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

                                    FORM 10-Q


(Mark One)

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

                 For the quarterly period ended March 31, 2002.

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

                        Commission file number   1-14012

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

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

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

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

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


As of April 30, 2002, there were 10,199,764 shares of the Registrant's Common
Stock, par value $.0001, outstanding.

<PAGE>
<TABLE>
<CAPTION>

                                      EMERITUS CORPORATION

                                              INDEX


                                 Part I.  Financial Information


<S>                                                                                     <C>

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

         Condensed Consolidated Balance Sheets as of March 31, 2002, and
         December 31, 2001. . . . . . . . . . . . . . . . . . . . . . . . . . .  . . .         1

         Condensed Consolidated Statements of Operations for the
         Three Months ended March 31, 2002 and 2001 . . . . . . . . . . . . . . . . . .        2

         Condensed Consolidated Statements of Cash Flows for the Three
         Months ended March 31, 2002 and 2001 . . . . . . . . . . . . . . . . . . . . .        3

         Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . .        4

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


Item 3.  Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . .        17


                                 Part II.  Other Information

Item 5.  Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        17


         Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  .      19


Note:  Items 1, 2, 3, 4, and 6 of Part II are omitted because they are not applicable.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                              EMERITUS CORPORATION
                                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                        (In thousands, except share data)
                                                     ASSETS


                                                                                      March 31,    December 31,
                                                                                        2002           2001
                                                                                     -----------  --------------
<S>                                                                                  <C>          <C>
 Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    8,661   $       9,811
 Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1,504           1,376
 Trade accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . .       1,652           1,172
 Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       3,244           2,859
 Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . .       4,310           2,463
 Property held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,242           2,242
                                                                                     -----------  --------------
 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      21,613          19,923
                                                                                     -----------  --------------
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .     109,248         131,200
Property held for development . . . . . . . . . . . . . . . . . . . . . . . . . . .       1,040           1,040
Notes receivable from and investments in affiliates . . . . . . . . . . . . . . . .       3,798           3,675
Restricted deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       4,852           5,520
Lease acquisition costs, net. . . . . . . . . . . . . . . . . . . . . . . . . . . .       5,693           4,864
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,389           2,206
                                                                                     -----------  --------------
 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  148,633   $     168,428
                                                                                     ===========  ==============

                                     LIABILITIES AND SHAREHOLDERS' DEFICIT

Current Liabilities:
 Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . .  $   14,492   $       4,523
 Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,154           2,105
 Accrued employee compensation and benefits . . . . . . . . . . . . . . . . . . . .       4,450           3,301
 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1,007           2,861
 Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1,102           1,415
  Accrued dividends on preferred stock. . . . . . . . . . . . . . . . . . . . . . .       9,102           7,429
 Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       8,666           8,690
 Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,715           1,699
                                                                                     -----------  --------------
 Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .      43,688          32,023
                                                                                     -----------  --------------
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . . . . . .     100,921         131,070
Convertible debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      32,000          32,000
Deferred gain on sale of communities. . . . . . . . . . . . . . . . . . . . . . . .      20,359          18,671
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,468           2,404
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .         229             256
                                                                                     -----------  --------------
 Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     199,665         216,424
                                                                                     -----------  --------------
Minority interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         949           1,145
Redeemable preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . .      25,000          25,000
Commitments and contingencies
Shareholders' Deficit:
Preferred stock, $.0001 par value. Authorized 70,000 shares; issued and outstanding
    30,609 and 30,609 at March 31,2002, and December 31, 2001, respectively
Common stock, $.0001 par value. Authorized 40,000,000 shares; issued and
    outstanding 10,199,764 and 10,196,030 shares at March 31, 2002, and
    December 31, 2001, respectively . . . . . . . . . . . . . . . . . . . . . . . .           1               1
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . .      68,016          67,686
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . .          (7)           (136)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (144,991)       (141,692)
                                                                                     -----------  --------------
 Total shareholders' deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . .     (76,981)        (74,141)
                                                                                     -----------  --------------
 Total liabilities and shareholders' deficit. . . . . . . . . . . . . . . . . . . .  $  148,633   $     168,428
                                                                                     ===========  ==============
</TABLE>


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

                                        1
<PAGE>
<TABLE>
<CAPTION>

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

                                                    Three Months
                                                ended March 31, 2002
                                               2002           2001
                                           -------------  -------------
<S>                                        <C>            <C>
Revenues:
  Community revenue . . . . . . . . . . .  $     32,121   $     32,701
  Other service fees. . . . . . . . . . .         1,000            542
  Management fees . . . . . . . . . . . .         3,025          1,538
                                           -------------  -------------
          Total operating revenues. . . .        36,146         34,781

Expenses:
  Community operations. . . . . . . . . .        20,562         20,645
  General and administrative. . . . . . .         4,923          4,167
  Depreciation and amortization . . . . .         1,851          1,816
  Facility lease expense. . . . . . . . .         6,728          6,833
                                           -------------  -------------
          Total operating expenses. . . .        34,064         33,461
                                           -------------  -------------
          Income from operations. . . . .         2,082          1,320

Other income (expense):
  Interest income . . . . . . . . . . . .           109            239
  Interest expense. . . . . . . . . . . .        (2,926)        (3,533)
  Other, net. . . . . . . . . . . . . . .          (567)          (143)
                                           -------------  -------------
          Net other expense . . . . . . .        (3,384)        (3,437)
                                           -------------  -------------

          Net loss. . . . . . . . . . . .        (1,302)        (2,117)

Preferred stock dividends . . . . . . . .         1,997          1,611
                                           -------------  -------------
          Net loss to common shareholders  $     (3,299)  $     (3,728)
                                           =============  =============

Loss per common share - basic and diluted  $      (0.32)  $      (0.37)
                                           =============  =============

Weighted average number of common shares.        10,196         10,120
                                           =============  =============

</TABLE>


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

                                        2
<PAGE>

<TABLE>
<CAPTION>

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


                                                                                 Three Months ended March 31,
                                                                             ------------------------------------
                                                                                    2002               2001
                                                                              -----------------  -----------------
<S>                                                                           <C>                <C>
Cash flows from operating activities:
  Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $         (1,302)  $         (2,117)
  Adjustments to reconcile net loss to net cash:
    Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . .                78                 63
    Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . .             1,851              1,624
    Amortization of deferred gain. . . . . . . . . . . . . . . . . . . . . .               (61)              (245)
    Loss on sale of properties . . . . . . . . . . . . . . . . . . . . . . .               530                  -
    Write off of deferred gain . . . . . . . . . . . . . . . . . . . . . . .                14                  -
    Changes in operating assets and liabilities. . . . . . . . . . . . . . .            (1,864)              (111)
                                                                              -----------------  -----------------
          Net cash used in operating activities. . . . . . . . . . . . . . .              (754)              (786)
                                                                              -----------------  -----------------

Cash flows from investing activities:
  Acquisition of property and equipment. . . . . . . . . . . . . . . . . . .               (81)              (271)
  Purchase of minority partner interest. . . . . . . . . . . . . . . . . . .            (3,070)                 -
  Proceeds from sale of property and equipment . . . . . . . . . . . . . . .            25,010              1,109
  Investment in lease acquisition costs. . . . . . . . . . . . . . . . . . .            (1,044)               (71)
  Payments to affiliates and other managed communities . . . . . . . . . . .              (650)                 -
  Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . .              (110)                 -
                                                                              -----------------  -----------------
          Net cash provided by investing activities. . . . . . . . . . . . .            20,055                767
                                                                              -----------------  -----------------

Cash flows from financing activities:
  Proceeds from sale of stock under employee stock purchase plan . . . . . .                 7                  -
  Decrease in restricted deposits. . . . . . . . . . . . . . . . . . . . . .               668                  -
  Repayment of short-term borrowings . . . . . . . . . . . . . . . . . . . .                 -             (1,650)
  Debt issue and other financing costs . . . . . . . . . . . . . . . . . . .              (946)                (5)
  Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . .            30,609                144
  Repayment of long-term borrowings. . . . . . . . . . . . . . . . . . . . .           (50,789)              (385)
                                                                              -----------------  -----------------
          Net cash used in financing activities. . . . . . . . . . . . . . .           (20,451)            (1,896)
                                                                              -----------------  -----------------

          Net decrease in cash and cash equivalents. . . . . . . . . . . . .            (1,150)            (1,915)

Cash and cash equivalents at the beginning of the period . . . . . . . . . .             9,811              7,496
                                                                              -----------------  -----------------

Cash and cash equivalents at the end of the period . . . . . . . . . . . . .  $          8,661   $          5,581
                                                                              =================  =================

Supplemental disclosure of cash flow information cash paid during the period
    for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $          4,780   $          3,639
                                                                              =================  =================

Noncash investing and financing activities:
  Unrealized holding gains (losses) on investment securities . . . . . . . .  $            129   $            104
                                                                              =================  =================
  Accrued preferred stock dividends. . . . . . . . . . . . . . . . . . . . .  $          1,997   $          1,611
                                                                              =================  =================
</TABLE>


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

                                        3
<PAGE>

                              EMERITUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Emeritus  believes  the  following  critical  accounting  policies  are  most
significant  to  the  judgments  and  estimates  used  in the preparation of its
condensed  consolidated financial statements.  Emeritus maintains allowances for
doubtful  accounts  for  estimated  losses  resulting  from the inability of its
residents  to  make required payments.  If the financial condition of Emeritus's
residents  were  to  deteriorate, resulting in an impairment of their ability to
make payments, additional charges may be required.  Emeritus holds shares in ARV
Assisted  Living, Inc. amounting to less than 5% of its shares.  ARV is publicly
traded  and  has  a  volatile  share  price.  Emeritus  records  an  investment
impairment  charge when it believes this investment has experienced a decline in
value that is other than temporary.  Future adverse changes in market conditions
or  poor  operating results underlying this investment could result in losses or
an  inability  to  recover  the carrying value of the investment that may not be
reflected  in  this  investment's  current  carrying  value,  thereby  possibly
requiring  an  impairment  charge  in  the future.  Emeritus records a valuation
allowance  to  reduce  its deferred tax assets to the amount that is more likely
than not to be realized, which at this time shows a net asset valuation of zero.
While  Emeritus  has  considered  future  taxable income and ongoing prudent and
feasible  tax  planning  strategies  in  assessing  the  need  for the valuation
allowance,  in  the  event  Emeritus  were to determine that it would be able to
realize  its  deferred  tax  assets  in the future in excess of its net recorded
amount,  an  adjustment  to  the deferred tax asset would increase income in the
period  such  determination  was  made.

NEW ACCOUNTING PRONOUNCEMENTS

In  October 2001, the FASB issued SFAS No.144, "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets."  SFAS  No.144  addresses  significant  issues
relating to the implementation of SFAS No.121, "Accounting for the Impairment of
Long-Lived  Assets  and for Long-Lived Assets to Be Disposed Of," and develops a
single  accounting  method under which long-lived assets that are to be disposed
of  by  sale  are measured at the lower of book value or fair value less cost to
sell.  Additionally, SFAS No.144 expands the scope of discontinued operations to
include  all  components  of  an  entity  with  operations  that  (1)  can  be
distinguished  from  the  rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction.  The Company adopted
SFAS  No.144  effective  January  1,  2002.  As  the  adoption of SFAS No.144 is
prospective,  the Company cannot predict the impact on its financial statements.

BASIS OF PRESENTATION

The  unaudited  interim financial information furnished below, in the opinion of
the  Company's management, reflects all adjustments, consisting of only normally
recurring  adjustments,  which  are  necessary  to  state  fairly  the condensed
consolidated  financial  position,  results  of  operations,  and  cash flows of
Emeritus as of March 31, 2002, and for the three months ended March 31, 2002 and
2001.  The
                                        4
<PAGE>
                              EMERITUS CORPORATION
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                   (unaudited)

 Company  presumes  that  those  reading this interim financial information have
read  or  have  access to its 2001 audited consolidated financial statements and
Management's  Discussion  and  Analysis  of  Financial  Condition and Results of
Operations  that  are  contained in the 2001 Form 10-K filed March 29, 2002, and
amended  on  April  30,  2002.  Therefore, the Company has omitted footnotes and
other  disclosures  herein,  which  are  disclosed  in  the  Form  10-K.

REVENUE RECOGNITION

Due to dramatic increases in liability insurance premiums for the year 2002, the
Company  decided  to  institute  a  one-time  insurance  surcharge  and  billed
approximately  $1.4  million  to  the  residents of its communities in the first
quarter  of 2002.  The associated revenue is being recognized on a straight-line
basis  over  the  life of the insurance policy.  In the three months ended March
31,  2002,  the  Company  recognized $342,000 in other service fees and recorded
deferred  revenues  of  approximately  $1.0  million,  included in other current
liabilities.

PROPERTY HELD FOR SALE

Emeritus currently has two properties being held for sale.  Assets to be
disposed of are reported at the lower of their carrying amount or fair market
value less costs to sell.

PROPERTY AND EQUIPMENT

In  March 2002, the Company entered into a 15-year master lease arrangement with
HC  REIT,  Inc.  for  four communities, two of which Emeritus previously held an
ownership interest in and two of which it previously leased from another lessor.
A  related party investor held a 50% economic interest in one community, located
in Fairfield, California.  Preceding the HC REIT transaction, Emeritus purchased
the  related party investor's economic interest for his investment basis of $2.1
million plus a 9% return, a $2.95 million total payment.  The Company recognized
a loss on the repurchase of approximately $158,000, which is included in "Other,
Net" in the condensed consolidated statements of operations.  Another community,
located  in Paso Robles, California, was 50% owned by an outside investor.  Also
preceding  the  HC  REIT  transaction,  the  Company purchased the remaining 50%
interest  in  this  community for $2.65 million.  The remaining two communities,
located  in  Hattiesburg,  Mississippi,  and  Urbana,  Illinois, were both under
operating  leases  with  a  different  lessor.  Subsequent  to  the two purchase
transactions,  Emeritus  entered  into  a  master lease arrangement for all four
communities  and  recognized a loss of approximately $372,000, which is recorded
in  "Other,  net"  in  the condensed consolidated statements of operations.  The
loss  is  primarily  comprised  of  write-offs  of  existing loan fees and lease
acquisition  costs  for  the  four  buildings.  Additionally,  the Company has a
deferred  gain  on  sale  associated with the transaction that approximates $1.8
million  and  new  lease  acquisition  costs  of $1.0 million, that will both be
amortized  over  the  lease  period  of  15  years.

ACCRUED DIVIDENDS ON PREFERRED STOCK

Since  the  third quarter of 2000, the Company has accrued its obligation to pay
cash  dividends  to both the Series A and Series B preferred shareholders, which
amounted  to  $9.1  million  at  March  31,  2002,  including  all penalties for
non-payment.  Since  dividends  on  the  Series  A  shares were not paid for six
consecutive  quarters,  the  Series  A dividends were calculated on a compounded
cumulative  basis,  retroactively.  This  caused  the  preferred dividends to be
approximately  $386,000  higher  in the first quarter of 2002 as compared to the
first  quarter  of  2001.  In  addition,  since  the  Company has not paid these
dividends  for  six  consecutive  quarters,  both  the  Series  A  and  Series B
shareholders  became  entitled  to  elect  one  additional  director each to the
Company's  board  of  directors  at each annual shareholders' meeting until such
time  as  the  accrued  dividends  have  been  paid.

                                        5
<PAGE>

LONG-TERM DEBT

In  February  2002,  the  Company  reached  an  agreement with Heller Healthcare
Finance to refinance three of the properties in the $71.8 million portfolio that
previously  was financed by Deutsche Bank AG and matured December 14, 2001.  The
new  loan  of  $30.6  million  matures  February  2004  and provides for monthly
principal  payments  of  approximately  $40,000 in addition to interest at LIBOR
plus  four  percent.  This refinancing in turn satisfied the extension agreement
dated  May  31,  2001,  with Deutsche Bank AG to extend the maturity date of the
remaining  debt  of  $46.3  million  secured by seven properties in the original
portfolio  to  May  31, 2003, provided that the Company pays to the lender a fee
equal  to  1% of the outstanding portfolio balance at May 31, 2002.  As a result
of this refinancing, the Company reclassified the entire $71.8 million principal
balance  on  this  portfolio to long-term debt from current debt in its December
31,  2001,  financial  statements.

LOSS PER SHARE

Basic  net  loss  per  share  is  computed  based  on  weighted  average  shares
outstanding  and excludes any potential dilution.  Diluted net loss per share is
computed  on the basis of the weighted average number of shares outstanding plus
dilutive  potential  common shares using the treasury stock method.  The capital
structure  of  Emeritus  includes  convertible  debentures,  redeemable  and
non-redeemable  convertible  preferred  stock,  common stock warrants, and stock
options.  The  assumed  conversion  and  exercise  of these securities have been
excluded  from  the calculation of diluted net loss per share since their effect
is  anti-dilutive.  The loss per common share was calculated on a dilutive basis
without consideration of 9,507,196 and 9,285,337 common shares at March 31, 2002
and  2001,  respectively,  related to outstanding options, warrants, convertible
debentures,  and  convertible  preferred  stock.

UNREALIZED HOLDING GAINS ON INVESTMENT SECURITIES

The change in unrealized holding gains on investment securities for the
three-month period ended March 31, 2002, represents the change in value of the
Company's investment in ARV Assisted Living, Inc.

OTHER COMPREHENSIVE INCOME

Other comprehensive income includes the following transactions for the
three-month period ended March 31, 2002 and 2001, respectively:

<TABLE>
<CAPTION>

                                                            Three Months ended March 31,
                                                        ------------------------------------
                                                              2002               2001
                                                        -----------------  -----------------
                                                                   (In thousands)
<S>                                                     <C>                <C>
Net loss to common shareholders. . . . . . . . . . . .  $         (3,299)  $         (3,728)
Other comprehensive income:
     Unrealized holding gains on investment securities               129                104
                                                        -----------------  -----------------
Comprehensive loss . . . . . . . . . . . . . . . . . .  $         (3,170)  $         (3,624)
                                                        =================  =================
</TABLE>


SUBSEQUENT EVENTS

On  April 1, 2002, in conjunction with the HC REIT master lease transaction more
fully  discussed under "Property and Equipment" above, the Company received $6.7
million  in  proceeds  from  a  $6.8 million debt issuance under a separate loan
agreement  with HC REIT.  The loan agreement requires interest only

                                        6
<PAGE>

payments  and  bears interest at 12% per annum with fixed annual increases of 50
basis  points  for  a  term  of  36  months.

In  May  2002,  Emeritus  commenced  management  of eight communities previously
operated by Horizon Bay Management L.L.C., a national seniors housing management
company  that  manages  the  WHSLH Realty, L.L.C., ("WHSLH") portfolio of senior
housing  properties.

The  management  agreement structure replaces the originally announced agreement
where  Emeritus  was  to  have  directly  assumed  the  current  leases on seven
communities and the mortgage on an eighth, comprising 617 units in Louisiana and
Texas.  Entities  controlled  by  Daniel  R. Baty, Chairman and CEO of Emeritus,
have  agreed  to  assume  the  current  leases  and mortgage and will engage the
Company  as manager.  Under the terms of the management arrangement, the Company
will  receive  a  management  fee  equal  to  5%  of
revenue  and  has the right to assume the leases and mortgage at any time during
the  five-year term of the management agreement.  Horizon Bay has agreed to fund
operating losses of the Baty entities to the extent of $2.3 million in the first
twelve  months and $1.1 million in the second twelve months following the close.
The  Company  has  agreed to fund any operating losses in excess of these limits
over  the  five-year  lease  term.

RECLASSIFICATIONS

Certain  reclassifications of 2001 amounts have been made to conform to the 2002
presentation.

                                        7
<PAGE>

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

OVERVIEW

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

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

In  our  consolidated  portfolio,  our rate enhancement program brought about an
increase  in  average  monthly revenue per occupied unit to $2,546 for the first
quarter  of  2002 from $2,345 for the first quarter of 2001.  This represents an
average  revenue  increase  of  $201  per month per occupied unit, or 8.6%.  The
average  occupancy  rate  decreased  to 82.0% for the first quarter of 2002 from
85.4%  for  the  first  quarter  of  2001.

In  our  total  operated portfolio, which includes managed communities, our rate
enhancement  program  brought  about  an increase in average monthly revenue per
occupied  unit to $2,539 for the first quarter of 2002 from $2,231 for the first
quarter  of 2001.  This represents an average revenue increase of $308 per month
per occupied unit, or 13.8%.  The larger increase in average monthly revenue per
occupied  unit  in  our  total portfolio as compared to that in our consolidated
portfolio  is partially due to the addition of 17 communities previously managed
by  Regent  Assisted  Living,  Inc.,  discussed  more  fully  below  in  "Other
Transactions".  A  majority  of  the  Regent  communities  have  Special  Care
(Alzheimer's)  units,  which  have  a  significantly  higher  rental  rate  than
non-Special  Care  units.  The average occupancy rate decreased to 80.5% for the
first  quarter  of  2002  from  82.5%  for  the  first  quarter  of  2001.

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

               [The rest of this page is intentionally left blank]

                                        8
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS -CONTINUED


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


<TABLE>
<CAPTION>


                                             As of March 31,       As of December 31,       As of March 31,
                                                  2002                    2001                    2001
                                         ----------------------  ----------------------  ----------------------
                                         Buildings     Units     Buildings     Units     Buildings     Units
                                         ----------  ----------  ----------  ----------  ----------  ----------
<S>                                      <C>         <C>         <C>         <C>         <C>         <C>
Owned (1) . . . . . . . . . . . . . . .         16       1,579           16       1,579         16       1,579
Leased (1). . . . . . . . . . . . . . .         44       3,716           42       3,444         45       3,700
Managed/Admin Services. . . . . . . . .         88       8,194           70       6,620         69       6,528
Joint Venture/Partnership . . . . . . .          3         333            5         605          5         605
                                         ----------  ----------  ----------  ----------  ----------  ----------
     Operated Portfolio . . . . . . . .        151      13,822          133      12,248        135      12,412

     Percentage increase (decrease) (2)         14%         13%        (1%)        (1%)          0%          0%

Pending Acquisitions. . . . . . . . . .          -           -            -           -          -           -
New Developments (3). . . . . . . . . .          -           -            -           -          3         320
                                         ----------  ----------  ----------  ----------  ----------  ----------
     Total. . . . . . . . . . . . . . .        151      13,822          133      12,248        138      12,732
                                         ----------  ----------  ----------  ----------  ----------  ----------

     Percentage increase (decrease) (2)         14%         13%        (4%)        (4%)        (1%)        (1%)
</TABLE>

--------
(1)  Included  in  our  consolidated  portfolio  of  communities.
(2)  The percentage increase (decrease) indicates the change from the prior
     quarter.
(3)  The communities under development at March 31, 2001, were developed by
     third parties, but are currently managed by Emeritus.

We rely primarily on our residents' ability to pay our charges for services from
their  own  or  familial  resources  and  expect  that  we  will  do  so for the
foreseeable  future.  Although care in an assisted living community is typically
less  expensive  than  in  a skilled nursing facility, we believe that generally
only  seniors with income or assets meeting or exceeding the regional median can
afford  to  reside  in  our  communities.  Inflation or other circumstances that
adversely  affect  seniors'  ability  to  pay for assisted living services could
therefore  have an adverse effect on our business.  All sources of revenue other
than  residents'  private  resources  constitute  less  than  10%  of  our total
revenues.

We  have  incurred  net operating losses since our inception and as of March 31,
2002,  we  had  an  accumulated  deficit of approximately $145.0 million.  These
losses  resulted  from  a  number  of  factors,  including:

* occupancy levels at our communities that were lower for longer periods than we
originally  anticipated  and have declined in the last two years consistent with
industry  patterns;

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

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

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

                                        9
<PAGE>

EMERITRUST TRANSACTIONS

In  two separate transactions during the fall of 1998 and the spring of 1999, we
arranged for two investor groups to purchase an aggregate of 41 of our operating
communities and five communities under development for a total purchase price of
approximately  $292.2  million.  Of the 46 communities involved, 43 had been, or
were  proposed to be, leased to us by Meditrust Company LLC under sale/leaseback
financing  arrangements,  and  three  had been owned by us.  The first purchase,
consisting  of  25 communities, which we will call the Emeritrust I communities,
was  completed  in  December  1998  and  the  second  purchase, consisting of 21
communities,  16  of  which we will call the Emeritrust II Operating communities
and  five  of  which  we  call  the  Emeritrust  II Development communities, was
completed  in  March  1999.

Of  the  $168.0  million purchase price for the Emeritrust I communities, $138.0
million  was  financed  through  a  three-year  first  mortgage  loan  with  an
independent third party and $30.0 million was financed through subordinated debt
and  equity  investments from the investor group, which includes Daniel R. Baty,
our Chief Executive Officer, who is also a director and a principal shareholder.
Of the $124.2 million purchase price for the Emeritrust II Operating communities
and  Emeritrust  II  Development  communities,  approximately  $99.6 million was
financed  through three-year first mortgage loans with independent third parties
and  $24.6 million was financed through subordinated debt and equity investments
from  the  investor  group,  which  includes  Mr.  Baty.

The  investor  groups  retained  us  to  manage  all  of the communities through
December  31,  2001,  and  granted us options to purchase the communities during
this  period.  During  2000,  the Emeritrust I communities failed to comply with
covenants  under  the  $138.0 million mortgage loan, and in 2001 it became clear
that  we  would not be able to purchase the communities under the options.  As a
result, in January 2002, the mortgage loans were restructured and the management
agreements  and  options to purchase were extended to June 30, 2003 (to December
31,  2003,  in the case of the five Emeritrust II Development communities).  The
discussion  below  reflects  the  terms  of  these  arrangements  as  modified.
From  January 1, 2002, through June 30, 2003, we will receive for the Emeritrust
I  communities  a  base  management fee of 3% of gross revenues generated by the
communities  and  an additional management fee of 4%, payable out of 50% of cash
flow.  The  availability of cash flow to pay management fees is subject to prior
payment  of  expenses and fees related to the restructuring of the mortgage loan
in  2001.  For  the  Emeritrust  II  Operating communities and the Emeritrust II
Development  communities,  we  have  received  and  continue  to  receive a base
management  fee  of 5% of gross revenues and an additional management fee of 2%,
payable  to  the  extent  that the communities meet certain cash flow standards.
Prior  to  January 1, 2001, the management fees for the Emeritrust I communities
were  also  computed  in  this  fashion.
Under  the  management  agreements,  we  are obligated to reimburse the investor
groups  for  cumulative  cash  operating losses greater than $4.5 million in the
case  of  the  Emeritrust  I communities and $500,000 in the case of each of the
five  Emeritrust  II  Development communities.  Since these thresholds have been
exceeded,  we are currently responsible for most cash operating losses generated
by  these  communities if they occur.  There is no such funding arrangement with
respect  to  the  Emeritrust  II  Operating  communities.  For  the Emeritrust I
communities there was no funding obligation for the three months ended March 31,
2002,  compared  to  $387,000  for  the  three months ended March 31, 2001.  Our
funding  obligations  for the Emeritrust II Development communities were $35,000
and  $148,000  for the three months ended March 31, 2002 and 2001, respectively.
Thus,  our gross funding obligations decreased $500,000 for the first quarter of
2002  compared  to  the  comparable  period  in  2001.

Although the amounts of our funding obligation each year include management fees
earned  by  us  under  the  management  agreements,  we  do  not recognize these
management fees as revenue in our financial statements to the extent that we are
funding  the  cash  operating  losses  that  include  them.  Correspondingly,

                                       10
<PAGE>

we  recognize  the  funding  obligation under the agreement, less the applicable
management  fees,  as  an expense in our financial statements under the category
"Other,  net."  Conversely, if the applicable management fees exceed our funding
obligation,  we  recognize  the  management  fees less the funding obligation as
management fee revenue in our condensed consolidated financial statements.   For
the three months ended March 31, 2002 and 2001, total management fees earned for
the  Emeritrust I communities were $698,000 and $566,000, respectively, of which
$698,000 and $296,000, respectively, were recognized as revenue for that period.
For the three months ended March 31, 2002 and 2001, total management fees earned
for  the  Emeritrust  II  Development  communities  were $168,000, and $114,000,
respectively,  of  which  $155,000 and $77,000, respectively, were recognized as
revenue  for  that  period.  For the three months ended March 31, 2002 and 2001,
management  fees  earned  and  recognized  for  the  Emeritrust  II  Operating
communities were $486,000 and $464,000, respectively.  Thus, our management fees
recognized  for  all  of  the  Emeritrust communities increased $502,000 for the
first  quarter  of  2002  compared  to  the  comparable  period  in  2001.

We have an option to purchase 43 of the 46 Emeritrust communities and a right of
first  refusal  with  respect  to the remaining three communities, both of which
expire  June  30, 2003 (December 31, 2003, in the case of the five Emeritrust II
Development  communities).  The  option  must  be  exercised with respect to all
communities or may not be exercised at all.  If investor groups require Mr. Baty
to  purchase certain of the communities, upon the conditions described below, we
have the right to exercise our option within 60 days of receiving notice of this
action.  The  option  price  for  the  43 Emeritrust communities is equal to the
original  cost  of the communities of approximately $292 million, plus an amount
that  would  provide  the investor groups with an 18% rate of return, compounded
annually,  on  their  original  investment  of  $54.6  million  (less  any  cash
distributions  received).  In connection with the exercise of the option, we are
also  obligated  to  pay  certain  costs  and  fees.

The  management  agreements,  including  the  options  to  purchase  the related
communities,  are  subject  to  various  termination  provisions,  including
cross-default  provisions among all three groups of communities.  The management
agreement  for  the  Emeritrust  I  communities  may  be  terminated  if  cash
distributions  to  the  investor  group  do  not  meet  certain levels or if the
communities  fail to meet certain coverage requirements under the mortgage loan.
In  addition,  certain of the communities have been refinanced and, accordingly,
our  ability  to  exercise  the  option  will depend on whether we can assume or
refinance  the debt secured by these communities.  Termination of the management
agreements  or  failure  to  exercise  the  options  could result in the loss of
management  fees  and  the  substantial decrease in the number of communities we
operate.

Under  related  agreements, the investor groups may require Mr. Baty to purchase
between  ten  and  twelve  of  the  Emeritrust  communities,  depending  on  the
occurrence  of  any  one  of  the  following events:  (a) we do not exercise our
option  to  purchase  the  communities before the option expires, (b) we default
under  the management agreements, (c) Mr. Baty's net worth falls below a certain
threshold,  (d)  we  experience a change of control or (e) Mr. Baty ceases to be
our  chief  executive  officer.  If Mr. Baty is required to purchase some of the
communities,  he  will  also  have  the option to purchase all of the Emeritrust
communities  on  the  same  terms  under  which  we are entitled to purchase the
communities, subject to our prior right to do so within a specified time period.

OTHER  TRANSACTIONS

In  January  2002, we entered into management and accounting services agreements
with  Regent  Assisted  Living,  Inc. of Portland, Oregon, to manage 18 of their
communities.  The  agreements  will result in the Company receiving a fixed base
management  fee with provisions for incentive fees based upon improved community
performance.    In  February  2002,  two of the communities were sold to a third
party  with  whom we have other management agreements.  Concurrently, we entered
into a management agreement with them to continue managing these communities for
5%  of  gross  revenues.  In  March  2002,  we  began  managing  another  Regent
community.  In  April  2002,  one  community  that  we  had  been  managing for

                                       11
<PAGE>

Regent  was  sold  to  another entity and our management terminated.  Management
fees recognized from managing the Regent communities were approximately $380,000
in  the  first  quarter  of  2002.


In  March 2002, we entered into a 15-year master lease arrangement with HC REIT,
Inc. for four communities, two of which we previously held an ownership interest
in  and  two of which we previously leased from another lessor.  A related party
investor  held  a  50% economic interest in one community, located in Fairfield,
California.  Preceding  the  HC REIT transaction, we purchased the related party
investor's  economic interest for his investment basis of $2.1 million plus a 9%
return,  a  $2.95 million total payment.  We recognized a loss on the repurchase
of  approximately  $158,000,  which is included in "Other, Net" in the condensed
consolidated  statements  of  operations.  Another  community,  located  in Paso
Robles, California, was 50% owned by an outside investor.  Also preceding the HC
REIT  transaction, we purchased the remaining 50% interest in this community for
$2.65  million.  The  remaining  two  communities,  located  in  Hattiesburg,
Mississippi,  and  Urbana,  Illinois,  were  both  under operating leases with a
different  lessor.  Subsequent to the two purchase transactions, we entered into
a  master  lease  arrangement  for all four communities and recognized a loss of
approximately  $372,000,  which  is  recorded  in  "Other, net" in the condensed
consolidated  statements  of  operations.  The  loss  is  primarily comprised of
write-offs  of  existing  loan  fees  and  lease  acquisition costs for the four
buildings.  Additionally,  we  have  a deferred gain on sale associated with the
transaction  that  approximates  $1.8 million and new lease acquisition costs of
$1.0  million, both of which we will amortize over the lease period of 15 years.

RESULTS  OF  OPERATIONS

Critical  Accounting  Policies  and  Estimates.

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

We  believe  the  following critical accounting policies are more significant to
the  judgments  and  estimates  used  in  the  preparation  of  its  condensed
consolidated  financial  statements.  Revisions in such estimates are charged to
income  in  the  period in which the facts that give rise to the revision become
known.  We  maintain  allowances  for  doubtful  accounts  for  estimated losses
resulting from the inability of our residents to make required payments.  If the
financial  condition  of  our  residents  were  to  deteriorate, resulting in an
impairment  of  their  ability  to  make  payments, additional allowances may be
required.  We hold shares in ARV Assisted Living, Inc. amounting to less than 5%
of  its  shares.  ARV  is  publicly  traded  and has a volatile share price.  We
record  an  investment  impairment  charge  when  we believe this investment has
experienced  a  decline  in  value that is other than temporary.  Future adverse
changes  in  market  conditions  or  poor  operating  results  underlying  this
investment  could result in losses or an inability to recover the carrying value
of  the  investment  that  may  not  be  reflected  in this investment's current
carrying  value,  thereby possibly requiring an impairment charge in the future.
We  record a valuation allowance to reduce our deferred tax assets to the amount
that  is  more  likely  than  not to be realized, which at this time shows a net
asset  valuation  of  zero.  While  we have considered future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need for a
valuation  allowance, in the event we were to determine that we would be able to
realize  our  deferred  tax  assets  in the future in excess of our net recorded

                                       12
<PAGE>

amount,  an  adjustment  to  the deferred tax asset would increase income in the
period  such  determination  was  made.

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


<TABLE>
<CAPTION>

                                                                     Period-to-Period
                                                                        Percentage
                                                                         Increase
                                        Percentage of Revenues           (Decrease)
                                     Three Months     Three Months      Three Months
                                        ended            ended             ended
                                       March 31,        March 31,         March 31,
                                         2002             2001           2001-2002
                                    ---------------  ---------------  ---------------
<S>                                 <C>              <C>              <C>
Revenues . . . . . . . . . . . . .           100.0%           100.0%             3.7%
Expenses:
     Community operations. . . . .            56.9             59.4             (0.4)
     General and administrative. .            13.6             12.0             18.1
     Depreciation and amortization             5.1              5.2              1.9
     Facility lease expense. . . .            18.6             19.6             (1.5)
         Total operating expenses.            94.2             96.2              1.8
                                    ---------------  ---------------  ---------------
Income from operations . . . . . .             5.8              3.8             57.7
Other income (expense):
     Interest income . . . . . . .             0.3              0.7            (54.4)
     Interest expense. . . . . . .            (8.1)           (10.2)           (17.2)
     Other, net. . . . . . . . . .            (1.6)            (0.4)           296.5
         Net other expense . . . .            (9.4)            (9.9)            (1.5)
                                    ---------------  ---------------  ---------------
          Net loss . . . . . . . .           (3.6%)           (6.1%)          (38.5%)
                                    ===============  ===============  ===============
</TABLE>


Comparison  of  the  three  months  ended  March  31,  2002  and  2001
----------------------------------------------------------------------

Total  Operating  Revenues:  Total operating revenues for the three months ended
March  31,  2002,  increased by $1.3 million to $36.1 million from $34.8 million
for  the  comparable period in 2001, or 3.7%. The change in revenue is primarily
the  result  of  an  increase  in  management  fee revenue of $1.5 million and a
one-time  insurance  surcharge  of  approximately  $1.4  million,  of  which
approximately  $342,000 was recognized in the first quarter of 2002, offset by a
decrease  in  community  revenue  of  approximately  $580,000.  The  decrease in
community  revenue  is  due to the disposal of three communities, which were not
included  in  our  consolidated  portfolio in the first quarter of 2002 but were
included  in  the  comparable  quarter of 2001 and the decrease in the occupancy
rate  offset  by the increase in average monthly revenue per unit. The occupancy
rate decreased 3.4 percentage points to 82.0% for the first quarter of 2002 from
85.4% for the first quarter of 2001. Average monthly revenue per unit was $2,546
for  the  first quarter of 2002 compared to $2,345 for the comparable quarter of
2001,  an  increase  of  approximately  8.6%.  Improved  performance  of managed
communities  allowed  us  to  recognize  additional  base  management  fees  and
performance-driven  contingent  management  fees.

Community  Operations:  Community  operating expenses for the three months ended
March 31, 2002 and 2001, were approximately $20.6 million in both periods.  This
was  due to increases in some expenses being offset by decreases in others.  The
significant  decreases  occurred in food service expenses, business licenses and
taxes,  and  utilities.  The  decrease  in  expenses  was  primarily  due to the
disposal  of  three  communities,  which  were  not included in our consolidated
portfolio  in  the  first  quarter  of  2002 but were included in the comparable
quarter  of  2001.  The  significant  increases  were  in liability and workers'
compensation  insurance  premiums.  Community operating expenses as a percentage
of  total  operating

                                       13
<PAGE>

revenue  decreased to 56.9% in the first quarter of 2002 from 59.4% in the first
quarter  of  2001,  primarily  as  a  result  of  increased  revenues  and  cost
containment  measures.

General  and  Administrative:  General and administrative (G&A) expenses for the
three  months ended March 31, 2002, increased $756,000 to $4.9 million from $4.2
million  for  the comparable period in 2001, or 18.1%.  As a percentage of total
operating  revenues,  G&A expenses increased to 13.6% for the three months ended
March  31,  2002,  compared  to 12.0% for the three months ended March 31, 2001.
G&A  expenses rose primarily due to increases in the number of employees from an
abnormally  low  level in 2001, normal increases in employee salaries, and costs
related  to various employee benefit programs.  In addition, a limited number of
employees  have  been  added  to  support  the  growth  in  number of facilities
operated.  Since  more  than half of the communities we operate are managed, G&A
expense  as  a  percentage  of operating revenues for all communities, including
managed  communities,  may  be  more  meaningful  for industry-wide comparisons.
These  percentages  were 6.0% and 6.2% for the three months ended March 31, 2002
and  2001,  respectively.

Depreciation  and  Amortization:  Depreciation  and  amortization  for the three
months  ended  March  31, 2002 and 2001, were approximately $1.8 million in both
periods.  In 2002, this represents 5.1% of total operating revenues, compared to
5.2%  for  the  comparable  period  in  2001.  The  decrease  as a percentage of
revenues  is  due  to  increased  revenues.
Facility Lease Expense:  Facility lease expense for the three months ended March
31, 2002, was $6.7 million compared to $6.8 million for the comparable period of
2001,  representing  a decrease of $105,000, or 1.5%.  The decrease is primarily
attributable to the number of communities under leasing arrangements.  We leased
44  communities as of March 31, 2002, compared to 45 communities as of March 31,
2001.  Facility  lease  expense  as  a  percentage of revenues was 18.6% for the
three  months  ended  March 31, 2002, and 19.6% for the three months ended March
31,  2001.
Interest Income:  Interest income for the three months ended March 31, 2002, was
$109,000  versus  $239,000  for the comparable period of 2001.  This decrease is
primarily  attributable  to  declining  interest  rates.

Interest  Expense:  Interest  expense for the three months ended March 31, 2002,
was  $2.9  million  compared  to $3.5 million for the comparable period of 2001.
This decrease of $607,000, or 17.2%, is primarily attributable to lower interest
rates  on  our variable rate debt.  As a percentage of total operating revenues,
interest  expense  decreased to 8.1% from 10.2% for the three months ended March
31,  2002  and  2001, respectively, reflecting increased revenues in conjunction
with  lower  interest  rates  in  the  first  quarter  of  2002.

Other,  net:  Other,  net  (expense)  increased  by $424,000 to $567,000 for the
quarter  ended  March  31,  2002,  from $143,000 for the quarter ended March 31,
2001.  The  net  change  of $424,000 is comprised of the following items: During
the first quarter of 2002, we repurchased a related party's economic interest in
a  172-unit  community  resulting  in  an expense of $158,000. Additionally, the
sale-leaseback  of  two  communities  and re-lease of two additional communities
resulted  in  transaction  related expense of $372,000, for a combined impact of
$530,000  for  the  quarter  ended  March  31,  2002.  These expenses compare to
sale-leaseback  related  gains  in the quarter ended March 31, 2001 of $189,000.
This  increase  of  $719,000 is offset by both a decrease of $205,000 in our net
funding  obligation  expense  associated  with  our obligation to fund operating
deficits  of  the  Emeritrust  I and Emeritrust II Development communities and a
property  tax  refund  of  approximately  $64,000.

Preferred  dividends:  For  the  three months ended March 31, 2002 and 2001, the
preferred  dividends  were  approximately  $2.0  million  and  $1.6  million,
respectively.  Since  dividends  on  the  Series  A shares were not paid for six
consecutive  quarters,  the  Series  A dividends were calculated on a compounded
cumulative  basis,  retroactively.  This  caused  the  preferred dividends to be
approximately  $416,000  higher  in  the  first

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<PAGE>

 quarter  of  2002 as compared to the first quarter of 2001.  In addition, since
we have not paid these dividends for six consecutive quarters, both our Series A
and  Series B shareholders became entitled to elect one additional director each
to  our  board of directors at each annual shareholders' meeting until such time
we  have  paid  the  accrued  dividends.

Same  Community  Comparison

We  operated  57  communities on a comparable basis during both the three months
ended  March  31, 2002 and 2001.  The following table sets forth a comparison of
same  community  results  of  operations,  excluding  general and administrative
expenses,  for  the  three  months  ended  March  31,  2002  and  2001.

<TABLE>
<CAPTION>

                                        Three Months ended March 31,
                                              (In thousands)
                               -------------------------------------------------
                                                            Dollar   Percentage
                                   2002          2001       Change     Change
                               ------------  ------------  --------  -----------
<S>                            <C>           <C>           <C>       <C>
Revenue . . . . . . . . . . .  $    30,755   $    29,812   $   943          3.2%
Community operating expenses.      (18,875)      (18,173)     (702)         3.9
                               ------------  ------------  --------  -----------
  Community operating income.       11,880        11,639       241          2.1
Depreciation & amortization .       (1,413)       (1,367)      (46)         3.4
Facility lease expense. . . .       (6,114)       (5,849)     (265)         4.5
                               ------------  ------------  --------  -----------
    Operating income. . . . .        4,353         4,423       (70)        (1.6)
Interest expense, net . . . .       (1,908)       (2,711)      803        (29.6)
Other income (expense). . . .          (26)         (196)      170        (86.7)
                               ------------  ------------  --------
    Net income. . . . . . . .  $     2,419   $     1,516   $   903         59.6%
                               ============  ============  ========  ===========
</TABLE>


The  same communities represented $30.8 million or 85.1% of our total revenue of
$36.1  million for the first quarter of 2002.  Same community revenues increased
by  $943,000  or  3.2% for the quarter ended March 31, 2002, from the comparable
period  in 2001.  There was a one-time insurance surcharge of approximately $1.2
million charged to residents in the first quarter of 2002 of which approximately
$311,000 was recognized in the period.  The increases in same community revenues
were  primarily  due  to  rate increases and the recognized insurance surcharge,
which  increased  revenue  per  unit  by 7.7%, partially offset by a decrease in
average  occupancy to 81.7% in the first quarter of 2002 from 85.0% in the first
quarter  of  2001.  For  the  quarter ended March 31, 2002, we increased our net
income  to  $2.4  million  from  $1.5 million for the comparable period of 2001,
primarily  as  a  result of the revenue increases and decreased interest expense
resulting  from  lower  interest  rates.

LIQUIDITY AND CAPITAL RESOURCES

For the three months ended March 31, 2002, net cash used in operating activities
was  $754,000  compared to $786,000 for the comparable period in the prior year.
The  primary  components of this operating use of cash were the net loss of $1.3
million and an increase in prepaid insurance of $1.4 million in the three months
ended  March  31,  2002,  which  is  typical  in the first quarter of each year,
partially  offset by depreciation and amortization of $1.8 million.  The primary
components  of  the  operating  use  of cash in the three months ended March 31,
2001,  were  the  net  loss of $2.1 million and amortization of deferred gain of
$245,000,  partially  offset  by  depreciation and amortization of $1.6 million.

Net  cash  provided  by  investing  activities amounted to $20.1 million for the
three months ended March 31, 2002, and was comprised primarily of funds from the
HC  REIT  transaction previously discussed under "Other Transactions".  Net cash
provided by investing activities amounted to $767,000 for the three months ended
March  31,  2001,  primarily  due  to proceeds of $1.1 million received from the
sale/leaseback  of  one

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<PAGE>

 community  partially  offset  by  the  acquisition of property and equipment of
$271,000  and  investment  in  lease  acquisition  costs  of  $71,000.

For the three months ended March 31, 2002, net cash used in financing activities
was  $20.5  million primarily from long-term debt repayments, which include debt
repayments  related to the HC REIT transaction previously discussed under "Other
Transactions", partially offset by decreases in restricted deposits and proceeds
of  long-term  borrowings.  For  the three months ended March 31, 2001, net cash
used  in  financing  activities was $1.9 million primarily from the repayment of
short-term  and  long-term  borrowings.

In  February  2002,  we  reached  an agreement with Heller Healthcare Finance to
refinance three of the properties in our $71.8 million portfolio that previously
were  financed  by Deutsche Bank AG and matured December 14, 2001.  The new loan
of  $30.6  million  matures  February  2004  and  provides for monthly principal
payments  of  approximately  $40,000  in addition to interest at LIBOR plus four
percent.  This  refinancing  in turn satisfied our extension agreement dated May
31,  2001,  with  Deutsche  Bank AG to extend the maturity date of the remaining
debt  of  $46.3 million secured by seven properties in the original portfolio to
May  31,  2003,  provided  that  we  pay  to the lender a fee equal to 1% of the
outstanding  portfolio  balance  at  May  31,  2002.

We  have  incurred  significant  operating losses since our inception and have a
working  capital  deficit  of  $22.1 million, although $9.1 million of preferred
cash  dividends  is only due if declared by our board of directors.  To date, we
have  been dependent upon third party financing or disposition of assets to fund
operations.  We intend to continue to refinance or restructure debt as necessary
with  our  current third party lenders.  We cannot, however, guaranty that third
party  financing  and  refinancing  or  dispositions of assets will be available
timely or on terms acceptable to us.  Subsequent to March 31, 2002, we completed
a  lease  and  debt transaction having a beneficial impact on working capital of
$6.7 million in conjunction with the HC REIT master lease transaction more fully
discussed  in  the  Notes  to  Condensed  Consolidated  Financial Statements and
elsewhere  in  Management's  Discussion  and Analysis of Financial Condition and
Results  of  Operations.  We  believe  we  have  sufficient  funds  to  sustain
operations  at  least  through  March  31,  2003.

We are currently out of compliance with covenants on debt totaling $1.7 million,
which  will  be  repaid  in  June 2002 and is not cross-defaulted with any other
debt.  Many  of  our  other  debt  instruments  and  leases,  however,  contain
"cross-default"  provisions pursuant to which a default under one obligation can
cause  a  default  under  one  or  more  other obligations to the same lender or
lessor.  Such  cross-default  provisions  affect  14  owned  assisted  living
properties  and  36  operated  under  leases.  Accordingly, any event of default
could cause a material adverse effect on our financial condition if such debt or
leases  are  cross-defaulted.  Except  as described above, at March 31, 2002, we
are  in  compliance  with  our  debt  and  lease  covenants.

IMPACT  OF  INFLATION

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

FORWARD-LOOKING  STATEMENTS

"Safe  Harbor"  Statement  under the Private Securities Litigation Reform Act of
1995:  A  number  of the matters and subject areas discussed in this report that
are  not  historical  or  contain  current  facts  deal  with

                                       16
<PAGE>

 potential  future  circumstances, operations, and prospects.  The discussion of
these  matters  and  subject  areas  is  qualified  by  the  inherent  risks and
uncertainties surrounding future expectations generally, and also may materially
differ  from  our  actual  future experience as a result of such factors as: the
effects  of  competition  and economic conditions on the occupancy levels in our
communities;  our  ability  under  current  market  conditions  to  maintain and
increase  our  resident  charges in accordance with our rate enhancement program
without  adversely  affecting occupancy levels; our ability to control community
operation  expenses  without  adversely affecting the level of occupancy and the
level  of  resident charges; the ability of our operations to generate cash flow
sufficient to service our debt and other fixed payment requirements; our ability
to  find sources of financing and capital on satisfactory terms to meet our cash
requirements  to  the  extent  that  they  are  not  met by operations.  We have
attempted  to  identify,  in  context,  certain of the factors that we currently
believe  may  cause  actual  future  experience  and  results to differ from our
current  expectations  regarding  the  matter  or subject area discussed in this
report.  These  and  other  risks  and uncertainties are detailed in our reports
filed  with the Securities and Exchange Commission, including our Annual Reports
on  Form  10-K  and  Quarterly  Reports  on  Form  10-Q.


ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our  earnings  are  affected  by  changes  in  interest rates as a result of our
short-term  and  long-term  borrowings.  We  manage this risk by obtaining fixed
rate  borrowings  when possible. At March 31, 2002, our variable rate borrowings
totaled  $73.5  million.  If  market interest rates were to average 2% more, our
annual  interest  expense and net loss would increase $1.5 million.  This amount
is  determined  by  considering the impact of hypothetical interest rates on our
outstanding variable rate borrowings as of March 31, 2002, and does not consider
changes in the actual level of borrowings that may occur subsequent to March 31,
2002.  This  analysis also does not consider the effects of the reduced level of
overall  economic  activity  that  could  exist  in  such an environment, or our
current  funding  requirements  for  the  Emeritrust  communities,  nor  does it
consider  actions  that  management  might  be  able to take with respect to our
financial  structure  to  mitigate  the  exposure  to  such  a  change.


                           PART II. OTHER INFORMATION

ITEM 5.  OTHER INFORMATION

On  April 1, 2002, in conjunction with the HC REIT master lease transaction more
fully  discussed  in  the  Notes  to Condensed Consolidated Financial Statements
under  "Property  and  Equipment" and in Management's Discussion and Analysis of
Financial  Condition  and  Results of Operations under "Other Transactions", the
Company  received  $6.7  million  in  proceeds from a $6.8 million debt issuance
under  a  separate  loan  agreement  with  HC REIT.  The loan agreement requires
interest  only  payments  and  bears interest at 12% per annum with fixed annual
increases  of  50  basis  points  for  a  term  of  36  months.

In  May  2002,  Emeritus  commenced  management  of eight communities previously
operated by Horizon Bay Management L.L.C., a national seniors housing management
company  that  manages  the  WHSLH Realty, L.L.C., ("WHSLH") portfolio of senior
housing  properties.

The  management  agreement structure replaces the originally announced agreement
where  Emeritus  was  to  have  directly  assumed  the  current  leases on seven
communities and the mortgage on an eighth, comprising 617 units in Louisiana and
Texas.  Entities  controlled  by  Daniel  R. Baty, Chairman and CEO of Emeritus,
have  agreed  to  assume  the  current  leases  and mortgage and will engage the
Company  as manager.  Under the terms of the management arrangement, the Company
will receive a management fee equal to 5% of revenue and has the right to assume
the  leases and mortgage at any time during the five-year term of the management
agreement.  Horizon Bay has agreed to fund operating losses of the Baty entities
to the extent of $2.3 million in the first twelve months and $1.1 million in the
second  twelve  months  following  the  close.

                                       17
<PAGE>

 The  Company  has agreed to fund any operating losses in excess of these limits
over  the  five-year  lease  term.

Items 1 through 4 and 6 are not applicable.

                                       18
<PAGE>


                                   SIGNATURES

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

Dated:  May 15, 2002

                                         EMERITUS CORPORATION
                                             (Registrant)


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


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<PAGE>