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 June 30, 2001

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

                        Commission file number   1-14012

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

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

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

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

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


As  of  July  31,  2001, there were 10,180,626 shares of the Registrant's Common
Stock,  par  value  $.0001,  outstanding.

<PAGE>
                              EMERITUS CORPORATION

                                      INDEX


                         Part I.  Financial Information

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

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

Condensed Consolidated Statements of Operations for the
Three Months and Six Months ended June 30, 2001 and 2000                       2

Condensed Consolidated Statements of Cash Flows for the Six
Months ended June 30, 2001 and 2000                                            3

Notes to Condensed Consolidated Financial Statements                           4

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                             6


Item 3.  Quantitative and Qualitative Disclosures About Market Risk           13


                           Part II.  Other Information

Item 6.  Exhibits and Reports on Form 8-K                                     13

     Signature                                                                14


Note:  Items 1, 2, 3, 4 and 5 of Part II are omitted because they are not
applicable.

<PAGE>

<TABLE>
<CAPTION>

                                              EMERITUS CORPORATION
                                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 (In thousands)


                                                     ASSETS
                                                                                      June 30,    December 31,
                                                                                        2001          2000
                                                                                     ----------  --------------
                                                                                    (unaudited)
<S>                                                                                  <C>         <C>
Current Assets:
 Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   7,297   $       7,496
 Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,390             425
 Current portion of restricted deposits . . . . . . . . . . . . . . . . . . . . . .        780             361
 Trade accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . .      1,166           1,817
 Other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,930           4,969
 Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . .      4,158           3,072
 Property held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,973           6,475
                                                                                     ----------  --------------
 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     19,694          24,615
                                                                                     ----------  --------------
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .    132,319         134,762
Property held for development . . . . . . . . . . . . . . . . . . . . . . . . . . .        312             310
Notes receivable from and investments in affiliates . . . . . . . . . . . . . . . .      3,576           4,380
Restricted deposits, less current portion . . . . . . . . . . . . . . . . . . . . .      5,283           5,907
Lease acquisition costs, net. . . . . . . . . . . . . . . . . . . . . . . . . . . .      5,625           5,983
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,670           2,122
                                                                                     ----------  --------------
 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 169,479   $     178,079
                                                                                     ==========  ==============

                                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
 Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $       -   $       1,650
 Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . .     75,558          80,978
  Trade accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,651           3,143
 Accrued employee compensation and benefits . . . . . . . . . . . . . . . . . . . .      2,738           2,449
 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      3,039           2,991
 Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,981           1,806
 Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      8,254           9,221
 Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .      6,293           3,544
                                                                                     ----------  --------------
 Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    100,514         105,782
                                                                                     ----------  --------------
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,220           2,132
Deferred gain on sale of communities. . . . . . . . . . . . . . . . . . . . . . . .     18,532          17,709
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . . . . . .     61,386          60,499
Convertible debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     32,000          32,000
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .        405             256
                                                                                     ----------  --------------
 Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    215,057         218,378
                                                                                     ----------  --------------
Minority interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        408             504
Redeemable preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     25,000          25,000
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . .          -               -
Shareholders' Deficit:
Preferred stock, $.0001 par value. Authorized 70,000 shares; issued and outstanding
    30,609 and 30,609 at June 30, 2001, and December 31, 2000, respectively . . . .          -               -
Common stock, $.0001 par value. Authorized 40,000,000 shares; issued and
    outstanding 10,150,598 and 10,120,045 shares at June 30, 2001, and
    December 31, 2000, respectively . . . . . . . . . . . . . . . . . . . . . . . .          1               1
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     66,995          66,373
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . .       (122)         (1,087)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (137,860)       (131,090)
                                                                                     ----------  --------------
 Total shareholders' deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . .    (70,986)        (65,803)
                                                                                     ----------  --------------
 Total liabilities and shareholders' deficit. . . . . . . . . . . . . . . . . . . .  $ 169,479   $     178,079
                                                                                     ==========  ==============
</TABLE>

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

                                        1
<PAGE>

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

                                               Three Months        Six Months
                                              ended June 30,      ended June 30,
                                              2001      2000      2001      2000
                                            --------  --------  --------  ---------
<S>                                         <C>       <C>       <C>       <C>
Revenues:
  Community revenue. . . . . . . . . . . .  $32,728   $28,842   $65,504   $ 57,923
  Other service fees . . . . . . . . . . .      523       363       990        760
  Management fees. . . . . . . . . . . . .    1,926     1,145     3,464      2,233
                                            --------  --------  --------  ---------
          Total operating revenues . . . .   35,177    30,350    69,958     60,916

Expenses:
  Community operations . . . . . . . . . .   19,900    18,345    40,547     38,300
  General and administrative . . . . . . .    4,670     3,696     8,837      7,452
  Depreciation and amortization. . . . . .    1,673     1,709     3,297      3,367
  Rent . . . . . . . . . . . . . . . . . .    6,792     5,978    13,584     11,923
                                            --------  --------  --------  ---------
          Total operating expenses . . . .   33,035    29,728    66,265     61,042
                                            --------  --------  --------  ---------
          Income (loss) from operations. .    2,142       622     3,693       (126)

Other income (expense):
  Interest income. . . . . . . . . . . . .      318       329       558        694
  Interest expense . . . . . . . . . . . .   (3,535)   (3,753)   (7,068)    (7,391)
  Other, net . . . . . . . . . . . . . . .     (347)     (780)     (722)    (2,057)
                                            --------  --------  --------  ---------
          Net other expense. . . . . . . .   (3,564)   (4,204)   (7,232)    (8,754)
                                            --------  --------  --------  ---------

          Net loss . . . . . . . . . . . .   (1,422)   (3,582)   (3,539)    (8,880)

Preferred stock dividends. . . . . . . . .    1,620     1,089     3,231      2,164
                                            --------  --------  --------  ---------
          Net loss to common shareholders.  $(3,042)  $(4,671)  $(6,770)  $(11,044)
                                            ========  ========  ========  =========

Loss per common share - basic and diluted:

    Loss before preferred stock dividends.  $ (0.14)  $ (0.35)  $ (0.34)  $  (0.88)

    Preferred stock dividends. . . . . . .    (0.16)    (0.11)    (0.32)     (0.21)
                                            --------  --------  --------  ---------
Loss per common share. . . . . . . . . . .  $ (0.30)  $ (0.46)  $ (0.66)  $  (1.09)
                                            ========  ========  ========  =========

Weighted average number of common shares
      outstanding - basic and diluted. . .   10,151    10,079    10,136     10,138
                                            ========  ========  ========  =========
</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)

                                                                                  Six Months
                                                                                 ended June 30,
                                                                                 2001      2000
                                                                               --------  ---------
<S>                                                                            <C>       <C>
Net cash used in operating activities (including changes in all operating
     assets and liabilities). . . . . . . . . . . . . . . . . . . . . . . . .  $(1,762)  $ (3,963)

Cash flows from investing activities:
  Acquisition of property and equipment . . . . . . . . . . . . . . . . . . .     (767)    (9,494)
  Acquisition of property held for development. . . . . . . . . . . . . . . .       (2)      (564)
  Proceeds from sale of property and equipment. . . . . . . . . . . . . . . .    1,014        609
  Increase in lease acquisition costs . . . . . . . . . . . . . . . . . . . .     (126)         -
  Construction expenditures - leased communities. . . . . . . . . . . . . . .        -       (197)
  Repayments from (advances to) affiliates and other managed communities. . .    4,267        (94)
  Investment in Senior Med. . . . . . . . . . . . . . . . . . . . . . . . . .        -     (1,303)
                                                                               --------  ---------
          Net cash provided by (used in)  investing activities. . . . . . . .    4,386    (11,043)
                                                                               --------  ---------

Cash flows from financing activities:
  Increase (decrease) in restricted deposits. . . . . . . . . . . . . . . . .      205       (793)
  Decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . .        -     13,500
  Payments related to the sale of preferred stock . . . . . . . . . . . . . .        -       (503)
  Repayment of short-term borrowings. . . . . . . . . . . . . . . . . . . . .   (1,650)    (1,000)
  Debt issue and other financing costs. . . . . . . . . . . . . . . . . . . .       (7)       (86)
  Proceeds from long-term borrowings. . . . . . . . . . . . . . . . . . . . .      144      7,800
  Repayment of long-term borrowings . . . . . . . . . . . . . . . . . . . . .   (1,515)    (2,118)
  Payment of dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . .        -     (3,308)
  Repurchase of common stock. . . . . . . . . . . . . . . . . . . . . . . . .        -     (1,245)
                                                                               --------  ---------
          Net cash provided by (used in) financing activities . . . . . . . .   (2,823)    12,247
                                                                               --------  ---------

          Effect of exchange rate changes on cash . . . . . . . . . . . . . .        -         (3)
                                                                               --------  ---------
          Net increase (decrease) in cash and cash equivalents. . . . . . . .     (199)    (2,762)

Cash and cash equivalents at the beginning of the period. . . . . . . . . . .    7,496     12,860
                                                                               --------  ---------

Cash and cash equivalents at the end of the period. . . . . . . . . . . . . .  $ 7,297   $ 10,098
                                                                               ========  =========

Supplemental disclosure of cash flow information cash paid during the period
    for interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 6,231   $  6,971
                                                                               ========  =========

Noncash investing and financing activities:
  Transfer of property and equipment from (to) property held for sale . . . .  $    18   $    (50)
                                                                               ========  =========

Note receivable from buyer in sale/leaseback. . . . . . . . . . . . . . . . .  $   635   $      -
                                                                               ========  =========

Assumption of debt by buyer in sale/leaseback . . . . . . . . . . . . . . . .  $ 3,162   $      -
                                                                               ========  =========

Unrealized holding gains (losses) in investment securities. . . . . . . . . .  $   965   $   (382)
                                                                               ========  =========

Accrued preferred stock dividends . . . . . . . . . . . . . . . . . . . . . .  $ 3,231   $  2,164
                                                                               ========  =========
</TABLE>

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

                                        3
<PAGE>

                              EMERITUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


BASIS  OF  PRESENTATION

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

PROPERTY  HELD  FOR  SALE

Emeritus  currently  has  three  properties  being  held  for  sale.

LONG-TERM  DEBT

The  current  portion  of long-term debt includes approximately $73.0 million of
mortgage  debt  that  originally  matured  in  April  2001.  On June 6, 2001, we
reached an agreement with the lender to extend the maturity date to December 14,
2001.  We may further extend the maturity date to May 31, 2002, provided that we
pay  down  the  mortgage  debt by at least $30 million on or before December 14,
2001.  In  the alternative, we can provide a commitment for alternative mortgage
financing  in the amount of at least $30 million for three designated properties
secured  by  the  mortgage  debt  or provide an executed agreement to sell those
three  properties  to  a  third  party  for  at least $30 million, provided such
financing  or  sale closes on or before March 15, 2002.  Subject to paying a fee
equal  to  1%  of the outstanding loan balance on or before May 31, 2002, we may
further  extend  the  maturity  to May 31, 2003.  Subject to our exercise of the
applicable  extension,  the agreement requires us to (i) make principal payments
of  $200,000  per  month, from June 2001 through May 2002 and $250,000 per month
from  June 2002 through May 2003 and (ii) pay interest at floating rate equal to
the  Eurodollar  Rate  plus  3% through May 2002 and the Eurodollar Rate plus 4%
from  June  2002  through  May  2003. We are currently in discussions with other
potential  lenders  regarding  meeting  the  December 14, 2001, requirement in a
timely  manner.

LOSS  PER  SHARE

Basic  net  loss  per  share  is  computed  based  on  weighted  average  shares
outstanding  and excludes any potential dilution.  Diluted net loss per share is
computed  on the basis of the weighted average number of shares outstanding plus
dilutive  potential  common shares using the treasury stock method.  The capital
structure  of  Emeritus  includes   convertible   debentures,   redeemable   and
non-redeemable  convertible  preferred  stock,  common stock warrants, and stock
options.  The  assumed  conversion  and  exercise  of these securities have been
excluded  from  the calculation of diluted net loss per share since their effect
is  anti-dilutive.  We have calculated loss per common share on a dilutive basis
without  consideration of 8,087,358 and 8,411,928 common shares at June 30, 2001
and  2000,  respectively,  related to outstanding options, warrants, convertible
debentures,  and  convertible  preferred  stock.

UNREALIZED  HOLDING  GAINS  (LOSSES)  ON  INVESTMENT  SECURITIES

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

                                        4
<PAGE>

                              EMERITUS CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (unaudited)


OTHER  COMPREHENSIVE  INCOME

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


<TABLE>
<CAPTION>
                                                        Three Months   Six Months
                                                           ended          ended
                                                          June 30,       June 30,
                                                       2001    2000   2001    2000
                                                       -----  ------  -----  ------
<S>                                                    <C>    <C>     <C>    <C>
  Other comprehensive income (loss):
     Foreign currency translation adjustments . . . .  $  -   $  -    $  -   $  (3)
     Unrealized holding gains (losses) on investment
         securities . . . . . . . . . . . . . . . . .    861   (351)    965   (382)
            Total other comprehensive income (loss) .  $ 861  $(351)  $ 965  $(385)
                                                       =====  ======  =====  ======
</TABLE>

STOCK  OPTIONS

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

NEW  ACCOUNTING  PRONOUNCEMENT

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

                                        5
<PAGE>

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

OVERVIEW

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

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

In  our  consolidated  portfolio,  our rate enhancement program brought about an
increase  in  average  monthly revenue per occupied unit to $2,374 for the first
two  quarters  of  2001  from  $2,172  for the first two quarters of 2000.  This
represents  an  average revenue increase of $202 per month per occupied unit, or
9%.  Total  occupied units increased by 292 units between June 30, 2001 and June
30,  2000  primarily  as a result of leasing four previously managed communities
and  disposing  of one community.   The average occupancy rate declined slightly
to  84.8%  in  the  first  two  quarters of 2001 from 86.0% during the first two
quarters  of  2000.

In  our  total  operated portfolio, which includes managed communities, our rate
enhancement  program  brought  about  an increase in average monthly revenue per
occupied  unit  to $2,261 for the first two quarters of 2001 from $2,058 for the
first two quarters of 2000.  This represents an average revenue increase of $203
per  month  per  occupied  unit,  or  10%.  The average occupancy rate decreased
slightly  to 82.0% in the first two quarters of 2001 from 82.2% during the first
two  quarters  of  2000.

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

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

<TABLE>
<CAPTION>
                                              As of June 30,   As of December 31,  As of December 31,
                                                  2001                 2000                 1999
                                         ------------------- -------------------  -------------------
                                         Buildings    Units   Buildings    Units   Buildings    Units
                                         ----------  -------  ----------  -------  ----------  -------
<S>                                      <C>         <C>      <C>         <C>      <C>         <C>
Owned (1) . . . . . . . . . . . . . . .         16    1,579          16    1,579          16    1,572
Leased (1). . . . . . . . . . . . . . .         44    3,629          45    3,700          40    3,302
Managed/Admin Services. . . . . . . . .         71    6,710          69    6,528          68    6,247
Joint Venture/Partnership . . . . . . .          5      605           5      605           5      605
                                         ----------  -------  ----------  -------  ----------  -------
     Operated Portfolio . . . . . . . .        136   12,523         135   12,412         129   11,726

     Percentage increase (2). . . . . .          1%       1%          5%       6%         14%      18%

Pending Acquisitions                                                                       2      206
New Developments (3). . . . . . . . . .          2      220           2      200           6      604
                                         ----------  -------  ----------  -------  ----------  -------
     Total. . . . . . . . . . . . . . .        138   12,743         137   12,612         137   12,536
                                         ----------  -------  ----------  -------  ----------  -------

     Percentage increase (decrease) (2)          1%       1%          0%       1%       (12%)     (5%)
</TABLE>
--------
(1)  Included in our consolidated portfolio of communities.
(2)  The percentage increase (decrease) indicates the change from the prior
     period.
(3)  The two communities under development at June 30, 2001, are being
     developed by third parties, but will be managed by us upon completion.

                                        6
<PAGE>

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

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

We  have  incurred  net  operating losses and negative cash flows from operating
activities  since  our  inception.  As  of  June 30, 2001, we had an accumulated
deficit of approximately $137.9 million.  These losses resulted from a number of
factors,  including:

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

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

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

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

RESULTS  OF  OPERATIONS

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

<TABLE>
<CAPTION>

                                                                        Period to Period
                                         Percentage of Revenues    Percentage Increase (Decrease)
                                       Three Months     Six Months   Three Months  Six Months
                                          ended           ended          ended       ended
                                         June 30,        June 30,       June 30,    June 30,
                                        --------        --------       --------     --------
                                      2001    2000     2001    2000    2000-2001   2000-2001
<S>                                  <C>     <C>      <C>     <C>      <C>         <C>
Revenues. . . . . . . . . . . . . .  100.0%   100.0%  100.0%   100.0%       15.9%       14.8%
Expenses:
     Community operations . . . . .   56.5     60.5    58.0     62.9         8.5         5.9
     General and administrative . .   13.3     12.2    12.7     12.2        26.3        18.6
     Depreciation and amortization.    4.8      5.6     4.7      5.5        (2.1)       (2.1)
     Rent . . . . . . . . . . . . .   19.3     19.7    19.4     19.6        13.6        13.9
         Total operating expenses .   93.9     98.0    94.8    100.2        11.1         8.6
                                     ------  -------  ------  -------  ----------  ----------
Income (loss) from operations . . .    6.1      2.0     5.2     (0.2)      244.5    (3,031.0)
Other income (expense)
     Interest income. . . . . . . .    0.9      1.1     0.8      1.1        (3.3)      (19.6)
     Interest expense . . . . . . .  (10.0)   (12.4)  (10.1)   (12.1)       (5.8)       (4.4)
     Other, net . . . . . . . . . .   (1.0)    (2.6)   (1.0)    (3.4)      (55.5)      (64.9)
         Net other expense. . . . .  (10.1)   (13.9)  (10.3)   (14.4)      (15.2)      (17.4)
                                     ------  -------  ------  -------  ----------  ----------

         Net loss . . . . . . . . .  (4.0%)  (11.9%)  (5.1%)  (14.6%)     (60.3%)     (60.1%)
                                     ======  =======  ======  =======  ==========  ==========

</TABLE>
                                        7
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS --CONTINUED

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

Total  Operating  Revenues:  Total operating revenues for the three months ended
June 30, 2001, increased by $4.8 million to $35.2 million from $30.4 million for
the comparable period in 2000, or 15.9%.  The change in revenue is primarily the
result  of  an  increase  in the number of occupied units through the leasing of
four  previously  managed  communities  offset  by the sale of one community and
increases  in  the  average monthly revenue per unit due to our rate enhancement
program.  Average  monthly revenue per unit was $2,404 for the second quarter of
2001  compared  to  $2,183  for  the  comparable quarter of 2000, an increase of
approximately  10%.  These increases were partially offset by a small decline in
the  occupancy  rate of 0.9 percentage points to 84.3% for the second quarter of
2001  from  85.5% for the second quarter of 2000.  An increase in management fee
revenue of $781,000 contributed to increased revenue, as improved performance of
managed communities also allowed us to reduce our related funding obligation for
these  communities  as  discussed  below  in  Other,  net.

Community  Operations:  Community  operating expenses for the three months ended
June  30,  2001, increased  $1.6 million to $19.9 million from $18.3 million for
the  comparable period in 2000, or 8.5%.  This was generally due to the addition
of four leased communities that had been formerly managed, offset by the sale of
one  community,  and  above  average  increases  in  utility costs and liability
insurance  premiums.  Community  operating  expenses  as  a  percentage of total
operating  revenue declined to 56.5% in the second quarter of 2001 from 60.5% in
the second quarter of 2000, primarily as a result of increased revenues and cost
containment  measures.

General  and  Administrative:  General and administrative (G&A) expenses for the
three  months  ended June 30, 2001, increased $973,000 to $4.7 million from $3.7
million  for  the comparable period in 2000, or 26.3%.  As a percentage of total
operating  revenues,  G&A expenses increased to 13.3% for the three months ended
June  30,  2001,  compared  to  12.2%  for the three months ended June 30, 2000.
Approximately  $400,000  of  the increase is attributable to accruals of certain
employee  expenses  arising  from  changes in employee policies and reserves for
certain  payables,  none  of which items were individually material.  Otherwise,
G&A  expenses rose primarily due to increases in the number of employees from an
abnormally  low  level  in  2000,  normal increases in employee salaries and the
effects  of  higher premiums and deductible levels associated with our liability
insurance  coverage,  and  telephone  expense.

Depreciation  and  Amortization:  Depreciation  and  amortization  for the three
months  ended June 30, 2001, and June 30, 2000, were approximately $1.7 million.
In  2001, this represents 4.8% of total operating revenues, compared to 5.6% for
the  comparable period in 2000.  The decrease as a percentage of revenues is due
to  increased revenues.  Rent:  Rent expense for the three months ended June 30,
2001,  was  $6.8  million  compared to $6.0 million for the comparable period of
2000,  representing an increase of $814,000, or 13.6%. The increase is primarily
attributable to the number of communities under leasing arrangements.  We leased
44  communities  as  of June 30, 2001, compared to 40 communities as of June 30,
2000.  Rent  as a percentage of revenues was essentially unchanged for the three
months  ended  June  30,  2001 and 2000, respectively.

Interest Income:  Interest income for  the three months ended June 30, 2001, was
$318,000 versus $329,000 for the  comparable  period of 2000.  This decrease is
primarily attributable to a  decrease  in  available invested cash and declining
interest rates.

Interest  Expense:  Interest  expense  for the three months ended June 30, 2001,
was  $3.5  million  compared  to $3.7 million for the comparable period of 2000.
This decrease of  $218,000, or 5.8%, is primarily attributable to lower interest
rates  on  our variable rate debt.  As a percentage of total operating revenues,
interest  expense  declined  to 10.0% from 12.4% for the three months ended June
30,  2001  and  2000, respectively, reflecting increased revenues in conjunction
with  lower  interest  rates  in  the  second  quarter  of  2001.

                                        8

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


Other,  net:  Other,  net  (a net expense) decreased by $433,000 to $347,000 for
the  quarter  ended  June 30, 2001, from $780,000 for the quarter ended June 30,
2000,  or  55.5%.  In  December  1998  and  March  1999,  respectively, we began
managing  two  groups  of  communities  that we formerly leased or owned and, in
connection  with  the  management agreements, have obligations to fund operating
deficits  of these communities.  We refer to these communities as the Emeritrust
I  and  Emeritrust  II  Development  communities.  Our  net  obligation  to fund
operating  deficits for the these communities declined to $50,000 for the second
quarter  of 2001, compared to an obligation of $336,000 in the second quarter of
2000,  a  reduction of $286,000.  Under the management agreements, the reduction
in funding obligation also enabled us to realize $579,000 in management fees for
the  second  quarter  of  2001 from these communities compared to $83,000 in the
comparable  period  of 2000.  This contributed to the increase in management fee
revenue  referred  to  in  "Total  Operating  Revenues".

Preferred  dividends:  For  the  three months ended June 30, 2001, the preferred
dividends  were  $1.6  million  as  compared  to $1.1 million for the comparable
period  of  2000, for an increase of $531,000, or 48.8%.  The primary reason for
this  is  that  we  are  accruing  dividends  for both the Series A and Series B
preferred  stock at higher rates due to non-payment of cash dividends on payment
dates  specified  in  the  terms  of  the  respective preferred  stocks.

Six  months  ended  June  30,  2001,  compared to six months ended June 30, 2000

Total  Operating  Revenues:  Total  operating  revenues for the six months ended
June 30, 2001, increased by $9.1 million to $70.0 million from $60.9 million for
the  comparable  period in 2000, or 14.8%.  The change in revenue is primarily a
result  of  an  increase  in the number of occupied units through the leasing of
four  previously  managed communities offset by the disposition of one community
and  increases  in  the  average  monthly  revenue  per  unit  due  to  our rate
enhancement  program.  These  increases were partially offset by a small decline
in  the  occupancy  rate  of  1.2  percentage  points to 84.8% for the first two
quarters  of 2001 from 86.0% for the first two quarters of 2000.  An increase in
management  fee revenue of $1.2 million contributed to increased revenue, as the
improved  performance  of  managed  communities  also  allowed  us to reduce our
related  funding  obligation  for these communities as discussed below in Other,
net.

Community Operations: Community operating expenses for the six months ended June
30,  2001,  increased  $2.2  million to $40.5 million from $38.3 million for the
comparable  period  in  2000,  or  5.9%.  The  increase  in  community operating
expenses  is  principally  a  result  of the addition of four previously managed
communities  offset  by  the  disposition  of  one  community, and above average
increases  in  utility  costs  and   liability   insurance  premiums.  Community
operating  expenses as a percentage of total operating revenue declined to 58.0%
in  the first two quarters of 2001 from 62.9% in the first two quarters of 2000,
primarily  as  a  result  of  increased  revenues and cost containment measures.

General  and  Administrative:  General and administrative (G&A) expenses for the
six months ended June 30, 2001, increased $1.3 million to $8.8 million from $7.5
million  for the comparable period in 2000, or 18.6 %.  As a percentage of total
operating  revenues,  G&A  expenses  increased to 12.7% for the six months ended
June  30,  2001,  compared  to  12.2%  for  the  six months ended June 30, 2000.
Approximately  $400,000  of  the increase is attributable to accruals of certain
employee  expenses  arising  from  changes in employee policies and reserves for
certain  payables,  none  of which items were individually material.  Otherwise,
G&A  expenses rose primarily due to increases in the number of employees from an
abnormally low level in 2000, normal increases in employee salaries, the effects
of higher premiums and deductible levels associated with our liability insurance
coverage,  and  telephone  expense.

Depreciation  and Amortization: Depreciation and amortization for the six months
ended  June  30,  2001,  were $3.3 million, or 4.7% of total operating revenues,
compared to $3.4 million, or 5.5% of total operating revenues for the comparable
period  in  2000,  for  a  total  decrease of $70,000, or 2.1%.  The decrease is

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


principally  the  result  of a decrease in the depreciable asset base due to the
sale and leaseback of one community with its attendant furnishings and equipment
during  the  first  quarter  of  2001.

Rent:  Rent  expense  for  the six months ended June 30, 2001, was $13.6 million
compared  to  $11.9  million  for the comparable period of 2000, representing an
increase  of  $1.7  million, or 13.9%. The increase is primarily attributable to
the  number of communities under leasing arrangements.  We leased 44 communities
as  of June 30, 2001, compared to 40 communities as of June 30, 2000.  Rent as a
percentage  of  revenues was essentially unchanged for the six months ended June
30,  2001  and  2000,  respectively.

Interest  Income:  Interest  income  for the six months ended June 30, 2001, was
$558,000  versus  $694,000 for the comparable period of 2000.  This represents a
decrease  of  $136,000, or 19.6%, and is attributable to a decrease in available
invested  cash  and  declining  interest  rates.

Interest  Expense:  Interest expense for the six months ended June 30, 2001, was
$7.1  million  compared to $7.4 million for the comparable period of 2000.  This
decrease  of  $323,000,  or  4.4%,  is  primarily attributable to lower interest
rates  on  our variable rate debt.  As a percentage of total operating revenues,
interest  expense declined to 10.1% from 12.1% for the six months ended June 30,
2001  and  2000, respectively, reflecting increased revenues in conjunction with
lower  interest  rates  in  the  first  two  quarters  of  2001.

Other,  net:  Other, net (a net expense) decreased by $1.3 million, or 64.9%, to
$722,000  for  the six months ended June 30, 2001, from $2.1 million for the six
months  ended  June 30, 2000.  In December 1998 and March 1999, respectively, we
began  managing  two groups of communities that we formerly leased or owned and,
in connection with the management agreements, have obligations to fund operating
deficits  of these communities.  We refer to these communities as the Emeritrust
I  and  Emeritrust  II  Development  communities.  Our  net  obligation  to fund
operating  deficits for these communities declined to $280,000 for the first two
quarters  of  2001  from  $1.2  million  for  the  first two quarters of 2000, a
reduction of $920,000.  Under the management agreement, the reduction in funding
obligation  also enabled us to realize $875,000 in management fees for the first
two  quarters  of  2001  from  these  communities  compared  to  $83,000  in the
comparable  period  of 2000.  This contributed to the increase in management fee
revenue  referred  to  in  "Total  Operating  Revenues".

Preferred  dividends:  For  the  six  months  ended June 30, 2001, the preferred
dividends  were  $3.2  million  as  compared  to $2.2 million for the comparable
period  of  2000, for an increase of $1.0 million, or 49.3%.  The primary reason
for  this  is  that we are accruing dividends for both the Series A and Series B
preferred  stock at higher rates due to non-payment of cash dividends on payment
dates  specified  in  the  terms  of  the  respective  preferred  stocks.

                                       10

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

Same  Community  Comparison

We  operated  57  communities on a comparable basis during both the three months
ended  June  30,  2001 and 2000.  The following table sets forth a comparison of
same  community  results  of  operations,  excluding  general and administrative
expenses,  for  the  three  months  ended  June  30,  2001  and  2000.
<TABLE>
<CAPTION>
                                     Three Months ended June 30,
                                           (In thousands)
                                                     Dollar   Percentage
                                2001       2000      Change     Change
                              ---------  ---------  --------  -----------
<S>                           <C>        <C>        <C>       <C>
Revenue. . . . . . . . . . .  $ 30,056   $ 27,944   $ 2,112          7.6%
Community operating expenses   (17,588)   (17,343)     (245)         1.4
                              ---------  ---------  --------  -----------
  Community operating income    12,468     10,601     1,867         17.6
Depreciation & amortization.    (1,407)    (1,350)      (57)         4.2
Rent . . . . . . . . . . . .    (5,965)    (5,740)     (225)         3.9
                              ---------  ---------  --------  -----------
    Operating income . . . .     5,096      3,511     1,585         45.1
Interest expense, net. . . .    (2,548)    (2,860)      312        (10.9)
Other expense. . . . . . . .      (141)       (95)      (46)        48.4
                              ---------  ---------  --------  -----------
    Net income . . . . . . .  $  2,407   $    556   $ 1,851        332.9%
                              =========  =========  ========  ===========

</TABLE>

The same communities represented $30.1 million or 85.4% of our total revenue for
the  second  quarter of 2001.  Same community revenues increased by $2.1 million
or 7.6% for the quarter ended June 30, 2001, from the comparable period in 2000.
The  increase  in revenue is attributable to the operational success of our rate
enhancement  program.  The  same  community  average  monthly  revenue  per unit
increased  to  $2,409  for  the quarter ended June 30, 2001, from $2,180 for the
comparable  quarter in 2000.  This is an increase in average monthly revenue per
unit  of  $229  or  11%.  These  results  were  partially offset by a decline in
occupancy  to  84.0%  in  the  second  quarter  of 2001 from 85.8% in the second
quarter  of  2000.  For  the  quarter  ended June 30, 2001, we increased our net
income  to  $2.4  million  from $556,000 for the comparable period of 2000.  The
improvement  is  primarily attributable to an improvement in community operating
margin  due  to  improved  cost  control  measures  and  rate  enhancement.

LIQUIDITY  AND  CAPITAL  RESOURCES

For  the  six  months ended June 30, 2001, net cash used by operating activities
was $1.8 million compared to $4.0 million for the comparable period in the prior
year.  The  primary  component  of the operating use of cash was the net loss of
$3.5  million  and  $8.9 million in the six months ended June 30, 2001 and 2000,
respectively.

Net  cash  provided by investing activities amounted to $4.4 million for the six
months ended June 30, 2001, and was comprised primarily of repayment of advances
by  third  parties and affiliates of $4.3 million and proceeds received from the
sale/leaseback  of  one community, which was partially offset by the acquisition
of  property,  equipment, and new leases.  Net cash used in investing activities
amounted  to $11.0 million for the six months ended June 30, 2000, primarily due
to  the  acquisition  of  property  and  equipment  of  $9.5  million.

For  the  six  months ended June 30, 2001, net cash used in financing activities
was  $2.8  million primarily from short-term and long-term debt repayments.  For
the  six  months  ended June 30, 2000, net cash provided by financing activities
was  $12.2  million  primarily  from  the  agreement with Saratoga Partners that
removed  the  restriction of $13.5 million in cash, and the financing of one new
community,  partially  offset  by  debt  repayment.

                                       11
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS --CONTINUED

We  have  incurred  significant  operating  losses  since our inception.  We are
dependent  upon  third  party  financing  or  disposition  of  assets  to  fund
operations.  We  cannot  guarantee  that third party financing or disposition of
assets  will  be  available  timely  or  at  all,  or on terms attractive to the
Company.  In  addition,  as  of  June  30, 2001, our working capital deficit was
approximately  $81  million,  due  in  part to $73 million of mortgage debt that
originally matured in April 2001.  On June 6, 2001, we reached an agreement with
the  lender  to  extend  the maturity date to December 14, 2001.  We may further
extend the maturity date to May 31, 2002, provided that we pay down the mortgage
debt  by  at  least  $30  million  on  or  before  December  14,  2001.  In  the
alternative,  we  can provide a commitment for alternative mortgage financing in
the  amount  of  at least $30 million for three designated properties secured by
the  mortgage  debt  or  provide  an  executed  agreement  to  sell  those three
properties to a third party for at least $30 million, provided such financing or
sale closes on or before March 15, 2002.  Subject to paying a fee equal to 1% of
the  outstanding  loan  balance on or before May 31, 2002, we may further extend
the  maturity  to  May  31,  2003.  Subject  to  our  exercise of the applicable
extension,  the agreement requires us to (i) make principal payments of $200,000
per month, from June 2001 through May 2002 and $250,000 per month from June 2002
through  May  2003,  and  (ii),  pay  interest  at  floating  rate  equal to the
Eurodollar  Rate  plus  3% through May 2002 and the Eurodollar Rate plus 4% from
June 2002 through May 2003.If we are unable to meet any one of these provisions,
the  lender  could  declare  the  entire  amount  immediately due and payable at
maturity  and  could  begin  foreclosure  proceedings  with  respect  to the ten
assisted living properties that secure this debt.  In addition, many of our debt
instruments  and  leases  contain "cross-default" provisions pursuant to which a
default  under  one  obligation  can  cause  a  default  under one or more other
obligations.  Such cross-default provisions affect 35 assisted living properties
that  we  own  or lease.  Accordingly, our inability to extend the debt past the
December 14, 2001, maturity date could have a further material adverse effect on
our financial condition if any other lender or lessor notifies us of our default
under  any  such  cross-defaulted  debt  instrument  or  lease.

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

IMPACT  OF  INFLATION

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

FORWARD-LOOKING  STATEMENTS

"Safe  Harbor"  Statement  under the Private Securities Litigation Reform Act of
1995:  A  number  of the matters and subject areas discussed in this report that
are  not  historical  or  contain  current  facts  deal  with  potential  future
circumstances,  operations,  and prospects.  The discussion of these matters and
subject  areas  is qualified by the inherent risks and uncertainties surrounding
future  expectations  generally,  and also may materially differ from our actual
future experience as a result of such factors as: the effects of competition and
economic  conditions  on  the  occupancy  levels in our communities; our ability
under current market conditions to maintain and increase our resident charges in
accordance  with  our  rate  enhancement  program  without  adversely  affecting

                                       12
<PAGE>

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

occupancy  levels;  our  ability to control community operation expenses without
adversely  affecting  the  level of occupancy and the level of resident charges;
the  ability  of  our operations to generate cash flow sufficient to service our
debt  and  other  fixed  payment  requirements;  our  ability to find sources of
financing and capital on satisfactory terms to meet our cash requirements to the
extent  that  they  are  not  met  by  operations,  including the requirement of
refinancing  $30  million  of  mortgage  debt  by  December 14, 2001; and making
satisfactory  arrangements  for  the  continued  operation  of  the  Emeritrust
communities  beyond  December 31, 2001, when our management agreements for those
communities  expire.  We  have attempted to identify, in context, certain of the
factors that we currently believe may cause actual future experience and results
to  differ  from  our  current expectations regarding the matter or subject area
discussed  in  this  statement.  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 June 30, 2001, our variable rate borrowings
totaled  $76.5  million.  If  market interest rates average 2% more in 2001 than
they did in 2000, our 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 June 30, 2001, and does
not consider changes in the actual level of borrowings that may occur subsequent
to  June  30,  2001.  This  analysis  also  does not consider the effects of the
reduced  level  of  overall  economic  activity  that  could  exist  in  such an
environment,  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  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)     Exhibits

None.

(b)     Reports  on  Form  8-K

The Company filed a Current Report on Form 8-K, dated July 18, 2001, in which it
reported,  under  Item  5, its agreement reached with Deutsche Bank AG to extend
its  mortgage  debt.

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                                    SIGNATURE

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

Dated:  August  14,  2001

                                                      EMERITUS  CORPORATION
                                                          (Registrant)


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

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