(ORLANDO, Fla.) August 15, 2012 — CNL Lifestyle Properties, Inc., a real estate investment trust (“we,” “our” or “us”), today announced its operating results for the quarter ended June 30, 2012.  As of August 15, 2012, we owned a portfolio of 177 properties, 78 of which are wholly-owned by us and run by third-party operators under long-term, triple-net leases with a weighted average lease rate of 8.0 percent, 48 of which are managed by third-party operators, one of which is held for development and 50 of which are owned through unconsolidated joint venture arrangements. Of our joint venture investments, 14 are leased and 36 are managed by third-party operators. Diversification by asset class based on initial purchase price is 32.5 percent senior housing, 18.7 percent ski and mountain lifestyle, 15.6 percent golf, 13.4 percent attractions, 5.1 percent marinas and 14.7 percent in additional lifestyle properties, including lodging.

Financial Highlights
The following table presents selected comparable financial data through June 30, 2012 (in millions except ratios and per share data):

 

	Quarter ended			Year ended June 30,
	June 30,
	2012	2011		2012	2011
Total revenues	$           120.8	$           105.6		$           210.7	$           187.8
Total expenses	126.9	106.7		226.0	194.5
Net loss	(19.9)	(15.7)		(44.7)	(36.4)
Net loss per share	(0.07)	(0.05)		(0.14)	(0.12)
FFO	16.9	19.7		32.8	35.1
FFO per share	0.05	0.06		0.11	0.12
MFFO	21.5	17.0		31.3	39.2
MFFO per share	0.07	0.06		0.10	0.13
Adjusted EBITDA	40.6	30.4		68.5	54.3
Cash flow from operating activities				36.2	51.6
As of June 30, 2012:
Total assets				$       3,015.4
Total debt				1,103.1
Leverage ratio				36.6%

See detailed financial information and full reconciliation of Funds from Operations (“FFO”), Modified Funds from Operations (“MFFO”) and Adjusted EBITDA, which are non-GAAP measures, below.

The increase in net loss and loss per share for the quarter ended June 30, 2012 as compared to the same period in 2011 was primarily attributable to:  (i) a reduction in rental income of approximately $2.3 million on 32 golf facilities as a result of the lease modifications as well as lower net operating income in 2012 versus rental income in 2011 from the nine properties that were converted from a leased structure to a managed structure, (ii) an increase in interest expense and loan cost amortization of approximately $1.0 million resulting from additional long-term debt obtained subsequent to June 30, 2011, (iii) an increase in depreciation expense of approximately $2.6 million, (iv) an increase in bad debt expense of approximately $0.5 million, (v) an increase in loss on lease terminations of approximately $2.3 million on leases that we anticipate terminating during third quarter of 2012, (vi) an increase in asset management fees and other general and administrative expenses totaling approximately $1.9 million due to the growth in the number of properties and (vii) an increase in loan loss provision of $1.7 million; offset by (i) an increase in rental income from leased properties and net operating income from managed properties of approximately $7.6 million related to properties acquired subsequent to June 30, 2011.

The increase in net loss and loss per share for the six months ended June 30, 2012 as compared to the same period in 2011 was primarily attributable to:  (i) a reduction in rental income of approximately $3.2 million on 32 golf facilities as a result of the lease modifications, (ii) an increase in interest expense and loan cost amortization of approximately $6.0 million resulting from the issuance of our senior notes and additional long-term debt obtained subsequent to June 30, 2011, (iii) lower net operating income in 2012 versus rental income in 2011 totaling $2.5 million from the nine properties that were converted from a leased structure to a managed structure, (iv) an increase in depreciation expense of approximately $4.9 million, (v) an increase in bad debt expense of approximately $2.5 million primarily attributable to write-off of past due rents in connection with the amending and terminating leases with two of our golf tenants that were deemed uncollectible, (vi) an increase in loss on lease terminations of approximately $2.3 million on leases that we anticipate terminating during third quarter of 2012, (vii) an increase in asset management fees and general and administrative expenses totaling approximately $4.6 million due to the growth in the number of properties and (vii) an increase in loan loss provision of $1.7 million; offset by (i) an increase in equity in earnings of approximately $5.2 million related to our unconsolidated entities as a result of expensing non-recurring significant initial transaction costs incurred upon the formation of CNLSun I Venture incurred in 2011, (ii) an increase in income of approximately $8.9 million related to properties acquired in 2011, and (iii) a $4.1 million reduction in acquisition costs and fees as a result of our primary common stock offering ending in April 2011.

Total FFO and FFO per share was approximately $16.9 million and $32.8 million or $0.05 and $0.11 for the quarter and six months ended June 30, 2012, respectively, as compared to approximately $19.7 million and $35.1 million or $0.06 and $0.12 for the quarter and six months ended June 30, 2011, respectively.  The decrease in FFO for the quarter ended June 30, 2012 was attributable to:  (i) a reduction in rental income of approximately $2.3 million on the 32 golf facilities as a result of the lease modification as well as lower net operating income in 2012 versus rental income in 2011 from the nine properties that were recently converted from a leased to managed structure, (ii) an increase in loan loss provision and loss on lease terminations of approximately $4.0 million, (iii) an increase in bad debt expense, asset management fees and general and administrative expense of approximately $2.5 million, (iv) an increase in interest expense and loan costs amortization of approximately $1.0 million resulting from the issuance of additional debt and (v) a decrease in FFO contribution from unconsolidated entities of approximately $0.6 million; offset in part, by (i) an increase in rental income from leased properties and net operating income from managed properties of approximately $7.6 million related to properties acquired subsequent to June 30, 2011.

The decrease in FFO for the six months ended June 30, 2012 was attributable to:  (i) a reduction in rental income of approximately $3.2 million related to a reduction of rental income on the 32 golf facilities as a result of lease modifications as well as lower net operating income in 2012 versus rental income in 2011 from the nine properties that were recently converted from a leased to managed structure, (ii) an increase in loan loss provision and loss on lease terminations of approximately $4.0 million, (iii) an increase in bad debt expense and asset management fees of approximately $4.6 million, and (iv) an increase in interest expense and loan costs amortization expense of approximately $6.0 million resulting from the issuance of our senior notes in April 2011, additional debt facilities acquired subsequent to June 30, 2011 and the draw down on our revolving line of credit in connection with the acquisition of nine properties; offset, in part, by (i) a reduction in acquisition fees and expenses of approximately $4.1 million, (ii) an increase in rental income from leased properties and net operating income from managed properties of approximately $8.9 million related to properties acquired subsequent to June 30, 2011, (iii) a reduction in loss from extinguishment of debt of approximately $1.5 million and (iv) an increase in FFO contribution from unconsolidated entities of approximately $1.6 million.

Total MFFO and MFFO per share was approximately $21.5 million or $0.07 for the quarter ended June 30, 2012 as compared to approximately $17.0 million or $0.06 for the quarter ended June 30, 2011.  The increase in MFFO and MFFO per share for the quarter ended June 30, 2012 was principally due to an increase in rental income from leased properties (excluding straight-line adjustments for rental income) and net operating income from managed properties of approximately $7.4 million related to properties acquired subsequent to June 30, 2011, offset by an increase in interest expense and loan costs amortization, bad debt expense, asset management fees and general and administrative expenses of approximately $3.5 million.

Total MFFO and MFFO per share was approximately $31.3 million or $0.10 for the six months ended June 30, 2012 as compared to approximately $39.2 million or $0.13 for the six months ended June 30, 2011.  The decrease in MFFO and MFFO per share for the six months ended June 30, 2012 was principally due to:  (i) a reduction of cash rent received of approximately $3.6 million attributable to the lease modification on 32 golf properties, and (ii) an increase in interest expense and loan costs amortization, bad debt expense, asset management fees and general and administrative expenses of approximately $13.0 million, offset by an $8.6 million increase in net cash received on properties acquired subsequent to June 30, 2011.

Adjusted EBITDA was approximately $40.6 million for the quarter ended June 30, 2012 as compared to approximately $30.4 million for the quarter ended June 30, 2011, respectively. The increase in adjusted EBITDA of approximately $10.1 million for the quarter ended June 30, 2012 was primarily attributable to:  (i) an increase in distributions from unconsolidated entities of approximately $5.3 million, primarily from our three senior housing joint ventures, (ii) an increase in net cash received of $4.3 million on properties acquired subsequent to June 30, 2011, and (iii) an increase in net operating income from our managed properties of $3.0 million, offset by an increase in bad debt, asset management fees and general and administrative expenses of approximately $2.5 million.

Adjusted EBITDA was approximately $68.5 million for the six months ended June 30, 2012 as compared to approximately $54.3 million for the six months ended June 30, 2011, respectively. The increase in adjusted EBITDA of approximately $14.2 million for the six months ended June 30, 2012 was primarily attributable to:  (i) an increase in distributions from unconsolidated entities of approximately $13.7 million, primarily from our three senior housing joint ventures and (ii) an increase in net cash received of $8.6 million on properties acquired subsequent to June 30, 2011; offset by an increase in bad debt, asset management fees and general and administrative expenses of approximately $7.1 million and a reduction in rental income from leased properties that were transitioned to managed of approximately $1.0 million.

Portfolio Performance
Although property-level operating results are not necessarily indicative of our consolidated results of operations for properties where the Company has long-term leases and reports rental income and the cash flows it receives from its unconsolidated joint ventures, the Company believes that the property-level performance reported to it by its tenants and operators is useful because it is representative of the changing health of its properties and trends in its portfolio.  The following table summarizes the Company’s same-store comparable property performance for the quarter and six months ended June 30, 2012 (in millions except coverage ratio):

 

				Quarter ended
				June 30,													TTM
		#		2012				2011					Increase/(Decrease)				Rent
		Properties		Revenue		EBITDA		Revenue		EBITDA			Revenue		EBITDA		Coverage*
Ski and mountain lifestyle		22		31.4		(8.2)		36.9		(9.3)			-14.9%		12.6%		1.18
Golf		49		47.7		12.7		46.3		10.5			3.0%		20.6%		1.55
Attractions		19		58.0		10.8		54.8		9.7			5.9%		10.9%		1.52
Marinas		17		9.6		3.4		9.1		3.3			6.4%		1.5%		0.84
Additional lifestyle properties		7		46.7		10.3		44.4		9.7			5.0%		6.2%		1.32
Total		114		193.4		29.0		191.5		23.9			1.0%		21.1%		1.25

 

				Six months ended
				June 30,
		#		2012					2011					Increase/(Decrease)
		Properties		Revenue		EBITDA			Revenue		EBITDA			Revenue		EBITDA
Ski and mountain lifestyle		22		222.1		75.0			255.9		94.4			-13.2%		-20.6%
Golf		49		82.6		20.9			78.4		16.0			5.4%		30.8%
Attractions		19		65.4		(1.0)			61.1		(0.9)			7.1%		-14.8%
Marinas		17		15.6		5.2			15.0		5.4			3.8%		-3.3%
Additional lifestyle properties		7		99.8		26.3			95.1		25.3			4.9%		3.8%
Total		114		485.5		126.4			505.5		140.2			-3.9%		-9.9%

*As of June 30, 2012 on trailing 12-month (“TTM”) basis for properties subject to lease calculated as property-level EBITDA before recurring capital expenditures divided by base rent.

For the quarter ended June 30, 2012, our tenants and managers reported to us an increase in revenue and property-level EBITDA of 1.0% and 21.1%, respectively, as compared to the same period in the prior year.  The increase was primarily attributable to quarter-over-quarter improvements in our golf, attractions and additional lifestyle properties.  Our golf properties have begun to see an increase in total rounds played and higher rates, along with focused operations and margin management.  Our additional lifestyle properties, which include three waterpark hotels and our attractions properties, have experienced an increase in visitation during the early portion of their operating season.  We believe that all of these trends are as a result of favorable weather patterns and a general improvement in consumer confidence and spending. The increase was offset by our ski and mountain lifestyle properties, which recorded a decrease in revenue of 14.9% as compared to same period in the prior year. Many of these properties experienced unprecedented low levels of natural snowfall for the 2011/2012 ski season.  However, we expect regained performance to historical levels in the future during more typical snow years.  Excluding our ski and mountain lifestyle properties and the Omni Mt. Washington Resort, our tenants and managers reported an overall increase in revenues and EBITDA for the quarter of 5.5% and 13.6%, respectively, compared to the same period last year.

For the six months ended June 30, 2012, our tenants and managers reported to us a decrease in revenue and property-level EBTIDA of 3.9% and 9.9%, respectively, as compared to the same period in the prior year. The decrease in revenue was primarily attributable to a decline in revenues from our ski and mountain lifestyle properties as described previously.  Excluding our ski and mountain lifestyle properties and the Omni Mt. Washington Resort, our tenants and managers reported an overall increase in revenues and EBITDA of 6.9% and 17.4%, respectively, for the comparable year-over-year, six-month period.  The increase is primarily attributable to our golf, attractions and additional lifestyle properties as described in the preceding paragraph.

When evaluating our senior housing properties’ performance, we review operating statistics of the underlying properties, including monthly revenue per occupied unit (“RevPOU”) and occupancy levels.  RevPOU, which we define as total revenue divided by average number of occupied units during a month, is a performance metric commonly used within the healthcare sector.  This metric assists us in determining the effectiveness of our operators in achieving market rental rates and driving revenues from providing healthcare-related services.  For the quarter and six months ended June 30, 2012, our managers for our 29 comparable properties owned through our unconsolidated joint ventures reported to us an increase (decrease) in average occupancy of 1.1% and (0.3%), respectively, and a 3.3% and 2.3% increase in average RevPOU, respectively.  The increase in average RevPOU for the quarter and six months ended June 30, 2012 was driven primarily by our operators’ success at driving rate increases at our properties.

Acquisitions
During the quarter ended June 30, 2012, we acquired four senior housing communities located in the Atlanta, Georgia area, three senior housing communities located in Illinois, one near St. Louis, Mo. two in the Davenport-Moline-Rock Island Metropolitan Statistical Area, one senior housing community located in Carson City, Nevada and one attractions property located in South Florida for approximately $168.7 million.

As of June 30, 2012, we had fully invested the proceeds of our common stock offering and senior unsecured note offering.  Going forward, we expect that our cash needs will be 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 pursue additional acquisitions and further investment in our existing portfolio, the primary source of funds will be from capital recycling from property dispositions, borrowings and proceeds from our distribution reinvestment plan (“DRP”).

Valuation
In July 2012, we conducted a detailed analysis to estimate the net asset value (“NAV”) on a per share basis to assist broker dealers in connection with their obligations under applicable Financial Industry Regulatory Authority (“FINRA”) rules with respect to customer account statements and to assist fiduciaries in discharging their obligations under Employee Retirement Income Security Act (“ERISA”) reporting requirements.  As of August 1, 2012, the Board determined that the estimated NAV per share was $7.31.  In determining an estimated fair value of our shares, the Board of Directors considered various analyses and information, a portion of which was provided by an internationally recognized independent valuation advisor that we had engaged in support of this process.  As a result of our new estimated fair value, effective August 1, 2012, and until the Board of Directors announces a new price, the DRP shares will be offered at a five percent discount to the new estimated fair value per share.

Distributions
For the year ended June 30, 2012, we declared and paid distributions of approximately $97.0 million ($0.3126 per share).  Upon reaching the milestone of achieving full initial investment, the Board evaluated the expected future cash flows, FFO, MFFO and Adjusted EBITDA forecasted to be generated by our portfolio.  On August 9, 2012, based on the assessment of forward looking expected performance, the impact of the expected continued slow growth of the broader domestic economy and to ensure that we retain sufficient capital to continue to reinvest in and improve our assets, the Board has approved a reduction in our quarterly distribution to $0.10625 per share, effective during the third quarter of 2012.  On an annualized basis, this amount represents a yield of 5.81 percent on our new estimated value per share and 4.25 percent on the original $10.00 per share offering price.

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands except per share data)

		June 30, 2012		December 31, 2011
ASSETS
Real estate investment properties, net (including $207,459 and $210,866		$2,182,779		$2,055,678
related to consolidated variable interest entities, respectively)
Investments in unconsolidated entities		299,994		318,158
Cash		128,862		162,839
Mortgages and other notes receivable, net		123,075		124,352

 

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