net
increase  in  other  operating  assets  and  liabilities  of  $2.4  million, and
amortization  of deferred gain of $714,000, partially offset by depreciation and
amortization  of $2.1 million.  The primary components of operating cash used in
operating  activities  for  the  three  months  ended  March  31,  2003, was the
depreciation  and amortization of $1.8 million, partially offset by the net loss
of  $393,000  and  the net increase in other operating assets and liabilities of
$1.2  million.


                                       22
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

Net  cash  used  in  investing activities amounted to $1.4 million for the three
months  ended  March  31, 2004, and was comprised primarily of proceeds from the
repayment  of  a note receivable from a Baty entity of $2.7 million and proceeds
from  the  sale  of  property and equipment of approximately $165,000, partially
offset by purchases of approximately $846,000 of various property and equipment,
an  increase  in  management  and  lease  acquisition  costs  of  $302,000,  and
investment  in  affiliates  of  $303,000.  Net cash used in investing activities
amounted  to  $1.0  million  for  the three months ended March 31, 2003, and was
comprised  primarily  of purchases of approximately $484,000 of various property
and  equipment,  distributions to minority partners of $299,000, and an increase
in  management  and  lease  acquisition  costs  of  approximately  $189,000.

For the three months ended March 31, 2004, net cash used in financing activities
was  $1.8  million,  primarily  from  the  current  portion  of  long-term  debt
repayments  of  $1.1  million,  an  increase in restricted deposits of $582,000,
long-term debt repayments of $305,000, and an increase of approximately $101,000
in  debt  issuance  and  other financing costs, partially offset by the proceeds
from  the  sale  of common stock under the employee stock purchase and incentive
plans  of approximately $321,000. For the three months ended March 31, 2003, net
cash  used  in financing activities was $1.2 million, primarily from the current
portion  of  long-term  debt  repayments  of  $960,000  and  an  increase  of
approximately  $232,000  in  debt  issuance  and  other  financing  costs.

We  have  incurred  significant  operating losses since our inception and have a
working  capital  deficit  of  $35.3  million, although $11.4 million represents
deferred  revenue and unearned rental income, and $8.8 million of preferred cash
dividends  is  only  due if declared by our board of directors.  At times in the
past, we have been dependent upon third-party financing or disposition of assets
to fund operations.  If such transactions are necessary in the future, we cannot
guarantee  that they will be available on a timely basis, on terms attractive to
us,  or  at  all.

Throughout  2002  and  continuing  in  the  first quarter of 2003, we refinanced
substantially  all  of  our  debt  obligations, extending the maturities of such
financings  to  dates  in  2005  or  thereafter,  at  which time we will need to
refinance  or otherwise repay the obligations.  Many of our debt instruments and
leases  contain "cross-default" provisions pursuant to which a default under one
obligation  can  cause a default under one or more other obligations to the same
lender or lessor.  Such cross-default provisions affect 17 owned assisted living
properties  and 104 properties operated under leases.  Accordingly, any event of
default could cause a material adverse effect on our financial condition if such
debt  or  leases  are  cross-defaulted.  At March 31, 2004, we complied with all
such covenants, except for a portfolio of 23 leased buildings.  We have obtained
a waiver from the lessor and are considered to be in full compliance as of March
31,  2004.

Management believes that we will be able to sustain positive operating cash flow
on  an  annual basis and will have adequate cash for all necessary investing and
financing  activities  including  required debt service and capital expenditures
through  at  least  March  31,  2005.

The following table summarizes our contractual obligations at March 31, 2004 (In
thousands):


<TABLE>
<CAPTION>

                                                                         Payments Due by Period
                                            ----------------------------------------------------------------------------------
                                                                Less than 1                                        More Than
          Contractual Obligations                Total             year         1 - 3 years      4 - 5 years        5 years
------------------------------------------  ---------------  ---------------  ---------------  ---------------  ---------------
<S>                                         <C>              <C>              <C>              <C>              <C>
 Long-Term Debt, including current portion  $       139,897  $         4,934  $        73,608  $        60,749  $           606
 Operating Leases. . . . . . . . . . . . .  $       590,888  $        56,339  $       112,873  $       107,276  $       314,400
 Convertible Debentures. . . . . . . . . .  $        32,000  $             -  $        32,000  $             -  $             -
</TABLE>



                                       23
<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS - CONTINUED

IMPACT  OF  INFLATION

To  date,  inflation  has not had a significant impact on us. However, inflation
could  affect  our future revenues and operating income due to our dependence on
the senior resident population, most of whom rely on relatively fixed incomes to
pay  for  our  services.  The monthly charges for a resident's unit and assisted
living  services  are  influenced  by  the  location  of the community and local
competition.  Our  ability  to  increase  revenues  in  proportion  to increased
operating  expenses  may  be  limited. We typically do not rely to a significant
extent  on  governmental  reimbursement  programs.  In  pricing our services, we
attempt  to  anticipate  inflation levels, but there can be no assurance that we
will  be  able  to  respond  to  inflationary  pressures  in  the  future.

FORWARD-LOOKING  STATEMENTS

"Safe  Harbor"  Statement  under the Private Securities Litigation Reform Act of
1995:  A  number  of the matters and subject areas discussed in this report that
are  not  historical  or current facts deal with potential future circumstances,
operations,  and prospects.  The discussion of such matters and subject areas is
qualified  by  the  inherent  risks  and  uncertainties  surrounding  future
expectations  generally,  and  also may materially differ from our actual future
experience  as  a  result  of  such  factors  as: the effects of competition and
economic  conditions  on  the  occupancy  levels in our communities; our ability
under current market conditions to maintain and increase our resident charges in
accordance  with rate enhancement programs without adversely affecting occupancy
levels;  increases  in  interest  rates that would increase costs as a result of
variable  rate  debt;  our  ability  to  control  community  operation expenses,
including  insurance and utility costs, without adversely affecting the level of
occupancy  and  the level of resident charges; our ability to generate cash flow
sufficient to service our debt and other fixed payment requirements; our ability
to  find sources of financing and capital on satisfactory terms to meet our cash
requirements  to  the  extent  that  they  are  not  met  by operations; and our
continued  management  of  the  Emeritrust  I  communities  since our management
agreements  for  those  communities  could  be  terminated on short-term notice.
While  we  believe  that the arrangements with our Emeritrust I communities will
continue,  we  cannot  guarantee  that  they  will  and  thus, we could lose the
management  fee  revenue from these communities.  We have attempted to identify,
in  context,  certain  of the factors that we currently believe may cause actual
future  experience and results to differ from our current expectations regarding
the  relevant  matter  or subject area.  These and other risks and uncertainties
are  detailed  in  our reports filed with the Securities and Exchange Commission
(SEC),  including  our Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q.

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                                       24
<PAGE>

ITEM  3.   QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

Our  earnings  are  affected  by  changes  in  interest rates as a result of our
short-term  and  long-term  borrowings.  We  manage this risk by obtaining fixed
rate  borrowings when possible.  At March 31, 2004, our variable rate borrowings
totaled  approximately  $64.6  million.  Currently,  all  our  variable  rate
borrowings  are  based upon LIBOR, subject to a LIBOR floor ranging from 2.0% to
2.5%.  As  of  March  31,  2004, the LIBOR rates were below the floor.  If LIBOR
interest rates were to average 2% more, our annual interest expense and net loss
would  increase  approximately  $462,000  with  respect  to  our  variable  rate
borrowings.  This amount is determined by considering the impact of hypothetical
interest rates on our outstanding variable rate borrowings as of March 31, 2004,
and  does  not consider changes in the actual level of borrowings that may occur
subsequent  to  March 31, 2004.  If LIBOR rates should increase above the floor,
we  will  be  exposed to higher interest expense costs.  This analysis also does
not  consider the effects of the reduced level of overall economic activity that
could exist in such an environment, nor does it consider actions that management
might  be  able  to take with respect to our financial structure to mitigate the
exposure  to  such  a  change.

ITEM  4.  CONTROLS  AND  PROCEDURES

We  maintain  a  set of disclosure controls and procedures and internal controls
designed  to  ensure  that  information  required to be disclosed in our filings
under  the  Securities  Exchange Act of 1934 is recorded, processed, summarized,
and  reported  within  the time periods specified in the Securities and Exchange
Commission's  rules  and  forms.  Our principal executive and financial officers
have  evaluated  our  disclosure controls and procedures (as defined in Exchange
Act  Rules  13a-15(e) and 15d-15(e)) as of the end of the period covered by this
Quarterly  Report on Form 10-Q and have determined that such disclosure controls
and  procedures  are  effective.

No  change  was made to our internal control over financial reporting during the
quarter  that  has  materially  affected,  or is reasonably likely to materially
affect,  our  internal  control  over  financial  reporting.



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                                       25
<PAGE>
                           PART II. OTHER INFORMATION


ITEMS  1  THROUGH  4  ARE  NOT  APPLICABLE.

ITEM  5.  OTHER  INFORMATION.

On  April  20,  2004,  we  appointed two new directors to serve on the Company's
Board  of  Directors,  Bruce  L.  Busby  and  T.  Michael  Young.

Bruce  L.  Busby served as Chairman and Chief Executive Officer of The Hillhaven
Corporation, a Tacoma, Washington based skilled nursing company that merged with
Vencor,  Inc.  in  1995.  Hillhaven  operated  360 facilities throughout the US.
Before joining Hillhaven, Mr. Busby served National Medical Enterprises, Inc. as
Chief  Executive  Officer  and  President  of the Venture Development Group from
April  1988 to March 1991, Chairman and Chief Executive Officer of the Long Term
Care  Group from August 1986 to March 1988, and President of the Retail Services
Group  from  June  1986  to  November  1987.

T.  Michael Young is President and Chief Executive Officer of Metal Supermarkets
International,  a  privately  held  concern  with  operations  in North America,
Europe,  and  the  Middle  East.  Previously, Young, who is a CPA, was Chairman,
President  and  Chief  Executive  Officer  of  Hi-Lo  Automotive, Inc., a public
retailer and wholesale distributor of auto parts and supplies.  Young also was a
partner  at  Arthur  Andersen  from  1976  to  1980.

Both  Busby  and  Young  qualify as independent directors under new SEC and AMEX
rules  for  audit committees and will serve on our Audit Committee along with an
existing  qualifying  director.

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                                       26
<PAGE>

Item  6     Exhibits  and  Reports  on  Form  8-K

(a)  Exhibits

<TABLE>
<CAPTION>

  Number                                             Description                                                     Footnote
---------  -------------------------------------------------------------------------------------------------------  ---------
<S>        <C>                                                                                                      <C>
10.52      Emeritrust communities
   10.52.15   Fourth Amendment to Management Agreement with Option to Purchase by and among Emeritus
              Management LLC ("Emeritus Management"), Emeritus Management I LP ("Texas Management"), Emeritus
              Corporation ("Emeritus"), and AL Investors LLC ("AL Investors"), effective April 1, 2004.. . . . . . . .   (1)
10.79      Loyalton of Folsom, California, The Lakes, Florida, Canterbury Woods, Massachusetts, Beckett Meadows,
           Texas, Creekside, Texas, Oak Hollow, Texas, Pinehurst, Texas, Stonebridge, Texas, Desert Springs, Texas,
           Austin Gardens, California, Kingsley Place Shreveport, Louisiana, Silverleaf Manor, Mississippi,
           Pine Meadow, Mississippi, Pines of Goldsboro, North Carolina, Loyalton of Rockford, Illinois,
           and Charleston Gardens, West Virginia. The following agreements are representative of those executed
           in connection with these properties:
  10.79.1    Purchase and Sale Agreement ("Agreement") by and between Lodi Care Group LLC, Aurora Bay/Columbus,
             L.L.C., Aurora Bay/Hattiesburg, L.L.C., Spring Creek Group, Ltd., Bedford Care Group, Ltd.,
             Tyler Group, Ltd., White Rock Care Group, Ltd., El Paso Care Group, Ltd., and Lubbock Group, Ltd.,
             (each of the foregoing individually, a "Seller" and collectively, "Sellers") and Emeritus Corporation,
             "Purchaser") and Aurora Bay Investments, LLC, ("ABI"),  and JCI, LLC, ("JCI" and together with ABI,
             the "Guarantors") dated March, 30, 2004 (the "Execution Date").. . . . . . . . . . . . . . . . . . . . .    (4)
  10.79.2    Purchase and Sale Agreement ("Agreement") by and among (i) THE LAKES ASSISTED LIVING, LLC,
             SACRAMENTO COUNTY ASSISTED LLC, ROCKFORD RETIREMENT RESIDENCE, LLC, HB-ESC I,
             LLC, CANTERBURY WOODS ASSISTED LIVING, LLC, AUTUMN RIDGE HERCULANEUM, L.L.C.,
             MERIDIAN ASSISTED, L.L.C., GOLDSBORO ASSISTED, L.L.C., CAPE MAY ASSISTED LIVING, LLC,
             TRAVIS COUNTY ASSISTED LIVING LP, RICHLAND ASSISTED, L.L.C., SILVER LAKE ASSISTED
             LIVING LLC, CHARLESTON ASSISTED LIVING, LLC,  and JOLIET ASSISTED L.L.C., (each of the
             foregoing individually, a "Seller" and collectively, the "Sellers") and (ii) EMERITUS CORPORATION,
             ("Purchaser") dated March, 31, 2004 (the "Execution Date").. . . . . . . . . . . . . . . . . . . . . . .    (4)
  10.79.3    Master Lease agreement between NHP SENIOR HOUSING, INC., ("Landlord"), and EMERITUS
             CORPORATION, ("Tenant"), dated March 31, 2004 to be effective as of April 1, 2004
             (the "Effective Date"). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (4)
  10.79.4    Master Lease among the Entities Listed on Schedule 1A (collectively, "Landlord"), and the Entities Listed
             on Schedule 1B (collectively, "Tenant"), for the respective real properties and improvements thereon
             (each a "Facility" and collectively, the "Facilities"), dated March 31, 2004, to be effective as of
             April 1, 2004 (the "Effective Date").. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (4)
  10.79.5    NOMINATION AGREEMENT ("Agreement") made as of March 31, 2004, by and between
             NATIONWIDE HEALTH PROPERTIES, INC., ("NHP"), and EMERITUS CORPORATION,  ("Emeritus").. . . . . . . . . .    (4)
  10.79.6    NOMINATION AGREEMENT ("Agreement") made as of March 31, 2004, by and between
             NATIONWIDE HEALTH PROPERTIES, INC., ("NHP"), and EMERITUS CORPORATION, ("Emeritus"). . . . . . . . . . .    (4)
10.80        Credit Agreement
  10.80.1    Credit Agreement between U.S. National Association and Emeritus Corporation dated March 16, 2004.. . . . .  (1)
  10.80.2    Exhibit A to Credit Agreement; Revolving Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  (1)
  10.80.3    Exhibit B to Credit Agreement; Pledge Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  (1)
31.1       Certification of Periodic Reports
   31.1.1    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
             Act of 2002 for Daniel R. Baty dated May 13, 2004. . . . . . . . . . . . . . . . . . . . . . . . . . . .    (1)
   31.1.2    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
             Act of 2002 for Raymond R. Brandstrom dated May 13, 2004.. . . . . . . . . . . . . . . . . . . . . . . .    (1)
32.1      Certification of Periodic Reports
   32.1.1    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
             Act of 2002 for Daniel R. Baty dated May 13, 2004.. . . . . . . . . . . . . . . . . . . . . . . . . . .     (1)
   32.1.2    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
             Act of 2002 for Raymond R. Brandstrom dated May 13, 2004.. . . . . . . . . . . . . . . . . . . . . . . .    (1)
 99.1      Press Releases
   99.1.1    Press Release dated January 5, 2004, announcing the acquisition of Five Communities. . . . . . . . . . . .  (2)
   99.1.2    Press Release dated January 12, 2004, announcing the acquisition of Seven Communities. . . . . . . . . . .  (2)
   99.1.3    Press Release dated March 25, 2004, reports on fourth quarter and year 2003 results. . . . . . . . . . . .  (3)
   99.1.4    Press Release dated March 29, 2004, reporting intent to acquire nine memory loss facilities. . . . . . . .  (4)
   99.1.5    Press Release dated March 29, 2004, reporting intent to acquire managed facilities.. . . . . . . . . . . .  (4)
   99.1.6    Press Release dated April 23, 2004, announcing appointment of new directors. . . . . . . . . . . . . . . .  (1)
   99.1.7    Press Release dated May 12, 2004, reports on first quarter 2004 results. . . . . . . . . . . . . . . . . .  (5)
</TABLE>
--------------------------
(1)  Filed  herewith.
(2)  Filed  as  an  exhibit  to  a  Form  8-K  filed  on  January  14, 2004, and
     incorporated  herein  by  reference.
(3)  Filed  as  an  exhibit  to  a  Form  10-K  filed  on  March  30,  2004, and
     incorporated  herein  by  reference.
(4)  Filed as an exhibit to a Form 8-K filed on April 12, 2004, and incorporated
     herein  by  reference.
(5)  Filed  as  an exhibit to a Form 8-K filed on May 13, 2004, and incorporated
     herein  by  reference.

                                       27
<PAGE>

(b)  Reports  on  Form  8-K.

1.   A  report  on  Form  8-K  dated December 31, 2003, was filed on January 14,
     2004,  announcing  the  acquisition  of  five  communities.

2.   A  report  on  Form  8-K  dated December 31, 2003, was filed on January 14,
     2004,  announcing  a  lease acquisition of seven communities from Mr. Baty.

3.   A  report  on  Form  8-K  dated  March 5, 2004, was filed on March 5, 2004,
     reporting  on  the  fourth quarter and December 31, 2003, year end results.

4.   A  report  on  Form  8-K/A  dated December 31, 2003, was filed on March 15,
     2004,  related  to the acquisition of eight communities from Mr. Baty. This
     filing  includes  item  7.

5.   A  report  on  Form  8-K  dated April 1, 2004, was filed on April 12, 2004,
     announcing  the  first  part  of  a  24  community  lease  acquisition.

6.   A  report  on  Form  8-K  dated  May  12,  2004, was filed on May 13, 2004,
     reporting  on  the  first  quarter  2004  results.


                                       28
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                                    SIGNATURE

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.

Dated:  May  13,  2004

                                                EMERITUS  CORPORATION
                                                   (Registrant)


                                       /s/  Raymond  R.  Brandstrom
                                       -----------------------------------------
                                       Raymond  R.  Brandstrom, Vice President
                                       of Finance, Chief Financial Officer, and
                                       Secretary

                                       29
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