American Retirement Announces Expected Charges and Lower Management Fees For Fourth Quarter.

Business Editors

NASHVILLE, Tenn.--(BUSINESS WIRE)--Dec. 20, 1999

American Retirement Corporation (NYSE:ACR), a leading national provider of senior living care, today announced that the Company is expecting to take pretax charges to earnings, during the fourth quarter, in the range of $12 million to $13 million. American Retirement also expects to recognize a $3 million gain from the sale of land. Additionally, the Company expects management fees at two of its communities to be below the Company's plan by between $2.1 million and $2.4 million for the fourth quarter. As a result, the Company anticipates that results for the fourth quarter are expected to be a loss in the range of $.35 to $.39 per share, including all charges and gains and earnings for the full year ending December 31,1999 are anticipated to be between $.13 and $.17 per share, including all charges and gains.

At the end of the third quarter the Company decided to shift its growth strategy from development to acquisitions of existing communities. As part of that decision, the Company put on hold several planned and early-stage construction projects in its development pipeline and suspended all new free-standing assisted living development. After further review during the fourth quarter, the Company has concluded not to develop those projects and has determined that the corresponding assets should be written down to their estimated realizable values. The Company has also decided to dispose of a select number of assisted living properties that are not in its Senior Living Network areas. The total charge for the discontinuance and divestiture of these projects is estimated to be $12 million to $13 million ($.43 to $.47 per share), with $8 million to $9 million associated with the discontinued projects and $4 million to $5 million for the properties to be disposed. The Company also anticipates about $900,000 to $1,000,000 of increased general and administrative (G&A) expenses, about $.03 to $.04 per share, the largest component of which is the non-recurring costs associated with the closing of the Company's development office located in Bradenton, Florida.

Fourth quarter earnings are also expected to be impacted by a shortfall in management fees of between $2.1 million and $2.4 million against plan. The shortfall results from fewer than expected sales of units in two of the entry-fee communities that the Company manages - Freedom Square and Freedom Plaza Peoria. Higher than planned attrition was not offset by increased new sales of vacated units during the quarter.

The Company expects earnings per share for the fourth quarter to be a loss of between $.35 and $.39, including all charges and gain on sale of land. Excluding the charges, the gain on sale of land and the increased G&A expenses, the fourth quarter earnings are expected be around break-even. The management fee shortfall is expected to represent between $.08 and $.09 per share.

Commenting on the Company's announcement, CEO Bill Sheriff said, "We believe that stopping new development and divesting of those assisted living properties in our portfolio that do not fit within our Senior Living Networks is the right thing to do. Unfortunately, we made expenditures that we may not recoup upon sale of the properties and, therefore, need to write the assets down to their expected realizable values."

Regarding the management fee shortfall, Mr. Sheriff commented, "We are disappointed with unit sales in the last quarter at Freedom Square and Freedom Plaza Peoria. These are two strong CCRC's that do experience some timing cycles in their sales and refund patterns. We believe this is more of a timing issue than a long-term trend."

The Company also announced plans to buy back up to $1.5 million of its common stock to fund the Company's contributions to its employee benefit plans for 2000 and 2001. The purchases are anticipated to be made primarily in the open market over the next year. The timing and actual number of shares purchased will depend on future market conditions.

American Retirement Corporation is a national senior living and health care services provider offering a broad range of care and services to seniors, including independent living, assisted living, skilled nursing and Alzheimer's care. The Company's strategy is to develop senior living networks in major metropolitan regions. These networks are made up of large continuing care retirement communities and smaller free-standing assisted living residences located in the same markets. The Company believes that this hub and spoke approach produces management efficiencies and market penetration by offering a range of senior living arrangements at various price levels. American Retirement Corporation currently operates 53 senior living communities in 16 states with an aggregate capacity for approximately 13,500 residents. Approximately 95 percent of the Company's revenues come from private pay sources.

This press release and statements made by or on behalf of American Retirement Corporation relating hereto may be deemed to constitute forward-looking information made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be affected by certain risks and uncertainties, including the difficulty of predicting future financial performance, market conditions, and the time by which occupancy levels or operating results are expected to improve, and the other risks and uncertainties described in American Retirement Corporation's Annual Report on Form 10-K for the year ended December 31, 1998 under the caption "Risk Factors" and in American Retirement's other filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included herein, American Retirement Corporation's actual results could differ materially from such forward-looking statements. American Retirement Corporation does not undertake any obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.