News Releases

(ORLANDO, Fla.) March 21, 2012 — CNL Lifestyle Properties, Inc., a non-traded real estate investment trust (the “Company”), today announced its operating results for the fourth quarter and year ended December 31, 2011.  As of March 21, 2012, the Company owns a portfolio of 170 lifestyle properties, 78 of which are wholly-owned and run by operators under long-term, triple-net leases with a weighted average lease rate of 8.9 percent, 41 of which are managed by independent operators, one which is held for development and 50 of which are owned through unconsolidated joint venture arrangements. Of its joint venture investments, 14 are leased and 36 are managed by independent operators. Diversification by asset class based on initial purchase price is 30.7 percent senior living, 19.6 percent ski and mountain lifestyle, 16.5 percent golf, 12.5 percent attractions, 5.3 percent marinas and 15.4 percent in additional lifestyle properties, including lodging.

Financial Highlights

The following table presents selected comparable financial data through December 31, 2011 (in millions except ratios and per share data):

See detailed financial information and full reconciliation of FFO, MFFO and Adjusted EBITDA, which are non-GAAP measures, below.

Total revenues increased $9.5 million, or 13.9 percent, for the quarter ended December 31, 2011 and $119.6 million, or 39.8 percent, for the year ended December 31, 2011, as compared to the same periods in 2010.  Total expenses increased $6.6 million, or 7.5 percent, for the quarter ended December 31, 2011 and $56.7 million, or 15.8 percent, for the year ended December 31, 2011, as compared to the same periods in 2010.  Net loss per share was $(0.10) and $(0.23) for the quarter and year ended December 31, 2011 as compared to net loss per share of $(0.05) and $(0.31) for the comparable periods in 2010.  FFO and MFFO per share were $0.01 for the quarter ended December 31, 2011 as compared to $0.07 and $0.00, respectively, for the quarter ended December 31, 2010.  For the year ended December 31, 2011, FFO and MFFO per share were $0.30 and $0.32, respectively, as compared to $0.31 and $0.37, respectively, for the year ended December 31, 2010. 

The increases in revenues and expenses for the quarter and year ended December 31, 2011 are primarily attributable to the transition of certain of our attractions properties that were converted from leased to managed properties where we now record property-level gross revenues and property-level operating expenses rather than straight-line rents as was the case in 2010. In addition, the increase in revenues related to an improvement in the results from our Omni Mt. Washington Resort property and our two Great Wolf waterpark resorts as well as increased revenues relating to our 2011 senior housing acquisitions.

The increase in net loss and net loss per share for the fourth quarter of 2011 was attributable to a reduction in gain on extinguishment of debt of approximately $15.8 million.  The reduction in net loss and net loss per share for the year was primarily attributable  to a reduction in impairment provision, loan loss provision and loss on lease terminations of approximately $60.6 million for the year ended December 31, 2011, offset by (i) a reduction in gain on extinguishment of debt of approximately $15.8 million, (ii) a reduction in equity in earnings of our unconsolidated entities as a result of initial transaction costs incurred upon the formation of the ventures of approximately $10.0 million for the year ended December 31, 2011, (iii) a reduction of rental income of approximately $38.1 million from the 17 attractions properties and one additional lifestyle property that were converted from a leased structure to a managed structure offset by property net operating income of approximately $26.5 million, and (iv) an increase in interest expense and loan cost amortization resulting from the issuance of the senior notes during the second quarter of 2011, net of lower interest expense as a result of debt repayments of approximately $10.0 million.

Total FFO and FFO per share was approximately $3.0 million and $89.6 million, or $0.01 and $0.30, for the quarter and year ended December, 2011, respectively.  Comparatively, FFO and FFO per share was approximately $19.6 million and $82.1 million, or $0.07 and $0.31, for the quarter and year ended December, 2010, respectively. 

The decrease in FFO and FFO per share for the quarter ended December 31, 2011 was primarily attributable to (i) a reduction in gain on extinguishment of debt of approximately $15.8 million, and (ii) an increase in property net operating loss of $8.2 million from the 17 attractions properties that were converted from a leased structure to a managed structure offset by a reduction in loan loss provision and loss on lease terminations of approximately $12.6 million.  The increase in FFO for the year ended December 31, 2011 is attributable primarily to a reduction in loan loss provision and loss on lease terminations of approximately $50.4 million, offset by (i) a reduction in gain on extinguishment of debt of approximately $15.8 million, (ii) a reduction of rental income of approximately $38.1 million from the 17 attractions properties and one additional lifestyle property that were converted from a leased structure to a managed structure, offset by property net operating income of approximately $26.5 million, and (iii) an increase in interest expense and loan cost amortization resulting from the issuance of the senior notes in April 2011, net of lower interest expense as a result of debt repayments, of approximately $10.0 million.  While FFO increased, the additional shares issued during the year relating to our third offering, which ended in April 2011 and the shares issued pursuant to our Reinvestment Plan resulted in increased dilution and a decrease in FFO per share. 

The increase in MFFO and MFFO per share for the quarter ended December 31, 2011 was principally due to a reduction in costs associated with the property transitions to managed structures of approximately $10.9 million, offset by an increase in property net operating loss of $8.2 million from the 17 attractions properties that were converted from a leased structure to a managed structure.  The decrease in MFFO for the year ended December 31, 2011 was principally due to (i) a decrease in cash rent received on the 17 attractions properties and one lifestyle property that were transitioned from leased properties to managed properties compared to property net operating income of approximately $7.5 million, and (ii) an increase in interest expense, as described above, offset by a reduction in costs associated with the property transitions to managed structures of approximately $14.6 million.

The decrease in Adjusted EBITDA of $2.7 million for the quarter ended December 31, 2011 was primarily attributable to offseason property operating losses  recorded in 2011 for the transitioned properties discussed above, offset by an increase in cash distributions of $5.4 million (primarily from the Company’s initial Sunrise joint venture).  The increase in Adjusted EBITDA of $4.5 million for the year ended December 31, 2011 was primarily attributable to an increase in cash distributions of $13.2 million (primarily from the Company’s initial Sunrise joint venture), offset by a reduction because property net operating income in 2011 was less than cash to rent payments received in 2010 for the transitioned properties discussed above.

Portfolio Performance

Although property-level operating results are not necessarily indicative of our consolidated results of operations for properties where we have long-term leases and report rental income of the cash flows we receive from our unconsolidated joint ventures, we believe that the property-level performance reported to us by our tenants and operators is useful because it is representative of the changing health of our properties and trends in our industry.  Overall property-level revenues and EBITDA decreased by 2.2 percent and 23.4 percent, respectively, for the quarter ended December 31, 2011 as compared to the same period in 2010 and increased 4.4 percent and decreased 0.4 percent, respectively, for the year ended December 31, 2011 as compared to the prior year. The EBITDA rent coverage for our 88 wholly-owned leased properties by asset class calculated on a trailing 12-month basis as of December 31, 2011 was 1.27x. The following table summarizes property performance for the quarter and year ended December 31, 2011 (in millions except coverage ratio):

*As of December 31, 2011 on trailing 12-month basis for properties subject to lease calculated as property level EBITDA before recurring capital expenditures divided by rent.

The overall decrease in tenant-level EBITDA for the fourth quarter and the year ended December 31, 2011 is primarily attributable to a weak fourth quarter ski season due to record low levels of natural snowfall (which also impacted the results at the Omni Mount Washington Resort included in “Additional lifestyle” properties), as well as, a decrease at our golf and marina properties which continued to experience challenging operating environments.  Although revenues increased at our attractions properties, operating income at those properties declined compared to 2010 as a result of  the general disruption caused by, and the transition costs incurred in, moving these properties to new operators, as well as higher than normal maintenance costs in 2011 resulting from extreme expenditure reduction measures implemented in 2010 by our prior tenant.

During the fourth quarter of 2011, we began to see improvements in our golf portfolio with revenue and EBITDA up 3.9 percent and 19.1 percent, respectively, which has thus far continued into January and February of 2012.  We are also expecting a significant increase in operating income at our managed attractions properties in 2012. 

“We are encouraged by the recent improvements in our golf portfolio and particularly excited about the upcoming attractions season this summer,” said Joe Johnson senior vice president and chief financial officer of CNL Lifestyle Properties.  “This is the first season where we expect to really start to see the benefits of the strategic operator transitions we made at our 17 attractions properties in early 2011.”

Although golf has improved recently, our operators have and continue to struggle and we have been actively monitoring the performance of several of our golf facilities operated by a large tenant that has continued to experience ongoing challenges.  The golf industry in particular is still subject to significant discounting from competition and golf courses have a large fixed-cost component necessary to keep the facilities in good condition regardless of the number of rounds played in a given day.  Additionally, at a number of the facilities, operating expenses have increased even though the properties are being managed in a focused manner.  During 2011, in an effort to provide relief to our large tenant and diversify our tenant concentration, we provided rent forbearance for select golf properties and elected to sell five properties, allowing for the termination of leases upon the sale of the properties.  In addition, we began the transition of seven other golf courses to new third-party managers to be operated for a period of time (and allowed the tenant to terminate the leases at the time of transition).    We also provided the tenant with additional loans of approximately $2.9 million, of which approximately $1 million had been repaid as of December 31, 2011.  

As a result of our efforts to diversify our tenant and operator base, and provide relief to our large tenant, we recorded impairment provisions of approximately $13.7 million and a loss from the write-off of deferred rent of approximately $2.0 million related to the five properties approved to be sold (and classified as assets held for sale) which we recorded as part of discontinued operations.  We also recorded an impairment provision of approximately $3.2 million related to one property and a loss from the write-off of deferred rent of approximately $6.5 million on the seven golf facilities we expect to transition to third party managers.  As of March 23, 2012, we have completed the sale of two of the five properties identified for sale and transitioned the seven properties to third-party managers.  We anticipate completing the sale of the remaining three properties during 2012. 

We continue to assess the need for additional support for the golf tenant described above and are evaluating several possibilities that may include providing additional working capital advances in the form of lease incentives, amending the leases to change the rent terms and increasing our investment in the properties by funding certain deferred capital projects.  We believe this additional support will enable our tenant to work through financial challenges and begin operating profitably by 2013.

Acquisitions

During the quarter ended December 31, 2011, we acquired the following real estate investment properties (in thousands):