----

| (Mark                One) |
|---------------------------|
| x                         |   QUARTERLY                REPORT                PURSUANT TO SECTION 13 OR 15(d) OF |
|                      |   THE                SECURITIES                EXCHANGE ACT 1934 |

| o      | TRANSITION                REPORT PURSUANT TO                SECTION 13 OR 15(d) OF |
|--------|------------------------------------------------------------------------------------|
|   | THE                SECURITIES EXCHANGE ACT OF                1934                  |

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

----

|                                                                               |
|------------------------------------------------------------------------------------|
| EMERITUS                CORPORATION                                                |
|                                                                               |   |   |   |
| Table                of                Contents                                    |
|                                                                               |   |   |   |
| Part                I.  Financial                Information             |
|                                                                               |   |   | Page                No. |
|                                                                               |   |   |   |
| Item                1.  Financial                Statements (unaudited): | 1 |
|                                                                               |   |   |   |
|                                                                               |   | Condensed                Consolidated Balance Sheets as of September 30, 2007, and December                31,                2006 | 2 |
|                                                                               |   |   |   |
|                                                                               |   | Condensed                Consolidated Statements of Operations for the Three Months and Nine                Months                ended September 30, 2007 and 2006 | 3 |
|                                                                               |   |   |   |
|                                                                               |   | Condensed                Consolidated Statements of Cash Flows for the Nine Months ended September                30, 2007 and 2006 | 4 |
|                                                                               |   |   |   |
|                                                                               |   | Notes                to Unaudited Condensed Consolidated Financial Statements | 5 |
|                                                                               |   |   |   |
| Item                2.                                                             | Management’s                Discussion and                Analysis of Financial Condition and Results of                Operations | 17 |
|                                                                               |   |
| Item                3.                                                             | Quantitative                and Qualitative                Disclosures About Market Risk | 40 |
|                                                                               |   |   |   |
| Item                4.                                                             | Controls                and                Procedures | 40 |
|                                                                               |   |   |   |
| Part                II.  Other                Information                |
|                                                                               |   |   |   |
| Note:                                                                              | Items                2, 3, and 5 of Part II are omitted because they are not                applicable. |
|                                                                               |   |   |   |
| Item                1.                                                             | Legal                Proceedings | 41 |
|                                                                               |   |   |
| Item                1A.                                                            | Risk                Factors | 41 |
|                                                                               |   |   |
| Item                4.                                                             | Submission                of Matters to a Vote                of Security Holders | 41 |
|                                                                               |   |   |
| Item                6.                                                             | Exhibits | 42 |
|                                                                               |   |   |   |
|                                                                               |   |
|                                                                               | Signature | 43 |
|                                                                               |   |   |
|                                                                               | Index                to                Exhibits | 44 |

----

PART      I. Financial      Information

Item      1.  Financial Statements (unaudited)

----

| EMERITUS                CORPORATION                                                                                       |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|
| CONDENSED                CONSOLIDATED BALANCE                SHEETS                                                       |   |
| (unaudited)                                                                                                               |   |
| (In                thousands, except share                data)                                                           |   |
| ASSETS                                                                                                                    |   |
|                                                                                                                      |   | September                30, |   |   | December                31, |   |
|                                                                                                                      |   | 2007 |   |   | 2006 |   |
| Current                Assets:                                                                                            |   |   |   |   |   |   |
| Cash                and cash equivalents                                                                                  |   | $ | 66,571 |   |   | $ | 14,049 |   |
| Short-term                investments                                                                                     |   |   | 2,470 |   |   |   | 1,883 |   |
| Trade                accounts receivable, net of allowance of $748 and $348                                               |   |   | 6,186 |   |   |   | 5,115 |   |
| Other                receivables                                                                                          |   |   | 6,469 |   |   |   | 3,488 |   |
| Tax                and maintenance escrows                                                                                |   |   | 18,044 |   |   |   | 7,067 |   |
| Prepaid                workers' compensation                                                                              |   |   | 14,173 |   |   |   | 11,112 |   |
| Other                prepaid expenses                                                                                     |   |   | 11,682 |   |   |   | 8,457 |   |
| Total                current assets                                                                                       |   |   | 125,595 |   |   |   | 51,171 |   |
| Long-term                investments                                                                                      |   |   | 6,174 |   |   |   | 7,504 |   |
| Property                and equipment, net of accumulated depreciation of $161,103 and                $151,919            |   |   | 1,414,712 |   |   |   | 594,823 |   |
| Construction                in progress                                                                                   |   |   | 13,315 |   |   |   | 6,469 |   |
| Restricted                deposits                                                                                        |   |   | 19,250 |   |   |   | 12,601 |   |
| Lease                and contract acquisition costs, net of amortization of $22,468 and                $14,515            |   |   | 79,411 |   |   |   | 25,762 |   |
| Goodwill                                                                                                                  |   |   | 74,297 |   |   |   | – |   |
| Other                intangible assets, net of amortization of $1,018                                                     |   |   | 151,389 |   |   |   | – |   |
| Other                assets, net                                                                                          |   |   | 10,432 |   |   |   | 4,730 |   |
| Total                assets                                                                                               |   | $ | 1,894,575 |   |   | $ | 703,060 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| LIABILITIES                AND SHAREHOLDERS'                EQUITY (DEFICIT)                                              |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| Current                Liabilities:                                                                                       |   |   |   |   |   |   |   |   |
| Current                portion of long-term debt                                                                          |   | $ | 44,219 |   |   | $ | 2,645 |   |
| Current                portion of capital lease and financing obligations                                                 |   |   | 23,028 |   |   |   | 22,472 |   |
| Current                portion of convertible debentures                                                                  |   |   | 10,455 |   |   |   | – |   |
| Trade                accounts payable                                                                                     |   |   | 6,369 |   |   |   | 6,718 |   |
| Accrued                employee compensation and benefits                                                                 |   |   | 37,692 |   |   |   | 21,012 |   |
| Accrued                interest                                                                                           |   |   | 4,624 |   |   |   | 1,407 |   |
| Accrued                real estate taxes                                                                                  |   |   | 11,550 |   |   |   | 6,225 |   |
| Accrued                professional and general liability                                                                 |   |   | 13,600 |   |   |   | 10,761 |   |
| Accrued                income taxes                                                                                       |   |   | 1,770 |   |   |   | 233 |   |
| Other                accrued expenses                                                                                     |   |   | 13,922 |   |   |   | 6,469 |   |
| Deferred                revenue                                                                                           |   |   | 9,407 |   |   |   | 8,951 |   |
| Unearned                rental income                                                                                     |   |   | 6,812 |   |   |   | 6,155 |   |
| Total                current liabilities                                                                                  |   |   | 183,448 |   |   |   | 93,048 |   |
| Long-term                debt, less current portion                                                                       |   |   | 678,152 |   |   |   | 83,335 |   |
| Capital                lease and financing obligations, less current portion                                              |   |   | 501,349 |   |   |   | 586,174 |   |
| Convertible                debentures, less current portion                                                               |   |   | – |   |   |   | 26,575 |   |
| Deferred                gain on sale of communities                                                                       |   |   | 21,761 |   |   |   | 23,795 |   |
| Deferred                rent                                                                                              |   |   | 3,825 |   |   |   | 6,389 |   |
| Other                long-term liabilities                                                                                |   |   | 24,231 |   |   |   | 2,776 |   |
| Total                liabilities                                                                                          |   |   | 1,412,766 |   |   |   | 822,092 |   |
| Commitments                and contingencies                                                                              |   |   |   |   |   |   |   |   |
| Shareholders'                Deficit:                                                                                     |   |   |   |   |   |   |   |   |
| Preferred                stock, $.0001 par value. Authorized 20,000,000 shares, none                issued                |   |   |   |   |   |   |   |   |
| Common                stock, $.0001 par value. Authorized 100,000,000 shares; issued and                outstanding       |   |   |   |   |   |   |   |   |
| 38,891,495                and 18,165,986 shares at September 30, 2007, and December 31, 2006,                respectively |   |   | 4 |   |   |   | 2 |   |
| Additional                paid-in capital                                                                                 |   |   | 711,716 |   |   |   | 87,980 |   |
| Accumulated                deficit                                                                                        |   |   | (229,911 | ) |   |   | (207,014 | ) |
| Total                shareholders' equity (deficit)                                                                       |   |   | 481,809 |   |   |   | (119,032 | ) |
| Total                liabilities and shareholders' equity (deficit)                                                       |   | $ | 1,894,575 |   |   | $ | 703,060 |   |

----

| EMERITUS                CORPORATION                                                                                            |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|
| CONDENSED                CONSOLIDATED                STATEMENTS OF OPERATIONS                                                  |   |
| (unaudited)                                                                                                                    |   |
| (In                thousands, except per share                data)                                                            |   |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                           |   | Three                Months                ended |   |   | Nine                Months                ended |   |
|                                                                                                                           |   | September                30, |   |   | September                30, |   |
|                                                                                                                           |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
| Revenues:                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Community                revenue                                                                                               |   | $ | 136,646 |   |   | $ | 106,931 |   |   | $ | 355,991 |   |   | $ | 310,729 |   |
| Management                fees                                                                                                 |   |   | 1,414 |   |   |   | 380 |   |   |   | 3,221 |   |   |   | 1,321 |   |
| Total                operating revenues                                                                                        |   |   | 138,060 |   |   |   | 107,311 |   |   |   | 359,212 |   |   |   | 312,050 |   |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Community                operations (exclusive of depreciation and amortization                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     and                facility lease expense shown separately below)                                      |   |   | 89,214 |   |   |   | 69,763 |   |   |   | 229,225 |   |   |   | 203,792 |   |
| Texas                lawsuit settlement                                                                                        |   |   | – |   |   |   | – |   |   |   | – |   |   |   | (12,207 | ) |
| General                and administrative                                                                                      |   |   | 12,999 |   |   |   | 10,380 |   |   |   | 34,335 |   |   |   | 27,832 |   |
| Depreciation                and amortization                                                                                   |   |   | 20,350 |   |   |   | 12,820 |   |   |   | 49,545 |   |   |   | 37,221 |   |
| Facility                lease expense                                                                                          |   |   | 12,287 |   |   |   | 11,254 |   |   |   | 30,139 |   |   |   | 33,264 |   |
| Total                operating expenses                                                                                        |   |   | 134,850 |   |   |   | 104,217 |   |   |   | 343,244 |   |   |   | 289,902 |   |
| Operating                income from continuing operations                                                                     |   |   | 3,210 |   |   |   | 3,094 |   |   |   | 15,968 |   |   |   | 22,148 |   |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income (expense):                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income                                                                                                 |   |   | 2,624 |   |   |   | 759 |   |   |   | 3,816 |   |   |   | 2,311 |   |
| Interest                expense                                                                                                |   |   | (18,659 | ) |   |   | (12,581 | ) |   |   | (49,219 | ) |   |   | (36,787 | ) |
| Equity                gains (losses) in unconsolidated joint ventures                                                          |   |   | (805 | ) |   |   | (138 | ) |   |   | 5,691 |   |   |   | (630 | ) |
| Other,                net                                                                                                      |   |   | 767 |   |   |   | 561 |   |   |   | 877 |   |   |   | 1,719 |   |
| Net                other expense                                                                                               |   |   | (16,073 | ) |   |   | (11,399 | ) |   |   | (38,835 | ) |   |   | (33,387 | ) |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           Loss                from continuing operations before income taxes |   |   | (12,863 | ) |   |   | (8,305 | ) |   |   | (22,867 | ) |   |   | (11,239 | ) |
|           Benefit                of (provision for) income taxes             |   |   | 1,290 |   |   |   | 1,877 |   |   |   | (30 | ) |   |   | 1,967 |   |
| Loss                from continuing operations                                                                                 |   |   | (11,573 | ) |   |   | (6,428 | ) |   |   | (22,897 | ) |   |   | (9,272 | ) |
| Loss                from discontinued operations (net of tax)                                                                  |   |   | – |   |   |   | (6 | ) |   |   | – |   |   |   | (50 | ) |
| Net                loss                                                                                                        |   | $ | (11,573 | ) |   | $ | (6,434 | ) |   | $ | (22,897 | ) |   | $ | (9,322 | ) |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                and diluted loss per common share:                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing                operations                                                                                           |   | $ | (0.36 | ) |   | $ | (0.36 | ) |   | $ | (0.99 | ) |   | $ | (0.53 | ) |
| Discontinued                operations                                                                                         |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
|                                                                                                                           |   | $ | (0.36 | ) |   | $ | (0.36 | ) |   | $ | (0.99 | ) |   | $ | (0.53 | ) |
|                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                average common shares outstanding: - basic and diluted                                                 |   |   | 32,001 |   |   |   | 18,024 |   |   |   | 23,165 |   |   |   | 17,664 |   |

----

| EMERITUS                CORPORATION                                                                       |   |
|-----------------------------------------------------------------------------------------------------------|--------|
| CONDENSED                CONSOLIDATED                STATEMENTS OF CASH FLOWS                             |   |
| (unaudited)                                                                                               |   |
| (In                thousands)                                                                             |   |
|                                                                                                      |   |   |   |   |   |   |
|                                                                                                      |   | Nine                Months Ended September                30, |   |
|                                                                                                      |   | 2007 |   |   | 2006 |   |
| Cash                flows from operating activities:                                                      |   |   |   |   |   |   |
| Net                loss                                                                                   |   | $ | (22,897 | ) |   | $ | (9,322 | ) |
| Adjustments                to reconcile net loss to net cash provided by                                  |   |   |   |   |   |   |   |   |
| operating                activities                                                                       |   |   |   |   |   |   |   |   |
| Depreciation                and amortization                                                              |   |   | 49,545 |   |   |   | 37,221 |   |
| Amortization                of above/below market rents                                                   |   |   | 860 |   |   |   | - |   |
| Amortization                of deferred gain                                                              |   |   | (1,567 | ) |   |   | (1,661 | ) |
| Amortization                of loan fees                                                                  |   |   | 1,284 |   |   |   | 191 |   |
| Allowance                for doubtful receivables                                                         |   |   | 798 |   |   |   | 610 |   |
| Equity                investment losses/(gains) and distributions                                         |   |   | 1,651 |   |   |   | 630 |   |
| Stock                option compensation                                                                  |   |   | 3,456 |   |   |   | 2,205 |   |
| Deferred                revenue                                                                           |   |   | 456 |   |   |   | 1,123 |   |
| Deferred                rent                                                                              |   |   | 1,348 |   |   |   | 710 |   |
| Other                                                                                                     |   |   | 8 |   |   |   | – |   |
| Changes                in operating assets and liabilities, net of Summerville                acquisition |   |   | (4,387 | ) |   |   | (28,054 | ) |
| Net                cash provided by operating activities                                                  |   |   | 30,555 |   |   |   | 3,653 |   |
| Cash                flows from investing activities:                                                      |   |   |   |   |   |   |   |   |
| Acquisition                of property and equipment                                                      |   |   | (783,409 | ) |   |   | (19,186 | ) |
| Construction                expenditures - leased properties                                              |   |   | (1,468 | ) |   |   | (3,068 | ) |
| Lease                and contract acquisition costs                                                       |   |   | (170 | ) |   |   | (2,801 | ) |
| Payments                from affiliates and other managed communities                                     |   |   | 371 |   |   |   | 402 |   |
| Investment                in affiliates                                                                   |   |   | (306 | ) |   |   | (590 | ) |
| Payment                for purchase of Summerville, net of acquired cash                                  |   |   | (770 | ) |   |   | - |   |
| Collection                of notes receivable                                                             |   |   | – |   |   |   | 39 |   |
| Net                cash used in investing activities                                                      |   |   | (785,752 | ) |   |   | (25,204 | ) |
| Cash                flows from financing activities:                                                      |   |   |   |   |   |   |   |   |
| Proceeds                from sale of stock, net of issuance costs                                         |   |   | 330,863 |   |   |   | 4,179 |   |
| Decrease                (increase) in restricted deposits                                                 |   |   | 8,555 |   |   |   | (2,640 | ) |
| Debt                issuance and other financing costs                                                    |   |   | (5,570 | ) |   |   | (274 | ) |
| Proceeds                from long-term borrowings and financings                                          |   |   | 643,093 |   |   |   | 8,586 |   |
| Repayment                of long-term borrowings and financings                                           |   |   | (153,628 | ) |   |   | (7,926 | ) |
| Repayment                of capital lease and financing obligations                                       |   |   | (15,594 | ) |   |   | (13,904 | ) |
| Tax                benefit of stock compensation                                                          |   |   | – |   |   |   | 1,325 |   |
| Net                cash provided by (used in) financing activities                                        |   |   | 807,719 |   |   |   | (10,654 | ) |
| Net                increase (decrease) in cash and cash equivalents                                       |   |   | 52,522 |   |   |   | (32,205 | ) |
| Cash                and cash equivalents at the beginning of the period                                   |   |   | 14,049 |   |   |   | 56,413 |   |
| Cash                and cash equivalents at the end of the period                                         |   | $ | 66,571 |   |   | $ | 24,208 |   |
| Supplemental                disclosure of cash flow information -                                         |   |   |   |   |   |   |   |   |
| Cash                paid during the period for interest                                                   |   | $ | 40,982 |   |   | $ | 38,166 |   |
| Cash                paid during the period for income taxes                                               |   | $ | 1,447 |   |   | $ | 4,590 |   |
| Non-cash                financing and investing activities:                                               |   |   |   |   |   |   |   |   |
|     Capital                and financing lease terminations                           |   | $ | 126,565 |   |   | $ | – |   |
|     Deferred                rent                                                      |   | $ | 3,912 |   |   | $ | – |   |
|     Deferred                gain/loss                                                 |   | $ | 467 |   |   | $ | – |   |
|     Summerville                accrued transaction costs                              |   | $ | 3,227 |   |   | $ | – |   |
|     Capital                lease and financing obligations                            |   | $ | 2,884 |   |   | $ | 788 |   |
|     Conversion                of convertible debentures                               |   | $ | 16,120 |   |   | $ | 50 |   |
|     Deferred                lease acquisition cost                                    |   | $ | 2,438 |   |   | $ | 178 |   |
|     Debt                assumed in acquisitions                                       |   | $ | 122,393 |   |   | $ | – |   |
| Summerville                acquisition:                                                                   |   |   |   |   |   |   |   |   |
|     Fair                value of Summerville assets acquired                          |   | $ | 408,954 |   |   | $ | – |   |
|     Cash                paid for Summerville acquisition                              |   | $ | 4,471 |   |   | $ | – |   |
|     Stock                issued for Summerville                                       |   | $ | 273,349 |   |   | $ | – |   |
|     Liabilities                assumed upon merger                                    |   | $ | 131,134 |   |   | $ | – |   |

----

EMERITUS      CORPORATION

|   | · | The                experience and reputation of Summerville’s management team members who                have since joined the Company; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                complementary nature of the two companies’                operations; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | The                expectation that the acquisition of Summerville will be immediately                accretive to cash flow per share; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                potential of the combination to leverage each companies’ expertise and                investment in technology to improve the delivery of care services                to the                residents; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                opportunity to realize cost savings through potential operational                synergies. |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

----

----

|                                                                               |   | 2007   |      |   | 2006      |   |
|------------------------------------------------------------------------------------|--------|--------|-----------|--------|-----------|--------|
|                                                                               |   |   |      |   | Weighted- |   |   | Aggregate |   |   |   |   |   | Weighted- |   |   | Aggregate |   |
|                                                                               |   |   |      |   | Average   |   |   | Intrinsic |   |   |   |   |   | Average |   |   | Intrinsic |   |
|                                                                               |   |   |      |   | Exercise  |   |   | Value |   |   |   |   |   | Exercise |   |   | Value |   |
|                                                                               |   | Shares |      |   | Price     |   |   |   |                               $(000) |   |   | Shares |   |   | Price |   |   |   |                                $(000) |   |
| Outstanding                at beginning of year                                    |   |   | 1,510,189 |   |      | $      | 9.09 |   |   |   |   |   |   |   | 1,349,381 |   |   | $ | 3.81 |   |   |   |   |   |
| Granted                                                                            |   |   | 1,082,500 |   |      | $      | 27.34 |   |   |   |   |   |   |   | 524,500 |   |   | $ | 18.81 |   |   |   |   |   |
| Exercised                                                                          |   |   | (282,825  | )      |      | $      | 6.66 |   |   | $ | (6,822 | ) |   |   | (257,869 | ) |   | $ | 3.26 |   |   | $ | (4,615 | ) |
| Canceled                                                                           |   |   | (38,077   | )      |      | $      | 17.47 |   |   |   |   |   |   |   | (9,333 | ) |   | $ | 7.09 |   |   |   |   |   |
|                                                                               |   |   |      |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding                at Sept 30,                                             |   |   | 2,271,787 |   |      | $      | 17.95 |   |   | $ | 21,100 |   |   |   | 1,606,679 |   |   | $ | 8.77 |   |   | $ | 20,507 |   |
| Options                exercisable at Sept 30,                                     |   |   | 1,164,976 |   |      | $      | 9.98 |   |   | $ | 19,974 |   |   |   | 1,244,036 |   |   | $ | 5.82 |   |   | $ | 19,570 |   |
| Weighted-average                fair value of options granted in second quarter    |   |   |      |   |      |   |   |   |   |   |   |   |   |   |   |   |   | $ | 11.67 |   |   |   |   |   |
| Weighted-average                fair value of options granted during third quarter |   |   |      |   |      | $      | 13.05 |   |   |   |   |   |   |   |   |   |   | $ | 10.17 |   |   |   |   |   |

|                                                    |   |                                                           |       |   |                                                          |   |   |                                             |   |   |       |   |
|---------------------------------------------------------|--------|----------------------------------------------------------------|------------|--------|---------------------------------------------------------------|--------|--------|--------------------------------------------------|--------|--------|------------|--------|
|                                                    |   | Three                Months Ended September                30, |       |   | Nine                Months Ended September                30, |   |
|                                                    |   | 2007                                                           |       |   | 2006                                                          |   |   | 2007                                             |   |   | 2006       |   |
|                                                    |   |                                                           |       |   |                                                          |   |   | No                options                granted |   |   |       |   |
| Expected                life from grant date (in years) |   |                                                           | 5          |   |                                                          |   | 5      |                                             |   |   | 5          |   |   |   | 5 |   |
| Weighted                average risk-free interest rate |   |                                                           | 4.26%-4.31 | %      |                                                          |   | 5.02   | %                                                |   |   | 4.26%-4.31 | %      |   |   | 5.02%-5.03 | % |
| Weighted                average volatility              |   |                                                           | 48.90      | %      |                                                          |   | 58.00  | %                                                |   |   | 48.90      | %      |   |   | 58.0%-59.4 | % |
| Dividend                yield                           |   |                                                           | -          |   |                                                          |   | -      |                                             |   |   | -          |   |   |   | - |   |
| Weighted-average                fair value of options   |   |                                                           | 13.05      |   |                                                          |   | 10.17  |                                             |   |   | 13.05      |   |   |   | 10.30 |   |

----

|                     |   | 2007   |   |   | 2006   |   |
|--------------------------|--------|--------|--------|--------|--------|--------|
|                     |   | Shares |   |   | Price  |   |   | Shares |   |   | Price |   |
|                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Quarter                1 |   |   | 4,958  |   |   | $      | 22.10 |   |   |   | 4,929 |   |   | $ | 18.36 |   |
| Quarter                2 |   |   | 5,317  |   |   | $      | 26.33 |   |   |   | 5,882 |   |   | $ | 15.94 |   |
| Quarter                3 |   |   | 6,228  |   |   | $      | 23.04 |   |   |   | 7,016 |   |   | $ | 16.15 |   |

|                                                     |   |                                                           |   |   |                                                          |   |   |   |   |   |       |   |
|----------------------------------------------------------|--------|----------------------------------------------------------------|--------|--------|---------------------------------------------------------------|--------|--------|--------|--------|--------|------------|--------|
|                                                     |   | Three                Months Ended September                30, |   |   | Nine                Months Ended September                30, |   |
|                                                     |   | 2007                                                           |   |   | 2006                                                          |   |   | 2007   |   |   | 2006       |   |
|                                                     |   |                                                           |   |   |                                                          |   |   |   |   |   |       |   |
| Expected                life from grant date (in months) |   |                                                           | 3      |   |                                                          |   | 3      |   |   |   | 3          |   |   |   | 3 |   |
| Risk-free                interest rate                   |   |                                                           | 4.69   | %      |                                                          |   | 4.91   | %      |   |   | 4.69%-4.93 | %      |   |   | 3.91%-4.91 | % |
| Volatility                                               |   |                                                           | 17.20  | %      |                                                          |   | 13.50  | %      |   |   | 17.2%-20.3 | %      |   |   | 13.5%-16.50 | % |

----

|                                                     |   | Dollar                Value   |    |   |   |   |
|----------------------------------------------------------|--------|-------------------------------|---------|--------|--------|--------|
|                                                     |   | (in                thousands) |    |   | Shares |   |
|                                                     |   |                          |    |   |   |   |
| Value                of common stock issued              |   | $                             | 273,349 |   |   |   | 8,392,656 |   |
| Cash                in lieu of common stock              |   |                          | 2,902   |   |   |   | 107,344 |   |
| Transaction                costs                         |   |                          | 1,569   |   |   |   |   |   |
|    Total                Transaction Value |   | $                             | 277,820 |   |   |   | 8,500,000 |   |

| Allocation                of Purchase                Price         |   |
|--------------------------------------------------------------------|--------|
| (in                thousands)                                      |   |
|                                                               |   |   |   |
| Current                assets                                      |   | $ | 14,435 |   |
| Property                and equipment, including capital leases    |   |   | 87,532 |   |
| Other                long-term assets                              |   |   | 17,344 |   |
| Intangibles                assets:                                 |   |   |   |   |
|    Below                market facility rents       |   |   | 100,573 |   |
|    In-place                resident contracts       |   |   | 63,851 |   |
|    Lease                purchase options            |   |   | 45,022 |   |
|    Trademarks                and operating licenses |   |   | 5,900 |   |
|    Goodwill                                         |   |   | 74,297 |   |
| Current                liabilities                                 |   |   | (27,165 | ) |
| Deferred                revenue                                    |   |   | (7,751 | ) |
| Long-term                debt                                      |   |   | (24,533 | ) |
| Other                long-term liabilities                         |   |   | (792 | ) |
| Above                market facility rents                         |   |   | (15,886 | ) |
| Capital                lease obligations-facilities and equipment  |   |   | (55,007 | ) |
|      Total                purchase price  |   | $ | 277,820 |   |

----

| Property                  and Equipment:                        |                                                                                                                                          |
|-----------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|
| Furniture                  and equipment                        | 5                  years.                                                                                                                     |
| Computer                  equipment                             | 3                  years.                                                                                                                     |
| Computer                  software                              | 3                  years.                                                                                                                     |
| Vehicles                                                        | 1-                  4 years based on age of specific vehicle.                                                                                 |
| Leasehold                  improvements                         | Lesser                  of remaining useful life or lease term.                                                                               |
| Assets                  under capital leases – facilities | Remaining                  lease term.                                                                                                        |
| Assets                  under capital leases – equipment  | Remaining                  lease term.                                                                                                        |
| Discount                  on lease deposits                     | Remaining                  lease term, deposit refundable at end of lease term.                                                               |
| Below                  market facility rents                    | Remaining                  lease term.                                                                                                        |
| In-place                  resident contracts                    | Average                  length of stay for Summerville – 19 months.                                                                    |
| Lease                  purchase options                         | No                  amortization, will be capitalized as part of acquisition costs                  upon                  exercise of option. |
| Trademarks                                                      | 12                  years.                                                                                                                    |
| Operating                  licenses                             | 12                  years, the weighted average life of remaining lease                  terms.                                               |
| Above                  market facility rents                    | Remaining                  lease term.                                                                                                        |
| Below                  market resident leases                   | 12                  months.                                                                                                                   |
| Capital                  lease obligations – facilities   | Remaining                  lease term using effective interest method.                                                                        |
| Capital                  lease obligations – equipment    | Remaining                  lease term using effective interest                  method.                                                       |

|                                                                           |   | Pro                Forma                Combined |    |
|--------------------------------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                                           |   | Nine                Months                ended  |    |   | Nine                Months                ended |   |
|                                                                           |   | September                30,                     |    |   | September                30, |   |
|                                                                           |   | 2007                                             |    |   | 2006 |   |
| Total                operating revenues                                        |   | $                                                | 547,026 |   |   |   | 468,636 |   |
| Operating                loss from continuing operations                       |   | $                                                | (19,421 | ) |   |   | (20,495 | ) |
| Loss                from operations before income taxes                        |   | $                                                | (63,172 | ) |   |   | (60,683 | ) |
| Net                loss                                                        |   | $                                                | (63,212 | ) |   |   | (58,749 | ) |
| Basic                and diluted loss per common share                         |   | $                                                | (2.05   | ) |   | $ | (2.25 | ) |
| Weighted                average common shares outstanding: - basic and diluted |   |                                             | 30,845  |   |   |   | 26,057 |   |

$4.5 million in cash security deposits held by      HCPI.  The      cash security deposits were applied against the purchase price for the seven      acquired properties.  This master lease is accounted for as an      operating lease by the Company.

----

----

$143.5 million,      including transaction costs.  The Company had leased these communities      from Fretus Investors LLC since October 2002.  All leases had been      accounted for as operating leases.  As a result of this transaction,      the Fretus lease was terminated.  Capmark Finance, Inc. provided fixed      rate mortgage financing of $132.0 million and variable rate mortgage      financing of $8.0 million.  The fixed rate component has a term      of five years and bears interest at 6.55% per annum, with a 1% exit fee payable      if the debt is paid off or refinanced by anyone except Capmark), with monthly      interest-only payments for two years and thereafter, monthly payments of      principal and interest based on a 25-year amortization.  The remaining      balance is due in full in February 2012.  The variable rate component      has a term of three years and interest at 30-day LIBOR plus 1.8%, which was      7.12% at closing, and the same exit fee and payment schedule as for the fixed      component.  The variable rate loan of $8.0 million was repaid in July      2007.

----

|                                                |   | HCPI                7 |   |   | HRT         |   |    | Fretus      |   |   |    |   |   |
|-----------------------------------------------------|--------|-----------------------|--------|--------|-------------|--------|---------|-------------|--------|--------|---------|--------|--------|
|                                                |   | Acquisition           |   |   | Acquisition |   |    | Acquisition |   |   | Total   |   |   |
| Land                                                |   |                  | 1,557  |   |        |   | 13,259  |        |   |   | 31,536  |   |   |   | 46,352 |   |   |
| Building                                            |   |                  | 23,962 |   |        |   | 81,673  |        |   |   | 108,455 |   |   |   | 214,090 |   |   |
| Equipment                                           |   |                  | 3,375  |   |        |   | 1,790   |        |   |   | 3,480   |   |   |   | 8,645 |   |   |
| Properties                under capital leases, net |   |                  | -      |   |        |   | (17,304 | )           |   |   | -       |   |   |   | (17,304 | ) | (a) |
| Restricted                deposits                  |   |                  | (4,543 | )      |        |   | -       |        |   |   | -       |   |   |   | (4,543 | ) | (b) |
| Loan                fees                            |   |                  | 790    |   |        |   | 1,973   |        |   |   | 2,344   |   |   |   | 5,107 |   |   |
| Long-term                debt, net                  |   |                  | 23,600 |   |        |   | 101,000 |        |   |   | 158,000 |   |   |   | 282,600 |   |   |
| Capital                lease obligations            |   |                  | -      |   |        |   | (20,818 | )           |   |   | -       |   |   |   | (20,818 | ) | (a) |
| Other                long-term liabilities          |   |                  | 472    |   |        |   | 1,016   |        |   |   | 1,400   |   |   |   | 2,888 |   | (c) |

| (a) | Four                HRT properties were accounted for as capital leases.  The                termination of the leases created a $3.5 million gain, which was                offset                against the cost basis of the four properties acquired in this                transaction. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Restricted                deposits held by HCPI were refunded and used to pay a portion of                the                purchase price. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | The                Capmark loans require the payment of exit fees upon retirement or                maturity                of the debt.  These were recorded as loan fees with a                corresponding long-term liability. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                |   | HC                REIT |    |   | HCPI                41 |   |    | Wegman      |   |   |   |   |   |
|-----------------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|---------|-------------|--------|--------|--------|--------|--------|
|                                                |   | Acquisition            |    |   | Acquisition            |   |    | Acquisition |   |   | Total  |   |   |
| Land                                                |   |                   | 6,605   |   |                   |   | 45,998  |        |   |   | 14,075 |   |   |   | 66,678 |   |   |
| Building                                            |   |                   | 15,253  |   |                   |   | 415,405 |        |   |   | 70,462 |   |   |   | 501,120 |   |   |
| Equipment                                           |   |                   | 710     |   |                   |   | 14,631  |        |   |   | 2,362  |   |   |   | 17,703 |   |   |
| Properties                under capital leases, net |   |                   | (22,283 | )      |                   |   | (52,671 | )           |   |   | -      |   |   |   | (74,954 | ) | (d) |
| Deferred                Rents                       |   |                   | -       |   |                   |   | (1,615  | )           |   |   | (2,297 | )      |   |   | (3,912 | ) | (f) |
| Facility                Below Market Rents          |   |                   | -       |   |                   |   | 776     |        |   |   | -      |   |   |   | 776 |   |   |
| Deferred                Gain on Sale                |   |                   | 427     |   |                   |   | (894    | )           |   |   | -      |   |   |   | (467 | ) | (f) |
| Restricted                deposits                  |   |                   | -       |   |                   |   | (3,493  | )           |   |   | -      |   |   |   | (3,493 | ) | (e) |
| Loan                fees                            |   |                   | 268     |   |                   |   | 3,223   |        |   |   | 639    |   |   |   | 4,130 |   |   |
| Long-term                debt, net                  |   |                   | 19,640  |   |                   |   | 302,916 |        |   |   | 67,760 |   |   |   | 390,316 |   |   |
| Financing                lease obligations          |   |                   | -       |   |                   |   | (80,266 | )           |   |   | -      |   |   |   | (80,266 | ) |   |
| Capital                lease obligations            |   |                   | (25,481 | )      |                   |   | -       |        |   |   | -      |   |   |   | (25,481 | ) | (d) |

----

| (d) | Three                HC REIT and ten HCPI properties were accounted for as capital or                financing                leases.  The termination of the leases created a $2.8 million,                and $27.6 million gain, which were offset against the cost basis                of the                three properties acquired in these                transactions. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | Restricted                deposits held by HCPI were refunded and used to pay a portion of                the                purchase price. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------|

| (f) | The                deferred rents (straight-line rent accrual) and deferred gain on                sale were                offset against the purchase price of the properties acquired in these                transactions. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Emeritrust      Transactions

----

|                                                                                                                              |   | Three                Months                ended |   |   | Nine                Months                ended |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|-------------------------------------------------|--------|
|                                                                                                                              |   | September                30,                     |   |   | September,                30,                   |   |
|                                                                                                                              |   | 2007                                             |   |   | 2006                                            |   |   | 2007 |   |   | 2006 |   |
| Convertible                Debentures (1)                                                                                         |   |                                             | 475    |   |                                            |   | 1,208 |   |   |   | 475 |   |   |   | 1,208 |   |
| Options                                                                                                                           |   |                                             | 2,272  |   |                                            |   | 1,607 |   |   |   | 2,272 |   |   |   | 1,607 |   |
|                                                                                                                              |   |                                             | 2,747  |   |                                            |   | 2,815 |   |   |   | 2,747 |   |   |   | 2,815 |   |
|                                                                                                                              |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| (1)                Approximately $5.4 million principal amount paid at                maturity                on January 3, 2006, |   |                                             |   |   |                                            |   |   |   |   |   |   |   |   |
| and                $16.1 million principal amount converted to common stock on March                8,                2007.       |   |                                             |   |   |                                            |

----

----

Item      2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION      AND

----

|                                              |   | As                of September                30, |   |   | As                of December                31, |   |   | As                of September                30, |   |
|---------------------------------------------------|--------|---------------------------------------------------|--------|--------|--------------------------------------------------|--------|--------|---------------------------------------------------|--------|
|                                              |   | 2007                                              |   |   | 2006                                             |   |   | 2006                                              |   |
|                                              |   | Buildings                                         |   |   | Units                                            |   |   | Buildings                                         |   |   | Units |   |   | Buildings |   |   | Units |   |
| Owned                (1)                          |   |                                              | 106    |   |                                             |   | 8,675  |                                              |   |   | 10 |   |   |   | 808 |   |   |   | 10 |   |   |   | 808 |   |
| Leased                (2 )                        |   |                                              | 147    |   |                                             |   | 12,978 |                                              |   |   | 161 |   |   |   | 12,821 |   |   |   | 161 |   |   |   | 12,821 |   |
| Consolidated                Portfolio             |   |                                              | 253    |   |                                             |   | 21,653 |                                              |   |   | 171 |   |   |   | 13,629 |   |   |   | 171 |   |   |   | 13,629 |   |
| Managed/Admin                Services (3)         |   |                                              | 10     |   |                                             |   | 1,184  |                                              |   |   | 11 |   |   |   | 1,232 |   |   |   | 10 |   |   |   | 1,134 |   |
| Joint                Venture/Partnership (4)      |   |                                              | 25     |   |                                             |   | 1,975  |                                              |   |   | 21 |   |   |   | 1,652 |   |   |   | 1 |   |   |   | 140 |   |
| Operated                Portfolio                 |   |                                              | 288    |   |                                             |   | 24,812 |                                              |   |   | 203 |   |   |   | 16,513 |   |   |   | 182 |   |   |   | 14,903 |   |
|                                              |   |                                              |   |   |                                             |   |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Percentage                increase (decrease) (5) |   |                                              | 41.9   | %      |                                             |   | 50.3   | %                                                 |   |   | 10.3 | % |   |   | 9.4 | % |   |   | (1.1 | %) |   |   | (1.3 | %) |

|   | (1)   Owned                communities increased from September 30, 2006, due to the acquisition                of                24 communities in six states acquired in February 2007, 19 communities                in                six states acquired in March 2007, three communities in Florida on                August                6, 2007, 41 communities on August 15, 2007, and nine communities                on August                31, 2007. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2)   Of                the 147 leased communities at September 30, 2007, 72 are accounted                for as                operating leases, in which the assets and liabilities of the communities                are not included in our condensed consolidated balance sheet and                71 are                accounted for as capital leases, in which a long-term asset and                corresponding liability is established on our balance                sheet.  The remaining four leased communities are reflected in                our condensed consolidated financial statements as owned communities                because of accounting requirements related to sale-leaseback accounting,                notwithstanding the legal sale of the communities and their subsequent                leasing by us. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3)   Managed                communities remained the same as September 30, 2006.  We                discontinued management of one community in January 2007 and started                managing another community in September                2007. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4)   Since                September 30, 2006, we have added 24 communities to our joint venture                managed group, 20 from the Blackstone joint venture in December 2006,                one                additional Blackstone joint venture community in March 2007 that                was                formerly managed by the Company, and an additional three communities                acquired by the Blackstone joint venture in May                2007. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5)   The                percentage increase (decrease) indicates the change from the prior                year,                or, in the case of September 30, 2007 and 2006, from the end of the                prior                year. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                     |   | Three                Months ended September                30, |   |   |   | Nine                Months ended September                30, |   |               |
|----------------------------------------------------------|--------|----------------------------------------------------------------|--------|--------|--------|---------------------------------------------------------------|--------|--------------------|
|                                                     |   | 2007                                                           |   |   | 2006   |                                                          |   | $                D |   |   | %                D |   |   |   | 2007 |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
| Average                monthly revenue                   |   |                                                           |   |   |   |                                                          |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     per                occupied unit |   | $                                                              | 3,239  |   |   | $                                                             | 3,113  |               |   | $ | 126 |   |   |   | 4.1 | % |   |   | $ | 3,224 |   |   | $ | 3,081 |   |   | $ | 144 |   |   |   | 4.7 | % |   |
|                                                     |   |                                                           |   |   |   |                                                          |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                occupancy rate                    |   |                                                           | 86.9   | %      |   |                                                          | 86.0   | %                  |   |   |   |   |   |   | .9 |                ppt* |   |   |   | 86.3 | % |   |   | 84.8 | % |   |   | 0 |   |   |   | 1.5 |  ppt* |   |

----

|                                                               | Month  |   | Owned  |    |   | Leased |   |    | Consolidated |   |   | Managed |   |   | Total  |    |
|--------------------------------------------------------------------|--------|--------|--------|---------|--------|--------|--------|---------|--------------|--------|--------|---------|--------|--------|--------|---------|
| December                31,                2005                    |   |   |   | 9       |   |   |   | 161     |         |   |   | 170     |   |   |   | 14      |   |   |   | 184 |   |
| Isle                at Emerald Court                               | Jan-06 |   |   | – |   |   |   | – |         |   |   | – |   |   |   | 1       |   |   |   | 1 |   |
| Park                Lane – disposition                       | Jan-06 |   |   | – |   |   |   | – |         |   |   | – |   |   |   | (1      | ) |   |   | (1 | ) |
| La                Villita – disposition                      | Mar-06 |   |   | – |   |   |   | – |         |   |   | – |   |   |   | (1      | ) |   |   | (1 | ) |
| March                31,                2006                       |   |   |   | 9       |   |   |   | 161     |         |   |   | 170     |   |   |   | 13      |   |   |   | 183 |   |
| Emerald                Estates – disposition                 | Apr-06 |   |   | – |   |   |   | – |         |   |   | – |   |   |   | (1      | ) |   |   | (1 | ) |
| June                30,                2006                        |   |   |   | 9       |   |   |   | 161     |         |   |   | 170     |   |   |   | 12      |   |   |   | 182 |   |
| Arbor                Place                                         | Jul-06 |   |   | 1       |   |   |   | – |         |   |   | 1       |   |   |   | (1      | ) |   |   | – |   |
| September                30,                2006                   |   |   |   | 10      |   |   |   | 161     |         |   |   | 171     |   |   |   | 11      |   |   |   | 182 |   |
| JV                – management agreements                    | Dec-06 |   |   | – |   |   |   | – |         |   |   | – |   |   |   | 21      |   |   |   | 21 |   |
| December                31,                2006                    |   |   |   | 10      |   |   |   | 161     |         |   |   | 171     |   |   |   | 32      |   |   |   | 203 |   |
| Walking                Horse Meadows – disposition           | Jan-07 |   |   | – |   |   |   | – |         |   |   | – |   |   |   | (1      | ) |   |   | (1 | ) |
| Fretus                Purchase                                     | Feb-07 |   |   | 24      |   |   |   | (24     | )            |   |   | – |   |   |   | – |   |   |   | – |   |
| HRT                Purchase                                        | Mar-07 |   |   | 12      |   |   |   | (12     | )            |   |   | – |   |   |   | – |   |   |   | – |   |
| HCPI                Purchase                                       | Mar-07 |   |   | 7       |   |   |   | (7      | )            |   |   | – |   |   |   | – |   |   |   | – |   |
| March                31,                2007                       |   |   |   | 53      |   |   |   | 118     |         |   |   | 171     |   |   |   | 31      |   |   |   | 202 |   |
| Additional                JV– management agreements          | May-07 |   |   | – |   |   |   | – |         |   |   | – |   |   |   | 3       |   |   |   | 3 |   |
| June                30,                2007                        |   |   |   | 53      |   |   |   | 118     |         |   |   | 171     |   |   |   | 34      |   |   |   | 205 |   |
| Inn                at Marietta                                     | Jul-07 |   |   | – |   |   |   | 1       |         |   |   | 1       |   |   |   | – |   |   |   | 1 |   |
| HC                REIT Purchase                                    | Aug-07 |   |   | 3       |   |   |   | (3      | )            |   |   | – |   |   |   | – |   |   |   | – |   |
| HCPI                Purchase (including 8 Summerville communities) | Aug-07 |   |   | 41      |   |   |   | (33     | )            |   |   | 8       |   |   |   | – |   |   |   | 8 |   |
| Wegman                Purchase                                     | Aug-07 |   |   | 9       |   |   |   | (9      | )            |   |   | – |   |   |   | – |   |   |   | – |   |
| Isle                of Ledgewood                                   | Sep-07 |   |   | -       |   |   |   | -       |         |   |   | – |   |   |   | 1       |   |   |   | 1 |   |
| Summerville                Merger                                  | Sep-07 |   |   | -       |   |   |   | 73      |         |   |   | 73      |   |   |   | – |   |   |   | 73 |   |
| September                30,                2007                   |   |   |   | 106     |   |   |   | 147     |         |   |   | 253     |   |   |   | 35      |   |   |   | 288 |   |

----

----

|                                                                                                                              |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   | Period-to-Period            |      |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|---------|--------|-------------------------------------------------|--------|---------|------------------------------|--------|--------|------------------------------|--------|--------|-----------------------------|-----------|
|                                                                                                                              |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   | Percentage                  |      |
|                                                                                                                              |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   | Change                      |      |
|                                                                                                                              |   | Percentage                of                Revenues |    |   | Fav                /                (Unfav)     |   |
|                                                                                                                              |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   | Three                Months |      |   | Nine                Months |   |
|                                                                                                                              |   | Three                Months                ended     |    |   | Nine                Months                ended |   |    | ended                        |   |   | ended                        |   |
|                                                                                                                              |   | September                30,                         |    |   | September                30,                    |   |    | September                30, |   |   | September                30, |   |
|                                                                                                                              |   | 2007                                                 |    |   | 2006                                            |   |    | 2007                         |   |   | 2006                         |   |   |                        | 2007-2006 |   |   |   | 2007-2006 |   |
|                                                                                                                              |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   |                        |      |   |   |   |   |   |
| Revenues:                                                                                                                         |   |                                                 | 100.0   | %      |                                            |   | 100.0   | %                            |   |   | 100.0                        | %      |   |                        | 100.0     | % |   |   | 28.7 | % |   |   | 15.1 | % |
| Expenses:                                                                                                                         |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   |                        |      |   |   |   |   |   |   |   |   |   |
| Community                operations*                                                                                              |   |                                                 | 64.7    |   |                                            |   | 65.0    |                         |   |   | 63.8                         |   |   |                        | 65.3      |   |   |   | (27.9 | ) |   |   | (12.5 | ) |
| Texas                lawsuit settlement                                                                                           |   |                                                 | – |   |                                            |   | – |                         |   |   | –                      |   |   |                        | (3.9      | ) |   | N/A |   |   | N/A |   |
| General                and administrative                                                                                         |   |                                                 | 9.4     |   |                                            |   | 9.7     |                         |   |   | 9.6                          |   |   |                        | 8.9       |   |   |   | (25.2 | ) |   |   | (23.4 | ) |
| Depreciation                and amortization                                                                                      |   |                                                 | 14.7    |   |                                            |   | 11.9    |                         |   |   | 13.8                         |   |   |                        | 11.9      |   |   |   | (58.7 | ) |   |   | (33.1 | ) |
| Facility                lease expense                                                                                             |   |                                                 | 8.9     |   |                                            |   | 10.5    |                         |   |   | 8.4                          |   |   |                        | 10.7      |   |   |   | (9.2 | ) |   |   | 9.4 |   |
| Total                operating expenses                                                                                           |   |                                                 | 97.7    |   |                                            |   | 97.1    |                         |   |   | 95.6                         |   |   |                        | 92.9      |   |   |   | (29.4 | ) |   |   | (18.4 | ) |
| Operating                income from continuing operations                                                                        |   |                                                 | 2.3     |   |                                            |   | 2.9     |                         |   |   | 4.4                          |   |   |                        | 7.1       |   |   |   | 3.7 |   |   |   | (27.9 | ) |
| Other                income (expense)                                                                                             |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   |                        |      |   |   |   |   |   |   |   |   |   |
| Interest                income                                                                                                    |   |                                                 | 1.9     |   |                                            |   | 0.7     |                         |   |   | 1.1                          |   |   |                        | 0.7       |   |   |   | 245.7 |   |   |   | 65.1 |   |
| Interest                expense                                                                                                   |   |                                                 | (13.5   | )      |                                            |   | (11.7   | )                            |   |   | (13.7                        | )      |   |                        | (11.8     | ) |   |   | (48.3 | ) |   |   | (33.8 | ) |
| Equity                gains (losses) in unconsolidated joint ventures                                                             |   |                                                 | (0.6    | )      |                                            |   | (0.1    | )                            |   |   | 1.6                          |   |   |                        | (0.2      | ) |   | N/A |   |   | N/A |   |
| Other,                net                                                                                                         |   |                                                 | 0.6     |   |                                            |   | 0.5     |                         |   |   | 0.2                          |   |   |                        | 0.6       |   |   |   | 36.7 |   |   |   | (49.0 | ) |
| Net                other expense                                                                                                  |   |                                                 | (11.6   | )      |                                            |   | (10.6   | )                            |   |   | (10.8                        | )      |   |                        | (10.7     | ) |   |   | (41.0 | ) |   |   | (16.3 | ) |
| Loss                from continuing operations                                                                                    |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   |                        |      |   |   |   |   |   |   |   |   |   |
|   before                income taxes                                                                                    |   |                                                 | (9.3    | )      |                                            |   | (7.7    | )                            |   |   | (6.4                         | )      |   |                        | (3.6      | ) |   |   | (54.9 | ) |   |   | (103.5 | ) |
|          Benefit                of income taxes                                      |   |                                                 | 0.9     |   |                                            |   | 1.7     |                         |   |   | -                            |   |   |                        | 0.6       |   |   |   | 31.3 |   |   |   | 101.5 |   |
| Net                loss                                                                                                           |   |                                                 | (8.4    | %)     |                                            |   | (6.0    | %)                           |   |   | (6.4                         | %)     |   |                        | (3.0      | %) |   |   | (79.9 | %) |   |   | (145.6 | %) |
|                                                                                                                              |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   |                        |      |   |   |   |   |   |   |   |   |   |
| * exclusive                of depreciation and amortization and facility lease expense shown                separately below |   |                                                 |    |   |                                            |   |    |                         |   |   |                         |   |   |

----

|                                    |   | Three                Months ended September                30,   |    |
|-----------------------------------------|--------|------------------------------------------------------------------|---------|
|                                    |   | 2007                                                             |    |   | 2006 |   |   | $                D |   |   | %                D |   |
|                                    |   | (in                thousands, except                percentages) |    |
|                                    |   |                                                             |    |   |   |   |   |   |   |   |   |   |
| Community                revenue        |   | $                                                                | 136,646 |   |   | $ | 106,931 |   |   | $ | 29,715 |   |   |   | 27.8 | % |
| Management                fees          |   |                                                             | 1,414   |   |   |   | 380 |   |   |   | 1,034 |   |   |   | 272.1 | % |
| Total                operating revenues |   | $                                                                | 138,060 |   |   | $ | 107,311 |   |   | $ | 30,749 |   |   |   | 28.7 | % |
|                                    |   |                                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                     |   | Three                Months ended September                30, |   |
|----------------------------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                     |   | 2007                                                           |   |   | 2006 |   |   | $                D |   |   | %                D |   |
|                                                     |   |                                                           |   |   |   |   |   |   |   |   |   |   |
| Average                monthly revenue per occupied unit |   | $                                                              | 3,239  |   |   | $ | 3,113 |   |   | $ | 126 |   |   |   | 4.1 | % |
|                                                     |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                occupancy rate                    |   |                                                           | 86.9   | % |   |   | 86.0 | % |   |   |   |   |   |   | .9 |                ppt* |

|                                   |   | Three                Months ended September                30,   |   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                   |   | (in                thousands, except                percentages) |   |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Community                operations    |   | $                                                                | 89,214 |   |   | $ | 69,763 |   |   | $ | 19,451 |   |   |   | 27.9 | % |   |
| As                a percent of revenue |   |                                                             | 64.7   | %      |   |   | 65.0 | % |   |   |   |   |   |   | (.3 | ) | ppt |

----

|                                      |   | Three                Months ended September                30,   |   |   |
|-------------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                      |   | 2007                                                             |   |   | 2006 |   |   | $D |   |   | %                D |   |   |
|                                      |   | (in                thousands, except                percentages) |   |   |
|                                      |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| General                and administrative |   | $                                                                | 12,999 |   |   | $ | 10,380 |   |   | $ | 2,619 |   |   |   | 25.2 | % |   |
| As                a percent of revenue    |   |                                                             | 9.4    | %      |   |   | 9.7 | % |   |   |   |   |   |   | (.3 | ) | ppt |

|                                         |   | Three                Months ended September                30,   |   |   |
|----------------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                         |   | 2007                                                             |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                         |   | (in                thousands, except                percentages) |   |   |
|                                         |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                and amortization |   | $                                                                | 20,350 |   |   | $ | 12,820 |   |   | $ | 7,530 |   |   |   | 58.7 | % |   |
| As                a percent of revenue       |   |                                                             | 14.7   | %      |   |   | 11.9 | % |   |   |   |   |   |   | 2.8 |   | ppt |

|                                   |   | Three                Months ended September                30,   |   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                   |   | (in                thousands, except                percentages) |   |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Facility                lease expense  |   | $                                                                | 12,287 |   |   | $ | 11,254 |   |   | $ | 1,033 |   |   |   | 9.2 | % |   |
| As                a percent of revenue |   |                                                             | 8.9    | %      |   |   | 10.5 | % |   |   |   |   |   |   | (1.6 | ) | ppt |

----

|                                   |   | Three                Months ended September                30,   |   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $D |   |   | %D |   |   |
|                                   |   | (in                thousands, except                percentages) |   |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income         |   | $                                                                | 2,624  |   |   | $ | 759 |   |   | $ | 1,865 |   |   |   | 245.7 | % |   |
| As                a percent of revenue |   |                                                             | 1.9    | %      |   |   | 0.7 | % |   |   |   |   |   |   | 1.2 |   | ppt |

|                                   |   | Three                Months ended September                30,   |   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $D |   |   | %D |   |   |
|                                   |   | (in                thousands, except                percentages) |   |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest                expense        |   | $                                                                | 18,659 |   |   | $ | 12,581 |   |   | $ | 6,078 |   |   |   | 48.3 | % |   |
| As                a percent of revenue |   |                                                             | 13.5   | %      |   |   | 11.7 | % |   |   |   |   |   |   | 1.8 |   | ppt |

|                                                           |   | Three                Months ended September                30,   |   |   |
|----------------------------------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                                           |   | 2007                                                             |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                                           |   | (in                thousands, except                percentages) |   |   |
|                                                           |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Equity                losses in                                |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
|    unconsolidated                joint ventures |   | $                                                                | (805   | )      |   | $ | (138 | ) |   | $ | (667 | ) |   |   | 483.3 | % |   |
| As                a percent of revenue                         |   |                                                             | (0.6   | %)     |   |   | (0.1 | %) |   |   |   |   |   |   | (.5 | ) | ppt |

----

|                                   |   | Three                Months ended September                30,   |   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                   |   | (in                thousands, except                percentages) |   |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Other,                net              |   | $                                                                | 767    |   |   | $ | 561 |   |   | $ | 206 |   |   |   | 36.7 | % |   |
| As                a percent of revenue |   |                                                             | 0.6    | %      |   |   | 0.5 | % |   |   |   |   |   |   | .1 |   | ppt |

|                                   |   | Three                Months ended September                30,   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $                D |   | %                D |   |
|                                   |   | (in                thousands, except                percentages) |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |
| Benefit                of income taxes |   | $                                                                | 1,290  |   |   | $ | 1,877 |   |   | $ | (587 | ) |  N/A |   |
| As                a percent of revenue |   |                                                             | 0.9    | % |   |   | 1.7 | % |   |   |   |   | 0.8 | ppt |

----

| Detail                of property-related                expenses from lease accounting treatment: |   |                                                             |    |   |   |   |    |
|----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|---------|--------|--------|--------|---------|
|                                                                                               |   |                                                             |    |   |   |   |    |   |   |   |   |   |
|                                                                                               |   | Three                Months ended September                30,   |    |
|                                                                                               |   | 2007                                                             |    |   | 2006   |   |    | $                D |   |   | %                D |   |
|                                                                                               |   | (in                thousands, except                percentages) |    |
| Total                property-related                expense:                                      |   |                                                             |    |   |   |   |    |   |   |   |   |   |
|                                                                                               |   |                                                             |    |   |   |   |    |   |   |   |   |   |
| Depreciation                and amortization                                                       |   | $                                                                | 20,350  |   |   | $      | 12,820  |   |   | $ | 7,530 |   |   |   | 58.7 | % |
| Facility                lease expense                                                              |   |                                                             | 12,287  |   |   |   | 11,254  |   |   |   | 1,033 |   |   |   | 9.2 | % |
| Interest                expense                                                                    |   |                                                             | 18,659  |   |   |   | 12,581  |   |   |   | 6,078 |   |   |   | 48.3 | % |
| Total                property-related expense                                                      |   | $                                                                | 51,296  |   |   | $      | 36,655  |   |   | $ | 14,641 |   |   |   | 39.9 | % |
|                                                                                               |   |                                                             |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Property-related                expenses from                lease accounting treatment:           |   |                                                             |    |   |   |   |    |   |   |   |   |   |   |
|                                                                                               |   |                                                             |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Depreciation                and amortization                                                       |   | $                                                                | 12,448  |   |   | $      | 9,724   |   |   | $ | 2,724 |   |   |   | 28.0 | % |
| Interest                expense                                                                    |   |                                                             | 8,489   |   |   |   | 10,288  |   |   |   | (1,799 | ) |   |   | (17.5 | %) |
| Straight-line/below                market lease expense                                            |   |                                                             | 1,891   |   |   |   | 222     |   |   |   | 1,669 |   |   |   | 751.8 | % |
| Operating                lease expense                                                             |   |                                                             | 10,396  |   |   |   | 11,031  |   |   |   | (635 | ) |   |   | (5.8 | %) |
| Total                property-related lease expense                                                |   |                                                             | 33,224  |   |   |   | 31,265  |   |   |   | 1,959 |   |   |   | 6.3 | % |
| Actual                lease payments                                                               |   |                                                             | (24,010 | )      |   |   | (26,146 | ) |   |   | 2,137 |   |   |   | (8.2 | %) |
| Expense                in excess of lease payments                                                 |   | $                                                                | 9,214   |   |   | $      | 5,119   |   |   | $ | 4,096 |   |   |   | 80.0 | % |

----

|                                    |   | Nine                Months ended September                30,    |    |
|-----------------------------------------|--------|------------------------------------------------------------------|---------|
|                                    |   | 2007                                                             |    |   | 2006 |   |   | $                D |   |   | %                D |   |
|                                    |   | (in                thousands, except                percentages) |    |
|                                    |   |                                                             |    |   |   |   |   |   |   |   |   |   |
| Total                community revenues |   | $                                                                | 355,991 |   |   | $ | 310,729 |   |   | $ | 45,262 |   |   |   | 14.6 | % |
| Management                fees          |   |                                                             | 3,221   |   |   |   | 1,321 |   |   |   | 1,900 |   |   |   | 143.8 | % |
| Total                operating revenues |   | $                                                                | 359,212 |   |   | $ | 312,050 |   |   | $ | 47,162 |   |   |   | 15.1 | % |

|                                                     |   | Nine                Months ended September                30, |   |   |
|----------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------|
|                                                     |   | 2007                                                          |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                                     |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Average                monthly revenue per occupied unit |   | $                                                             | 3,224  |   |   | $ | 3,081 |   |   | $ | 144 |   |   |   | 4.7 | % |   |
|                                                     |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                occupancy rate                    |   |                                                          | 86.3   | %      |   |   | 84.8 | % |   |   |   |   |   |   | 1.5 |   | ppt* |
|                                                     |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                   |   | Nine                Months ended September                30,    |    |   |
|----------------------------------------|--------|------------------------------------------------------------------|---------|--------|
|                                   |   | 2007                                                             |    |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                   |   | (in                thousands, except                percentages) |    |   |
|                                   |   |                                                             |    |   |   |   |   |   |   |   |   |   |   |
| Community                operations    |   | $                                                                | 229,225 |   |   | $ | 203,792 |   |   | $ | 25,433 |   |   |   | 12.5 | % |   |
| As                a percent of revenue |   |                                                             | 63.8    | %      |   |   | 65.3 | % |   |   |   |   |   |   | (1.5 | ) | ppt |

----

|                                      |   | Nine                Months ended September                30,    |   |   |
|-------------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                      |   | 2007                                                             |   |   | 2006 |   |   | $D |   |   | %                D |   |   |
|                                      |   | (in                thousands, except                percentages) |   |   |
|                                      |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| General                and administrative |   | $                                                                | 34,335 |   |   | $ | 27,832 |   |   | $ | 6,503 |   |   |   | 23.4 | % |   |
| As                a percent of revenue    |   |                                                             | 9.6    | %      |   |   | 8.9 | % |   |   |   |   |   |   | .7 |   | ppt |

|                                         |   | Nine                Months ended September                30,    |   |   |
|----------------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                         |   | 2007                                                             |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                         |   | (in                thousands, except                percentages) |   |   |
|                                         |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                and amortization |   | $                                                                | 49,545 |   |   | $ | 37,221 |   |   | $ | 12,324 |   |   |   | 33.1 | % |   |
| As                a percent of revenue       |   |                                                             | 13.8   | %      |   |   | 11.9 | % |   |   |   |   |   |   | 1.9 |   | ppt |

----

|                                   |   | Nine                Months ended September                30,    |   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                   |   | (in                thousands, except                percentages) |   |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Facility                lease expense  |   | $                                                                | 30,139 |   |   | $ | 33,264 |   |   | $ | (3,125 | ) |   |   | (9.4 | %) |   |
| As                a percent of revenue |   |                                                             | 8.4    | %      |   |   | 10.7 | % |   |   |   |   |   |   | (2.3 | ) | ppt |

|                                   |   | Nine                Months ended September                30,    |   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $D |   |   | %D |   |   |
|                                   |   | (in                thousands, except                percentages) |   |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest                income         |   | $                                                                | 3,816  |   |   | $ | 2,311 |   |   | $ | 1,505 |   |   |   | 65.1 | % |   |
| As                a percent of revenue |   |                                                             | 1.1    | %      |   |   | 0.7 | % |   |   |   |   |   |   | .4 |   | ppt |

|                                   |   | Nine                Months ended September                30,    |   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $D |   |   | %D |   |   |
|                                   |   | (in                thousands, except                percentages) |   |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Interest                expense        |   | $                                                                | 49,219 |   |   | $ | 36,787 |   |   | $ | 12,432 |   |   |   | 33.8 | % |   |
| As                a percent of revenue |   |                                                             | 13.7   | %      |   |   | 11.8 | % |   |   |   |   |   |   | 1.9 |   | ppt |

----

|                                                           |   | Nine                Months ended September                30,    |   |   |
|----------------------------------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                                           |   | 2007                                                             |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                                           |   | (in                thousands, except                percentages) |   |   |
|                                                           |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Equity                gains (losses) in                        |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
|    unconsolidated                joint ventures |   | $                                                                | 5,691  |   |   | $ | (630 | ) |   | $ | 6,321 |   |   |   | (1,003.3 | %) |   |
| As                a percent of revenue                         |   |                                                             | 1.6    | %      |   |   | (0.2 | %) |   |   |   |   |   |   | 1.8 |   | ppt |

|                                   |   | Nine                Months ended September                30,    |   |   |
|----------------------------------------|--------|------------------------------------------------------------------|--------|--------|
|                                   |   | 2007                                                             |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                   |   | (in                thousands, except                percentages) |   |   |
|                                   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |
| Other,                net              |   | $                                                                | 877    |   |   | $ | 1,719 |   |   | $ | (842 | ) |   |   | (49.0 | %) |   |
| As                a percent of revenue |   |                                                             | 0.2    | %      |   |   | 0.6 | % |   |   |   |   |   |   | (.4 | ) | ppt |

|                                                   |   | Nine                Months ended September                30,    |    |
|--------------------------------------------------------|--------|------------------------------------------------------------------|---------|
|                                                   |   | 2007                                                             |    |   | 2006 |   |   | $                D |   | %                D |   |
|                                                   |   | (in                thousands, except                percentages) |    |
|                                                   |   |                                                             |    |   |   |   |   |   |   |   |   |
| Benefit                of (provision for) income taxes |   | $                                                                | (30     | ) |   | $ | 1,967 |   |   | $ | (1,997 | ) |  N/A |   |
| As                a percent of revenue                 |   |                                                             | – |   |   |   | 0.6 | % |   |   |   |   | 0.6 | ppt |

----

| Detail                of property-related                expenses from lease accounting treatment: |   |                                                             |    |   |   |   |    |
|----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|---------|--------|--------|--------|---------|
|                                                                                               |   |                                                             |    |   |   |   |    |   |   |   |   |   |
|                                                                                               |   | Nine                Months ended September                30,    |    |
|                                                                                               |   | 2007                                                             |    |   | 2006   |   |    | $                D |   |   | %                D |   |
|                                                                                               |   | (in                thousands, except                percentages) |    |
| Total                property-related                expense:                                      |   |                                                             |    |   |   |   |    |   |   |   |   |   |
|                                                                                               |   |                                                             |    |   |   |   |    |   |   |   |   |   |
| Depreciation                and amortization                                                       |   | $                                                                | 49,545  |   |   | $      | 37,221  |   |   | $ | 12,324 |   |   |   | 33.1 | % |
| Facility                lease expense                                                              |   |                                                             | 30,139  |   |   |   | 33,264  |   |   |   | (3,125 | ) |   |   | (9.4 | %) |
| Interest                expense                                                                    |   |                                                             | 49,219  |   |   |   | 36,787  |   |   |   | 12,432 |   |   |   | 33.8 | % |
| Total                property-related expense                                                      |   | $                                                                | 128,903 |   |   | $      | 107,272 |   |   | $ | 21,631 |   |   |   | 20.2 | % |
|                                                                                               |   |                                                             |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Property-related                expenses from                lease accounting treatment:           |   |                                                             |    |   |   |   |    |   |   |   |   |   |   |
|                                                                                               |   |                                                             |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Depreciation                and amortization                                                       |   | $                                                                | 31,201  |   |   | $      | 29,149  |   |   | $ | 2,052 |   |   |   | 7.0 | % |
| Interest                expense                                                                    |   |                                                             | 28,137  |   |   |   | 31,047  |   |   |   | (2,910 | ) |   |   | (9.4 | %) |
| Straight-line/below                market lease expense                                            |   |                                                             | 2,208   |   |   |   | 734     |   |   |   | 1,483 |   |   |   | 202.0 | % |
| Operating                lease expense                                                             |   |                                                             | 27,931  |   |   |   | 32,529  |   |   |   | (4,607 | ) |   |   | (14.2 | %) |
| Total                property-related lease expense                                                |   |                                                             | 89,477  |   |   |   | 93,459  |   |   |   | (3,982 | ) |   |   | (4.3 | %) |
| Actual                lease payments                                                               |   |                                                             | (71,460 | )      |   |   | (77,481 | ) |   |   | 6,021 |   |   |   | (7.8 | %) |
| Expense                in excess of lease payments                                                 |   | $                                                                | 18,017  |   |   | $      | 15,978  |   |   | $ | 2,039 |   |   |   | 12.8 | % |

----

|                                                                                                                              |   | Three                Months ended September                30, |    |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|---------|
|                                                                                                                              |   | (In                thousands)                                  |    |
|                                                                                                                              |   |                                                           |    |   |   |   |   | $                D |   |   | %D |   |
|                                                                                                                              |   | 2007                                                           |    |   | 2006 |   |   | Fav                /                (Unfav) |   |   | Fav                /                (Unfav) |   |
| Revenue                                                                                                                           |   | $                                                              | 110,414 |   |   | $ | 105,538 |   |   | $ | 4,876 |   |   |   | 4.6 | % |
| Community                operations *                                                                                             |   |                                                           | (72,421 | ) |   |   | (68,498 | ) |   |   | (3,923 | ) |   |   | (5.7 | ) |
| Community                operating income                                                                                         |   |                                                           | 37,993  |   |   |   | 37,040 |   |   |   | 953 |   |   |   | 2.6 |   |
| Depreciation                & amortization                                                                                    |   |                                                           | (15,185 | ) |   |   | (12,270 | ) |   |   | (2,915 | ) |   |   | (23.8 | ) |
| Facility                lease expense                                                                                             |   |                                                           | (4,899  | ) |   |   | (10,863 | ) |   |   | 5,964 |   |   |   | 54.9 |   |
| Operating                income                                                                                                   |   |                                                           | 17,909  |   |   |   | 13,907 |   |   |   | 4,002 |   |   |   | 28.8 |   |
| Interest                expense, net                                                                                              |   |                                                           | (16,699 | ) |   |   | (11,466 | ) |   |   | (5,233 | ) |   |   | (45.6 | ) |
| Operating                income after interest expense                                                                            |   | $                                                              | 1,210   |   |   | $ | 2,441 |   |   | $ | (1,231 | ) |   | N/A |   |
|                                                                                                                              |   |                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| * exclusive                of depreciation and amortization and facility lease expense shown                separately below |   |                                                           |    |   |   |

|                                                     |   | Three                Months ended September                30, |   |   |
|----------------------------------------------------------|--------|----------------------------------------------------------------|--------|--------|
|                                                     |   | 2007                                                           |   |   | 2006 |   |   | $                D |   |   | %                D |   |   |
|                                                     |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |
| Average                monthly revenue per occupied unit |   | $                                                              | 3,215  |   |   | $ | 3,115 |   |   | $ | 100 |   |   |   | 3.2 | % |   |
|                                                     |   |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                occupancy rate                    |   |                                                           | 86.3   | %      |   |   | 86.0 | % |   |   |   |   |   |   | .3 |   | ppt |

----

| Significant                components of                changes in operating assets and liabilities:    |   |                                            |    |
|---------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|---------|
|                                                                                                    |   | Nine                Months                Ended |    |
|                                                                                                    |   | September                30,                    |    |
|                                                                                                    |   | 2006                                            |    |
|                                                                                                    |   |                                            |    |
| Reduction                of Texas settlement liability accruals, including interest                     |   | $                                               | (12,973 | ) |
| Payment                of Texas Settlement                                                              |   |                                            | (5,600  | ) |
| Refund                of court bond related to Texas Settlement                                         |   |                                            | 1,725   |   |
| Texas                settlement subtotal                                                                |   |                                            | (16,848 | ) |
| Federal                tax refund receivable, related to 2005 overpayment                               |   |                                            | (1,043  | ) |
| Federal                tax deposits, principally related to the Alterra transaction                gain |   |                                            | (4,200  | ) |
| Professional                and general liability accrual adjustment                                    |   |                                            | (1,700  | ) |
| Workers                ' compensation accrual adjustment                                                |   |                                            | (2,021  | ) |
| Payment                of semi-annual debenture interest                                                |   |                                            | (1,830  | ) |
| Payment                of annual insurance premiums                                                     |   |                                            | (8,655  | ) |
| Federal                tax refund receivable, related to 2006 loss carryback                            |   |                                            | (2,258  | ) |
| Texas                Medicaid settlement accrual                                                        |   |                                            | 1,272   |   |
| All                other activity, net                                                                  |   |                                            | 9,229   |   |
| Net                change in operating assets and liabilities                                           |   | $                                               | (28,054 | ) |

----

----

|                                                       |   | Principal                and Lease Payments                Due by Period |      |
|------------------------------------------------------------|--------|--------------------------------------------------------------------------|-----------|
|                                                       |   |                                                                     |      |   |   |   |   |   |   |   |   |   |   | After                5 |   |
| Contractual                Obligations                     |   | Total                                                                    |      |   | 1                year |   |   | 2-3                years |   |   | 4-5                years |   |   | years |   |
| Long-term                debt, including current portion   |   | $                                                                        | 722,371   |   |   | $ | 44,219 |   |   | $ | 107,996 |   |   | $ | 249,125 |   |   | $ | 321,031 |   |
| Capital                lease and financing obligations,    |   |                                                                     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    including                current portion |   |                                                                     | 524,377   |   |   |   | 23,028 |   |   |   | 54,656 |   |   |   | 66,947 |   |   |   | 379,746 |   |
| Operating                leases                            |   |                                                                     | 943,129   |   |   |   | 67,211 |   |   |   | 151,436 |   |   |   | 156,301 |   |   |   | 568,181 |   |
| Convertible                debentures                      |   |                                                                     | 10,455    |   |   |   | 10,455 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                       |   | $                                                                        | 2,200,332 |   |   | $ | 144,913 |   |   | $ | 314,088 |   |   | $ | 472,373 |   |   | $ | 1,268,958 |   |

|                                                   |   | Interest                Due by                Period |    |
|--------------------------------------------------------|--------|------------------------------------------------------|---------|
|                                                   |   |                                                 |    |   |   |   |   |   |   |   |   |   |   | After                5 |   |
| Contractual                Obligations                 |   | Total                                                |    |   | 1                year |   |   | 2-3                years |   |   | 4-5                years |   |   | years |   |
| Long-term                debt                          |   | $                                                    | 279,656 |   |   | $ | 47,679 |   |   | $ | 83,222 |   |   | $ | 64,641 |   |   | $ | 84,114 |   |
| Capital                lease and financing obligations |   |                                                 | 202,227 |   |   |   | 28,194 |   |   |   | 52,178 |   |   |   | 45,234 |   |   |   | 76,621 |   |
| Convertible                debentures                  |   |                                                 | 653     |   |   |   | 653 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                   |   | $                                                    | 482,536 |   |   | $ | 76,526 |   |   | $ | 135,400 |   |   | $ | 109,875 |   |   | $ | 160,735 |   |

----

Impact      of      Inflation

|   | · | gains                or losses, net of tax, in discontinued                operations, |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | provision                or benefit for income taxes, |
|--------|--------|-------------------------------------------------------|

|   | · | equity                earnings or losses in unconsolidated joint                ventures, |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | gains                or losses on sale of assets or                investments, |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | depreciation                and amortization, |
|--------|--------|-----------------------------------------------|

|   | · | impairment                losses, |
|--------|--------|-----------------------------------|

|   | · | amortization                of deferred gains, |
|--------|--------|------------------------------------------------|

|   | · | non-cash                stock option compensation                expense, |
|--------|--------|---------------------------------------------------------------------------|

----

|   | · | interest                expense, |
|--------|--------|----------------------------------|

|   | · | interest                income, and |
|--------|--------|-------------------------------------|

|   | · | other                non-cash unusual adjustments |
|--------|--------|---------------------------------------------------|

|   | · | The                items excluded from the calculation of Adjusted EBITDA generally                represent                income or expense items that may have a significant affect on our                financial results, |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Items                determined to be non-recurring in nature could, nevertheless, re-occur                in                the future, and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Depreciation                and amortization, while not directly affecting our current cash position,                does represent wear and tear and/or reduction in value of our                properties.  If the cost to maintain our properties exceeds our                expected routine capital expenditures, then this could affect our                ability                to attract and retain long-term residents at our                communities. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                    |   | Three                  Months                  ended |    |   | Nine                  Months                  ended |   |
|-------------------------------------------------------------------------|--------|------------------------------------------------------|---------|--------|-----------------------------------------------------|--------|
|                                                                    |   | September                  30,                       |    |   | September                  30,                      |   |
|                                                                    |   | 2007                                                 |    |   | 2006                                                |   |   | 2007 |   |   | 2006 |   |
|                                                                    |   |                                                 |    |   |                                                |   |   |   |   |   |   |   |
| Net                  loss                                               |   | $                                                    | (11,573 | )      |                                                | $      | (6,434 | ) |   | $ | (22,897 | ) |   | $ | (9,322 | ) |
| Provision                  for (benefit of) income taxes                |   |                                                 | (1,290  | )      |                                                |   | (1,877 | ) |   |   | 30 |   |   |   | (1,967 | ) |
| Equity                  losses (gains) in unconsolidated joint ventures |   |                                                 | 805     |   |                                                |   | 138 |   |   |   | (5,691 | ) |   |   | 630 |   |
| Depreciation                  and amortization                          |   |                                                 | 20,350  |   |                                                |   | 12,820 |   |   |   | 49,545 |   |   |   | 37,221 |   |
| Amortization                  of deferred gains                         |   |                                                 | (464    | )      |                                                |   | (554 | ) |   |   | (1,567 | ) |   |   | (1,661 | ) |
| Non-cash                  stock option compensation expenses            |   |                                                 | 2,133   |   |                                                |   | 1,984 |   |   |   | 3,456 |   |   |   | 2,205 |   |
| Convertible                  debentures conversion costs                |   |                                                 | – |   |                                                |   | – |   |   |   | 1,329 |   |   |   | – |   |
| Interest                  expense                                       |   |                                                 | 18,659  |   |                                                |   | 12,581 |   |   |   | 49,219 |   |   |   | 36,787 |   |
| Interest                  income                                        |   |                                                 | (2,624  | )      |                                                |   | (759 | ) |   |   | (3,816 | ) |   |   | (2,311 | ) |
| Other                  non-cash unusual activity:                       |   |                                                 |    |   |                                                |   |   |   |   |   |   |   |   |   |   |   |
| Reversal                  of Texas settlement accrued in 2004           |   |                                                 | -       |   |                                                |   | - |   |   |   | - |   |   |   | (12,207 | ) |
| Adjusted                  EBITDA                                        |   | $                                                    | 25,996  |   |                                                | $      | 17,899 |   |   | $ | 69,608 |   |   | $ | 49,375 |   |

----

Item      3.  Quantitative and Qualitative Disclosures About Market      Risk

Item      4.  Controls and Procedures

| (b) | Changes                in internal                controls |
|-----|------------------------------------------------------------|

----

PART      II.  OTHER INFORMATION

Item      1.  Legal Proceedings

Item      1A.  Risk      Factors

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

| (a) | The                Annual Meeting of Shareholders was held on August 29,                2007. |
|-----|-----------------------------------------------------------------------------------------------|

| (b) | Not                applicable. |
|-----|--------------------------------|

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

|   | · | Approval                of the issuance of up to 8,500,000 shares of Emeritus common stock                pursuant to the merger agreement with Summerville Senior Living,                Inc. and                certain other parties |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Election                of Class II directors |
|--------|--------|-----------------------------------------------|

----

|   | · | Approval                of amendment to the restated articles of incorporation to increase                the                number of authorized shares of common stock and preferred                stock |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Approval                of amendments to our 2006 Equity Incentive                Plan |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | Ratification                of appointment of independent registered public accounting                firm |
|--------|--------|------------------------------------------------------------------------------------------------------------|

| Approval                of share issuance                pursuant to merger agreement                                                   |   |       |   |                                                                      |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|---------------------------------------------------------------------------|
|                                                                                                                                    |   |       |   |                                                                      |   |   |
| For                                                                                                                                     |   | Against    |   | Abstain                                                                   |   | Broker                Non-vote |
| 25,014,179                                                                                                                              |   | 44,307     |   | 88,123                                                                    |   | 3,231,138 |
|                                                                                                                                    |   |       |   |                                                                      |   |   |
| Election                of                Directors:                                                                                    |   |       |   |                                                                      |   |   |
|                                                                                                                                    |   |       |   |                                                                      |   | Abstain                or |
| Name                                                                                                                                    |   | For        |   | Withhold                                                                  |   | Broker                Non-vote |
| Stanley                L. Baty                                                                                                          |   | 28,222,437 |   |            – |   | 155,310 |
| Raymond                R. Brandstrom                                                                                                    |   | 28,211,938 |   |            – |   | 165,809 |
| T.                Michael Young                                                                                                         |   | 28,226,205 |   |            – |   | 151,542 |
|                                                                                                                                    |   |       |   |                                                                      |   |   |
| Approval                of the Increase in the                Number of Authorized Shares of Common and Preferred                stock: |
|                                                                                                                                    |   |       |   |                                                                      |   |   |
| For                                                                                                                                     |   | Against    |   | Abstain                                                                   |   | Broker                Non-vote |
| 22,998,552                                                                                                                              |   | 2,135,015  |   | 13,042                                                                    |   | 3,231,138 |
|                                                                                                                                    |   |       |   |                                                                      |   |   |
| Approval                of Amendments to the                Emeritus 2006 Equity Incentive Plan:                                        |   |       |   |
|                                                                                                                                    |   |       |   |                                                                      |   |   |
| For                                                                                                                                     |   | Against    |   | Abstain                                                                   |   | Broker                Non-vote |
| 20,214,353                                                                                                                              |   | 4,925,407  |   | 6,849                                                                     |   | 3,231,138 |
|                                                                                                                                    |   |       |   |                                                                      |   |   |
| Ratification                of Independent                Public Accountants:                                                           |   |       |   |                                                                      |   |   |
|                                                                                                                                    |   |       |   |                                                                      |   |   |
| For                                                                                                                                     |   | Against    |   | Abstain                                                                   |   | Broker                Non-vote |
| 28,298,233                                                                                                                              |   | 35,373     |   | 44,141                                                                    |   | 0 |

| (d) | Not                applicable. |
|-----|--------------------------------|

Item      6.  Exhibits

|   | See                Index to Exhibits, which is incorporated by                reference. |
|--------|------------------------------------------------------------------------------------------|

----

SIGNATURE

| Dated:  November                9, 2007 | EMERITUS                CORPORATION                                                                                             |
|---------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                              | (Registrant)                                                                                                                    |
|                                              |                                                                                                                            |
|                                              |                                                                                                                            |
|                                              | /s/                Raymond R. Brandstrom                                                                                        |
|                                              | Raymond                R. Brandstrom, Executive Vice President - Finance, Chief Financial                Officer, and Secretary |
|                                              |                                                                                                                            |

----

Index      to      Exhibits

|   |   |                                                                                                                                                          |                                                                                                                                                                     |   |  Footnote |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|
| Number |   | Description                                                                                                                                                   |                                                                                                                                                                     | Number |
|   |   |                                                                                                                                                          |                                                                                                                                                                     |   |           |
| 3.1    |   | 3.1.3                                                                                                                                                         | Articles                of Amendment of Emeritus Corporation Dated August 29, 2007                                                                                       |   | (6)            |
| 10.5   |   | Agreement                and Plan of Merger                dated as of March 29, 2007, by and among Emeritus                Corporation,                      |                                                                                                                                                                     |   |
|   |   |  Boston                Project Acquisition Corp., Summerville Senior Living, Inc. AP Summerville,                LLC,                                    |                                                                                                                                                                     |   |
|   |   | AP                Summerville II, LLC, Daniel R. Baty, and Saratoga Partners IV,                L.P.                                                          |                                                                                                                                                                     | (1)    |
| 10.6   |   | Amended                and Restated                Shareholders Agreement dated as of March 29, 2007, by and                among                             |                                                                                                                                                                     |   |
|   |   | Emeritus                Corporation, AP Summerville, LLC, AP Summerville II, LLC, Apollo                Real                Estate                            |                                                                                                                                                                     |   |
|   |   | Investment                Fund III, L.P., Apollo Real Estate Investment Fund IV, L.P., Daniel                R.                Baty,                          |                                                                                                                                                                     |   |
|   |   | Catalina                General Partnership, L.P., Columbia Select, L.P., B.F., Limited                Partnership, Saratoga                                  |                                                                                                                                                                     |   |
|   |   | Partners                IV, L.P., Saratoga Coinvestment Company, LLC and Saratoga Management                Company, LLC.                                     |                                                                                                                                                                     | (1)    |
| 10.7   |   | Registration                Rights Agreement                dated as of March 29, 2007, by and among Emeritus                Corporation,                     |                                                                                                                                                                     |   |
|   |   | AP                Summerville, LLC, AP Summerville II, LLC, Apollo Real Estate Investment                Fund III, L.P.,                                      |                                                                                                                                                                     |   |
|   |   | Apollo                Real Estate Investment Fund IV, L.P., Daniel R. Baty, Catalina General                Partnership, L.P.,                                |                                                                                                                                                                     |   |
|   |   | Columbia                Select, L.P., B.F., Limited Partnership, Saratoga Partners IV, L.P.,                Saratoga Coinvestment                             |                                                                                                                                                                     |   |
|   |   | Company,                LLC, Saratoga Management Company, LLC and Granger Cobb.                                                                               |                                                                                                                                                                     | (1)    |
| 10.9   |   | Executive                Employment                Agreements                                                                                                 |                                                                                                                                                                     |   |
|   |   | 10.9.1                                                                                                                                                        | Employment                Agreement by and between Granger Cobb and Emeritus Corporation,                dated                                                           |   |           |
|   |   |                                                                                                                                                          | August                31, 2007                                                                                                                                           |   | (7)            |
| 10.12  |   | Purchase                of 12 communities                consisting of 786 units in five states from Healthcare Realty Trust                (HRT)             |                                                                                                                                                                     |   |
|   |   | 10.12.1                                                                                                                                                       | Agreement                of Sale and Purchase entered into by Sellers HR Acquisition I Corporation,                HR Acquisition for                                    |   |           |
|   |   |                                                                                                                                                          | Pennsylvania,                Inc., HR Acquisition of San Antonio LTD., Healthcare Acquisition                of Texas,                Inc. HRT                           |   |           |
|   |   |                                                                                                                                                          | and                Emeritus Corporation Holdings, Inc., and Healthcare Reality Trust                Incorporated                                                         |   | (2)            |
|   |   | 10.12.2                                                                                                                                                       | Loan                Agreement by and among 12 Delaware limited liability companies or                limited                partnerships listed on                       |   |           |
|   |   |                                                                                                                                                          | Schedule                A together with their respective successors (borrowers) and Capmark                Bank                (lender) for $88.0 million                |   | (2)            |
|   |   | 10.12.3                                                                                                                                                       | Loan                Agreement by and among 12 Delaware limited liability companies or                limited                partnerships listed on                       |   |           |
|   |   |                                                                                                                                                          | Schedule                A together with their respective successors (borrowers) and Capmark                Bank                (lender) for $13.6 million                |   | (2)            |
|   |   | 10.12.4                                                                                                                                                       | Promissory                Note for $88,000,000;the undersigned limited liability companies                and                limited partnerships                        |   |           |
|   |   |                                                                                                                                                          |  (borrower)                promises to pay to Capmark Bank (Lender) principal amount                                                                                |   | (2)            |
|   |   | 10.12.5                                                                                                                                                       | Promissory                Note for $13,600,000;the undersigned limited liability companies                and                limited partnerships                        |   |           |
|   |   |                                                                                                                                                          |  (borrower)                promises to pay to Capmark Bank (Lender) principal amount                                                                                |   | (2)            |
|   |   | 10.12.6                                                                                                                                                       | Assignment                and Assumption of Loan and Loan Documents by and between Healthcare                Reality Trust                                               |   |           |
|   |   |                                                                                                                                                          | Incorporated                and Columbia Pacific Opportunity Fund, LP                                                                                                    |   | (2)            |
| 10.14  |   | Purchase                of 3 communities                consisting of 453 units located in South Carolina from Health Care                Property            |                                                                                                                                                                     |   |
|   |   |  Investors,                Inc.                (HCPI)                                                                                                    |                                                                                                                                                                     |   |
|   |   | 10.14.1                                                                                                                                                       | Purchase                and Sale Agreement and Joint Escrow Instructions by and Between HCPI                Trust                "Seller" and                            |   |           |
|   |   |                                                                                                                                                          | Emeritus                Corporation "Buyer"                                                                                                                              |   | (2)            |
|   |   | 10.14.2                                                                                                                                                       | Loan                Agreement by and among Emeri-Sky SC LLC, Emerivell SC LLC, and Emeripark                SC LLC "Borrowers"                                           |   |           |
|   |   |                                                                                                                                                          | and                CAPMARK BANK                                                                                                                                          |   | (2)            |
|   |   | 10.14.3                                                                                                                                                       | Promissory                Note $13.12 million Emeri-Sky (Skylyn) promises to pay to the order                of                CAPMARK BANK                              |   | (2)            |
|   |   | 10.14.4                                                                                                                                                       | Promissory                Note $6.0 million Emerivill SC LLC (Village) promises to pay to the                order                of CAPMARK BANK                        |   | (2)            |
|   |   | 10.14.5                                                                                                                                                       | Promissory                Note $4.48 million Emeripark SC LLC (Park) promises to pay to the                order of                CAPMARK BANK                          |   | (2)            |
| 10.15  |   | Executive                Separation                Agreements                                                                                                 |                                                                                                                                                                     |   |
|   |   | 10.15.1                                                                                                                                                       | Frank                Ruffo                                                                                                                                               |   | (2)            |
|   |   | 10.15.2                                                                                                                                                       | Gary                Becker                                                                                                                                               |   | (2)            |
|   |   |                                                                                                                                                          |                                                                                                                                                                     |   |           |
| 10.23  |   | Documents                Relating                to  Debt Financing with Health Care REIT, Inc. & Summerville                Senior Living, Inc |                                                                                                                                                                     |   |
|   |   | 10.23.1                                                                                                                                                       | Promissory                Note for Senior Living Properties, LLC dated March 1, 2007 payable                to                Health                                     |   | (8)            |
|   |   |                                                                                                                                                          | Care                REIT, Inc.                                                                                                                                           |   |           |
| 10.24  |   | Documents                Relating to Leases                with Health Care Property Investors, Inc. & Summerville Senior Living,                Inc      |                                                                                                                                                                     |   |
|   |   | 10.24.1                                                                                                                                                       | Amended                and Restated Master Lease Agreement dated 4-20-05 between Health                Care                Property Investors, Inc and                   |   |
|   |   |                                                                                                                                                          | Westminster                HCP, LLC and certain subsidiaries of Summerville Senior                                                                                       |   |           |
|   |   |                                                                                                                                                          | Living                for 10 properties                                                                                                                                  |   | (8)            |
|   |   | 10.24.2                                                                                                                                                       | First                Amendment HCPI Master Lease dated 9-1-05 to add 9 Group 4 acquisition                facilities                                                     |   | (8)            |
|   |   | 10.24.3                                                                                                                                                       | Second                Amendment HCPI Master Lease dated 12-20-05  to add 2 Group 5                facilities                                                   |   | (8)            |
|   |   | 10.24.4                                                                                                                                                       | Third                Amendment HCPI Master Lease dated 1-31-06 to add Chestnut Hill                facilities                                                            |   | (8)            |
|   |   | 10.24.5                                                                                                                                                       | Fourth                Amendment HCPI Master Lease dated 5-24-06 to add Becket Lake Lodge                facility and capital additions                                   |   | (8)            |
|   |   | 10.24.6                                                                                                                                                       | Fifth                Amendment HCPI Master Lease dated 6-1-06 to add Carrollwood and Gainsville                facilities                                                |   | (8)            |
|   |   | 10.24.7                                                                                                                                                       | Sixth                Amendment HCPI Master Lease dated 8-1-06 to add Fox Run                facility                                                                     |   | (8)            |
|   |   | 10.24.8                                                                                                                                                       | Seventh                Amendment HCPI Master Lease dated 10-1-06 to add 5 Group 10                facilities                                                             |   | (8)            |
|   |   | 10.24.9                                                                                                                                                       | Eigth                Amendment HCPI Master Lease dated 8-8-07                                                                                                            |   | (8)            |
|   |   | 10.24.10                                                                                                                                                      | Ninth                Amendment HCPI Master Lease dated 8-15-07 to remove eight purchased                communities from lease                                           |   | (8)            |
| 10.25  |   | Documents                related to Leases                with HC REIT, Inc. and Summerville Senior Living                                                    |                                                                                                                                                                     |   |
|   |   | 10.25.1                                                                                                                                                       | Amended                and Restated Master Lease Agreement between HC Reit, Inc, HCRI Louisiana                Properties and Senior                                     |   |           |
|   |   |                                                                                                                                                          |  Living                Properties, LLC, (Summerville ) for 3 communities Kenner, Outlook                Manor,                and South Dayton dated March 1, 2007  | (8)    |
| 10.26  |   | Documents                related to Leases                with Nationwide Health Properties, Inc. and Summerville Senior                Living                |                                                                                                                                                                     |   |
|   |   | 10.26.1                                                                                                                                                       | Master                Lease Agreement between Nationwide Health Properties, Inc. and certain                subsidiaries of Summerville                                  |   |           |
|   |   |                                                                                                                                                          |  Senior                Living for 3 properties dated 10-2-06                                                                                                        |   | (8)            |
|   |   | 10.26.2                                                                                                                                                       | First                Amendment to NHP Master Lease dated 12-1-06 to add Ridgewood                Gardens                                                                 |   | (8)            |
|   |   | 10.26.3                                                                                                                                                       | Second                Amendment to NHP Master Lease dated 1-2-07 to add North Hills and                Medina                facilities                                  |   | (8)            |
| 10.27  |   | Documents                related to Leases                with Brentwood/Garantoni and Summerville Senior                Living                               |                                                                                                                                                                     |   |
|   |   | 10.27.1                                                                                                                                                       | Master                Lease Agreement for 4 Indiana communities between Brentwood/Garantoni                and                Summerville Senior Living                  |
|   |   |                                                                                                                                                          | dated                10-01-04                                                                                                                                            |   | (8)            |
|   |   | 10.27.2                                                                                                                                                       | Brentwood-Elkart                Lease Agreement 10-29-04                                                                                                                 |   | (8)            |
|   |   | 10.27.3                                                                                                                                                       | Brentwood-Hobart                Lease Agreement 10-29-04                                                                                                                 |   | (8)            |
|   |   | 10.27.4                                                                                                                                                       | First                Amendment to Brentwood-Hobart Lease Agreement 8-15-06                                                                                               |   | (8)            |
|   |   | 10.27.5                                                                                                                                                       | Second                Amendment to Brentwood-Hobart Lease Agreement 2-12-07                                                                                              |   | (8)            |
|   |   | 10.27.6                                                                                                                                                       | Brentwood-LaPorte                Lease Agreement 11-15-04                                                                                                                |   | (8)            |
|   |   | 10.27.7                                                                                                                                                       | First                Amendment to Brentwood-LaPorte Lease Agreement 8-15-06                                                                                              |   | (8)            |
|   |   | 10.27.8                                                                                                                                                       | Second                Amendment to Brentwood-LaPorte Lease Agreement 2-12-07                                                                                             |   | (8)            |
|   |   | 10.27.9                                                                                                                                                       | Third                Amendment to Brentwood-LaPorte Lease Agreement 5-14-07                                                                                              |   | (8)            |
|   |   | 10.27.10                                                                                                                                                      | Brentwood-Niles                Lease Agreement 11-15-04                                                                                                                  |   | (8)            |
| 10.28  |   | Documents                related to Leases                with Warren L. Breslow Trust as Lessor and Summerville Senior                Living                 |                                                                                                                                                                     |   |
|   |   | 10.28.1                                                                                                                                                       | Amended                and Restated Lease Agreement dated 11-1-94 between Alhambra Royale                and                Jerry Agam and Pacifica Manor, Inc.          | (8)    |
|   |   | 10.28.2                                                                                                                                                       | Amendment                to Lease and Consent Agreement dated 8-28-98 by and among Alhmabra                Royale,                Jerry Agam, Pacifica                   |
|   |   |                                                                                                                                                          | Manor,                Inc and COBBCO Inc                                                                                                                                 |   | (8)            |
|   |   | 10.28.3                                                                                                                                                       | Amended                and Restated Lease Agreement dated 11-1-94 between Chatsworth and                Jerry                Agam 'and Pacifica Manor, Inc.              | (8)    |
|   |   | 10.28.4                                                                                                                                                       | Amendment                to Lease and Consent Agreement dated 8-28-98 between Chatsworth Jerry                Agam, Pacifica Manor,  Inc                       |
|   |   |                                                                                                                                                          |  and                COBBCO Inc                                                                                                                                      |   | (8)            |
|   |   | 10.28.5                                                                                                                                                       | Amended                and Restated Lease Agreement dated 11-1-94 between Clairemont and                Jerry                Agam and Pacifica Manor, Inc.               | (8)    |
|   |   | 10.28.6                                                                                                                                                       | Amendment                to Lease and Consent Agreement dated 8-28-98 between Clairemont,                Jerry                Agam, Pacifica Manor, Inc                  |
|   |   |                                                                                                                                                          |  and                COBBCO Inc                                                                                                                                      |   | (8)            |
|   |   | 10.28.7                                                                                                                                                       | Lease                Agreement dated 3-1-05 between Brookhurst Royale, LLC and Summerville                13,                LLC                                         |   | (8)            |
| 10.29  |   | Documents                related to Leases                with General Residential Corp and Summerville Senior                Living                          |                                                                                                                                                                     |   |
|   |   | 10.29.1                                                                                                                                                       |  Lease                Agreement dated 2-24-05 between General Residential Corporation and                Summerville at COBBCO for Orange                           | (8)    |
|   |   | 10.29.2                                                                                                                                                       | Lease                Agreement dated 9-28-05 between General Residential Corporation and                Summerville at COBBCO for Casa Whittier                          | (8)    |
| 10.43  |   | Documents                related to Lease                between Ventas Realty, Ventas Framingham and Summerville for 6                communities            |                                                                                                                                                                     |   |
|   |   | 10.43.1                                                                                                                                                       | Amended                and Restated Master Lease Agreement by Ventas Realty, Ventas Framingham                and Summerville 5, 14, 15, 16                              |
|   |   |                                                                                                                                                          |  and                Summerville 17 LLC dated 8-1-05 to add 4 communities                                                                                            |   | (8)            |
| 10.44  |   | Documents                related to Lease                between Ventas Fairwood, LLC and Summerville  for 1                community               |                                                                                                                                                                     |   |
|   |   | 10.44.1                                                                                                                                                       | Master                Lease Agreement by Ventas Fairwood, LLC and Summerville at Fairwood                Manor,                LLC dated 1-31-05                         |   | (8)            |
| 10.45  |   | Documents                related to Lease                between Ventas Whitehall Estates, LLC and Summerville for 1                community                 |                                                                                                                                                                     |   |
|   |   | 10.45.1                                                                                                                                                       | Master                Lease Agreement by Ventas Whitehall Estates, LLC and Summerville                4, LLC                dated 4-14-05 for Whitehall Estates          | (8)    |
| 10.46  |   | Documents                related to Lease between Ventas Brighton, LLC and Summerville for                1                community                          |                                                                                                                                                                     |   |
|   |   | 10.46.1                                                                                                                                                       | Master                Lease Agreement by Ventas Brighton, LLC and Summerville 6, LLC dated                8-1-05 for Brighton                                            |   | (8)            |
| 10.55  |   | 10.55.08                                                                                                                                                      | Early                Option Letter between Health Care REIT, Inc. and certain Affiliates                and                Emeritus                                      |   |           |
|   |   |                                                                                                                                                          | Corporation,                Purchase of Park Club of Fort Meyers                                                                                                         |   | (5)            |
| 10.61  |   | 10.61.06                                                                                                                                                      | Early                Option Letter between Health Care REIT, Inc. and certain Affiliates                and                Emeritus                                      |   |           |
|   |   |                                                                                                                                                          | Corporation,                Purchase of Pavilion at Crossing Point, Orlando FL                                                                                           |   | (5)            |
|   |   | 10.61.07                                                                                                                                                      | Early                Option Letter between Health Care REIT, Inc. and certain Affiliates                and                Emeritus                                      |   |           |
|   |   |                                                                                                                                                          | Corporation,                Purchase of Springtree, Sunrise, FL                                                                                                          |   | (5)            |
| 10.62  |   | 10.62.06                                                                                                                                                      | Promissory                Note of ESC-Arbor Place, LLC dated June 30, 2006 in the principal                amount                of                                      |   |           |
|   |   |                                                                                                                                                          | $8,000,000                payable to General Electric Capital Corporation.                                                                                               |   | (3)            |
| 10.66  |   | Documents                Relating to Purchase                of Communities from Wegman/Manor Number One thru                Number                           |                                                                                                                                                                     |   |
|   |   | Four                , LLC (9                Communities)                                                                                                      |                                                                                                                                                                     |   |
|   |   | 10.66.01                                                                                                                                                      | Purchase                and Sale Agreement dated June 8, 2007, by and between Wegman/Manor                Number                                                         |   |           |
|   |   |                                                                                                                                                          | One                thru Number Four , LLC, and Emeritus Corporation.                                                                                                     |   | (4)            |
|   |   | 10.66.02                                                                                                                                                      | Fannie                Mae Multifamily Increased Consolidated & Restated Mortgage &                Security Agreement                                             |   |           |
|   |   |                                                                                                                                                          | dated                August 31, 2007 between Meriweg-Syracuse, LLC (Bellevue Manor) and                Red                Mortgage                                       |   |           |
|   |   |                                                                                                                                                          | Capital,                Inc. Agreement represents an example of all three communities                agreements                                                          |   | (8)            |
|   |   | 10.66.03                                                                                                                                                      | Amended                and Restated Multifamily Note dated August 31, 2007 between                Meriweg-Syracuse,                                                      |   |           |
|   |   |                                                                                                                                                          |  LLC                (Bellevue Manor) and Red Mortgage Capital, Inc. Agreement represents                an                example of                                |   |           |
|   |   |                                                                                                                                                          | three                communities agreements                                                                                                                              |   | (8)            |
|   |   | 10.66.04                                                                                                                                                      | Fannie                Mae Multifamily Mortgage, Assignment of Rents & Security Agreement                dated August 31, 2007 between                                |   |
|   |   |                                                                                                                                                          |  Meriweg-Rochester,                LLC and Red Mortgage Capital, Inc. Agreement represents an example                of                three communities agreements | (8)    |
|   |   | 10.66.05                                                                                                                                                      | Fannie                Mae Multifamily Mortgage, Assignment of Rents & Security Agreement                dated August 31, 2007 between                                |   |
|   |   |                                                                                                                                                          |  Meriweg-Williamsville                BPM, LLC and Red Mortgage Capital, Inc. represents an example of                three                communities agreements   | (8)    |
|   |   | 10.66.06                                                                                                                                                      | Multifamily                Note dated August 31, 2007 between Meriweg-Williamsville BPM, LLC,                and Red                Mortgage Capital, Inc.               |
|   |   |                                                                                                                                                          |   Agreement                represents an example of six communities                                                                                            |   | (8)            |
| 10.67  |   | Documents                Relating to the                Purchase of Communities from Health Care Properties Investors,                Inc.                    |                                                                                                                                                                     |   |
|   |   | (40                Communities)                                                                                                                               |                                                                                                                                                                     |   |
|   |   | 10.67.01                                                                                                                                                      | Purchase                and Sale Agreement dated June 14, 2007, by and between HCPI, HCPI                Trust,                                                          |   |           |
|   |   |                                                                                                                                                          | Emeritus                Realty V, LLC, ESC-La Casa Grande, LLC, Texas HCP Holding, LP, HCP                AL                of                                           |   |           |
|   |   |                                                                                                                                                          | Florida,                LLC, and Emeritus Corporation                                                                                                                    |   | (5)            |
|   |   | 10.67.02                                                                                                                                                      | Amended                and Restated Purchase and Sale Agreement dated July 31, 2007 by and                between                                                        |   |           |
|   |   |                                                                                                                                                          | HCPI,                HCPI Trust, Emeritus Realty V, LLC, ESC-La Casa Grande, LLC and Texas                HCP                Holding                                     |   |           |
|   |   |                                                                                                                                                          | LP                and Emeritus Corporation as buyer                                                                                                                      |   | (8)            |
|   |   | 10.67.03                                                                                                                                                      | Purchase                and Sale Agreement dated July 31, 2007 by and among HCPI and                Emeritus                                                             |   |           |
|   |   |                                                                                                                                                          | Corporation                as Buyer (Boise, ID)                                                                                                                          |   | (8)            |
|   |   | 10.67.04                                                                                                                                                      | Purchase                and Sale Agreement dated July 31, 2007 by and among HCPI and                Emeritus                                                             |   |           |
|   |   |                                                                                                                                                          | Corporation                as Buyer (Cedar Rapids)                                                                                                                       |   | (8)            |
|   |   | 10.67.05                                                                                                                                                      | Purchase                and Sale Agreement dated July 31, 2007 by and among HCPI and                Emeritus                                                             |   |           |
|   |   |                                                                                                                                                          | Corporation                as Buyer (Escondido Ca, Puyallup, WA)                                                                                                         |   | (8)            |
|   |   | 10.67.06                                                                                                                                                      | Purchase                and Sale Agreement dated July 31, 2007 by and between HCPI and FAEC                Holdings                                                      |   |           |
|   |   |                                                                                                                                                          | (EP),                LLC and Emeritus Corporation as Buyer (Escondido Ca, Puyallup, WA)                (Morristown,                                                      |   |           |
|   |   |                                                                                                                                                          | Lewiston,                & Stockton)                                                                                                                                 |   | (8)            |
|   |   | 10.67.07                                                                                                                                                      | Purchase                and Sale Agreement dated July 31, 2007 by and between HCP AL of Florida,                LLC. and                                                 |   |           |
|   |   |                                                                                                                                                          | Emeritus                Corporation as Buyer (Venice, Lakeland & New Port                Richey)                                                                     |   | (8)            |
|   |   | 10.67.08                                                                                                                                                      | Purchase                and Sale Agreement dated July 31, 2007 by and among HCPI and                Emeritus                                                             |   |           |
|   |   |                                                                                                                                                          | Corporation                as Buyer (Phoenix)                                                                                                                            |   | (8)            |
|   |   | 10.67.09                                                                                                                                                      | Loan                Agreement dated August 15, 2007 by and among the 4 Delaware LLC or                LP and                Capmark                                      |   |           |
|   |   |                                                                                                                                                          | Bank.  (Everett,                Phoenix, San Antonio, Walla Walla), Loan 1                                                                                     |   | (8)            |
|   |   | 10.67.10                                                                                                                                                      | Promissory                note of 4 Delaware LLC dated August 15, 2007 in principal amount                of                $26.2                                        |   |           |
|   |   |                                                                                                                                                          | million                payable to Capmark Bank, (Emerichip Everett LLC, Phoenix LLC, San                Antonio                AO LP, and Walla Walla)                   | (8)    |
|   |   | 10.67.11                                                                                                                                                      | Loan                Agreement dated August 15, 2007 by and among the 8 Delaware LLC or                LP and                Capmark                                      |   |           |
|   |   |                                                                                                                                                          | Bank.  (New                Port Richey, Venice, Dover, Altomonte, Stockton, Cambria, El Paso,                Dallas), Loan 2                                   |   | (8)            |
|   |   | 10.67.12                                                                                                                                                      | Promissory                note of 4 Delaware LLC dated August 15, 2007 in principal amount                of                $49.8                                        |   |           |
|   |   |                                                                                                                                                          | million                payable to Capmark Bank, (Emerichip New Port Richey, Venice, Dover,                Altomonte,                                                     |   |           |
|   |   |                                                                                                                                                          | Stockton,                Cambria, El Paso, Dallas and Walla Walla)                                                                                                       |   | (8)            |
|   |   | 10.67.13                                                                                                                                                      | Fannie                Mae Multifamily Mortgage, Assignment of Rents & Security Agreement                dated                                                        |   |           |
|   |   |                                                                                                                                                          | August                15, 2007 between Emerichip Voorhees, LLC and Capmark Bank (Laurel                Lakes                Estates)                                     |   | (8)            |
|   |   | 10.67.14                                                                                                                                                      | Multifamily                Note dated August 15, 2007 in principal amount of $6.975 million                between                                                       |   |           |
|   |   |                                                                                                                                                          |  Emerichip                Voorhees, LLC, and Capmark Bank. (Laurel Lake Estates)                                                                                    |   | (8)            |
| 10.68  |   | 10.68.01                                                                                                                                                      | Loan                Agreement dated August 6, 2007 between HC3 FT Meyer, HC3 Orlando,&                HC3 Sunrise,                                                   |   |           |
|   |   |                                                                                                                                                          | subsidiaries                of registrant, as borrowers, and General Electric Capital Corporation                as                lender                                |   | (8)            |
|   |   | 10.68.02                                                                                                                                                      | Promissory                Note of HC3 Ft. Meyer, Orlando, & Sunrise dated August 6, 2007 in the                principal                                             |   |           |
|   |   |                                                                                                                                                          | amount                of $19.64 million payable to General Electric Capital                Corporation                                                                   |   | (8)            |
| 10.68  |   | 10.68.29                                                                                                                                                      | Lease                Termination Agreement by and among HR Acquisition I Corporation,                HR                Acquisition of                                    |   |           |
|   |   |                                                                                                                                                          | Pennsylvania,                Inc., and HRT Holdings, Inc. and Emeritus Corporation                                                                                       |   | (2)            |
|   |   | 10.68.30                                                                                                                                                      | Lease                Termination Agreement by and among HR Acquisition I Corporation,                HR                Acquisition of                                    |   |           |
|   |   |                                                                                                                                                          | Pennsylvania,                Inc., and HRT Holdings, Inc. and Emeritus Corporation                Roanoke                                                                |   | (2)            |
|   |   | 10.68.31                                                                                                                                                      | Lease                Termination Agreement by and among HR Acquisition I Corporation,                HR                Acquisition of                                    |   |           |
|   |   |                                                                                                                                                          | Pennsylvania,                Inc., and HRT Holdings, Inc. and Emeritus Corporation                Ravenna                                                                |   | (2)            |
|   |   | 10.68.32                                                                                                                                                      | Lease                Termination Agreement by and among HR Acquisition I Corporation,                HR                Acquisition of                                    |   |           |
|   |   |                                                                                                                                                          | Pennsylvania,                Inc., and HRT Holdings, Inc. and Emeritus Corporation                Harrisburg                                                             |   | (2)            |
|   |   | 10.68.33                                                                                                                                                      | Lease                Termination Agreement by and among HR Acquisition I Corporation,                HR                Acquisition of                                    |   |           |
|   |   |                                                                                                                                                          | Pennsylvania,                Inc., and HRT Holdings, Inc. and Emeritus Corporation                Danville                                                               |   | (2)            |
|   |   | 10.68.34                                                                                                                                                      | Lease                Termination Agreement by and among HR Acquisition I Corporation,                HR                Acquisition of                                    |   |           |
|   |   |                                                                                                                                                          | Pennsylvania,                Inc., and HRT Holdings, Inc. and Emeritus Corporation                Harrisonburg                                                           |   | (2)            |
|   |   | 10.68.35                                                                                                                                                      | Lease                Termination Agreement by and among HR Acquisition I Corporation,                HR                Acquisition of                                    |   |           |
|   |   |                                                                                                                                                          | Pennsylvania,                Inc., and HRT Holdings, Inc. and Emeritus Corporation                Mechanicsburg                                                          |   | (2)            |
|   |   | 10.68.36                                                                                                                                                      | Lease                Termination Agreement by and among HR Acquisition I Corporation,                HR                Acquisition of                                    |   |           |
|   |   |                                                                                                                                                          | Pennsylvania,                Inc., and HRT Holdings, Inc. and Emeritus Corporation                Bloomsburg                                                             |   | (2)            |
|   |   | 10.68.37                                                                                                                                                      | Lease                Termination Agreement by HR Acquisition of San Antonio, LTD, and                ESC IV,                LP                                           |   |           |
|   |   |                                                                                                                                                          | Kingsley                Place Oakwell                                                                                                                                    |   | (2)            |
|   |   | 10.68.38                                                                                                                                                      | Lease                Termination Agreement by HR Acquisition of San Antonio, LTD, and                ESC IV,                LP                                           |   |           |
|   |   |                                                                                                                                                          | Kingsley                Place Oakwell Medical Center                                                                                                                     |   | (2)            |
|   |   | 10.68.39                                                                                                                                                      | Lease                Termination Agreement by HR Acquisition of San Antonio, LTD, and                ESC IV,                LP                                           |   |           |
|   |   |                                                                                                                                                          | Kingsley                Place McKinney                                                                                                                                   |   | (2)            |
|   |   | 10.68.40                                                                                                                                                      | Lease                Termination Agreement by HR Acquisition of San Antonio, LTD, and                ESC IV,                LP                                           |   |           |
|   |   |                                                                                                                                                          | Kingsley                Place Henderson                                                                                                                                  |   | (2)            |
| 10.82  |   | 10.82.5                                                                                                                                                       | Sixth                Amendment to Amended and Restated Master Lease is among Health Care                Property Investors, Inc.                                         |   |           |
|   |   |                                                                                                                                                          | HCPI                Trust, Emeritus Realty V, LLC, ESC-LA Casa Grande, LLC, and Texas                HCP                Holding, LP and together                         |   |           |
|   |   |                                                                                                                                                          | with                HCP, HCP Trust, ER-V and La Casa Gande "Lessor on the one hand, and                Emeritus Corporation                                              |   |           |
|   |   |                                                                                                                                                          | ESC                III, LP, Emeritus Properties II Inc., Emeritus Properties III, Inc.,                Emeritus Properties V, Inc                                        |   |           |
|   |   |                                                                                                                                                          | Emeritus                Properties XIV, LLC, ESC-Bozeman, LLC, ESC-New Port Richey, LLC "Lessee"                on the other hand                                        |   | (2)            |
|   |   |                                                                                                                                                          |                                                                                                                                                                     |   |           |
| 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 November                9,                2007.                                                |   | (8)            |
|   |   | 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 November                9,                2007.                                         |   | (8)            |
|   |   | 31.1.3                                                                                                                                                        | Certification                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section                302                                                       |   |           |
|   |   |                                                                                                                                                          | of                the Sarbanes-Oxley Act of 2002 for L. Granger Cobb dated November                9,                2007.                                               |   | (8)            |
| 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 November                9,                2007.                                                |   | (8)            |
|   |   | 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 November                9,                2007.                                         |   | (8)            |
|   |   | 32.1.3                                                                                                                                                        | Certification                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section                906                                                       |   |           |
|   |   |                                                                                                                                                          | of                the Sarbanes-Oxley Act of 2002 for L. Granger Cobb dated November                9,                2007.                                               |   | (8)            |

| Footnotes: |                                                                                                                                                      |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                      |
| (1)        | Incorporated                by reference to the indicated exhibit filed with the Company’s Form 8-K                (File No. 1-14012)               |
|       | on                April 2, 2007.                                                                                                                          |
| (2)        | Incorporated                by reference to the indicated exhibit filed with the Company's First                Quarter Report on Form 10-Q               |
|       | (File                No. 1-14012) on May 10, 2007.                                                                                                        |
| (3)        | Filed                as the indicated Exhibit to Registration Statement of Form S-3                Amendment 2 filed June 13, 2007 and          |
|       |  incorporated                herein by reference.                                                                                                    |
| (4)        | Filed                as the indicated Exhibit to Form 8-K filed on June 14, 2007 and                incorporated herein by reference.                |
| (5)        | Filed                as the indicated Exhibit to Form 8-K filed on June 20, 2007 and                incorporated herein by reference.                |
| (6)        | Filed                as the indicated appendix to Definitive Proxy Statement filed on                July 25,                2007 and incorporated herein |
|       | reference.                                                                                                                                                |
| (7)        | Filed                as the indicated Exhibit to Form 8-K filed on September 4, 2007 and                incorporated herein by reference.            |
| (8)        | Filed                herewith.                                                                                                                            |

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