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 September 30, 2001

[  ]  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


As  of October 31, 2001, there were 10,196,030 shares of the Registrant's Common
Stock,  par  value  $.0001,  outstanding.


<TABLE>
<CAPTION>

                                        EMERITUS CORPORATION

                                          TABLE OF CONTENTS

                                   Part I.  Financial Information


<S>      <C>                                                                           <C>
Item 1.  Financial Statements:                                                         Page No.
                                                                                       --------

  . . .  Condensed Consolidated Balance Sheets as of September 30, 2001,
  . . .  and December 31, 2000                                                                1

  . . .  Condensed Consolidated Statements of Operations for the
  . . .  Three Months and Nine Months ended September 30, 2001
  . . .  and 2000                                                                             2

  . . .  Condensed Consolidated Statements of Cash Flows for the Nine
  . . .  Months ended September 30, 2001 and 2000                                             3

  . . .  Notes to Condensed Consolidated Financial Statements                                 4

Item 2.  Management's Discussion and Analysis of Financial Condition
  . . .  and Results of Operations                                                            8

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                          16


  . . .  Part II.  Other Information

Item 4.  Submission of Matters to a Vote of Security Holders                                 16

Item 6.  Exhibits and Reports on Form 8-K                                                    16

  . . .  Signature                                                                           17

Note: .  Items 1, 2, 3, and 5 of Part II are omitted because they are not applicable.
</TABLE>

<TABLE>
<CAPTION>

                                                EMERITUS CORPORATION
                                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                                     (unaudited)
                                                   (In thousands)

                                                       ASSETS


                                                                                      September 30,    December 31,
                                                                                          2001             2000
                                                                                     ---------------  --------------
<S>                                                                                  <C>              <C>
 Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $        9,614   $       7,496
 Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1,172             425
 Current portion of restricted deposits . . . . . . . . . . . . . . . . . . . . . .             780             361
 Trade accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . .           1,185           1,817
 Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           3,205           4,969
 Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . .           3,864           3,072
 Property held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,242           6,475
                                                                                     ---------------  --------------
 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          22,062          24,615
                                                                                     ---------------  --------------
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .         131,380         134,762
Property held for development . . . . . . . . . . . . . . . . . . . . . . . . . . .           1,040             310
Notes receivable from and investments in affiliates . . . . . . . . . . . . . . . .           3,671           4,380
Restricted deposits, less current portion . . . . . . . . . . . . . . . . . . . . .           5,311           5,907
Lease acquisition costs, net. . . . . . . . . . . . . . . . . . . . . . . . . . . .           5,220           5,983
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,459           2,122
                                                                                     ---------------  --------------
 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      171,143   $     178,079
                                                                                     ===============  ==============

                                       LIABILITIES AND SHAREHOLDERS' EQUITY

 Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $                $       1,650
 Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . .          76,680          80,978
 Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,406           3,143
 Accrued employee compensation and benefits . . . . . . . . . . . . . . . . . . . .           3,576           2,449
 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,379           2,991
 Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1,978           1,806
 Accrued dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . .           6,179           2,329
 Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          11,581           9,221
 Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1,170           1,215
                                                                                     ---------------  --------------
 Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .         105,949         105,782
                                                                                     ---------------  --------------
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . . . . . .          59,384          60,499
Convertible debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          32,000          32,000
Deferred gain on sale of communities. . . . . . . . . . . . . . . . . . . . . . . .          18,742          17,709
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,255           2,132
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .             459             256
                                                                                     ---------------  --------------
 Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         218,789         218,378
                                                                                     ---------------  --------------
Minority interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             578             504
Redeemable preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . .          25,000          25,000
Commitments and contingencies
Shareholders' Deficit:
Preferred stock, $.0001 par value. Authorized 70,000 shares; issued and outstanding
    30,609 and 30,609 at September 30, 2001, and December 31, 2000, respectively. .               -               -
Common stock, $.0001 par value. Authorized 40,000,000 shares; issued and
    outstanding 10,196,030 and 10,120,045 shares at September 30, 2001, and
    December 31, 2000, respectively . . . . . . . . . . . . . . . . . . . . . . . .               1               1
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . .          67,387          66,373
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . .            (340)         (1,087)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (140,272)       (131,090)
                                                                                     ---------------  --------------
 Total shareholders' deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . .         (73,224)        (65,803)
                                                                                     ---------------  --------------
 Total liabilities and shareholders' deficit. . . . . . . . . . . . . . . . . . . .  $      171,143   $     178,079
                                                                                     ===============  ==============
</TABLE>


      See accompanying Notes to Condensed Consolidated Financial Statements
                   and Management's Discussion  and  Analysis
               of  Financial  Condition  and  Results  of Operations
                                        1
<PAGE>

<TABLE>
<CAPTION>

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

                                                    Three  Months                 Nine  Months
                                                ended  September  30,         ended  September  30,
                                                2001           2000           2001           2000
                                            -------------  -------------  -------------  -------------
<S>                                         <C>            <C>            <C>            <C>
Revenues:
  Community revenue. . . . . . . . . . . .  $     32,297   $     29,231   $     97,801   $     87,154
  Other service fees . . . . . . . . . . .           388            426          1,378          1,186
  Management fees. . . . . . . . . . . . .         2,279          1,165          5,743          3,398
                                            -------------  -------------  -------------  -------------
          Total operating revenues . . . .        34,964         30,822        104,922         91,738

Expenses:
  Community operations . . . . . . . . . .        20,327         18,823         60,874         57,123
  General and administrative . . . . . . .         5,142          3,835         13,979         11,288
  Depreciation and amortization. . . . . .         1,861          1,801          5,533          5,447
  Facility lease expense . . . . . . . . .         6,681          5,871         20,361         17,620
                                            -------------  -------------  -------------  -------------
          Total operating expenses . . . .        34,011         30,330        100,747         91,478
                                            -------------  -------------  -------------  -------------
          Income from operations . . . . .           953            492          4,175            260

Other income (expense):
  Interest income. . . . . . . . . . . . .           221            302            779            995
  Interest expense . . . . . . . . . . . .        (3,306)        (3,851)       (10,374)       (11,242)
  Other, net . . . . . . . . . . . . . . .         1,286         (1,884)         1,034         (3,835)
                                            -------------  -------------  -------------  -------------
          Net other expense. . . . . . . .        (1,799)        (5,433)        (8,561)       (14,082)
                                            -------------  -------------  -------------  -------------

          Net loss . . . . . . . . . . . .          (846)        (4,941)        (4,386)       (13,822)

Preferred stock dividends. . . . . . . . .         1,565          1,562          4,796          3,726
                                            -------------  -------------  -------------  -------------
          Net loss to common shareholders.  $     (2,411)  $     (6,503)  $     (9,182)  $    (17,548)
                                            =============  =============  =============  =============

Loss per common share - basic and diluted:

    Loss before preferred stock dividends.  $      (0.09)  $      (0.49)  $      (0.43)  $      (1.36)

    Preferred stock dividends. . . . . . .         (0.15)         (0.15)         (0.47)         (0.37)
                                            -------------  -------------  -------------  -------------
Loss per common share. . . . . . . . . . .  $      (0.24)  $      (0.64)  $      (0.90)  $      (1.73)
                                            =============  =============  =============  =============

Weighted average number of common shares
      outstanding - basic and diluted. . .        10,186         10,089         10,156         10,121
                                            =============  =============  =============  =============
</TABLE>


      See accompanying Notes to Condensed Consolidated Financial Statements
                   and Management's Discussion  and  Analysis
               of  Financial  Condition  and  Results  of Operations
                                        2
<PAGE>
<TABLE>
<CAPTION>

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

                                                                                Nine  Months  ended  September 30,
                                                                             ------------------------------------
                                                                                    2001               2000
                                                                              -----------------  -----------------
<S>                                                                           <C>                <C>
Cash flows from operating activities:
  Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $         (4,386)  $        (13,822)
  Adjustments to reconcile net loss to net cash:
    Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . .                74                 91
    Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . .             5,533              5,447
    Amortization of deferred gain. . . . . . . . . . . . . . . . . . . . . .              (521)              (151)
    Gain on sale of properties . . . . . . . . . . . . . . . . . . . . . . .              (983)                 -
    Write down of lease acquisition costs. . . . . . . . . . . . . . . . . .               169                  -
    Changes in operating assets and liabilities. . . . . . . . . . . . . . .             2,294                565
                                                                              -----------------  -----------------
          Net cash provided by (used in) operating activities. . . . . . . .             2,180             (7,870)
                                                                              -----------------  -----------------

Cash flows from investing activities:
  Acquisition of property and equipment. . . . . . . . . . . . . . . . . . .            (1,456)           (10,351)
  Acquisition of property held for development . . . . . . . . . . . . . . .                 -               (262)
  Proceeds from property held for sale . . . . . . . . . . . . . . . . . . .                 -                555
  Proceeds from sale of property and equipment . . . . . . . . . . . . . . .             2,350                311
  Construction expenditures - leased communities . . . . . . . . . . . . . .                 -                (64)
  Repayments from affiliates and other managed communities . . . . . . . . .             2,798                 86
  Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .               (30)            (1,197)
                                                                              -----------------  -----------------
          Net cash provided by (used in)  investing activities . . . . . . .             3,662            (10,922)
                                                                              -----------------  -----------------

Cash flows from financing activities:
  Increase in restricted deposits. . . . . . . . . . . . . . . . . . . . . .               177                235
  Decrease in restricted cash. . . . . . . . . . . . . . . . . . . . . . . .                 -             13,500
  Proceeds from short-term borrowings. . . . . . . . . . . . . . . . . . . .                 -              2,100
  Repayment of short-term borrowings . . . . . . . . . . . . . . . . . . . .            (1,650)            (1,000)
  Debt issue and other financing costs . . . . . . . . . . . . . . . . . . .                 -               (590)
  Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . .               155              7,800
  Repayment of long-term borrowings. . . . . . . . . . . . . . . . . . . . .            (2,406)            (3,349)
  Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . .                 -             (4,024)
  Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . .                 -             (1,375)
                                                                              -----------------  -----------------
          Net cash provided by (used in) financing activities. . . . . . . .            (3,724)            13,297
                                                                              -----------------  -----------------
Effect of exchange rate changes on cash. . . . . . . . . . . . . . . . . . .                 -                 (3)
                                                                              -----------------  -----------------
          Net increase (decrease) in cash and cash equivalents . . . . . . .             2,118             (5,498)
Cash and cash equivalents at the beginning of the period . . . . . . . . . .             7,496             12,860
                                                                              -----------------  -----------------
Cash and cash equivalents at the end of the period . . . . . . . . . . . . .  $          9,614   $          7,362
                                                                              =================  =================

Supplemental disclosure of cash flow information cash paid during the period
    for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $         10,986   $         11,634
                                                                              =================  =================

Noncash investing and financing activities:
  Transfer of property held for development from property held for sale. . .  $            730   $              -
                                                                              =================  =================
  Note receivable from buyer in sale/leaseback . . . . . . . . . . . . . . .  $            625   $              -
                                                                              =================  =================
  Assumption of debt by buyer in sale/leaseback. . . . . . . . . . . . . . .  $          3,162   $              -
                                                                              =================  =================
  Unrealized holding gains (losses) in investment securities . . . . . . . .  $            746   $           (472)
                                                                              =================  =================
  Accrued preferred stock dividends. . . . . . . . . . . . . . . . . . . . .  $          4,796   $          1,245
                                                                              =================  =================
</TABLE>


      See accompanying Notes to Condensed Consolidated Financial Statements
                   and Management's Discussion  and  Analysis
               of  Financial  Condition  and  Results  of Operations
                                        3
<PAGE>


                              EMERITUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


BASIS  OF  PRESENTATION

The  unaudited  interim financial information furnished below, in the opinion of
our  management, reflects all normally recurring adjustments which are necessary
to  state fairly the consolidated financial position, results of operations, and
cash  flows  of  Emeritus  as  of September 30, 2001, and for the three and nine
months  ended  September  30, 2001 and 2000.  We presume that those reading this
interim  financial  information  have  read  or  have access to our 2000 audited
consolidated  financial  statements  and Management's Discussion and Analysis of
Financial  Condition  and  Results  of Operations that are contained in the 2000
Form  10-K  filed  April  2, 2001, and amended on April 30, 2001.  Therefore, we
have  omitted footnotes and other disclosures herein, which are disclosed in the
Form  10-K.

PROPERTY  HELD  FOR  SALE

Emeritus  currently  has  two  properties  being  held  for  sale.

ACCRUED  DIVIDENDS  ON  PREFERRED  STOCK

Since  the  third  quarter  of  2000, we have accrued our obligation to pay cash
dividends  to  both  our  Series  A  and  Series B preferred shareholders, which
amounted  to  $4.0  million at September 30, 2001.  In addition, we have accrued
penalties  of  $2.2  million  at  September 30, 2001, to both parties related to
non-payment  of  the  cash  portion of their dividends.  If we are unable to pay
these  dividends  for  six  consecutive quarters, both our Series A and Series B
shareholders  become entitled to elect one additional director each to our board
of  directors  at each annual shareholders' meeting until such time we have paid
the  accrued  dividends.  In  addition,  after  six  consecutive  quarters  of
non-payment the Series A dividends will be calculated on a compounded cumulative
basis,  retroactively.

DEFERRED  GAIN  ON  SALE  OF  COMMUNITIES

In  January  2001,  we sold one of our communities to a new operator and various
third parties.  The sale included terms for the Company to lease and continue to
operate the facility for an interim period, which concluded in the third quarter
of  2001.  We  recognized  a  gain  on the sale of the facility of $1.3 million,
$380,000 of which was recognized in the first half of 2001, and the remainder of
$960,000  was  recognized  in  the  third  quarter  of  2001.

LONG-TERM  DEBT

The  current  portion  of long-term debt includes approximately $72.4 million of
mortgage  debt  that  originally  matured  in  April  2001.  On June 6, 2001, we
reached an agreement with the lender to extend the maturity date to December 14,
2001.  We may further extend the maturity date to May 31, 2002, provided that we
pay  down  the  mortgage  debt by at least $30 million on or before December 14,
2001.  In  the alternative, we can provide a commitment for alternative mortgage
financing  in the amount of at least $30 million for three designated properties
secured  by  the  mortgage  debt  or provide an executed agreement to sell those
three  properties  to  a  third  party  for  at least $30 million, provided such
financing  or  sale closes on or before March 15, 2002.  Subject to paying a fee
equal  to  1%  of the outstanding loan balance on or before May 31, 2002, we may
further  extend  the  maturity  to May 31, 2003.  Subject to our exercise of the
applicable  extension,  the agreement requires us to (i) make principal payments
of  $200,000  per  month, from June 2001 through May 2002 and $250,000 per month
from  June  2002 through May 2003 and (ii) pay interest at a floating rate equal
to  the  Eurodollar  Rate  plus  3.25%  through  May  2002  and  the  Eurodollar

                                        4
<PAGE>

                              EMERITUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

Rate  plus  4%  from  June  2002  through  May  2003.  We have made all required
principal  payments  to  date.  We  are  currently  in  discussions  with  other
potential  lenders  regarding  meeting  the  December 14, 2001, requirement in a
timely  manner.

OTHER,  NET

In  April  1998, we assigned our economic interest in a 172-unit assisted living
community  located  in  Fairfield, California, to a related party investor group
for  $2.8 million in cash.  Our economic interest consisted of a 67% interest in
the profits, losses, and distributions of an operating limited liability company
that owns and operates the community, the right to receive payments of principal
and interest under a $2.4 million promissory note evidencing a loan by us to the
operating  company,  and the obligation to make additional capital contributions
under  the  agreement establishing the operating company.  We continue to manage
the operations of the community pursuant to a management agreement and to manage
the  affairs  of  the  operating limited liability company.  In January 2000, we
repurchased  25%  of  our  original  interest  in  the  community  (16.7% of the
operating  limited  liability  company)  for  a  total  of $791,000.  During the
quarter  ended September 30, 2001, we entered into an agreement with the related
party  investor  to  offset  against  interest  payable  any amounts that we had
previously  funded  or  will fund the assisted living community on their behalf.
This  agreement  allows  for  collection  of  a note receivable in the amount of
approximately  $477,000  that had previously been fully reserved.  Therefore, we
recorded  approximately  $428,000  in  Other, net and approximately $49,000 as a
decrease  in interest expense.  Other, net also includes $960,000 related to the
gain  we  recognized  on  the sale of one of our communities as discussed in the
note  above  on  Deferred  Gain  on  Sale  of  Communities.

LOSS  PER  SHARE

Basic  net  loss  per  share  is  computed  based  on  weighted  average  shares
outstanding  and excludes any potential dilution.  Diluted net loss per share is
computed  on the basis of the weighted average number of shares outstanding plus
dilutive  potential  common shares using the treasury stock method.  The capital
structure  of  Emeritus  includes  convertible  debentures,  redeemable  and
non-redeemable  convertible  preferred  stock,  common stock warrants, and stock
options.  The  assumed  conversion  and  exercise  of these securities have been
excluded  from  the calculation of diluted net loss per share since their effect
is  anti-dilutive.  We have calculated loss per common share on a dilutive basis
without  consideration of 8,086,357 and 8,363,595 common shares at September 30,
2001  and  2000,  respectively,  related  to  outstanding  options,  warrants,
convertible  debentures,  and  convertible  preferred  stock.

UNREALIZED  HOLDING  GAINS  (LOSSES)  ON  INVESTMENT  SECURITIES

The change in unrealized holding gains (losses) on investment securities for the
nine-month  period  ended  September 30, 2001, represents the change in value of
our  investment  in  ARV  Assisted  Living,  Inc.



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

OTHER  COMPREHENSIVE  INCOME

Other  comprehensive  income  includes  the  following  transactions  for  the
three-month  and  nine-month  periods  ended  September  30,  2001  and  2000,
respectively  (in  thousands):

<TABLE>
<CAPTION>


                                                             Three  Months                   Nine  Months
                                                                 ended                          ended
                                                              September  30,                 September  30,
                                                       -----------------------------  -----------------------------
                                                            2001            2000           2001            2000
                                                       --------------  --------------  -------------  --------------
<S>                                                    <C>             <C>             <C>            <C>
  Other comprehensive income (loss):
     Foreign currency translation adjustments . . . .  $           -   $           -   $           -  $          (3)
     Unrealized holding gains (losses) on investment
         securities . . . . . . . . . . . . . . . . .           (218)            (90)            747           (472)
                                                       --------------  --------------  -------------  --------------
            Total other comprehensive income (loss) .  $        (218)  $         (90)  $         747  $        (475)
                                                       ==============  ==============  =============  ==============
</TABLE>

STOCK  OPTIONS

In  May  2001,  we  announced an offer to exchange options under our Amended and
Restated  1995 Stock Incentive Plan (the "Stock Incentive Plan") held by current
employees, including executive officers, for new options to be granted under the
Stock  Incentive  Plan  and  new  option  letter  agreements.  Under  the offer,
employees  were  required to tender all or none of their options in exchange for
new  options subject to the same number of shares of common stock as the options
tendered for exchange.  Approximately 99% of outstanding options were exchanged.
The  new  options  will  be  granted  on  or  about December 12, 2001, the first
business  day  that  is  at least six months and one day after the date tendered
options  were accepted for exchange. The new options will have an exercise price
equal  to  the  higher  of the fair market value of Emeritus common stock on the
date  of  grant  or  $1.50 and will fully vest 2 1/2 years from the date the new
options  are granted under the following schedule:  33 1/3 percent will vest six
months  after  the  date  of grant; 33 1/3 percent will vest 18 months after the
date  of  grant; and 33 1/3 percent will vest 30 months after the date of grant.
In  all  other  respects,  the  terms of the new options will be the same as the
terms  of  the  options  tendered  for  exchange.

NEW  ACCOUNTING  PRONOUNCEMENTS

In  July  2001, the Financial Accounting Standards Board (FASB) issued Statement
of  Financial  Accounting  Standards  (SFAS) No. 141, Business Combinations, and
SFAS  No.  142,  Goodwill  and  Other  Intangible  Assets.  Under  SFAS 141, any
business  combination  initiated after June 30, 2001, must be accounted for as a
purchase.  In  accordance  with  SFAS  142,  for  business combinations that are
consummated  after June 30, 2001, goodwill and intangible assets with indefinite
lives  should  not  be  amortized and other identified intangibles with definite
lives should be amortized over their useful lives.  Additionally, any amounts of
goodwill or other intangible assets with indefinite lives that were amortized in
previous business combinations should be reclassified upon adoption of SFAS 142.
Adoption of SFAS 141 is required as of July 1, 2001, and adoption of SFAS 142 is
required  for  fiscal  years  beginning  after December 15, 2001. We have had no
business  combinations  accounted  for  other  than as a purchase and we have no
goodwill  or other intangible assets with indefinite lives.  Unless and until we
enter  into  a  business  combination  that gives rise to goodwill or intangible
assets  with indefinite lives, these pronouncements will have no material effect
on  our  financial  statements.

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement
No.  143,  Accounting  for  Asset  Retirement  Obligations.  Statement  No.  143
requires  an  enterprise  to  record  the  fair  value  of  an  asset retirement
obligation  as  a  liability in the period in which it incurs a legal obligation
associated  with the retirement of a tangible long-lived asset.  Enterprises are
required  to  adopt  Statement  No.  143  for  fiscal

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

years  beginning  after  June  15, 2002.  We do not expect this pronouncement to
have  a  material  effect  on  our  financial  statements.

In October 2001, FASB issued Statement No. 144, Accounting for the Impairment or
Disposal  of  Long-Lived  Assets,  which  addresses  financial  accounting  and
reporting  for  the  impairment or disposal of long-lived assets.  Statement No.
144  supersedes  FASB  Statement  No.  121,  Accounting  for  the  Impairment of
Long-Lived  Assets  and for Long-Lived Assets to Be Disposed Of, and APB Opinion
No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of
a  Segment  of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events  and  Transactions.  Statement  No.  144  establishes a single accounting
model,  based  on  the  framework  established  in Statement 121, for long-lived
assets  to  be  disposed of by sale. Statement No. 144 also resolves significant
implementation  issues  related  to  Statement  121. Enterprises are required to
adopt  Statement No. 144 for fiscal years beginning after December 15, 2001.  We
do  not  expect  this  pronouncement  to have a material effect on our financial
statements.

RECLASSIFICATIONS

Certain  reclassifications of 2000 amounts have been made to conform to the 2001
presentation.


                                        7
<PAGE>

           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
and  began  our  expansion  strategy.

Through  1998,  we  focused  on  rapidly  expanding  our  operations in order to
assemble  a  portfolio  of  assisted  living communities with a critical mass of
capacity.  We  pursued an aggressive acquisition and development strategy during
that  time,  acquiring 35 and developing 10 communities in 1996, acquiring 7 and
developing 20 communities in 1997, and developing 5 communities in 1998.  During
1999  and 2000, and continuing into 2001, we have substantially reduced our pace
of  acquisition  and  development  activities  to  concentrate  on improving our
operations  and  increasing  occupancy  and  our  average  revenue  per  unit.

In  our  consolidated  portfolio,  our rate enhancement program brought about an
increase  in  average  monthly revenue per occupied unit to $2,387 for the first
three  quarters  of 2001 from $2,192 for the first three quarters of 2000.  This
represents  an  average  monthly revenue increase of $195 per month per occupied
unit,  or  8.9%.  The  average  occupancy rate declined slightly to 84.4% in the
first three quarters of 2001 from 85.8% during the first three quarters of 2000.

In  our  total  operated portfolio, which includes managed communities, our rate
enhancement  program  brought  about  an increase in average monthly revenue per
occupied unit to $2,277 for the first three quarters of 2001 from $2,083 for the
first  three  quarters  of 2000.  This represents an average revenue increase of
$194 per month per occupied unit, or 9.3%.  The average occupancy rate increased
slightly  to  81.7%  in  the  first three quarters of 2001 from 81.4% during the
first  three  quarters  of  2000.

We  intend  to  continue  a  selective  growth  strategy  through  acquiring and
developing  new  communities  with operating characteristics consistent with our
current  emphasis on stabilizing occupancy and enhancing our operating model and
service  offerings.

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

<TABLE>
<CAPTION>


                                         As  of  September  30,   As  of  December  31,   As  of  December  31,
                                                  2001                    2000                    1999
                                         ----------------------  ----------------------  ----------------------
                                         Buildings     Units     Buildings     Units     Buildings     Units
                                         ----------  ----------  ----------  ----------  ----------  ----------
<S>                                      <C>         <C>         <C>         <C>         <C>         <C>
Owned (1) . . . . . . . . . . . . . . .         16       1,579          16       1,579          16       1,572
Leased (1). . . . . . . . . . . . . . .         43       3,527          45       3,700          40       3,302
Managed/Admin Services. . . . . . . . .         71       6,710          69       6,528          68       6,247
Joint Venture/Partnership . . . . . . .          5         605           5         605           5         605
                                         ----------  ----------  ----------  ----------  ----------  ----------
     Operated Portfolio . . . . . . . .        135      12,421         135      12,412         129      11,726

     Percentage increase (2). . . . . .          0%          0%          5%          6%         14%         18%

Pending Acquisitions. . . . . . . . . .          -           -           -           -           2         206
New Developments. . . . . . . . . . . .          -           -           2         200           6         604
                                         ----------  ----------  ----------  ----------  ----------  ----------
     Total. . . . . . . . . . . . . . .        135      12,421         137      12,612         137      12,536
                                         ----------  ----------  ----------  ----------  ----------  ----------

     Percentage increase (decrease) (2)        (1%)        (2%)          0%          1%       (12%)        (5%)
</TABLE>

(1)     Included  in  our  consolidated  portfolio  of  communities.
(2)     The  percentage  increase (decrease) indicates the change from the prior
period.
                                        8
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                   AND  RESULTS  OF  OPERATIONS  -  CONTINUED
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.  Inflation or other circumstances that
adversely  affect  seniors'  ability  to  pay for assisted living services could
therefore  have an adverse effect on our business.  All sources of revenue other
than  residents'  private  resources  constitute  less  than  10%  of  our total
revenues.

We  have incurred net operating losses since our inception.  As of September 30,
2001,  we  had  an  accumulated  deficit of approximately $140.3 million.  These
losses  resulted  from  a  number  of  factors,  including:

   * occupancy levels at our communities that were lower for longer periods than
   we  originally  anticipated;

   * financing  costs  that  we  incurred  as a result of multiple financing and
   refinancing  transactions;  and

   * administrative  and  corporate expenses that we increased to facilitate our
   growth  and  maintain  operations.

During  1998,  we  decided  to reduce acquisition and development activities and
dispose  of  select  communities  that had been operating at a loss.  We believe
that  slowing  our  acquisition and development activities has enabled us to use
our  resources  more  efficiently  and increase our focus on enhancing community
operations.

RESULTS  OF  OPERATIONS

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  of  Revenues                   Percentage  Increase  (Decrease)
                                     -----------------------------------------------------   ----------------------------------
                                           Three  Months                Nine  Months         Three  Months       Nine  Months
                                               ended                       ended                 ended             ended
                                            September  30,              September  30,        September  30,    September  30,
                                     --------------------------  --------------------------  ----------------  ----------------
                                         2001          2000          2001          2000         2000-2001         2000-2001
                                     ------------  ------------  ------------  ------------  ----------------  ----------------
<S>                                  <C>           <C>           <C>           <C>           <C>               <C>
Revenues. . . . . . . . . . . . . .        100.0%        100.0%        100.0%        100.0%             13.6%             14.4%
Expenses:
     Community operations . . . . .         58.2          61.1          58.0          62.3               8.0               6.7
     General and administrative . .         14.7          12.4          13.3          12.3              34.2              23.9
     Depreciation and amortization.          5.3           5.8           5.3           5.9               3.4               1.6
     Facility lease expense . . . .         19.1          19.1          19.4          19.2              13.8              15.9
         Total operating expenses .         97.3          98.4          96.0          99.7              12.2              10.1
                                     ------------  ------------  ------------  ------------  ----------------  ----------------
Income from operations. . . . . . .          2.7           1.6           4.0           0.3              93.7           1,300.0
Other income (expense)
     Interest income. . . . . . . .          0.7           1.0           0.7           1.1             (26.8)            (21.7)
     Interest expense . . . . . . .         (9.5)        (12.5)         (9.9)        (12.3)            (14.2)             (7.7)
     Other, net . . . . . . . . . .          3.7          (6.1)          1.0          (4.2)              N/A               N/A
         Net other expense. . . . .         (5.1)        (17.6)         (8.2)        (15.4)            (66.7)            (39.0)
                                     ------------  ------------  ------------  ------------  ----------------  ----------------

         Net loss . . . . . . . . .        (2.4%)       (16.0%)        (4.2%)       (15.1%)           (83.7%)           (68.1%)
                                     ============  ============  ============  ============  ================  ================

</TABLE>
                                        9
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                   AND  RESULTS  OF  OPERATIONS  -  CONTINUED

Three  months ended September 30, 2001, compared to three months ended September
30,  2000

Total  Operating  Revenues:  Total operating revenues for the three months ended
September  30,  2001,  increased  by  $4.2  million  to $35.0 million from $30.8
million  for  the comparable period in 2000, or 13.6%.  The change in revenue is
primarily  the result of an increase in the number of occupied units through the
leasing  of  four  previously  managed  communities  offset  by  the sale of two
communities  and  increases  in  the average monthly revenue per unit due to our
rate  enhancement  program.  Average monthly revenue per unit was $2,414 for the
third  quarter of 2001 compared to $2,233 for the comparable quarter of 2000, an
increase  of  approximately  8.1%.  These  increases  were partially offset by a
small  decrease in the occupancy rate of 1.3  percentage points to 83.6% for the
third  quarter of 2001 from 84.9% for the third quarter of 2000.  An increase in
management  fee  revenue  of  $1.1  million  contributed  to  increased revenue.
Improved  performance  of managed communities allowed us to recognize additional
base  management  fees  and  performance-driven  contingent  management  fees.
Concurrently,  our  net  funding  obligation  for the Emeritrust communities was
greatly  reduced  (see  Other,  net  below).

Community  Operations:  Community  operating expenses for the three months ended
September  30,  2001, increased $1.5 million to $20.3 million from $18.8 million
for  the  comparable  period in 2000, or 8.0% .  This was due to the addition of
four  leased  communities  that had been formerly managed, offset by the sale of
two  communities,  which  resulted in increased salary and payroll tax expenses,
and  above  average increases in utility costs and liability insurance premiums.
Community  operating  expenses  as  a  percentage  of  total  operating  revenue
decreased  to 58.2% in the third quarter of 2001 from 61.1% in the third quarter
of  2000,  primarily  as  a  result  of  increased revenues and cost containment
measures.

General  and  Administrative:  General and administrative (G&A) expenses for the
three  months  ended  September 30, 2001, increased $1.3 million to $5.1 million
from  $3.8 million for the comparable period in 2000, or 34.2%.  As a percentage
of  total  operating  revenues,  G&A  expenses  increased to 14.7% for the three
months  ended  September  30, 2001, compared to 12.4% for the three months ended
September  30, 2000.  G&A expenses rose primarily due to increases in the number
of  employees from an abnormally low level in 2000, normal increases in employee
salaries,  the  effects of higher premiums and deductible levels associated with
our  liability insurance coverage, a total company management meeting, and costs
related  to  various  employee  benefit  programs.

Depreciation  and  Amortization:  Depreciation  and  amortization  for the three
months  ended  September  30, 2001 and 2000, were approximately $1.9 million and
$1.8  million,  respectively.  In  2001, this represents 5.3% of total operating
revenues, compared to 5.8% for the comparable period in 2000.  The decrease as a
percentage  of  revenues  is  due  to  increased  revenues.

Facility  Lease  Expense:  Facility  lease  expense  for  the three months ended
September 30, 2001, was $6.7 million compared to $5.9 million for the comparable
period of 2000, representing an increase of $810,000, or 13.8%.  The increase is
primarily  attributable to the number of communities under leasing arrangements.
We leased 43 communities as of September 30, 2001, compared to 40 communities as
of  September 30, 2000.  In addition, we re-leased two of our communities in the
third  quarter  to  realize  more favorable rates from the new lessor.  Facility
lease expense as a percentage of revenues was essentially unchanged at 19.1% for
the  three  months  ended  September  30,  2001  and  2000.

Interest Income:  Interest income for the three months ended September 30, 2001,
was  $221,000  versus $302,000 for the comparable period of 2000.  This decrease
is  primarily  attributable  to  declining  interest  rates.

Interest  Expense:  Interest  expense  for  the three months ended September 30,
2001,  was  $3.3  million  compared to $3.8 million for the comparable period of
2000.  This  decrease  of $545,000, or 14.2%, is primarily attributable to lower
interest  rates  on our variable rate debt.  As a percentage of total operating
                                       10
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                   AND  RESULTS  OF  OPERATIONS  -  CONTINUED

revenues,  interest  expense  decreased  to 9.5% from 12.5% for the three months
ended  September  30, 2001 and 2000, respectively, reflecting increased revenues
in  conjunction  with  lower  interest  rates  in  the  third  quarter  of 2001.

Other, net:  Other, net increased by $3.2 million to $1.3 million income for the
quarter  ended  September  30,  2001,  from $1.9 million expense for the quarter
ended September 30, 2000.  In April 1998, we assigned our economic interest in a
172-unit  assisted  living  community  located  in  Fairfield,  California, to a
related  party  investor  group for $2.8 million in cash.  Our economic interest
consisted  of  a  67%  interest  in the profits, losses, and distributions of an
operating  limited  liability  company that owns and operates the community, the
right  to  receive  payments  of  principal  and  interest  under a $2.4 million
promissory  note  evidencing  a  loan  by  us  to the operating company, and the
obligation  to  make  additional  capital  contributions  under  the  agreement
establishing the operating company.  We continue to manage the operations of the
community  pursuant  to  a management agreement and to manage the affairs of the
operating limited liability company.  In January 2000, we repurchased 25% of our
original  interest  in  the  community (16.7% of the operating limited liability
company)  for a total of $791,000.  During the quarter ended September 30, 2001,
we  entered  into an agreement with the related party investor to offset against
interest  payable  any  amounts  that  we had previously funded or will fund the
assisted living community on their behalf.  This agreement allows for collection
of a note receivable in the amount of approximately $477,000 that had previously
been  fully  reserved.  Therefore,  we recorded approximately $428,000 in Other,
net  and  approximately  $49,000 as a decrease in interest expense.  In December
1998  and  March 1999, respectively, we began managing two groups of communities
that  we  formerly  leased  or  owned  and,  in  connection  with the management
agreements,  have  obligations  to fund operating deficits of these communities.
We  refer to these communities as the Emeritrust I and Emeritrust II development
communities.  We  had  a minimal obligation to fund operating deficits for these
communities  for the third quarter of 2001, compared to a net obligation of $1.0
million  in  the  third  quarter  of 2000.  Under the management agreements, the
reduction  in  net  funding  obligation  also  enabled us to realize $881,000 in
management  fees  for  the third quarter of 2001 from these communities where we
were not able to realize management fees in the comparable period of 2000.  This
contributed  to  the  increase  in  management fee revenue referred to in "Total
Operating  Revenues".  Other,  net also includes $960,000 related to the gain we
recognized  on  the  sale  of  one  of  our  communities  in  the third quarter.

Preferred  dividends:  For  the  three months ended September 30, 2001 and 2000,
the  preferred  dividends were approximately $1.6 million.   If we are unable to
pay these dividends for six consecutive quarters, both our Series A and Series B
shareholders  become entitled to elect one additional director each to our board
of  directors  at each annual shareholders' meeting until such time we have paid
the  accrued  dividends.  In  addition,  after  six  consecutive  quarters  of
non-payment the Series A dividends will be calculated on a compounded cumulative
basis,  retroactively.

Nine  months  ended  September 30, 2001, compared to nine months ended September
30,  2000

Total  Operating  Revenues:  Total  operating revenues for the nine months ended
September  30,  2001,  increased  by  $13.2 million to $104.9 million from $91.7
million  for  the comparable period in 2000, or 14.4%.  The change in revenue is
primarily  a  result  of an increase in the number of occupied units through the
leasing  of four previously managed communities offset by the disposition of two
communities  and  increases  in  the average monthly revenue per unit due to our
rate  enhancement  program.  Average monthly revenue per unit was $2,387 for the
first nine months of 2001 compared to $2,192 for the comparable quarter of 2000,
an  increase  of approximately 8.9%.  These increases were partially offset by a
small  decrease  in the occupancy rate of 1.4 percentage points to 84.4% for the
first  three  quarters  of 2001 from 85.8% for the first three quarters of 2000.
An  increase  in  management  fee  revenue  of  $2.3  million contributed to the
increased  total operating revenues. Improved performance of managed communities
allowed  us  to recognize additional base management fees and performance-driven
contingent  management  fees.  Concurrently,  our net funding obligation for the
Emeritrust  communities  was  greatly  reduced  (see  Other,  net  below).
                                       11
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                   AND  RESULTS  OF  OPERATIONS  -  CONTINUED

Community  Operations:  Community  operating  expenses for the nine months ended
September  30,  2001, increased $3.8 million to $60.9 million from $57.1 million
for the comparable period in 2000, or 6.7%.  The increase in community operating
expenses  is  principally  a  result  of the addition of four previously managed
communities  offset  by  the  disposition  of two communities, which resulted in
increased  salary  and  payroll  tax  expenses,  and  above average increases in
utility costs and liability insurance premiums.  Community operating expenses as
a  percentage  of  total operating revenue decreased to 58.0% in the first three
quarters  of 2001 from 62.3% in the first three quarters of 2000, primarily as a
result  of  increased  revenues  and  cost  containment  measures.

General  and  Administrative:  General and administrative (G&A) expenses for the
nine  months  ended  September 30, 2001, increased $2.7 million to $14.0 million
from $11.3 million for the comparable period in 2000, or 23.9%.  As a percentage
of total operating revenues, G&A expenses increased to 13.3% for the nine months
ended  September 30, 2001, compared to 12.3% for the nine months ended September
30, 2000.  G&A  expenses  rose  primarily  due  to  increases  in the number of
employees  from  an  abnormally  low level in 2000, normal increases in employee
salaries,  the  effects of higher premiums and deductible levels associated with
our  liability  insurance  coverage,  health insurance accruals, a total company
management  meeting,  and  telephone  expenses.

Depreciation and Amortization: Depreciation and amortization for the nine months
ended  September  30,  2001  and  2000, were approximately $5.5 million and $5.4
million,  respectively.  In  2001,  this  represents  5.3%  of  total  operating
revenues, compared to 5.9% of total operating revenues for the comparable period
in 2000.  The decrease as a percentage of revenues is due to increased revenues.

Facility  Lease  Expense:  Facility  lease  expense  for  the  nine months ended
September  30,  2001,  was  $20.4  million  compared  to  $17.6  million for the
comparable  period  of 2000, representing an increase of $2.8 million, or 15.9%.
The  increase  is  primarily  attributable  to  the  number of communities under
leasing  arrangements.  We  leased  43  communities  as  of  September 30, 2001,
compared  to 40 communities as of September 30, 2000.  In addition, we re-leased
two of our communities in the third quarter to realize more favorable rates from
the new lessor.  Facility lease expense as a percentage of revenues increased to
19.4%  from  19.2%  for  the  nine  months  ended  September  30, 2001 and 2000,
respectively.

Interest  Income:  Interest income for the nine months ended September 30, 2001,
was $779,000 versus $995,000 for the comparable period of 2000.  This represents
a  decrease  of  $216,000,  or 21.7%, and is primarily attributable to declining
interest  rates.

Interest  Expense:  Interest  expense  for  the  nine months ended September 30,
2001,  was  $10.4 million compared to $11.2 million for the comparable period of
2000.  This  decrease  of  $868,000, or 7.7%, is primarily attributable to lower
interest  rates  on  our variable rate debt.  As a percentage of total operating
revenues,  interest  expense  decreased  to  9.9% from 12.3% for the nine months
ended  September  30, 2001 and 2000, respectively, reflecting increased revenues
in  conjunction  with  lower interest rates in the first three quarters of 2001.

Other, net:  Other, net increased by $4.8 million to $1.0 million income for the
nine  months  ended  September  30, 2001, from $3.8 million expense for the nine
months  ended  September  30,  2000.  In  April  1998,  we assigned our economic
interest  in  a  172-unit  assisted  living  community  located  in  Fairfield,
California,  to  a  related  party investor group for $2.8 million in cash.  Our
economic  interest  consisted  of  a  67%  interest  in the profits, losses, and
distributions  of  an operating limited liability company that owns and operates
the  community,  the right to receive payments of principal and interest under a
$2.4  million  promissory note evidencing a loan by us to the operating company,
and  the obligation to make additional capital contributions under the agreement
establishing  the  operating  company.  We  continue  to  manage  the
                                       12
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                   AND  RESULTS  OF  OPERATIONS  -  CONTINUED

operations of the community pursuant to a management agreement and to manage the
affairs  of  the  operating  limited  liability  company.  In  January  2000, we
repurchased  25%  of  our  original  interest  in  the  community  (16.7% of the
operating  limited  liability  company)  for  a  total  of $791,000.  During the
quarter  ended September 30, 2001, we entered into an agreement with the related
party  investor  to  offset  against  interest  payable  any amounts that we had
previously  funded  or  will fund the assisted living community on their behalf.
This  agreement  allows  for  collection  of  a note receivable in the amount of
approximately  $477,000  that had previously been fully reserved.  Therefore, we
recorded  approximately  $428,000  in  Other, net and approximately $49,000 as a
decrease in interest expense.  In December 1998 and March 1999, respectively, we
began  managing  two groups of communities that we formerly leased or owned and,
in connection with the management agreements, have obligations to fund operating
deficits  of these communities.  We refer to these communities as the Emeritrust
I  and  Emeritrust  II  development  communities.  Our  net  obligation  to fund
operating  deficits  for  these  communities  declined to $304,000 for the first
three quarters of 2001 from $2.2 million for the first three quarters of 2000, a
reduction of $1.9 million.  Under the management agreement, the reduction in net
funding  obligation  also  enabled us to realize $1.9 million in management fees
for  the  first  three quarters of 2001 from these communities where we were not
able  to  realize  management  fees  in  the  comparable  period  of 2000.  This
contributed  to  the  increase  in  management fee revenue referred to in "Total
Operating  Revenues".  Other,  net also includes $960,000 related to the gain we
recognized  on  the  sale  of  one  of  our  communities  in  the third quarter.

Preferred  dividends:  For  the  nine  months  ended  September  30,  2001,  the
preferred  dividends  were  $4.8  million  as  compared  to $3.7 million for the
comparable  period  of  2000,  for  an  increase of $1.1 million, or 29.7%.  The
primary  reason  for the increase is accrued dividends for both the Series A and
Series B preferred stock at higher rates due to non-payment of cash dividends on
specified  payment  dates.  If  we  are  unable  to  pay these dividends for six
consecutive  quarters,  both  our  Series  A  and  Series  B shareholders become
entitled to elect one additional director each to our board of directors at each
annual shareholders' meeting until such time we have paid the accrued dividends.
In  addition,  after  six  consecutive  quarters  of  non-payment  the  Series A
dividends  will  be  calculated on a compounded cumulative basis, retroactively.

Same  Community  Comparison

We  operated  57  communities on a comparable basis during both the three months
ended  September 30, 2001 and 2000.  The following table sets forth a comparison
of  same  community  results of operations, excluding general and administrative
expenses,  for  the  three  months  ended  September  30,  2001  and  2000.

<TABLE>
<CAPTION>

                                    Three Months ended September 30,
                                           (In thousands)
                                                            Dollar   Percentage
                                   2001          2000       Change     Change
                               ------------  ------------  --------  -----------
<S>                            <C>           <C>           <C>       <C>
Revenue . . . . . . . . . . .  $    29,821   $    28,316   $ 1,505          5.3%
Community operating expenses.      (18,423)      (17,382)   (1,041)         6.0
                               ------------  ------------  --------  -----------
  Community operating income.       11,398        10,934       464          4.2
Depreciation & amortization .       (1,432)       (1,351)      (81)         6.0
Facility lease expense. . . .       (5,902)       (5,735)     (167)         2.9
                               ------------  ------------  --------  -----------
    Operating income. . . . .        4,064         3,848       216          5.6
Interest expense, net . . . .       (2,756)       (2,935)      179         (6.1)
Other income (expense). . . .           22          (102)      124       (121.6)
                               ------------  ------------  --------  -----------
    Net income. . . . . . . .  $     1,330   $       811   $   519         64.0%
                               ============  ============  ========  ===========
</TABLE>

The same communities represented $29.8 million or 85.3% of our total revenue for
the third quarter of 2001.  Same community revenues increased by $1.5 million or
5.3%  for  the  quarter  ended September 30, 2001, from the comparable period in
2000.  The increase in revenue is attributable to the operational success of our
rate  enhancement program.  The same community average monthly revenue per unit
                                       13
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                   AND  RESULTS  OF  OPERATIONS  -  CONTINUED

increased  to  $2,359  for the quarter ended September 30, 2001, from $2,144 for
the  comparable quarter in 2000.  This is an increase in average monthly revenue
per unit of $215 or 10.0%.  These results were partially offset by a decrease in
occupancy  to 83.1% in the third quarter of 2001 from 85.3% in the third quarter
of  2000.  For the quarter ended September 30, 2001, we increased our net income
to  $1.3  million  from  $811,000  for  the  comparable  period  of  2000.  The
improvement  is  primarily attributable to an improvement in community operating
margin  due  to  improved  cost  control  measures  and  rate  enhancement.

LIQUIDITY  AND  CAPITAL  RESOURCES

For  the  nine  months  ended September 30, 2001, net cash provided by operating
activities  was  $2.2 million compared to $7.9 million of cash used in operating
activities  for  the comparable period in the prior year.  The primary component
of  the operating cash provided in the nine months ended September 30, 2001, was
the  decrease  of  our  net  loss  from  $13.8  million in the nine months ended
September 30, 2000 to $4.4 million for the nine months ended September 30, 2001.

Net  cash provided by investing activities amounted to $3.7 million for the nine
months  ended  September  30,  2001, and was comprised primarily of repayment of
advances  by  third parties and affiliates of $2.8 million and proceeds received
from  the  re-leasing  of  two  communities,  which  was partially offset by the
acquisition  of property, equipment, and new leases.  Net cash used in investing
activities  amounted  to  $10.9  million for the nine months ended September 30,
2000,  primarily  due  to  the  acquisition  of  property and equipment of $10.4
million.

For  the  nine  months  ended  September  30,  2001,  net cash used in financing
activities  was  $3.7  million  primarily  from  short-term  and  long-term debt
repayments.  For  the nine months ended September 30, 2000, net cash provided by
financing  activities  was  $13.3  million  primarily  from  the  agreement with
Saratoga Partners that removed the restriction of $13.5 million in cash, and the
financing  of  one  new  community,  partially  offset  by  debt  repayment.

We  have  incurred  significant  operating  losses  since our inception.  We are
dependent  upon  third  party  financing  or  disposition  of  assets  to  fund
operations.  We  cannot  guarantee  that third party financing or disposition of
assets  will  be  available  timely  or  at  all,  or on terms attractive to the
Company.  In addition, as of September 30, 2001, our working capital deficit was
approximately  $84  million,  due  in  part to $73 million of mortgage debt that
originally matured in April 2001.  On June 6, 2001, we reached an agreement with
the  lender  to  extend  the maturity date to December 14, 2001.  We may further
extend the maturity date to May 31, 2002, provided that we pay down the mortgage
debt  by  at  least  $30  million  on  or  before  December  14,  2001.  In  the
alternative,  we  can provide a commitment for alternative mortgage financing in
the  amount  of  at least $30 million for three designated properties secured by
the  mortgage  debt  or  provide  an  executed  agreement  to  sell  those three
properties to a third party for at least $30 million, provided such financing or
sale closes on or before March 15, 2002.  Subject to paying a fee equal to 1% of
the  outstanding  loan  balance on or before May 31, 2002, we may further extend
the  maturity  to  May  31,  2003.  Subject  to  our  exercise of the applicable
extension,  the agreement requires us to (i) make principal payments of $200,000
per month, from June 2001 through May 2002 and $250,000 per month from June 2002
through  May  2003,  and  (ii),  pay  interest  at  a floating rate equal to the
Eurodollar Rate plus 3.25% through May 2002 and the Eurodollar Rate plus 4% from
June  2002  through  May  2003.  If  we  are  unable  to  meet  any one of these
provisions,  the  lender  could  declare  the  entire amount immediately due and
payable  at maturity and could begin foreclosure proceedings with respect to the
ten  assisted living properties that secure this debt.  In addition, 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.  Such cross-default provisions affect 35 assisted living properties
that  we  own  or lease.  Accordingly, our inability to extend the debt past the
December 14, 2001, maturity date could have a further material adverse effect on
our financial condition if any other lender or lessor notifies us of our default
under  any  such  cross-defaulted  debt  instrument  or  lease.

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

The  foregoing  factors  raise  doubt  about  our ability to continue as a going
concern.  We  are pursuing several initiatives to mitigate this doubt, including
continued  discussions  regarding  obtaining alternative financing for the three
properties  prior  to  December  14,  2001,  in  accordance  with  the foregoing
agreement  and conducting discussions with other lenders and lessors that may be
affected  by  cross-default  provisions.    We  are  taking  further  steps  to
stabilize  operations  at positive cash flow levels, including implementing rate
increases  and  pursuing  additional  programs  to  increase  occupancy,  and if
necessary,  the  sale  of  selected  assets.

IMPACT  OF  INFLATION

To  date,  inflation  has  not  had a significant impact on Emeritus.  Inflation
could,  however,  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 the 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  contain  current  facts  deal  with  potential  future
circumstances,  operations,  and prospects.  The discussion of these 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  our  rate  enhancement  program  without  adversely  affecting
occupancy  levels;  our  ability to control community operation expenses without
adversely  affecting  the  level of occupancy and the level of resident charges;
the  ability  of  our operations 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,  including the requirement of
refinancing  $30  million  of  mortgage  debt  by  December 14, 2001; and making
satisfactory  arrangements  for  the  continued  operation  of  the  Emeritrust
communities  beyond  December 31, 2001, when our management agreements for those
communities  expire.  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 matter or subject area
discussed  in this report.  These and other risks and uncertainties are detailed
in  our reports filed with the Securities and Exchange Commission, including our
Annual  Reports  on  Form  10-K  and  Quarterly  Reports  on  Form  10-Q.
                                       15
<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  September  30,  2001,  our  variable rate
borrowings  totaled  $75.9 million.  If market interest rates were to average 2%
more,  our  annual  interest  expense  and net loss would increase $1.5 million.
This  amount  is  determined  by considering the impact of hypothetical interest
rates  on our outstanding variable rate borrowings as of September 30, 2001, and
does  not  consider  changes  in  the  actual level of borrowings that may occur
subsequent  to  September  30,  2001.  This  analysis also does not consider the
effects  of  the  reduced level of overall economic activity that could exist in
such  an  environment,  or  our  current funding requirements for the Emeritrust
communities,  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.


                           PART II. OTHER INFORMATION

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

(a)     The  Annual  Meeting  of  Shareholders  was  held on September 27, 2001.

(b)     All  director nominees listed in the proxy statement were elected at the
meeting.

(c)      The  following matters voted upon at the meeting received the number of
votes  set  forth  below:

Election  of  Directors:
------------------------
                                           Abstain or
                                           ----------
          Name                For         Against     Broker Non-vote
          ----                ---         -------     ---------------
Raymond  R.  Brandstrom   14,837,388      57,662
David  T.  Hamamoto       14,871,127      23,923

Amendment  to  1998  Employee  Stock  Purchase  Plan:
-----------------------------------------------------

                 For         Against     Abstain     Other Non-vote
                 ---         -------     -------     --------------

              14,835,603     54,707       4,740         212,551

Ratification  of  Independent  Public  Auditors:
------------------------------------------------

                 For         Against     Abstain     Other Non-vote
                 ---         -------     -------     --------------

              14,895,050     5,550        4,848         212,551

(d)     Not  applicable.

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)     Exhibits

     None.

(b)     Reports  on  Form  8-K

None.

                                       16
<PAGE>

                                    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:  November  12,  2001

                                   EMERITUS  CORPORATION
                                        (Registrant)


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