CNL Lifestyle Properties (CLLY) 10-Q 2013 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number: 000-51288

CNL Lifestyle Properties, Inc.

(Exact name of registrant as specified in its charter)

Maryland	20-0183627
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
450 South Orange Avenue Orlando, Florida	32801
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (407) 650-1000

Former name, former address and former fiscal year, if changed since last report

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.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of common stock outstanding as of May 3, 2013 was 317,942,524

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Information (unaudited):
	Condensed Consolidated Balance Sheets		1
	Condensed Consolidated Statements of Operations		2
	Condensed Consolidated Statements of Comprehensive Losses		3
	Condensed Consolidated Statements of Stockholders’ Equity		4
	Condensed Consolidated Statements of Cash Flows		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 4.	Controls and Procedures		40
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		40
Item 1A.	Risk Factors		41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		41
Item 3.	Defaults Upon Senior Securities		41
Item 4.	Mine Safety Disclosures		41
Item 5.	Other Information		41
Item 6.	Exhibits		41
Signatures			42
Exhibits			43

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands except per share data)

	March 31, 2013			December 31, 2012
ASSETS
Real estate investment properties, net (including $204,730 and $207,516 related to consolidated variable interest entities, respectively)	$	2,156,013		$	2,176,357
Investments in unconsolidated entities		274,877			287,339
Mortgages and other notes receivable, net		125,126			124,730
Deferred rent and lease incentives		108,259			109,507
Cash		105,014			73,224
Other assets		57,954			63,655
Restricted cash		49,753			40,316
Intangibles, net		33,572			35,457
Accounts and other receivables, net		18,298			21,700
Assets held for sale		10,525			5,743
Total Assets	$	2,939,391		$	2,938,028
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgages and other notes payable (including $79,498 and $80,481 related to non-recourse debt of consolidated variable interest entities, respectively)	$	672,727		$	649,002
Senior notes, net of discount		394,177			394,100
Line of credit		95,000			95,000
Other liabilities		67,085			47,445
Accounts payable and accrued expenses		43,430			40,064
Due to affiliates		1,323			986
Total Liabilities		1,273,742			1,226,597
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $.01 par value per share 200 million shares authorized and unissued		—			—
Excess shares, $.01 par value per share 120 million shares authorized and unissued		—			—
Common stock, $.01 par value per share
One billion shares authorized; 339,184 and 337,213 shares issued and 317,942 and 316,371 shares outstanding as of March 31, 2013 and December 31, 2012, respectively		3,179			3,164
Capital in excess of par value		2,814,126			2,803,346
Accumulated deficit		(172,745	)		(149,446	)
Accumulated distributions		(971,583	)		(937,972	)
Accumulated other comprehensive loss		(7,328	)		(7,661	)
Total Stockholders’ Equity		1,665,649			1,711,431
Total Liabilities and Stockholders’ Equity	$	2,939,391		$	2,938,028

See accompanying notes to condensed consolidated financial statements.

1

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands except per share data)

	Three Months Ended March 31,
	2013			2012
Revenues:
Rental income from operating leases	$	47,465		$	46,089
Property operating revenues		55,552			40,011
Interest income on mortgages and other notes receivable		3,419			3,103
Total revenues		106,436			89,203
Expenses:
Property operating expenses		53,981			43,232
Asset management fees to advisor		9,213			8,682
General and administrative		4,316			4,537
Ground lease and permit fees		4,780			4,195
Acquisition fees and costs		367			1,130
Other operating expenses		1,682			2,485
Bad debt expense		108			2,074
Depreciation and amortization		36,126			32,106
Total expenses		110,573			98,441
Operating loss		(4,137	)		(9,238	)
Other income (expense):
Interest and other income		440			43
Interest expense and loan cost amortization (includes $414 loss on termination of cash flow hedges for both periods presented)		(18,332	)		(16,277	)
Equity in (loss) earnings of unconsolidated entities		(1,123	)		1,231
Total other expense		(19,015	)		(15,003	)
Loss from continuing operations		(23,152	)		(24,241	)
Discontinued operations		(147	)		(502	)
Net loss	$	(23,299	)	$	(24,743	)
Loss per share of common stock (basic and diluted)
Continuing operations	$	(0.07	)	$	(0.08	)
Discontinued operations		0.00			0.00
Loss per share	$	(0.07	)	$	(0.08	)
Weighted average number of shares of common stock outstanding (basic and diluted)		316,382			309,235

See accompanying notes to condensed consolidated financial statements.

2

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSES

(UNAUDITED)

(in thousands)

	Three Months Ended March 31,
	2013			2012
Net loss	$	(23,299	)	$	(24,743	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(460	)		525
Changes in fair value of cash flow hedges:
Unrealized loss arising during the period		379			213
Loss on termination of cash flow hedges reclassed to interest expense		414			414
Total other comprehensive income		333			1,152
Total comprehensive loss	$	(22,966	)	$	(23,591	)

See accompanying notes to condensed consolidated financial statements.

3

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2013 and the Year Ended December 31, 2012

(UNAUDITED)

(in thousands except per share data)

																Accumulated
	Common Stock						Capital in									Other			Total
	Number			Par			Excess of			Accumulated			Accumulated			Comprehensive			Stockholders’
	of Shares			Value			Par Value			Deficit			Distributions			Income (Loss)			Equity
Balance at December 31, 2011		309,215		$	3,092		$	2,743,972		$	(73,373	)	$	(774,259	)	$	(9,452	)	$	1,889,980
Subscriptions received for common stock through reinvestment plan		8,329			83			68,953			—			—			—			69,036
Redemption of common stock		(1,173	)		(11	)		(9,579	)		—			—			—			(9,590	)
Net loss		—			—			—			(76,073	)		—			—			(76,073	)
Distributions, declared and paid ($0.5252 per share)		—			—			—			—			(163,713	)		—			(163,713	)
Foreign currency translation adjustment		—			—			—			—			—			531			531
Loss on termination of cash flow hedges reclassed to interest expense		—			—			—			—			—			1,655			1,655
Current period adjustment to recognize changes in fair value of cash flow hedges, net of reclassifications (Note 8)		—			—			—			—			—			(395	)		(395	)
Balance at December 31, 2012		316,371		$	3,164		$	2,803,346		$	(149,446	)	$	(937,972	)	$	(7,661	)	$	1,711,431
Subscriptions received for common stock through reinvestment plan		1,976			19			13,695			—			—			—			13,714
Redemption of common stock		(405	)		(4	)		(2,915	)		—			—			—			(2,919	)
Net loss		—			—			—			(23,299	)		—			—			(23,299	)
Distributions, declared and paid ($0.1063 per share)		—			—			—			—			(33,611	)		—			(33,611	)
Foreign currency translation adjustment		—			—			—			—			—			(460	)		(460	)
Loss on termination of cash flow hedges reclassed to interest expense		—			—			—			—			—			414			414
Current period adjustment to recognize changes in fair value of cash flow hedges, net of reclassifications (Note 8)		—			—			—			—			—			379			379
Balance at March 31, 2013		317,942		$	3,179		$	2,814,126		$	(172,745	)	$	(971,583	)	$	(7,328	)	$	1,665,649

See accompanying notes to condensed consolidated financial statements.

4

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	Three Months Ended March 31,
	2013			2012
Operating activities:
Net cash provided by operating activities	$	48,644		$	22,157
Investing activities:
Capital expenditures		(15,478	)		(12,878	)
Proceeds from sale of property		675			—
Proceeds from disposal of assets		27			—
Investments in and contributions to unconsolidated entities		—			(1,864	)
Distributions from unconsolidated entities		—			7,977
Deposits on real estate investments		—			(200	)
Return collateral on loan		8,684			—
Issuance of mortgage loans receivable		(81	)		—
Principal payments received on mortgage loans receivable		73			11
Changes in restricted cash		(9,451	)		(7,251	)
Other		—			(18	)
Net cash used in investing activities		(15,551	)		(14,223	)
Financing activities:
Redemptions of common stock		(2,919	)		(1,744	)
Distributions to stockholders, net of distributions reinvested		(19,897	)		(27,477	)
Proceeds from mortgage loans and other notes payable		30,000			30,800
Principal payments on mortgage loans and senior notes		(5,886	)		(19,041	)
Principal payments on capital leases		(1,947	)		(1,300	)
Payment of loan costs		(640	)		(2,166	)
Other		—			(4	)
Net cash used in financing activities		(1,289	)		(20,932	)
Effect of exchange rate fluctuations on cash		(14	)		(12	)
Net increase (decrease) in cash		31,790			(13,010	)
Cash at beginning of period		73,224			162,839
Cash at end of period	$	105,014		$	149,829

See accompanying notes to condensed consolidated financial statements.

5

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

1. Organization and Nature of Business:

CNL Lifestyle Properties, Inc. (the “Company”), was organized in Maryland on August 11, 2003. The Company operates and has elected to be taxed as a real estate investment trust (a “REIT”) for federal income tax. Various wholly-owned subsidiaries have been and will be formed by the Company for the purpose of acquiring and owning direct or indirect interests in real estate. The Company generally invests in lifestyle properties in the United States that are primarily leased on a long-term (generally five to 20-years, plus multiple renewal options), triple-net or gross basis to tenants or operators that the Company considers to be industry leading. The Company also leases properties to taxable REIT subsidiary (“TRS”) tenants and engages independent third-party managers to operate those properties. In the event of certain tenant defaults, the Company has also engaged third-party managers to operate properties on its behalf until they are re-leased.

As of March 31, 2013, the Company owned 178 lifestyle properties directly and indirectly within the following asset classes: ski and mountain lifestyle, golf facilities, senior housing, attractions, marinas and additional lifestyle properties. Fifty of these 178 properties are owned through unconsolidated joint ventures and three are located in Canada. Although these are the asset classes in which the Company has invested and is most likely to invest in the future, it may acquire or invest in any type of property that it believes has the potential for long-term growth and income generation. The Company may also make or acquire loans (mortgage, mezzanine and other loans) or other permitted investments. The Company raises capital through its distribution reinvestment plan (“DRP”) and uses such proceeds to make investments and for other corporate purposes. The Company may make selected asset dispositions and reinvest those proceeds in other income producing investment opportunities or other permitted investments in order to maximize the growth and value of its portfolio.

2. Significant Accounting Policies:

Principles of Consolidation and Basis of Presentation— The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management are necessary for the fair statement of the Company’s results for the interim period presented. Operating results for the three months ended March 31, 2013 may not be indicative of the results that may be expected for the year ending December 31, 2013. Amounts as of December 31, 2012 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The accompanying unaudited condensed consolidated financial statements include the Company’s accounts, the accounts of wholly owned subsidiaries or subsidiaries for which the Company has a controlling interest, the accounts of variable interest entities (“VIEs”) in which the Company is the primary beneficiary, and the accounts of other subsidiaries over which the Company has a controlling financial interest. All material intercompany accounts and transactions have been eliminated in consolidation.

In accordance with the guidance for the consolidation of VIEs, the Company analyzes its variable interests, including loans, leases, guarantees, and equity investments, to determine if the entity in which it has a variable interest is a variable interest entity (“VIE”). The Company’s analysis includes both quantitative and qualitative reviews. The Company bases its quantitative analysis on the forecasted cash flows of the entity, and its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and financial agreements. The Company also uses its quantitative and qualitative analyses to determine if it is the primary beneficiary of the VIE, and if such determination is made, it includes the accounts of the VIE in its consolidated financial statements.

Use of Estimates— The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the disclosure of contingent liabilities. For example, significant estimates and assumptions are made in connection with the allocation of purchase price and the analysis of real estate, equity method investments and impairments. Actual results could differ from those estimates.

6

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

2. Significant Accounting Policies(continued):

Revision to Previously Issued Financial Statements — In connection with the preparation of its financial statements for the three months ended March 31, 2013, the Company determined that the Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and for the year ended December 31, 2012 contained an error in the presentation of a deposit escrowed as additional collateral to one of the Company’s loans, entered into by a non-guarantor subsidiary, in the amount of approximately $11.2 million. Accordingly, the Company will revise the Consolidated Statements of Cash Flows and the Supplemental Consolidating Statement of Cash Flows for the nine months ended September 30, 2012 and for the year ended December 31, 2012 (in thousands):

	Nine Month Ended September  30, 2012			Year Ended December 31, 2012
CNL Lifestyle Properties, Inc.
Cash flows provided by operating activities, as reported	$	82,799		$	76,726
Cash flows provided by operating activities, as revised	$	93,966		$	87,893
Cash flows used in investing activities, as reported	$	(227,310	)	$	(260,297	)
Cash flows used in investing activities, as revised	$	(238,477	)	$	(271,464	)
Non-Guarantor Subsidiaries
Cash flows provided by operating activities, as reported	$	71,502		$	70,093
Cash flows provided by operating activities, as revised	$	82,669		$	81,260
Cash flows used in investing activities, as reported	$	(207,972	)	$	(233,256	)
Cash flows used in investing activities, as revised	$	(219,139	)	$	(244,423	)

The Company concluded that the corrections are not material to any of its previously issued consolidated financial statements based on an analysis of quantitative and qualitative factors performed in accordance with the guidance provided in SEC Staff Accounting Bulletin No. 99, “Materiality.” The error and revisions do not affect the Company’s Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Losses, Consolidated Statements of Stockholders’ Equity, Supplemental Consolidating Balance Sheet, Supplemental Consolidating Statement of Operations, Supplemental Consolidating Statement of Comprehensive Loss or cash balances for any reporting periods. Additionally, the revisions do not affect the Company’s compliance with any financial covenants.

Reclassifications— Certain prior period amounts in the unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation with no effect on previously reported total assets and total liabilities, net loss or stockholders’ equity. The results of operations of the real estate properties that are classified as held for sale, along with properties sold during the period, are reflected in discontinued operations for all periods presented.

Recent Accounting Pronouncements—In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (AOCI).” This update clarified the guidance in subtopic 220 and requires preparers to report, in one place, information about reclassifications out of AOCI. The ASU also requires companies to report changes in AOCI balances. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. The adoption of this ASU did not have a material impact on the Company’s financial statements and disclosures.

In July 2012, the FASB issued ASU No. 2012-02, “Intangibles — Goodwill and Other (Topic 350).” This ASU provides an entity with the option to make a qualitative assessment about the likelihood that an indefinite-lived intangible asset is impaired and to determine whether it should perform a quantitative impairment test. This ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this ASU did not have a material effect on the Company’s financial statements and disclosures.

7

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

2. Significant Accounting Policies(continued):

In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (Topic 210).” This ASU also serves to amend the disclosure requirements in FASB ASU 815, “Derivatives and Hedging.” This ASU will require companies to provide both net amounts (those that are offset) and gross information (as if amounts are not offset) in notes to the financial statements. In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”, that clarifies which instruments and transactions are subject to the offsetting disclosure requirement within the scope of ASU 2011-11. This ASU is effective for interim and annual periods beginning after January 1, 2013. The adoption of this ASU did not have a material effect on the Company’s financial statements and disclosures. See Footnote 8. “Derivative Instruments and Hedging Activities” for additional information.

3. Real Estate Investment Properties, net:

Real Estate Investment Properties, net —As of March 31, 2013 and December 31, 2012, the Company had accumulated depreciation and amortization of approximately $682.4 million and $650.0 million, respectively.

Assets Held for Sale —As of December 31, 2012, the Company classified four properties as assets held for sale. During the three months ended March 31, 2013, the Company sold one of these properties and classified one new property as an asset held for sale. The balances consist of the following (in thousands):

	March 31, 2013		December 31, 2012
Land and land improvements	$	3,784	$	2,874
Building and building improvements		5,904		2,157
Equipment		837		712
Total	$	10,525	$	5,743

4. Discontinued Operations:

The Company classified the revenues and expenses related to all real estate properties sold and all real estate properties considered as assets held for sale which were not accounted for under the equity method of accounting as of March 31, 2013, as discontinued operations in the accompanying unaudited condensed consolidated statements of operations. The table is a summary of income (loss) from discontinued operations for the three months ended March 31, 2013 and 2012 (in thousands):

	Three Months Ended March 31,
	2013			2012
Revenues	$	685		$	661
Expenses		(778	)		(709	)
Depreciation and amortization		(57	)		(116	)
Impairment provision		—			(267	)
Operating loss		(150	)		(431	)
Total other income (expense)		3			(71	)
Discontinued operations	$	(147	)	$	(502	)

8

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

5. Variable Interest and Unconsolidated Entities:

Consolidated VIEs— The Company has five wholly-owned subsidiaries, designed as single property entities to own and lease their respective properties to single tenant operators, which are VIEs due to potential future buy-out options held by the respective tenants. Three tenants’ buy-out options were exercisable as of March 31, 2013 and are exercisable through March 2026, the date of lease expiration. At March 31, 2013, the tenants have not elected to exercise the buy-out options. The remaining two buy-out options become exercisable in 2014. In addition, two other entities that hold the properties in which service providers have a significant variable interest were also determined to be VIEs. The Company determined it is the primary beneficiary and holds a controlling financial interest in each of these entities due to the Company’s power to direct the activities that most significantly impact the economic performance of the entities, as well as its obligation to absorb the losses and its right to receive benefits from these entities that could potentially be significant to these entities. As such, the transactions and accounts of these VIEs are included in the accompanying unaudited condensed consolidated financial statements. At March 31, 2013, the Company had no change to its five wholly-owned subsidiaries that were deemed to be VIEs.

The aggregate carrying amount and major classifications of the consolidated assets that can be used to settle obligations of the VIEs and liabilities of the consolidated VIEs that are non-recourse to the Company are as follows (in thousands):

	March 31, 2013		December 31, 2012
Assets
Real estate investment properties, net	$	204,730	$	207,516
Other assets	$	33,166	$	39,618
Liabilities
Mortgages and other notes payable	$	79,498	$	80,481
Other liabilities	$	15,328	$	15,806

The Company’s maximum exposure to loss as a result of its involvement with these VIEs is limited to its net investment in these entities, which totaled approximately $143.1 million and $150.8 million as of March 31, 2013 and December 31, 2012, respectively. The Company’s exposure is limited because of the non-recourse nature of the borrowings of the VIEs.

Unconsolidated Entities — The Company also holds ownership in five ventures, the DMC Partnership, the Intrawest Venture, CNLSun I Venture, CNLSun II Venture and CNLSun III Venture. Of these, the Intrawest Venture was deemed a VIE in which the Company is not the primary beneficiary. While several significant decisions are shared between the Company and its joint venture partner in the Intrawest Joint Venture, the Company does not direct the activities that most significantly impact the venture’s performance and has not consolidated the activities of the venture. The Company’s maximum exposure to loss as a result of its interest in the Intrawest Venture is limited to the carrying amount of its investment in the venture, which totaled approximately $24.1 million and $23.5 million as of March 31, 2013 and December 31, 2012, respectively. In December 2012, the Intrawest Venture decided to market for sale its seven destination retail properties to third–party buyers.

In December 2012, in connection with an existing purchase option held by Sunrise Living Investments, Inc. (“Sunrise”), the Company’s venture partner in its three senior housing ventures, the Company entered into an agreement with Health Care REIT, Inc. (“HCN”), as a result of a potential merger by HCN with Sunrise. Under the agreement, HCN and Sunrise have agreed to purchase the Company’s interests in the CNLSun I, CNLSun II and CNLSun III Ventures, which own 42 properties in total, for an aggregate purchase price of approximately $195.9 million subject to adjustment based on the closing date and actual cash flow distribution (the “Joint Venture Dispositions”). The Joint Venture Dispositions were conditioned upon the merger of HCN with Sunrise, which was completed in January 2013. The Company expects the sale of these three ventures to close in 2013. For the three months ended March 31, 2013 and 2012, the Company recorded aggregate equity loss of approximately $(5.1) million and $(1.5) million, respectively, and received aggregate cash distributions of $7.8 million and $8.8 million, respectively, from CNLSun I, CNLSun II and CNLSun III Ventures.

9

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

5. Variable Interest and Unconsolidated Entities(Continued):

The following tables present financial information for the Company’s unconsolidated entities for the three months ended March 31, 2013 and 2012, and as of March 31, 2013 and December 31, 2012 (in thousands):

Summarized operating data:

	Three Months Ended March 31, 2013
	DMC Partnership			Intrawest Venture			CNLSun I Venture			CNLSun II Venture			CNLSun III Venture			Total
Revenues	$	7,452		$	—		$	35,173		$	9,633		$	10,835		$	63,093
Property operating expenses		(160	)		—			(22,919	)		(8,889	)		(7,358	)		(39,326	)
Depreciation and amortization		(2,298	)		—			(5,587	)		(1,108	)		(1,448	)		(10,441	)
Interest expense		(1,971	)		—			(8,037	)		(1,155	)		(1,464	)		(12,627	)
Interest and other income		2			—			12			—			—			14
Income (loss) from continuing operations		3,025			—			(1,358	)		(1,519	)		565			713
Discontinued operations(4)		—			1,340			—			—			—			1,340
Net income (loss)	$	3,025		$	1,340		$	(1,358	)	$	(1,519	)	$	565		$	2,053
Income (loss) allocable to other venture partners(1)	$	227		$	—	(3)	$	420		$	(463	)	$	1,872		$	2,056
Income (loss) allocable to the Company(1)	$	2,798		$	1,340		$	(1,778	)	$	(1,056	)	$	(1,307	)	$	(3	)
Amortization of capitalized costs		(108	)		(58	)		(653	)		(215	)		(86	)		(1,120	)
Equity in earnings (loss) of unconsolidated entities	$	2,690		$	1,282		$	(2,431	)	$	(1,271	)	$	(1,393	)	$	(1,123	)
Distribution declared to the Company	$	2,797		$	369		$	3,877		$	517		$	825		$	8,385
Distributions received by the Company	$	2,852		$	689		$	3,952		$	528		$	3,305		$	11,326

	Three Months Ended March 31, 2012
	DMC Partnership			Intrawest Venture			CNLSun I Venture			CNLSun II Venture			CNLSun III Venture			Total
Revenues	$	7,244		$	—		$	33,703		$	9,036		$	10,703		$	60,686
Property operating expenses		(163	)		—			(21,661	)		(6,928	)		(7,092	)		(35,844	)
Depreciation and amortization		(2,248	)		—			(5,228	)		(1,361	)		(1,572	)		(10,409	)
Interest expense		(2,086	)		—			(8,113	)		(1,168	)		(1,465	)		(12,832	)
Interest and other income (expense)		22			—			(182	)		(120	)		(261	)		(541	)
Income (loss) from continuing operations		2,769			—			(1,481	)		(541	)		313			1,060
Discontinued operations (4)		—			(226	)		—			—			—			(226	)
Net income (loss)	$	2,769		$	(226	)	$	(1,481	)	$	(541	)	$	313		$	834
Loss allocable to other venture partners(1)	$	(52	)	$	(355	)(3)	$	(701	)	$	(240	)	$	(182	)	$	(1,530	)
Income (loss) allocable to the Company(1)	$	2,821		$	129		$	(780	)	$	(301	)	$	495		$	2,364
Amortization of capitalized costs		(122	)		(58	)		(653	)		(215	)		(85	)		(1,133	)
Equity in earnings (loss) of unconsolidated entities	$	2,699		$	71		$	(1,433	)	$	(516	)	$	410		$	1,231
Distribution declared to the Company	$	2,821		$	68		$	3,894		$	2,142	(2)	$	2,796	(2)	$	11,721
Distributions received by the Company	$	2,860		$	318		$	3,909		$	2,151	(2)	$	2,702	(2)	$	11,940

10

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

5. Variable Interest and Unconsolidated Entities(Continued):

FOOTNOTES:

⁽¹⁾  Income is allocated between the Company and its partnership using the hypothetical liquidation book value (“HLBV”) method of accounting.

⁽²⁾  Includes approximately $0.6 million and $0.8 million in distributions representing our respective preferred return on CNLSun II and CNLSun III ventures, respectively, in accordance with the venture agreements and approximately $1.5 million and $1.9 million in return of capital on CNLSun II and CNLSun III, respectively.

⁽³⁾  This amount represents the venture partner’s portion of interest expense on a loan which the partners made to the venture. These amounts are treated as distributions for the purposes of the HLBV calculation.

⁽⁴⁾  In connection with the proposed sale, the venture reclassified and included the results of operations from its seven properties as discontinued operations.

As of March 31, 2013 and December 31, 2012, the Company’s share of partners’ capital determined under HLBV was approximately $257.0 million and $265.3 million, respectively, and the total difference between the carrying amount of the investment and the Company’s share of partners’ capital determined under HLBV was approximately $17.9 million and $22.0 million, respectively.

6. Mortgages and Other Notes Receivable:

The estimated fair market value of the Company’s mortgages and other notes receivable was approximately $121.4 million and $121.0 million as of March 31, 2013 and December 31, 2012, respectively, based on discounted cash flows for each individual instrument based on market interest rates as of March 31, 2013 and December 31, 2012, respectively. Because this methodology includes inputs that are not observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to the Company’s mortgage and other notes receivable is categorized as Level 3 on the three-level valuation hierarchy. The estimated fair value of accounts and other receivables approximates the carrying value as of March 31, 2013 and December 31, 2012 because of the relatively short maturities of the obligations.

7. Indebtedness:

The estimated fair values of mortgages and other notes payable and the line of credit were approximately $764.2 million and $742.9 million as of March 31, 2013 and December 31, 2012, respectively, based on rates and spreads the Company would expect to obtain for similar borrowings with similar loan terms. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to the Company’s mortgage notes payable is categorized as Level 3 on the three-level valuation hierarchy. The estimated fair values of the senior notes was approximately $402.9 million and $385.6 million as of March 31, 2013 and December 31, 2012, respectively, based on prices traded for similar or identical instruments in active or inactive markets and is categorized as level 2 on the three-level valuation hierarchy. The estimated fair value of accounts payable and accrued expenses approximates the carrying value as of March 31, 2013 and December 31, 2012 because of the relatively short maturities of the obligations.

8. Derivative Instruments and Hedging Activities:

The Company utilizes derivative instruments to offset partially the effect of fluctuating interest rates on the cash flows associated with its variable-rate debt. The Company follows established risk management policies and procedures in its use of derivatives and does not enter into or hold derivatives for trading or speculative purposes. The Company records all derivative instruments on its balance sheet at fair value. On the date the Company enters into a derivative contract, the derivative is designated as a hedge of the exposure to variable cash flows of a forecasted transaction. The effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently recognized in the statements of operations in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. Any ineffective portion of the gain or loss is reflected in interest expense in the statements of operations.

11

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

8. Derivative Instruments and Hedging Activities(Continued):

As of March 31, 2013 and December 31, 2012, the Company had five interest rate swaps that were designated as cash flow hedges of interest payments from their inception with maturity dates between December 2015 through September 2019. The fair value of the Company’s derivative financial instruments as of March 31, 2013 and December 31, 2012, was included in other liabilities in the accompanying unaudited condensed consolidated balance sheets.

			As of March 31, 2013								Gross Amounts Not Offset in the Balance Sheets
Notional Amount of Cash Flow Hedges			Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Balance Sheets		Net Amounts of Liabilities Presented in the Balance Sheets			Financial Instruments			Cash Collateral		Net Amount
$	62,403		$	(2,265	)	$	—	$	(2,265	)	$	(2,265	)	$	—	$	(2,265	)
$	8,991		$	(1,158	)	$	—	$	(1,158	)	$	(1,158	)	$	—	$	(1,158	)
$	17,915	(1)	$	(419	)	$	—	$	(419	)	$	(419	)	$	—	$	(419	)
$	16,125		$	(697	)	$	—	$	(697	)	$	(697	)	$	—	$	(697	)
$	25,000		$	(671	)	$	—	$	(671	)	$	(671	)	$	—	$	(671	)

			As of December 31, 2012								Gross Amounts Not Offset in the Balance Sheets
Notional Amount of Cash Flow Hedges			Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Balance Sheets		Net Amounts of Liabilities Presented in the Balance Sheets			Financial Instruments			Cash Collateral		Net Amount
$	62,856		$	(2,423	)	$	—	$	(2,423	)	$	(2,423	)	$	—	$	(2,423	)
$	9,070		$	(1,238	)	$	—	$	(1,238	)	$	(1,238	)	$	—	$	(1,238	)
$	18,434	(1)	$	(460	)	$	—	$	(460	)	$	(460	)	$	—	$	(460	)
$	16,350		$	(761	)	$	—	$	(761	)	$	(761	)	$	—	$	(761	)
$	25,000		$	(716	)	$	—	$	(716	)	$	(716	)	$	—	$	(716	)

FOOTNOTE:

(1) The Company swapped the interest rate on its $20.0 million loan denominated in Canadian dollars to a fixed interest rate of 6.4%. The notional amount has been converted from Canadian dollars to U.S. dollars at an exchange rate of 0.98 and 1.00 Canadian dollars for $1.00 U.S. dollar on March 31, 2013 and December 31, 2012, respectively.

As of March 31, 2013, the Company’s hedges qualified as highly effective and, accordingly, all of the change in value is reflected in other comprehensive income (loss). Determining fair value and testing effectiveness of these financial instruments requires management to make certain estimates and judgments. Changes in assumptions could have a positive or negative impact on the estimated fair values and measured effectiveness of such instruments could, in turn, impact the Company’s results of operations.

9. Fair Value Measurements:

The Company is making an accounting policy election to use the exception in ASC 820-10-35-18D with respect to measuring fair value of a group of financial assets and financial liabilities entered into with a particular counterparty, where the Company reports the net exposure to the credit risk of that counterparty.

12

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

9. Fair Value Measurements(Continued):

The Company had four investment properties that were classified as assets held for sale and were carried at fair value as of March 31, 2013. The Level 3 unobservable inputs used in determining the fair value of the real estate properties include, but are not limited to, management’s estimated cash flows over various holding periods, discounted using a range of estimated capitalization rates, and estimated net sale prices from third party offers.

The Company’s derivative instruments are valued primarily based on inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, volatilities, and credit risks) and are classified as Level 2 in the fair value hierarchy. The valuation of derivative instruments also includes a credit value adjustment which is a Level 3 input. However, the impact of the assumption is not significant to its overall valuation calculation, and therefore the Company considers its derivative instruments to be classified as Level 2. The fair value of such instruments is included in other liabilities in the accompanying unaudited condensed consolidated balance sheets.

The following tables show the fair value of the Company’s financial assets and liabilities carried at fair value as of March 31, 2013 and December 31, 2012, as follows (in thousands):

	Fair Value Measurement as of March 31, 2013		Level 1		Level 2		Level 3
Assets:
Asset held for sale carried at the lower of cost or fair value	$	10,525	$	—	$	—	$	10,525
Liabilities:
Derivative instruments	$	5,210	$	—	$	5,210	$	—

	Fair Value Measurement as of December 31, 2012		Level 1		Level 2		Level 3
Assets:
Assets held for sale carried at the lower of costs or fair value	$	5,743	$	—	$	—	$	5,743
Liabilities:
Derivative instruments	$	5,598	$	—	$	5,598	$	—

10. Related Party Arrangements:

In January 2013, the Company’s operating partnership entered into an exclusive right of sale listing agreement with CNL Commercial Real Estate Inc. (“CCRE”), an affiliate of the Company, pursuant to which in exchange for CCRE’s solicitation of purchasers for the sale of one of the Company’s additional lifestyle properties, the operating partnership will pay CCRE a commission equal to either (i) 2% of the gross sales price; or (ii) 3% of the gross sales price if a cooperating broker assists in the sale. The term of the exclusive right of sale listing agreement is from January 15, 2013 through July 31, 2013.

13

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

10. Related Party Arrangements(Continued):

For the three months ended March 31, 2013 and 2012, the Advisor and former advisor collectively earned fees and incurred reimbursable expenses as follows (in thousands):

	Three Months Ended March 31,
	2013		2012
Acquisition fees:
Acquisition fees from distribution reinvestment plan	$	322	$	574
Acquisition fees from debt proceeds		234		924
Total		556		1,498
Asset management fees		9,213		8,682
Reimbursable expenses:
Acquisition costs		67		78
Operating expenses		3,025		1,978
Total		3,092		2,056
Total fees earned and reimbursable expenses	$	12,861	$	12,236

Amounts due to affiliates for fees and expenses described above are as follows (in thousands):

	March 31, 2013		December 31, 2012
Due to the Advisor and its affiliates:
Asset management fees	$	—	$	14
Operating expenses		741		509
Acquisition fees and expenses		582		463
Total due to affiliates	$	1,323	$	986

The Advisor and its affiliates are entitled to reimbursement of certain expenses incurred on behalf of the Company in connection with the Company’s organization, offering, acquisitions, and operating activities. Pursuant to the advisory agreement, the Company will not reimburse the Advisor for any amount by which total operating expenses paid or incurred by the Company exceed the greater of 2% of average invested assets or 25% of net income (the “Expense Cap”) in any expense year, as defined in the advisory agreement. For the expense year ended March 31, 2013, operating expenses did not exceed the Expense Cap.

The Company also maintains accounts at a bank in which the Company’s chairman serves as a director. The Company had deposits at that bank of approximately $7.0 million and $5.5 million as of March 31, 2013 and December 31, 2012, respectively.

11. Stockholders’ Equity:

Distribution Reinvestment Plan— For the three months ended March 31, 2013, the Company received aggregate proceeds of approximately $13.7 million (representing 2.0 million shares) through its DRP.

Distributions— For the three months ended March 31, 2013, the Company declared and paid distributions of approximately $33.6 million ($0.1063 per share).

14

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

11. Stockholders’ Equity(Continued):

Redemption of Shares— The following details the activity of the pending redemption requests for the three months ended March 31, 2013 (in thousands except per share data):

Requests in queue		9,726
Redemptions requested		716
Shares redeemed:
Prior period requests		(213	)
Current period requests		(192	)
Adjustments(1)		(75	)
Pending redemption requests(2)		9,962
Average price paid per share	$	7.31

FOOTNOTES:

(1) This amount represents redemption request cancellations and other adjustments.

(2) Requests that are not fulfilled in whole during a particular quarter will be redeemed on a pro rata basis to the extent funds are made available pursuant to the redemption plan.

12. Supplemental Condensed Consolidating Financial Statements:

The Company issued senior obligations which are guaranteed by certain of the Company’s consolidated subsidiaries (the “Guarantor Subsidiaries”). The guarantees are joint and several, full and unconditional.

In June 2012, the Company revised the classification of intercompany financing with its consolidated subsidiaries on its consolidated statements of cash flows to present them correctly as cash flows from investing activities. These amounts were previously classified as cash flows from financing activities. The Company has determined that these revisions are not material to the related financial statements. The impact of these revisions for the three months ended March 31, 2012 (which eliminate in consolidation) is to increase cash inflows from investing activities and decrease cash inflows from financing activities for the Issuer by approximately $30.4 million.

15

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

12. Supplemental Condensed Consolidating Financial Statements(Continued):

The following summarizes the Company’s unaudited condensed consolidating balance sheet as of March 31, 2013 and December 31, 2012, statement of operations, statement of comprehensive income (loss) and statement of cash flows for the three months ended March 31, 2013 and 2012 (in thousands):

Condensed Consolidating Balance Sheet:

	As of March 31, 2013
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Real estate investment properties, net	$	—		$	1,056,055		$	1,099,958		$	—		$	2,156,013
Investments in unconsolidated entities		—			274,877			—			—			274,877
Investments in subsidiaries		1,988,858			1,153,815			2,572,986			(5,715,659	)		—
Mortgages and other notes receivable, net		—			39,632			121,626			(36,132	)		125,126
Deferred rent and lease incentives		—			86,864			21,395			—			108,259
Cash		73,227			10,053			21,734			—			105,014
Other assets		13,502			18,456			25,996			—			57,954
Restricted cash		57			26,347			23,349			—			49,753
Intangibles, net		—			16,312			17,260			—			33,572
Accounts and other receivables, net		—			10,125			8,173			—			18,298
Assets held for sale		—			10,525			—			—			10,525
Total Assets	$	2,075,644		$	2,703,061		$	3,912,477		$	(5,751,791	)	$	2,939,391
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgages and other notes payable	$	—		$	252,313		$	453,482		$	(33,068	)	$	672,727
Senior notes, net of discount		394,177			—			—			—			394,177
Line of credit		—			95,000			—			—			95,000
Other liabilities		—			35,896			31,189			—			67,085
Accounts payable and accrued expenses		14,767			11,743			19,984			(3,064	)		43,430
Due to affiliates		1,051			4			268			—			1,323
Total Liabilities		409,995			394,956			504,923			(36,132	)		1,273,742
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value per share		—			—			—			—			—
Excess shares, $.01 par value per share		—			—			—			—			—
Common stock, $.01 par value per share		3,179			—			—			—			3,179
Capital in excess of par value		2,814,126			5,443,550			7,908,957			(13,352,507	)		2,814,126
Accumulated earnings (deficit)		(172,745	)		311,703			338,029			(649,732	)		(172,745	)
Accumulated distributions		(971,583	)		(3,447,148	)		(4,832,104	)		8,279,252			(971,583	)
Accumulated other comprehensive loss		(7,328	)		—			(7,328	)		7,328			(7,328	)
		1,665,649			2,308,105			3,407,554			(5,715,659	)		1,665,649
Total Liabilities and Stockholders’ Equity	$	2,075,644		$	2,703,061		$	3,912,477		$	(5,751,791	)	$	2,939,391

16

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

12. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Balance Sheet:

	As of December 31, 2012
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Real estate investment properties, net	$	—		$	1,066,297		$	1,110,060		$	—		$	2,176,357
Investments in unconsolidated entities		—			287,339			—			—			287,339
Investments in subsidiaries		2,061,102			1,208,475			2,684,880			(5,954,457	)		—
Cash		39,219			14,125			19,880			—			73,224
Mortgages and other notes receivable, net		—			38,987			121,190			(35,447	)		124,730
Deferred rent and lease incentives		—			86,752			22,755			—			109,507
Other assets		13,967			16,057			33,631			—			63,655
Restricted cash		46			20,009			20,261			—			40,316
Intangibles, net		—			16,481			18,976			—			35,457
Accounts and other receivables, net		—			11,939			9,761			—			21,700
Assets held for sale		—			5,743			—			—			5,743
Total Assets	$	2,114,334		$	2,772,204		$	4,041,394		$	(5,989,904	)	$	2,938,028
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgages and other notes payable	$	—		$	255,942		$	426,127		$	(33,067	)	$	649,002
Senior notes, net of discount		394,100			—			—			—			394,100
Line of credit		—			95,000			—			—			95,000
Other liabilities		—			23,533			23,912			—			47,445
Accounts payable and accrued expenses		7,857			12,306			22,281			(2,380	)		40,064
Due to affiliates		946			3			37			—			986
Total Liabilities		402,903			386,784			472,357			(35,447	)		1,226,597
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value per share		—			—			—			—			—
Excess shares, $.01 par value per share		—			—			—			—			—
Common stock, $.01 par value per share		3,164			—			—			—			3,164
Capital in excess of par value		2,803,346			5,389,388			7,846,451			(13,235,839	)		2,803,346
Accumulated earnings (deficit)		(149,446	)		313,032			338,888			(651,920	)		(149,446	)
Accumulated distributions		(937,972	)		(3,317,000	)		(4,608,641	)		7,925,641			(937,972	)
Accumulated other comprehensive loss		(7,661	)		—			(7,661	)		7,661			(7,661	)
		1,711,431			2,385,420			3,569,037			(5,954,457	)		1,711,431
Total Liabilities and Stockholders’ Equity	$	2,114,334		$	2,772,204		$	4,041,394		$	(5,989,904	)	$	2,938,028

17

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

12. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Statement of Operations:

	For the Three Months Ended March 31, 2013
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rental income from operating leases	$	—		$	25,468		$	21,997		$	—		$	47,465
Property operating revenues		—			8,682			46,870			—			55,552
Interest income on mortgages and other notes receivable		—			1,041			3,345			(967	)		3,419
Total revenues		—			35,191			72,212			(967	)		106,436
Expenses:
Property operating expenses		—			12,870			41,111			—			53,981
Asset management fees to advisor		9,213			—			—			—			9,213
General and administrative		3,499			415			402			—			4,316
Ground lease and permit fees		—			2,890			1,890			—			4,780
Acquisition fees and costs		367			—			—			—			367
Other operating expenses		174			211			1,297			—			1,682
Bad debt expense		—			98			10			—			108
Depreciation and amortization		—			16,243			19,883			—			36,126
Total expenses		13,253			32,727			64,593			—			110,573
Operating income (loss)		(13,253	)		2,464			7,619			(967	)		(4,137	)
Other income (expense):
Interest and other income (expense)		5			467			(32	)		—			440
Interest expense and loan cost amortization (includes $414 loss on termination of cash flow hedges)		(7,857	)		(5,627	)		(5,815	)		967			(18,332	)
Equity in earnings of unconsolidated entities		—			(1,123	)		—			—			(1,123	)
Equity in earnings (loss), intercompany		(2,194	)		2,638			(2,632	)		2,188			—
Total other income (expense)		(10,046	)		(3,645	)		(8,479	)		3,155			(19,015	)
Income (loss) from continuing operations		(23,299	)		(1,181	)		(860	)		2,188			(23,152	)
Discontinued operations		—			(147	)		—			—			(147	)
Net income (loss)	$	(23,299	)	$	(1,328	)	$	(860	)	$	2,188		$	(23,299	)

18

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

12. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Statement of Operations:

	For the Three Months Ended March 31, 2012
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rental income from operating leases	$	—		$	25,667		$	20,422		$	—		$	46,089
Property operating revenues		—			5,984			34,027			—			40,011
Interest income on mortgages and other notes receivable		—			2,212			3,190			(2,299	)		3,103
Total revenues		—			33,863			57,639			(2,299	)		89,203
Expenses:
Property operating expenses		—			10,739			32,493			—			43,232
Asset management fees to advisor		8,682			—			—			—			8,682
General and administrative		3,734			102			701			—			4,537
Ground lease and permit fees		—			2,470			1,725			—			4,195
Acquisition fees and costs		927			—			203			—			1,130
Other operating expenses		126			759			1,600			—			2,485
Bad debt expense		—			2,064			10			—			2,074
Depreciation and amortization		—			15,513			16,593			—			32,106
Total expenses		13,469			31,647			53,325			—			98,441
Operating income (loss)		(13,469	)		2,216			4,314			(2,299	)		(9,238	)
Other income (expense):
Interest and other income (expense)		51			(24	)		16			—			43
Interest expense and loan cost amortization (includes $414 loss on termination of cash flow hedges)		(7,940	)		(3,997	)		(6,639	)		2,299			(16,277	)
Equity in earnings of unconsolidated entities		—			1,231			—			—			1,231
Equity in earnings (loss), intercompany		(3,385	)		2,932			(11,182	)		11,635			—
Total other income (expense)		(11,274	)		142			(17,805	)		13,934			(15,003	)
Income (loss) from continuing operations		(24,743	)		2,358			(13,491	)		11,635			(24,241	)
Discontinued operations		—			(502	)		—			—			(502	)
Net income (loss)	$	(24,743	)	$	1,856		$	(13,491	)	$	11,635		$	(24,743	)

19

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

12. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Statement of Other Comprehensive Income (Loss):

	For the Three Months Ended March 31, 2013
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated
Net income (loss)	$	(23,299	)	$	(1,328	)	$	(860	)	$	2,188	$	(23,299	)
Other comprehensive income (loss):
Foreign currency translation adjustments		—			—			(460	)		—		(460	)
Changes in fair value of cash flow hedges:
Unrealized gain arising during the period		—			—			379			—		379
Loss on termination of cash flow hedges reclassed to interest expense		—			—			414			—		414
Total other comprehensive income		—			—			333			—		333
Comprehensive income (loss)	$	(23,299	)	$	(1,328	)	$	(527	)	$	2,188	$	(22,966	)

	For the Three Months Ended March 31, 2012
	Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments		Consolidated
Net income (loss)	$	(24,743	)	$	1,856	$	(13,491	)	$	11,635	$	(24,743	)
Other comprehensive income (loss):
Foreign currency translation adjustments		—			—		525			—		525
Changes in fair value of cash flow hedges:
Unrealized gain arising during the period		—			—		213			—		213
Loss on termination of cash flow hedges reclassed to interest expense		—			—		414			—		414
Total other comprehensive income		—			—		1,152			—		1,152
Comprehensive income (loss)	$	(24,743	)	$	1,856	$	(12,339	)	$	11,635	$	(23,591	)

20

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

12. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Statement of Cash Flows:

	For the Three Months Ended March 31, 2013
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities:
Net cash provided by (used in) operating activities	$	(13,549	)	$	30,967		$	31,226		$	—		$	48,644
Investing activities:
Capital expenditures		—			(5,431	)		(10,047	)		—			(15,478	)
Proceeds from sale of property		—			1,000			(325	)		—			675
Proceeds from disposal of assets		—			—			27						27
Return collateral on loan		—			—			8,684			—			8,684
Issuance of mortgage loans receivable		—			—			(81	)		—			(81	)
Principal payments received on mortgage loans receivable		—			15			58			—			73
Changes in restricted cash		(11	)		(6,337	)		(3,103	)		—			(9,451	)
Intercompany investing		70,384			—			—			(70,384	)		—
Net cash provided by (used in) investing activities		70,373			(10,753	)		(4,787	)		(70,384	)		(15,551	)
Financing activities:
Redemptions of common stock		(2,919	)		—			—			—			(2,919	)
Distributions to stockholders, net of reinvestments		(19,897	)		—			—			—			(19,897	)
Proceeds from mortgage loans and other notes payable		—			—			30,000			—			30,000
Principal payments on mortgage loans and senior notes		—			(3,140	)		(2,746	)		—			(5,886	)
Principal payments on capital leases		—			(1,284	)		(663	)		—			(1,947	)
Payment of loan costs		—			—			(640	)		—			(640	)
Intercompany financing		—			(19,862	)		(50,522	)		70,384			—
Net cash provided by (used in) financing activities		(22,816	)		(24,286	)		(24,571	)		70,384			(1,289	)
Effect of exchange rate fluctuation on cash		—			—			(14	)		—			(14	)
Net increase (decrease) in cash		34,008			(4,072	)		1,854			—			31,790
Cash at beginning of period		39,219			14,125			19,880			—			73,224
Cash at end of period	$	73,227		$	10,053		$	21,734		$	—		$	105,014

21

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

12. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Statement of Cash Flows:

	For the Three Months Ended March 31, 2012
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities:
Net cash provided by (used in) operating activities	$	(13,595	)	$	24,423		$	11,329		$	—		$	22,157
Investing activities:
Capital expenditures		—			(12,777	)		(101	)		—			(12,878	)
Investment in and contributions to unconsolidated entities		—			(1,864	)		—			—			(1,864	)
Distributions from unconsolidated entities		—			7,977			—			—			7,977
Deposits on real estate investments		(200	)		—			—			—			(200	)
Other		—			—			(18	)		—			(18	)
Principal payments received on mortgage loans receivable		—			11			—			—			11
Changes in restricted cash		(36	)		(3,097	)		(4,118	)		—			(7,251	)
Intercompany investing		30,261			—			—			(30,261	)		—
Net cash provided by (used in) investing activities		30,025			(9,750	)		(4,237	)		(30,261	)		(14,223	)
Financing activities:
Redemptions of common stock		(1,744	)		—			—			—			(1,744	)
Distributions to stockholders, net of reinvestments		(27,477	)		—			—			—			(27,477	)
Proceeds from mortgage loans and other notes payable		—			—			30,800			—			30,800
Principal payments on mortgage loans and senior notes		—			(1,931	)		(17,110	)		—			(19,041	)
Principal payments on capital leases		—			(767	)		(533	)		—			(1,300	)
Payment of loan costs		(3	)		—			(2,163	)		—			(2,166	)
Other		(4	)		—			—			—			(4	)
Intercompany financing		—			(15,966	)		(14,295	)		30,261			—
Net cash provided by (used in) financing activities		(29,228	)		(18,664	)		(3,301	)		30,261			(20,932	)
Effect of exchange rate fluctuation on cash		—			—			(12	)		—			(12	)
Net increase (decrease) in cash		(12,798	)		(3,991	)		3,779			—			(13,010	)
Cash at beginning of period		134,608			11,268			16,963			—			162,839
Cash at end of period	$	121,810		$	7,277		$	20,742		$	—		$	149,829

22

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013

(UNAUDITED)

13. Commitments and Contingencies:

A purported class action lawsuit on behalf of shareholders who purchased shares under the Company’s DRP on or after April 1, 2010, Allyn v. CNL Lifestyle Properties, Inc. et al., was filed on January 18, 2013 in the United States District Court for the Middle District of Florida against the Company and certain of its current and former directors. The lawsuit alleges claims for breach of fiduciary duty against the directors and constructive trust and unjust enrichment against the Company. The factual assertions in the complaint consist primarily of the allegation that the price for shares purchased under the DRP was inflated. The complaint seeks an unspecified amount of damages and other relief relating to the purported inflation. The Company intends to defend vigorously against such claims and is not able to determine the ultimate outcome at this time.

From time to time the Company may be exposed to litigation arising from operations of its business in the ordinary course of business. Management is not aware of any litigation that it believes will have a material adverse impact on the Company’s financial condition or results of operations.

14. Subsequent Events:

In April 2013, the Company completed the sale of its additional lifestyle property that was classified as one of the four properties held for sale as of March 31, 2013 for approximately $8.5 million and recorded a gain of approximately $1.8 million. In connection with the sale, the Company will pay approximately $0.2 million in commission to CCRE for solicitation of the purchasers pursuant to the exclusive right of sale listing agreement. See “Related Party Arrangements” above for additional information.

23

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

INTRODUCTION

The following discussion is based on our unaudited condensed consolidated financial statements as of March 31, 2013 and December 31, 2012 and for the three months ended March 31, 2013 and 2012 of CNL Lifestyle Properties, Inc. and its subsidiaries (hereinafter referred to as the “Company,” “we,” “us,” or “our”). Amounts as of December 31, 2012 included in the unaudited condensed consolidated financial statements have been derived from the audited consolidated financial statements as of that date. This information should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto, as well as the audited consolidated financial statements, notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2012. Capitalized terms used in this Item 2 have the same meaning as in the accompanying condensed financial statements.

Caution Concerning Forward-Looking Statements

Certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company’s business and its performance, the economy, and other future conditions and forecasts of future events, and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should” and “could,” and words and terms of similar substance in connection with discussions of future operating or financial performance, business strategy and portfolios, projected growth prospects, cash flows, costs and financing needs, legal proceedings, amount and timing of anticipated future distributions, estimated per share value of the Company’s common stock, and other matters. The Company’s forward-looking statements are not guarantees of future performance. While the Company’s management believes its forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized. The Company’s forward-looking statements are based on management’s current expectations and a variety of risks, uncertainties and other factors, many of which are beyond the Company’s ability to control or accurately predict. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factors. Given these uncertainties, the Company cautions you not to place undue reliance on such statements

Important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements include, but are not limited to, government regulation, economic, strategic, political and social conditions, and the following: risks associated with the Company’s investment strategy; a worsening economic environment in the U.S. or globally, including financial market fluctuations; risks associated with real estate markets, including declining real estate values; risks of doing business internationally, including currency risks; the Company’s failure to obtain, renew or extend necessary financing or to access the debt or equity markets; the use of debt to finance the Company’s business activities, including refinancing and interest rate risk and the Company’s failure to comply with debt covenants; failure to successfully manage growth or integrate acquired properties and operations; the Company’s ability to make necessary improvements to properties on a timely or cost-efficient basis; risks related to property expansions and renovations; competition for properties and/or tenants; defaults on or non-renewal of leases by tenants; failure to lease properties on favorable terms or at all; the impact of current and future environmental, zoning and other governmental regulations affecting the Company’s properties; the impact of changes in accounting rules; the impact of regulations requiring periodic valuation of the Company on a per share basis; inaccuracies of the Company’s accounting estimates; unknown liabilities of acquired properties or liabilities caused by property managers or operators; material adverse actions or omissions by any joint venture partners; increases in operating costs and other expenses; uninsured losses or losses in excess of the Company’s insurance coverage; the impact of outstanding and/or potential litigation; risks associated with the Company’s tax structuring; failure to maintain the Company’s REIT qualification; and the Company’s ability to protect its intellectual property and the value of its brand.

For further information regarding risks and uncertainties associated with the Company’s business, and important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements, please refer to the factors listed and described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” sections of the Company’s documents filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, this and the Company’s other quarterly reports on Form 10-Q, and the Company’s annual report on Form 10-K, copies of which may be obtained from the Company’s website at http://www.cnllifestyleproperties.com.

All written and oral forward-looking statements attributable to the Company or persons acting on its behalf are qualified in their entirety by these cautionary statements. Forward-looking statements speak only as of the date on which they are made; and the

24

Company undertakes no obligation to, and expressly disclaims any obligation to, update or revise its forward-looking statements to reflect new information, changed assumptions, the occurrence of subsequent events, or changes to future operating results over time unless otherwise required by law.

GENERAL

CNL Lifestyle Properties, Inc. is a Maryland corporation incorporated on August 11, 2003. We were formed primarily to acquire lifestyle properties in the United States that we generally lease on a long-term, triple-net basis (generally five to 20 years, plus multiple renewal options) to tenants or operators that we consider to be industry leading. We also engage third-party managers to operate certain properties on our behalf as permitted under applicable tax regulations. We define lifestyle properties as those properties that reflect or are impacted by the social, consumption and entertainment values and choices of our society. When beneficial to our investment structure and as a result of tenant defaults, we engage third-party managers to operate certain properties on our behalf as permitted under applicable tax regulations. We have also made loans (including mortgage, mezzanine and other loans) generally collateralized by interests in real estate. We have engaged CNL Lifestyle Advisor Corporation (the “Advisor”) as our Advisor to provide management, acquisition, disposition, advisory and administrative services.

Our principal business objectives include investing in and owning a diversified portfolio of real estate with a goal to preserve, protect and enhance the long-term value of those assets. We have built a portfolio of properties that we consider to be well-diversified by region, asset type and operator. As of May 3, 2013, we had a portfolio of 177 lifestyle properties of which 52 properties (three consolidated properties and 49 unconsolidated properties held through four joint ventures) are classified as assets held for sale and are expected to be sold in 2013. When aggregated by initial purchase price, the portfolio is diversified as follows: approximately 19% in ski and mountain lifestyle, 15% in golf facilities, 33% in senior housing, 13% in attractions, 5% in marinas and 15% in additional lifestyle properties.

As a mature REIT, a significant focus is to actively manage our assets and reinvest in our existing properties in order to maximize growth in rental income and property operating income. We will seek to maximize the total value of our portfolio in connection with our evaluation of various strategic opportunities in preparation for a potential future listing or other liquidity event(s), and our board of directors will undertake an evaluation of various strategic opportunities including the sale of either us or our assets, potential merger opportunities, or the listing of our common stock.

We are evaluating each of our properties on a rigorous and ongoing basis, and to the extent we consider selling certain assets that we believe are not central to our long-term strategy in an effort to optimize and enhance our portfolio, we will evaluate these assets for impairment in accordance with our accounting policy. We anticipate that proceeds from any future sales will be reinvested into new assets, enhancements to existing assets or to retire obligations. We will also continue to reposition certain assets by making strategic tenant or operator changes for properties that we believe will benefit from a new operator based on specific expertise or geographic concentrations that a particular operator possesses.

We currently operate and have elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. As a REIT, we generally will not be subject to federal income tax at the corporate level to the extent that we distribute at least 100% of our REIT taxable income and capital gains to our stockholders and meet other compliance requirements. We are subject to income taxes on taxable income from properties operated by third-party managers. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on all of our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is lost. Such an event could materially and adversely affect our operating results and cash flows. However, we believe that we are organized and have operated in a manner to qualify for treatment as a REIT beginning with the year ended December 31, 2004. In addition, we intend to continue to be organized and to operate so as to remain qualified as a REIT for federal income tax purposes.

Portfolio Trends

A large number of the properties in our real estate portfolio are operated by third-party tenant operators under long-term triple-net leases for which we report rental income and are not directly exposed to the variability of property-level operating revenues and expenses. We also engage third-party managers to operate certain properties on our behalf for which we record the property-level operating revenues and expenses and are directly exposed to the variability of the property’s operations which impacts our results of operations. We believe that the financial and operational performance of our tenants and managers, and the general conditions of the industries within which they operate, provide indicators about our tenants’ health and their ability to pay contractually obligated rent. For example, positive growth in visitation and per capita spending may result in our receipt of additional percentage rent and, conversely, declines may impact our tenants’ ability to pay rent to us.

The following table illustrates property level revenues and earnings before interest, taxes, depreciation and amortization (“EBITDA”) reported to us by our tenants and managers for the asset types below and includes both our leased and managed properties. We have only included property-level operating performance for consolidated properties in the table below. Property-level operating performance from our unconsolidated properties has been excluded because we do not believe it is as relevant and meaningful

25

particularly since we are entitled cash distribution preferences where we receive a stated return on our investment each year ahead of our partners. Our tenants and managers are contractually required to provide this information to us in accordance with their respective lease and management agreements. While this information has not been audited, it has been reviewed by management to determine whether the information is reasonable and accurate in all material respects. In connection with this review, management reviews monthly property level operating performance versus budgeted expectations, conducts periodic operational review calls with operators and conducts periodic property inspections. We have aggregated this performance data on a “same-store” basis only for comparable properties that we have owned during the entirety of all periods presented and have included information for both leased and managed properties. We have not included performance data on acquisitions made after January 1, 2012 because we did not own those properties during the entirety of both periods presented below. For these reasons, we consider the property level data to be performance information that gives us information on trends which does not directly represent our results of operations. We do not consider this information to be a non-GAAP measure which can be reconciled to our GAAP financial statements because it includes performance of properties leased to third-party tenants and excludes performance of any properties acquired during the current periods presented. However, we believe this information is useful to help readers of our financial statements understand and evaluate trends, events and uncertainties in our business as it relates to our prior periods and to broader industry performance (in thousands):

	Number		Quarter Ended March 31,
	of		2013					2012					Increase/(Decrease)
	Properties		Revenue (1)		EBITDA (1)			Revenue(1)		EBITDA (1)			Revenue			EBITDA
Ski and mountain lifestyle		16	$	235,084	$	113,380		$	199,934	$	87,422			17.6	%		29.7	%
Golf		49		34,490		8,930			34,716		8,259			-0.7	%		8.1	%
Attractions		19		8,612		(11,302	)		7,395		(11,688	)		16.5	%		3.3	%
Marinas		17		6,046		2,140			5,958		1,899			1.5	%		12.7	%
Additional lifestyle		6		37,024		7,745			33,637		6,236			10.1	%		24.2	%
		107	$	321,256	$	120,893		$	281,640	$	92,128			14.1	%		31.2	%

FOOTNOTE:

(1) Property operating results for tenants under leased arrangements are not included in the company’s operating results. Property-level EBITDA above is disclosed before rent and capital reserve payments to us, as applicable.

Overall, for the three months ended March 31, 2013, our tenants and managers reported to us an increase in revenue and property-level EBITDA of 14.1% and 31.2%, respectively, as compared to the same period in the prior year. The increase was primarily attributable to our ski and mountain lifestyle properties, additional lifestyle properties and attractions properties. Our ski and mountain lifestyle properties and our additional lifestyle properties, which include the Omni Mount Washington Resort, experienced a strong 2012/2013 ski season as a result of the return to a normal level of natural snowfall and favorable snowmaking conditions as compared to unprecedented low levels of natural snowfall for the same period in 2012. Our attractions properties experienced an increase in revenue due to rate inflation, and increases in visitations and in-park spending as compared to the same period in 2012. Our attractions properties are in their off-peak season during first, second and fourth quarters due to the nature of their business and have improved in their EBITDA primarily due to cost controls. Our golf facilities experienced a slight decrease in rounds played as a direct result of the unusually warm weather conditions experienced during the winter of 2012 as compared to normal conditions in 2013, however, operator-driven efficiencies resulted in an 8.1% increase in EBITDA over the prior year.

When evaluating our senior housing properties’ performance, management reviews operating statistics of the underlying properties, including revenue per occupied unit (“RevPOU”) and occupancy levels. RevPOU, which is defined as total revenue divided by number of occupied units, is a widely used performance metric within the healthcare sector. This metric assists us to determine the ability of our operators to achieve market rental rates and to obtain revenues from providing healthcare related services. As of March 31, 2013, the managers for our 52 comparable properties reported to us an increase in occupancy of 3.0% as compared to the same period in 2012 and an increase in RevPOU of 2.9% for the three months ended March 31, 2013 as compared to the same period in 2012. The increases in occupancy and RevPOU were driven primarily due to strong demands and rate increases at the properties.

26

The following table presents same store unaudited property-level information for our senior housing properties as of March 31, 2013 and 2012 (in thousands):

	Number		Three Months Ended March 31,
	of		2013					2012					Increase/(Decrease)
	Properties		Occupancy			RevPOU		Occupancy			RevPOU		Occupancy			RevPOU
Senior housing		52		90.5	%	$	6,343		87.9	%	$	6,167		3.0	%		2.9	%

We continue to closely monitor the performance of all tenants, their financial strength and their ability to pay rent under the leases for our properties. Our asset managers review operating results and rent coverage compared to budget for each of our properties on a monthly basis, monitor the local and regional economy, competitor activity, and other environmental, regulatory or operating conditions for each property, make periodic site visits and engage in regular discussions with our tenants.

Ski and Mountain Lifestyle. According to the National Ski Areas Association and the preliminary Kottke National End of Season Survey 2012/13, the U.S. ski industry recorded a total of 56.6 million visits, up 11.0% from a weather-challenged 2011/12 season. Our ski resorts finished the season with preliminary skier visits totaling 6.05 million, up 10.4% over the prior year. As the industry results largely represent a recovery over the prior winter season, it is important to note that many of our resorts, most notably in the Northeast, performed better than the competition during the low snow of 2011/12 due to our continued investment in snowmaking infrastructure. Those results reinforce our commitment to efficient snowmaking technology as a key hedge against low snowfall, allowing our resorts to maintain consistent and high-quality ski terrain throughout each season. As of March 31, 2013, revenues for the winter season were up 16.0% over last year, resulting in higher spend per guest. In addition, resorts which began pre-selling season passes during the months of March and April for the 2013/14 season have reported an uptick in sales pace, largely fueled by significant snowfall during those months.

Golf. Golf Datatech, one of the leading golf industry providers, reported a decrease of 7.7% in total rounds played in the U.S. for the two months ended February 28, 2013 as compared to same period in 2012. The decrease in year-over-year rounds played was a direct result of the unusually warm weather conditions experienced during the winter of 2012 as compared to normal conditions in 2013. Therefore, the industry anticipates rounds in 2013 to be less than those in 2012.

Attractions.Our properties include regional gated amusement parks and water parks that generally draw most of their visitation from local markets. Regional and local attractions have historically been resistant to recession, with inclement weather being a more significant factor impacting attendance. For the three months ended March 31, 2013, our attractions portfolio exhibited an increase in property-level revenue of approximately 16.5% as compared to the same period in 2012. The increase was due to rate inflation, and increases in visitations and in-park spending as compared to the same period in 2012. Our large attractions properties are in their off-peak season during first, second and fourth quarters due to the nature of their business with their peak months during the third quarter.

Marinas.According to the August 2012 IBIS World Industry Report on “Marinas in the U.S.”, the industry remains highly fragmented, with 91.6% of companies employing fewer than 20 people. Therefore, the industry has a large number of small, locally operated and owned enterprises. High barriers to entry limit the supply of competing properties, and demand is projected to rise as the number of boat sales increases. Common industry drivers are boat ownership and occupancy. Marina operators are affected by government regulations, rising fuel prices, and general economic conditions. According to IBIS World Industry Report, marinas in the United States are expected to experience slightly better prospects over the next five years with forecasted revenue to grow at an average annual rate of 1.3% as compared to a decline in revenues during recent years.

Senior Housing. Americans 65 years and older are expected to live longer than the elderly did in the past and will need additional housing options to accommodate their special needs. Demand for senior housing options is currently outpacing the existing supply of senior housing units. The supply growth of certain senior housing asset classes over the last decade has declined dramatically following a boom in senior housing development in the 1990’s. According to the data from the National Investment Center for the Senior Housing and Care Industry Map Monitor for the first quarter of 2013 (the “Q1 2013 NIC Map Monitor”), overall senior housing occupancy was at 89.1% in the first quarter of 2013, flat compared to the previous quarter and up 0.8% compared to the prior year.

Seasonality

Many of the asset classes in which we invest experience seasonal fluctuations due to the nature of their business, geographic location, climate and weather patterns. As a result, these businesses experience seasonal variations in revenues that may require our operators to supplement operating cash from their properties in order to be able to make scheduled rent payments to us. We have structured the leases for certain tenants such that rents are paid on a seasonal schedule with most, if not all, of the rent being paid during the tenant’s seasonally busy operating period.

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As part of our portfolio diversification strategy, we have specifically considered the varying and complimentary seasonality of our asset classes and portfolio mix. For example, the peak operating season for our ski and mountain lifestyle assets is highly complimentary to the peak seasons for our attractions, marinas and golf portfolios to balance and mitigate the risks associated with seasonality. Generally, seasonality does not significantly affect our recognition of rental income from operating leases due to straight-line revenue recognition in accordance with generally accepted accounting principles (“GAAP”). However, seasonality does impact the timing of when base rent payments are made by our tenants, which impacts our operating cash flows and the amount of rental revenue we recognize in connection with capital improvement reserve revenue and percentage rents paid by our tenants, which is recognized in the period in which it is earned and is generally based on a percentage of tenant revenues.

In addition, seasonality directly impacts certain of our properties where we engage independent third-party operators to manage on our behalf and where we record property operating revenues and expenses rather than straight-line rents from operating leases. These properties will likely generate net operating losses during their non-peak months while generating most, if not all, of their operating income during their peak operating months. As of May 3, 2013, we had a total of 55 wholly-owned managed properties consisting of 13 golf facilities, 20 senior housing properties, 15 attractions properties, two marinas and five additional lifestyle properties. Our consolidated operating results and cash flows during the first, second and fourth quarters will be lower than the third quarter primarily due to the non-peak operating months of our larger attractions properties.

Litigation

A purported class action lawsuit on behalf of shareholders who purchased shares under our DRP on or after April 1, 2010, Allyn v. CNL Lifestyle Properties, Inc. et al., was filed on January 18, 2013 in the United States District Court for the Middle District of Florida against the Company and certain of our current and former directors. The lawsuit alleges claims for breach of fiduciary duty against the directors and constructive trust and unjust enrichment against the Company. The factual assertions in the complaint consist primarily of the allegation that the price for shares purchased under the distribution reinvestment plan (“DRP”) was inflated. The complaint seeks an unspecified amount of damages and other relief relating to the purported inflation. The Company intends to defend vigorously against such claims and is not able to determine the ultimate outcome at this time.

LIQUIDITY AND CAPITAL RESOURCES

General

Our principal demand for funds during the short and long-term will be for operating expenses, debt service and cash distributions to stockholders. Generally, our cash needs will be covered by cash generated from our investments including rental income, property operating income from managed properties, interest payments on the loans we make and distributions from our unconsolidated entities. To the extent we have dispositions, we expect the net sale proceeds will be used to make additional acquisitions, to enhance our existing portfolio or to retire indebtedness. To the extent we have acquisitions, our primary source of funds will be from property dispositions, borrowings and proceeds from our DRP.

We believe that our current liquidity needs for operating expenses, debt service and cash distributions to stockholders will be adequately covered by cash generated from our investments and other sources of available cash. Additionally, many of our asset classes experience seasonal fluctuations where they make rental payments to us during their peak operating months. As a result, our operating cash flows will fluctuate due to the seasonality of those properties. We believe that we will be able to refinance our debt as it comes due in the ordinary course of business and will be exploring additional borrowing opportunities. From time to time, we will consider open market purchases of our senior notes or other indebtedness when considered advantageous.

During mid-2013, we expect to receive approximately $195.9 million from the sale of our interests in the three joint ventures with Sunrise Living Investments, Inc. (“Sunrise”) to Health Care REIT, Inc. (“HCN”) and plan to reinvest these proceeds into new and existing properties with a focus on ski and mountain lifestyle properties, attractions and senior housing.

Sources and Uses of Liquidity and Capital Resources

Operating Cash Flows.Our net cash flows provided by operating activities for the three months ended March 31, 2013 and 2012 were approximately $48.6 million and $22.2 million, respectively. Operating cash flows primarily consists of rental income from operating leases, property operating revenues, interest income on mortgages and other notes receivable, and distributions from our unconsolidated entities offset by payments made for operating expenses including property operating expenses and asset management fees to our Advisor. The increase in operating cash flows of approximately $26.4 million or 118.9% as compared to the same period in 2012 was primarily attributable to:

• An increase in rental income from leased properties and net operating income from managed properties related to properties acquired after the first quarter of 2012;

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• An increase in “same store” rent from leased properties and net operating income from managed properties primarily relating to our ski and mountain lifestyle properties and additional lifestyle properties which includes the Omni Mount Washington Resort as a result of a strong 2012/2013 ski season and rental income earned from certain golf properties where payments were waived during the first quarter of 2012 as a result of a lease amendment;

• An increase in interest income on mortgages and other notes receivable and interest and other income;

• An increase in distributions from unconsolidated entities. During the three months ended March 31, 2013, all of the distributions received were considered a return on capital which is included in cash flows from operating activities as compared to only a portion of the distributions received being considered a return on capital during the same period in 2012; and

• A decrease in acquisition fees and expenses, other operating expenses and general and administrative expenses.

During the fourth quarter of 2012, our tenants on the 15 marina properties experienced ongoing challenges due to the general economic environment and defaulted on their lease payments to us. In anticipation of transitioning to new tenants or managers, we recorded loss on lease terminations and wrote off deferred rent and lease intangible assets on all 15 marina properties. We will continue to evaluate the best course of action for the 15 marina properties, including potential transitions of properties to new third-party tenants or managers which is expected to be completed during 2013.

Indebtedness.We have borrowed and intend to continue to borrow money to acquire properties, fund ongoing enhancements to our portfolio, pay certain related fees and to cover periodic shortfalls between distributions paid and cash flows from operating activities. See “Distributions” below for additional information. In many cases, we have pledged our assets in connection with such borrowings. We have also borrowed, and may continue to borrow money to pay distributions to stockholders in order to avoid distribution volatility. The aggregate amount of long-term financing is not expected to exceed 50% of our total assets. As of March 31, 2013, our leverage ratio, calculated as total indebtedness over total assets, was 39.5% (46.1% including our share of unconsolidated assets and debts).

During the three months ended March 31, 2013, we obtained $30.0 million in new debt financing which is collateralized by four senior housing properties. The loan has a three year term with two one year extensions and has a variable interest rate of 30-day LIBOR plus 3.50% with interest only payments during the first two years and principal and interest payments for year three using a 30-year amortization.

As of March 31, 2013, certain of our loans require us to meet certain customary financial covenants and ratios including fixed charge coverage ratio, leverage ratio, interest coverage ratio and debt to total assets ratio. We were in compliance with all applicable provisions as of March 31, 2013. Our other long-term borrowings are not subject to any significant financial covenants.

In July 2012, a lender’s deposit was escrowed in the amount of approximately $11.2 million, of which approximately $8.7 million was released to us during the three months ended March 31, 2013.

Distributions from Unconsolidated Entities.As of March 31, 2013, we had investments in 50 properties through unconsolidated entities, some of which we are marketing to sell, as discussed in further detail below. We are entitled to receive quarterly cash distributions from our unconsolidated entities to the extent there is cash available to distribute. For the three months ended March 31, 2013 and 2012, we received distributions of approximately $11.3 million and $11.9 million, respectively. We expect that distributions from unconsolidated joint ventures will decrease during the remainder of 2013 due to the sale of these properties.

In December 2012, in connection with an existing purchase option held by Sunrise, our venture partner in our three senior housing ventures, we entered into an agreement with HCN, as a result of a potential merger by HCN with Sunrise. Under the agreement, HCN and Sunrise have agreed to purchase our interests in the CNLSun I, CNLSun II and CNLSun III Ventures, which own 42 properties in total, for an aggregate purchase price of approximately $195.9 million subject to adjustment based on the closing date and actual cash flow distribution (the “Joint Venture Dispositions”). The Joint Venture Dispositions were conditioned upon the merger of HCN with Sunrise, which was completed in January 2013. We expect the sale of these three ventures to close in 2013 and plan to reinvest the sales proceeds in additional permitted investments and pay down the principal balance of our revolving line of credit.For the three months ended March 31, 2013 and 2012, we recorded aggregate equity in loss of approximately $(5.1) million and $(1.5) million, respectively, and received aggregate cash distributions of $7.8 million and $8.8 million, respectively, from CNLSun I, CNLSun II and CNLSun III Ventures.

In December 2012, the Intrawest Venture decided to market for sale its seven destination retail properties to third–party buyers. For the three months ended March 31, 2013 and 2012, we recorded equity in earnings of approximately $1.3 million and $0.1 million, respectively, and received cash distributions of $0.7 million and $0.3 million, respectively, from the Intrawest Venture.

Distribution Reinvestment Plan.There is currently no public trading market for our shares. Shareholders are able to purchase shares from us under our DRP. Shares sold under the DRP are offered at $6.95, which represents a 5% discount to the estimated net asset

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value (“NAV”) of $7.31 per share. We anticipate we will continue to raise capital through our DRP and will use such proceeds for acquisitions and enhancements, distributions shortfalls and other corporate purposes. For the three months ended March 31, 2013, we received approximately $13.7 million (2.0 million shares) through our DRP.

Related Party Arrangements.In January 2013, our operating partnership entered into an exclusive right of sale listing agreement with CNL Commercial Real Estate Inc. (“CCRE”), one of our affiliates, pursuant to which in exchange for CCRE’s solicitation of purchasers for the sale of one of our additional lifestyle properties, the operating partnership will pay CCRE a commission equal to either (i) 2% of the gross sales price; or (ii) 3% of the gross sales price if a cooperating broker assists in the sale. The term of the exclusive right of sale listing agreement is from January 15, 2013 through July 31, 2013. In April 2013, we completed the sale of our additional lifestyle property that was classified as one of the four properties held for sale as of March 31, 2013 for approximately $8.5 million and recorded a gain of approximately $1.8 million. In connection with the sale, we will pay approximately $0.2 million in commission to CCRE pursuant to the exclusive right of sale listing agreement.

Certain affiliates are entitled to receive fees and compensation in connection with the issuance of shares through our DRP, acquisition and operating activities. Amounts incurred relating to these transactions were approximately $9.8 million and $10.2 million for the three months ended March 31, 2013 and 2012, respectively. Of these amounts, approximately $1.3 million and $1.0 million are included in due to affiliates in the unaudited condensed consolidated balance sheets as of March 31, 2013 and December 31, 2012, respectively. In addition, these affiliates are entitled to reimbursement of certain expenses and amounts incurred on our behalf in connection with our DRP, acquisitions and operating activities. Reimbursable expenses for the three months ended March 31, 2013 and 2012 were approximately $3.1 million and $2.1 million, respectively.

Pursuant to the advisory agreement, we will not reimburse our Advisor for any amount by which total operating expenses paid or incurred by us exceed the greater of 2% of average invested assets or 25% of net income (the “Expense Cap”) in any expense year. For the expense years ended March 31, 2013 and 2012, operating expenses did not exceed the Expense Cap.

We also maintain accounts at a bank in which our chairman serves as a director. We had deposits at that bank of approximately $7.0 million and $5.5 million as of March 31, 2013 and December 31, 2012, respectively.

Common Stock Redemptions.We redeem shares pursuant to our redemption plan, which is designed to provide eligible stockholders with limited interim liquidity by enabling them to sell shares back to us prior to any listing of our shares. There is currently a sizeable backlog and a waiting list for redemption requests and stockholders will likely wait a long period of time to have their shares redeemed, if ever. The following details the redemption plan activity for the three months ended March 31, 2013 (in thousands except per share data):

Requests in queue		9,726
Redemptions requested		716
Shares redeemed:
Prior period requests		(213	)
Current period requests		(192	)
Adjustments(1)		(75	)
Pending redemption requests(2)		9,962
Average price paid per share	$	7.31

FOOTNOTES:

⁽¹⁾  This amount represents redemption request cancellations and other adjustments.

⁽²⁾  Requests that are not fulfilled in whole during a particular quarter will be redeemed on a pro rata basis to the extent funds are made available pursuant to the redemption plan.

Our Board of Directors approved an increase of the redemption amount to the lesser of (i) $3.0 million per calendar quarter or (ii) the amount of aggregate proceeds available under our DRP, effective as of the third quarter of 2012. Our Board of Directors will continue to evaluate and determine the amount of shares to be redeemed based on what it believes to be in the best interest of the company and our stockholders, as the redemption of shares dilutes the amount of cash available to make acquisitions and for other corporate purposes.

In the event there are insufficient funds to redeem all of the shares for which redemption requests have been submitted, redemptions will occur on a pro rata basis at the end of each quarter, with the actual redemption occurring at the beginning of the next quarter. Stockholders whose shares are not redeemed due to insufficient funds in that quarter will have their requests carried forward and be honored at such time as sufficient funds exist. In such case, the redemption request will be retained and such shares will be redeemed before any subsequently received redemption requests are honored, subject to certain priority groups for hardship cases. Redeemed shares are considered retired and will not be reissued.

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Distributions. In 2012, our Board of Directors began declaring distributions on a quarterly basis. Payment of distributions has been and will continue to be paid quarterly. The distributions declared to our stockholders are determined by our Board of Directors and is dependent upon a number of factors, including:

• Sources of cash available for distribution such as current year and inception to date cumulative cash flows from operating activities, FFO, MFFO and Adjusted EBITDA, as well as, expected future long-term stabilized cash flows, FFO and MFFO and Adjusted EBITDA;

• The proportion of distributions paid in cash compared to the amount being reinvested through our DRP;

• Limitations and restrictions contained in the terms of our current and future indebtedness concerning the payment of distributions; and

• Other factors such as the avoidance of distribution volatility, our objective of continuing to qualify as a REIT, capital requirements, the general economic environment and other factors.

In August 2012, our Board approved a reduction in quarterly distributions to $0.1063 per share. The following table presents total distributions declared including cash distributions, distributions reinvested and distributions per share for the three months ended March 31, 2013 and 2012 (in thousands except per share data):

									Sources of Distributions Paid in Cash
	Distributions Per Share		Total Distributions Declared		Distributions Reinvested (1)		Net Cash Distributions		Cash Flows From Operating  Activities (2)
2013 Quarter
First	$	0.1063	$	33,611	$	13,714	$	19,897	$	48,644

									Sources of Distributions Paid in Cash
	Distributions Per Share		Total Distributions Declared		Distributions Reinvested (1)		Net Cash Distributions		Cash Flows From Operating Activities (2) (3)
2012 Quarter
First	$	0.1563	$	48,353	$	20,876	$	27,477	$	22,157

FOOTNOTES:

⁽¹⁾  Distributions reinvested may be dilutive to stockholders to the extent that they are not covered by cash flows from operations, FFO and MFFO and such shortfalls are instead covered by borrowings.

⁽²⁾  Cash flows from operating activities calculated in accordance with GAAP are not necessarily indicative of the amount of cash available to pay distributions. For example, GAAP requires that the payment of acquisition fees and costs be classified as a use of cash in operating activities in the statement of cash flows, which directly reduces the measure of cash flows from operations. However, acquisition fees and costs are paid for with debt financings as opposed to operating cash flows. The Board of Directors also uses other measures such as FFO and MFFO in order to evaluate the level of distributions.

⁽³⁾  The shortfall in cash flows from operating activities versus cash distributions paid was funded with borrowings.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

See our annual report on Form 10-K for the year ended December 31, 2012 for a summary of our Significant Accounting Policies.

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

See Item 1. “Financial Statements” for a summary of the impact of recent accounting pronouncements.

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RESULTS OF OPERATIONS

As of March 31, 2013 and 2012, we had invested in 178 and 170 properties, respectively, through the following investment structures:

	March 31,
	2013		2012
Wholly-owned:
Leased properties		72		79
Managed properties(1)(2)		55		40
Held for development		1		1
Unconsolidated joint ventures:(3)
Leased properties		14		14
Managed properties		36		36
		178		170

FOOTNOTES:

(1) As of March 31, 2013 and 2012, wholly-owned managed properties are as follows:

	March 31,
	2013		2012
Golf		13		8
Attractions		15		15
Senior housing		20		10
Marinas		2		2
Additional lifestyle		5		5
		55		40

(2) Under applicable tax regulations, certain properties are permitted to be temporarily managed and certain properties are permitted to be indefinitely managed. As of March 31, 2013 and 2012, 30 and 25 properties were temporarily managed and 25 and 15 properties were indefinitely managed under management agreements, respectively.

(3) As of May 3, 2013, 49 properties held through four unconsolidated joint ventures are expected to be sold in 2013. See “Distributions from Unconsolidated Entities” for additional information.

Rental income from operating leases. Rental income for the three months ended March 31, 2013 increased by approximately $1.4 million as compared to the same period in 2012 primarily due to an increase in capital reserve income (which is generally a percentage of gross revenue) on our ski and mountain lifestyle properties as a result of an improved 2012/2013 ski season and one new attraction property acquired during the second quarter of 2012. The increase was partially offset by a reduction in rental income from marinas properties since we did not record deferred rent during 2013 in anticipation of transitioning to new tenants or managers (see “Liquidity and Capital Resources — Sources and Uses of Liquidity and Capital Resources” above for additional information) and the transition of certain golf properties from leased to managed structures during the first and third quarters of 2012. The following information summarizes trends in rental income from operating leases and base rents for certain of our properties (in thousands):

	Three Months Ended March 31,
Properties Subject to Operating Leases	2013		2012		$ Change			% Change
Ski and mountain lifestyle	$	31,070	$	28,872	$	2,198			7.6	%
Golf		6,809		7,774		(965	)		-12.4	%
Attractions		4,026		2,977		1,049			35.2	%
Marinas		4,374		5,034		(660	)		-13.1	%
Additional lifestyle		1,186		1,432		(246	)		-17.2	%
Total	$	47,465	$	46,089	$	1,376			3.0	%

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As of March 31, 2013 and 2012, the weighted-average lease rate for our portfolio of wholly-owned leased properties was 8.6%. These rates are based on annualized straight-line base rent due under our leases and the weighted-average contractual lease basis of our real estate investment properties subject to operating leases. The weighted-average lease rate of our portfolio will fluctuate based on our asset mix, timing of property acquisitions, lease terminations and reductions in rent granted to tenants.

Property operating revenues. Property operating revenues from managed properties, which are not subject to leasing arrangements, are derived from room rentals, food and beverage sales, ski and spa operations, golf operations, membership dues, ticket sales, concessions, waterpark and theme park operations, residential fees at our senior housing properties and other service revenues. The following information summarizes the revenues of our properties that are operated by third-party managers (in thousands):

Properties Managed Under	Three Months Ended March 31,
Third-Party Operators	2013		2012		$ Change		% Change
Golf	$	7,561	$	4,734	$	2,827		59.7	%
Attractions		1,690		1,260		430		34.1	%
Senior Living		16,678		8,487		8,191		96.5	%
Marinas		51		22		29		131.8	%
Additional lifestyle		29,572		25,508		4,064		15.9	%
Total	$	55,552	$	40,011	$	15,541		38.8	%

As of March 31, 2013 and 2012, we had a total of 55 and 40 managed properties, respectively, of which certain properties are operated seasonally due to geographic location, climate and weather patterns. The increase in property operating revenues is primarily attributable to (i) the acquisition of 10 senior housing properties subsequent to the first quarter of 2012, (ii) the transition of certain golf facilities from leased to managed structures which was completed during the first and third quarters of 2012, and (iii) an increase in operating revenue on our additional lifestyle properties which includes the Omni Mount Washington Resort due to a strong 2012/2013 ski season.

Interest income on mortgages and other notes receivable. For the three months ended March 31, 2013, we earned interest income of approximately $3.4 million, as compared to $3.1 million for the three months ended March 31, 2012.

Property operating expenses. Property operating expenses from managed properties increased primarily due to the acquisition of 10 senior housing properties subsequent to the first quarter of 2012, golf facilities that were transitioned from leased to managed structures which were completed during the first and third quarters of 2012 and a strong 2012/2013 ski season at our Omni Mount Washington Resort. See “Property operating revenues” above for additional information. The following information summarizes the expenses of our properties that are operated by third-party managers (in thousands):

Properties Managed Under	Three Months Ended March 31,
Third-Party Operators	2013		2012		$ Change		% Change
Golf	$	5,824	$	3,693	$	2,131		57.7	%
Attractions		13,698		12,897		801		6.2	%
Senior Living		11,204		5,708		5,496		96.3	%
Marinas		117		53		64		120.8	%
Additional lifestyle		23,138		20,881		2,257		10.8	%
Total	$	53,981	$	43,232	$	10,749		24.9	%

Asset management fees to advisor.Monthly asset management fees equal to 0.08334% of invested assets are paid to the Advisor for the management of our real estate assets, loans and other permitted investments. For the three months ended March 31, 2013, asset management fees to our Advisor were approximately $9.2 million, as compared to approximately $8.7 million for the three months ended March 31, 2012. The increase in such fees is due to an increase in invested assets from the acquisition of additional real estate properties subsequent to March 31, 2012.

General and administrative. General and administrative expenses totaled approximately $4.3 million for the three months ended March 31, 2013, as compared to approximately $4.5 million for the three months ended March 31, 2012. The slight decrease is primarily attributable to a reduction in legal and professional services.

Ground leases and permit fees. Ground lease payments and land permit fees are generally based on a percentage of gross revenue of the underlying property over certain thresholds. For properties that are subject to leasing arrangements, ground leases and permit fees

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are paid by the tenants in accordance with the terms of our leases with those tenants and we record the corresponding equivalent revenues in rental income from operating leases. For the three months ended March 31, 2013, ground lease and land permit fees were approximately $4.8 million, as compared to approximately $4.2 million for the three months ended March 31, 2012. The increase for the three months ended March 31, 2013 is attributable to an increase in gross revenues of our ski and mountain lifestyle properties.

Acquisition fees and costs.Acquisition fees are paid to our Advisor for services in connection with the selection, purchase, development or construction of real property and are generally 3% of proceeds received through our DRP. Acquisition fees and costs totaled approximately $0.4 million for the three months ended March 31, 2013, as compared to approximately $1.1 million for the three months ended March 31, 2012. The decrease is primarily due to the reduction in the proceeds received through our DRP due to lowering the distribution rate in August 2012.

Other operating expenses. Other operating expenses totaled approximately $1.7 million for the three months ended March 31, 2013, as compared to approximately $2.5 million for the three months ended March 31, 2012. The decrease for the three months ended March 31, 2013 is primarily attributable to a reduction in repair and maintenance expense relating to certain of our properties.

Bad debt expense. Bad debt expense totaled approximately $0.1 million for the three months ended March 31, 2013, as compared to $2.1 million for the same period in 2012. During the three months ended March 31, 2012, we restructured leases one of our golf tenants which resulted in the write-off of uncollectible past due rents. We did not have any lease restructure during the three months ended March 31, 2013.

Depreciation and amortization.Depreciation and amortization expenses were approximately $36.1 million for the three months ended March 31, 2013, as compared to approximately $32.1 million for the three months ended March 31, 2012. The increase is primarily due to new properties acquired subsequent to March 31, 2012.

Interest and other income.Interest and other income was approximately $0.4 million for the three months ended March 31, 2013, as compared to approximately $0.04 million for the three months ended March 31, 2012.

Interest expense and loan cost amortization.Interest expense and loan cost amortization was approximately $18.3 million for the three months ended March 31, 2013, as compared to approximately $16.3 million for the three months ended March 31, 2012. The increase is primarily attributable to the additional long-term debt obtained subsequent to March 31, 2012.

Equity in earnings (loss) of unconsolidated entities. The following table summarizes equity in earnings from our unconsolidated entities (in thousands):

	Three Months Ended March 31,
	2013			2012			$ Change			% Change
DMC Partnership	$	2,690		$	2,699		$	(9	)		-0.3	%
Intrawest Venture		1,282			71			1,211			1705.6	%
CNLSun I Venture		(2,431	)		(1,433	)		(998	)		-69.6	%
CNLSun II Venture		(1,271	)		(516	)		(755	)		-146.3	%
CNLSun III Venture		(1,393	)		410			(1,803	)		-439.8	%
Total	$	(1,123	)	$	1,231		$	(2,354	)		-191.2	%

Equity in earnings of unconsolidated entities decreased by approximately $2.4 million for the three months ended March 31, 2013 as compared to the same period in 2012. The change was primarily due to equity in loss that was allocated to us from the CNLSun I, CNLSun II and CNLSun III Ventures due to the timing of when distributions are paid to our venture partners and how equity in earnings or loss are allocated using the HLBV method of accounting which can create significant variability in earnings or loss from the ventures while the preferred cash distributions that we anticipate to receive from the ventures may be more consistent as result of our distribution preferences. For the three months ended March 31, 2013 and 2012, we received our preferred distributions from CNLSun I, CNLSun II and CNLSun III of approximately $7.8 million and $8.8 million, respectively.

Discontinued operations. Loss from discontinued operations was approximately $(0.1) million for the three months ended March 31, 2013, as compared to approximately $(0.5) million for the same period in 2012. During the three months ended March 31, 2012, we recorded an impairment provision on one of the properties classified as held for sale. We did not record any impairment provision for the three months ended March 31, 2013.

Net loss and loss per share of common stock. The Company had a net loss for the three months ended March 31, 2013 and 2012 of approximately $23.3 million and $24.7 million, respectively. The change was primarily attributable to (i) an increase in rental income from leased properties and net operating income from managed properties related to properties acquired after the first quarter of 2012, (ii) an increase in “same-store” rental income from leased properties and net operating income from managed properties primarily relating to our ski and lifestyle properties and additional lifestyle properties which includes the Omni Mount Washington Resort as a

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result of a strong 2012/2013 ski season and (iii) a reduction in bad debt expense. These decreases to net loss were partially offset by, (i) a reduction in rental income related to certain golf properties that were transitioned from leased to managed structures during the first and third quarters of 2012, (ii) a decrease in equity in earnings from unconsolidated entities and (iii) an increase in interest expense and loan cost amortization, asset management fees and ground lease and permit fees.

Other

Funds from Operations and Modified Funds From Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, (“NAREIT”), promulgated a measure known as FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards approved by the Board of Governors of NAREIT. NAREIT defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property, real estate asset impairment write-downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value of the property. We believe that, because real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income or loss. However, FFO and MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or loss in its applicability in evaluating the our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses for business combinations from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses as items that are expensed under GAAP and accounted for as operating expenses. Our Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start up entities may also experience significant acquisition activity during their initial years, we believe that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases. Due to the above factors and other unique features of publicly registered, non-listed REITs, the Investment Program Association (“IPA”), an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we acquired our properties and once our portfolio is in place. By providing MFFO, we believe it is presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry.

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income or loss: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to remove the impact of GAAP straight-line adjustments from rental revenues); accretion of discounts and amortization of premiums on debt investments, eliminations of

35

adjustments relating to contingent purchase price obligations where such adjustments have been included in the derivation of GAAP net income or loss, mark-to-market adjustments included in net income or loss; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, and unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we are responsible for managing interest rate, hedge and foreign exchange risk, we do retain an outside consultant to review all of our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such non-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective of on-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses, straight-line adjustments for leases and notes receivable, amortization of above and below market leases, impairments of lease related assets, loss from early extinguishment of debt and accretion of discounts or amortization of premiums for debt investments. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income or loss. These expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income or loss in determining cash flow from operating activities.

Our management uses MFFO and the adjustments used to calculate it in order to evaluate our performance against other non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. For example, acquisitions costs are funded from our subscription proceeds and other financing sources and not from operations. By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable our operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different non-listed REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way and as such comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flows available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of its liquidity, or indicative of funds available to fund our cash needs including its ability to make distributions to stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. MFFO has limitations as a performance measure in an offering such as ours where the price of a share of common stock is a stated value and there is no net asset value determination during the offering stage and for a period thereafter. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. FFO and MFFO are not useful measures in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO and MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and we would have to adjust its calculation and characterization of FFO or MFFO.

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The following table presents a reconciliation of net income (loss) to FFO and MFFO for the three months ended March 31, 2013 and 2012 (in thousands except per share data).

	Three Months Ended March 31,
	2013			2012
Net loss	$	(23,299	)	$	(24,743	)
Adjustments:
Depreciation and amortization(1)		36,183			32,423
Impairment of real estate assets(1)		—			267
Net effect of FFO adjustment from unconsolidated entities (2)		6,044			8,035
Total funds from operations		18,928			15,982
Acquisition fees and expenses(3)		367			1,130
Straight-line adjustments for leases and notes receivable(1)(4)		(486	)		(7,344	)
Amortization of above/below market intangible assets and liabilities(1)		336			(7	)
Loss from early extinguishment of debt(5)		—			4
MFFO adjustments from unconsolidated entities: (2)
Straight-line adjustments for leases and notes receivable		(68	)		142
Amortization of above/below market intangible assets and liabilities		(4	)		(5	)
Modified funds from operations	$	19,073		$	9,902
Weighted average number of shares of common stock outstanding (basic and diluted)		316,382			309,235
FFO per share (basic and diluted)	$	0.06		$	0.05
MFFO per share (basic and diluted)	$	0.06		$	0.03

FOOTNOTES:

⁽¹⁾  Includes amounts related to the properties that are classified as assets held for sale and for which the related results are classified as income (loss) from discontinued operations in the accompanying condensed consolidated statements of operations.

⁽²⁾  This amount represents our share of the FFO or MFFO adjustments allowable under the NAREIT or IPA definitions, respectively, multiplied by the percentage of income or loss recognized under the HLBV method. The fluctuations in FFO and MFFO contributions as allocated under the HLBV method resulted in lower FFO and MFFO from our unconsolidated entities during the first quarter of 2013 even though cash distribution from these entities were consistent with the first quarter of 2012.

⁽³⁾  In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment. By adding back acquisition fees and expenses relating to business combinations, management believes MFFO provides useful supplemental information of its operating performance and will also allow comparability between real estate entities regardless of their level of acquisition activities. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses relating to business combinations under GAAP are considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property.

⁽⁴⁾  Under GAAP, rental receipts are allocated to periods using various methodologies. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments, providing insight on the contractual cash flows of such lease terms and debt investments, and aligns results with management’s analysis of operating performance.

⁽⁵⁾  Loss of extinguishment of debt includes legal fees incurred with the transaction, prepayment penalty fees and write-off of unamortized loan costs, as applicable.

Total FFO and FFO per share was approximately $18.9 million or $0.06 for the three months ended March 31, 2013 as compared to approximately $16.0 million or $0.05 for the same period in 2012. The increase in FFO and FFO per share were attributable to (i) an

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increase in rental income from leased properties and net operating income from managed properties related to properties acquired after the first quarter of 2012, (ii) an increase in “same-store” rental income from leased properties and net operating income from managed properties primarily relating to our ski and mountain lifestyle properties and additional lifestyle properties which includes the Omni Mount Washington Resort as a result of a strong 2012/2013 ski season and (iii) a reduction in bad debt expense. The increases were partially offset by, (i) a reduction in rental income related to the certain golf properties that were transitioned from leased to managed structures during the first and third quarters of 2012, (ii) a decrease in FFO contribution from unconsolidated entities and (iii) an increase in interest expense and loan cost amortization, assets management fees and ground lease and permit fees.

Total MFFO and MFFO per share was approximately $19.1 million or $0.06 for the three months ended March 31, 2013 as compared to approximately $9.9 million or $0.03 for the same period in 2012. The increase in MFFO and MFFO per share were principally due to an increase in rental income from leased properties (excluding straight-line adjustments for rental income) and net operating income from managed properties related to properties acquired after the first quarter of 2012 and an increase in “same store” leased properties and net operating income from managed properties primarily relating to our ski and mountain lifestyle properties and additional lifestyle properties which includes the Omni Mount Washington Resort as result of a strong 2012/2013 ski season and rental payments from certain golf properties where payments were waived during the first quarter of 2012 as a result of a lease amendment. The increases were partially offset by a reduction in rental payments related to certain golf properties that were transitioned from leased to managed structures during the first and third quarters of 2012 and an increase in interest expense and loan cost amortization, assets management fees and ground lease and permit fees.

Adjusted EBITDA

We present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as net income (loss), less discontinued operations and other income, plus (i) interest expense, net, and loan cost amortization and (ii) depreciation and amortization, as further adjusted for the impact of equity in earnings (loss) of our unconsolidated entities, straight-line adjustments for leased properties and mortgages and other notes receivables, cash distributions from our unconsolidated entities and certain other non-recurring items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:

• Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

• Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements;

• Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and

• Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.

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Set forth below is a reconciliation of Adjusted EBITDA to net loss (in thousands):

	Three Months Ended March 31,
	2013			2012
Net loss	$	(23,299	)	$	(24,743	)
Discontinued operations		147			502
Interest and other (income) expense		(440	)		(43	)
Interest expense and loan cost amortization		18,332			16,277
Equity in (earnings) loss of unconsolidated entities(1)		1,123			(1,231	)
Loss from early extinguishment of debt		—			4
Depreciation and amortization		36,126			32,106
Loss on lease terminations		—			368
Impairment provision		—			267
Straight-line adjustments for leases and notes receivables(2)		(486	)		(7,344	)
Cash distributions from unconsolidated entities(1)		11,326			8,495
Adjusted EBITDA	$	42,829		$	24,658

FOOTNOTES:

⁽¹⁾  Investments in our unconsolidated joint ventures are accounted for under the HLBV method of accounting. Under this method, we recognize income or loss based on the change in liquidating proceeds we would receive from a hypothetical liquidation of our investments based on depreciated book value. We adjust EBITDA for equity in earnings (loss) of our unconsolidated entities because we believe this is not reflective of the joint ventures’ operating performance or cash flows available for distributions to us. We believe cash distributions from our unconsolidated entities, exclusive of any financing transactions, are reflective of their operating performance and its impact to us and have been added back to adjusted EBITDA above. For the three months ended March 31, 2012, cash distributions from unconsolidated entities excludes approximately $3.4 million in return of capital.

⁽²⁾  We believe that adjusting for straight-line adjustments for leased properties and mortgages and other notes receivable is appropriate because they are non-cash adjustments.

Adjusted EBITDA was approximately $42.8 million for the three months ended March 31, 2013 as compared to approximately $24.7 million for the three months ended March 31, 2012. The increase in adjusted EBITDA for the three months ended March 31, 2013 was primarily attributable to (i) an increase in rental income from leased properties (excluding straight-line adjustments for rental income) and net operating income from managed properties related to properties acquired after the first quarter of 2012, (ii) an increase in “same store” rental income from leased properties and net operating income from managed properties primarily relating to our ski and mountain lifestyle properties and additional lifestyle properties which includes the Omni Mount Washington Resort as a result of a strong 2012/2013 ski season and rental payments from certain golf properties where their payments were waived during the first quarter of 2012 as a result of a lease amendment, (iii) an increase in cash distribution from our unconsolidated entities and (iv) a decrease in bad debt expense, offset in part by an increase in asset management fees and ground lease and permit fees.

Off-Balance Sheet and Other Arrangements

See our annual report on Form 10-K for the year ended December 31, 2012 for a summary of our other off-balance sheet arrangements.

Commitments, Contingencies and Contractual Obligations

For the three months ended March 31, 2013, our commitments, contingencies and contractual obligations were not materially different from the amounts reported for the year ended December 31, 2012 aside from the $30.0 million debt obtained. See “Indebtedness” above for additional information. See our annual report on Form 10-K for the year ended December 31, 2012 for a summary of our commitments, contingencies and contractual obligations.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to interest rate changes primarily as a result of long-term debt used to acquire properties, make loans and other permitted investments. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives, we expect to borrow and lend primarily at fixed-rates or variable-rates with the lowest margins available, and in some cases, with the ability to convert variable-rates to fixed-rates. With regard to variable-rate financing, we will assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

Our fixed-rate mortgage and other notes receivable, which totaled $125.0 million and $124.7 million at March 31, 2013 and December 31, 2012, respectively, are subject to market risk to the extent that the stated interest rates vary from current market rates for borrowings under similar terms. The estimated fair value of the mortgage notes receivable was approximately $121.4 million and $121.0 million at March 31, 2013 and December 31, 2012, respectively.

As of March 31, 2013, our indebtedness was not materially different from the amounts reported for the year ended December 31, 2012 aside from the $30.0 million debt obtained. See “Indebtedness” above for additional information. See our annual report on Form 10-K for the year ended December 31, 2012 for a schedule of our fixed and variable debt maturities. The estimated fair value of our indebtedness is based on rates and spreads we would expect to obtain for similar borrowings with similar loan terms. As of March 31, 2013 and December 31, 2012, the estimated fair value of our indebtedness was approximately $1,167.1 million and $1,128.5 million, respectively.

Management estimates that a hypothetical one-percentage point increase in LIBOR would have resulted in additional interest costs of approximately $0.3 million for the three months ended March 31, 2013. This sensitivity analysis contains certain simplifying assumptions, and although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and our actual results will likely vary.

We are exposed to foreign currency exchange rate fluctuations as a result of our direct ownership of one property in Canada which is leased to a third-party tenant. The lease payments we receive under the triple-net lease and debt service payments are denominated in Canadian dollars. Management does not believe this to be a significant risk or that currency fluctuations would result in a significant impact to our overall results of operations.

We are also indirectly exposed to foreign currency risk related to our investment in unconsolidated Canadian entities and interest rate risk from debt at our unconsolidated entities. However, we believe our risk of foreign exchange loss and exposure to credit and interest rate risks are mitigated as a result of our right to receive a preferred return on our investments in our unconsolidated entities. Our preferred returns as stated in the governing venture agreements are denominated in U.S. dollars.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report.

Changes in Internal Controls over Financial Reporting

During the most recent fiscal quarter, there were no changes in our internal controls over financial reporting (as defined under Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

A purported class action lawsuit on behalf of shareholders who purchased shares under our DRP on or after April 1, 2010, Allyn v. CNL Lifestyle Properties, Inc. et al., was filed on January 18, 2013 in the United States District Court for the Middle District of Florida against the Company and certain of our current and former directors. The lawsuit alleges claims for breach of fiduciary duty against the directors and constructive trust and unjust enrichment against the Company. The factual assertions in the complaint consist primarily of the allegation that the price for shares purchased under the DRP was inflated. The complaint seeks an unspecified amount of damages and other relief relating to the purported inflation. The Company intends to defend vigorously against such claims and is not able to determine the ultimate outcome at this time.

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Item 1A. Risk Factors — None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Redemption of Shares and Issuer Purchases of Equity Securities

For the three months ended March 31, 2013, we have outstanding redemption requests of approximately 10.0 million shares. During the three months ended March 31, 2013, approximately 0.2 million shares relating to prior period requests were redeemed and approximately 0.2 million shares relating to current period requests were redeemed on a pro rata basis, for an average price per share of $7.31. The redemption price per share is based on the amount of time that the redeeming stockholder has held the applicable shares, but in no event is the redemption price greater than our estimated value per share on the date the redemption is effected. For additional information on the redemption process in the event there are insufficient funds to redeem all shares, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources and Uses of Liquidity and Capital Resources — Common Stock Redemptions.”

Pursuant to our share redemption plan, any stockholder who has held shares for not less than one year may present all or any portion equal to at least 25% of their shares to us for redemption at prices based on the amount of time that the redeeming stockholder has held the applicable shares, but in no event greater than our estimated value per share on the date the redemption is effected. We may, at our discretion, redeem the shares, subject to certain conditions and limitations under the redemption plan. However, at no time during a 12-month period may we redeem more than 5% of the weighted average number of our outstanding common stock at the beginning of such 12-month period. For the three months ended March 31, 2013, we redeemed the following shares:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased in Part of Publically Announced Plan		Maximum Number of Shares That May Yet be Purchased Under the Plan
January 1, 2013 through January 31, 2013		—		—		—		13,939,263
February 1, 2013 through February 28, 2013		—		—		—		13,939,263
March 1, 2013 through March 31, 2013		405,301	$	7.31		405,301		13,945,602	(1)
Total		405,301	$	7.31		405,301

FOOTNOTE:

⁽¹⁾  This number represents the maximum number of shares which can be redeemed under the redemption plan without exceeding the five percent limitation in a rolling 12-month period described above and does not take into account the amount the Board has determined to redeem or whether there are sufficient proceeds under the redemption plan. Under the redemption plan, we can at our discretion, use up to $100,000 per calendar quarter of the proceeds from any public offering of our common stock for redemptions. No such amounts are currently available.

Item 3. Defaults Upon Senior Securities —None

Item 4. Mine Safety Disclosures —Not Applicable

Item 5. Other Information —None

Item 6. Exhibits

The exhibits required by this item are set forth in the Exhibit Index attached hereto and are filed or incorporated as part of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 14th day of May, 2013.

	CNL LIFESTYLE PROPERTIES, INC.
By:	/s/ Stephen H. Mauldin
	STEPHEN H. MAULDIN
	President and Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Joseph T. Johnson
	JOSEPH T. JOHNSON
	Senior Vice President, Chief Financial Officer and Treasurer
	(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Exclusive Right of Sale Listing Agreement dated as of January 31, 2013, by and between CLP Partners, LP and CNL Commercial Real Estate, Inc. (Filed herewith.)
31.1	Certification of Chief Executive Officer of CNL Lifestyle Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
31.2	Certification of Chief Financial Officer of CNL Lifestyle Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
32.1	Certification of Chief Executive Officer and Chief Financial Officer of CNL Lifestyle Properties, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
101	The following materials from CNL Lifestyle Properties, Inc. Quarterly Report on Form 10-Q for the three months ended March 31, 2013 formatted in XBRL (Extensible Business Reporting Language); (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Other Comprehensive Income (Losses), (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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