The Company’s same community operating expenses increased $4.9 million, or 2.5%, to $196.4 million in the third quarter of 2012 compared to $191.6 million in the prior-year period.

Same community operating income increased by $1.9 million to $98.3 million in the third quarter of 2012, and same community operating income margin was 33.4% as compared to 33.5% in the third quarter of 2011.

Recent Developments

On October 16, 2012, the Company announced that it had entered into definitive agreements with HCP, Inc. (“HCP”) and affiliates of Blackstone Real Estate Partners VI (“Blackstone”), under which HCP and Emeritus will acquire a total of 142 senior housing communities (the “Communities”), representing approximately 11,350 units owned by a joint venture comprised of Emeritus, Blackstone, certain former tenants-in-common, and an investment fund affiliated with Dan Baty, the Company’s Chairman (the “Blackstone JV”). Emeritus owns approximately a 6% interest in the Blackstone JV and has been operating the Communities since 2010 under management agreements for a fee equal to 5% of collected revenues.

Upon consummation of the transaction, HCP will acquire 133 of the Communities for an aggregate purchase price of $1.7 billion, consisting of cash and the assumption of existing debt. Emeritus will receive cash of approximately $140 million, comprised of approximately $40 million for the Company’s interest in the Blackstone JV and an incentive payment of approximately $100 million based on the final rate of return to the Blackstone JV’s investors. On October 31, 2012, HCP closed on the acquisition of 127 of the 133 Communities and, as part of the transaction, Emeritus also acquired nine Communities for $62.0 million, of which $10.0 million was paid in cash and $52.0 million was financed with a four-year loan from HCP with an initial interest rate of 6.1%. The closing of the remaining six Communities is expected to be completed in the fourth quarter of 2012.

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