SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements in this Quarterly Report on Form 10-Q and other information we provide from time to time may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding the consummation of the Sunrise portfolio acquisition and the related financing and our expectations regarding the future performance of the acquired communities and their effect on our financial results; statements relating to our operational initiatives and our expectations regarding their effect on our results; our expectations regarding occupancy, revenue, expense levels, the demand for senior housing, expansion activity, acquisition opportunities and asset dispositions; our belief regarding our growth prospects; our ability to secure financing or repay, replace or extend existing debt at or prior to maturity; our ability to remain in compliance with all of our debt and lease agreements (including the financial covenants contained therein); our expectations regarding liquidity; our plans to deleverage; our expectations regarding financings and refinancings of assets; our plans to generate growth organically through occupancy improvements, increases in annual rental rates and the achievement of operating efficiencies and cost savings; our plans to expand our offering of ancillary services (therapy and home health); our plans to expand existing communities; the expected project costs for our expansion program; our expected levels of expenditures and reimbursements (and the timing thereof); our expectations for the performance of our entrance fee communities; our ability to anticipate, manage and address industry trends and their effect on our business; our expectations regarding the payment of dividends; and our ability to increase revenues, earnings, Adjusted EBITDA, Cash From Facility Operations, and/or Facility Operating Income (as such terms are defined herein). Words such as "anticipate(s)", "expect(s)", "intend(s)", "plan(s)", "target(s)", "project(s)", "predict(s)", "believe(s)", "may", "will", "would", "could", "should", "seek(s)", "estimate(s)" and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to, our ability to satisfy the closing conditions and successfully complete the Sunrise portfolio acquisition; our ability to assume and obtain the mortgage debt financing for the Sunrise portfolio acquisition; the risk associated with the current global economic crisis and its impact upon capital markets and liquidity; our inability to extend (or refinance) debt as it matures or replace our amended credit facility when it matures; the risk that we may not be able to satisfy the conditions precedent to exercising the extension options associated with certain of our debt agreements; events which adversely affect the ability of seniors to afford our monthly resident fees or entrance fees; the conditions of housing markets in certain geographic areas; our ability to generate sufficient cash flow to cover required interest and long-term operating lease payments; the effect of our indebtedness and long-term operating leases on our liquidity; the risk of loss of property pursuant to our mortgage debt and long-term lease obligations; the possibilities that changes in the capital markets, including changes in interest rates and/or credit spreads, or other factors could make financing more expensive or unavailable to us; the risk that we may be required to post additional cash collateral in connection with our interest rate swaps; the risk that continued market deterioration could jeopardize the performance of certain of our counterparties' obligations; changes in governmental reimbursement programs; our limited operating history on a combined basis; our ability to effectively manage our growth; our ability to maintain consistent quality control; delays in obtaining regulatory approvals; our ability to integrate acquisitions into our operations; competition for the acquisition of assets; our ability to obtain additional capital on terms acceptable to us; a decrease in the overall demand for senior housing; our vulnerability to economic downturns; acts of nature in certain geographic areas; terminations of our resident agreements and vacancies in the living spaces we lease; increased competition for skilled personnel; increased union activity; departure of our key officers; increases in market interest rates; environmental contamination at any of our facilities; failure to comply with existing environmental laws; an adverse determination or resolution of complaints filed against us; the cost and difficulty of complying with increasing and evolving regulation; and other risks detailed from time to time in our filings with the Securities and Exchange Commission, press releases and other communications, including those set forth under "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2008 and in this Quarterly Report. Such forward-looking statements speak only as of the date of this Quarterly Report. We expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

Executive Overview

During the third quarter of 2009, we continued to make progress in implementing the long-term growth objectives outlined in our most recent Annual Report on Form 10-K, in spite of the difficult operating environment. The following is a summary discussion of our progress during the three and nine months ended September 30, 2009.

Our primary long-term growth objectives are to grow our revenues, Adjusted EBITDA, Cash From Facility Operations and Facility Operating Income primarily through a combination of: (i) organic growth in our core business, including expense control and the realization of economies of scale; (ii) continued expansion of our ancillary services programs (including therapy and home health services); and (iii) expansion of our existing communities. Additionally, as opportunities arise, we may also grow through the selective acquisition and consolidation of additional communities, asset portfolios, home health agencies and other senior living companies, as well as through the acquisition of the fee interest in communities that we currently lease or manage.

Our operating results for the three and nine months ended September 30, 2009 were favorably impacted by an increase in our total revenues (primarily driven by an increase in average monthly revenue per unit/bed including an increase in our ancillary services revenue) and by the significant cost control measures that were implemented in recent periods. The difficult operating environment during the first nine months of 2009 has resulted in slightly lower occupancy and diminished growth in the rates we charge our residents. We responded by controlling our expenses and capital spending, and by increasing the reach of our ancillary services programs. We also continue to aggressively focus on maintaining and increasing occupancy.

During the first half of the year, we took steps to preserve our liquidity and increase our financial flexibility. For example, during the second quarter, we completed a public equity offering which yielded $163.7 million of net proceeds, which were primarily used to repay the $125.0 million of indebtedness which was outstanding under our credit facility. Furthermore, we extended the maturity of a number of mortgage loans and, factoring in contractual extension options, have no mortgage debt maturities until 2011 (other than periodic, scheduled principal payments). Finally, we took steps to reduce materially our exposure to collateralization requirements associated with interest rate swaps. As a result of these steps and our operating performance during the nine months ended September 30, 2009, we ended the third quarter with $159.3 million of unrestricted cash and cash equivalents on our condensed consolidated balance sheet.

We recently entered into an agreement to acquire 21 senior living communities from affiliates of Sunrise Senior Living, Inc. for an aggregate purchase price of $204.0 million plus customary transaction expenses. The portfolio has a total of 1,389 units, comprised of 92 independent living units, 876 assisted living units and 421 Alzheimer's units. We expect to finance the transaction with approximately $134.0 million of mortgage debt (substantially through the assumption of existing debt), with the balance of the purchase price to be paid from cash on hand. The consummation of the transaction is subject to the satisfaction of certain closing conditions and contingencies and the receipt of certain lender approvals. The transaction is expected to close in November 2009.

The tables below present a summary of our operating results and certain other financial metrics for the three and nine months ended September 30, 2009 and 2008 and the amount and percentage of increase or decrease of each applicable item (dollars in millions).

                                         Three Months Ended              Increase
                                           September 30,                (Decrease)
                                         2009         2008(1)      Amount      Percent
      Total revenues                  $    505.8      $  482.3     $  23.5          4.9 %
      Net loss                        $    (21.3 )    $  (35.9 )   $  14.6         40.7 %
      Adjusted EBITDA                 $     85.6      $   67.4     $  18.2         27.0 %
      Cash From Facility Operations   $     48.2      $   22.5     $  25.7        114.2 %
      Facility Operating Income       $    169.2      $  149.8     $  19.4         13.0 %



                                         Nine Months Ended              Increase
                                           September 30,               (Decrease)
                                        2009         2008(1)      Amount       Percent
      Total revenues                  $ 1,504.5     $ 1,441.1     $  63.4           4.4 %
      Net loss                        $   (45.5 )   $   (94.5 )   $  49.0          51.9 %
      Adjusted EBITDA                 $   263.6     $   227.0     $  36.6          16.1 %
      Cash From Facility Operations   $   150.9     $    97.7     $  53.2          54.5 %
      Facility Operating Income       $   519.8     $   481.2     $  38.6           8.0 %


________

(1) The calculation of Adjusted EBITDA and Cash From Facility Operations for the three and nine months ended September 30, 2008 includes hurricane and named tropical storms expense totaling $3.6 million.

Adjusted EBITDA and Facility Operating Income are non-GAAP financial measures we use in evaluating our operating performance. Cash From Facility Operations is a non-GAAP financial measure we use in evaluating our liquidity. See "Non-GAAP Financial Measures" below for an explanation of how we define each of these measures, a detailed description of why we believe such measures are useful and the limitations of each measure, a reconciliation of net loss to each of Adjusted EBITDA and Facility Operating Income and a reconciliation of net cash provided by operating activities to Cash From Facility Operations.

Our revenues for the three months ended September 30, 2009 increased to $505.8 million, an increase of $23.5 million, or approximately 4.9%, over our revenues for the three months ended September 30, 2008. For the nine months ended September 30, 2009, our revenues increased $63.4 million, or approximately 4.4%, to $1,504.5 million over the nine months ended September 30, 2008. The increase in revenues in the current year period was primarily a result of an increase in the average revenue per unit/bed compared to the prior year period, including growing revenues from our ancillary services programs, partially offset by a decline in occupancy from the prior year period. Our weighted average occupancy rate for the third quarter of 2009 was 89.0%, compared to 89.7% for the third quarter of 2008.

During the three months ended September 30, 2009, our Adjusted EBITDA, Cash From Facility Operations and Facility Operating Income increased by 27.0%, 114.2% and 13.0%, respectively, when compared to the three months ended September 30, 2008. During the nine months ended September 30, 2009, our Adjusted EBITDA, Cash From Facility Operations, and Facility Operating Income increased by 16.1%, 54.5% and 8.0%, respectively, when compared to the nine months ended September 30, 2008.

During the three months ended September 30, 2009, we continued to expand our ancillary services offerings. As of September 30, 2009, we offered therapy services to approximately 35,000 of our units and home health services to approximately 18,800 of our units. We continue to see positive results from the maturation of previously-opened therapy and home health clinics. We also expect to continue to expand our ancillary services programs to additional units and to open or acquire additional home health agencies.

During the third quarter of 2009, we opened two expansions with a total of 156 units. Our expansion program currently has two projects under construction that will add an additional 205 units, which are expected to open in the fourth quarter. Additionally, we recently opened the 240-unit independent living component of our new entry fee CCRC in the Villages, Florida. The 72-bed skilled nursing unit will open in the fourth quarter.

We believe that the deteriorating housing market, credit crisis and general economic uncertainty have caused some potential customers (or their adult children) to delay or reconsider moving into our communities, resulting in a decrease in occupancy rates and occupancy levels when compared to the prior year period. We remain cautious about the economy and the adverse credit and financial markets and their effect on our customers and our business. In addition, we continue to experience volatility in the entrance fee portion of our business. The timing of entrance fee sales is subject to a number of different factors (including the ability of potential customers to sell their existing homes) and is also inherently subject to variability (positively or negatively) when measured over the short-term. These factors also impact our potential independent living customers to a significant extent. We expect occupancy and entrance fee sales to normalize over the longer term.

Consolidated Results of Operations

Three Months Ended September 30, 2009 and 2008

The following table sets forth, for the periods indicated, statements of operations items and the amount and percentage of increase or decrease of these items. The results of operations for any particular period are not necessarily indicative of results for any future period. The following data should be read in conjunction with our condensed consolidated financial statements and the notes thereto, which are included herein.

(dollars in thousands, except average monthly revenue per unit/bed)

                                             Three Months Ended
                                                September 30,
                                                                         Increase        % Increase
                                             2009          2008         (Decrease)       (Decrease)

Statement of Operations Data:
Revenue
Resident fees
Retirement Centers                         $ 135,664     $ 137,057     $     (1,393 )           (1.0 %)
Assisted Living                              217,843       211,888            5,955              2.8 %
CCRCs                                        150,349       131,805           18,544             14.1 %
Total resident fees                          503,856       480,750           23,106              4.8 %
Management fees                                1,987         1,527              460             30.1 %
Total revenue                                505,843       482,277           23,566              4.9 %
Expense
Facility operating expense(1)
Retirement Centers                            76,964        81,309           (4,345 )           (5.3 %)
Assisted Living                              144,188       145,988           (1,800 )           (1.2 %)
CCRCs                                        107,787        98,917            8,870              9.0 %
Total facility operating expense             328,939       326,214            2,725              0.8 %
General and administrative expense            34,720        32,948            1,772              5.4 %
Facility lease expense                        68,036        67,017            1,019              1.5 %
Depreciation and amortization                 66,983        67,066              (83 )           (0.1 %)
Total operating expense                      498,678       493,245            5,433              1.1 %
Income (loss) from operations                  7,165       (10,968 )         18,133            165.3 %
Interest income                                  623         1,383             (760 )          (55.0 %)
Interest expense
Debt                                         (30,574 )     (37,599 )          7,025             18.7 %
Amortization of deferred financing costs      (2,167 )      (3,004 )            837             27.9 %
Change in fair value of derivatives and
amortization                                  (2,478 )      (8,454 )          5,976             70.7 %
Equity in earnings (loss) of
unconsolidated ventures                           42           358             (316 )          (88.3 %)
Loss on extinguishment of debt                (1,178 )           ?           (1,178 )         (100.0 %)
Other non-operating (expense) income             (52 )          69             (121 )         (175.4 %)
Loss before income taxes                     (28,619 )     (58,215 )         29,596             50.8 %
Benefit for income taxes                       7,329        22,338          (15,009 )          (67.2 %)
Net loss                                   $ (21,290 )   $ (35,877 )   $     14,587             40.7 %

Selected Operating and Other Data:
Total number of communities (at end of
period)                                          547           550               (3 )           (0.5 %)
Total units/beds operated(2)                  52,268        51,933              335              0.6 %
Owned/leased communities units/beds           47,836        47,640              196              0.4 %

Owned/leased communities occupancy rate
(weighted average) (3)                          89.0 %        89.7 %        (0.7 %)        (0.8 %)
Average monthly revenue per unit/bed(4)    $   3,987     $   3,786     $     201            5.3 %

Selected Segment Operating and Other
Data:
Retirement Centers
Number of communities (period end)                85            87            (2 )         (2.3 %)
Total units/beds(2)                           15,255        15,710          (455 )         (2.9 %)
Occupancy rate (weighted average)               89.1 %        90.6 %        (1.5 %)        (1.7 %)
Average monthly revenue per unit/bed(4)    $   3,347     $   3,232     $     115            3.6 %
Assisted Living
Number of communities (period end)               405           410            (5 )         (1.2 %)
Total units/beds(2)                           20,804        21,059          (255 )         (1.2 %)
Occupancy rate (weighted average)               90.7 %        90.2 %         0.5 %          0.6 %
Average monthly revenue per unit/bed(4)    $   3,850     $   3,723     $     127            3.4 %
CCRCs
Number of communities (period end)                35            32             3            9.4 %
Total units/beds(2)                           11,777        10,871           906            8.3 %
Occupancy rate (weighted average) (3)           85.7 %        87.4 %        (1.7 %)        (1.9 %)
Average monthly revenue per unit/bed(4)    $   5,200     $   4,810     $     390            8.1 %
Management Services
Number of communities (period end)                22            21             1            4.8 %
Total units/beds(2)                            4,432         4,293           139            3.2 %
Occupancy rate (weighted average)               83.9 %        85.3 %        (1.4 %)        (1.6 %)

Selected Entrance Fee Data:
Non-refundable entrance fees sales         $  12,635     $   7,253
Refundable entrance fees sales(5)              9,296         4,273
Total entrance fee receipts(6)                21,931        11,526
Refunds                                       (4,649 )      (5,856 )
Net entrance fees                          $  17,282     $   5,670

(1) Segment facility operating expense for the three months ended September 30, 2008 includes hurricane and named tropical storms expense totaling $3.6 million consisting of $1.1 million for Retirement Centers, $1.3 million for Assisted Living and $1.2 million for CCRCs.

(2) Total units/beds operated represent the total units/beds operated as of the end of the period.

(3) Excluding the impact of current quarter expansion openings, for the three months ended September 30, 2009, owned/leased communities occupancy rate was 89.2% and CCRCs occupancy rate was 86.4%.

(4) Average monthly revenue per unit/bed represents the average of the total monthly revenues, excluding amortization of entrance fees, divided by average occupied units/beds.

(5) Refundable entrance fee sales for the three months ended September 30, 2009 and 2008 include amounts received from residents participating in the MyChoice program, which allows new and existing residents the option to pay additional refundable entrance fee amounts in return for a reduced monthly service fee. MyChoice amounts received from residents totaled $0.1 million and $0.6 million for the three months ended September 30, 2009 and 2008, respectively.

(6) Includes $10.6 million of first generation entrance fee receipts which represent initial entrance fees received from the sale of units at a newly opened entrance fee CCRC.

As of September 30, 2009, our total operations included 547 communities with a capacity to serve 52,268 residents. Our resident capacity increased by 424 units from June 30, 2009 as a result of the completion of a number of community expansion projects and the addition of one new management agreement.

Resident Fees

The increase in resident fees occurred primarily in the Assisted Living and CCRC segments. Resident fees increased over the prior-year third quarter mainly due to an increase in average monthly revenue per unit/bed during the current period including an increase in our ancillary services revenue as we continue to roll out therapy and home health services to many of our communities. This increase was partially offset by a decrease in occupancy for our communities in the Retirement Centers and CCRCs segments. During the current period, revenues grew 4.5% at the 517 communities we operated during both periods with a 5.1% increase in the average monthly revenue per unit/bed and a 0.5% decrease in occupancy.

Retirement Centers revenue declined slightly, primarily due to a decrease in occupancy at the communities we operated during both periods, partially offset by an increase in the average monthly revenue per unit/bed at those same communities period over period.

Assisted Living revenue increased $6.0 million, or 2.8%, due to an increase in the average monthly revenue per unit/bed and an increase in occupancy at the communities we operated during both periods.

CCRCs revenue increased $18.5 million, or 14.1%, primarily due to an increase in the average monthly revenue per unit/bed at the communities we operated during both periods partially offset by a decrease in occupancy at these same communities period over period. Revenue growth was also positively impacted by an increase in revenue related to the rollout of our ancillary services business to these communities during 2008 and 2009.

Management Fees

Management fees increased $0.5 million, or 30.1%, primarily due to a reclassification between management fees and facility operating expense.

Facility Operating Expense

Facility operating expense increased over the prior-year period primarily due to an increase in salaries and wages, increased insurance expense, higher deferred community fee expense recognition, and additional current year expense incurred in connection with the continued expansion of our ancillary services programs during 2009. These increases were partially offset by significant cost control measures that were implemented in recent periods. Facility operating expense during the third quarter of 2008 was negatively impacted by hurricane and named tropical storms expense.

Retirement Centers operating expenses decreased $4.3 million, or 5.3%, period over period, primarily due to expenses incurred related to hurricane and named tropical storms during the third quarter of 2008, as well as decreases in public relations and advertising expenses, partially offset by additional expense incurred in connection with the continued expansion of our ancillary services programs.

Assisted Living operating expenses decreased $1.8 million, or 1.2%, primarily due to significant cost control measures implemented in recent periods, including reductions in overtime hours worked and reduced public relations and advertising expenses. These decreases were partially offset by additional expense incurred in connection with the continued expansion of our ancillary services programs. Facility operating expense during the third quarter of 2008 was negatively impacted by hurricane and named tropical storms expense.

CCRCs operating expenses increased $8.9 million, or 9.0%, primarily due to an increase in expense incurred in connection with the continued expansion of our ancillary services programs, as well as increased salaries and wages due to filling vacant positions and wage rate increases. These increases were partially offset by significant cost control measures that were implemented in recent periods. Facility operating expense during the third quarter of 2008 was negatively impacted by hurricane and named tropical storms expense.

General and Administrative Expense

. . .