##### Table of Contents





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 June 30, 2010

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   ̈    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 definition 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 August 6, 2010 was 266,274,003.









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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                                 |  |      
|----------------------------- |  | ----------------------------------------------------------------------------------------------- |  | -----
|                              |  |                                                                                                 |  | Page 
|PART I. FINANCIAL INFORMATION |  |                                                                                                
|                              |  |                                                                                                
|Item 1.                       |  | Financial Statements (unaudited):                                                               |  |      
|                              |  |                                                                                                
|                              |  | Condensed Consolidated Balance Sheets                                                           |  | 1    
|                              |  |                                                                                                
|                              |  | Condensed Consolidated Statements of Operations                                                 |  | 2    
|                              |  |                                                                                                
|                              |  | Condensed Consolidated Statements of Stockholders Equity and Other Comprehensive Income (Loss) |  | 3    
|                              |  |                                                                                                
|                              |  | Condensed Consolidated Statements of Cash Flows                                                 |  | 4    
|                              |  |                                                                                                
|                              |  | Notes to Condensed Consolidated Financial Statements                                            |  | 518 
|                              |  |                                                                                                
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations           |  | 1934
|                              |  |                                                                                                
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                      |  | 3536
|                              |  |                                                                                                
|Item 4T.                      |  | Controls and Procedures                                                                         |  | 36   
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                
|                              |  |                                                                                                
|Item 1.                       |  | Legal Proceedings                                                                               |  | 36   
|                              |  |                                                                                                
|Item 1A.                      |  | Risk Factors                                                                                    |  | 36   
|                              |  |                                                                                                
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                     |  | 3637
|                              |  |                                                                                                
|Item 3.                       |  | Defaults Upon Senior Securities                                                                 |  | 38   
|                              |  |                                                                                                
|Item 5.                       |  | Other Information                                                                               |  | 38   
|                              |  |                                                                                                
|Item 6.                       |  | Exhibits                                                                                        |  | 38   
|                              | 
|Signatures                    |  | 39                                                                                             
|                              | 
|Exhibits                      |  | 40                                                                                             



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##### Table of Contents

|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)



|                                                                                                                                                                                                           |  |              |           |   |                  |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                                           |  | June 30,2010 |           |   | December 31,2009 |  
|ASSETS                                                                                                                                                                                                     |  |              |           |   |                  |   |           |  
|                                                                                                                                                                                                           |  |             
|Real estate investment properties, net (including $236,278 related to consolidated variable interest entities)                                                                                             |  | $            | 2,060,973 |   |                  | $ | 2,021,188 |  
|Mortgages and other notes receivable, net                                                                                                                                                                  |  |              | 151,048   |   |                  |   | 145,640   |  
|Investments in unconsolidated entities                                                                                                                                                                     |  |              | 142,280   |   |                  |   | 142,487   |  
|Deferred rent and lease incentives                                                                                                                                                                         |  |              | 118,891   |   |                  |   | 91,851    |  
|Cash                                                                                                                                                                                                       |  |              | 117,930   |   |                  |   | 183,575   |  
|Other assets                                                                                                                                                                                               |  |              | 40,646    |   |                  |   | 24,655    |  
|Intangibles, net                                                                                                                                                                                           |  |              | 31,762    |   |                  |   | 32,032    |  
|Restricted cash                                                                                                                                                                                            |  |              | 20,930    |   |                  |   | 19,438    |  
|Accounts and other receivables, net                                                                                                                                                                        |  |              | 6,839     |   |                  |   | 11,262    |  
|                                                                                                                                                                                                           |  |              |           |   |                  |   |           |  
|Total Assets                                                                                                                                                                                               |  | $            | 2,691,299 |   |                  | $ | 2,672,128 |  
|                                                                                                                                                                                                           |  |              |           |   |                  |   |           |  
|                                                                                                                                                                                                           |  |             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                       |  |              |           |   |                  |   |           |  
|                                                                                                                                                                                                           |  |             
|Mortgages and other notes payable (including $88,972 non-recourse debt of consolidated variable interest
entities)                                                                                         |  | $            | 650,302   |   |                  | $ | 639,488   |  
|Line of credit                                                                                                                                                                                             |  |              | 58,000    |   |                  |   | 99,483    |  
|Other liabilities                                                                                                                                                                                          |  |              | 38,720    |   |                  |   | 43,931    |  
|Security deposits                                                                                                                                                                                          |  |              | 20,582    |   |                  |   | 16,180    |  
|Accounts payable and accrued expenses                                                                                                                                                                      |  |              | 14,983    |   |                  |   | 19,591    |  
|Due to affiliates                                                                                                                                                                                          |  |              | 4,404     |   |                  |   | 4,239     |  
|                                                                                                                                                                                                           |  |              |           |   |                  |   |           |  
|Total Liabilities                                                                                                                                                                                          |  |              | 786,991   |   |                  |   | 822,912   |  
|                                                                                                                                                                                                           |  |              |           |   |                  |   |           |  
|                                                                                                                                                                                                           |  |             
|Commitments and contingencies                                                                                                                                                                              |  |              |           |   |                  |   |           |  
|                                                                                                                                                                                                           |  |             
|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; 278,189 and 260,233 shares issued and 263,110 and 247,710
shares outstanding as of June 30, 2010 and December 31, 2009, respectively |  |              | 2,631     |   |                  |   | 2,477     |  
|Capital in excess of par value                                                                                                                                                                             |  |              | 2,330,783 |   |                  |   | 2,195,251 |  
|Accumulated earnings                                                                                                                                                                                       |  |              | 80,383    |   |                  |   | 78,126    |  
|Accumulated distributions                                                                                                                                                                                  |  |              | (500,952  | ) |                  |   | (421,873  | )
|Accumulated other comprehensive loss                                                                                                                                                                       |  |              | (8,537    | ) |                  |   | (4,765    | )
|                                                                                                                                                                                                           |  |              |           |   |                  |   |           |  
|                                                                                                                                                                                                           |  |              | 1,904,308 |   |                  |   | 1,849,216 |  
|                                                                                                                                                                                                           |  |              |           |   |                  |   |           |  
|Total Liabilities and Stockholders Equity                                                                                                                                                                 |  | $            | 2,691,299 |   |                  | $ | 2,672,128 |  
|                                                                                                                                                                                                           |  |              |           |   |                  |   |           |  

See accompanying notes to condensed consolidated financial statements.



1



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CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands except per share data)



|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                  |  | Quarter EndedJune
30, |         |   | Six Months EndedJune 30, |  
|                                                                                  |  | 2010                  |         |   | 2009                     |   |         | 2010 |  |   | 2009    |  
|                                                                                  |  |                       |         |  
|Revenues:                                                                         |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Rental income from operating leases                                               |  | $                     | 52,275  |   |                          | $ | 50,539  |      |  | $ | 106,664 |   |  | $ | 105,300 |  
|Property operating revenues                                                       |  |                       | 15,663  |   |                          |   | 4,050   |      |  |   | 41,417  |   |  |   | 6,908   |  
|Interest income on mortgages and other notes receivable                           |  |                       | 3,527   |   |                          |   | 3,168   |      |  |   | 7,050   |   |  |   | 6,552   |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Total revenues                                                                    |  |                       | 71,465  |   |                          |   | 57,757  |      |  |   | 155,131 |   |  |   | 118,760 |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                                                                                  |  |                       |         |  
|Expenses:                                                                         |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Property operating expenses                                                       |  |                       | 16,547  |   |                          |   | 4,032   |      |  |   | 37,359  |   |  |   | 6,168   |  
|Asset management fees to advisor                                                  |  |                       | 6,702   |   |                          |   | 6,181   |      |  |   | 13,189  |   |  |   | 12,304  |  
|General and administrative                                                        |  |                       | 3,680   |   |                          |   | 4,637   |      |  |   | 6,773   |   |  |   | 7,319   |  
|Ground lease and permit fees                                                      |  |                       | 3,386   |   |                          |   | 3,003   |      |  |   | 6,294   |   |  |   | 5,719   |  
|Acquisition fees and costs                                                        |  |                       | 3,126   |   |                          |   | 3,635   |      |  |   | 5,951   |   |  |   | 11,109  |  
|Other operating expenses                                                          |  |                       | 873     |   |                          |   | 2,684   |      |  |   | 2,045   |   |  |   | 4,523   |  
|Bad debt expense                                                                  |  |                       |        |   |                          |   | 1,221   |      |  |   |        |   |  |   | 2,159   |  
|Loss on lease termination                                                         |  |                       |        |   |                          |   | 2,247   |      |  |   |        |   |  |   | 3,955   |  
|Depreciation and amortization                                                     |  |                       | 32,035  |   |                          |   | 29,347  |      |  |   | 63,191  |   |  |   | 57,971  |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Total expenses                                                                    |  |                       | 66,349  |   |                          |   | 56,987  |      |  |   | 134,802 |   |  |   | 111,227 |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                                                                                  |  |                       |         |  
|Operating income                                                                  |  |                       | 5,116   |   |                          |   | 770     |      |  |   | 20,329  |   |  |   | 7,533   |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                                                                                  |  |                       |         |  
|Other income (expense):                                                           |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Interest and other income (expense)                                               |  |                       | (168    | ) |                          |   | 1,228   |      |  |   | 142     |   |  |   | 1,835   |  
|Interest expense and loan cost amortization                                       |  |                       | (12,005 | ) |                          |   | (8,891  | )    |  |   | (23,916 | ) |  |   | (18,311 | )
|Equity in earnings of unconsolidated entities                                     |  |                       | 2,525   |   |                          |   | 118     |      |  |   | 5,702   |   |  |   | 124     |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Total other expense                                                               |  |                       | (9,648  | ) |                          |   | (7,545  | )    |  |   | (18,072 | ) |  |   | (16,352 | )
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                                                                                  |  |                       |         |  
|Net income (loss)                                                                 |  | $                     | (4,532  | ) |                          | $ | (6,775  | )    |  | $ | 2,257   |   |  | $ | (8,819  | )
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                                                                                  |  |                       |         |  
|Earnings (loss) per share of common stock (basic and diluted)                     |  | $                     | (0.02   | ) |                          | $ | (0.03   | )    |  | $ | 0.01    |   |  | $ | (0.04   | )
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|                                                                                  |  |                       |         |  
|Weighted average number of shares of common stock outstanding (basic and diluted) |  |                       | 257,727 |   |                          |   | 232,599 |      |  |   | 254,048 |   |  |   | 230,119 |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |   |         |   |  |   |         |  

See accompanying notes to condensed consolidated financial statements.



2



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CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

AND OTHER COMPREHENSIVE INCOME (LOSS)

For the Six Months Ended June 30, 2010 and Year Ended December 31, 2009 (UNAUDITED)

(in thousands except per share data)



|                                                                                      |  |                 |   |  |                              |       |   |                     |   |           |                          |  |   |                                       |   |  |                          |          |   |                   |   |         |   |  |   |           |   |  |   |         |  
|------------------------------------------------------------------------------------- |  | --------------- | - |  | ---------------------------- | ----- | - | ------------------- | - | --------- | ------------------------ |  | - | ------------------------------------- | - |  | ------------------------ | -------- | - | ----------------- | - | ------- | - |  | - | --------- | - |  | - | ------- | -
|                                                                                      |  | Common Stock    |   |  | Capital inExcess ofPar Value |       |   | AccumulatedEarnings |   |           | AccumulatedDistributions |  |   | AccumulatedComprehensiveIncome (Loss) |   |  | TotalStockholdersEquity |          |   | ComprehensiveLoss |  
|                                                                                      |  | Numberof Shares |   |  | ParValue                     |       |   |                     |   |           |                          | 
|Balance at December 31, 2008                                                          |  | 226,037         |   |  | $                            | 2,260 |   |                     | $ | 2,005,147 |                          |  | $ | 97,446                                |   |  | $                        | (267,420 | ) |                   | $ | (15,061 | ) |  | $ | 1,822,372 |   |  |   |         |  
|Subscriptions received for common stock through public offering and reinvestment plan |  | 29,660          |   |  |                              | 297   |   |                     |   | 293,006   |                          |  |   |                                      |   |  |                          |         |   |                   |   |        |   |  |   | 293,303   |   |  |   |         |  
|Redemption of common stock                                                            |  | (7,987          | ) |  |                              | (80   | ) |                     |   | (76,161   | )                        |  |   |                                      |   |  |                          |         |   |                   |   |        |   |  |   | (76,241   | ) |  |   |         |  
|Stock issuance and offering costs                                                     |  |                |   |  |                              |      |   |                     |   | (26,741   | )                        |  |   |                                      |   |  |                          |         |   |                   |   |        |   |  |   | (26,741   | ) |  |   |         |  
|Net loss                                                                              |  |                |   |  |                              |      |   |                     |   |          |                          |  |   | (19,320                               | ) |  |                          |         |   |                   |   |        |   |  |   | (19,320   | ) |  | $ | (19,320 | )
|Distributions, declared and paid ($0.6577 per share)                                  |  |                |   |  |                              |      |   |                     |   |          |                          |  |   |                                      |   |  |                          | (154,453 | ) |                   |   |        |   |  |   | (154,453  | ) |  |   |         |  
|Foreign currency translation adjustment                                               |  |                |   |  |                              |      |   |                     |   |          |                          |  |   |                                      |   |  |                          |         |   |                   |   | 6,583   |   |  |   | 6,583     |   |  |   | 6,583   |  
|Current period adjustment to recognize changes in fair value of cash flow hedges      |  |                |   |  |                              |      |   |                     |   |          |                          |  |   |                                      |   |  |                          |         |   |                   |   | 3,713   |   |  |   | 3,713     |   |  |   | 3,713   |  
|                                                                                      |  |                 |   |  |                              |       |   |                     |   |           |                          |  |   |                                       |   |  |                          |          |   |                   |   |         |   |  |   |           |   |  |   |         |  
|Total comprehensive loss                                                              |  |                |   |  |                              |      |   |                     |   |          |                          |  |   |                                      |   |  |                          |         |   |                   |   |        |   |  |   |          |   |  | $ | (9,024  | )
|                                                                                      |  |                 |   |  |                              |       |   |                     |   |           |                          |  |   |                                       |   |  |                          |          |   |                   |   |         |   |  |   |           |   |  |   |         |  
|                                                                                      |  |                 |   |  |                              |       |   |                     |   |           |                          |  |   |                                       |   |  |                          |          |   |                   |   |         |   |  |   |           |   |  |   |         |  
|Balance at December 31, 2009                                                          |  | 247,710         |   |  | $                            | 2,477 |   |                     | $ | 2,195,251 |                          |  | $ | 78,126                                |   |  | $                        | (421,873 | ) |                   | $ | (4,765  | ) |  | $ | 1,849,216 |   |  |   |         |  
|Subscriptions received for common stock through public offering and reinvestment plan |  | 17,957          |   |  |                              | 180   |   |                     |   | 177,308   |                          |  |   |                                      |   |  |                          |         |   |                   |   |        |   |  |   | 177,488   |   |  |   |         |  
|Redemption of common stock                                                            |  | (2,557          | ) |  |                              | (26   | ) |                     |   | (25,370   | )                        |  |   |                                      |   |  |                          |         |   |                   |   |        |   |  |   | (25,396   | ) |  |   |         |  
|Stock issuance and offering costs                                                     |  |                |   |  |                              |      |   |                     |   | (16,406   | )                        |  |   |                                      |   |  |                          |         |   |                   |   |        |   |  |   | (16,406   | ) |  |   |         |  
|Net income                                                                            |  |                |   |  |                              |      |   |                     |   |          |                          |  |   | 2,257                                 |   |  |                          |         |   |                   |   |        |   |  |   | 2,257     |   |  |   | 2,257   |  
|Distributions, declared and paid ($0.3126 per share)                                  |  |                |   |  |                              |      |   |                     |   |          |                          |  |   |                                      |   |  |                          | (79,079  | ) |                   |   |        |   |  |   | (79,079   | ) |  |   |         |  
|Foreign currency translation adjustment                                               |  |                |   |  |                              |      |   |                     |   |          |                          |  |   |                                      |   |  |                          |         |   |                   |   | (184    | ) |  |   | (184      | ) |  |   | (184    | )
|Current period adjustment to recognize changes in fair value of cash flow hedges      |  |                |   |  |                              |      |   |                     |   |          |                          |  |   |                                      |   |  |                          |         |   |                   |   | (3,588  | ) |  |   | (3,588    | ) |  |   | (3,588  | )
|                                                                                      |  |                 |   |  |                              |       |   |                     |   |           |                          |  |   |                                       |   |  |                          |          |   |                   |   |         |   |  |   |           |   |  |   |         |  
|Total comprehensive loss                                                              |  |                |   |  |                              |      |   |                     |   |          |                          |  |   |                                      |   |  |                          |         |   |                   |   |        |   |  |   |          |   |  | $ | (1,515  | )
|                                                                                      |  |                 |   |  |                              |       |   |                     |   |           |                          |  |   |                                       |   |  |                          |          |   |                   |   |         |   |  |   |           |   |  |   |         |  
|                                                                                      |  |                 |   |  |                              |       |   |                     |   |           |                          |  |   |                                       |   |  |                          |          |   |                   |   |         |   |  |   |           |   |  |   |         |  
|Balance at June 30, 2010                                                              |  | 263,110         |   |  | $                            | 2,631 |   |                     | $ | 2,330,783 |                          |  | $ | 80,383                                |   |  | $                        | (500,952 | ) |                   | $ | (8,537  | ) |  | $ | 1,904,308 |   |  |   |         |  
|                                                                                      |  |                 |   |  |                              |       |   |                     |   |           |                          |  |   |                                       |   |  |                          |          |   |                   |   |         |   |  |   |           |   |  |   |         |  

See accompanying notes to condensed consolidated financial statements.



3



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)



|                                                                   |  |                           |          |   |                            |   |         |  
|------------------------------------------------------------------ |  | ------------------------- | -------- | - | -------------------------- | - | ------- | -
|                                                                   |  | Six Months Ended June 30, |         
|                                                                   |  | 2010                      |          |   | (as revised)see Note 22009 |  
|Increase (decrease) in cash:                                       |  |                           |          |   |                            |   |         |  
|Operating activities:                                              |  |                           |          |   |                            |   |         |  
|Net cash provided by operating activities                          |  | $                         | 54,082   |   |                            | $ | 25,546  |  
|                                                                   |  |                           |          |   |                            |   |         |  
|                                                                   |  |                          
|Investing activities:                                              |  |                           |          |   |                            |   |         |  
|Acquisition of properties                                          |  |                           | (47,390  | ) |                            |   | (42,000 | )
|Capital expenditures                                               |  |                           | (41,546  | ) |                            |   | (28,790 | )
|Payment of contingent purchase consideration                       |  |                           | (12,433  | ) |                            |   |        |  
|Proceeds from disposal of assets                                   |  |                           | 306      |   |                            |   | 453     |  
|Contributions to unconsolidated entities                           |  |                           |         |   |                            |   | (796    | )
|Issuance of mortgage notes receivable                              |  |                           | (5,804   | ) |                            |   | (1,493  | )
|Payment of additional carrying costs for mortgage notes receivable |  |                           |         |   |                            |   | (3,837  | )
|Acquisition fees on mortgage notes receivable                      |  |                           | (161     | ) |                            |   |        |  
|Collection of mortgage notes receivable                            |  |                           | 600      |   |                            |   | 12,900  |  
|Return of short-term investments                                   |  |                           | 8,201    |   |                            |   | 10,079  |  
|Changes in restricted cash                                         |  |                           | (5,473   | ) |                            |   | (5,975  | )
|                                                                   |  |                           |          |   |                            |   |         |  
|Net cash used in investing activities                              |  |                           | (103,700 | ) |                            |   | (59,459 | )
|                                                                   |  |                           |          |   |                            |   |         |  
|                                                                   |  |                          
|Financing activities:                                              |  |                           |          |   |                            |   |         |  
|Proceeds from stock offering                                       |  |                           | 131,699  |   |                            |   | 102,433 |  
|Redemptions of common stock                                        |  |                           | (25,396  | ) |                            |   | (42,289 | )
|Distributions to stockholders, net of reinvestments                |  |                           | (43,703  | ) |                            |   | (42,661 | )
|Stock issuance costs                                               |  |                           | (16,139  | ) |                            |   | (11,265 | )
|Borrowings under line of credit, net of repayments                 |  |                           | (41,483  | ) |                            |   |        |  
|Proceeds from mortgage loans and other notes payable               |  |                           | 10,999   |   |                            |   | 2,141   |  
|Principal payments on mortgage loans                               |  |                           | (14,434  | ) |                            |   | (6,104  | )
|Principal payments on capital leases                               |  |                           | (3,837   | ) |                            |   | (2,234  | )
|Payment of loan costs and lender deposits                          |  |                           | (13,693  | ) |                            |   | (573    | )
|                                                                   |  |                           |          |   |                            |   |         |  
|Net cash used in financing activities                              |  |                           | (15,987  | ) |                            |   | (552    | )
|                                                                   |  |                           |          |   |                            |   |         |  
|Effect of exchange rate fluctuations on cash                       |  | $                         | (40      | ) |                            | $ | 23      |  
|                                                                   |  |                           |          |   |                            |   |         |  
|                                                                   |  |                          
|Net decrease in cash                                               |  |                           | (65,645  | ) |                            |   | (34,442 | )
|Cash at beginning of period                                        |  |                           | 183,575  |   |                            |   | 209,501 |  
|                                                                   |  |                           |          |   |                            |   |         |  
|Cash at end of period                                              |  | $                         | 117,930  |   |                            | $ | 175,059 |  
|                                                                   |  |                           |          |   |                            |   |         |  

See accompanying notes to condensed consolidated financial statements.



4



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|1. | Organization and Nature of Business:
|-- | ------------------------------------

CNL Lifestyle Properties, Inc. (the Company) was organized in Maryland on August 11, 2003. The Company operates and has
elected to be taxed as a real estate investment trust (a REIT) for federal income tax purposes. 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 significant industry leaders. To a lesser extent, the Company also leases properties to taxable REIT subsidiary (TRS) tenants and engages independent third-party managers to operate those
properties.

As of June 30, 2010, the Company owned a portfolio of 121 lifestyle properties, directly and indirectly,
within the following asset classes: Ski and Mountain Lifestyle, Golf, Attractions, Marinas and Additional Lifestyle Properties. Eight of these 121 properties are owned through unconsolidated joint ventures and three are located in
Canada. Certain of these properties experience seasonal fluctuations due to geographic location, climate and weather patterns. 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 also makes or acquires loans (mortgage, mezzanine and other loans) or other permitted investments.



|2. | Significant Accounting Policies:
|-- | --------------------------------

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 are, in the opinion of management, necessary for the fair statement of the Companys results for the interim period presented. Operating results for the six months ended
June 30, 2010 may not be indicative of the results that may be expected for the year ending December 31, 2010. Amounts as of December 31, 2009 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, 2009.

Consolidation and Variable Interest Entities  Effective January 1, 2010, the Company adopted additional consolidation
guidance recently issued by the Financial Accounting Standards Board (FASB) relating to the identification of variable interest entities, the determination of a primary beneficiary in a variable interest entity (VIE),
disclosures about the involvement with variable interest entities and the overall ongoing analysis to determine whether a variable interest entity should be consolidated. The adoption of this guidance did not have a significant impact on the
Companys unaudited condensed consolidated financial statements. See Note 6, Variable Interest and Unconsolidated Entities, for additional disclosures about variable interest entities.

Revenue Recognition For properties subject to operating leases, rental revenue is recorded on a straight-line basis over the
terms of the leases. Additional percentage rent that is due contingent upon tenant performance thresholds, such as gross revenues, is deferred until the underlying performance thresholds have been achieved. 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 and other service revenues. Such revenues, excluding membership dues, are
recognized when rooms are occupied, when services have been performed, and when products are delivered. Membership dues are recognized ratably over the term of the membership period. For mortgages and other notes receivable, interest income is
recognized on an accrual basis when earned, except for loans placed on non-accrual status, for which interest income is recognized when received. Any deferred portion of contractual interest is recognized on a straight-line basis over the term of
the corresponding note. Loan origination fees charged and acquisition fees incurred in connection with the making of loans are recognized as interest income, and a reduction in interest income, respectively over the term of the notes.

Use of Estimates Management has made a number of estimates and assumptions related to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to prepare these unaudited condensed consolidated financial



5



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|2. | Significant Accounting Policies (Continued):
|-- | --------------------------------------------



statements in conformity with GAAP. For example, significant estimates and assumptions are made in connection with the allocation of purchase price and the analysis of real estate, equity method
investment and loan impairments. Actual results could differ from those estimates.

Revision to Previously Issued Financial
Statements  In connection with the preparation of its financial statements for the quarter ended March 31, 2010, the Company determined that the Condensed Consolidated Statements of Cash Flows for the quarter ended March 31, 2009
and the six months ended June 30, 2009 contained an error in the presentation of proceeds from the sale of short-term investments. Accordingly, the Company has revised the Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2009, as reported herein (in thousands):



|                                                         |  |                               |       
|-------------------------------------------------------- |  | ----------------------------- | ------
|                                                         |  | Six Months EndedJune 30, 2009
|Cash flows provided by operating activities, as reported |  | $                             | 35,625
|Cash flows provided by operating activities, as revised  |  | $                             | 25,546
|Cash flows used in investing activities, as reported     |  | $                             | 69,538
|Cash flows used in investing activities, as revised      |  | $                             | 59,459

The Company
concluded that the corrections are not material to any of its previously issued consolidated financial statements based on an analysis of quantitative and qualitative factors performed in accordance with the guidance provided in SEC Staff Accounting
Bulletin No. 99, Materiality. The error and revisions do not affect the Companys Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Stockholders
Equity and Other Comprehensive Income (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.



|3. | Acquisitions:
|-- | -------------

During the
six months ended June 30, 2010, the Company acquired the following real estate investment properties (in thousands):



|                                         |  |            |  |                    |  |               |       
|---------------------------------------- |  | ---------- |  | ------------------ |  | ------------- | ------
|Property/Description                     |  | Location   |  | Date ofAcquisition |  | PurchasePrice
|                                         |  |            | 
|Anacapa Isle Marina                     |  | California |  | 3/12/2010          |  | $             | 9,829 
|                                         |  |            | 
|One marina (leasehold interest)          |  |            |  |                    |  |               |       
|                                         |  |            | 
|Ballena Isle Marina                     |  | California |  | 3/12/2010          |  |               | 8,179 
|                                         |  |            | 
|One marina (leasehold and fee interests) |  |            |  |                    |  |               |       
|                                         |  |            | 
|Cabrillo Isle Marina                    |  | California |  | 3/12/2010          |  |               | 20,575
|                                         |  |            | 
|One marina (leasehold interest)          |  |            |  |                    |  |               |       
|                                         |  |            | 
|Ventura Isle Marina                     |  | California |  | 3/12/2010          |  |               | 16,417
|                                         |  |            | 
|One marina (leasehold interest)          |  |            |  |                    |  |               |       
|                                         |  |            | 
|Bohemia Vista Yacht Basin               |  | Maryland   |  | 5/20/2010          |  |               | 4,970 
|                                         |  |            | 
|One marina (fee interest)                |  |            |  |                    |  |               |       
|                                         |  |            | 
|Hacks Point Marina                     |  | Maryland   |  | 5/20/2010          |  |               | 2,030 
|                                         |  |            | 
|One marina (fee interest)                |  |            |  |                    |  |               |       
|                                         |  |            |  |                    |  |               |       
|                                         |  |            |  | Total              |  | $             | 62,000
|                                         |  |            |  |                    |  |               |       

The marina properties above are subject to long-term
triple-net leases with renewal options. In connection with the transactions, the Company paid approximately $48.0 million in cash, excluding transaction costs, and assumed three existing loans collateralized by three properties, Anacapa Isle Marina,
Cabrillo Isle Marina and Ventura Isle Marina, with an aggregate outstanding principal balance of approximately $14.0 million, which were recorded at their estimated fair values of approximately $13.6 million.



6



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)

|3. | Acquisitions (Continued):
|-- | -------------------------



The following summarizes the allocation of the purchase price for the above properties,
and the estimated fair values of the assets acquired and liabilities assumed (in thousands):



|                                     |  |                                |         |  
|------------------------------------ |  | ------------------------------ | ------- | -
|                                     |  | Total PurchasePrice Allocation |        
|Land and land improvements           |  | $                              | 6,091   |  
|Leasehold interests and improvements |  |                                | 45,048  |  
|Buildings                            |  |                                | 8,531   |  
|Equipment                            |  |                                | 1,433   |  
|Intangibles                          |  |                                | 503     |  
|Below market loan premium            |  |                                | 394     |  
|Mortgage notes payable               |  |                                | (13,589 | )
|                                     |  |                                |         |  
|Net assets acquired                  |  | $                              | 48,411  |  
|                                     |  |                                |         |  

The revenue and net operating results attributable to the properties included in the Companys
unaudited condensed consolidated statements of operations for the six months ended June 30, 2010 were approximately $2.5 million and $0.3 million, respectively.

The following presents unaudited pro forma results of operations of the Company as if the properties above were acquired as of
January 1, 2009 and owned during the quarter and six months ended June 30, 2010 and 2009 (in thousands, except per share data):



|                                                                                  |  |                       |         |   |                           |   |         |      |  |   |          |   |  |   |          |  
|--------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ------------------------- | - | ------- | ---- |  | - | -------- | - |  | - | -------- | -
|                                                                                  |  | Quarter EndedJune 30, |         |   | Six Months EndedJune 
30, |  
|                                                                                  |  | 2010                  |         |   | 2009                      |   |         | 2010 |  |   | 2009     |  
|Revenues                                                                          |  | $                     | 71,568  |   |                           | $ | 59,821  |      |  | $ | 156,982  |   |  | $ | 122,848  |  
|Expenses                                                                          |  |                       | (66,386 | ) |                           |   | (58,564 | )    |  |   | (136,218 | ) |  |   | (114,363 | )
|Other expense                                                                     |  |                       | (9,648  | ) |                           |   | (7,780  | )    |  |   | (18,273  | ) |  |   | (16,816  | )
|                                                                                  |  |                       |         |   |                           |   |         |      |  |   |          |   |  |   |          |  
|Net income (loss)                                                                 |  | $                     | (4,466  | ) |                           | $ | (6,523  | )    |  | $ | 2,491    |   |  | $ | (8,331   | )
|                                                                                  |  |                       |         |   |                           |   |         |      |  |   |          |   |  |   |          |  
|Earnings (loss) per share of common stock (basic and diluted)                     |  | $                     | (0.02   | ) |                           | $ | (0.03   | )    |  | $ | 0.01     |   |  | $ | (0.04    | )
|                                                                                  |  |                       |         |   |                           |   |         |      |  |   |          |   |  |   |          |  
|Weighted average number of shares of common stock outstanding (basic and diluted) |  |                       | 257,727 |   |                           |   | 232,599 |      |  |   | 254,048  |   |  |   | 230,119  |  
|                                                                                  |  |                       |         |   |                           |   |         |      |  |   |          |   |  |   |          |  

In connection with the marinas acquisition on March 12, 2010, the Company agreed to pay additional
purchase consideration up to a maximum of $10.0 million, contingent upon the properties achieving certain performance thresholds. However, the Company determined, based on its estimates and the likelihood of the properties achieving such thresholds,
that the fair value of the liability was zero as of the acquisition date and June 30, 2010.



|4. | Real Estate Investment Properties, net:
|-- | ---------------------------------------

As of June 30, 2010 and December 31, 2009, real estate investment properties under operating leases consisted of the following
(in thousands):



|                                                |  |              |           |   |                  |   |           |  
|----------------------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                                |  | June 30,2010 |           |   | December 31,2009 |  
|Land and land improvements                      |  | $            | 1,012,596 |   |                  | $ | 999,355   |  
|Leasehold interests and improvements            |  |              | 280,836   |   |                  |   | 235,914   |  
|Buildings                                       |  |              | 645,962   |   |                  |   | 617,100   |  
|Equipment                                       |  |              | 469,786   |   |                  |   | 435,578   |  
|Construction in progress                        |  |              |          |   |                  |   | 20,021    |  
|Less: accumulated depreciation and amortization |  |              | (348,207  | ) |                  |   | (286,780  | )
|                                                |  |              |           |   |                  |   |           |  
|                                                |  | $            | 2,060,973 |   |                  | $ | 2,021,188 |  
|                                                |  |              |           |   |                  |   |           |  



7



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|4. | Real Estate Investment Properties, net (Continued):
|-- | ---------------------------------------------------



For the six months ended June 30, 2010 and 2009, depreciation and amortization
expense was approximately $62.4 million and $57.2 million, respectively.



|5. | Intangibles, net:
|-- | -----------------

The
gross carrying amount and accumulated amortization of the Companys intangible assets as of June 30, 2010 and December 31, 2009 are as follows (in thousands):



|                   |  |                     |        |                         |   |                                 |  |   |       
|------------------ |  | ------------------- | ------ | ----------------------- | - | ------------------------------- |  | - | ------
|Intangible Assets  |  | GrossCarryingAmount |        | AccumulatedAmortization |   | Net BookValue as ofJune 30,2010
|In place leases    |  | $                   | 23,495 |                         | $ | 3,718                           |  | $ | 19,777
|Trade name         |  |                     | 10,798 |                         |   | 948                             |  |   | 9,850 
|Trade name         |  |                     | 1,531  |                         |   |                                |  |   | 1,531 
|Below market lease |  |                     | 629    |                         |   | 25                              |  |   | 604   
|                   |  |                     |        |                         |   |                                 |  |   |       
|                   |  | $                   | 36,453 |                         | $ | 4,691                           |  | $ | 31,762
|                   |  |                     |        |                         |   |                                 |  |   |       



|                   |  |                     |        |                         |   |                                     |  |   |       
|------------------ |  | ------------------- | ------ | ----------------------- | - | ----------------------------------- |  | - | ------
|Intangible Assets  |  | GrossCarryingAmount |        | AccumulatedAmortization |   | Net BookValue as ofDecember 31,2009
|In place leases    |  | $                   | 23,093 |                         | $ | 3,094                               |  | $ | 19,999
|Trade name         |  |                     | 10,798 |                         |   | 814                                 |  |   | 9,984 
|Trade name         |  |                     | 1,429  |                         |   |                                    |  |   | 1,429 
|Below market lease |  |                     | 629    |                         |   | 9                                   |  |   | 620   
|                   |  |                     |        |                         |   |                                     |  |   |       
|                   |  | $                   | 35,949 |                         | $ | 3,917                               |  | $ | 32,032
|                   |  |                     |        |                         |   |                                     |  |   |       

Amortization expense was approximately $0.8 million
and $0.7 million for the six months ended June 30, 2010 and 2009, respectively.



|6. | Variable Interest and Unconsolidated Entities:
|-- | ----------------------------------------------

Consolidated VIEs

Upon adoption of the new guidance for Consolidation and Variable Interest Entities, the Company performed an analysis and determined that
certain of its wholly owned subsidiaries designed as single property entities to own and lease its respective properties to single tenant operators are VIEs due to potential future buy-out options held by the respective tenants, which are not
currently exercisable. Two other properties in which service providers have a significant variable interest were also determined to be VIEs. The Company determined that it is the primary beneficiary and holds a controlling financial interest in
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 most significant losses and its right to receive significant
benefits from these entities. As such, the transactions and accounts of these VIEs are included in the accompanying unaudited condensed consolidated financial statements. The adoption of the new guidance and the identification of these entities
as VIEs did not have an impact on the Companys financial statements, as the subsidiaries have historically been consolidated and continue to be consolidated under the new guidance.



8



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|6. | Variable Interest and Unconsolidated Entities (Continued):
|-- | ----------------------------------------------------------



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):



|                                       |  |   |        
|-------------------------------------- |  | - | -------
|Assets                                 |  |   |        
|Real estate investment properties, net |  | $ | 236,278
|Other assets                           |  | $ | 24,766 
|                                       | 
|Liabilities                            |  |   |        
|Mortgages and other notes payable      |  | $ | 88,972 
|Other liabilities                      |  | $ | 16,339 

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 $155.7 million as of June 30, 2010. The Companys exposure is limited because of the
non-recourse nature of the borrowings of the VIEs.

Unconsolidated Entities

The Company has investments in two unconsolidated joint ventures that are accounted for under the equity method of accounting. The
adoption of the new consolidation guidance did not impact the Companys financial statements or reporting of these entities. The Company determined that the DMC Partnership is not a VIE, and that the Company lacks control over major decisions
due to the shared voting rights of its partner. The Company determined that the Intrawest Venture is a VIE, however, while several significant decisions are shared between the venture partners, the Company does not direct the activities that most
significantly impact the ventures performance. The Companys maximum exposure to loss as a result of its involvement with this VIE is primarily limited to the carrying amount of its net investment in the venture of approximately $31.4
million as of June 30, 2010. The following tables present financial information for the Companys unconsolidated entities for the quarter and six months ended June 30, 2010 and 2009 and as of June 30, 2010 and December 31,
2009 (in thousands):

Summarized Operating Data



|                                                     |  |                             |        |   |                  |   |        |       |  |   |        |  
|---------------------------------------------------- |  | --------------------------- | ------ | - | ---------------- | - | ------ | ----- |  | - | ------ | -
|                                                     |  | Quarter Ended June 30, 2010 |       
|                                                     |  | DMCPartnership              |        |   | IntrawestVenture |   |        | Total | 
|                                                     |  |                             |       
|Revenue                                              |  | $                           | 6,869  |   |                  | $ | 3,976  |       |  | $ | 10,845 |  
|Property operating expenses                          |  |                             | (152   | ) |                  |   | (2,064 | )     |  |   | (2,216 | )
|Depreciation & amortization expenses                 |  |                             | (2,143 | ) |                  |   | (994   | )     |  |   | (3,137 | )
|Interest expense                                     |  |                             | (2,175 | ) |                  |   | (1,381 | )     |  |   | (3,556 | )
|Interest and other income (expense)                  |  |                             | 10     |   |                  |   | (41    | )     |  |   | (31    | )
|                                                     |  |                             |        |   |                  |   |        |       |  |   |        |  
|Net income (loss)                                    |  | $                           | 2,409  |   |                  | $ | (504   | )     |  | $ | 1,905  |  
|                                                     |  |                             |        |   |                  |   |        |       |  |   |        |  
|                                                     |  |                             |       
|Loss allocable to other venture partners             |  | $                           | (399   | ) |                  | $ | (401   | )     |  | $ | (800   | )
|                                                     |  |                             |        |   |                  |   |        |       |  |   |        |  
|                                                     |  |                             |       
|Income (loss) allocable to the Company               |  | $                           | 2,808  |   |                  | $ | (103   | )     |  | $ | 2,705  |  
|Amortization of capitalized costs                    |  |                             | (121   | ) |                  |   | (59    | )     |  |   | (180   | )
|                                                     |  |                             |        |   |                  |   |        |       |  |   |        |  
|Equity in earnings (loss) of unconsolidated entities |  | $                           | 2,687  |   |                  | $ | (162   | )     |  | $ | 2,525  |  
|                                                     |  |                             |        |   |                  |   |        |       |  |   |        |  
|                                                     |  |                             |       
|Distributions declared to the Company                |  | $                           | 2,413  |   |                  | $ | 450    |       |  | $ | 2,863  |  
|                                                     |  |                             |        |   |                  |   |        |       |  |   |        |  
|                                                     |  |                             |       
|Distributions received by the Company                |  | $                           | 2,777  |   |                  | $ | 450    |       |  | $ | 3,227  |  
|                                                     |  |                             |        |   |                  |   |        |       |  |   |        |  



9



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|6. | Variable Interest and Unconsolidated Entities (Continued):
|-- | ----------------------------------------------------------



Summarized Operating Data



|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|---------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------------ | - | ------ | ---------------- |  | - | ------ | - |  | - | ------ | -
|                                                     |  | Quarter Ended June 30, 2009 |       
|                                                     |  | WolfPartnership (1)         |        |   | DMCPartnership                 |   |        | IntrawestVenture |  |   | Total  |  
|Revenue                                              |  | $                           | 7,041  |   |                                | $ | 6,649  |                  |  | $ | 3,582  |   |  | $ | 17,272 |  
|Property operating expenses                          |  |                             | (6,764 | ) |                                |   | (174   | )                |  |   | (2,046 | ) |  |   | (8,984 | )
|Depreciation & amortization expenses                 |  |                             | (1,843 | ) |                                |   | (2,147 | )                |  |   | (961   | ) |  |   | (4,951 | )
|Interest expense                                     |  |                             | (982   | ) |                                |   | (2,223 | )                |  |   | (1,259 | ) |  |   | (4,464 | )
|Interest and other income (expense)                  |  |                             | (4     | ) |                                |   | 11     |                  |  |   | 45     |   |  |   | 52     |  
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|Net income (loss)                                    |  | $                           | (2,552 | ) |                                | $ | 2,116  |                  |  | $ | (639   | ) |  | $ | (1,075 | )
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|                                                     |  |                             |        |  
|Loss allocable to other venture partners             |  | $                           | (762   | ) |                                | $ | (372   | )                |  | $ | (298   | ) |  | $ | (1,432 | )
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|                                                     |  |                             |        |  
|Income (loss) allocable to the Company               |  | $                           | (1,790 | ) |                                | $ | 2,488  |                  |  | $ | (341   | ) |  | $ | 357    |  
|Amortization of capitalized costs                    |  |                             | (56    | ) |                                |   | (124   | )                |  |   | (59    | ) |  |   | (239   | )
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|Equity in earnings (loss) of unconsolidated entities |  | $                           | (1,846 | ) |                                | $ | 2,364  |                  |  | $ | (400   | ) |  | $ | 118    |  
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|                                                     |  |                             |        |  
|Distributions declared to the Company                |  | $                           |       |   |                                | $ | 2,229  |                  |  | $ | 450    |   |  | $ | 2,679  |  
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|                                                     |  |                             |        |  
|Distributions received by the Company                |  | $                           |       |   |                                | $ | 2,718  |                  |  | $ | 450    |   |  | $ | 3,168  |  
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|Summarized Operating Data                            |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|                                                     |  |                            
|                                                     |  |                             |        |   | Six Months Ended June 30, 2010 |  
|                                                     |  |                             |        |   | DMCPartnership                 |   |        | IntrawestVenture |  |   | Total  |  
|Revenue                                              |  |                             |        |   |                                | $ | 13,738 |                  |  | $ | 8,027  |   |  | $ | 21,765 |  
|Property operating expenses                          |  |                             |        |   |                                |   | (282   | )                |  |   | (3,561 | ) |  |   | (3,843 | )
|Depreciation & amortization expenses                 |  |                             |        |   |                                |   | (4,314 | )                |  |   | (1,987 | ) |  |   | (6,301 | )
|Interest expense                                     |  |                             |        |   |                                |   | (4,340 | )                |  |   | (2,748 | ) |  |   | (7,088 | )
|Interest and other income                            |  |                             |        |   |                                |   | 17     |                  |  |   | 25     |   |  |   | 42     |  
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|Net income (loss)                                    |  |                             |        |   |                                | $ | 4,819  |                  |  | $ | (244   | ) |  | $ | 4,575  |  
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|                                                     |  |                             |        |  
|Loss allocable to other venture partners             |  |                             |        |   |                                | $ | (766   | )                |  | $ | (722   | ) |  | $ | (1,488 | )
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|                                                     |  |                             |        |  
|Income allocable to the Company                      |  |                             |        |   |                                | $ | 5,585  |                  |  | $ | 478    |   |  | $ | 6,063  |  
|Amortization of capitalized costs                    |  |                             |        |   |                                |   | (244   | )                |  |   | (117   | ) |  |   | (361   | )
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|Equity in earnings of unconsolidated entities        |  |                             |        |   |                                | $ | 5,341  |                  |  | $ | 361    |   |  | $ | 5,702  |  
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|                                                     |  |                             |        |  
|Distributions declared to the Company                |  |                             |        |   |                                | $ | 5,190  |                  |  | $ | 450    |   |  | $ | 5,640  |  
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  
|                                                     |  |                             |        |  
|Distributions received by the Company                |  |                             |        |   |                                | $ | 5,616  |                  |  | $ | 450    |   |  | $ | 6,066  |  
|                                                     |  |                             |        |   |                                |   |        |                  |  |   |        |   |  |   |        |  



10



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|6. | Variable Interest and Unconsolidated Entities (Continued):
|-- | ----------------------------------------------------------



Summarized Operating Data



|                                                     |  |                                |         |   |                |   |        |                  |  |   |        |   |  |   |         |  
|---------------------------------------------------- |  | ------------------------------ | ------- | - | -------------- | - | ------ | ---------------- |  | - | ------ | - |  | - | ------- | -
|                                                     |  | Six Months Ended June 30, 2009 |        
|                                                     |  | WolfPartnership 
(1)           |         |   | DMCPartnership |   |        | IntrawestVenture |  |   | Total  |  
|                                                     |  |                                |         |  
|Revenue                                              |  | $                              | 14,650  |   |                | $ | 15,469 |                  |  | $ | 7,188  |   |  | $ | 37,307  |  
|Property operating expenses                          |  |                                | (14,171 | ) |                |   | (320   | )                |  |   | (3,758 | ) |  |   | (18,249 | )
|Depreciation & amortization expenses                 |  |                                | (3,689  | ) |                |   | (4,314 | )                |  |   | (1,903 | ) |  |   | (9,906  | )
|Interest expense                                     |  |                                | (1,966  | ) |                |   | (4,434 | )                |  |   | (2,702 | ) |  |   | (9,102  | )
|Interest and other income (expense)                  |  |                                | (4      | ) |                |   | 15     |                  |  |   | 80     |   |  |   | 91      |  
|                                                     |  |                                |         |   |                |   |        |                  |  |   |        |   |  |   |         |  
|Net income (loss)                                    |  | $                              | (5,180  | ) |                | $ | 6,416  |                  |  | $ | (1,095 | ) |  | $ | 141     |  
|                                                     |  |                                |         |   |                |   |        |                  |  |   |        |   |  |   |         |  
|                                                     |  |                                |         |  
|Income (loss) allocable to other venture partners    |  | $                              | (1,559  | ) |                | $ | 1,469  |                  |  | $ | (371   | ) |  | $ | (461    | )
|                                                     |  |                                |         |   |                |   |        |                  |  |   |        |   |  |   |         |  
|                                                     |  |                                |         |  
|Income (loss) allocable to the Company               |  | $                              | (3,621  | ) |                | $ | 4,947  |                  |  | $ | (724   | ) |  | $ | 602     |  
|Amortization of capitalized costs                    |  |                                | (113    | ) |                |   | (248   | )                |  |   | (117   | ) |  |   | (478    | )
|                                                     |  |                                |         |   |                |   |        |                  |  |   |        |   |  |   |         |  
|Equity in earnings (loss) of unconsolidated entities |  | $                              | (3,734  | ) |                | $ | 4,699  |                  |  | $ | (841   | ) |  | $ | 124     |  
|                                                     |  |                                |         |   |                |   |        |                  |  |   |        |   |  |   |         |  
|                                                     |  |                                |         |  
|Distributions declared to the Company                |  | $                              |        |   |                | $ | 4,947  |                  |  | $ | 809    |   |  | $ | 5,756   |  
|                                                     |  |                                |         |   |                |   |        |                  |  |   |        |   |  |   |         |  
|                                                     |  |                                |         |  
|Distributions received by the Company                |  | $                              |        |   |                | $ | 4,962  |                  |  | $ | 954    |   |  | $ | 5,916   |  
|                                                     |  |                                |         |   |                |   |        |                  |  |   |        |   |  |   |         |  



FOOTNOTE:



| | (1) | The Company acquired a controlling interest in this venture as a result of its purchase of Great Wolfs 30.3% interest on August 6, 2009. As a result,
operating data related to this entity is now consolidated in the Companys unaudited condensed consolidated statements of operations for the quarter and six months ended June 30, 2010.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Summarized Balance Sheet Data



|                                  |  |                     |         |   |                       |   |        |           |  |   |        
|--------------------------------- |  | ------------------- | ------- | - | --------------------- | - | ------ | --------- |  | - | -------
|                                  |  | As of June 30, 2010
|                                  |  | DMCPartnership 
(1) |         |   | IntrawestVenture 
(1) |   |        | Total
(1)
|                                  |  |                     |        
|Real estate assets, net           |  | $                   | 248,517 |   |                       | $ | 95,353 |           |  | $ | 343,870
|Intangible assets, net            |  |                     | 6,446   |   |                       |   | 1,405  |           |  |   | 7,851  
|Other assets                      |  |                     | 7,041   |   |                       |   | 13,006 |           |  |   | 20,047 
|Mortgages and other notes payable |  |                     | 143,666 |   |                       |   | 76,456 |           |  |   | 220,122
|Other liabilities                 |  |                     | 3,774   |   |                       |   | 13,781 |           |  |   | 17,555 
|Partners capital                 |  |                     | 114,564 |   |                       |   | 19,527 |           |  |   | 134,091
|Companys ownership percentage    |  |                     | 81.9    | % |                       |   | 80.0   | %         |  |   |        

Summarized Balance Sheet Data



|                                  |  |                         |         |   |                      |   |        |           |  |   |        
|--------------------------------- |  | ----------------------- | ------- | - | -------------------- | - | ------ | --------- |  | - | -------
|                                  |  | As of December 31, 2009
|                                  |  | DMCPartnership 
(1)     |         |   | IntrawestVenture (1) |   |        | Total (1)
|                                  |  |                         |        
|Real estate assets, net           |  | $                       | 251,791 |   |                      | $ | 97,082 |           |  | $ | 348,873
|Intangible assets, net            |  |                         | 6,571   |   |                      |   | 1,506  |           |  |   | 8,077  
|Other assets                      |  |                         | 6,673   |   |                      |   | 11,463 |           |  |   | 18,136 
|Mortgages and other notes payable |  |                         | 145,293 |   |                      |   | 77,165 |           |  |   | 222,458
|Other liabilities                 |  |                         | 4,808   |   |                      |   | 13,036 |           |  |   | 17,844 
|Partners capital                 |  |                         | 114,934 |   |                      |   | 19,850 |           |  |   | 134,784
|Companys ownership percentage    |  |                         | 81.9    | % |                      |   | 80.0   | %         |  |   |        



11



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|6. | Variable Interest and Unconsolidated Entities (Continued):
|-- | ----------------------------------------------------------





FOOTNOTE:



| | (1) | As of June 30, 2010 and December 31, 2009, the Companys share of partners capital was approximately $132.9 million and $132.4 million,
respectively, and the total difference between the carrying amount of investment and the Companys share of partners capital was approximately $9.4 million and $10.1 million, respectively.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|7. | Mortgages and Other Notes Receivable, net:
|-- | ------------------------------------------

As of June 30, 2010 and December 31, 2009, mortgages and other notes receivable consisted of the following (in thousands):



|                           |  |              |         |   |                  |   |         |  
|-------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                           |  | June 30,2010 |         |   | December 31,2009 |  
|                           |  |             
|Principal                  |  | $            | 145,433 |   |                  | $ | 140,228 |  
|Accrued interest           |  |              | 3,595   |   |                  |   | 2,628   |  
|Acquisition fees, net      |  |              | 2,101   |   |                  |   | 2,956   |  
|Loan origination fees, net |  |              | (81     | ) |                  |   | (172    | )
|                           |  |              |         |   |                  |   |         |  
|Total carrying amount      |  | $            | 151,048 |   |                  | $ | 145,640 |  
|                           |  |              |         |   |                  |   |         |  

On June 15, 2010, an affiliate of Jiminy Peak Mountain Resort, LLC, an existing tenant, acquired
Cranmore Mountain Resort and assumed one loan that the Company originally made to Booth Creek Resort Property, LLC. The loan is collateralized by a portion of the property and had an outstanding principal balance of approximately $8.8 million. In
connection with the transaction, the loan was amended with the following terms: annual interest rate of 6.0% with periodic increases to 11.0% over the life of the loan until maturity on September 30, 2017 with monthly interest-only payments.
Simultaneously, the Company committed to provide a $7.0 million construction loan to fund a significant expansion of the property with the following terms: annual interest rate of 9.0% with periodic increases to 11.0% over the life of the loan until
maturity on September 30, 2017 with monthly interest-only payments. The Company obtained a call option, and the new borrower retained a put option to allow or cause the Company, to purchase the Cranmore Mountain Resort, if certain criteria are
met in years 2015 through 2017. The Companys obligation to the put option would be limited to the outstanding loan balance. As of June 30, 2010, approximately $1.0 million was drawn on the construction loan for improvements at the resort.

On March 30, 2010, Marinas International, Inc., an existing borrower, entered into a new construction loan for
approximately $3.1 million which is collateralized by one marina property. Approximately $1.8 million was drawn as of June 30, 2010. The loan bears an annual interest rate of 9.0% with monthly interest-only payments until
January 1, 2011, at which time, monthly payments of principal and interest in the amount of $25,216 with unpaid principal and interest due at maturity on December 22, 2021. In addition, Marinas International is required to pay an exit
fee at maturity equal to the aggregate of monthly interest payments that would have been payable if the annual interest rate had been 10.25% instead of 9.0%.

On February 10, 2010, PARC Investors, LLC and PARC Operations, LLC collectively (PARC) borrowed $3.0 million which is
collateralized by membership interests. The loan requires monthly interest-only payments at a fixed rate of 9.0% with principal due at maturity on September 1, 2010.

The estimated fair market value of mortgages and other notes receivable was approximately $139.3 million and $137.6 million as of
June 30, 2010 and December 31, 2009, respectively. The Company estimated the fair market value of mortgages and other notes receivable using discounted cash flows for each individual instrument based on market interest rates as of
June 30, 2010 and December 31, 2009, respectively. The Company determined market rates based on rates it has negotiated for similar loans and through discussions regarding market conditions with various third-party lenders.

The Company has two outstanding loans to VIEs totaling approximately $13.4 million, which represents the Companys maximum exposure
to loss related to these investments. The Company determined it is not the primary beneficiary of the VIEs because it does not have the ability to direct the activities that most significantly impact the economic performance of the entities.



12



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|8. | Public Offerings and Stockholders Equity:
|-- | ------------------------------------------

On April 9, 2008, the Company commenced its third common stock offering for the sale of up to $2.0 billion in common stock (200
million shares of common stock at $10.00 per share), including up to $285.0 million in shares of common stock (30.0 million shares of common stock at $9.50 per share) available for sale under the terms of the Companys reinvestment plan. In
March 2010, the Company elected to extend this current stock offering for a period of one year through April 9, 2011. On June 28, 2010, the Companys board of directors determined that at this time the Company does not expect to
commence another public offering of its shares following the termination of its current public offering on April 9, 2011. However, the Company intends to continue offering shares through its reinvestment plan.

As of June 30, 2010, the Company had cumulatively raised approximately $2.8 billion (278.1 million shares) in subscription proceeds
through its three public offerings, including approximately $232.4 million (24.5 million shares) received through the reinvestment plan. The Company has and will continue to incur costs in connection with the offering and issuance of shares,
including filing, legal, accounting, printing, marketing support and escrow fees, selling commissions and due diligence expense reimbursements, all of which are deducted from the gross proceeds of the offering. As of June 30, 2010, the total
cumulative offering and stock issuance costs incurred were approximately $289.8 million.



|9. | Indebtedness:
|-- | -------------

As of
June 30, 2010 and December 31, 2009, the Company had the following indebtedness (in thousands):



|                                        |  |              |         |                  |   |        
|--------------------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                                        |  | June 30,2010 |         | December 31,2009
|Mortgages payable                       |  |              |         |                  |   |        
|Fixed rate debt                         |  | $            | 424,913 |                  | $ | 416,527
|Variable rate debt(1)                   |  |              | 156,489 |                  |   | 145,861
|Sellers financing                       |  |              |         |                  |   |        
|Fixed rate debt                         |  |              | 68,900  |                  |   | 77,100 
|                                        |  |              |         |                  |   |        
|Total mortgages and other notes payable |  |              | 650,302 |                  |   | 639,488
|                                        |  |              |         |                  |   |        
|Line of credit                          |  |              | 58,000  |                  |   | 99,483 
|                                        |  |              |         |                  |   |        
|Total indebtedness                      |  | $            | 708,302 |                  | $ | 738,971
|                                        |  |              |         |                  |   |        



FOOTNOTE:



| | (1) | Amount includes variable rate debt of approximately $102.7 million and $103.0 million as of June 30, 2010 and December 31, 2009, respectively, that has been
swapped to fixed rates.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On June 18, 2010, the Company repaid one of its seller financing arrangements
totaling $8.0 million, including interest.

On March 30, 2010, the Company obtained a syndicated revolving line of credit
(the 2013 Revolver) with $85.0 million in total borrowing capacity of which $58.0 million was drawn as of June 30, 2010. The 2013 Revolver bears interest at LIBOR plus 4.75%, is collateralized by a pool of the Companys
lifestyle properties, matures on March 30, 2013 and requires the Company to maintain customary financial covenants such as minimum debt service, fixed charge and interest coverage ratios and maximum leverage ratio. As of June 30, 2010, the
Company was in compliance with these covenants. In connection with obtaining the 2013 Revolver, the Company recorded approximately $2.9 million in loan costs, repaid its previous line of credit with an outstanding balance of approximately $96.6
million and wrote-off approximately $0.4 million in remaining unamortized loan costs from its previous line of credit.

On
March 19, 2010, the Company amended its previously unsecured seller financing arrangement with an outstanding principal balance of approximately $16.9 million as of June 30, 2010, by depositing collateral of $10.0 million in exchange for
an extension of the maturity date from April 1, 2017 to April 1, 2019.



13



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|9. | Indebtedness (Continued):
|-- | -------------------------



On March 12, 2010, in connection with the acquisition of four marina properties,
the Company assumed three existing loans that are collateralized by three of the properties with an aggregate outstanding principal balance of approximately $14.0 million, which were recorded at their estimated fair values totaling approximately
$13.6 million. The loans bear interest at fixed rates between 6.29% and 6.50%, require monthly payments of principal and interest and mature between November 1, 2016 and December 1, 2016.

On July 6, 2009, the Company obtained a $20.0 million construction loan for the renovation of the Coco Key Waterpark Resort in
Orlando, Florida of which approximately $17.4 million and $6.4 million was drawn as of June 30, 2010 and December 31, 2009, respectively.

The estimated fair value of accounts payable and accrued expenses approximates the carrying value as of June 30, 2010 and
December 31, 2009 because of the relatively short maturities of the obligations. The Company estimates that the fair value of its fixed rate debt was approximately $467.9 million and $465.0 million and the fair value of its variable rate debt
was approximately $208.9 million and $235.6 million as of June 30, 2010 and December 31, 2009, respectively, based upon the current rates and spreads it would expect to obtain for similar borrowings.



|10. | Derivative Instruments and Hedging Activities:
|--- | ----------------------------------------------

The Company has four interest rate swaps that were designated as cash flow hedges of interest payments from their inception. The
following table summarizes the terms and fair values of the Companys derivative financial instruments as of June 30, 2010 and December 31, 2009, which are included in other liabilities in the accompanying unaudited condensed
consolidated balance sheets (in thousands).



|                |        |     |        |       |      |            |           |              |           |                  |   |                  |  |   |      
|--------------- | ------ | --- | ------ | ----- | ---- | ---------- | --------- | ------------ | --------- | ---------------- | - | ---------------- |  | - | -----
|                |        |     |        |       |      |            |           |              |           | Fair Value as of
|Notional
Amount |        |     | Strike |       |      | Trade Date |           | MaturityDate |           | June 30,2010     |   | December 31,2009
|$               | 57,300 |     |        | 4.285 | %(1) |            | 1/2/2008  |              | 1/2/2015  |                  | $ | 5,902            |  | $ | 3,802
|                | 16,700 |     |        | 4.305 | %(1) |            | 1/2/2008  |              | 1/2/2015  |                  |   | 1,734            |  |   | 1,123
|                | 9,824  |     |        | 6.890 | %    |            | 9/28/2009 |              | 9/1/2019  |                  |   | 660              |  |   | 46   
|                | 18,845 | (2) |        | 6.430 | %(2) |            | 12/1/2009 |              | 12/1/2014 |                  |   | 284              |  |   | 15   



FOOTNOTES:



| | (1) | The strike rate does not include the credit spread on each of the notional amounts. The credit spread is 1.715% on the $57.3 million swap, totaling a blended fixed
rate of 6.0% and 1.5% on the $16.7 million swap, totaling a blended fixed rate of 5.805%.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The Company swapped the interest rate on its $20.0 million loan, denominated in Canadian dollars, to a fixed interest rate of 6.43%. The notional amount has been
converted from Canadian dollars to U.S. dollars at an exchange rate of 1.048 Canadian dollars for $1.00 U.S. dollar on June 30, 2010.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the six months ended June 30, 2010, the Companys hedges qualified as highly effective and, accordingly, all of the
change in value is reflected in other comprehensive income (loss).



|11. | Fair Value Measurements:
|--- | ------------------------

The Companys derivative instruments are valued primarily based on inputs other than quoted prices that are observable for the asset
or liability (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 was approximately $8.6 million and $5.0
million as of June 30, 2010 and December 31, 2009, respectively, and is included in other liabilities in the accompanying unaudited condensed consolidated balance sheets.

In connection with certain property acquisitions, the Company has agreed to pay additional purchase consideration contingent upon the
property achieving certain financial performance goals over a specified period. Upon acquisition, the



14



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##### Table of Contents

CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|11. | Fair Value Measurements (Continued):
|--- | ------------------------------------



Company estimates the fair value of the expected additional purchase consideration to be paid, which is classified as Level 3 in the fair value hierarchy. Such amounts are recorded and included
in other liabilities in the accompanying unaudited condensed consolidated balances sheets and the total was approximately $2.1 million and $14.4 million as of June 30, 2010 and December 31, 2009, respectively. During the six months
ended June 30, 2010, the Company paid approximately $12.4 million in additional purchase consideration, thereby satisfying a portion of the estimated liability. Changes in estimates or the periodic accretion of the estimated payments are
recognized as a period cost in the accompanying unaudited condensed consolidated statements of operations.

The following
tables show the fair value of the Companys financial liability (in thousands):



|                                  |  |                                                 |        |         |   |         |  |         |       |  |   |       
|--------------------------------- |  | ----------------------------------------------- | ------ | ------- | - | ------- |  | ------- | ----- |  | - | ------
|                                  |  | Fair Value Measurements as of June 30, 2010    
|                                  |  | Balance atJune 30, 2010                         |        | Level 1 |   | Level 2 |  | Level 3
|Liabilities:                      |  |                                                 |        |         |   |         |  |         |       |  |   |       
|Derivative instruments            |  | $                                               | 8,580  |         | $ |        |  | $       | 8,580 |  | $ |      
|Contingent purchase consideration |  | $                                               | 2,065  |         | $ |        |  | $       |      |  | $ | 2,065 
|                                  | 
|                                  |  | Fair Value Measurements as of December 31, 2009
|                                  |  | Balance atDecember 31,2009                      |        | Level 1 |   | Level 2 |  | Level 3
|Liabilities:                      |  |                                                 |        |         |   |         |  |         |       |  |   |       
|Derivative instruments            |  | $                                               | 4,986  |         | $ |        |  | $       | 4,986 |  | $ |      
|Contingent purchase consideration |  | $                                               | 14,402 |         | $ |        |  | $       |      |  | $ | 14,402

The following
information details the changes in the fair value measurements using significant unobservable inputs (Level 3) for the six months ended June 30, 2010 (in thousands):



|                                             |  |   |         |  
|-------------------------------------------- |  | - | ------- | -
|Beginning balance                            |  | $ | 14,402  |  
|Payment of additional purchase consideration |  |   | (12,433 | )
|Accretion of discounts                       |  |   | 96      |  
|                                             |  |   |         |  
|Ending balance                               |  | $ | 2,065   |  
|                                             |  |   |         |  



|12. | Related Party Arrangements:
|--- | ---------------------------

Certain directors and officers of the Company hold similar positions with CNL Lifestyle Company, LLC (the Advisor) and CNL
Securities Corp. (the Managing Dealer), which is the Managing Dealer for the Companys public offerings. The Companys chairman of the board indirectly owns a controlling interest in CNL Financial Group, Inc., the parent
company of the Advisor and Managing Dealer. The Advisor and Managing Dealer receive fees and compensation in connection with the Companys stock offerings and the acquisition, management and sale of the Companys assets.

For the quarter and six months ended June 30, 2010 and 2009, the Company incurred the following fees to related parties in connection
with the sale of its common stock (in thousands):



|                                                             |  |                        |       |                           |   |       |  |      |        |  |   |       
|------------------------------------------------------------ |  | ---------------------- | ----- | ------------------------- | - | ----- |  | ---- | ------ |  | - | ------
|                                                             |  | Quarter Ended June 30, |       | Six Months Ended June 30,
|                                                             |  | 2010                   |       | 2009                      |   | 2010  |  | 2009
|Selling commissions                                          |  | $                      | 5,714 |                           | $ | 4,007 |  | $    | 9,876  |  | $ | 7,137 
|Marketing support fee & due diligence expense reimbursements |  |                        | 2,455 |                           |   | 1,719 |  |      | 4,242  |  |   | 3,061 
|                                                             |  |                        |       |                           |   |       |  |      |        |  |   |       
|Total                                                        |  | $                      | 8,169 |                           | $ | 5,726 |  | $    | 14,118 |  | $ | 10,198
|                                                             |  |                        |       |                           |   |       |  |      |        |  |   |       



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CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|12. | Related Party Arrangements (Continued):
|--- | ---------------------------------------



The Managing Dealer is entitled to selling commissions of up to 7.0% of gross offering
proceeds and marketing support fees of 3.0% of gross offering proceeds, in connection with the Companys offerings, as well as actual expenses incurred up to 0.10% of proceeds in connection with due diligence. A substantial portion of the
selling commissions and marketing support fees and all of the due diligence expenses are re-allowed to third-party participating broker dealers.

For the quarter and six months ended June 30, 2010 and 2009, the Advisor earned fees and incurred reimbursable expenses as follows
(in thousands):



|                                            |  |                        |        |                           |   |        |  |      |        |  |   |       
|------------------------------------------- |  | ---------------------- | ------ | ------------------------- | - | ------ |  | ---- | ------ |  | - | ------
|                                            |  | Quarter Ended June 30, |        | Six Months Ended June 30,
|                                            |  | 2010                   |        | 2009                      |   | 2010   |  | 2009
|Acquisition fees:(1)                        |  |                        |        |                           |   |        |  |      |        |  |   |       
|Acquisition fees from offering proceeds     |  | $                      | 2,781  |                           | $ | 1,721  |  | $    | 4,567  |  | $ | 2,905 
|Acquisition fees from debt proceeds         |  |                        |       |                           |   | 432    |  |      | 419    |  |   | 432   
|                                            |  |                        |        |                           |   |        |  |      |        |  |   |       
|Total                                       |  |                        | 2,781  |                           |   | 2,153  |  |      | 4,986  |  |   | 3,337 
|                                            |  |                        |        |                           |   |        |  |      |        |  |   |       
|                                            |  |                        |        |                          
|Asset management fees:(2)                   |  |                        | 6,702  |                           |   | 6,181  |  |      | 13,189 |  |   | 12,304
|                                            |  |                        |        |                           |   |        |  |      |        |  |   |       
|                                            |  |                        |        |                          
|Reimbursable expenses:(3)                   |  |                        |        |                           |   |        |  |      |        |  |   |       
|Offering costs                              |  |                        | 815    |                           |   | 686    |  |      | 1,620  |  |   | 1,339 
|Acquisition costs                           |  |                        | 29     |                           |   | 36     |  |      | 67     |  |   | 88    
|Operating expenses                          |  |                        | 2,098  |                           |   | 2,764  |  |      | 3,826  |  |   | 4,470 
|                                            |  |                        |        |                           |   |        |  |      |        |  |   |       
|Total                                       |  |                        | 2,942  |                           |   | 3,486  |  |      | 5,513  |  |   | 5,897 
|                                            |  |                        |        |                           |   |        |  |      |        |  |   |       
|Total fees earned and reimbursable expenses |  | $                      | 12,425 |                           | $ | 11,820 |  | $    | 23,688 |  | $ | 21,538
|                                            |  |                        |        |                           |   |        |  |      |        |  |   |       



FOOTNOTES:



| | (1) | Acquisition fees are paid for services in connection with the selection, purchase, development or construction of real property, generally equal to 3.0% of gross
offering proceeds, and 3.0% of loan proceeds for services in connection with the incurrence of debt.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Asset management fees are equal to 0.08334% per month of the Companys real estate asset value, as defined in the Companys prospectus, and
the outstanding principal amount of any mortgage note receivable as of the end of the preceding month.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The Advisor and its affiliates are entitled to reimbursement of certain expenses incurred on behalf of the Company in connection with the Companys organization,
offering, acquisitions, and operating activities. Pursuant to the advisory agreement, the Company will not reimburse the Advisor for any amount by which total operating expenses paid or incurred by the Company exceed the greater of 2.0% of average
invested assets or 25.0% of net income (the Expense Cap) in any expense year, as defined in the advisory agreement. For the expense year ended June 30, 2010, operating expenses did not exceed the Expense Cap.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|12. | Related Party Arrangements (Continued):
|--- | ---------------------------------------



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



|                                                                |  |              |       |                  |   |      
|--------------------------------------------------------------- |  | ------------ | ----- | ---------------- | - | -----
|                                                                |  | June 30,2010 |       | December 31,2009
|Due to the Advisor and its affiliates:                          |  |              |       |                  |   |      
|Offering expenses                                               |  | $            | 478   |                  | $ | 256  
|Asset management fees                                           |  |              | 2,239 |                  |   | 2,212
|Operating expenses                                              |  |              | 857   |                  |   | 1,305
|Acquisition fees and expenses                                   |  |              | 438   |                  |   | 119  
|                                                                |  |              |       |                  |   |      
|Total                                                           |  | $            | 4,012 |                  | $ | 3,892
|                                                                |  |              |       |                  |   |      
|                                                                |  |             
|Due to Managing Dealer:                                         |  |              |       |                  |   |      
|Selling commissions                                             |  | $            | 274   |                  | $ | 243  
|Marketing support fees and due diligence expense reimbursements |  |              | 118   |                  |   | 104  
|                                                                |  |              |       |                  |   |      
|Total                                                           |  | $            | 392   |                  | $ | 347  
|                                                                |  |              |       |                  |   |      
|Total due to affiliates                                         |  | $            | 4,404 |                  | $ | 4,239
|                                                                |  |              |       |                  |   |      

The Company also maintains accounts at a bank in which
the Companys chairman and vice-chairman serve as directors. The Company had deposits at that bank of approximately $8.1 million and $26.1 million as of June 30, 2010 and December 31, 2009, respectively.



|13. | Redemption of Shares:
|--- | ---------------------

In
March 2010, the Company amended its redemption plan to clarify the board of directors discretion in establishing the amount of redemptions that will be processed each quarter and allow certain priority groups of stockholders with requests made
pursuant to circumstances such as death, qualifying disability, bankruptcy or unforeseeable emergency to have their redemption requests processed ahead of the general stockholder population. The board of directors has determined to limit
redemptions to no more than $7.5 million per quarter at this time.

The following details the Companys redemption
activity for the six months ended June 30, 2010 (in thousands except per share data).



|                               |  |       |        |   |        |   |       |      |  |   |        |  
|------------------------------ |  | ----- | ------ | - | ------ | - | ----- | ---- |  | - | ------ | -
|2010 Quarters                  |  | First |        |   | Second |   |       | Year | 
|Requests in queue              |  |       | 1,324  |   |        |   | 1,387 |      |  |   | 1,324  |  
|Redemptions requested          |  |       | 1,981  |   |        |   | 1,746 |      |  |   | 3,727  |  
|Shares redeemed:               |  |       |        |   |        |   |       |      |  |   |        |  
|Prior period requests          |  |       | (1,200 | ) |        |   | (538  | )    |  |   | (1,738 | )
|Current period requests        |  |       | (594   | ) |        |   | (225  | )    |  |   | (819   | )
|Adjustments                    |  |       | (124   | ) |        |   | (107  | )    |  |   | (231   | )
|                               |  |       |        |   |        |   |       |      |  |   |        |  
|Pending redemption requests(1) |  |       | 1,387  |   |        |   | 2,263 |      |  |   | 2,263  |  
|                               |  |       |        |   |        |   |       |      |  |   |        |  
|Average price paid per share   |  | $     | 9.73   |   |        | $ | 9.83  |      |  | $ | 9.76   |  



FOOTNOTE:



| | (1) | Requests that are not fulfilled in whole in a particular quarter will be redeemed on a pro rata basis pursuant to the Redemption Plan.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------

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 the price of shares sold to the public in the Companys offerings.



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CNL LIFESTYLE PROPERTIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

SIX MONTHS ENDED JUNE 30, 2010

(UNAUDITED)



|14. | Distributions:
|--- | --------------

In order
to qualify as a REIT for federal income tax purposes, the Company must, among other things, make distributions each taxable year equal to at least 90% of its REIT taxable income. The Company intends to make regular distributions, and its board of
directors currently intends to declare distributions on a monthly basis using the first day of the month as the record date. During the six months ended June 30, 2010, the Company declared and paid distributions of approximately $79.1 million
($0.3126 per share).

For the six months ended June 30, 2010 and 2009, approximately 20.3% and 13.9% of the distributions
paid to the stockholders were considered ordinary income and approximately 79.7% and 86.1% were considered a return of capital for federal income tax purposes, respectively. No amounts distributed to stockholders are required to be or have been
treated as a return of capital for purposes of calculating the stockholders return on their invested capital as described in the advisory agreement.



|15. | Commitments & Contingencies:
|--- | ----------------------------

The Company has commitments under ground leases, concession holds and land permit fees. Ground lease payments, concession holds and land
permit fees are generally based on a percentage of gross revenue of the underlying property over certain thresholds, and are paid by the third-party tenants in accordance with the terms of the triple-net leases with those tenants. These fees and
expenses were approximately $3.4 million and $6.3 million for the quarter and six months ended June 30, 2010 and $3.0 million and $5.7 million for the quarter and six months ended June 30, 2009, respectively, and have been reflected as
ground lease, concession holds and land permit fees with a corresponding increase in rental income from operating leases in the accompanying unaudited condensed consolidated statements of operations.

In connection with the transactions relating to Jiminy Peak Mountain Resort, LLC and Marinas International Inc., discussed in Note 7
above, the Company is committed to fund, in aggregate, approximately $10.1 million in construction loans of which approximately $2.8 million was drawn as of June 30, 2010.

In connection with the acquisition of WetnWild Hawaii, the Company agreed to pay additional purchase consideration of up to
$14.7 million upon the property achieving certain financial performance goals over the next three years, of which approximately $12.4 million was paid during the six months ended June 30, 2010. The remaining estimated fair value of the
Companys anticipated payments is approximately $2.1 million, and is included as a liability in the unaudited condensed consolidated balance sheets. See Note 11, Fair Value Measurements for additional information.

In connection with the marinas acquisition on March 12, 2010 discussed in Note 3 above, the Company agreed to pay additional purchase
consideration up to a maximum of $10.0 million, contingent upon the properties achieving certain performance thresholds. However, the Company determined, based on its estimates and the likelihood of the properties achieving such thresholds, that the
fair value of the liability was zero as of June 30, 2010.

From time to time, the Company is exposed to litigation arising
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.



|16. | Subsequent Events:
|--- | ------------------

The
Companys board of directors declared distributions of $0.0521 per share to stockholders of record at the close of business on July 1, 2010 and August 1, 2010. These distributions are to be paid by September 30, 2010.

On July 26, 2010, PARC exercised its right to extend the maturity date of its existing loan with an outstanding principal balance of
$3.0 million from September 1, 2010 to September 1, 2011.



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##### Table of Contents

|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 June 30, 2010 and December 31, 2009 and for the quarter and six months ended June 30, 2010 and 2009. Amounts as of December 31, 2009
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,
2009.

All capitalized terms used herein but not defined shall have the meanings ascribed to them in the
Definitions section of our prospectus.

STATEMENT REGARDING FORWARD
LOOKING INFORMATION

The following information contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements generally are characterized by the use of terms such as may,
will, should, plan, anticipate, estimate, intend, predict, believe and expect or the negative of these terms or other comparable terminology.
Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. Some factors that might
cause such a difference include the following: continued or worsening economic environment, the lack of available debt for us and our tenants, declining value of real estate, conditions affecting the CNL brand name, increased direct competition,
changes in government regulations or accounting rules, changes in local and national real estate conditions, our ability to obtain additional lines of credit or long-term financing on satisfactory terms, changes in interest rates, availability of
proceeds from our offering of shares, our tenants inability to increase revenues and manage rising costs, our ability to identify suitable investments, our ability to close on identified investments, our ability to locate suitable tenants and
operators for our properties and borrowers for our loans, tenant or borrower defaults under their respective leases or loans, tenant or borrower bankruptcies and inaccuracies of our accounting estimates. Given these uncertainties, we caution you not
to place undue reliance on such statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances or to reflect the occurrence of
unanticipated events.

GENERAL

CNL Lifestyle Properties, Inc. was organized pursuant to the laws of the State of Maryland 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 between five to 20 years, plus multiple renewal options) to tenants or operators that we consider to be significant
industry leaders. We define lifestyle properties as those properties that reflect or are impacted by the social, consumption and entertainment values and choices of our society. To a lesser extent, we also lease properties to taxable REIT subsidiary
(TRS) tenants and engage independent third-party managers to operate those properties. We also make and acquire loans (including mortgage, mezzanine and other loans) generally collateralized by interests in real estate. We have retained
CNL Lifestyle Company, LLC (the Advisor), as our Advisor to provide management, acquisition, 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 August 6, 2010, we had a portfolio of 121 lifestyle properties
which when aggregated by initial purchase price is diversified as follows: approximately 27.7% in ski and mountain lifestyle, 24.6% in golf facilities, 17.5% in attractions, 7.8% in marinas and 22.4% in additional lifestyle properties. These assets
consist of 22 ski and mountain lifestyle properties, 53 golf facilities, 21 attractions, 17 marinas and eight additional lifestyle properties. Eight of these 121 properties are owned through unconsolidated ventures. As of June 30, 2010, 107 of
our 121 properties (including those owned by the DMC Partnership) were subject to long-term triple-net leases to single tenant operators (fully occupied) with a weighted-average lease rate of 9.1% and average lease expiration of 18 years. This rate
is based on the weighted-average annualized straight-lined base rent due under our leases.

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 90% of our taxable income to our stockholders and meet
other compliance requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on 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 net income 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.

Economic and Market Trends

Although the U.S economy began showing some signs of improvement in late 2009 and early 2010, there is concern that there may be a second
wave of the recession or a continuation of minimal growth over the next 12 to 24 months. We continue to monitor the economic environment, capital markets and the financial stability of our tenants in an effort to minimize the impact of the economic
downturn on the company.



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During the first six months of 2010, we experienced an increase in sales of our common stock
and a decrease in redemption requests as compared to the same period in 2009. For the six months ended June 30, 2010, our average monthly sales of common stock were approximately $29.6 million as compared to approximately $23.2 million for the
six months ended June 30, 2009 and redemption requests were approximately 3.7 million shares and 5.7 million shares for the six months ended June 30, 2010 and 2009, respectively. If this trend continues, the increase in sales of
our common stock and decrease in redemption requests should increase the amount of capital that we have available to take advantage of acquisition opportunities.

We continued to see a slight increase in potential financing opportunities. However, the availability of debt continues to be limited
with an increase in the cost of borrowing over historical rates, which we expect to continue. Our portfolio was approximately 26% leveraged at June 30, 2010, with approximately 84% of our debt in the form of long-term, fixed-rate mortgage
loans (some of which are effectively fixed through the use of interest rate swaps).

In response to the economic and market
pressures, we have continued to focus on liquidity, maintained a strong balance sheet with significant cash balances, proactively managed debt with low leverage and no significant near term maturities, closely monitored tenant performance,
restructured tenant leases when necessary and strengthened relationships with key constituents including tenants and lenders. We expect to continue to see an increase in real estate transaction volume and believe we are well positioned to take
advantage of buying opportunities in the current environment.

Industry and Portfolio Trends

The majority of our real estate portfolio is 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. However, the financial and operational performance of our tenants and the general conditions of the industries within which
they operate provide indicators about the tenants health and their ability to pay our rent. During the six months ended June 30, 2010, our tenants reported to us an average increase in revenue of 0.3% and an average increase in
property level net operating income of approximately 5.9% as compared to the same period in the prior year primarily due to effective cost control.

The overall improvement in tenant operating performance for the six months ended June 30, 2010 is primarily attributable to a strong
ski season which was completed early in the second quarter. According to the Kottke 2009/2010 National End of Season Survey and the National Ski Area Association (NSAA), the U.S. ski industry tallied 59.7 million ski and snowboard visits for
the 2009/2010 ski season, representing the second highest total on record, reflecting an increase of 4.2% over the 2008/09 season and just 1.2% below the all-time record set during the 2007/2008 season when skier visits tallied 60.5
million. Conversely, according to June 2010s Golf Datatech, national golf rounds through June 2010 were down 2.7% year-over-year. Our tenants have generally attempted to limit the impact of the decline in rounds and revenues through
effective cost control, which has helped improve property level net operating income.

Despite these improvements, a number of
our tenants have lingering working capital deficiencies from 2009 or have continued to experience difficult operating conditions with a limited ability to obtain working capital from lenders and capital partners. In addition to lease restructures
granted in 2009, we provided additional lease modifications resulting in: (i) a temporary rent deferral of $1.3 million in the first quarter of 2010 to be paid over the remainder of 2010, (ii) a reduction in annualized straight-line rents of
$1.1 million and (iii) the release of security deposits totaling $0.9 million. Although we have granted only limited lease modification in the first six months of 2010, there can be no assurances that tenant defaults or additional lease
restructures will not occur. If the economy worsens or does not continue to improve, tenants may experience declining revenues and operating income and could have cash flows shortages. We continue to have concentrations of credit risk with our PARC,
EAGLE and Boyne tenants, which each accounted for 10 percent or more of our total revenues in 2009. Failure of any of these tenants to pay contractual lease payments could significantly impact our results of operations and cash flow from operations.

LIQUIDITY AND CAPITAL RESOURCES

General

Our principal
demand for funds during the next 12 months will be for property acquisitions, loans and other permitted investments and for the payment of operating expenses, debt service and distributions to stockholders. Generally, our cash needs for items other
than property acquisitions and making loans will be generated from operations and our existing investments. The sources of our operating cash flows are primarily driven by the rental income and net security deposits received from leased properties,
interest payments on the loans we make, interest earned on our cash balances and by distributions from our unconsolidated entities. A reduction in cash flows from any of these sources could result in the need to borrow more to maintain the same
level of distributions or decrease the level of distributions. In addition, we have a revolving line of credit with a total borrowing capacity of $85.0 million, of which $58.0 million was drawn as of June 30, 2010.



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We intend to continue to acquire properties, make loans and other permitted investments
within the parameters of our conservative investment policies, with proceeds from our public offerings, our line of credit and long-term debt financing. If sufficient capital is not raised, or if affordable debt is unavailable, it could limit our
ability to acquire additional properties or make loans and permitted investments.

We intend to continue to pay distributions
to our stockholders on a quarterly basis. Operating cash flows are expected to continue to be generated from properties, loans and other permitted investments to cover a significant portion of such distributions and any temporary shortfalls are
expected to be funded with cash borrowed under our line of credit. In the event that our properties do not perform as expected or we are unable to acquire properties at the pace expected, we may not be able to continue to pay distributions to
stockholders or may need to reduce the distribution rate or borrow to continue paying distributions, all of which may negatively impact a stockholders investment in the long-term. Our ability to acquire properties is in part dependent upon our
ability to locate and contract with suitable third-party tenants. The inability to locate suitable tenants may delay our ability to acquire certain properties. Delays in acquiring properties or making loans with the capital raised from our common
stock offerings may adversely affect our ability to pay distributions to our existing stockholders.

We believe that our
current liquidity needs to pay operating expenses, debt service and distributions to stockholders will be adequately covered by cash generated from our investments and cash on hand. We have no significant debt maturities coming due in the near term.
The acquisition of additional real estate investments will be dependent upon the amount and pace of capital raised through our public offerings and our ability to obtain additional long-term debt financing.

Sources of Liquidity and Capital Resources

Common Stock Offering

Our main source of capital is from our common stock offerings. As of June 30, 2010, we had received approximately $2.8 billion (278.1
million shares) in total offering proceeds from all three offerings. During the period from July 1, 2010 through August 6, 2010, we received additional subscription proceeds of approximately $31.6 million (3.2 million shares).

As of March 31, 2010, we elected to extend our current common stock offering for a period of one year through April 9,
2011. On June 28, 2010, our board of directors determined at this time that we do not expect to commence another public offering of our shares following the termination of our current public offering on April 9, 2011. However, we
intend to continue offering shares through our reinvestment plan. In making this decision, the board of directors considered a number of factors, including the companys size and diversification of our portfolio and our relatively low
leverage and strong cash position, as well as the current stage of our lifecycle. We expect the sales of our common stock to increase as a result of this determination which will provide acquisition opportunities and increase our assets under
management in the future.

Borrowings

We have borrowed and intend to continue to borrow money to acquire properties, pay certain related fees and to cover periodic shortfalls
between distributions paid and cash flows from operating activities (see Distributions below for additional information on distribution policy). In general, we pledge our assets in connection with such borrowings. As discussed above, the
availability of debt has been significantly restricted in the last two years due to the global economic downturn. The aggregate amount of long-term financing is not expected to exceed 50% of our total assets on an annual basis.



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As of June 30, 2010, our indebtedness consisted of the following (in thousands):



|                                        |  |              |         |                  |   |        
|--------------------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                                        |  | June 30,2010 |         | December 31,2009
|Mortgages payable                       |  |              |         |                  |   |        
|Fixed rate debt                         |  | $            | 424,913 |                  | $ | 416,527
|Variable rate
debt(1)                   |  |              | 156,489 |                  |   | 145,861
|Sellers financing                       |  |              |         |                  |   |        
|Fixed rate debt                         |  |              | 68,900  |                  |   | 77,100 
|                                        |  |              |         |                  |   |        
|Total mortgages and other notes payable |  |              | 650,302 |                  |   | 639,488
|                                        |  |              |         |                  |   |        
|Line of credit                          |  |              | 58,000  |                  |   | 99,483 
|                                        |  |              |         |                  |   |        
|Total indebtedness                      |  | $            | 708,302 |                  | $ | 738,971
|                                        |  |              |         |                  |   |        



FOOTNOTE:



|(1) | Amount includes variable rate debt of approximately $102.7 million and $103.0 million as of June 30, 2010 and December 31, 2009, respectively, that has been
swapped to fixed rates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On June 18, 2010, we repaid one of our seller financing arrangements totaling $8.0
million, including interest.

On March 30, 2010, we obtained a syndicated revolving line of credit (the 2013
Revolver) with $85.0 million in total borrowing capacity of which $58.0 million was drawn as of June 30, 2010. The 2013 Revolver bears interest at LIBOR plus 4.75%, is collateralized by a pool of our lifestyle properties, matures on
March 30, 2013 and requires us to maintain customary financial covenants such as minimum debt service, fixed charge and interest coverage ratios and maximum leverage ratio. As of June 30, 2010, we were in compliance with these
covenants. In connection with obtaining the 2013 Revolver, we recorded approximately $2.9 million in loan costs, repaid our previous line of credit with an outstanding balance of approximately $96.6 million and wrote-off approximately $0.4
million in remaining unamortized loan costs from our previous line of credit.

On March 19, 2010, we amended our
previously unsecured seller financing arrangement with an outstanding principal balance of approximately $16.9 million as of June 30, 2010, by depositing collateral of $10.0 million in exchange for an extension of the maturity date from
April 1, 2017 to April 1, 2019.

On March 12, 2010, in connection with the acquisition of four marina
properties, we assumed three existing loans that are collateralized by three of the properties with an aggregate outstanding principal balance of approximately $14.0 million, which were recorded at their estimated fair values totaling approximately
$13.6 million. The loans bear interest at fixed rates between 6.29% and 6.50%, require monthly payments of principal and interest and mature between November 1, 2016 and December 1, 2016.

On July 6, 2009, we obtained a $20.0 million construction loan for the renovation of the Coco Key Waterpark Resort in Orlando,
Florida of which approximately $17.4 million and $6.4 million was drawn as of June 30, 2010 and December 31, 2009, respectively.

Operating Cash Flows

Our net cash flow provided by operating activities was approximately $54.1 million and $25.5 million for the six months ended
June 30, 2010 and 2009, respectively, which consisted primarily of rental income, cash receipts and disbursements for properties operated under management contracts, interest collected on mortgages and other notes receivable, distributions from
our unconsolidated entities, security deposits from tenants and interest earned on cash balances offset by payments made for general operating expenses including property operating expenses and asset management fees to our Advisor. The increase in
operating cash flows is principally attributable to: (i) fewer rent deferrals in 2010 resulting in an increase in base rent payments received from tenants in 2010 as compared to 2009, (ii) no lease terminations as compared to two
leases terminated in 2009, (iii) receipts of security deposits from newly acquired properties and the replenishment of the refunded security deposits as a result of certain lease restructures in 2009 and (iv) reduction in acquisition fees
and costs, offset, in part, by an increase in interest expense paid as a result of increase in our mortgages and other notes payable. Our cash flows from operations continue to be negatively impacted in the short term by current economic trends
and as a result of lease modifications and rent deferrals we have granted to our tenants.



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##### Table of Contents

Distributions from Unconsolidated Entities

The following table summarizes the distributions declared to us from our unconsolidated entities (in thousands):



|                               |  |                |       |                  |   |      |       |  |   |       |  
|------------------------------ |  | -------------- | ----- | ---------------- | - | ---- | ----- |  | - | ----- | -
|Period                         |  | DMCPartnership |       | IntrawestVenture |   |      | Total | 
|Quarter ended June 30, 2010    |  | $              | 2,413 |                  | $ | 450  |       |  | $ | 2,863 |  
|Quarter ended June 30, 2009    |  |                | 2,229 |                  |   | 450  |       |  |   | 2,679 |  
|                               |  |                |       |                  |   |      |       |  |   |       |  
|Increase (decrease)            |  | $              | 184   |                  | $ |     |       |  | $ | 184   |  
|                               |  |                |       |                  |   |      |       |  |   |       |  
|                               |  |                |      
|Period                         |  | DMCPartnership |       | IntrawestVenture |   |      | Total | 
|Six months ended June 30, 2010 |  | $              | 5,190 |                  | $ | 450  |       |  | $ | 5,640 |  
|Six months ended June 30, 2009 |  |                | 4,947 |                  |   | 809  |       |  |   | 5,756 |  
|                               |  |                |       |                  |   |      |       |  |   |       |  
|Increase (decrease)            |  | $              | 243   |                  | $ | (359 | )     |  | $ | (116  | )
|                               |  |                |       |                  |   |      |       |  |   |       |  

The Retail Villages owned by the Intrawest Venture have been impacted by the current recession resulting in
a reduction in cash distributions as compared with the prior year. Operating results at these properties have begun to improve and ultimately we expect cash flows from these properties to return to historical levels as consumer spending and the
broader economy continue to improve. Distributions from the DMC Partnership remained consistent during 2010 as a result of the preferences we have ahead of our partner in this investment.

Acquisitions

During the
six months ended June 30, 2010, we acquired the following real estate investment properties (in thousands):



|                                         |  |            |  |                    |  |               |       
|---------------------------------------- |  | ---------- |  | ------------------ |  | ------------- | ------
|Property/Description                     |  | Location   |  | Date ofAcquisition |  | PurchasePrice
|                                         |  |            | 
|Anacapa Isle Marina                     |  | California |  | 3/12/2010          |  | $             | 9,829 
|                                         |  |            | 
|One marina (leasehold interest)          |  |            |  |                    |  |               |       
|                                         |  |            | 
|Ballena Isle Marina                     |  | California |  | 3/12/2010          |  |               | 8,179 
|                                         |  |            | 
|One marina (leasehold and fee interests) |  |            |  |                    |  |               |       
|                                         |  |            | 
|Cabrillo Isle Marina                    |  | California |  | 3/12/2010          |  |               | 20,575
|                                         |  |            | 
|One marina (leasehold interest)          |  |            |  |                    |  |               |       
|                                         |  |            | 
|Ventura Isle Marina                     |  | California |  | 3/12/2010          |  |               | 16,417
|                                         |  |            | 
|One marina (leasehold interest)          |  |            |  |                    |  |               |       
|                                         |  |            | 
|Bohemia Vista Yacht Basin               |  | Maryland   |  | 5/20/2010          |  |               | 4,970 
|                                         |  |            | 
|One marina (fee interest)                |  |            |  |                    |  |               |       
|                                         |  |            | 
|Hacks Point Marina                     |  | Maryland   |  | 5/20/2010          |  |               | 2,030 
|                                         |  |            | 
|One marina (fee interest)                |  |            |  |                    |  |               |       
|                                         |  |            |  |                    |  |               |       
|                                         |  |            |  | Total              |  | $             | 62,000
|                                         |  |            |  |                    |  |               |       

The marina properties above are subject to long-term
triple-net leases with renewal options. In connection with the transactions, we paid approximately $48.0 million in cash, excluding transaction costs, and assumed three existing loans collateralized by three properties, Anacapa Isle Marina, Cabrillo
Isle Marina and Ventura Isle Marina, with an aggregate outstanding principal balance of approximately $14.0 million, which were recorded at their estimated fair values of approximately $13.6 million.



23



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##### Table of Contents

Mortgages and Other Notes Receivable, net

As of June 30, 2010 and December 31, 2009, mortgages and other notes receivable consisted of the following (in thousands):



|                           |  |              |         |   |                  |   |         |  
|-------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                           |  | June 30,2010 |         |   | December 31,2009 |  
|                           |  |             
|Principal                  |  | $            | 145,433 |   |                  | $ | 140,228 |  
|Accrued interest           |  |              | 3,595   |   |                  |   | 2,628   |  
|Acquisition fees, net      |  |              | 2,101   |   |                  |   | 2,956   |  
|Loan origination fees, net |  |              | (81     | ) |                  |   | (172    | )
|                           |  |              |         |   |                  |   |         |  
|Total carrying amount      |  | $            | 151,048 |   |                  | $ | 145,640 |  
|                           |  |              |         |   |                  |   |         |  

On June 15, 2010, an affiliate of Jiminy Peak Mountain Resort, LLC, an existing tenant, acquired
Cranmore Mountain Resort and assumed one loan that we originally made to Booth Creek Resort Property, LLC. The loan is collateralized by a portion of the property and had an outstanding principal balance of approximately $8.8 million. In
connection with the transaction, the loan was amended with the following terms: annual interest rate of 6.0% with periodic increases to 11.0% over the life of the loan until maturity on September 30, 2017 with monthly interest-only payments.
Simultaneously, we committed to provide a $7.0 million construction loan to fund a significant expansion of the property with the following terms: annual interest rate of 9.0% with periodic increases to 11.0% over the life of the loan until
maturity on September 30, 2017 with monthly interest-only payments. We obtained a call option, and the new borrower retained a put option, to allow or cause us, to purchase the Cranmore Mountain Resort, if certain criteria are met in
years 2015 through 2017. Our obligation to the put option would be limited to the outstanding loan balance. As of June 30, 2010, approximately $1.0 million was drawn on the construction loan for improvements at the resort.

On March 30, 2010, Marinas International, Inc., an existing borrower, entered into a new construction loan for approximately $3.1
million which is collateralized by one marina property. Approximately $1.8 million was drawn as of June 30, 2010. The loan bears an annual interest rate of 9.0% with monthly interest-only payments until January 1, 2011, at which
time, monthly payments of principal and interest in the amount of $25,216 with unpaid principal and interest due at maturity on December 22, 2021. In addition, Marinas International is required to pay an exit fee at maturity equal to the
aggregate of monthly interest payments that would have been payable if the annual interest rate had been 10.25% instead of 9.0%.

On February 10, 2010, PARC Investors, LLC and PARC Operations, LLC collectively (PARC) borrowed $3.0 million which is
collateralized by membership interests. The loan requires monthly interest-only payments at a fixed rate of 9.0% with principal due at maturity on September 1, 2010.

Distributions

We intend
to pay distributions to our stockholders on a quarterly basis. The amount of distributions declared to our stockholders is determined by our board of directors and is dependent upon a number of factors, including:



| |  |  | sources of cash available for distribution such as current year and inception to date cumulative cash flows, FFO and MFFO, as well as, expected future
long-term stabilized cash flows, FFO and MFFO;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the proportion of distributions paid in cash compared to that which is being reinvested through our reinvestment program; 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We may use borrowings and proceeds from our dividend reinvestment
plan to fund a portion of our distributions during the growth stage of our company and the current economic downturn in order to avoid distribution volatility.



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##### Table of Contents

The following table details our total distributions to stockholders for the six month
periods ended June 30, 2010 and 2009 (in thousands):



|             |  |                        |        |                            |   |                              |  |                   |        |                                        |   |        |  |   |        |    
|------------ |  | ---------------------- | ------ | -------------------------- | - | ---------------------------- |  | ----------------- | ------ | -------------------------------------- | - | ------ |  | - | ------ | ---
|             |  |                        |        |                            |   |                              |  |                   |        | Sources ofDistributionsPaid in Cash    |  
|Periods      |  | DistributionsPer Share |        | TotalDistributionsDeclared |   | DistributionsReinvested 
(1) |  | CashDistributions |        | Cash FlowsFrom OperatingActivities
(2) |  
|2010 Quarter |  |                        |        |                            |   |                              |  |                   |        |                                        |  
|First        |  | $                      | 0.1563 |                            | $ | 38,987                       |  | $                 | 17,463 |                                        | $ | 21,524 |  | $ | 25,134 |    
|Second       |  |                        | 0.1563 |                            |   | 40,092                       |  |                   | 17,913 |                                        |   | 22,179 |  |   | 28,948 |    
|             |  |                        |        |                            |   |                              |  |                   |        |                                        |   |        |  |   |        |    
|Year         |  | $                      | 0.3126 |                            | $ | 79,079                       |  | $                 | 35,376 |                                        | $ | 43,703 |  | $ | 54,082 |    
|             |  |                        |        |                            |   |                              |  |                   |        |                                        |   |        |  |   |        |    
|             |  |                        |        |                            |  
|2009 Quarter |  |                        |        |                            |   |                              |  |                   |        |                                        |  
|First        |  | $                      | 0.1538 |                            | $ | 34,917                       |  | $                 | 16,304 |                                        | $ | 18,613 |  | $ | 21,644 |    
|Second       |  |                        | 0.1913 |                            |   | 44,285                       |  |                   | 20,237 |                                        |   | 24,048 |  |   | 3,902  | (3)
|             |  |                        |        |                            |   |                              |  |                   |        |                                        |   |        |  |   |        |    
|Year         |  | $                      | 0.3451 |                            | $ | 79,202                       |  | $                 | 36,541 |                                        | $ | 42,661 |  | $ | 25,546 | (3)
|             |  |                        |        |                            |   |                              |  |                   |        |                                        |   |        |  |   |        |    



FOOTNOTES:



|(1) | Distributions reinvested may be dilutive to shareholders to the extent that they are not covered by operating cash flows, FFO and MFFO and such shortfalls will be
covered by borrowings.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Cash flows from operating activities calculated in accordance with GAAP are not necessarily indicative of the amount of cash available to pay distributions. For
example, GAAP requires that the payment of acquisition fees and costs be classified as a use of cash in operating activities in the statement of cash flows, which directly reduces the measure of cash flows from operations. However, acquisition fees
and costs are paid for with proceeds from our offerings and debt financings as opposed to operating cash flows. Cash flows from operating activities for the first quarter of 2009 has been revised as discussed in Footnote 2 to Item 1, however,
the revision had no impact on FFO or MFFO for any period. As noted above, FFO and MFFO are key factors used in the determination of distribution levels.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The shortfall in cash flows from operating activities versus cash distributions paid was funded with temporary borrowings under our revolving line of credit.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

Approximately 79.7% and 86.1% of the distributions for the six months ended June 30, 2010 and 2009,
respectively, constitute a return of capital for federal income tax purposes. Due to seasonality of rent collections, rent deferrals and other factors, the characterization of distributions declared for the six months ended June 30, 2010 may
not be indicative of the characterization of distributions that may be expected for the year ending December 31, 2010. No amounts distributed to stockholders are required to be or have been treated as a return of capital for purposes of
calculating the stockholders return on their invested capital as described in our advisory agreement.

Common Stock Redemptions

The following details our redemptions for the six months ended June 30, 2010 (in thousands except per share data).



|                               |  |       |        |   |        |   |       |      |  |   |        |  
|------------------------------ |  | ----- | ------ | - | ------ | - | ----- | ---- |  | - | ------ | -
|2010 Quarters                  |  | First |        |   | Second |   |       | Year | 
|Requests in queue              |  |       | 1,324  |   |        |   | 1,387 |      |  |   | 1,324  |  
|Redemptions requested          |  |       | 1,981  |   |        |   | 1,746 |      |  |   | 3,727  |  
|Shares redeemed:               |  |       |        |   |        |   |       |      |  |   |        |  
|Prior period requests          |  |       | (1,200 | ) |        |   | (538  | )    |  |   | (1,738 | )
|Current period requests        |  |       | (594   | ) |        |   | (225  | )    |  |   | (819   | )
|Adjustments                    |  |       | (124   | ) |        |   | (107  | )    |  |   | (231   | )
|                               |  |       |        |   |        |   |       |      |  |   |        |  
|Pending redemption requests(1) |  |       | 1,387  |   |        |   | 2,263 |      |  |   | 2,263  |  
|                               |  |       |        |   |        |   |       |      |  |   |        |  
|Average price paid per share   |  | $     | 9.73   |   |        | $ | 9.83  |      |  | $ | 9.76   |  



FOOTNOTE:



|(1) | Requests that are not fulfilled in whole in a particular quarter will be redeemed on a pro rata basis pursuant to the redemption plan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

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 the price of shares sold to the public in our offerings.

In the event there are
insufficient funds to redeem all of the shares for which redemption requests have been submitted, and we determine to redeem shares, we will commit to redeem shares on a pro rata basis at the end of each quarter, with the



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##### Table of Contents

actual redemption occurring at the beginning of the next quarter. A stockholder 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. Redeemed shares are
considered retired and will not be reissued.

In March 2010, we amended our redemption plan to provide clarity about the board
of directors discretion in establishing the amount of redemptions that may be processed each quarter and to allow certain priority groups of stockholders with requests made pursuant to circumstances such as death, qualifying disability,
bankruptcy or unforeseeable emergency to have their redemption requests processed ahead of the general stockholder population. In addition, our board of directors determined that we will redeem shares pursuant to the redemption plan of no more
than $7.5 million per calendar quarter beginning in the second quarter of 2010. 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 interests of the
company and our stockholders, as the redemption of shares dilutes the amount of cash available to make acquisitions.

Stock Issuance Costs
and Other Related Party Arrangements

Certain of our directors and officers hold similar positions with CNL Lifestyle
Company, LLC and CNL Securities Corp. (the Managing Dealer), which is the managing dealer for our public offerings. Our chairman of the board indirectly owns a controlling interest in CNL Financial Group, Inc., the parent company of our
Advisor and Managing Dealer. These entities receive fees and compensation in connection with our stock offerings and the acquisition, management and sale of our assets. Amounts incurred relating to these transactions were approximately $32.3 million
and $25.8 million for the six months ended June 30, 2010 and 2009, respectively. Of these amounts, approximately $4.4 million and $4.2 million is included in the due to affiliates line item in the accompanying unaudited condensed consolidated
balance sheets as of June 30, 2010 and December 31, 2009, respectively. Our Advisor and its affiliates are entitled to reimbursement of certain expenses and amounts incurred on our behalf in connection with our organization, offering,
acquisitions, and operating activities. Reimbursable expenses for the six months ended June 30, 2010 and 2009 were approximately $5.5 million and $5.9 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 2.0% of average invested assets or 25.0% of net income (the Expense Cap) in any expense year. For the expense year ended June 30, 2010, operating expenses did not exceed the Expense Cap.

We also maintain accounts at a bank in which our chairman and vice-chairman serve as directors. We had deposits at that bank of
approximately $8.1 million and $26.1 million as of June 30, 2010 and December 31, 2009, respectively.

CRITICAL
ACCOUNTING POLICIES AND ESTIMATES

See our annual report on Form
10-K for the year ended December 31, 2009 for a summary of our other Critical Accounting Policies and Estimates.

IMPACT
OF RECENT ACCOUNTING PRONOUNCEMENTS

Consolidation.Effective January 1, 2010, we adopted the amended accounting guidance on consolidations as follows: (i) replaced the quantitative-based risks and rewards calculation for determining when a reporting entity has a controlling financial
interest in a variable interest entity (VIE) with a qualitative approach focused on identifying which reporting entity has the power to direct the activities of a VIE that most significantly impact the entitys economic performance
and the obligation to absorb losses of the entity or the right to receive benefits from the entity and (ii) requires additional disclosures about a reporting entitys involvement in VIEs. This consolidation guidance for VIEs also:
(i) requires ongoing consideration, rather than only when specific events occur, of whether an entity is a primary beneficiary of a VIE, (ii) eliminates substantive removal rights consideration in determining whether an entity is VIE, and
(iii) eliminates the exception for troubled debt restructurings as an event triggering reconsideration of an entitys status as a VIE. The adoption of this guidance did not have a material impact on our financial position or results of
operations.

Revenue Recognition.For properties subject to operating leases, rental revenue is recorded on a
straight-line basis over the terms of the leases. Additional percentage rent that is due contingent upon tenant performance thresholds, such as gross revenues, is deferred until the underlying performance thresholds have been achieved. 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 and other service revenues. Such revenues,
excluding membership dues, are recognized when rooms are occupied, when services have been performed, and when products are delivered. Membership dues are recognized ratably over the term of the membership period. For mortgages and other notes
receivable, interest income is recognized on an accrual basis when earned, except for loans placed on non-accrual status, for which interest income is recognized when received. Any deferred portion of contractual interest is recognized on a
straight-line basis over the term of the corresponding note. Loan origination fees charged and acquisition fees incurred in connection with the making of loans are recognized as interest income, and a reduction in interest income, respectively over
the term of the notes.



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##### Table of Contents

See Item 1. Financial Statements for a summary of the impact of recent
accounting pronouncements.

RESULTS OF OPERATIONS

General Trends and Effects of Seasonality

As of June 30, 2010 and 2009, we owned 121 and 116 properties directly and indirectly, of which 106 and 102 were 100% leased
under long-term triple-net leases, six and three were operated by third-party managers under management contracts and one held for development for both periods, respectively. Eight and ten of these 121 and 116 properties are owned through
unconsolidated joint ventures as of June 30, 2010 and 2009. Changes in ownership structure, leasing arrangements, seasonality and timing of acquisitions all impact the comparability of our results of operations from period to
period.

Certain of our properties are operated seasonally due to geographic location, climate and weather
patterns. Generally, the effect of seasonality will not significantly affect our recognition of base rental income from operating leases due to straight-line revenue recognition in accordance with GAAP. However, seasonality does impact the
timing of when base rent payment is made by our tenants which impacts our operating cash flows. In addition, seasonality impacts the amount of rental revenue we recognize in connection with capital improvement reserve revenue and other contingent
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. For example, during the first quarter of 2010, capital improvement reserve revenue, a component of
rental income from operating leases, totaled approximately $9.6 million as compared to $4.7 million for the second quarter ended June 30, 2010, primarily due to the high point in the ski season occurring during the first quarter of the year.
During the third quarter we would generally expect to see a rise in capital improvement reserve revenue attributable to attractions properties.



27



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##### Table of Contents

The following is an analysis and discussion of our operations for the quarter and six months
ended June 30, 2010 as compared to the same periods in 2009 (in thousands except per share data):



|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|--------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---- | - | ------- | -------- |  | - | -------- | - |  | ------ | -
|                                                                                  |  | Quarter Ended |        
|                                                                                  |  | June 30,      |         |   |      |   |         |          | 
|                                                                                  |  | 2010          |         |   | 2009 |   |         | $ Change |  |   | % Change |  
|                                                                                  |  |               |         |  
|Revenues:                                                                         |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|Rental income from operating leases                                               |  | $             | 52,275  |   |      | $ | 50,539  |          |  | $ | 1,736    |   |  | 3.4    | %
|Property operating revenues                                                       |  |               | 15,663  |   |      |   | 4,050   |          |  |   | 11,613   |   |  | 286.7  | %
|Interest income on mortgages and other notes receivable                           |  |               | 3,527   |   |      |   | 3,168   |          |  |   | 359      |   |  | 11.3   | %
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|Total revenues                                                                    |  |               | 71,465  |   |      |   | 57,757  |          |  |   | 13,708   |   |  | 23.7   | %
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |               |         |  
|Expenses:                                                                         |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|Property operating expenses                                                       |  |               | 16,547  |   |      |   | 4,032   |          |  |   | 12,515   |   |  | 310.4  | %
|Asset management fees to advisor                                                  |  |               | 6,702   |   |      |   | 6,181   |          |  |   | 521      |   |  | 8.4    | %
|Acquisition fees and costs                                                        |  |               | 3,126   |   |      |   | 3,635   |          |  |   | (509     | ) |  | -14.0  | %
|General and administrative                                                        |  |               | 3,680   |   |      |   | 4,637   |          |  |   | (957     | ) |  | -20.6  | %
|Ground lease and permit fees                                                      |  |               | 3,386   |   |      |   | 3,003   |          |  |   | 383      |   |  | 12.8   | %
|Other operating expenses                                                          |  |               | 873     |   |      |   | 2,684   |          |  |   | (1,811   | ) |  | -67.5  | %
|Bad debt expense                                                                  |  |               |        |   |      |   | 1,221   |          |  |   | (1,221   | ) |  | -100.0 | %
|Loss on lease termination                                                         |  |               |        |   |      |   | 2,247   |          |  |   | (2,247   | ) |  | -100.0 | %
|Depreciation and amortization                                                     |  |               | 32,035  |   |      |   | 29,347  |          |  |   | 2,688    |   |  | 9.2    | %
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|Total expenses                                                                    |  |               | 66,349  |   |      |   | 56,987  |          |  |   | 9,362    |   |  | 16.4   | %
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |               |         |  
|Operating income                                                                  |  |               | 5,116   |   |      |   | 770     |          |  |   | 4,346    |   |  | 564.4  | %
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |               |         |  
|Other income (expense):                                                           |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|Interest and other income (expense)                                               |  |               | (168    | ) |      |   | 1,228   |          |  |   | (1,396   | ) |  | -113.7 | %
|Interest expense and loan cost amortization                                       |  |               | (12,005 | ) |      |   | (8,891  | )        |  |   | (3,114   | ) |  | -35.0  | %
|Equity in earnings of unconsolidated entities                                     |  |               | 2,525   |   |      |   | 118     |          |  |   | 2,407    |   |  | 2039.8 | %
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|Total other expense                                                               |  |               | (9,648  | ) |      |   | (7,545  | )        |  |   | (2,103   | ) |  | -27.9  | %
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |               |         |  
|Net loss                                                                          |  | $             | (4,532  | ) |      | $ | (6,775  | )        |  | $ | 2,243    |   |  | 33.1   | %
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |               |         |  
|Loss per share of common stock (basic and diluted)                                |  | $             | (0.02   | ) |      | $ | (0.03   | )        |  | $ | 0.01     |   |  | 33.3   | %
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |               |         |  
|Weighted average number of shares of common stock outstanding (basic and diluted) |  |               | 257,727 |   |      |   | 232,599 |          |  |   |          |   |  |        |  
|                                                                                  |  |               |         |   |      |   |         |          |  |   |          |   |  |        |  



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|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|--------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ---- | - | ------- | -------- |  | - | -------- | - |  | ------ | -
|                                                                                  |  | Six Months Ended |        
|                                                                                  |  | June 30,         |         |   |      |   |         |          | 
|                                                                                  |  | 2010             |         |   | 2009 |   |         | $ Change |  |   | % Change |  
|                                                                                  |  |                  |         |  
|Revenues:                                                                         |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|Rental income from operating leases                                               |  | $                | 106,664 |   |      | $ | 105,300 |          |  | $ | 1,364    |   |  | 1.3    | %
|Property operating revenues                                                       |  |                  | 41,417  |   |      |   | 6,908   |          |  |   | 34,509   |   |  | 499.6  | %
|Interest income on mortgages and other notes receivable                           |  |                  | 7,050   |   |      |   | 6,552   |          |  |   | 498      |   |  | 7.6    | %
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|Total revenues                                                                    |  |                  | 155,131 |   |      |   | 118,760 |          |  |   | 36,371   |   |  | 30.6   | %
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |                  |         |  
|Expenses:                                                                         |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|Property operating expenses                                                       |  |                  | 37,359  |   |      |   | 6,168   |          |  |   | 31,191   |   |  | 505.7  | %
|Asset management fees to advisor                                                  |  |                  | 13,189  |   |      |   | 12,304  |          |  |   | 885      |   |  | 7.2    | %
|Acquisition fees and costs                                                        |  |                  | 5,951   |   |      |   | 11,109  |          |  |   | (5,158   | ) |  | -46.4  | %
|General and administrative                                                        |  |                  | 6,773   |   |      |   | 7,319   |          |  |   | (546     | ) |  | -7.5   | %
|Ground lease and permit fees                                                      |  |                  | 6,294   |   |      |   | 5,719   |          |  |   | 575      |   |  | 10.1   | %
|Other operating expenses                                                          |  |                  | 2,045   |   |      |   | 4,523   |          |  |   | (2,478   | ) |  | -54.8  | %
|Bad debt expense                                                                  |  |                  |        |   |      |   | 2,159   |          |  |   | (2,159   | ) |  | -100.0 | %
|Loss on lease termination                                                         |  |                  |        |   |      |   | 3,955   |          |  |   | (3,955   | ) |  | -100.0 | %
|Depreciation and amortization                                                     |  |                  | 63,191  |   |      |   | 57,971  |          |  |   | 5,220    |   |  | 9.0    | %
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|Total expenses                                                                    |  |                  | 134,802 |   |      |   | 111,227 |          |  |   | 23,575   |   |  | 21.2   | %
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |                  |         |  
|Operating income                                                                  |  |                  | 20,329  |   |      |   | 7,533   |          |  |   | 12,796   |   |  | 169.9  | %
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |                  |         |  
|Other income (expense):                                                           |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|Interest and other income                                                         |  |                  | 142     |   |      |   | 1,835   |          |  |   | (1,693   | ) |  | -92.3  | %
|Interest expense and loan cost amortization                                       |  |                  | (23,916 | ) |      |   | (18,311 | )        |  |   | (5,605   | ) |  | -30.6  | %
|Equity in earnings of unconsolidated entities                                     |  |                  | 5,702   |   |      |   | 124     |          |  |   | 5,578    |   |  | 4498.4 | %
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|Total other expense                                                               |  |                  | (18,072 | ) |      |   | (16,352 | )        |  |   | (1,720   | ) |  | -10.5  | %
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |                  |         |  
|Net income (loss)                                                                 |  | $                | 2,257   |   |      | $ | (8,819  | )        |  | $ | 11,076   |   |  | 125.6  | %
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |                  |         |  
|Earnings (loss) per share of common stock (basic and diluted)                     |  | $                | 0.01    |   |      | $ | (0.04   | )        |  | $ | 0.05     |   |  | 125.0  | %
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  
|                                                                                  |  |                  |         |  
|Weighted average number of shares of common stock outstanding (basic and diluted) |  |                  | 254,048 |   |      |   | 230,119 |          |  |   |          |   |  |        |  
|                                                                                  |  |                  |         |   |      |   |         |          |  |   |          |   |  |        |  

Rental income from operating leases. Overall, we experienced a net increase of
3.4% and 1.3% in rental income for the quarter and six months ended June 30, 2010 as compared to the same periods in 2009, respectively. The increase is attributable to rents from recently acquired properties and capital expansion projects that
have increased the lease basis of certain of our properties compared to the same periods in 2009. These increases were partially offset by lease restructures of certain tenants and three lease terminations discussed under Property
operating revenues below.

The following information summarizes trends in rental income from operating leases for the
quarter and six months ended June 30, 2010 and 2009.



|                                       |  |                         |  |                                                                |        |                                     |   |        |                                     |       |   |                                             |       |   |  |        |  
|-------------------------------------- |  | ----------------------- |  | -------------------------------------------------------------- | ------ | ----------------------------------- | - | ------ | ----------------------------------- | ----- | - | ------------------------------------------- | ----- | - |  | ------ | -
|Properties Subject to Operating Leases |  | Number ofProperties (1) |  | Total Rental Income(in thousands)
forthe Quarter EndedJune 30, |        | Percentageof Total2010 RentalIncome |   |        | Percentageof Total2009 RentalIncome |       |   | PercentageIncrease(Decrease)in RentalIncome |      
|                                       |  |                         |  | 2010 (1)                                                       |        | 2009 (1)                            |   |        |                                     |       |   |                                             |       |   | 
|Acquired prior to April 1, 2009        |  | 100                     |  | $                                                              | 49,242 |                                     | $ | 48,754 |                                     | 94.2  | % |                                             | 96.5  | % |  | 1.0    | %
|Acquired after April 1, 2009           |  | 7                       |  |                                                                | 3,033  |                                     |   | 421    |                                     | 5.8   | % |                                             | 0.8   | % |  | 620.4  | %
|Terminated leases(2)                   |  | 3                       |  |                                                                |       |                                     |   | 1,364  |                                     | 0.0   | % |                                             | 2.7   | % |  | -100.0 | %
|                                       |  |                         |  |                                                                |        |                                     |   |        |                                     |       |   |                                             |       |   |  |        |  
|Total                                  |  |                         |  | $                                                              | 52,275 |                                     | $ | 50,539 |                                     | 100.0 | % |                                             | 100.0 | % |  |        |  
|                                       |  |                         |  |                                                                |        |                                     |   |        |                                     |       |   |                                             |       |   |  |        |  



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|                                       |  |                         |  |                                                                   |         |                                     |   |         |                                     |       |   |                                             |       |   |  |        |  
|-------------------------------------- |  | ----------------------- |  | ----------------------------------------------------------------- | ------- | ----------------------------------- | - | ------- | ----------------------------------- | ----- | - | ------------------------------------------- | ----- | - |  | ------ | -
|Properties Subject to Operating Leases |  | Number 
ofProperties(1) |  | Total Rental Income(in
thousands) for theSix Months EndedJune 30, |         | Percentageof Total2010 RentalIncome |   |         | Percentageof Total2009 RentalIncome |       |   | PercentageIncrease(Decrease)in RentalIncome |      
|                                       |  |                         |  | 2010 (1)                                                          |         | 2009 (1)                            |   |         |                                     |       |   |                                             |       |   | 
|Acquired prior to January 1, 2009      |  | 99                      |  | $                                                                 | 100,621 |                                     | $ | 99,323  |                                     | 94.3  | % |                                             | 94.3  | % |  | 1.3    | %
|Acquired after January 1, 2009         |  | 8                       |  |                                                                   | 6,043   |                                     |   | 2,397   |                                     | 5.7   | % |                                             | 2.3   | % |  | 152.1  | %
|Terminated leases(2)                   |  | 3                       |  |                                                                   |        |                                     |   | 3,580   |                                     | 0.0   | % |                                             | 3.4   | % |  | -100.0 | %
|                                       |  |                         |  |                                                                   |         |                                     |   |         |                                     |       |   |                                             |       |   |  |        |  
|Total                                  |  |                         |  | $                                                                 | 106,664 |                                     | $ | 105,300 |                                     | 100.0 | % |                                             | 100.0 | % |  |        |  
|                                       |  |                         |  |                                                                   |         |                                     |   |         |                                     |       |   |                                             |       |   |  |        |  



FOOTNOTES:



|(1) | These amounts only include our consolidated properties operated under long-term triple-net leases and our multi-family residential property.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents rental income on two golf properties and one additional lifestyle property prior to the lease termination at which point we began recording the
properties operating revenues and expenses in place of rental income.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of June 30, 2010 and 2009,
the weighted-average lease rate for our portfolio of wholly-owned leased properties was 8.8% and 9.0%, respectively. These rates are based on annualized straight-lined base rent due under our leases and the weighted average contractual lease basis
of our real estate investment properties subject to operating leases. The decrease is primarily a result of reduced rents on certain properties and three lease terminations. Additionally, the weighted-average lease rate of our portfolio will
fluctuate based on our asset mix, timing of property acquisitions, lease terminations and reductions in rents 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 and other service revenues. For the quarter and six months ended June 30, 2010, property operating revenues were
approximately $15.7 million and $41.4 million, respectively as compared to approximately $4.1 million and $6.9 million for the quarter and six months ended June 30, 2009, respectively, and are not directly comparable. We began recording
the operating results of three of our properties that are operated by third-party management companies as a result of leases that were terminated in 2009 and previously accounted for as operating leases, as well as the operations from two properties
that were previously unconsolidated and owned by the Wolf Partnership that we began consolidating effective August 6, 2009 upon our acquisition of our former partners interests in that partnership.

The Mount Washington Resort, is a highly seasonal business and directly impacts the amount of property operating revenues and expenses we
recognize from quarter to quarter. Total property operating revenues and expenses attributable to the Mount Washington Resort were approximately $14.7 million and $11.0 million, respectively for the first quarter of 2010 as compared to $4.7 million
and $6.7 million for the second quarter ended June 30, 2010. In general, we expect to experience better performance in the first quarter due to the ski sectors peak season and a slow-down in the second quarter as the ski season comes
to completion.

Interest income on mortgages and other notes receivable.For the quarter and six months ended
June 30, 2010, we recorded interest income totaling approximately $3.5 million and $7.1 million as compared to approximately $3.2 million and $6.6 million for the quarter and six months ended June 30, 2009, respectively, on our performing
loans with an aggregate principal balance of approximately $145.4 million and $118.3 million as of June 30, 2010 and 2009, respectively. The increase is attributable to loans made by us subsequent to June 30, 2009. As of June 30,
2009, we had one non-performing loan with a principal balance of $40.0 million for which no interest income was recorded for the six months ended June 30, 2009 and was subsequently foreclosed and satisfied.

Property operating expenses. Property operating expenses from managed properties are derived from its operations as discussed
above. For the quarter and six months ended June 30, 2010, property operating expenses were approximately $16.5 million and $37.4 million, respectively as compared to approximately $4.0 million and $6.2 million for the quarter and six
months ended June 30, 2009, respectively, and are not directly comparable. We began recording the operating results of three of our properties that are operated by third-party management companies as a result of leases that were terminated
in 2009 and previously accounted for as operating leases, as well as the operations from two properties that were previously unconsolidated and owned by the Wolf Partnership that we began consolidating effective August 6, 2009 upon our
acquisition of our former partners interests in that partnership.

Asset management fees to advisor.Monthly
asset management fees of 0.08334% of invested assets are paid to our Advisor for the acquisition of real estate assets and making loans. Total asset management fees were approximately $6.7



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million and $13.2 million for the quarter and six months ended June 30, 2010 and approximately $6.2 million and $12.3 million for the quarter and six months ended June 30, 2009,
respectively. The increase in fees is due to an increase in real estate assets under management as a result of the acquisition of additional real estate properties we acquired and loans we made during the past twelve months.

Acquisition fees and costs.Effective January 1, 2009, we began expensing acquisition fees and costs as a result of a
newly issued accounting standard. Upon adoption of the new standard on January 1, 2009, we were required to initially expense approximately $5.9 million in acquisition fees and costs that were incurred prior to December 31, 2008 and
capitalized on our balance sheet. Acquisition fees and costs incurred for the quarter and six months ended June 30, 2010, were approximately $3.1 million and $6.0 million, respectively. Additionally, acquisition fees and costs incurred for the
quarter and six months ended June 30, 2009, unrelated to the initial adoption of the new standard, were approximately $3.6 million and $5.2 million, respectively.

General and administrative.General and administrative expenses were approximately $3.7 million and $6.8 million for the quarter
and six months ended June 30, 2010 as compared to approximately $4.6 million and $7.3 million for the quarter and six months ended June 30, 2009, respectively. The decrease is primarily due to a reduction in employee costs allocated
by the Advisor for accounting, legal and administrative personnel, offset, in part, by an increase in legal and professional services.

Ground lease and permit fees. Ground lease payments, concession holds and land permit fees are generally based on a
percentage of gross revenue of the underlying property over certain thresholds and are paid by the tenants in accordance with the terms of our triple-net leases with those tenants. These expenses have corresponding revenues included in the
rental income described above. For the quarter and six months ended June 30, 2010, ground lease, concession holds and land permit fees were approximately $3.4 million and $6.3 million as compared to $3.0 million and $5.7 million for the quarter
and six months ended June 30, 2009, respectively. The increase is attributable to the growth of our property portfolio. As of June 30, 2010, we owned 113 consolidated properties of which 41 properties are subject to ground lease,
concession holds or land permit fees.

Other operating expenses.Other operating expenses totaled approximately
$0.9 million and $2.0 million for the quarter and six months ended June 30, 2010, as compared to approximately $2.7 million and $4.5 million for the quarter and six months ended June 30, 2009, respectively. The decrease is primarily a
result of lower repairs and maintenance expenses incurred. Capital expenditures are made from the capital improvement reserve accounts for replacements, refurbishments, repairs and maintenance at our properties. Certain expenditures, that do
not substantially enhance the property value or increase the estimated useful lives, cannot be capitalized and are expensed.

Bad debt expense. Bad debt expense was approximately $1.2 million and $2.2 million for the quarter and six months ended
June 30, 2009, as a result of the write-off of past due rents receivable that were deemed uncollectible from a tenant whose lease was terminated in 2009. We incurred no bad debt expense and terminated no leases during the six months ended
June 30, 2010.

Loss on lease termination.Loss on lease termination was approximately $2.2 million and $4.0
million for the quarter and six months ended June 30, 2009 as a result of terminations of leases for two properties during the first quarter of 2009. There were no lease terminations during the quarter and six months ended June 30, 2010.

Depreciation and amortization.Depreciation and amortization expenses were approximately $32.0 million and $63.2
million for the quarter and six months ended June 30, 2010 as compared to approximately $29.3 million and $58.0 million for the quarter and six months ended June 30, 2009, respectively. The increase is primarily due to the acquisition of
real estate properties acquired in 2009 which were depreciated for the full six months ended June 30, 2010.

Interest
and other income (expense). Interest and other income (expense) totaled approximately $(0.2) million and $0.1 million for the quarter and six months ended June 30, 2010, respectively as compared to approximately $1.2 million and $1.8
million for the same periods in 2009. The decrease is primarily due to a general decrease in rates paid by depository institutions on short-term deposits and a reduction in average cash on hand during 2010 as compared to 2009. During the quarter and
six months ended June 30, 2010, we received an average yield of 0.27% and 0.67% as compared to an average yield of 0.59% and 0.92%, during the same periods in 2009. Our average uninvested offering proceeds, based on month-end balances, was
approximately $87.9 million and $108.3 million during the quarter and six months ended June 30, 2010 as compared to $184.3 million and $180.9 million during the same periods in 2009, respectively.

Interest expense and loan cost amortization.Interest expense and loan cost amortization were approximately $12.0 million and
$23.9 million for the quarter and six months ended June 30, 2010 as compared to approximately $8.9 million and $18.3 million for the quarter and six months ended June 30, 2009, respectively. The increase was attributable to the increase in
our borrowings. In addition, in March 2010, we wrote-off the remaining unamortized loan costs from our previous line of credit as a result of obtaining a new line of credit.



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



|                  |  |                           |       |   |      |   |        |          |  |          |       |  |       |  
|----------------- |  | ------------------------- | ----- | - | ---- | - | ------ | -------- |  | -------- | ----- |  | ----- | -
|                  |  | Quarter Ended June 30,    |      
|                  |  | 2010                      |       |   | 2009 |   |        | $ Change |  | % Change |      
|Wolf Partnership  |  | $                         |      |   |      | $ | (1,846 | )        |  | $        | 1,846 |  | 100.0 | %
|DMC Partnership   |  |                           | 2,687 |   |      |   | 2,364  |          |  |          | 323   |  | 13.7  | %
|Intrawest Venture |  |                           | (162  | ) |      |   | (400   | )        |  |          | 238   |  | 59.5  | %
|                  |  |                           |       |   |      |   |        |          |  |          |       |  |       |  
|Total             |  | $                         | 2,525 |   |      | $ | 118    |          |  | $        | 2,407 |  |       |  
|                  |  |                           |       |   |      |   |        |          |  |          |       |  |       |  
|                  | 
|                  |  | Six Months Ended June 30, |      
|                  |  | 2010                      |       |   | 2009 |   |        | $ Change |  | % Change |      
|Wolf Partnership  |  | $                         |      |   |      | $ | (3,734 | )        |  | $        | 3,734 |  | 100.0 | %
|DMC Partnership   |  |                           | 5,341 |   |      |   | 4,699  |          |  |          | 642   |  | 13.7  | %
|Intrawest Venture |  |                           | 361   |   |      |   | (841   | )        |  |          | 1,202 |  | 142.9 | %
|                  |  |                           |       |   |      |   |        |          |  |          |       |  |       |  
|Total             |  | $                         | 5,702 |   |      | $ | 124    |          |  | $        | 5,578 |  |       |  
|                  |  |                           |       |   |      |   |        |          |  |          |       |  |       |  

Equity in earnings of unconsolidated entities increased by approximately $2.4 million and $5.6
million for the quarter and six months ended June 30, 2010, respectively, as compared to the same periods in 2009, primarily due to our acquisition of the remaining interest in the Wolf Partnership in August 2009 which resulted in the
consolidation of these properties operations and no longer reporting its operating results within equity in earnings. In addition, during 2009, we increased our ownership interest in the DMC Partnership which resulted in an increase in our
allocation of income due to distribution preference and how such preferences impact income allocations under the hypothetical liquidation at book value (HLBV) method of accounting. Operating results for the Intrawest Venture showed
improvement as a result of increased rents resulting from an increase in consumer spending at the properties.

Net income
(loss) and earnings (loss) per share.The improvement in net income (loss) and earnings (loss) per share for the quarter and six months ended June 30, 2010 as compared to the same period in 2009 was primarily due to (i) an increase in
net operating income from properties that are being operated by third-party management companies that were being leased in the prior year, (ii) the additional acquisition fees and costs expensed in the prior year upon initial adoption of a new
accounting standard and (iii) a reduction in bad debt expense and loss on lease termination, offset, in part, by an increase in interest expense from additional borrowings and depreciation expense in the current year as a result of acquisitions
of properties. Our earnings and earnings per share may fluctuate while we continue to raise capital and make significant acquisitions. These performance measures are affected by the pace at which we raise offering proceeds and the time it takes
to accumulate and invest such proceeds in real estate acquisitions and other income-producing investments. The accumulation of funds over time in order to make individually significant acquisitions can be dilutive to the earnings per share ratio.

OTHER

Funds from
Operations and Modified Funds from Operations

FFO is a non-GAAP financial measure that is widely recognized as a measure
of REIT operating performance. We use FFO, which is defined by the National Association of Real Estate Investment Trusts (NAREIT) as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of
property, plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures, as one measure to evaluate our operating performance. In addition to FFO, we use MFFO, which
excludes acquisition-related costs and non-recurring charges such as the write-off of in-place lease intangibles and other similar costs associated with lease terminations and fair value adjustments to contingent purchase price obligation in order
to further evaluate our ongoing operating performance.

FFO was developed by NAREIT as a relative measure of performance of an
equity REIT in order to recognize that income-producing real estate has historically not depreciated on the basis determined under GAAP. We believe that FFO is helpful to investors and our management as a measure of operating performance
because it excludes depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates,
operating costs, general and administrative expenses, and interest costs, which is not immediately apparent from net income (loss) alone.

We believe MFFO is helpful to our investors and our management as a measure of operating performance because it excludes costs that
management considers more reflective of investing activities, such as the payment of acquisition expenses that are directly associated with property acquisition, and other non-operating items historically included in the computation of FFO such as
non-recurring charges associated with lease terminations and the write-off of in-place lease intangibles and other deferred charges. Acquisition expenses are paid for with proceeds from our common stock offerings or debt proceeds rather



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than paid for with cash generated from operations. Costs incurred in connection with acquiring a property are generally added to the contractual lease basis of the property thereby generating
future incremental revenue rather than creating a current periodic operating expense and are funded through offering proceeds rather than operations. Similarly, new accounting standards require us to estimate any future contingent purchase
consideration at the time of acquisition and subsequently record changes to those estimates or eventual payments in the statement of operations even though the payment is funded by offering proceeds. Previously under GAAP, these amounts would be
capitalized, which is consistent with how these incremental payments are added to the contractual lease basis used to calculate rent for the related property and generates future rental income. Therefore, we exclude these amounts in the computation
of MFFO. By providing MFFO, we present information that is more consistent with managements long term view of our core operating activities and is more reflective of a stabilized asset base.

Accordingly, we believe that in order to facilitate a clear understanding of our operating performance between periods and as compared to
other equity REITs, FFO and MFFO should be considered in conjunction with our net income (loss) and cash flows as reported in the accompanying consolidated financial statements and notes thereto. FFO and MFFO (i) do not represent cash generated
from operating activities determined in accordance with GAAP (which, unlike FFO or MFFO, generally reflects all cash effects of transactions and other events that enter into the determination of net income (loss)), (ii) are not necessarily
indicative of cash flow available to fund cash needs and (iii) should not be considered as alternatives to net income (loss) determined in accordance with GAAP as an indication of our operating performance, or to cash flow from operating
activities determined in accordance with GAAP as a measure of either liquidity or our ability to make distributions. FFO or MFFO as presented may not be comparable to amounts calculated by other companies.

The following table presents a reconciliation of net income (loss) to FFO and MFFO for the quarter and six months ended June 30,
2010 and 2009 (in thousands):



|                                                                                  |  |                       |         |   |                          |   |         |      |  |      |         |  |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | ---- | ------- |  | - | ------- | -
|                                                                                  |  | Quarter
EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                                                                  |  | 2010                  |         |   | 2009                     |   |         | 2010 |  | 2009 |        
|Net income (loss)                                                                 |  | $                     | (4,532  | ) |                          | $ | (6,775  | )    |  | $    | 2,257   |  | $ | (8,819  | )
|                                                                                  |  |                       |         |  
|Adjustments:                                                                      |  |                       |         |   |                          |   |         |      |  |      |         |  |   |         |  
|Depreciation and amortization                                                     |  |                       | 32,035  |   |                          |   | 29,347  |      |  |      | 63,191  |  |   | 57,971  |  
|Net effect of FFO adjustment from unconsolidated entities(1)                      |  |                       | 2,775   |   |                          |   | 4,362   |      |  |      | 5,685   |  |   | 8,278   |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |      |         |  |   |         |  
|Total funds from operations                                                       |  | $                     | 30,278  |   |                          | $ | 26,934  |      |  | $    | 71,133  |  | $ | 57,430  |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |      |         |  |   |         |  
|                                                                                  |  |                       |         |  
|Acquisition fees and costs                                                        |  |                       | 3,126   |   |                          |   | 3,635   |      |  |      | 5,951   |  |   | 11,109  |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |      |         |  |   |         |  
|                                                                                  |  |                       |         |  
|Modified funds from operations                                                    |  | $                     | 33,404  |   |                          | $ | 30,569  |      |  | $    | 77,084  |  | $ | 68,539  |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |      |         |  |   |         |  
|                                                                                  |  |                       |         |  
|Weighted average number of shares of common stock outstanding (basic and diluted) |  |                       | 257,727 |   |                          |   | 232,599 |      |  |      | 254,048 |  |   | 230,119 |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |      |         |  |   |         |  
|                                                                                  |  |                       |         |  
|FFO per share (basic and diluted)                                                 |  | $                     | 0.12    |   |                          | $ | 0.12    |      |  | $    | 0.28    |  | $ | 0.25    |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |      |         |  |   |         |  
|                                                                                  |  |                       |         |  
|MFFO per share (basic and diluted)                                                |  | $                     | 0.13    |   |                          | $ | 0.13    |      |  | $    | 0.30    |  | $ | 0.30    |  
|                                                                                  |  |                       |         |   |                          |   |         |      |  |      |         |  |   |         |  



FOOTNOTE:



|(1) | This amount represents our share of the FFO adjustments allowable under the NAREIT definition (primarily depreciation) multiplied by the percentage of income or loss
recognized under the HLBV method.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Total FFO and FFO per share was approximately $30.3 million and $71.1 million
or $0.12 and $0.28 for the quarter and six months ended June 30, 2010, respectively. Comparatively, FFO and FFO per share was approximately $26.9 million and $57.4 million or $0.12 and $0.25 for the quarter and six months ended
June 30, 2009, respectively. The increase in FFO is attributable principally to: (i) an increase in net operating income from properties that are being operated by third-party management companies that were being leased in the prior
year, (ii) a reduction in acquisition fees and costs and (iii) a reduction in bad debt expense and loss on lease termination, offset, in part, by an increase in interest expense from additional borrowings and depreciation expense as a
result of acquisitions of properties.

Total MFFO and MFFO per share was approximately $33.4 million and $77.1 million or $0.13
and $0.30 for the quarter and six months ended June 30, 2010, respectively. Comparatively, MFFO and MFFO per share was approximately $30.6 million and $68.5 million or $0.13 and $0.30 for the quarter and six months ended June 30,
2009, respectively. The increase in MFFO is attributable principally to: (i) an increase in net operating income from properties that are being operated by third-party management companies that were being leased in the prior year and
(ii) a reduction in bad debt expense and loss on lease termination, offset, in part, by an increase in interest expense from additional borrowings and depreciation expense as a result of acquisitions of properties.



33



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##### Table of Contents

OFF BALANCE SHEET ARRANGEMENTS

See our annual report on Form 10-K for the year ended December 31, 2009 for a summary of our Off Balance Sheet Arrangements.

EVENTS OCCURRING SUBSEQUENT TO JUNE 30, 2010

Our board of directors declared distributions of $0.0521 per share to stockholders of record at the close of business on July 1, 2010
and August 1, 2010. These distributions are to be paid by September 30, 2010.

On July 26, 2010, PARC exercised
its right to extend the maturity date of its existing loan with an outstanding principal balance of $3.0 million from September 1, 2010 to September 1, 2011.

COMMITMENTS, CONTINGENCIES AND CONTRACTUAL OBLIGATIONS

The following tables present our contractual obligations and contingent commitments and the related payment periods as of June 30,
2010:

Contractual Obligations



|                                                              |  |                                       |        |           |   |           |  |                  |         |       |   |         |  |   |          
|------------------------------------------------------------- |  | ------------------------------------- | ------ | --------- | - | --------- |  | ---------------- | ------- | ----- | - | ------- |  | - | ---------
|                                                              |  | Payments Due by Period (in thousands)
|                                                              |  | Less than 1year                       |        | Years 1-3 |   | Years 3-5 |  | More than5 years |         | Total
|Mortgages and other notes payable (principal and interest)(1) |  | $                                     | 58,079 |           | $ | 470,797   |  | $                | 239,318 |       | $ | 147,234 |  | $ | 915,428  
|Obligations under capital leases                              |  |                                       | 2,465  |           |   | 2,439     |  |                  | 453     |       |   |        |  |   | 5,357    
|Obligations under operating leases(2)                         |  |                                       | 14,722 |           |   | 29,172    |  |                  | 29,163  |       |   | 270,087 |  |   | 343,144  
|                                                              |  |                                       |        |           |   |           |  |                  |         |       |   |         |  |   |          
|Total                                                         |  | $                                     | 75,266 |           | $ | 502,408   |  | $                | 268,934 |       | $ | 417,321 |  | $ | 1,263,929
|                                                              |  |                                       |        |           |   |           |  |                  |         |       |   |         |  |   |          



FOOTNOTES:



|(1) | This line item includes all third-party and seller financing obtained in connection with the acquisition of properties, and the $58.0 million drawn on our syndicated
revolving line of credit. Future interest payments on our variable rate debt and line of credit were estimated based on a LIBOR forward rate curve.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This line item represents obligations under ground leases, concession holds and land permits which are paid by our third-party tenants on our behalf. Ground lease
payments, concession holds and land permit fees are generally based on a percentage of gross revenue of the related property exceeding a certain threshold. The future obligations have been estimated based on current revenue levels projected over the
term of the leases or permits.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Contingent Commitments



|                                     |  |                                       |        |           |   |           |  |                  |       |       |   |   |  |   |       
|------------------------------------ |  | ------------------------------------- | ------ | --------- | - | --------- |  | ---------------- | ----- | ----- | - | - |  | - | ------
|                                     |  | Payments Due by Period (in thousands)
|                                     |  | Less than 1year                       |        | Years 1-3 |   | Years 3-5 |  | More than5 years |       | Total
|Contingent purchase consideration(1) |  | $                                     | 2,065  |           | $ |          |  | $                |      |       | $ |  |  | $ | 2,065 
|Capital improvements(2)              |  |                                       | 42,946 |           |   | 4,781     |  |                  | 2,387 |       |   |  |  |   | 50,114
|Loan commitments(3)                  |  |                                       | 7,279  |           |   |          |  |                  |      |       |   |  |  |   | 7,279 
|                                     |  |                                       |        |           |   |           |  |                  |       |       |   |   |  |   |       
|Total                                |  | $                                     | 52,290 |           | $ | 4,781     |  | $                | 2,387 |       | $ |  |  | $ | 59,458
|                                     |  |                                       |        |           |   |           |  |                  |       |       |   |   |  |   |       



FOOTNOTES:



|(1) | In connection with the acquisition of WetnWild Hawaii we agreed to pay additional purchase consideration of up to $14.7 million upon the property achieving
certain financial performance goals over the next three years, of which approximately $12.4 million was paid during the six months ended June 30, 2010. The additional purchase price consideration is not to provide compensation for services but
is based on the property achieving certain financial performance goals. In accordance with relevant accounting standards, we recorded the fair value of this contingent liability in our unaudited condensed consolidated balance sheets as of
June 30, 2010.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In connection with the marinas acquisition on March 12, 2010, we agreed to pay
additional purchase consideration up to a maximum of $10.0 million, contingent upon the properties achieving certain performance thresholds. However, we have determined, based on our estimates and the likelihood of the properties achieving such
thresholds, that the fair value was zero as of June 30, 2010.

|(2) | We have committed to fund ongoing equipment replacements and other capital improvement projects on our existing properties through capital reserves set aside by us for
this purpose and additional capital investment in the properties that will increase the lease basis and generate additional rental income.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In connection with the transactions relating to Jiminy Peak Mountain Resort, LLC and Marinas International Inc., discussed above, we are committed to fund, in
aggregate, approximately $10.1 million in construction loans of which approximately $2.8 million was drawn as of June 30, 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



34



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We may be 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.

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



|                                              |  |                     |                   |      |      |   |         |      |  |   |        |   |  |      |         |     |            |   |            |       |  |   |               |        |  |   |         |   |  |   |         |    
|--------------------------------------------- |  | ------------------- | ----------------- | ---- | ---- | - | ------- | ---- |  | - | ------ | - |  | ---- | ------- | --- | ---------- | - | ---------- | ----- |  | - | ------------- | ------ |  | - | ------- | - |  | - | ------- | ---
|                                              |  | Expected Maturities |                   |      |      |   |         |      | 
|                                              |  | 2010                |                   |      | 2011 |   |         | 2012 |  |   | 2013   |   |  | 2014 |         |     | Thereafter |   |            | Total |  |   | Fair Value    |       
|                                              |  |                     |                   |      |      |   |         |     
|Fixed rate debt                               |  | $                   | 5,078             |      |      | $ | 64,351  |      |  | $ | 13,020 |   |  | $    | 196,303 |     |            | $ | 92,667     |       |  | $ | 126,432       |        |  | $ | 497,851 |   |  | $ | 467,946 | (1)
|                                              |  |                     |                   |      |      |   |         |     
|Weighted average interest rates of maturities |  |                     | 6.20              | %    |      |   | 8.93    | %    |  |   | 6.53   | % |  |      | 6.12    | %   |            |   | 6.17       | %     |  |   | 6.62          | %      |  |   | 6.63    | % |  |   |         |    
|                                              |  |                     |                   |      |      |   |         |     
|Variable rate debt                            |  |                     | 383               |      |      |   | 43,210  |      |  |   | 855    |   |  |      | 58,911  | (5) |            |   | 17,285     | (4)   |  |   | 93,845        |        |  |   | 214,489 |   |  |   | 208,908 | (6)
|                                              |  |                     |                   |      |      |   |         |     
|Average interest rate                         |  |                     | Prime orLIBOR 
+2 | %(2) |      |   | (3      | )    |  |   | (3     | ) |  |      | (3      | )   |            |   | CDOR +3.75 | %     |  |   | LIBOR +Spread | (2)(5) |  |   |         |   |  |   |         |    
|                                              |  |                     |                   |      |      |   |         |      |  |   |        |   |  |      |         |     |            |   |            |       |  |   |               |        |  |   |         |   |  |   |         |    
|Total debt                                    |  | $                   | 5,461             |      |      | $ | 107,561 |      |  | $ | 13,875 |   |  | $    | 255,214 |     |            | $ | 109,952    |       |  | $ | 220,277       |        |  | $ | 712,340 |   |  | $ | 676,854 |    
|                                              |  |                     |                   |      |      |   |         |      |  |   |        |   |  |      |         |     |            |   |            |       |  |   |               |        |  |   |         |   |  |   |         |    



FOOTNOTES:



|(1) | The fair value of our fixed-rate debt was determined using discounted cash flows based on market interest rates as of June 30, 2010. We determined market rates
through discussions with our existing lenders pricing our loans with similar terms and current rates and spreads.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The 30-day LIBOR rate was approximately 0.35% at June 30, 2010. The 30-day CDOR rate was approximately 0.78% as of June 30, 2010.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(3) | The average interest rate from year 2011 through 2013 consists of (i) 30-day LIBOR +3.25% on the $10.0 million loan collateralized by our Jimmy Peak Mountain
Resort property and (ii) 30-day CDOR + 3.75% on the $20.0 million loan collateralized by our Cypress Ski Resort property.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | On November 30, 2009, we obtained a $20.0 million loan (denominated in Canadian dollars) collateralized by our Cypress Ski Resort property. The loan matures on
December 1, 2014 and bears interested at CDOR plus 3.75% that has been fixed with an interest rate swap to 6.43% for the term of the loan. The loan requires monthly payments of principal and interest based on a 20-year amortization schedule.
The balance as of June 30, 2010 has been converted from Canadian dollars to U.S. dollar at an exchange rate of 1.048 Canadian dollars for $1.00 U.S. dollar on June 30, 2010. The fair value of this instrument has been recorded as an
asset of approximately $0.3 million.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | On March 30, 2010, we obtained a syndicated revolving line of credit (the 2013 Revolver) with $85.0 million in total borrowing capacity of which $58.0
million was drawn as of June 30, 2010. The 2013 Revolver bears interest at LIBOR plus 4.75%, is collateralized by a pool of our lifestyle properties and matures on March 30, 2013. In connection with obtaining the 2013 Revolver,
we repaid our previous line of credit with an outstanding balance of approximately $96.6 million.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On
September 29, 2009, we obtained a $10.0 million loan collateralized by the Jiminy Peak Mountain Resort property. The loan requires monthly payments of interest and principal with the remaining principal and accrued interest payable upon
maturity on September 1, 2019. For the entire term, the loan bears interest at a 30-day LIBOR plus 3.25%. However, we entered into an interest rate swap and thereby fixing the rate to 6.89%. The fair value of this instrument has been recorded
as a liability of approximately $0.7 million.

On December 31, 2007, we obtained a loan for approximately $85.4 million.
The loan bears interest at 30-day LIBOR plus 1.72% on the first $57.3 million, 30-day LIBOR plus 1.5% (of which 1.25% is deferred until maturity) on the next $16.7 million and 30-day LIBOR plus 1.5% on the remaining $11.4 million (of which
approximately all is deferred until maturity). On January 2, 2008, we entered into two interest rate swaps to hedge the variable interest rate. The instruments, which were designated as cash flow hedges of interest payments from their
inception, swap the rate on the first $57.3 million of debt to a blended fixed rate of 6.0% per year and on the next $16.7 million to a blended fixed rate of 5.8% for the term of the loan (of which 1.25% is deferred until maturity). The fair
value of these instruments has been recorded as a liability of approximately $7.6 million.

|(6) | The estimated fair value of our variable rate debt was determined using discounted cash flows based on market interest rates as of June 30, 2010. We determined
market rates through discussions with our existing lenders pricing our loans with similar terms and current rates and spreads.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35



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##### Table of Contents

Management estimates that a hypothetical one-percentage point increase in LIBOR would have
resulted in additional interest costs of approximately $0.6 million for the six months ended June 30, 2010. 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 as our actual results will likely vary.

We are exposed to
foreign currency exchange rate fluctuations as a result of our direct ownership of one property in Canada which is leased to a third-party tenant. The lease payments we receive under the triple-net lease are denominated in Canadian dollars. However,
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 4T. | 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

In the most recent fiscal quarter, there was no change 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. However, while preparing our statement of cash flows for the first quarter of 2010, management
determined there had been an error in the presentation of proceeds from the sale of short-term investments which resulted in a revision to the operating and investing activities of the Condensed Consolidated Statements of Cash Flows for the quarter
ended March 31, 2009 and six months ended June 30, 2009, as discussed above in Note 2 to our Condensed Consolidated Financial Statements for the six months ended June 30, 2010. Management of the company has reviewed its internal
controls over the preparation of the statements of cash flows and has enhanced the design of its controls to (i) identify new, non-recurring and atypical transactions at a lower level of significance than has previously been done, and to
(ii) separately track those transactions for cash flow reporting purposes in order to ensure proper classification between operating, investing and financing activities.

PART II OTHER INFORMATION



|Item 1. | Legal ProceedingsNone
|------- | ----------------------



|Item 1A. | Risk FactorsNone
|-------- | -----------------



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

Use of Proceeds

As of
June 30, 2010, we sold approximately $2.8 billion (278.1 million shares) in connection with our offerings, including approximately $232.4 million (24.5 million shares) purchased through our reinvestment plan. The shares sold and the gross
offering proceeds received from our offerings do not include 20,000 shares purchased by our Advisor for $200,000



36



---

##### Table of Contents

preceding the commencement of our
1stOffering or 117,706 restricted common shares issued
for $1.2 million in December 2004 to CNL Financial Group, Inc., the parent company of our Advisor and wholly owned indirectly by our chairman of the board and his wife.

As of June 30, 2010, we incurred the following aggregate expenses in connection with the issuance of our registered securities on
our offerings (in thousands):



|                                                               |  |   |        
|-------------------------------------------------------------- |  | - | -------
|Selling commissions                                            |  | $ | 173,727
|Marketing support fee and due diligence expense reimbursements |  |   | 73,085 
|Offering costs and expenses                                    |  |   | 42,999 
|                                                               |  |   |        
|Offering and stock issuance costs                              |  | $ | 289,811
|                                                               |  |   |        

Selling commissions, marketing support fee and due
diligence expenses are paid to our Managing Dealer and a substantial portion of the selling commissions, marketing support fees and all of the due diligence expenses are re-allowed to third-party participating broker-dealers. Other offering costs
and expenses have been incurred by, and are payable to, an affiliate of our Advisor.

Our net offering proceeds, after
deducting the total expenses described above, were approximately $2.5 billion at June 30, 2010. As of June 30, 2010, we invested approximately $2.1 billion in properties, loans and other permitted investments.

Redemption of Shares and Issuer Purchases of Equity Securities

For the six months ended June 30, 2010, we received total redemption requests of approximately 1.7 million shares, of which
0.5 million shares relating to prior period requests were redeemed and 0.2 million shares relating to current period requests were redeemed on a pro rata basis, for an average price per share of $9.83. 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 the price of shares sold to the public in our offerings. 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  Common Stock Redemptions.

In March 2010, we amended our redemption plan to provide clarity about the board of directors discretion in establishing the amount
of redemptions that may be processed each quarter and to allow certain priority groups of stockholders with requests made pursuant to circumstances such as death, qualifying disability, bankruptcy or unforeseeable emergency to have their redemption
requests processed ahead of the general stockholder population. In addition, our board of directors determined that we will redeem shares pursuant to the redemption plan in an amount totaling $7.5 million per calendar quarter beginning in the
second quarter of 2010. 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 interests of the company and our stockholders, as the redemption of shares
dilutes the amount of cash available to make acquisitions.

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 25.0% 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 the price of shares sold to the public in any offering. We may, at our discretion, redeem the shares, subject to certain conditions and limitations under the redemption plan. However, at no time during a 12-month period may we redeem
more than 5.0% of the weighted average number of our outstanding common stock at the beginning of such 12-month period. For the six months ended June 30, 2010, we redeemed the following shares:



|                                     |  |                               |  |                            |      |                                                                  |         |                                                               |           |    
|------------------------------------ |  | ----------------------------- |  | -------------------------- | ---- | ---------------------------------------------------------------- | ------- | ------------------------------------------------------------- | --------- | ---
|Period                               |  | TotalNumber ofSharesPurchased |  | AveragePrice PaidPer Share |      | Total Number ofShares PurchasedAs Part of PubliclyAnnounced
Plan |         | Maximum Numberof Shares ThatMay Yet BePurchased UnderThe Plan |          
|April 1, 2010 through April 30, 2010 |  |                              |  |                            |      |                                                                  |        |                                                               | 3,562,477 |    
|May 1, 2010 through May 31, 2010     |  |                              |  |                            |      |                                                                  |        |                                                               | 3,562,477 |    
|June 1, 2010 through June 30, 2010   |  | 763,217                       |  | $                          | 9.83 |                                                                  | 763,217 |                                                               | 5,073,943 | (1)
|                                     |  |                               |  |                            |      |                                                                  |         |                                                               |           |    
|Total                                |  | 763,217                       |  |                            |      |                                                                  | 763,217 |                                                               |           |    
|                                     |  |                               |  |                            |      |                                                                  |         |                                                               |           |    



FOOTNOTE:



|(1) | This number represents the maximum number of shares which can be redeemed under the redemption plan without exceeding the five percent limitation in a rolling 12-month
period described above and does not take into account the amount the board of directors has determined to redeem or whether there are sufficient proceeds under the redemption plan. Under the redemption plan, we can, at our discretion, use up to
$100,000 per calendar quarter of the proceeds from any public offering of our common stock for redemptions.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



37



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##### Table of Contents

|Item 3. | Defaults Upon Senior SecuritiesNone
|------- | ------------------------------------



|Item 5. | Other Information
|------- | -----------------



| | (a) | Submission of Matters to a Vote of Security Holders
| | --- | ---------------------------------------------------



| | (1) | Our annual meeting of stockholders was held in Orlando, Florida on June 16, 2010.
| | --- | ---------------------------------------------------------------------------------



| | (2) | Each of our five directors was re-elected. Those directors are: Bruce Douglas, Dennis N. Folken, Robert J. Woody, Robert A. Bourne and James M. Seneff, Jr.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | The meeting was held for the purpose of electing the board of directors and transacting such other business as may properly have come before the meeting or any
adjournment or postponement thereof.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The two proposals were submitted to a vote of stockholders and received
votes as follows:



| | a. | The stockholders approved the election of the following persons as directors of the company for one year term:
| | -- | --------------------------------------------------------------------------------------------------------------



|                     |  |             |  |          
|-------------------- |  | ----------- |  | ---------
|Name                 |  | For         |  | Withheld 
|Bruce Douglas        |  | 126,272,511 |  | 3,417,925
|Dennis N. Folken     |  | 126,192,741 |  | 3,497,695
|Robert J. Woody      |  | 126,383,026 |  | 3,307,410
|Robert A. Bourne     |  | 126,392,413 |  | 3,298,022
|James M. Seneff, Jr. |  | 126,394,323 |  | 3,296,112



| | b. | To transact such other business as may properly have come before the meeting or any adjournment or postponement thereof:
| | -- | ------------------------------------------------------------------------------------------------------------------------



|            |  |           |  |            
|----------- |  | --------- |  | -----------
|For         |  | Against   |  | Abstentions
|122,383,587 |  | 2,101,045 |  | 5,205,803  



|Item 6. | Exhibits
|------- | --------

The following documents are filed or incorporated as part of this report.



|     |  |                                                                                                                                                                                                        
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 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.)
|     | 
|32.2 |  | Certification of 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.)



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##### Table of Contents

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 13th day of August, 2010.



CNL LIFESTYLE PROPERTIES, INC.By:

/s/ R. Byron Carlock, Jr.R. BYRON CARLOCK, JR.President and Chief Executive Officer(Principal Executive Officer)By:

/s/ Tammie A. QuinlanTAMMIE A. QUINLANExecutive Vice President and Chief Financial Officer(Principal Financial Officer)By:

/s/ Joseph T. JohnsonJOSEPH T. JOHNSONSenior Vice President and Chief Accounting Officer(Principal Accounting Officer)




39