CNL Lifestyle Properties (CLLY) 10-Q 2013 Q3 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 September 30, 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 November 5, 2013 was 321,046,244.

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 Income (Loss)		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		29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		48
Item 4.	Controls and Procedures		49
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		49
Item 1A.	Risk Factors		49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 3.	Defaults Upon Senior Securities		50
Item 4.	Mine Safety Disclosures		50
Item 5.	Other Information		50
Item 6.	Exhibits		50
Signatures			51
Exhibits			52

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)

	September 30, 2013			December 31, 2012
ASSETS
Real estate investment properties, net (including $210,524 and $207,516 related to consolidated variable interest entities, respectively)	$	2,172,835		$	2,176,357
Investments in unconsolidated entities		133,130			287,339
Cash		128,496			73,224
Mortgages and other notes receivable, net		120,618			124,730
Deferred rent and lease incentives		109,114			109,507
Restricted cash		52,666			40,316
Other assets		50,187			63,655
Intangibles, net		33,075			35,457
Accounts and other receivables, net		17,787			21,700
Assets held for sale		17,630			5,743
Total Assets	$	2,835,538		$	2,938,028
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgages and other notes payable (including $78,077 and $80,481 related to non-recourse debt of consolidated variable interest entities, respectively)	$	664,218		$	649,002
Senior notes, net of discount		394,336			394,100
Line of credit		—			95,000
Other liabilities		72,808			47,445
Accounts payable and accrued expenses		59,336			40,064
Due to affiliates		858			986
Total Liabilities		1,191,556			1,226,597
Commitments and contingencies (Note 14)
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; 343,131 and 337,213 shares issued and 321,057 and 316,371 shares outstanding as of September 30, 2013 and December 31, 2012, respectively		3,211			3,164
Capital in excess of par value		2,835,504			2,803,346
Accumulated deficit		(149,657	)		(149,446	)
Accumulated distributions		(1,039,311	)		(937,972	)
Accumulated other comprehensive loss		(5,765	)		(7,661	)
Total Stockholders’ Equity		1,643,982			1,711,431
Total Liabilities and Stockholders’ Equity	$	2,835,538		$	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)

	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Revenues:
Rental income from operating leases	$	40,203		$	38,698		$	126,748		$	122,496
Property operating revenues		133,844			132,575			278,530			250,431
Interest income on mortgages and other notes receivable		3,253			3,199			10,035			9,468
Total revenues		177,300			174,472			415,313			382,395
Expenses:
Property operating expenses		80,119			77,985			207,370			187,350
Asset management fees to advisor		8,241			9,102			26,665			26,571
General and administrative		4,053			5,278			13,474			14,430
Ground lease and permit fees		3,883			3,594			12,049			10,587
Acquisition fees and costs		1,009			570			1,922			3,380
Other operating expenses		3,440			1,623			7,602			6,140
Bad debt expense		1,855			1,646			5,985			4,740
Impairment provision		—			—			42,451			—
Loss (recovery) on lease termination		—			(67	)		—			3,226
Loan loss provision		—			—			—			1,699
Depreciation and amortization		38,295			35,059			110,926			99,774
Total expenses		140,895			134,790			428,444			357,897
Operating income (loss)		36,405			39,682			(13,131	)		24,498
Other income (expense):
Interest and other income		2,818			243			3,335			338
Interest expense and loan cost amortization (includes $414 and $1,241 amortization of loss on termination of cash flow hedges for both quarters and nine months ended September 30, 2013 and 2012, respectively)		(17,835	)		(18,393	)		(54,619	)		(51,407	)
Gain from sale of unconsolidated entities		55,394			—			55,394			—
Equity in earnings of unconsolidated entities		4,147			2,266			9,183			5,774
Total other income (expense)		44,524			(15,884	)		13,293			(45,295	)
Income (loss) from continuing operations		80,929			23,798			162			(20,797	)
Loss from discontinued operations		(2,636	)		(185	)		(373	)		(275	)
Net income (loss)	$	78,293		$	23,613		$	(211	)	$	(21,072	)
Net income (loss) per share of common stock (basic and diluted)
Income (loss) from continuing operations	$	0.25		$	0.08		$	0.00		$	(0.07	)
Income (loss) from discontinued operations		(0.01	)		0.00			0.00			0.00
Income (loss) per share	$	0.24		$	0.08		$	0.00		$	(0.07	)
Weighted average number of shares of common stock outstanding (basic and diluted)		319,507			313,250			317,960			311,455

See accompanying notes to condensed consolidated financial statements.

2

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands)

	Quarter Ended September 30,					Nine Months Ended September 30,
	2013		2012			2013			2012
Net income (loss)	$	78,293	$	23,613		$	(211	)	$	(21,072	)
Other comprehensive income (loss):
Foreign currency translation adjustments		410		960			(804	)		843
Changes in fair value of cash flow hedges:
Unrealized gain (loss) arising during the period		60		(245	)		1,459			(898	)
Amortization of loss on termination of cash flow hedges		414		414			1,241			1,241
Total other comprehensive income		884		1,129			1,896			1,186
Total comprehensive income (loss)	$	79,177	$	24,742		$	1,685		$	(19,886	)

See accompanying notes to condensed consolidated financial statements.

3

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2013 and the Year Ended December 31, 2012

(UNAUDITED)

(in thousands except per share data)

							Capital in Excess of Par Value			Accumulated (Deficit)			Accumulated Distributions			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Common Stock
	Number of Shares			Par Value
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 distribution 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
Amortization of loss on termination of cash flow hedges		—			—			—			—			—			1,655			1,655
Current period adjustment to recognize changes in fair value of cash flow hedges, net of reclassifications (Note 9)		—			—			—			—			—			(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 distribution reinvestment plan		5,918			59			41,100			—			—			—			41,159
Redemption of common stock		(1,232	)		(12	)		(8,942	)		—			—			—			(8,954	)
Net loss		—			—			—			(211	)		—			—			(211	)
Distributions, declared and paid ($0.3189 per share)		—			—			—			—			(101,339	)		—			(101,339	)
Foreign currency translation adjustment		—			—			—			—			—			(804	)		(804	)
Amortization of loss on termination of cash flow hedges		—			—			—			—			—			1,241			1,241
Current period adjustment to recognize changes in fair value of cash flow hedges, net of reclassifications (Note 9)		—			—			—			—			—			1,459			1,459
Balance at September 30, 2013		321,057		$	3,211		$	2,835,504		$	(149,657	)	$	(1,039,311	)	$	(5,765	)	$	1,643,982

See accompanying notes to condensed consolidated financial statements.

4

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	Nine Months Ended
	September 30,
				(as revised) see Note 2
	2013			2012
Operating activities:
Net cash provided by operating activities	$	133,035		$	93,966
Investing activities:
Acquisition and deposits on real estate investments		(83,451	)		(168,650	)
Capital expenditures		(52,722	)		(50,654	)
Investments in and contributions to unconsolidated entities		—			(3,625	)
Distributions from unconsolidated entities		—			3,445
Proceeds from sale of properties		11,000			1,500
Proceeds from sale of unconsolidated entities		195,446			—
Proceeds from release of collateral on loan payable		11,167			(11,167	)
Changes in restricted cash		(12,377	)		(9,055	)
Collection of mortgage loans and receivables		4,220			29
Other		(524	)		(300	)
Net cash provided by (used in) investing activities		72,759			(238,477	)
Financing activities:
Redemptions of common stock		(8,954	)		(6,500	)
Distributions to stockholders, net of distribution reinvestments		(60,180	)		(74,989	)
Proceeds under line of credit		50,000			150,000
Proceeds from mortgage loans and other notes payable		30,000			122,300
Principal payments on line of credit		(145,000	)		(75,000	)
Principal payments on mortgage loans and senior notes		(12,318	)		(30,237	)
Principal payments on capital leases		(3,313	)		(2,282	)
Payment of loan costs		(751	)		(9,484	)
Net cash provided by (used in) financing activities		(150,516	)		73,808
Effect of exchange rate fluctuations on cash		(6	)		32
Net increase (decrease) in cash		55,272			(70,671	)
Cash at beginning of period		73,224			162,839
Cash at end of period	$	128,496		$	92,168
Supplemental disclosure of non-cash investing activities:
Assumption of entrance fee liabilities	$	13,810		$	—

See accompanying notes to condensed consolidated financial statements.

5

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 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 (“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 September 30, 2013, the Company owned 138 lifestyle properties directly and indirectly within the following asset classes: ski and mountain lifestyle, golf facilities, senior housing, attractions, marinas and additional lifestyle properties. Eight of these 138 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 quarter and nine months ended September 30, 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

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

2. Significant Accounting Policies(Continued):

Revision to Previously Issued Financial Statements — In connection with the preparation of its financial statements, 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 during the three months ended September 30, 2012, in the amount of approximately $11.2 million. Accordingly, the Company revised the Consolidated Statements of Cash Flows and the Supplemental Consolidating Statement of Cash Flows for the nine months ended September 30, 2012, as reported herein, and will revise the Consolidated Statements of Cash Flows and the Supplemental Consolidating Statement of Cash Flows for the year ended December 31, 2012 as follows (in thousands):

CNL Lifestyle Properties, Inc.	Nine Months Ended September 30, 2012			Year Ended December 31, 2012
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 Securities Exchange Commission (“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.

Adopted Accounting Pronouncements—In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2013-10, “Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (Topic 815).” This ASU permits the Fed Funds Effective Swap Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to U.S. government and the London Interbank Offer Rate (LIBOR). This ASU is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this ASU did not have a material impact on the Company’s financial statements and disclosures.

In February 2013, the FASB issued 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. Effective January 1, 2013, the Company adopted this ASU. The adoption of this update did not have a material impact on the Company’s financial statements and disclosures.

7

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

2. Significant Accounting Policies(Continued):

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.

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 9. “Derivative Instruments and Hedging Activities” for additional information.

3. Acquisitions:

During the nine months ended September 30, 2013, the Company acquired three senior housing properties and one attractions property for an aggregate purchase price of approximately $83.5 million, net of the present value of entrance fee liabilities assumed on one of the senior housing properties of approximately $13.8 million. In addition, the Company recorded approximately $2.7 million in bargain purchase gain relating to the aforementioned attractions property as a result of the fair value of the net assets acquired exceeding the consideration transferred. The excess resulted from the fact that the seller did not widely market the property for sale and was motivated to sell because the property was deemed an outlier from the other investments owned by the seller. The properties are subject to long-term triple-net leases with an initial term of ten to 20 years with renewal options. These acquisitions are not considered material to the Company as such no pro forma information has been included.

During the nine months ended September 30, 2012, the Company acquired eight senior housing properties and one attractions property for an aggregate purchase price of approximately $168.7 million. The revenues and net operating income (loss) attributable to the properties included in the Company’s unaudited condensed consolidated statements of operations were approximately $8.0 million and $(0.2) million for the quarter ended September 30, 2012 and $11.1 million and $(1.1) million for the nine months ended September 30, 2012, respectively. The following table presents the unaudited pro forma results of operations of the Company as if each of the properties were acquired as of January 1, 2012 and owned during the quarter and nine months ended September 30, 2012 (in thousands, except per share data):

	Unaudited			Unaudited
	Quarter Ended September 30,			Nine Months Ended September 30,
	2012			2012
Revenues	$	176,022		$	398,409
Expenses(1)		136,394			370,963
Other expense		(15,842	)		(45,173	)
Net income (loss)	$	23,786		$	(17,727	)
Income (loss) per share of common stock (basic and diluted)	$	0.08		$	(0.06	)
Weighted average number of shares of common stock outstanding (basic and diluted)		313,250			311,455

FOOTNOTE:

(1) The pro forma for the quarter and nine months ended September 30, 2012, were adjusted to exclude approximately $1.2 million of acquisition related expenses incurred in 2012.

8

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

4. Real Estate Investment Properties, net:

As of September 30, 2013 and December 31, 2012, real estate investment properties consisted of the following (in thousands):

	September 30, 2013			December 31, 2012
Land and land improvements	$	1,019,109		$	1,052,350
Leasehold interests and improvements		315,860			316,419
Buildings		924,239			847,940
Equipment		664,118			609,647
Less: accumulated depreciation and amortization		(750,491	)		(649,999	)
	$	2,172,835		$	2,176,357

5. Assets Held for Sale and Discontinued Operations:

As of December 31, 2012, the Company classified four of its properties as assets held for sale. During the first quarter of 2013, the Company classified one additional lifestyle property as assets held for sale. In June 2013, the Company decided that it was no longer going to actively pursue its development plan at one of its unimproved land parcels and began exploring different options including the sale of some or all of the land. Due to the change in plans, the Company evaluated the carrying value of the unimproved land and, based on comparable land sale transactions, determined that the carrying value was not recoverable. As such, in June 2013, the Company recorded an impairment provision of approximately $42.5 million to write down the book value to the estimate sales price less costs to sell and classified it as asset held for sale.

In September 2013, the Company decided to sell two additional attractions properties and classified them as assets held for sale. Due to this decision, the Company evaluated the carrying value of the properties for impairment and determined that the carrying value on one of the properties was not recoverable based on a potential third-party sale price. As a result, the Company recorded an impairment provision of approximately $2.7 million which is included in discontinued operations in the accompanying unaudited condensed statements of operations for the quarter and nine months ended September 30, 2013.

During the nine months ended September 30, 2013, the Company completed the sale of three properties which were classified as assets held for sale and received aggregate sales proceeds of approximately $11.0 million, net of transaction costs and recorded an aggregate gain of approximately $2.1 million. During the nine months ended September 30, 2012, the Company completed the sale of three properties for an aggregate sales price of approximately $1.5 million and recorded an aggregate gain of approximately $0.3 million.

As of September 30, 2013, the Company classified a total of five properties as assets held for sale which consists of the following (in thousands):

	September 30, 2013		December 31, 2012
Land and land improvements	$	14,183	$	2,874
Building and building improvements		2,055		2,157
Equipment		1,392		712
Total	$	17,630	$	5,743

9

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

5. Assets Held for Sale and Discontinued Operations(Continued):

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 (excluding unimproved land), which were not accounted for under the equity method of accounting as of September 30, 2013, as discontinued operations in the accompanying unaudited condensed consolidated statements of operations. The table is a summary of loss from discontinued operations for the quarter and nine months ended September 30, 2013 and 2012 (in thousands):

	Quarter Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues	$	1,370		$	1,554		$	4,575		$	4,419
Expenses		(1,214	)		(1,544	)		(4,079	)		(4,170	)
Depreciation and amortization		(54	)		(187	)		(239	)		(545	)
Impairment provision		(2,740	)		—			(2,740	)		(267	)
Operating loss		(2,638	)		(177	)		(2,483	)		(563	)
Gain from of sale of properties		2			1			2,085			287
Other income (expense)		—			(9	)		25			1
Loss from discontinued operations	$	(2,636	)	$	(185	)	$	(373	)	$	(275	)

6. Variable Interest and Unconsolidated Entities:

Consolidated VIEs — As of December 31, 2012, the Company had 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. During the nine months ended September 30, 2013, one of the five VIEs sold its property and the Company classified an additional newly wholly-owned subsidiary as a VIE due to a potential future buy-out option originated in connection with its recent acquisition of one of the senior housing properties. As of September 30, 2013, the Company has five VIEs with buy-out options, of which three tenants can exercise but have not elected to do so. The remaining two tenants’ buy-out options will be exercisable in 2014 and 2018. One of the buy-out options expires in May 2015 and the remaining four expire in July 2023 and March 2030. 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. Other than the sale of one property and the acquisition of another that are considered VIEs at September 30, 2013, the Company had no change to its five wholly-owned subsidiaries that were deemed to be VIEs and no impact to its primary beneficiary position.

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):

	September 30,		December 31,
	2013		2012
Assets
Real estate investment properties, net	$	210,524	$	207,516
Other assets	$	28,013	$	39,618
Liabilities
Mortgages and other notes payable	$	78,077	$	80,481
Other liabilities	$	15,971	$	15,806

10

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

6. Variable Interest and Unconsolidated Entities(Continued):

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 $144.5 million and $150.8 million as of September 30, 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 —As of December 31, 2012, the Company held ownership in five ventures, the DMC Partnership, the Intrawest Venture, the CNLSun I Venture, the CNLSun II Venture and the CNLSun III Venture. In July 2013, the Company completed the sale of its interest in 42 senior housing properties held through the CNLSun I, CNLSun II and CNLSun III ventures as a result of Sunrise Living Investments, Inc. (“Sunrise”), the Company’s venture partner, exercising its purchase option in the aforementioned ventures. In connection with the transaction, the Company received aggregate sales proceeds of approximately $195.4 million, net of transaction costs and recorded aggregate gains of approximately $55.4 million. The carrying amounts of the investments relating to the CNLSun I, CNLSun II and CNLSun III ventures were understated prior to disposition as a result of acquisition fees and costs that were incorrectly expensed in prior years. This resulted in an out of period impact that increased the gain on sale in the third quarter of 2013 by approximately $1.9 million. As of September 30, 2013, the Company holds ownership in two unconsolidated ventures. 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 $25.9 million and $23.5 million as of September 30, 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.

The Intrawest Venture is working with the Canada Revenue Authority to resolve an assessment related to one of its entities and believes it is more likely than not that it will receive a favorable resolution to the audit. The Company’s maximum exposure relating to this matter is $5.7 million.

The following tables present financial information for the Company’s unconsolidated entities for the quarter and nine months ended September 30, 2013 and 2012 (in thousands):

Summarized operating data:

	Quarter Ended September 30, 2013
	DMC Partnership			Intrawest Venture			CNLSun I Venture (5)		CNLSun II Venture (5)		CNLSun III Venture (5)		Total
Revenues	$	6,870		$	—		$	—	$	—	$	—	$	6,870
Property operating expenses		(205	)		—			—		—		—		(205	)
Depreciation and amortization		(2,237	)		—			—		—		—		(2,237	)
Interest expense		(1,986	)		—			—		—		—		(1,986	)
Interest and other income		1			—			—		—		—		1
Income from continuing operations		2,443			—			—		—		—		2,443
Discontinued operations(4)		—			1,048			—		—		—		1,048
Net income	$	2,443		$	1,048		$	—	$	—	$	—	$	3,491
Loss allocable to other venture partners(1)	$	(416	)	$	(406	) (3)	$	—	$	—	$	—	$	(822	)
Income allocable to the Company(1)	$	2,859		$	1,454		$	—	$	—	$	—	$	4,313
Amortization of capitalized costs		(108	)		(58	)		—		—		—		(166	)
Equity in earnings of unconsolidated entities	$	2,751		$	1,396		$	—	$	—	$	—	$	4,147
Distribution declared to the Company	$	2,860		$	620		$	—	$	—	$	—	$	3,480
Distributions received by the Company	$	2,829		$	348		$	3,920	$	522	$	835	$	8,454

11

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

6. Variable Interest and Unconsolidated Entities(Continued):

Summarized operating data:

	Quarter Ended September 30, 2012
	DMC Partnership			Intrawest Venture			CNLSun I Venture			CNLSun II Venture			CNLSun III Venture			Total
Revenues	$	6,870		$	—		$	34,798		$	9,520		$	11,015		$	62,203
Property operating expenses		(2,406	) (6)		—			(22,134	)		(6,866	)		(7,404	)		(38,810	)
Depreciation and amortization		(2,269	)		—			(5,564	)		(1,181	)		(1,694	)		(10,708	)
Interest expense		(2,071	)		—			(8,194	)		(1,248	)		(1,465	)		(12,978	)
Interest and other expense		(17	)		—			—			(368	)		(1	)		(386	)
Income (loss) from continuing operations		107			—			(1,094	)		(143	)		451			(679	)
Discontinued operations (4)		—			(79	)		—			—			—			(79	)
Net income (loss)	$	107		$	(79	)	$	(1,094	)	$	(143	)	$	451		$	(758	)
Loss allocable to other venture partners (1)	$	(985	)	$	(404	) (3)	$	(2,019	)	$	(622	)	$	(126	)	$	(4,156	)
Income allocable to the Company(1)	$	1,092		$	325		$	925		$	479		$	577		$	3,398
Amortization of capitalized costs		(120	)		(58	)		(652	)		(215	)		(87	)		(1,132	)
Equity in earnings of unconsolidated entities	$	972		$	267		$	273		$	264		$	490		$	2,266
Distribution declared to the Company	$	2,851		$	1,143		$	3,952		$	1,860		$	841		$	10,647
Distributions received by the Company	$	—		$	397		$	3,909		$	563		$	833		$	5,702
	Nine Months Ended September 30, 2013
	DMC			Intrawest			CNLSun I			CNLSun II			CNLSun III
	Partnership			Venture			Venture (5)			Venture(5)			Venture(5)			Total
Revenues	$	21,192		$	—		$	71,287		$	19,654		$	21,549		$	133,682
Property operating expenses		(450	)		—			(45,999	)		(15,439	)		(14,609	)		(76,497	)
Depreciation and amortization		(6,786	)		—			(10,994	)		(2,244	)		(2,874	)		(22,898	)
Interest expense		(5,936	)		—			(16,154	)		(2,057	)		(2,928	)		(27,075	)
Interest and other income		4			—			20			—			—			24
Income (loss) from continuing operations		8,024			—			(1,840	)		(86	)		1,138			7,236
Discontinued operations(4)		—			3,128			—			—			—			3,128
Net income (loss)	$	8,024		$	3,128		$	(1,840	)	$	(86	)	$	1,138		$	10,364
Income (loss) allocable to other venture partners (1)	$	(461	)	$	(1,205	) (3)	$	(1,341	)	$	(8	)	$	1,788		$	(1,227	)
Income (loss) allocable to the Company(1)	$	8,485		$	4,333		$	(499	)	$	(78	)	$	(650	)	$	11,591
Amortization of capitalized costs		(325	)		(175	)		(1,305	)		(431	)		(172	)		(2,408	)
Equity in earnings (loss) of unconsolidated entities	$	8,160		$	4,158		$	(1,804	)	$	(509	)	$	(822	)	$	9,183
Distribution declared to the Company	$	8,486		$	1,737		$	7,797		$	1,039		$	1,660		$	20,719
Distributions received by the Company	$	8,478		$	1,807		$	11,750		$	1,567		$	4,965		$	28,567

12

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

6. Variable Interest and Unconsolidated Entities(Continued):

Summarized operating data:

	Nine Months Ended September 30, 2012
	DMC Partnership			Intrawest Venture			CNLSun I Venture			CNLSun II Venture			CNLSun III Venture			Total
Revenues	$	20,989		$	—		$	102,772		$	27,655		$	32,178		$	183,594
Property operating expenses		(2,675	) (6)		—			(66,108	)		(19,988	)		(21,875	)		(110,646	)
Depreciation and amortization		(6,763	)		—			(17,361	)		(3,869	)		(5,003	)		(32,996	)
Interest expense		(6,230	)		—			(24,420	)		(3,651	)		(4,394	)		(38,695	)
Interest and other income (expense)		7			—			362			(368	)		32			33
Income (loss) from continuing operations		5,328			—			(4,755	)		(221	)		938			1,290
Discontinued operations(4)		—			(828	)		—			—			—			(828	)
Net income (loss)	$	5,328		$	(828	)	$	(4,755	)	$	(221	)	$	938		$	462
Loss allocable to other venture partners (1)	$	(1,405	)	$	(1,159	) (3)	$	(5,241	)	$	(388	)	$	(519	)	$	(8,712	)
Income allocable to the Company(1)	$	6,733		$	331		$	486		$	167		$	1,457		$	9,174
Amortization of capitalized costs		(363	)		(175	)		(1,957	)		(646	)		(259	)		(3,400	)
Equity in earnings (loss) of unconsolidated entities	$	6,370		$	156		$	(1,471	)	$	(479	)	$	1,198		$	5,774
Distribution declared to the Company	$	8,493		$	2,007		$	11,756		$	4,566	(2)	$	4,470	(2)	$	31,292
Distributions received by the Company	$	8,501		$	1,283		$	11,713		$	3,329	(2)	$	4,415	(2)	$	29,241

FOOTNOTES:

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

⁽²⁾  Includes approximately $1.8 million and $2.5 million in distributions representing our respective preferred return on the 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 the CNLSun II and CNLSun III ventures, respectively, for the nine months ended September 30, 2012.

⁽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 planned sale of its properties, the venture reclassified and included the results of operations from its seven properties as discontinued operations for all periods presented.

⁽⁵⁾  On July 1, 2013, the Company completed the sale of its interest in 42 senior housing properties held through CNLSun I Venture, CNLSun II Venture and CNLSun III Venture as discussed above. As such, summarized operating data for those ventures is reported through June 30, 2013.

⁽⁶⁾  During the quarter ended September 30, 2012, the DMC Partnership incurred approximately $2.3 million in acquisition costs relating to a potential acquisition that was ultimately not pursued.

As of September 30, 2013 and December 31, 2012, the Company’s share of partners’ capital determined under HLBV was approximately $125.4 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 $7.7 million and $22.0 million, respectively.

13

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

7. Mortgages and Other Notes Receivable:

The Company evaluates impairment on its mortgages and other notes receivable on an individual loan basis which includes, current information and events, periodic visits and quarterly discussions on the financial results of the properties being collateralized and the financial stability of the borrowers who are also tenants or third-party managers for certain properties in the Company’s real estate portfolio. The Company reviews each loan to determine the risk of loss and whether the individual loan is impaired and whether an allowance is necessary. The credit quality of the Company’s borrowers is primarily based on their payment history on an individual loan basis, and, as such, the Company does not assign its mortgages and other note receivable in credit quality categories. The estimated fair market value of the Company’s mortgages and other notes receivable was approximately $115.5 million and $119.3 million as of September 30, 2013 and December 31, 2012, respectively, based on discounted cash flows for each individual instrument based on market interest rates as of September 30, 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 September 30, 2013 and December 31, 2012 because of the relatively short maturities of the obligations.

8. Indebtedness:

In July 2013, the Company’s revolving line of credit was repaid in full with the proceeds from the sale of its interest in three unconsolidated senior housing joint ventures. See “Variable Interest and Unconsolidated Entities” for additional information. In addition, the Company’s borrowing capacity in its revolving line of credit was reduced from $125.0 million to approximately $119.7 million as a result of the operator transition relating to three marina properties.

The estimated fair values of mortgages and other notes payable and the line of credit were approximately $677.0 million and $742.9 million as of September 30, 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 Company’s senior notes was approximately $408.4 million and $385.6 million as of September 30, 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 September 30, 2013 and December 31, 2012 because of the relatively short maturities of the obligations.

9. 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.

14

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

9. Derivative Instruments and Hedging Activities(Continued):

As of September 30, 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 is included in other liabilities in the accompanying unaudited condensed balance sheet as of September 30, 2013 and December 31, 2012. The following table summarizes the gross and net amounts of the Company’s derivative financial instruments (in thousands):

			As of September 30, 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
$	61,494		$	(1,925	)	$	—	$	(1,925	)	$	(1,925	)	$	—	$	(1,925	)
$	8,829		$	(847	)	$	—	$	(847	)	$	(847	)	$	—	$	(847	)
$	17,394	(1)	$	(291	)	$	—	$	(291	)	$	(291	)	$	—	$	(291	)
$	15,675		$	(580	)	$	—	$	(580	)	$	(580	)	$	—	$	(580	)
$	24,953		$	(481	)	$	—	$	(481	)	$	(481	)	$	—	$	(481	)

			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 0.970 and 1.00 Canadian dollars for $1.00 U.S. dollar on September 30, 2013 and December 31, 2012, respectively.

As of September 30, 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.

10. Fair Value Measurements:

The Company had five investment properties that were classified as assets held for sale and were carried at fair value as of September 30, 2013. The Level 3 unobservable inputs used in determining the fair value of the real estate properties include, but are not limited to, comparable sales transactions and other information from brokers and potential buyers, as applicable.

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 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.

15

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

10. Fair Value Measurements(Continued):

The following tables show the fair value of the Company’s financial assets and liabilities carried at fair value as of September 30, 2013 and December 31, 2012, as follows (in thousands):

	Fair Value Measurement as of September 30, 2013		Level 1		Level 2		Level 3
Assets:
Assets held for sale carried at fair value	$	17,630	$	—	$	—	$	17,630
Liabilities:
Derivative instruments	$	4,124	$	—	$	4,124	$	—

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

11. Related Party Arrangements:

In April 2013, the Company paid an affiliate, CNL Commercial Real Estate, Inc., a sales commission totaling approximately $0.2 million in connection with the sale of one of its properties under the terms of an exclusive right of sale listing agreement.

For the quarters and nine months ended September 30, 2013 and 2012, the Advisor and former advisor collectively earned fees and incurred reimbursable expenses as follows (in thousands):

	Quarter Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Acquisition fees:
Acquisition fees from distribution reinvestment plan	$	322	$	326	$	963	$	1,465
Acquisition fees from debt proceeds		—		—		234		5,112
Total		322		326		1,197		6,577
Asset management fees		8,241		9,102		26,665		26,571
Reimbursable expenses:
Acquisition costs		44		52		161		229
Operating expenses		1,110		2,189		5,461		6,348
Total		1,154		2,241		5,622		6,577
Total fees earned and reimbursable expenses	$	9,717	$	11,669	$	33,484	$	39,725

16

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

11. Related Party Arrangements(Continued):

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

	September 30, 2013		December 31, 2012
Due to the Advisor and its affiliates:
Asset management fees	$	—	$	14
Operating expenses		516		509
Acquisition fees and expenses		342		463
Total due to affiliates	$	858	$	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 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 September 30, 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 $8.6 million and $5.5 million as of September 30, 2013 and December 31, 2012, respectively.

12. Stockholders’ Equity:

Distribution Reinvestment Plan— For the nine months ended September 30, 2013, the Company received aggregate proceeds of approximately $41.2 million (representing 5.9 million shares) through its DRP.

Distributions — For the nine months ended September 30, 2013, the Company declared and paid distributions of approximately $101.3 million ($0.3189 per share).

Redemption of Shares— The following details the activity (in shares) of the pending redemption requests for the quarter and nine months ended September 30, 2013 (in thousands except per share data):

	First			Second			Third			Year-To-Date
2013 Quarters
Requests in queue		9,726			9,962			10,109			9,726
Redemptions requested		716			825			685			2,226
Shares redeemed:
Prior period requests		(213	)		(70	)		(77	)		(360	)
Current period requests		(192	)		(351	)		(329	)		(872	)
Adjustments(1)		(75	)		(257	)		(76	)		(408	)
Pending redemption requests(2)		9,962			10,109			10,312			10,312
Average price paid per share	$	7.31		$	7.30		$	7.29		$	7.30

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.

17

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. 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.

The following summarizes the Company’s unaudited condensed consolidating balance sheet as of September 30, 2013 and December 31, 2012, statement of operations, statement of comprehensive income (loss) and statement of cash flows for the nine months ended September 30, 2013 and 2012 (in thousands):

Condensed Consolidating Balance Sheet:

	As of September 30, 2013
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Real estate investment properties, net	$	—		$	984,390		$	1,188,445		$	—		$	2,172,835
Investments in unconsolidated entities		—			133,130			—			—			133,130
Investments in subsidiaries		1,962,297			1,324,187			2,312,393			(5,598,877	)		—
Cash		79,172			20,046			29,278			—			128,496
Mortgages and other notes receivable, net		—			44,065			117,115			(40,562	)		120,618
Deferred rent and lease incentives		—			85,579			23,535			—			109,114
Restricted cash		45			25,774			26,847			—			52,666
Other assets		12,545			16,581			21,061			—			50,187
Intangibles, net		—			15,888			17,187			—			33,075
Accounts and other receivables, net		—			9,260			8,527			—			17,787
Assets held for sale		—			17,630			—			—			17,630
Total Assets	$	2,054,059		$	2,676,530		$	3,744,388		$	(5,639,439	)	$	2,835,538
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgages and other notes payable	$	—		$	248,511		$	454,495		$	(38,788	)	$	664,218
Senior notes, net of discount		394,336			—			—			—			394,336
Line of credit		—			—			—			—			—
Other liabilities		—			33,806			39,002			—			72,808
Accounts payable and accrued expenses		14,906			17,441			28,763			(1,774	)		59,336
Due to affiliates		835			10			13			—			858
Total Liabilities		410,077			299,768			522,273			(40,562	)		1,191,556
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		3,211			—			—			—			3,211
Capital in excess of par value		2,835,504			5,823,054			8,391,321			(14,214,375	)		2,835,504
Accumulated earnings (deficit)		(149,657	)		462,021			464,346			(926,367	)		(149,657	)
Accumulated distributions		(1,039,311	)		(3,908,313	)		(5,627,787	)		9,536,100			(1,039,311	)
Accumulated other comprehensive loss		(5,765	)		—			(5,765	)		5,765			(5,765	)
		1,643,982			2,376,762			3,222,115			(5,598,877	)		1,643,982
Total Liabilities and Stockholders’ Equity	$	2,054,059		$	2,676,530		$	3,744,388		$	(5,639,439	)	$	2,835,538

18

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. 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
Restricted cash		46			20,009			20,261			—			40,316
Other assets		13,967			16,057			33,631			—			63,655
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

19

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Statement of Operations:

	For the Quarter Ended September 30, 2013
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rental income from operating leases	$	—		$	21,990		$	18,213		$	—		$	40,203
Property operating revenues		—			40,835			93,009			—			133,844
Interest income on mortgages and other notes receivable		—			1,170			3,184			(1,101	)		3,253
Total revenues		—			63,995			114,406			(1,101	)		177,300
Expenses:
Property operating expenses		—			24,655			55,464			—			80,119
Asset management fees to advisor		8,241			—			—			—			8,241
General and administrative		3,275			506			272			—			4,053
Ground lease and permit fees		—			2,792			1,091			—			3,883
Acquisition fees and costs		1,009			—			—			—			1,009
Other operating expenses		248			1,426			1,766			—			3,440
Bad debt expense		—			906			949			—			1,855
Depreciation and amortization		—			16,700			21,595			—			38,295
Total expenses		12,773			46,985			81,137			—			140,895
Operating income (loss)		(12,773	)		17,010			33,269			(1,101	)		36,405
Other income (expense):
Interest and other income		59			46			2,713			—			2,818
Interest expense and loan cost amortization (includes $414 amortization of loss on termination of cash flow hedges)		(8,107	)		(4,651	)		(6,178	)		1,101			(17,835	)
Gain from sale of unconsolidated entities					55,394									55,394
Equity in earnings of unconsolidated entities		—			4,147			—			—			4,147
Equity in earnings intercompany		99,114			106,546			123,357			(329,017	)		—
Total other income		91,066			161,482			119,892			(327,916	)		44,524
Income from continuing operations		78,293			178,492			153,161			(329,017	)		80,929
Loss from discontinued operations		—			(2,636	)		—			—			(2,636	)
Net income	$	78,293		$	175,856		$	153,161		$	(329,017	)	$	78,293

20

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. Supplemental Condensed Consolidating Financial Statements (Continued):

Condensed Consolidating Statement of Operations:

	For the Quarter Ended September 30, 2012
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rental income from operating leases	$	—		$	22,322		$	16,376		$	—		$	38,698
Property operating revenues		—			40,560			92,015			—			132,575
Interest income on mortgages and other notes receivable		—			1,672			2,725			(1,198	)		3,199
Total revenues		—			64,554			111,116			(1,198	)		174,472
Expenses:
Property operating expenses		—			24,041			53,944			—			77,985
Asset management fees to advisor		9,102			—			—			—			9,102
General and administrative		4,524			—			754			—			5,278
Ground lease and permit fees		—			2,924			670			—			3,594
Acquisition fees and costs		570			—			—			—			570
Other operating expenses		121			302			1,200			—			1,623
Bad debt expense		—			1,645			1			—			1,646
Loss (recovery) on lease termination		—			37			(104	)		—			(67	)
Depreciation and amortization		—			15,564			19,495			—			35,059
Total expenses		14,317			44,513			75,960			—			134,790
Operating income (loss)		(14,317	)		20,041			35,156			(1,198	)		39,682
Other income (expense):
Interest and other income		24			209			10			—			243
Interest expense and loan cost amortization (includes $414 amortization of loss on termination of cash flow hedges)		(7,969	)		(3,014	)		(8,608	)		1,198			(18,393	)
Equity in earnings of unconsolidated entities		—			2,266			—			—			2,266
Equity in earnings, intercompany		45,875			41,862			52,614			(140,351	)		—
Total other income (expense)		37,930			41,323			44,016			(139,153	)		(15,884	)
Income from continuing operations		23,613			61,364			79,172			(140,351	)		23,798
Loss from discontinued operations		—			(183	)		(2	)		—			(185	)
Net income	$	23,613		$	61,181		$	79,170		$	(140,351	)	$	23,613

21

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. Supplemental Condensed Consolidating Financial Statements (Continued):

Condensed Consolidating Statement of Operations:

	For the Nine Months Ended September 30, 2013
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rental income from operating leases	$	—		$	70,000		$	56,748		$	—		$	126,748
Property operating revenues		—			79,065			199,465			—			278,530
Interest income on mortgages and other notes receivable		—			3,351			9,814			(3,130	)		10,035
Total revenues		—			152,416			266,027			(3,130	)		415,313
Expenses:
Property operating expenses		—			60,724			146,646			—			207,370
Asset management fees to advisor		26,665			—			—			—			26,665
General and administrative		11,206			1,351			917			—			13,474
Ground lease and permit fees		—			8,063			3,986			—			12,049
Acquisition fees and costs		1,922			—			—			—			1,922
Other operating expenses		739			2,262			4,601			—			7,602
Bad debt expense		—			3,205			2,780			—			5,985
Impairment provision		—			42,451			—			—			42,451
Depreciation and amortization		—			49,311			61,615			—			110,926
Total expenses		40,532			167,367			220,545			—			428,444
Operating income (loss)		(40,532	)		(14,951	)		45,482			(3,130	)		(13,131	)
Other income (expense):
Interest and other income		174			550			2,611			—			3,335
Interest expense and loan cost amortization (includes $1,241 amortization of loss on termination of cash flow hedges)		(23,811	)		(15,697	)		(18,241	)		3,130			(54,619	)
Gain from sale of unconsolidated entities		—			55,394			—			—			55,394
Equity in earnings of unconsolidated entities		—			9,183			—			—			9,183
Equity in earnings intercompany		63,958			114,883			95,606			(274,447	)		—
Total other income		40,321			164,313			79,976			(271,317	)		13,293
Income (loss) from continuing operations		(211	)		149,362			125,458			(274,447	)		162
Loss from discontinued operations		—			(373	)		—			—			(373	)
Net income (loss)	$	(211	)	$	148,989		$	125,458		$	(274,447	)	$	(211	)

22

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. Supplemental Condensed Consolidating Financial Statements (Continued):

Condensed Consolidating Statement of Operations:

	For the Nine Months Ended September 30, 2012
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenues:
Rental income from operating leases	$	—		$	70,678		$	51,818		$	—		$	122,496
Property operating revenues		—			71,464			178,967			—			250,431
Interest income on mortgages and other notes receivable		—			4,471			8,844			(3,847	)		9,468
Total revenues		—			146,613			239,629			(3,847	)		382,395
Expenses:
Property operating expenses		—			55,473			131,877			—			187,350
Asset management fees to advisor		26,571			—			—			—			26,571
General and administrative		12,465			110			1,855			—			14,430
Ground lease and permit fees		—			7,522			3,065			—			10,587
Acquisition fees and costs		3,380			—			—			—			3,380
Other operating expenses		247			1,877			4,016			—			6,140
Bad debt expense		—			4,485			255			—			4,740
Loss on lease termination		—			2,775			451			—			3,226
Loan loss provision		—			—			1,699			—			1,699
Depreciation and amortization		—			46,347			53,427			—			99,774
Total expenses		42,663			118,589			196,645			—			357,897
Operating income (loss)		(42,663	)		28,024			42,984			(3,847	)		24,498
Other income (expense):
Interest and other income		98			210			30			—			338
Interest expense and loan cost amortization (includes $1,241 amortization of loss on termination of cash flow hedges)		(23,912	)		(11,719	)		(19,623	)		3,847			(51,407	)
Equity in earnings of unconsolidated entities		—			5,774			—			—			5,774
Equity in earnings, intercompany		45,405			42,100			59,138			(146,643	)		—
Total other income (expense)		21,591			36,365			39,545			(142,796	)		(45,295	)
Income (loss) from continuing operations		(21,072	)		64,389			82,529			(146,643	)		(20,797	)
Loss from discontinued operations		—			(273	)		(2	)		—			(275	)
Net income (loss)	$	(21,072	)	$	64,116		$	82,527		$	(146,643	)	$	(21,072	)

23

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. Supplemental Condensed Consolidating Financial Statements (Continued):

Condensed Consolidating Statement of Other Comprehensive Income (Loss):

	For the Quarter Ended September 30, 2013
	Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
Net income	$	78,293	$	175,856	$	153,161	$	(329,017	)	$	78,293
Other comprehensive income:
Foreign currency translation adjustments		410		—		410		(410	)		410
Changes in fair value of cash flow hedges:
Unrealized gain arising during the period		60		—		60		(60	)		60
Amortization of loss on termination of cash flow hedges		414		—		414		(414	)		414
Total other comprehensive income		884		—		884		(884	)		884
							��
Comprehensive income	$	79,177	$	175,856	$	154,045	$	(329,901	)	$	79,177

	For the Quarter Ended September 30, 2012
	Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income	$	23,613		$	61,181	$	79,170		$	(140,351	)	$	23,613
Other comprehensive income (loss):
Foreign currency translation adjustments		960			—		960			(960	)		960
Changes in fair value of cash flow hedges:
Unrealized loss arising during the period		(245	)		—		(245	)		245			(245	)
Amortization of loss on termination of cash flow hedges		414			—		414			(414	)		414
Total other comprehensive income		1,129			—		1,129			(1,129	)		1,129
Comprehensive income	$	24,742		$	61,181	$	80,299		$	(141,480	)	$	24,742

24

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Statement of Other Comprehensive Income (Loss):

	For the Nine Months Ended September 30, 2013
	Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	(211	)	$	148,989	$	125,458		$	(274,447	)	$	(211	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(804	)		—		(804	)		804			(804	)
Changes in fair value of cash flow hedges:
Unrealized gain arising during the period		1,459			—		1,459			(1,459	)		1,459
Amortization of loss on termination of cash flow hedges		1,241			—		1,241			(1,241	)		1,241
Total other comprehensive income		1,896			—		1,896			(1,896	)		1,896
Comprehensive income	$	1,685		$	148,989	$	127,354		$	(276,343	)	$	1,685

	For the Nine Months Ended September 30, 2012
	Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	(21,072	)	$	64,116	$	82,527		$	(146,643	)	$	(21,072	)
Other comprehensive income (loss):
Foreign currency translation adjustments		843			—		843			(843	)		843
Changes in fair value of cash flow hedges:
Unrealized loss arising during the period		(898	)		—		(898	)		898			(898	)
Amortization of loss on termination of cash flow hedges		1,241			—		1,241			(1,241	)		1,241
Total other comprehensive income		1,186			—		1,186			(1,186	)		1,186
Comprehensive income (loss)	$	(19,886	)	$	64,116	$	83,713		$	(147,829	)	$	(19,886	)

25

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Statement of Cash Flows:

	For the Nine Months Ended September 30, 2013
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities:
Net cash provided by (used in) operating activities	$	(55,324	)	$	95,174		$	93,185		$	—		$	133,035
Investing activities:
Acquisition and deposits on real estate investments		—			—			(83,451	)		—			(83,451	)
Capital expenditures		—			(21,715	)		(31,007	)		—			(52,722	)
Proceeds from sale of properties		—			11,000			—			—			11,000
Proceeds from sale of unconsolidated entities		—			195,446			—			—			195,446
Proceeds from release of collateral on loan payable		—			—			11,167			—			11,167
Changes in restricted cash		1			(5,765	)		(6,613	)		—			(12,377	)
Collection of mortgage loans and receivables		—			35			4,185			—			4,220
Other		(250	)		57			(331	)					(524	)
Intercompany investing		164,660			—			—			(164,660	)		—
Net cash provided by (used in) investing activities		164,411			179,058			(106,050	)		(164,660	)		72,759
Financing activities:
Redemptions of common stock		(8,954	)		—			—			—			(8,954	)
Distributions to stockholders, net of distribution reinvestments		(60,180	)		—			—			—			(60,180	)
Proceeds under line of credit		—			50,000			—			—			50,000
Proceeds from mortgage loans and other notes payable		—			—			30,000			—			30,000
Principal payments on line of credit		—			(145,000	)		—			—			(145,000	)
Principal payments on mortgage loans and senior notes		—			(7,431	)		(4,887	)		—			(12,318	)
Principal payments on capital leases		—			(2,007	)		(1,306	)		—			(3,313	)
Payment of loan costs		—			—			(751	)		—			(751	)
Intercompany financing		—			(163,873	)		(787	)		164,660			—
Net cash provided by (used in) financing activities		(69,134	)		(268,311	)		22,269			164,660			(150,516	)
Effect of exchange rate fluctuation on cash		—			—			(6	)		—			(6	)
Net increase in cash		39,953			5,921			9,398			—			55,272
Cash at beginning of period		39,219			14,125			19,880			—			73,224
Cash at end of period	$	79,172		$	20,046		$	29,278		$	—		$	128,496

26

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

13. Supplemental Condensed Consolidating Financial Statements(Continued):

Condensed Consolidating Statement of Cash Flows:

	For the Nine Months Ended September 30, 2012
	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries (as revised see Note 2)			Consolidating Adjustments			Consolidated
Operating activities:
Net cash provided by (used in) operating activities	$	(56,668	)	$	67,965		$	82,669		$	—		$	93,966
Investing activities:
Acquisition of properties		—			—			(168,650	)		—			(168,650	)
Capital expenditures		—			(17,079	)		(33,575	)		—			(50,654	)
Investment in and contributions to unconsolidated entities		—			(3,625	)		—			—			(3,625	)
Distributions from unconsolidated entities		—			3,445			—			—			3,445
Proceeds from sale of properties		—			1,500			—			—			1,500
Proceeds from release of collateral on loan payable		—			—			(11,167	)		—			(11,167	)
Changes in restricted cash		(93	)		(3,502	)		(5,460	)		—			(9,055	)
Collection of mortgage loans and receivables								29						29
Other		—			16			(316	)		—			(300	)
Intercompany investing		42,420			—			—			(42,420	)		—
Net cash provided by (used in) investing activities		42,327			(19,245	)		(219,139	)		(42,420	)		(238,477	)
Financing activities:
Redemptions of common stock		(6,500	)		—			—			—			(6,500	)
Distributions to stockholders, net of distribution reinvestments		(74,989	)		—			—			—			(74,989	)
Proceeds from line of credit		—			150,000			—			—			150,000
Proceeds from mortgage loans and other notes payable		—			45,000			77,300			—			122,300
Principal payments on line of credit		—			(75,000	)		—			—			(75,000	)
Principal payments on mortgage loans and senior notes		—			(6,507	)		(23,730	)		—			(30,237	)
Principal payments on capital leases		—			(1,225	)		(1,057	)		—			(2,282	)
Payment of loan costs		—			—			(9,484	)		—			(9,484	)
Intercompany financing		—			(153,131	)		110,711			42,420			—
Net cash provided by (used in) financing activities		(81,489	)		(40,863	)		153,740			42,420			73,808
Effect of exchange rate fluctuation on cash		—			—			32			—			32
Net increase (decrease) in cash		(95,830	)		7,857			17,302			—			(70,671	)
Cash at beginning of period		134,608			11,268			16,963			—			162,839
Cash at end of period	$	38,778		$	19,125		$	34,265		$	—		$	92,168

27

CNL LIFESTYLE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(UNAUDITED)

14. 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. The defendants filed a motion to dismiss the complaint on May 1, 2013, which is awaiting the court’s decision.

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.

15. Subsequent Events:

On September 30, 2013, the Company entered into a settlement agreement with Marinas International pursuant to which 11 leases were terminated effective September 30, 2013 and effective October 1, 2013, International Marina Group I, LP (“IMG”), an affiliate of Marinas International, will operate the marinas to allow for an orderly transition to new third-party managers. As of November 5, 2013, the IMG management agreements were terminated with respect to ten of the marinas and those properties were subsequently transitioned to new third-party managers. The Company anticipates that the remaining one marina will be fully transitioned to a third-party manager prior to December 31, 2013.

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

INTRODUCTION

The following discussion is based on the unaudited condensed consolidated financial statements as of September 30, 2013 and December 31, 2012 and for the quarter and nine months ended September 30, 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.

Cautionary Note Regarding Forward-Looking Statements

Statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q that are not statements of historical or current fact 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 harbor created by 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 net asset value of the Company’s common stock, and/or 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 athttp://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 this cautionary note. Forward-looking statements speak only as of the date on which they are made, and the Company

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undertakes no obligation to, and expressly disclaims any obligation to, publicly release the results of any revisions to its forward-looking statements to reflect new information, changed assumptions, the occurrence of unanticipated subsequent events or circumstances, or changes to future operating results over time, except as 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 November 5, 2013, we had 138 lifestyle properties of which twelve properties (five consolidated properties and seven unconsolidated properties held through one joint venture) are classified as held for sale. When aggregated by initial purchase price, the portfolio is diversified as follows: approximately 26% in ski and mountain lifestyle, 20% in golf facilities, 12% in senior housing, 22% in attractions, 7% in marinas and 13% in additional lifestyle properties.

As a mature real estate investment trust (“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 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 certain 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

30

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 monitor the credit of our tenants by reviewing their rental payment history, timeliness of rent collections, their operational performance on our properties and by monitoring news and industry reports regarding our tenants and their underlying businesses. 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 all 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 of Properties		Quarter Ended September 30,
			2013					2012					Increase/(Decrease)
			Revenue (1)		EBITDA (1)			Revenue (1)		EBITDA (1)			Revenue			EBITDA
Ski and mountain lifestyle		17	$	47,993	$	(6,690	)	$	45,609	$	(7,809	)		5.2	%		14.3	%
Golf		48		42,341		9,779			42,760		9,092			–1.0	%		7.6	%
Attractions		21		113,084		52,078			115,485		53,386			–2.1	%		–2.5	%
Senior Housing		10		9,260		2,958			8,713		2,911			6.3	%		1.6	%
Marinas		17		12,305		5,015			11,914		4,741			3.3	%		5.8	%
Additional lifestyle		1		1,264		562			1,430		771			–11.6	%		–27.1	%
		114	$	226,247	$	63,702		$	225,911	$	63,092			0.1	%		1.0	%

	Number of Properties		Nine Months Ended September 30,
			2013				2012				Increase/(Decrease)
			Revenue (1)		EBITDA (1)		Revenue (1)		EBITDA (1)		Revenue			EBITDA
Ski and mountain lifestyle		17	$	340,334	$	98,809	$	295,069	$	68,900		15.3	%		43.4	%
Golf		48		123,063		31,954		124,465		30,215		–1.1	%		5.8	%
Attractions		21		202,982		56,626		202,215		56,140		0.4	%		0.9	%
Senior Housing		10		27,186		8,769		25,769		8,287		5.5	%		5.8	%
Marinas		17		27,780		10,342		27,496		10,014		1.0	%		3.3	%
Additional lifestyle		1		3,661		1,641		4,279		2,230		–14.4	%		–26.4	%
		114	$	725,006	$	208,141	$	679,293	$	175,786		6.7	%		18.4	%

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 quarter and nine months ended September 30, 2013, our tenants and managers reported to us an increase in property-level revenue of 0.1% and 6.7%, respectively, and an increase of property-level EBITDA of 1.0% and 18.4%, respectively, as compared to the same periods in the prior year. The increases were primarily attributable to our ski and mountain lifestyle properties, senior housing and marinas properties. Our ski and lifestyle properties finished the 2012/2013 ski season with skier visits totaling 6.05 million, up 10.4% over the prior year as a result of the return to 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 results are consistent with the National Ski Areas Association and the Kottke National End of Season Survey 2012/13, which reported that the U.S. ski industry recorded a total of 56.9 million visits, up 11.7% from a weather-challenged 2011/12 ski season. Moreover, during the quarter ended September 30, 2013, our ski and mountain lifestyle properties experienced an increase in summer-based activities which includes scenic chairlift rides, mountain biking, zip lining and other attractions activities, due to favorable weather and the impact of new summer-based capital improvements. Our senior living properties experienced increases driven by higher occupancy and increases in the average rate paid by our residents. Our marinas properties posted moderate increases in slip rental fees and

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occupancies as a result of generally improved boating activity. This is consistent with the industry data reported by Yachtworld, August 2013, which reported that boat sales in North America have increased by 4% year to date in 2013 as compared to 2012. The increases in revenue were offset by our golf and additional lifestyle properties. Our golf properties experienced a decrease in rounds played during 2013 as a direct result of the unusually warm weather conditions experienced during 2012 as compared to colder and wetter conditions in 2013; however, operator-driven efficiencies resulted in 7.6% and 5.8% increases in EBITDA for the quarter and nine months ended September 30, 2013, respectively, due to operational efficiencies and cost controls. Our results are consistent with an industry wide decrease of 6.0% in rounds played reported by Golf Datatech, one of the leading golf industry providers in the U.S. for the eight months ended August 31, 2013. Our additional lifestyle property, which is multi-family rental complex, experienced decreases due to renovation of 247 apartment units (out of 540 units) that commenced during early 2013.During the quarter ended September 30, 2013, the increases were offset by lower revenues at our attractions properties of which certain of our large theme parks experienced unprecedented poor weather. During the 2013 operating season, our largest theme park Darien Lake had only 49 days with no rainfall as compared to 64 days during the same period in 2012.

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. As of September 30, 2013, the managers of our ten comparable, consolidated properties reported to us an increase in occupancy of 0.7% as compared to the same period in 2012 and an increase in RevPOU of 4.6% and 3.5% for the quarter and nine months ended September 30, 2013, respectively, as compared to the same periods in 2012. The increases in occupancy and RevPOU were primarily due to strong unit demand and the resultant ability to drive rate increases at the properties.

The following table presents same store unaudited property-level information for our senior housing properties as of and for the quarters and nine months ended September 30, 2013 and 2012 (in thousands):

	Number of Properties		Occupancy
			As of September 30,						Increase/
			2013			2012			(Decrease)
Senior housing		10		98.5	%		97.8	%		0.7	%

			RevPOU
	Number of Properties		Quarter Ended September 30,							Nine Months Ended September 30,
							Increase/ (Decrease)							Increase/ (Decrease)
			2013		2012					2013		2012
Senior housing		10	$	3,570	$	3,414		4.6	%	$	3,524	$	3,405		3.5	%

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.

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.

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 complementary 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

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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 November 5, 2013, we had a total of 65 wholly-owned managed properties consisting of one ski and mountain lifestyle property, 13 golf facilities, 20 senior housing properties, 17 attractions properties, 13 marinas and one additional lifestyle property. 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.

Marina Operator Transition

As previously reported, in December 2012 in anticipation of transitioning certain marina properties to new operators as a result of the tenants defaulting under their leases, we recorded a loss on lease termination and wrote off deferred rent and lease intangible assets. During the nine months ended September 30, 2013, our largest marina tenant filed for bankruptcy protection which was dismissed on September 30, 2013 in connection with entering into a settlement agreement with us. Under the terms of the settlement agreement the 11 leases were terminated effective September 30, 2013 and effective October 1, 2013, International Marina Group I, LP (“IMG”), an affiliate of Marinas International, began operating the marinas to allow for an orderly transition to new third-party managers. As of November 5, 2013, the IMG management agreements were terminated with respect to ten of the marinas and those properties were subsequently transitioned to new third-party managers. We anticipate that the remaining one marina will be fully transitioned to a third-party manager prior to December 31, 2013. In connection with the transition, we expect a small recovery to be reported in the fourth quarter of 2013. This transition is expected to impact our cash flows from operating activities in the near term until it is completed and may negatively impact our net asset value per share. Over the long-term, we expect these properties to perform better with new operators once the transition is completed. In connection with the aforementioned, we performed an impairment analysis on the marinas properties and determined that the estimated future undiscounted operating cash flows exceed the carrying value of the properties. As such no impairment was recorded.

Litigation

A purported class action lawsuit on behalf of shareholders who purchased shares under our distribution reinvestment plan (“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. The defendants filed a motion to dismiss the complaint on May 1, 2013, which is awaiting the court’s decision.

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 debt obligations. To the extent we have acquisitions, our primary source of funds will be from property dispositions, borrowings (which includes approximately $119.7 million available under our revolving line of credit at September 30, 2013) 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.

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Sources and Uses of Liquidity and Capital Resources

Cash Flows.Our primary sources of cash include rental income from operating leases, property operating revenues, collection of principal and interest on loans we make, distributions from our unconsolidated entities, proceeds from investment dispositions, borrowings under our revolving line of credit and subscriptions received for common stock through our DRP, offset by payments made for operating expenses, including property operating expenses, asset management fees to our Advisor, debt service payments (principal and interest), and real estate investments (including acquisitions and capital expenditures). The following is a summary of our cash flows (in thousands):

	Nine Months Ended September 30,
	2013			2012
Cash at beginning of period	$	73,224		$	162,839
Cash provided from (used in):
Operating activities		133,035			93,966
Investing activities		72,759			(238,477	)
Financing activities		(150,516	)		73,808
Effect of foreign currency translation on cash		(6	)		32
Cash at the end of period	$	128,496		$	92,168

Operating Activities. The change in net cash provided from operating activities increased $39.1 million or 41.6% for the nine months ended September 30, 2013 as compared to the same period in 2012. The increase is primarily attributable to:

• An increase in rental income from leased properties and net operating income from managed properties related to properties acquired subsequent to September 30, 2012;

• 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 as a result of a strong 2012/2013 ski season, senior housing properties due to increase in occupancy and the average rate paid by our residents 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;

• A decrease in acquisition fees and expenses and general and administrative expenses; and

• A decrease in lease incentives and the timing of cash receipt and payments made.

Investing Activities. The change in investing activities for the nine months ended September 30, 2013 as compared to the same period in 2012 is primarily attributable to (i) net changes in real estate investments, which includes acquisitions, capital expenditures on existing properties and proceeds from sale of properties, (ii) proceeds from sale of our interest in three unconsolidated senior housing joint ventures, (iii) collections on mortgages and other notes receivable, and (iv) proceeds from release of collateral on loan payable.

Financing Activities.The change in financing activities for the nine months ended September 30, 2013 as compared to the same period in 2012 is primarily attributable to (i) payments made on our indebtedness (including related loan costs) which includes the full repayment of our revolving line of credit, net of proceeds received from new indebtedness, (ii) principal payments on capital leases, (iii) distributions to stockholders, net of distribution reinvestments, and (iv) redemptions of common stock.

Real Estate Sales.During the nine months ended September 30, 2013, we completed the sale of three properties, one in each of the golf, attractions and additional lifestyle properties asset classes, and received net sales proceeds of approximately $11.0 million, net of transaction costs and recorded an aggregate gain of approximately $2.1 million.

Mortgages and Other Notes Receivable.During the nine months ended September 30, 2013, we received approximately $4.2 million in repayment of loans.

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 September 30, 2013, our leverage ratio, calculated as total indebtedness over total assets, was 37.3% (40.8% including our share of unconsolidated assets and debts).

In July 2012, a lender’s deposit was escrowed in the amount of approximately $11.2 million, of which the entire amount was released to us during the nine months ended September 30, 2013.

During the nine months ended September 30, 2013, we obtained $30.0 million in new debt financing which is collateralized by five 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.

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During the nine months ended September 30, 2013, we repaid $95.0 million, net of borrowings, on our revolving line of credit with the proceeds from the sale of our interests in 42 senior housing properties held through CNLSun I Venture, CNLSun II Venture and CNLSun III Venture. See “Distributions from Unconsolidated Entities” below for additional information. Moreover, in July 2013, our borrowing capacity in our revolving line of credit was reduced from $125.0 million to approximately $119.7 million as a result of the operator transition relating to three marina properties. We expect the borrowing capacity to return to $125.0 million upon receipt of updated appraisals of the marinas properties and the bank group’s approval of the new operators. See “Marina Operator Transition” above for additional information.

During the nine months ended September 30, 2013, we made approximately $15.6 million in scheduled principal payments under our mortgage loans and capital lease obligations.

As of September 30, 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 September 30, 2013. Our other long-term borrowings are not subject to any significant financial covenants.

Distributions from Unconsolidated Entities. We are entitled to receive quarterly cash distributions from our unconsolidated entities to the extent there is cash available to distribute. For the nine months ended September 30, 2013, we received distributions of approximately $28.6 million.

In July 2013, we completed the sale of our interests in 42 senior housing properties held through the CNLSun I, II, III ventures as a result of Sunrise Living Investments, Inc. (“Sunrise”), our venture partner, exercising its purchase option in the aforementioned ventures. In connection with the transaction, we received aggregate sales proceeds of approximately $195.4 million, net of transaction costs and recorded aggregate gains of approximately $55.4 million. The carrying amounts of the investments relating to the CNLSun I, II, III ventures were understated prior to disposition as a result of acquisition fees and costs that were incorrectly expensed in prior years. This resulted in an out of period impact that increased the gain on sale in the third quarter of 2013 by approximately $1.9 million. As of September 30, 2013, we had investments in eight properties through two unconsolidated joint ventures, of which seven properties are classified as held for sale. Going forward, distributions from unconsolidated joint ventures will decrease due to the sale of our interest in three unconsolidated entities that held 42 properties that were sold in July 2013.

The Intrawest Venture is working with the Canada Revenue Authority to resolve an assessment related to one of its entities and believes it is more likely than not that it will receive a favorable resolution to the audit. The Company’s maximum exposure relating to this matter is $5.7 million.

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 value (“NAV”) of $7.31 per share. We expect to update and announce our next estimated NAV per share no later than mid-February 2014. 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 nine months ended September 30, 2013, we received approximately $41.2 million (5.9 million shares) through our DRP.

Acquisitions and Capital Expenditures.During the nine months ended September 30, 2013, we acquired three senior housing properties and one attractions property for an aggregate purchase price of approximately $83.5 million.

During the nine months ended September 30, 2013 and 2012, we funded approximately $52.7 million and $50.7 million, respectively, in capital improvements at our properties.

Related Party Arrangements. In April 2013, we paid an affiliate, CNL Commercial Real Estate, Inc., a sales commission totaling approximately $0.2 million in connection with the sale of one of our properties under the terms of an 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 $27.9 million and $33.1 million for the nine months ended September 30, 2013 and 2012, respectively. Of these amounts, approximately $0.9 million and $1.0 million are included in due to affiliates in the unaudited condensed consolidated balance sheets as of September 30, 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 nine months ended September 30, 2013 and 2012 were approximately $5.6 million and $6.6 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 September 30, 2013 and 2012, operating expenses did not exceed the Expense Cap.

Common Stock Redemptions. During the nine months ended September 30, 2013, we paid approximately $9.0 million to redeem approximately 1.2 million shares of our common stock. We redeem shares pursuant to our redemption plan, which is designed to

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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 (in shares) for the quarter and nine months ended September 30, 2013 (in thousands except per share data):

2013 Quarters	First			Second			Third			Year-To-Date
Requests in queue		9,726			9,962			10,109			9,726
Redemptions requested		716			825			685			2,226
Shares redeemed:
Prior period requests		(213	)		(70	)		(77	)		(360	)
Current period requests		(192	)		(351	)		(329	)		(872	)
Adjustments(1)		(75	)		(257	)		(76	)		(408	)
Pending redemption requests(2)		9,962			10,109			10,312			10,312
Average price paid per share	$	7.31		$	7.30		$	7.29		$	7.30

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 has approved redemptions equal 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.

Distributions. We declare and pay distributions on a quarterly basis. 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 expected cash flows from operating activities, FFO, MFFO and Adjusted EBITDA on a rolling 12 months basis;

• 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.

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In August 2012, our board of directors 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 nine months ended September 30, 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)(3)
2013 Quarter
First	$	0.1063	$	33,611	$	13,714	$	19,897	$	48,644
Second		0.1063		33,782		13,697		20,085		33,521
Third		0.1063		33,946		13,748		20,198		50,870
	$	0.3189	$	101,339	$	41,159	$	60,180	$	133,035
2012 Quarter
First	$	0.1563	$	48,353	$	20,876	$	27,477	$	22,157
Second		0.1563		48,631		20,579		28,052		14,025
Third		0.1063		33,280		13,820		19,460		57,784
	$	0.4189	$	130,264	$	55,275	$	74,989	$	93,966

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 may be 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 during the first and second quarters of 2012 were funded with borrowings of approximately $5.3 million and $14.0 million, respectively.

Our cash flows from operating activities will fluctuate due to the seasonality of certain properties. As such, we anticipate cash flows from operating activities to increase during the third quarter to reflect the peak seasonal period of our attractions properties.

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 September 30, 2013 and 2012, we had invested in 138 and 177 properties, respectively, through the following investment structures:

	September 30,
	2013		2012
Wholly-owned:
Leased properties		75		73
Managed properties(1) (2)		54		53
Unimproved land		1		1
Unconsolidated joint ventures:(3)
Leased properties		8		14
Managed properties		—		36
		138		177

FOOTNOTES:

(1) As of September 30, 2013 and 2012, wholly-owned managed properties are as follows:

	September 30,
	2013		2012
Ski and mountain lifestyle		1		1
Golf		13		13
Attractions		17		18
Senior housing		20		18
Marinas		2		2
Additional lifestyle		1		1
		54		53

(2) Under applicable tax regulations, certain properties are permitted to be temporarily managed and certain properties are permitted to be indefinitely managed. As of September 30, 2013 and 2012, 29 and 30 properties were temporarily managed and 25 and 23 properties were indefinitely managed under management agreements, respectively.

(3) In July 2013, we sold our interests in 42 senior housing properties held through three unconsolidated joint ventures. As of September 30, 2013, seven properties held through one unconsolidated joint venture are classified as held for sale. See “Distributions from Unconsolidated Entities” for additional information.

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Rental income from operating leases. Rental income for the quarter and nine months ended September 30, 2013 increased by approximately $1.5 million and $4.3 million, respectively, as compared to the same periods in 2012. The increase is primarily attributable to properties acquired subsequent to September 30, 2012 which consists of one attraction property and three senior housing properties and 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. The increase was partially offset by a reduction in rental income from marinas properties since we did not record the full amount of 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). The increase was also partially offset by 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):

	Quarter Ended September 30,
Properties Subject to Operating Leases	2013		2012		$ Change			% Change
Ski and mountain lifestyle	$	20,123	$	19,448	$	675			3.5	%
Golf		7,461		7,174		287			4.0	%
Attractions		5,380		5,285		95			1.8	%
Senior housing		1,263		—		1,263			n/a
Marinas		4,700		5,361		(661	)		–12.3	%
Additional lifestyle		1,276		1,430		(154	)		–10.8	%
Total	$	40,203	$	38,698	$	1,505			3.9	%

	Nine Months Ended September 30,
Properties Subject to Operating Leases	2013		2012		$ Change			% Change
Ski and mountain lifestyle	$	72,063	$	68,031	$	4,032			5.9	%
Golf		21,930		23,227		(1,297	)		–5.6	%
Attractions		14,135		11,376		2,759			24.3	%
Senior housing		1,283		—		1,283			n/a
Marinas		13,678		15,584		(1,906	)		–12.2	%
Additional lifestyle		3,659		4,278		(619	)		–14.5	%
Total	$	126,748	$	122,496	$	4,252			3.5	%

As of September 30, 2013 and 2012, the weighted-average lease rate for our portfolio of wholly-owned leased properties was 8.6% and 8.5%, respectively. 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 for the quarters and nine months ended September 30, 2013 and 2012 (in thousands):

Properties Managed Under Third-Party Operators	Quarter Ended September 30,
	2013		2012		$ Change			% Change
Ski and mountain lifestyle	$	14,310	$	14,240	$	70			0.5	%
Golf		8,370		6,735		1,635			24.3	%
Attractions		93,467		96,279		(2,812	)		–2.9	%
Senior housing		17,474		15,154		2,320			15.3	%
Marinas		223		167		56			33.5	%
Total	$	133,844	$	132,575	$	1,269			1.0	%

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	Nine Months Ended September 30,
Properties Managed Under Third-Party Operators	2013		2012		$ Change			% Change
Ski and mountain lifestyle	$	39,144	$	35,255	$	3,889			11.0	%
Golf		25,506		17,279		8,227			47.6	%
Attractions		162,170		162,323		(153	)		–0.1	%
Senior housing		51,280		35,247		16,033			45.5	%
Marinas		430		327		103			31.5	%
Total	$	278,530	$	250,431	$	28,099			11.2	%

As of September 30, 2013 and 2012, we had a total of 54 and 53 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 ten senior housing properties during the second and fourth quarters 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 ski and mountain lifestyle properties as a result of a strong 2012/2013 ski season.

Interest income on mortgages and other notes receivable. For the quarter and nine months ended September 30, 2013, we earned interest income of approximately $3.3 million and $10.0 million, as compared to $3.2 million and $9.5 million, respectively, for the same periods in 2012.

Property operating expenses. Property operating expenses from managed properties increased primarily due to the property acquisitions during the second and fourth quarters of 2012, golf facilities that were transitioned from leased to managed structures and a strong 2012/2013 ski season at our ski and mountain lifestyle properties. See “Property operating revenues” above for additional information. The following information summarizes the expenses of our properties that are operated by third-party managers for the quarters and nine months ended September 30, 2013 and 2012 (in thousands):

	Quarter Ended September 30,
Properties Managed Under Third-Party Operators	2013		2012		$ Change			% Change
Ski and mountain lifestyle	$	11,238	$	11,289	$	(51	)		–0.5	%
Golf		7,615		5,987		1,628			27.2	%
Attractions		48,912		50,346		(1,434	)		–2.8	%
Senior housing		11,635		10,173		1,462			14.4	%
Marinas		719		190		529			278.4	%
Total	$	80,119	$	77,985	$	2,134			2.7	%
	Nine Months Ended September 30,
Properties Managed Under Third-Party Operators	2013		2012		$ Change			% Change
Ski and mountain lifestyle	$	33,446	$	31,177	$	2,269			7.3	%
Golf		20,791		14,341		6,450			45.0	%
Attractions		117,892		117,706		186			0.2	%
Senior housing		34,228		23,678		10,550			44.6	%
Marinas		1,013		448		565			126.1	%
Total	$	207,370	$	187,350	$	20,020			10.7	%

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 quarter and nine months ended September 30, 2013, asset management fees to our Advisor were approximately $8.2 million and $26.7 million, as compared to approximately $9.1 million and $26.6 million for the quarter and nine months ended September 30, 2012, respectively. The decrease in such fees for the quarter ended September 30, 2013 is due to the sale of our interests in 42 senior housing properties held through three unconsolidated joint ventures as discussed above.

General and administrative. General and administrative expenses totaled approximately $4.1 million and $13.5 million for the quarter and nine months ended September 30, 2013, as compared to approximately $5.3 million and $14.4 million for the quarter and nine months ended September 30, 2012, respectively. The decrease is primarily attributable to a reduction in legal and professional services.

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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 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 quarter and nine months ended September 30, 2013, ground lease and land permit fees were approximately $3.9 million and $12.0 million, respectively, as compared to approximately $3.6 million and $10.6 million for the quarter and nine months ended September 30, 2012, respectively. The increase in such fees is primarily 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 $1.0 million and $1.9 million for the quarter and nine months ended September 30, 2013, respectively, as compared to approximately $0.6 million and $3.4 million for the same periods in 2012. The slight increase for the quarter ended September 30, 2013 is due to the acquisition of two senior housing properties and one attractions property as compared to zero property acquisitions during the same period in 2012. The decrease for the nine months ended September 30, 2013 is primarily due to the reduction in the proceeds received through our DRP due to lowering the distribution rate in August 2012 and a reduction in property acquisitions during the nine months ended September 30, 2013 as compared to the same period in 2012.

Other operating expenses. Other operating expenses totaled approximately $3.4 million and $7.6 million for the quarter and nine months ended September 30, 2013, respectively, as compared to approximately $1.6 million and $6.1 million for the same periods in 2012. The increase for the quarter and nine months ended September 30, 2013 is primarily attributable to an increase in repair and maintenance expenses and higher real estate taxes on certain properties that were converted to managed structure due to lease terminations.

Bad debt expense. Bad debt expense totaled approximately $1.9 million and $6.0 million for the quarter and nine months ended September 30, 2013, respectively, as compared to $1.6 million and $4.7 million for the same periods in 2012. The increase is primarily attributable to the establishment of reserves of uncollectible past due rents on two of our marina tenants as compared to one golf tenant for the same periods in 2012.

Impairment provision. Impairment provision was approximately $42.5 million for the nine months ended September 30, 2013. During the nine months ended September 30, 2013, we decided that we were no longer actively pursuing our development plan at one of our unimproved land parcels and began exploring different options including the sale of some or all of the land. Due to the change in plans, we evaluated the carrying value of the unimproved land and, based on comparable land sale transactions, determined that the carrying value was not recoverable. The land has been classified as an asset held for sale.

Loss (recovery) on lease termination. Loss (recovery) on lease termination was approximately $(0.1) million and $3.2 million for the quarter and nine months ended September 30, 2012, respectively. During the nine months ended September 30, 2012, we terminated leases on two tenants. There were no lease terminations that resulted in additional write-offs during the quarter and nine months ended September 30, 2013.

Loan loss provision. Loan loss provision was approximately $1.7 million for the nine months ended September 30, 2012 as a result of a troubled debt restructuring on a note receivable from one of our golf tenants where we restructured their loan. There were no loan provisions recorded during the quarter or nine months ended September 30, 2013.

Depreciation and amortization. Depreciation and amortization expense was approximately $38.3 million and $110.9 million for the quarter and nine months ended September 30, 2013, respectively, as compared to approximately $35.1 million and $99.8 million for the quarter and nine months ended September 30, 2012, respectively. The increase is primarily due to new properties acquired subsequent to September 30, 2012.

Interest and other income.Interest and other income was approximately $2.8 million and $3.3 million for the quarter and nine months ended September 30, 2013, respectively, as compared to approximately $0.2 million and $0.3 million for the same periods in 2012. The increase is primarily attributable to a $2.7 million bargain purchase gain relating to the newly acquired attractions property where the fair value of the net assets acquired exceeded the consideration transferred. The excess resulted from the fact that the seller did not widely market the property for sale and was motivated to sell because the property was deemed an outlier from the other investments owned by the seller.

Interest expense and loan cost amortization. Interest expense and loan cost amortization was approximately $17.8 million and $54.6 million for the quarter and nine months ended September 30, 2013, respectively, as compared to approximately $18.4 million and $51.4 million for the quarter and nine months ended September 30, 2012, respectively. The decrease for the quarter ended September 30, 2013 is primarily attributable to the full repayment of our revolving line of credit in July 2013. The increase for the nine months ended September 30, 2013 is primarily attributable to the additional long-term debt obtained subsequent to September 30, 2012.

Gain from sale of unconsolidated entities.Gain from sale of unconsolidated entities was approximately $55.4 million for the quarter and nine months ended September 30, 2013. This gain relates to the sale of our interests in the 42 senior housing properties held through the CNLSun I, CNLSun II and CNLSun III Ventures in July 2013. See “Distributions from Unconsolidated Entities” above for additional information. There was no sale of unconsolidated entities during the quarter and nine months ended September 30, 2012.

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

	Quarter Ended September 30,
	2013			2012			$ Change			% Change
DMC Partnership	$	2,751		$	972		$	1,779			183.0	%
Intrawest Venture		1,396			267			1,129			422.8	%
CNLSun I Venture		—			273			(273	)		n/a
CNLSun II Venture		—			264			(264	)		n/a
CNLSun III Venture		—			490			(490	)		n/a
Total	$	4,147		$	2,266		$	1,881			83.0	%
	Nine Months Ended September 30,
	2013			2012			$ Change			% Change
DMC Partnership	$	8,160		$	6,370		$	1,790			28.1	%
Intrawest Venture		4,158			156			4,002			2565.4	%
CNLSun I Venture		(1,804	)		(1,471	)		(333	)		–22.6	%
CNLSun II Venture		(509	)		(479	)		(30	)		–6.3	%
CNLSun III Venture		(822	)		1,198			(2,020	)		–168.6	%
Total	$	9,183		$	5,774		$	3,409			59.0	%

Equity in earnings of unconsolidated entities increased by approximately $1.9 million and $3.4 million for the quarter and nine months ended September 30, 2013, respectively, as compared to the same periods in 2012. The increase in equity in earnings on our unconsolidated entities is primarily attributable to the following: (i) the Intrawest Venture stopped recording depreciation and amortization expenses during the fourth quarter of 2012 due to the venture’s decision to market its seven retail destination properties for sale, and (ii) the DMC Partnership incurred approximately $2.3 million in acquisition costs during the third quarter of 2012 relating to a potential acquisition that was ultimately not pursued. The increases were offset by the impact of the sale of our interest in 42 senior housing properties held through CNLSun I, CNLSun II and CNLSun III Ventures in July 2013. See “Distributions from Unconsolidated Entities” above for additional information.

Loss from discontinued operations. Loss from discontinued operations was approximately $2.6 million and $0.4 million for the quarter and nine months ended September 30, 2013, respectively, as compared to approximately $0.2 million and $0.3 million for the same periods in 2012. The increase for the quarter and nine months ended September 30, 2013, is attributable to an impairment provision of approximately $2.7 million recorded on one of our properties because the carrying value was unrecoverable based on a potential third-party sale price. For the nine months ended September 30, 2013, the increase was offset by a gain of approximately $1.8 million recorded from the sale of one property.

Net income (loss) and income (loss) per share of common stock. The Company had a net income (loss) for the quarter and nine months ended September 30, 2013 of approximately $78.3 million and $(0.2) million, respectively, as compared to approximately $23.6 million and $(21.1) million, respectively, for the same periods in 2012. The increase is primarily attributable to (i) the recording of a gain in connection with the sale of our interests in 42 senior housing properties that were held through three unconsolidated joint ventures, (ii) an increase in rental income from leased properties and net operating income from managed properties related to properties acquired during 2012, and (iii) an increase in “same-store” rental income from leased properties and net operating income from managed properties primarily relating to our senior housing properties and ski and mountain lifestyle properties as a result of a strong 2012/2013 ski season. The increases were partially offset by an increase in other operating expenses. For the nine months ended September 30, 2013, the increase is further attributable to a reduction in acquisition fees and expenses, loss on lease termination and loan loss provision, but is further offset by an impairment provision recorded on one of our unimproved land parcels as well as an increase in interest expense and loan cost amortization.

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.

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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 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.

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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 quarter and nine months ended September 30, 2013 and 2012 (in thousands except per share data):

	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net income (loss)	$	78,293		$	23,613		$	(211	)	$	(21,072	)
Adjustments:
Depreciation and amortization(1)		38,349			35,246			111,165			100,319
Impairment of real estate assets(1)		2,740			—			45,191			267
Gain on sale of unconsolidated entities(7)		(55,394	)		—			(55,394	)		—
Gain on sale of real estate investment(1)		(2	)		(5	)		(2,085	)		(287	)
Net effect of FFO adjustment from unconsolidated entities (2)		1,484			16,151			11,820			28,580
Total funds from operations		65,470			75,005			110,486			107,807
Acquisition fees and expenses(3)		1,009			570			1,922			3,380
Straight-line adjustments on leases and notes receivable (1)(4)		(1,924	)		(2,531	)		(3,502	)		(12,718	)
Amortization of above/below market intangible assets and liabilities (1)		349	��		196			1,030			207
Loss from early extinguishment of debt (5)		—			—			—			4
Write-off/impairment of lease related investments (6)		—			—			—			3,566
Loan loss provision		—			—			—			1,699
Accretion of discounts/amortization of premiums for debt investments		3			242			9			641
MFFO adjustments from unconsolidated entities: (2)
Straight-line adjustments on leases and notes receivable		(29	)		68			(175	)		242
Amortization of above/below market intangible assets and liabilities		47			(4	)		39			(14	)
Modified funds from operations	$	64,925		$	73,546		$	109,809		$	104,814
Weighted average number of shares of common stock outstanding (basic and diluted)		319,507			313,250			317,960			311,455
FFO per share (basic and diluted)	$	0.20		$	0.24		$	0.35		$	0.35
MFFO per share (basic and diluted)	$	0.20		$	0.23		$	0.35		$	0.34

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 quarter and nine months ended September 30, 2013 even though cash distribution from these entities were consistent for the same periods in 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.

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⁽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.

⁽⁶⁾  Management believes that adjusting for write-offs of lease related assets is appropriate because they are non-recurring non-cash adjustments that may not be reflective of our ongoing operating performance.

⁽⁷⁾  In July 2013, we completed the sale of our interests in 42 senior housing properties held through three unconsolidated joint ventures as discussed above.

Total FFO was approximately $65.5 million and $110.5 million for the quarter and nine months ended September 30, 2013, respectively, as compared to approximately $75.0 million and $107.8 million for the same periods in 2012. Total FFO per share was $0.20 and $0.35 for the quarter and nine months ended September 30, 2013, respectively, as compared to $0.24 and $0.35 for the same periods in 2012. The decrease in FFO and FFO per share for the quarter ended September 30, 2013 is primarily attributable to a reduction in FFO contribution from unconsolidated entities primarily relating to the CNLSun I, CNLSun II, CNLSun III ventures where we completed the sale of our interests in 42 senior housing properties held through three unconsolidated joint ventures. The increase in FFO for the nine months ended September 30, 2013 is primarily attributable to (i) an increase in rental income from leased properties and net operating income from managed properties related to properties acquired subsequent to September 30, 2012, (ii) an increase in “same-store” rental income from leased properties and net operating income from managed properties primarily relating to our senior housing properties and ski and mountain lifestyle properties as a result of a strong 2012/2013 ski season, and (iii) a decrease in general and administrative expenses, acquisition fees and expenses, loss on lease termination and loan loss provision. The increases for the nine months ended September 30, 2013 were partially offset by a reduction in FFO contribution from unconsolidated entities primarily relating to the CNLSun I, CNLSun II, CNLSun III ventures as discussed above and an increase in bad debt, other operating expenses and interest expense and loan cost amortization.

Total MFFO was approximately $64.9 million and $109.8 million for the quarter and nine months ended September 30, 2013, respectively, as compared to approximately $73.5 million and $104.8 million for the same periods in 2012. Total MFFO per share was $0.20 and $0.35 for the quarter and nine months ended September 30, 2013, respectively, as compared to $0.23 and $0.34 for the same periods in 2012. The decrease in MFFO and MFFO per share for the quarter ended September 30, 2013 is primarily attributable to a reduction in MFFO contribution from unconsolidated entities due to the sale of our interests in three unconsolidated senior housing joint and an increase in bad debt and other operating expenses. The increase in MFFO and MFFO per share for the nine months ended September 30, 2013 is 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 subsequent to September 30, 2012, (ii) an increase in “same-store” leased properties and net operating income from managed properties primarily relating to our senior housing properties and ski and mountain lifestyle properties as a result of a strong 2012/2013 ski season, and (iii) a decrease in general and administrative expenses. The increases for the nine months ended September 30, 2013 were partially offset by a reduction in MFFO contribution from unconsolidated entities primarily relating to the CNLSun I, CNLSun II, CNLSun III ventures as discussed above and an increase in bad debt, other operating expenses and interest expenses and loan cost amortization.

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.

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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.

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

	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net income (loss)	$	78,293		$	23,613		$	(211	)	$	(21,072	)
Loss from discontinued operations		2,636			185			373			275
Interest and other income		(165	)		(243	)		(682	)		(338	)
Bargain purchase gain on acquisition of real estate (4)		(2,653	)		—			(2,653	)		—
Interest expense and loan cost amortization		17,835			18,393			54,619			51,407
Equity in earnings of unconsolidated entities(1)		(4,147	)		(2,266	)		(9,183	)		(5,774	)
Cash distributions from unconsolidated entities(1)		3,177			5,702			23,290			25,796
Gain on sale of unconsolidated entities(3)		(55,394	)		—			(55,394	)		—
Loss from early extinguishment of debt		—			—			—			4
Depreciation and amortization		38,295			35,059			110,926			99,774
Loss (recovery) on lease termination		—			(67	)		—			3,226
Impairment provision		—			—			42,451			—
Loan loss provision		—			—			—			1,699
Straight-line adjustments for leases and notes receivables(2)		(1,924	)		(2,531	)		(3,502	)		(12,718	)
Adjusted EBITDA	$	75,953		$	77,845		$	160,034		$	142,279

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 quarter and nine months ended September 30, 2013, cash distributions from unconsolidated entities excludes approximately $5.3 million in return of capital. For the nine months ended September 30, 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.

⁽³⁾  In July 2013, we completed the sale of our interests in 42 senior housing properties held through three unconsolidated joint ventures. See “Distributions from Unconsolidated Entities” above for additional information.

⁽⁴⁾  In connection with an acquisition of an attraction property, we recorded a bargain purchase gain as a result of the fair value of the net assets acquired exceeding the consideration transferred as discussed above.

Adjusted EBITDA was approximately $76.0 million and $160.0 million for the quarter and nine months ended September 30, 2013, respectively, as compared to approximately $77.8 million and $142.3 million for the same periods in 2012. The decrease in Adjusted EBITDA for the quarter ended September 30, 2013 is primarily attributable to a reduction in cash distributions from unconsolidated entities due to the sale of our interests in three unconsolidated senior housing joint ventures and increase in other operating expenses. The increase in Adjusted EBITDA for the nine months ended September 30, 2013 is 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 subsequent to September 30, 2012, (ii) an increase in “same-store” leased properties and net operating income from managed properties primarily relating to our senior housing properties and ski and mountain lifestyle properties as a result of a strong 2012/2013 ski season, and (iii) a decrease in general and administrative expenses. The increases for the nine months ended September 30, 2013 were partially offset by an increase in other operating expenses and a reduction in cash distributions from unconsolidated entities due to the sale of our interests in three unconsolidated senior housing joint ventures.

Off-Balance Sheet and Other Arrangements

In connection with the sale of our interests in 42 senior housing properties held through the CNLSun I, CNLSun II and CNLSun III Ventures, the indebtedness held in each of the aforementioned ventures with an aggregate outstanding principal balance of approximately $659.3 million, as of July 2013, was assumed by Health Care REIT, Inc.

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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 nine months ended September 30, 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.

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 $120.6 million and $124.7 million at September 30, 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 $115.5 million and $119.3 million at September 30, 2013 and December 31, 2012, respectively.

The following is a schedule of our fixed and variable debt maturities for each of the next five years, and thereafter (in thousands):

	2013		2014		2015		2016		2017		Thereafter		Total		Fair Value
Fixed-rate debt	$	4,522	$	50,933	$	96,778	$	83,602	$	90,815	$	554,962	$	881,612	$	913,967
Variable-rate debt (2)		1,059		21,095		39,562		109,981		412		7,236		179,345		171,470	(1)
	$	5,581	$	72,028	$	136,340	$	193,583	$	91,227	$	562,198	$	1,060,957	$	1,085,437

	2013			2014			2015			2016			2017			Thereafter			Total
Weighted average fixed interest rate of maturities		5.96	%		8.28	%		6.06	%		6.29	%		6.02	%		6.51	%		6.49	%
Average interest rate on variable debt		LIBOR or CDOR + 3.31	%		LIBOR or CDOR + 3.31	%		LIBOR or CDOR + 3.24	%		LIBOR + 3.32	% (4)		LIBOR + 3.48	% (4)		LIBOR + 3.48	% (4)

FOOTNOTES:

(1) The fair value of our fixed-rate debt was determined using discounted cash flows based on market interest rates as of September 30, 2013. We determined market rates through discussions with our existing lenders pricing our loans with similar terms and current rates and spreads.

(2) As of September 30, 2013, some of our variable-rate debt in mortgages and notes payable was hedged.

(3) The estimated fair value of our variable-rate debt was determined using discounted cash flows based on market interest rates as of September 30, 2013 We determined market rates through discussions with our existing lenders pricing our loans with similar terms and current rates and spreads.

(4) The 30-day CDOR rate was approximately 1.2% at September 30, 2013. The 30-day LIBOR rate was approximately 0.2% at September 30, 2013.

Management estimates that a hypothetical one-percentage point increase in LIBOR would have resulted in additional interest costs of approximately $0.7 million for the nine months ended September 30, 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.

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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. The defendants filed a motion to dismiss the complaint on May 1, 2013, which is awaiting for the court’s decision.

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 nine months ended September 30, 2013, we have outstanding redemption requests of approximately 10.3 million shares. During the nine months ended September 30, 2013, approximately 0.4 million shares relating to prior period requests were redeemed and approximately 0.9 million shares relating to current period requests were redeemed on a pro rata basis, for an average price per share of $7.30. 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.”

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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. The aggregate amount of funds under the redemption plan will be determined on a quarterly basis in the sole discretion of the board of directors, and may be less than but is not expected to exceed the aggregate proceeds from our DRP (subject to a $3.0 million cap.) 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 quarter ended September 30, 2013, we redeemed the following shares (in thousands except per share data):

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
July 1, 2013 through July 31, 2013		—		—		—		—
August 1, 2013 through August 31, 2013		—		—		—		—
September 1, 2013 through September 30, 2013		406	$	7.29		406		—	(1)
Total		406	$	7.29		406

FOOTNOTE:

⁽¹⁾  This number represents the additional number of shares which could have been redeemed under the redemption plan during the third quarter without exceeding either of the limitations described above.

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 13^th of November, 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
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 nine months ended September 30, 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.

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