Emeritus Announces Operating Results for Third Quarter and Year to Date 2008 - Press Releases

Emeritus Corporation (NYSE: ESC), a national provider of assisted living and Alzheimer’s and related dementia care services to senior citizens, today announced its third quarter 2008 results.

Third Quarter 2008 Operating Highlights Compared to Second Quarter 2008

• Same store average occupancy increased to 87.2% from 86.7%
• Average monthly revenue per unit increased by 2.3% to $3,449
• Community revenues increased by $6.1 million, or 3.3%, to $191.8 million
• Operating income from continuing operations improved by $2.1 million

Granger Cobb, President and Co-Chief Executive Officer, stated, "Our third quarter operating results demonstrate solid progress in improving occupancy and rate growth in a challenging economic environment. Despite the turmoil in the markets, the need-driven demand characteristics for senior care remains strong. Given our high quality portfolio, broad geographic reach, and our focus on the middle market, we expect our performance to be less affected by general economic conditions than many other providers in the industry.”

Summary of 2008 Third Quarter Results

Total revenue from continuing operations for the third quarter ended September 30, 2008, was $193.0 million. Of that, total community revenue from continuing operations was $191.8 million in the third quarter of 2008, compared to $185.7 million in the second quarter of 2008, an increase of $6.1 million, or 3.3%. Of the $6.1 million increase, approximately $4.2 million was due to an increase in the average monthly revenue per occupied unit with the balance attributable to improvements in occupancy. Average monthly revenue per occupied unit increased by 2.3% to $3,449 from $3,372 in the second quarter of 2008. The year-to-date increase in average monthly revenue per occupied unit is now above 6.0% on an annualized basis.

For the total consolidated portfolio, average occupancy for the third quarter of 2008 was 86.6% versus 86.4% in the second quarter of 2008. For the total consolidated portfolio, occupancy increased to 88.1% on September 30, 2008, compared to 87.8% on June 30, 2008, the last day of each quarter. For the modified same store portfolio, which is all communities continuously operated since October 1, 2007 (i.e. post Summerville merger), excluding four communities with changes in capacity due to expansions, average occupancy increased to 87.2% in the third quarter of 2008 from 86.7% in the second quarter of 2008. Occupancy for this same store group on September 30, 2008, was 88.7% as compared to 88.0% on June 30, 2008.

Community operating expenses were $123.7 million in the third quarter of 2008, compared to $119.5 million in the second quarter of 2008. This $4.2 million increase in operating expenses was primarily the result of an increase of $2.0 million in utilities costs and $1.9 million in labor expenses. Both expense categories were impacted by an additional day in the third quarter. Labor was also impacted by one-time hurricane costs and start-up costs related to new developments and a community acquisition.

General and administrative expenses were flat at $14.7 million for the both third and second quarter of 2008. General and administrative expenses as a percent of total operated community revenues (including revenues of managed communities) was 6.7% for the third quarter compared to 6.9% in the second quarter of 2008.

Operating income from continuing operations improved by $2.1 million from the second quarter of 2008, primarily driven by revenue gains of $6.1 million, and offset by an increase in operating expenses of $4.2 million.

For the quarter ended September 30, 2008, Adjusted EBITDA was $31.9 million compared to $28.9 million for the second quarter of 2008, with the increase primarily driven by the improvement in operating income from continuing operations.

Subsequent Events

On October 17, 2008, the Company closed on the balance of the previously announced purchase of 29 communities from Health Care REIT, Inc. (NYSE: HCN) and affiliates. The communities were formerly operated by Emeritus under long-term leases. The initial closing was completed on June 30, 2008, and consisted of 19 communities with a capacity of 1,564 units. The October 17th closing included 10 communities with a capacity of 693 units for a purchase price of $77.2 million, excluding financing and closing costs.

Financing for the 10 facilities consists of $56.4 million of mortgage debt financing, of which $29.0 million is at a weighted average fixed rate of 6.654%, and $27.4 million of variable rate debt at the one-month LIBOR rate plus 3.0%. The fixed-rate credit facility has a term of 10 years. The variable rate loan has a term of three years and may be prepaid without penalty.

On October 22, 2008, the Company reached an agreement with Nationwide Health Properties, Inc. (NYSE: NHP) to extend its $21.4 million note from March 3, 2009, to March 31, 2012.

Balance Sheet

As of September 30, 2008, the Company had approximately $43.6 million of cash and cash equivalents, and had no outstanding borrowings under its $25.0 million line of credit. As previously announced, the Company retired its convertible debentures in the amount of $10.5 million on July 1, 2008. On September 30, 2008, total assets were $2.0 billion, including $1.6 billion of net investments in properties, total debt was $1.5 billion, including capital lease obligations, and shareholders’ equity was $389.1 million.

Conference Call:

The Company will host a conference call on November 10, 2008, at 5:00 P.M. Eastern Time to discuss its financial results for the third quarter ended September 30, 2008. Hosting the call will be Mr. Daniel Baty, Chairman and Co-Chief Executive Officer, Mr. Granger Cobb, President and Co-Chief Executive Officer, and Mr. Raymond Brandstrom, Chief Financial Officer.

The conference call will be webcast live over the internet from the Company’s web site at www.emeritus.com under the “investors” section. The conference call can also be accessed by dialing (800) 545-9704, or for international participants (913) 981-5535. A replay of the conference call will be available after 8:00 P.M. Eastern Time on Monday, November 10, 2008, until midnight Eastern Time on Monday, November 17, 2008, and can be accessed by dialing (888) 203-1112, or for international participants (719) 457-0820 and entering the passcode 1534639.

Non-GAAP Financial Measures

Adjusted EBITDA/EBITDAR are financial measures of operating performance that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). We believe these non-GAAP measures are useful in identifying trends in our day-to-day performance because they exclude items that are of little or no significance to operations and provide indicators to management of progress in achieving optimal operating performance. In addition, these measures are used by many research analysts and investors to evaluate the performance and the value of companies in our industry. We strongly urge you to review the reconciliation of net loss to Adjusted EBITDA/EBITDAR provided below, along with our consolidated balance sheets, statements of operations, and cash flows. We define Adjusted EBITDA/EBITDAR and provide other information about these non-GAAP measures in our quarterly report on Form 10-Q.

The table below shows the reconciliation of net loss to Adjusted EBITDAR for the three and nine months ended September 30, 2008 and 2007:

For a more detailed understanding of Emeritus, please refer to the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2008, or visit the Company’s Internet site at http://www.emeritus.com/ to obtain a copy.

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About Emeritus Senior Living

Emeritus Corporation is a national provider of assisted living and Alzheimer's and related dementia care services to seniors. Emeritus is one of the largest and most experienced operators of freestanding assisted living communities located throughout the United States. These communities provide a residential housing alternative for senior citizens who need assistance with the activities of daily living, with an emphasis on personal care services, which provides support to the residents in the aging process. Emeritus currently operates 309 communities in 36 states representing capacity for approximately 27,200 units and approximately 32,400 residents. Our common stock is traded on the New York Stock Exchange under the symbol ESC, and our home page can be found on the Internet at www.emeritus.com.

Forward Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: A number of the matters and subject areas discussed in this report that are not historical or current facts deal with potential future circumstances, operations, and prospects. The discussion of such matters and subject areas is qualified by the inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from our actual future experience as a result of such factors as: the effects of competition and economic conditions on the occupancy levels in our communities; our ability under current market conditions to maintain and increase our resident charges in accordance with our rate enhancement programs without adversely affecting occupancy levels; increases in interest costs as a result of re-financings; our ability to control community operation expenses, including insurance and utility costs, without adversely affecting the level of occupancy and the level of resident charges; our ability to generate cash flow sufficient to service our debt and other fixed payment requirements; our ability to find sources of financing and capital on satisfactory terms to meet our cash requirements to the extent that they are not met by operations, uncertainties related to professional liability claims; and uncertainties about our ability to successfully integrate our company after the merger with Summerville Senior Living, Inc. We have attempted to identify, in context, certain of the factors that we currently believe may cause actual future experience and results to differ from our current expectations regarding the relevant matter or subject area. These and other risks and uncertainties are detailed in our reports filed with the Securities and Exchange Commission, including "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2007.

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