UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K
(Mark One)
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[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2001
                                             -----------------

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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                        For the transition period from           to

                        Commission file number 000-32607

                         CNL RETIREMENT PROPERTIES, INC.
             (Exact name of registrant as specified in its charter)

                   Maryland                             59-3491443
       (State or other jurisdiction of      (I.R.S. Employer Identification No.)
        incorporation or organization)

                             450 South Orange Avenue
                             Orlando, Florida 32801
          (Address of principal executive offices, including zip code)

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

           Securities registered pursuant to Section 12(b) of the Act:

       Title of each class:              Name of exchange on which registered:
             None                                    Not Applicable

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $0.01 par value per share
                                (Title of class)

     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 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 if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     Aggregate  market  value of the common stock held by  nonaffiliates  of the
registrant: The registrant registered an offering of shares of common stock (the
"Shares") on Form S-11 under the  Securities  Act of 1933, as amended.  Since no
established  market for such Shares  exists,  there is no market  value for such
Shares.  Each  Share  was  originally  sold at $10 per  Share.  Based on the $10
offering  price of the  Shares,  $93,262,611  of our  common  stock  was held by
non-affiliates as of February 11, 2002.

     The number of Shares of common  stock  outstanding  as of February 11, 2002
was 9,346,833.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Registrant  incorporates  by  reference  portions  of  the  CNL  Retirement
Properties,  Inc.  Definitive  Proxy  Statement  for the 2002 Annual  Meeting of
Stockholders  (Items  10,  11, 12 and 13 of Part III) to be filed no later  than
April 30, 2002.
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                                    Contents

                                                                                                    Page
Part I
    Item 1.       Business                                                                          1-5
    Item 2.       Properties                                                                        5-6
    Item 3.       Legal Proceedings                                                                 6
    Item 4.       Submission of Matters to a Vote of Security Holders                               6

Part II
    Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters             7
    Item 6.       Selected Financial Data                                                           8-9
    Item 7.       Management's Discussion and Analysis of Financial Condition and
                           Results of Operations                                                    10-16
    Item 7A.      Quantitative and Qualitative Disclosures About Market Risk                        16
    Item 8.       Financial Statements and Supplementary Data                                       17-32
    Item 9.       Changes in and Disagreements with Accountants on Accounting and
                           Financial Disclosure                                                     33

Part III
    Item 10.      Directors and Executive Officers of the Registrant                                33
    Item 11.      Executive Compensation                                                            33
    Item 12.      Security Ownership of Certain Beneficial Owners and Management                    33
    Item 13.      Certain Relationships and Related Transactions                                    33

Part IV
    Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K                   33-35

Signatures                                                                                          36-37

Schedule III - Real Estate and Accumulated Depreciation                                             38-40

Exhibits
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                                     PART I

Item 1.  Business

     CNL  Retirement  Properties,  Inc.  is a  corporation  which was  organized
pursuant  to the  laws of the  state of  Maryland  on  December  22,  1997.  CNL
Retirement GP Corp. and CNL Retirement LP Corp. are wholly owned subsidiaries of
CNL Retirement  Properties,  Inc., each of which were organized  pursuant to the
laws of the state of Delaware in December  1999. CNL Retirement GP Corp. and CNL
Retirement LP Corp. are the general and limited  partner,  respectively,  of CNL
Retirement Partners, LP. CNL Retirement Partners, LP ("Retirement  Partners") is
a Delaware limited partnership formed in December 1999.  Properties acquired are
generally  expected  to be held  by  Retirement  Partners  or its  wholly  owned
subsidiaries and, as a result, owned by CNL Retirement Properties,  Inc. through
such  entities.  CNL  Retirement - GP/Holding  Corp.  was formed in June 2001 to
serve as the general  partner of various other wholly owned  subsidiaries  which
have been or will be formed for the purpose of acquiring future properties.  The
terms "Company" or "Registrant" include CNL Retirement Properties,  Inc. and its
subsidiaries, CNL Retirement GP Corp., CNL Retirement LP Corp., CNL Retirement -
GP/Holding Corp., CNL Retirement  Partners,  LP and each of their  subsidiaries.
The Company operates for federal income tax purposes as a real estate investment
trust (a "REIT").

     The  Company  was  formed  primarily  to  acquire  real  estate  properties
("Properties")   related  to   seniors'   housing  and   retirement   facilities
("Retirement  Facilities")  located  across the United  States.  The  Retirement
Facilities may include  congregate  living,  assisted living and skilled nursing
facilities,  continuing care retirement  communities and life care  communities,
and medical office buildings and walk-in clinics.  The Properties will be leased
on a long-term,  "triple-net" basis to operators of Retirement Facilities. Under
the Company's  triple-net  leases, the lessees generally will be responsible for
repairs,  maintenance,  property taxes, utilities and insurance. The Company may
provide  mortgage  financing (the  "Mortgage  Loans") to operators of Retirement
Facilities  secured by real estate owned by the  borrower.  However,  because it
prefers  to focus on  investing  in  Properties,  which  have the  potential  to
appreciate,  the  Company  currently  expects to provide  Mortgage  Loans in the
aggregate  principal  amount  of no more  than 5 percent  to 10  percent  of the
Company's total assets. The Company expects that the interest rates and terms of
the Mortgage  Loans will be similar to those of its leases.  To a lesser extent,
the Company also may provide  furniture,  fixtures and  equipment  ("Equipment")
financing through loans or direct financing leases  (collectively,  the "Secured
Equipment  Leases").  The  aggregate  outstanding  principal  amount of  Secured
Equipment  Leases is not  expected to exceed 10 percent of the  Company's  total
assets.

     On September 18, 1998,  the Company  commenced an offering to the public of
up to  15,500,000  shares of common  stock (the  "Shares")  ($155,000,000)  (the
"Initial Offering") pursuant to a registration  statement on Form S-11 under the
Securities  Act of 1933, as amended.  Of the  15,500,000  Shares of common stock
offered, 500,000 ($5,000,000) were available only to stockholders who elected to
participate in the Company's  reinvestment plan. Upon termination of the Initial
Offering on September 18, 2000, the Company had received aggregate  subscription
proceeds of  $9,718,974  (971,898  Shares),  including  $50,463  (5,046  Shares)
through the Company's  reinvestment plan.  Immediately following the termination
of the Initial  Offering,  the Company commenced an offering of up to 15,500,000
Shares of common stock  ($155,000,000) (the "2000 Offering").  Of the 15,500,000
Shares of common stock  offered,  up to 500,000 are  available  to  stockholders
purchasing Shares through the distribution  reinvestment plan. The 2000 Offering
will expire no later than  September  5, 2002.  As of  December  31,  2001,  the
Company had  received  total  proceeds  from the Initial  Offering  and the 2000
Offering of $71,211,344  (7,121,131 Shares),  including $381,407 (38,141 Shares)
through the distribution reinvestment plan.

     As of December 31, 2001,  net proceeds to the Company from its offerings of
Shares and capital  contributions from the CNL Retirement Corp. (the "Advisor"),
after  deduction of selling  commissions,  marketing  support and due  diligence
expense  reimbursement fees and  organizational  and offering expenses,  totaled
approximately $63,100,000. The Company had used approximately $26,000,000 of net
offering  proceeds and  $8,100,000  in advances  relating to its line of credit,
described  below, to invest  approximately  $34,100,000 in three assisted living
Properties.  As of December 31, 2001,  the Company had repaid the advance on its
line of credit and had also paid  approximately  $4,080,000 in acquisition  fees
and  acquisition  expenses,  leaving  approximately  $24,920,000  available  for
investment in Properties and Mortgage Loans.


<PAGE>


     On January 10, 2002,  the Company  filed a  registration  statement on Form
S-11 with the Securities and Exchange Commission in connection with the proposed
sale by the Company of up to an  additional  45,000,000  Shares of common  stock
($450,000,000)  (the  "2002  Offering")  in an  offering  expected  to  commence
immediately  following the  completion of the 2000  Offering.  Of the 45,000,000
Shares of common  stock to be offered,  up to  5,000,000  will be  available  to
stockholders purchasing Shares through the reinvestment plan.

     During the period January 1, 2002,  through  February 11, 2002, the Company
received additional net offering proceeds of approximately $19,300,000, received
permanent  financing of  approximately  $13,000,000  and invested  approximately
$28,200,000 in two additional assisted living Properties.  The Company also paid
additional  acquisition  fees and  costs of  approximately  $1,610,000,  leaving
approximately  $27,410,000 for investment in Properties and Mortgage Loans as of
February 11, 2002. The Company expects to use the uninvested net proceeds,  plus
any  additional  net proceeds from the sale of Shares from the 2000 Offering and
the 2002 Offering to purchase  additional  Properties  and, to a lesser  extent,
invest in Mortgage  Loans.  In addition,  the Company intends to borrow money to
acquire additional Properties, to invest in Mortgage Loans and Secured Equipment
Leases,  and to pay certain related fees. The Company intends to encumber assets
in connection with such borrowings. The Company currently has a $25,000,000 line
of credit available, as described below. Borrowings on the line of credit may be
repaid with offering proceeds, proceeds from the sale of assets, working capital
or permanent financing. The maximum amount the Company may borrow is 300 percent
of the Company's net assets. The Company believes that the net proceeds received
from the 2000 Offering and the 2002 Offering will enable the Company to continue
to grow and take advantage of acquisition opportunities until such time, if any,
that  the  Company  lists  its  Shares  on a  national  securities  exchange  or
over-the-counter market ("Listing"), although there is no assurance that Listing
will occur.

     The Company's primary  investment  objectives are to preserve,  protect and
enhance  the  Company's  assets  while (i)  making  quarterly  distributions  to
stockholders;  (ii) obtaining fixed income through the receipt of base rent, and
increasing  the  Company's  income  (and   distributions  to  stockholders)  and
providing protection against inflation through automatic increases in base rent,
or increases in base rent based on increase in consumer  price  indices over the
term of the lease and  obtaining  fixed  income  through the receipt of payments
from Mortgage Loans and Secured Equipment Leases; (iii) continuing to qualify as
a REIT for federal income tax purposes;  and (iv) providing  stockholders of the
Company with liquidity of their investment, through (a) Listing of the Shares on
a national  securities  exchange or  over-the-counter  market, or (b) if Listing
does not occur by December 31, 2008,  the  commencement  of orderly sales of the
Company's  assets  (outside the ordinary  course of business and consistent with
its  objectives  of  qualifying  as a REIT)  and  distribution  of the  proceeds
thereof. There can be no assurance that these investment objectives will be met.

     For the next seven years,  the Company  intends,  to the extent  consistent
with the Company's  objective of qualifying as a REIT, to reinvest in additional
Properties  or  Mortgage  Loans  any  proceeds  from the sale of a  Property  or
Mortgage Loan that are not required to be distributed to  stockholders  in order
to  preserve  the  Company's  REIT  status  for  federal  income  tax  purposes.
Similarly,  and to the extent  consistent with REIT  qualification,  the Company
plans to use the  proceeds  from the sale of a Secured  Equipment  Lease to fund
additional Secured Equipment Leases, or to reduce its outstanding  indebtedness.
At or prior to the end of such seven-year period, the Company intends to provide
stockholders of the Company with liquidity of their investment,  either in whole
or in part,  through  Listing of the Shares of the Company  (although  liquidity
cannot be assured  thereby)  or by  commencing  orderly  sales of the  Company's
assets. If Listing occurs, the Company intends to use any net sales proceeds not
required to be  distributed to  stockholders  in order to preserve the Company's
status  as a REIT to  reinvest  in  additional  Properties,  Mortgage  Loans and
Secured  Equipment  Leases.  The Company's  Articles of  Incorporation  provide,
however,  that if Listing  does not occur by  December  31,  2008,  the  Company
thereafter will undertake the orderly liquidation of the Company and the sale of
the Company's assets and will distribute any net sales proceeds to stockholders.
In  addition,  the  Company  will not sell any  assets if such sale would not be
consistent with the Company's objective of qualifying as a REIT.

     In deciding the precise timing and terms of Property sales,  CNL Retirement
Corp. ("the  Advisor"),  will consider factors such as national and local market
conditions,  potential capital  appreciation,  cash flows and federal income tax
considerations. The terms of certain leases, however, may require the Company to
sell a  Property  at an  earlier  time if the  tenant  exercises  its  option to
purchase a Property after a specified portion of the lease term has elapsed. The
Company will have no  obligation to sell all or any portion of a Property at any
particular  time,  except as may be required  under  property  or joint  venture
purchase  options  granted  to  certain  tenants.  In  connection  with sales of
Properties,  purchase money  obligations  may be taken by the Company as partial
payment of the sales  price.  The terms of payment will be affected by custom in
the area in which the Property is located and  prevailing  economic  conditions.
When a purchase money  obligation is accepted in lieu of cash upon the sale of a
Property,  the Company will  continue to have a mortgage on the Property and the
proceeds  of the sale will be  realized  over a period of years  rather  than at
closing of the sale.

     It is anticipated that if the Company wishes at any time to sell a Property
pursuant to a bona fide offer from a third  party,  the tenant of that  Property
will have the right to purchase the Property for the same price, and on the same
terms and conditions,  as contained in the offer.  In certain cases,  the tenant
also  may have  the  right to  purchase  the  Property  seven to 20 years  after
commencement  of the lease at a purchase  price  equal to the greater of (i) the
appraised value of the Property, or (ii) a specified amount,  generally equal to
the Company's purchase price of the Property plus a predetermined  percentage of
the Company's purchase price.

     If the Company enters into any Secured Equipment  Leases,  the Company does
not anticipate  selling the Secured  Equipment Leases prior to expiration of the
lease term, except in the event that the Company undertakes orderly  liquidation
of its assets.  In addition,  if the Company  provides any Mortgage  Loans,  the
Company does not  anticipate  selling any Mortgage Loans prior to the expiration
of the loan term,  except in the event (i) the Company owns the  Property  (land
only) underlying the building  improvements  which secures the Mortgage Loan and
the sale of the Property occurs, or (ii) the Company  undertakes an orderly sale
of its assets.

Property Leases

     As of December 31, 2001, the Company had acquired three Properties  located
in Orland Park,  Illinois (the "Orland Park  Property"),  Arlington,  Texas (the
"Arlington  Property") and Boca Raton, Florida (the "Boca Raton Property").  The
leases provide for an initial term of 15 years and expire between 2015 and 2016.
The leases are on a triple-net lease basis,  meaning the tenants are required to
pay all repairs,  maintenance,  property  taxes,  utilities and  insurance.  The
tenants are also  required to pay for  special  assessments  and the cost of any
renovations  permitted  under the leases.  The leases  provide for minimum  base
annual rent payments  (generally payable in monthly  installments)  ranging from
approximately  $991,000 to  $1,350,000.  The leases  provide  that the base rent
required under the terms of the leases will increase at predetermined  intervals
during the terms of the leases.  In  addition  to annual base rent,  the tenants
will also pay  contingent  rent  computed as a percentage  of gross sales of the
Properties.  The lease for the Orland Park Property also provides for the tenant
to fund, in addition to its lease  payments,  an FF&E reserve  fund.  The tenant
deposits funds into the FF&E reserve account and  periodically  uses these funds
to cover  the cost of the  replacement,  renewal  and  additions  to  furniture,
fixtures and equipment.  The Company may be responsible for capital expenditures
or  repairs  in  excess of the  amounts  in the  reserve  fund,  and the  tenant
generally will be responsible for replenishing the reserve fund and for paying a
specified  return on the amount of capital  expenditures  or repairs paid for by
the Company in excess of amounts in the reserve fund.

Major Tenants

     BG Orland  Park,  LLC,  ARC Pecan Park LP, and ARC Boca  Raton,  Inc.  each
contributed  more than 10 percent of the  Company's  total rental income for the
year ended December 31, 2001. These  Properties  operate as either a Marriott or
an American Retirement  Corporation brand chain. Although the Company intends to
acquire  additional  Properties  located in various  states and  regions  and to
carefully  screen its tenants in order to reduce  risks of  default,  failure of
these lessees or the Marriott or American  Retirement  Corp.  brand chains would
significantly  impact  the  results  of  operations  of  the  Company.  However,
management  believes that the risk of such a default is reduced by the Company's
initial and continuing due diligence procedures.

Certain Management Services

     Pursuant to an advisory agreement (the "Advisory  Agreement"),  the Advisor
provides  management  services  relating to the  Company,  the  Properties,  the
Mortgage Loans and the Secured  Equipment  Lease program.  Under this agreement,
the Advisor is  responsible  for  assisting the Company in  negotiating  leases,
Mortgage Loans, lines of credit and Secured Equipment Leases; collecting rental,
Mortgage Loan and Secured  Equipment Lease  payments;  inspecting the Properties
and the tenants'  books and records;  and  responding to tenants'  inquiries and
notices.  The  Advisor is also  responsible  for  providing  information  to the
Company  about the status of the leases,  Properties,  Mortgage  Loans,  Secured
Equipment Leases, any lines of credit and any permanent  financing.  In exchange
for these  services,  the Advisor is entitled to receive  certain  fees from the
Company.  For supervision of the Properties and the Mortgage Loans,  the Advisor
receives an asset management fee, which is payable  monthly,  in an amount equal
to one-twelfth of 0.60 percent of the total amount  invested in the  Properties,
exclusive of acquisition  fees and acquisition  expenses (the "Real Estate Asset
Value"), plus one-twelfth of 0.60 percent of the outstanding principal amount of
any  Mortgage  Loans,  as of the end of the  preceding  month.  For  negotiating
Secured  Equipment  Leases and supervising the Secured  Equipment Lease program,
the Advisor will receive,  upon entering  into each lease,  a Secured  Equipment
Lease  servicing  fee,  payable out of the  proceeds of  borrowings,  equal to 2
percent of the purchase price of the equipment subject to each Secured Equipment
Lease (the  "Secured  Equipment  Lease  Servicing  Fee").  For  identifying  the
Properties,  structuring  the  terms  of  the  acquisition  and  leases  of  the
Properties and structuring the terms of the Mortgage Loans, the Advisor receives
an  acquisition  fee equal to 4.5 percent of gross  proceeds from the offerings,
loan proceeds from permanent  financing (the "Permanent  Financing") and amounts
outstanding on the line of credit, if any, at the time of Listing, but excluding
that  portion  of the  Permanent  Financing  used to finance  Secured  Equipment
Leases.

     The Advisory  Agreement  continues until September 16, 2002, and thereafter
may be extended  annually  upon  mutual  consent of the Advisor and the Board of
Directors of the Company unless terminated at an earlier date upon 60 days prior
written notice by either party.

Borrowing

     The Company has a line of credit  (the "Line of Credit")  which  allows the
Company to receive  advances of up to $25,000,000  until April 19, 2005, with an
annual  review to be  performed  by the bank to indicate  that there has been no
substantial  deterioration,   as  determined  by  the  bank  in  its  reasonable
discretion,  of the Company's  credit quality.  Interest expense on each advance
shall be payable  monthly,  with all unpaid  interest and principal due no later
than five years from the date of the advance. Generally, advances under the Line
of Credit will bear  interest at either (i) a rate per annum equal to the London
Interbank Offered Rate (LIBOR) plus the difference  between LIBOR and the bank's
base rate at the time of the  advance or (ii) a rate  equal to the  bank's  base
rate,  whichever the Company selects at the time advances are made. The interest
rate will be adjusted daily in accordance with fluctuations with the bank's rate
or the LIBOR rate, as applicable.  Notwithstanding  the above, the interest rate
on the first  $9,700,000  drawn will be 8.75 percent  through April 1, 2002, and
thereafter  will bear  interest at either (i) or (ii) above as of April 1, 2002.
In  addition,  a fee of 0.5 percent  per advance  will be due and payable to the
bank on funds as  advanced.  Each  advance made under the Line of Credit will be
collateralized by the assignment of rents and leases.  In addition,  the Line of
Credit  provides  that the  Company  will not be able to  further  encumber  the
applicable  Property  during the term of the advance without the bank's consent.
The  Company  will be  required,  at each  closing,  to pay all costs,  fees and
expenses  arising in connection  with the Line of Credit.  The Company must also
pay the bank's attorney's fees, subject to a maximum cap, incurred in connection
with the Line of Credit and each  advance.  The  Company  obtained an advance of
$8,100,000  relating to the Line of Credit  during the year ended  December  31,
2000,  in  connection  with the  purchase  of the Orland  Park  Property.  As of
December  31,  2001,  the  Company  had repaid  this  advance and had no amounts
outstanding on the Line of Credit.

     The  Company  currently  plans to obtain one or more  additional  revolving
lines of credit in an aggregate  amount of up to  $45,000,000  to acquire assets
and to pay certain fees.  The Line of Credit may be increased at the  discretion
of the Board of  Directors.  The Line of  Credit  may be  repaid  with  offering
proceeds,  proceeds  from the  sale of  assets,  working  capital  or  Permanent
Financing.  The Board of Directors anticipates that the Permanent Financing will
not exceed 30 percent of the Company's total assets. However, in accordance with
the  Company's  Articles of  Incorporation,  the  aggregate  maximum  amount the
Company may borrow is 300 percent of the Company's net assets (as defined in the
Company's prospectus).  The Company assumed Permanent Financing of approximately
$13,000,000 in connection  with the purchase of a Property on February 11, 2002.
However, there is no assurance that the Company will obtain additional Permanent
Financing on  satisfactory  terms.  The Board of Directors may elect to encumber
assets in connection with any borrowing.

Competition

     The  Company  will  be  in  competition  with  other  REITs,   real  estate
partnerships,  health care  providers and other  investors,  including,  but not
limited  to,  banks and  insurance  companies,  many of which will have  greater
financial resources than the Company, in the acquisition,  leasing and financing
of Retirement Facilities.  Further,  non-profit entities are particularly suited
to make  investments  in senior  care  facilities  because  of their  ability to
finance  acquisitions  through  the  issuance  of  tax-exempt  bonds,  providing
non-profit  entities  with a  relatively  lower cost of capital as  compared  to
for-profit  purchasers.  In addition,  in certain states,  Retirement Facilities
owned  by  non-profit  entities  are  exempt  from  taxes on real  property.  As
profitability  increases  for investors in  retirement  properties,  competition
among investors likely will become increasingly intense.

Employees

     Reference  is made to Item 10.  Directors  and  Executive  Officers  of the
Registrant for a listing of the Company's Executive Officers. The Company has no
other employees.


Item 2.  Properties

     As of December  31, 2001,  the Company  owned three  private-pay,  assisted
living  Properties  located in Orland Park,  Illinois,  Boca Raton,  Florida and
Arlington,  Texas.  As of  February  11,  2002,  the Company  had  acquired  two
additional Properties located in Oak Park, Illinois, and Coconut Creek, Florida.
Generally,  Properties  acquired or to be acquired by the Company conform to the
following specifications of size, cost and type of land and buildings:

     Congregate  Living  Facilities.  Congregate living facilities are primarily
apartment  buildings  which  contain a  significant  amount  of common  space to
accommodate dining, recreation, activities and other support services for senior
citizens.  These  properties range in size from 100 to 500 units with an average
size of approximately  225 units.  Units include studios and one and two bedroom
units ranging in size from 450 square feet to over 1,500 square feet.

     Assisted Living  Facilities.  Assisted living facilities  provide a special
combination of housing, supportive services,  personalized assistance and health
care to their  residents in a manner which is designed to respond to  individual
needs.  These  facilities  offer a  lower-cost  alternative  to skilled  nursing
facilities for those who do not require intensive nursing care. Current industry
practice generally is to build  freestanding  assisted living facilities with an
average of between 40 and 100 units, depending on such factors as market forces,
site constraints and program  orientation.  Current  economics place the size of
the private  living space of a unit in the range of 300 gross square feet for an
efficiency unit to 750 square feet for a large one bedroom unit.

     Skilled Nursing Facilities.  In addition to housing, meals,  transportation
and housekeeping,  skilled nursing facilities provide  comprehensive nursing and
long-term care to their residents. Skilled nursing facilities are also generally
freestanding,  but are  typically  more  institutional  in nature,  allowing for
efficient  cleaning and  sterilization.  The rooms in skilled nursing facilities
are equipped with patient monitoring devices and emergency call systems.  Oxygen
systems may also be present.  Both  multiple  floor and single floor designs are
common.  Individual  rooms in skilled nursing  facilities may be as small as 100
square feet, with common areas varying greatly in size.

     Continuing  Care  Retirement  Communities.   Congregate  living  facilities
sometimes have assisted  living and/or skilled  nursing  facilities  attached or
adjacent to their locations.  When this occurs,  the projects are often referred
to as continuing  care  retirement  communities  or life care  communities.  The
intent of continuing care retirement  communities or life care communities is to
provide a continuum of care to the residents.  As residents age and their health
care needs increase,  they can receive the care they need without having to move
away  from  the  "community"  which  has  become  their  home.  Continuing  care
retirement  communities  typically  operate on a  fee-for-service  basis and the
units are  rented on a  monthly  basis to  residents,  while  life care  centers
generally  charge an entrance  fee that is partially  refundable  and covers the
cost of all of the  resident's  health  care-related  services,  plus a  monthly
maintenance fee.

     Medical Office  Buildings.  Medical  office  buildings,  including  walk-in
clinics, are conventional office buildings with additional plumbing,  mechanical
and  electrical  service  amenities,  which  facilitate  physicians  and medical
delivery  companies  in the  practice  of medicine  and  delivery of health care
services.  These  facilities  can range in size from 3,000 square feet  (walk-in
clinic) up to 100,000 square feet (medical office building).


<PAGE>


     Either before or after  construction  or  renovation,  the Properties to be
acquired by the Company will be one of a Retirement Facility operator's approved
designs.  Generally,  Properties  to be acquired by the Company  will consist of
both land and  building,  although  in a number of cases the Company may acquire
only the land underlying the building with the building owned by the tenant or a
third  party,  and also may acquire the  building  only with the land owned by a
third party. In general,  the Properties will be freestanding  and surrounded by
paved  parking  areas and  landscaping.  Although  buildings may be suitable for
conversion to various uses through  modifications,  some  Properties  may not be
economically convertible to other uses.

     A tenant  generally will be required by the lease agreement to make capital
expenditures as may be reasonably  necessary to refurbish  buildings,  premises,
signs and equipment and maintain the leasehold in a manner that allows operation
for its intended purpose.  These capital expenditures  generally will be paid by
the tenant during the term of the lease.

     Leases with Major Tenants. The terms of the leases with the Company's major
tenants as of December 31, 2001 are described as follows:

     BG Orland Park, LLC leases the Orland Park Property located in Orland Park,
Illinois.  The  initial  term of the  lease is 15 years  (expiring  in 2015) and
minimum annual rent is approximately $1,350,000.

     ARC Pecan Park,  LP leases the  Arlington  Property  located in  Arlington,
Texas.  The lease has an initial term of 15 years  (expiring in 2016),  provides
for two consecutive  renewal options of five years each and requires  payment of
minimum annual rent of approximately $1,084,000.

     ARC Boca Raton,  Inc. leases the Boca Raton Property located in Boca Raton,
Florida. The lease has an initial term 15 years (expiring in 2016), provides for
two  consecutive  renewal options of five years each and requires the payment of
minimum annual rent of approximately $991,000.


Item 3.  Legal Proceedings

     Neither the  Company,  nor any of its  subsidiaries,  nor their  respective
Properties,   is  a  party  to,  or  subject  to,  any  material  pending  legal
proceedings.


Item 4.  Submission of Matters to a Vote of Security Holders

         None.


                                     PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

(a) As of February 11, 2002,  there were 3,204  stockholders of record of common
stock.  There is no public  trading  market for the Shares,  and even though the
Company  intends  to list  the  Shares  on a  national  securities  exchange  or
over-the-counter  market within seven years, there is no assurance that a public
market for the Shares  will  develop.  Prior to such  time,  if any,  as Listing
occurs,  any stockholder (other than the Advisor) may present all or any portion
equal to at least 25 percent of such  stockholders'  Shares to the  Company  for
redemption  at any time,  in  accordance  with the  procedures  outlined  in the
Company's prospectus.  At such time, the Company may, at its sole option, redeem
such Shares  presented for redemption  for cash, at a redemption  price equal to
the then current offering price, which the Company  anticipates will continue to
be $10.00 per Share, until Listing occurs, less a discount of 8.0 percent, for a
net  redemption  price of $9.20 per Share.  Redemption are limited to the extent
sufficient funds are available. In addition, the Company may, at its discretion,
use up to $100,000 per calendar  quarter of the proceeds of any public  offering
of its common stock for  redemptions.  There is no assurance  that there will be
sufficient  funds available for redemptions  and,  accordingly,  a stockholder's
Shares may not be redeemed. Any Shares acquired pursuant to a redemption will be
retired  and no longer  available  for  issuance  by the  Company.  The Board of
Directors of the Company, in its discretion, may amend or suspend the redemption
plan at any time they determine that such amendment or suspension is in the best
interest of the Company. During the year ended December 31, 2001 and 2000, 3,415
and 3,316 Shares, respectively, were redeemed at $9.20 per Share (for a total of
$31,420 and $30,508, respectively) and retired from Shares outstanding of common
stock. No Shares were redeemed prior to 2000.

     As of December 31, 2001,  the offering  price per Share of common stock was
$10. Based on the continued  sale of Shares  through  February 11, 2002, for $10
per Share, the Company  estimates that the value of its Shares is $10 per Share.
The Company's  Shares are not publicly  traded.  Investors  are  cautioned  that
common  stock not  publicly  traded is  generally  considered  illiquid  and the
estimated  value  per  Share  may not be  realized  when an  investor  seeks  to
liquidate his or her common stock.

     The Company expects to make  distributions to the stockholders  pursuant to
the  provisions of the Articles of  Incorporation.  For the years ended December
31, 2001 and 2000,  the Company  declared cash  distributions  of $1,507,322 and
$502,078,  respectively, to stockholders.  For the years ended December 31, 2001
and  2000,   approximately   65  percent  and  54  percent,   respectively,   of
distributions   paid  to  stockholders  were  considered   ordinary  income  and
approximately 35 percent and 46 percent, respectively,  were considered a return
of  capital  for  federal  income  tax  purposes.   No  amounts  distributed  to
stockholders for the years ended December 31, 2001 and 2000, were required to be
or have been  treated  by the  Company as a return of capital  for  purposes  of
calculating the stockholders'  return on their invested  capital.  The following
table presents total distribution and distributions per Share:
<TABLE>
<CAPTION>

<c>
               2001 Quarter                First          Second         Third          Fourth           Year
      -------------------------------   ------------    -----------    -----------    -----------    --------------

      Total distributions declared         $219,887       $247,922       $312,583       $726,930        $1,507,322
      Distributions per Share                0.1749         0.1749         0.1749         0.1749            0.6996

               2000 Quarter                First          Second         Third          Fourth           Year
      -------------------------------   ------------    -----------    -----------    -----------    --------------

      Total distributions declared         $ 43,593       $108,932       $160,911       $188,642          $502,078
      Distributions per Share                0.0750         0.1537         0.1749         0.1749            0.5785
</TABLE>

     On January 1, 2002 and February 1, 2002, the Company declared distributions
to  stockholders  totalling  $415,936 and $513,585,  respectively,  ($0.0583 per
Share) payable in March 2002, to  stockholders  of record on January 1, 2002 and
February 1, 2002, respectively.

     The  Company  intends  to  continue  to  declare  distributions  of cash to
stockholders  on a monthly  basis  during the  offering  period,  and  quarterly
thereafter.

Item 6.  Selected Financial Data

     The following  selected  financial data should be read in conjunction  with
the consolidated financial statements and related notes in Item 8 hereof.


<TABLE>
<CAPTION>

<c>
                                            2001            2000            1999 (1)       1998 (2)     1997 (2)(3)
                                          -----------     -----------     -----------    -----------    ------------
Year Ended December 31:
     Revenues                             $ 1,899,619     $ 1,084,730      $   86,231    $        --     $        --
     General operating and
       administrative expenses (4)            395,268         340,086          79,261             --              --
     Organizational costs                          --              --          35,000             --              --
     Net earnings (loss)                      915,965         224,778         (28,390)            --              --
     Cash distributions declared            1,507,322         502,078          50,404             --              --
     Cash from operations                   2,173,379       1,096,019          12,851             --              --
     Cash used in investing
       activities                         (22,931,469)    (14,428,703)             --             --              --
     Cash from (used in) financing
       activities                          47,301,313       8,766,346       4,731,279       (199,908)        200,000
     Funds from operations (5)              1,439,908         527,962         (28,390)            --              --
     Earnings (loss) per Share                   0.38            0.27           (0.07)            --              --
     Cash distributions declared
       per Share                                 0.70            0.58            0.13             --              --

     Weighted average number
       of Shares outstanding (6)            2,391,072         845,833         412,713             --              --

At December 31:
     Total assets                        $ 64,446,889     $14,688,560      $5,088,560    $   976,579     $   280,330
     Total stockholders' equity (7)        60,910,042       9,203,548       3,292,137        200,000         200,000

</TABLE>

(1)   No  operations  commenced  until the  Company  received  minimum  offering
      proceeds of  $2,500,000  and funds were  released  from escrow on July 14,
      1999.

(2)   No  significant  operations  had commenced  because the Company was in its
      development stage.

(3)   Selected  financial data for 1997 represents the period December 22, 1997,
      (date of inception) through December 31, 1997.

(4)   In accordance with the Company's prospectus,  to the extent that operating
      expenses  payable or reimbursable by the Company,  in any four consecutive
      fiscal  quarters (the  "Expense  Year") exceed the greater of 2 percent of
      average  invested  assets or 25 percent of net income (the "Expense Cap"),
      the Advisor shall  reimburse  the Company  within 60 days after the end of
      the Expense Year the amount by which the total operating  expenses paid or
      incurred by the Company  exceed the  Expense  Cap.  During the years ended
      December 31, 2001 and 2000, the Advisor  reimbursed  the Company  $145,015
      and $213,886, respectively, in operating expenses.

(5)   Funds from operations ("FFO"),  based on the revised definition adopted by
      the  Board  of  Governors  of the  National  Association  of  Real  Estate
      Investment  Trusts  ("NAREIT")  and as used  herein,  means  net  earnings
      determined in accordance  with generally  accepted  accounting  principles
      ("GAAP"),  excluding gains or losses from debt  restructuring and sales of
      property,  plus  depreciation  and  amortization of real estate assets and
      after adjustments for unconsolidated partnerships and joint ventures. (Net
      earnings determined in accordance with GAAP includes the noncash effect of
      straight-lining   rent   increases   throughout   the  lease  term.   This
      straight-lining  is a GAAP convention  requiring real estate  companies to
      report rental  revenue based on the average rent per year over the life of
      the  lease.)  During  the years  ended  December  31,  2001 and 2000,  net
      earnings included $76,665 and $21,128, respectively, of these amounts. FFO
      was developed by NAREIT as a relative measure of performance and liquidity
      of an equity REIT in order to recognize that  income-producing real estate
      historically  has not  depreciated  on the basis  determined  under  GAAP.
      However,  FFO  (i)  does  not  represent  cash  generated  from  operating
      activities   determined  in  accordance  with  GAAP  (which,  unlike  FFO,
      generally  reflects all cash effects of transactions and other events that
      enter into the  determination  of net earnings),  (ii) is not  necessarily
      indicative of cash flow  available to fund cash needs and (iii) should not
      be considered as an alternative  to net earnings  determined in accordance
      with GAAP as an indication of the Company's operating  performance,  or to
      cash flow from operating activities  determined in accordance with GAAP as
      a  measure  of  either   liquidity  or  the  Company's   ability  to  make
      distributions.   FFO  as  presented  may  not  be  comparable  to  amounts
      calculated by other companies.  Accordingly,  the Company believes that in
      order to facilitate a clear  understanding of the consolidated  historical
      operating results of the Company,  FFO should be considered in conjunction
      with the  Company's  net  earnings  and  cash  flows  as  reported  in the
      accompanying consolidated financial statements and notes thereto.

(6)   The  weighted  average  number of Shares  outstanding  for the year  ended
      December 31, 1999, is based upon the period the Company was operational.

(7)   As required  by the  Securities  and  Exchange  Commission,  stockholders'
      equity includes the amount of accumulated  distributions  in excess of net
      earnings. This represents the amount of distributions that the Company has
      paid in  excess  of the net  earnings.  Net  earnings,  as  determined  in
      accordance  with GAAP,  includes  noncash  items  including  accrued rent,
      depreciation  and  amortization  and,  therefore,  is not considered to be
      indicative of the amount of cash available for distribution.  In addition,
      FF&E reserve  income is not included in cash  available for  distribution.
      During the years ended December 31, 2001 and 2000,  net earnings  included
      $419,262 and $270,182,  respectively,  of such noncash items. For the year
      ending December 31, 1999, net earnings did not include any noncash items.

<PAGE>


Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

     This information contains forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934. These statements are generally characterized by the use of
terms such as "believe,"  "expect" and "may." Although the Company believes that
the  expectations  reflected in such  forward-looking  statements are based upon
reasonable  assumptions,  the Company's  actual results could differ  materially
from those set forth in the  forward-looking  statements.  Certain  factors that
might cause such a difference include the following: changes in general economic
conditions,  changes in real estate  conditions,  availability  of capital  from
borrowings  under  the  Company's  Line of  Credit,  continued  availability  of
proceeds  from the  Company's  offerings,  the  ability of the Company to obtain
additional Permanent Financing on satisfactory terms, the ability of the Company
to  continue  to identify  suitable  investments,  the ability of the Company to
continue to locate  suitable  tenants for its  Properties  and borrowers for its
Mortgage Loans and Secured Equipment Leases, and the ability of such tenants and
borrowers to make payments  under their  respective  leases,  Mortgage  Loans or
Secured Equipment Leases. Given these  uncertainties,  readers are cautioned not
to place undue reliance on such statements.

                                  Introduction

The Company

     The Company was formed to acquire  Properties  related to seniors'  housing
and  Retirement  facilities  located  across the United  States.  The Retirement
Facilities may include  congregate  living,  assisted living and skilled nursing
facilities,  continuing care retirement  communities and life care  communities,
and medical office buildings and walk-in clinics.  The Properties will be leased
on a long-term,  "triple-net" basis. The Company may also provide Mortgage Loans
to operators of  Retirement  Facilities  in the  aggregate  principal  amount of
approximately 5 percent to 10 percent of the Company's total assets. The Company
also may offer Secured  Equipment Leases to operators of Retirement  Facilities.
The aggregate  principal  amount of Secured  Equipment Leases is not expected to
exceed 10 percent of the Company's total assets.

                         Liquidity and Capital Resources

Common Stock Offerings

     Pursuant to a registration  statement on Form S-11 under the Securities Act
of 1933,  effective  September  18,  1998,  the Company  registered  for sale an
aggregate of up to $155,000,000 of Shares of common stock (15,500,000  Shares at
$10 per Share),  with 500,000 of such Shares  available only to stockholders who
elected to participate in the Company's  reinvestment  plan. In connection  with
the Initial Offering,  the Company received  subscription proceeds of $9,718,974
(971,898  Shares),  including  $50,463 (5,046 Shares)  through the  reinvestment
plan.  Immediately following the completion of the Initial Offering, the Company
commenced the 2000 Offering.  Of the 15,500,000 Shares  ($155,000,000) of common
stock offered in the 2000 Offering,  up to 500,000 are available to stockholders
purchasing  Shares through the  reinvestment  plan.  The managing  dealer of the
offerings of Shares of the Company is CNL Securities  Corp., an affiliate of the
Advisor.

     As of December 31, 2001, the Company had received  aggregate  proceeds from
its Initial Offering,  the 2000 Offering and  contributions  from the Advisor of
$71,411,344  (7,141,131 Shares),  including $381,407 (38,141 Shares) through its
reinvestment  plan.  As of December  31,  2001,  the Company  had  received  net
offering  proceeds of  approximately  $63,100,000  following  the  deduction  of
selling commissions,  marketing support and due diligence expense  reimbursement
fees and offering expenses.  The Company has used  approximately  $34,100,000 of
the net  proceeds  to  invest  in three  Retirement  Facilities  (see  "Property
Acquisitions" below.)

     On January 10, 2002,  the Company  filed a  registration  statement on Form
S-11 with the Securities and Exchange commission in connection with the proposed
sale by the Company of up to an  additional  45,000,000  Shares of common  stock
($450,000,000)  in an offering  expected to commence  immediately  following the
completion of the 2000 Offering.  Of the 45,000,000  Share of common stock to be
offered in the 2002 Offering,  up to 5,000,000 will be available to stockholders
purchasing Shares through the Reinvestment Plan.


<PAGE>


     During the  period  January  1, 2002 to  February  11,  2002,  the  Company
received additional net offering proceeds of $22,124,327. The Company expects to
use any uninvested net proceeds,  plus any additional net proceeds from the 2000
Offering and the 2002 Offering to purchase  additional  Properties and to invest
in Mortgage Loans.  In addition,  the Company intends to borrow money to acquire
assets and to pay certain  related fees. The Company  intends to encumber assets
in  connection  with such  borrowing.  The  Company  has  obtained  a  revolving
$25,000,000  initial  Line of Credit.  The Company has also  obtained  Permanent
Financing.  The Line of Credit may be repaid with  offering  proceeds,  proceeds
from the sale of assets,  working capital or Permanent Financing.  The aggregate
amount of any  Permanent  Financing  is not expected to exceed 30 percent of the
Company's  total  assets and the  maximum  amount the  Company may borrow is 300
percent of the Company's net assets.

     Apart from the effects of reduced  economic  activity in general  following
the events of September 11, 2001, management does not anticipate that the events
of  September  11 will have a direct  effect  on the  health  care and  seniors'
housing industries.  However, Marriott International,  Inc., which has extensive
investments in the hospitality industry, guarantees, within certain limitations,
the  obligations  of the tenant of the  Company's  Orland  Park  Property to pay
minimum rent under the lease for the  property.  To the extent that  business or
leisure  travel  is  substantially  reduced  for a lengthy  period of time,  the
business of Marriott  International,  Inc. may be affected.  Management does not
anticipate that the events of September 11 will have a significant effect on the
Company's ability to raise capital in equity offerings.  Gross offering proceeds
during the year ended December 31, 2001 exceeded  levels of previous  years.  In
addition, the Company has received gross offering proceeds of $22,124,327 during
the period of January 1, 2002 through February 11, 2002. Management expects that
future  offering  proceeds and amounts  available  under the  Company's  Line of
Credit will be sufficient to meet the Company's capital requirements.

Redemptions

     In October 1998, the Board of Directors  elected to implement the Company's
redemption  plan.  Under the  redemption  plan,  prior to such time,  if any, as
Listing  occurs,  any  stockholder who has held Shares for at least one year may
present all or any portion  equal to at least 25 percent of their  Shares to the
Company  for  redemption  in  accordance  with the  procedures  outlined  in the
redemption plan. Upon presentation,  the Company may, at its option,  redeem the
Shares,  subject to certain  conditions  and  limitations.  However,  at no time
during a 12-month period may the number of Shares redeemed by the Company exceed
5 percent of the number of Shares of the Company's  outstanding  common stock at
the beginning of such 12-month period.  During the years ended December 31, 2001
and 2000, 3,415 and 3,316 Shares, respectively, were redeemed at $9.20 per Share
(for a total of $31,420  and  $30,508,  respectively)  and  retired  from Shares
outstanding of common stock. No Shares were redeemed prior to 2000.

Line of Credit and Security Agreement

     The  Company  has a Line of Credit  which  allows  the  Company  to receive
advances of up to $25,000,000  until April 19, 2005, with an annual review to be
performed  by  the  bank  to  indicate  that  there  has  been  no   substantial
deterioration,  in the bank's  reasonable  discretion,  of the Company's  credit
quality.  Interest  expense on each advance shall be payable  monthly,  with all
unpaid  interest and principal due no later than five years from the date of the
advance.  Generally,  advances  under the Line of Credit  will bear  interest at
either (i) a rate per annum equal to LIBOR plus the difference between LIBOR and
the  bank's  base rate at the time of the  advance  or (ii) a rate  equal to the
bank's base rate,  whichever the Company  selects at the time advances are made.
The interest rate will be adjusted daily in accordance  with  fluctuations  with
the bank's rate or the LIBOR rate, as applicable. Notwithstanding the above, the
interest rate on the first  $9,700,000  drawn will be 8.75 percent through April
1, 2002,  and  thereafter  will bear  interest at either (i) or (ii) above as of
April 1, 2002.  In  addition,  a fee of 0.5 percent per advance  will be due and
payable to the bank on funds as  advanced.  Each  advance made under the Line of
Credit  will be  collateralized  by the  assignment  of  rents  and  leases.  In
addition,  the Line of  Credit  provides  that the  Company  will not be able to
further encumber the applicable  Property during the term of the advance without
the bank's consent.  The Company will be required,  at each closing,  to pay all
costs,  fees and expenses  arising in  connection  with the Line of Credit.  The
Company  must also pay the bank's  attorney's  fees,  subject to a maximum  cap,
incurred in connection with the Line of Credit and each advance. During the year
ended December 31, 2000,  the Company  obtained an advance on the Line of Credit
of $8,100,000.  As of December 31, 2001, the Company had repaid this advance and
had no amounts outstanding on its Line of Credit.

Market Risk

     There  were no  amounts  outstanding  on the  Company's  Line of  Credit at
December 31, 2001. The interest rate on the first $9,700,000 drawn (the "Initial
Draw") on the Company's  Line of Credit will be 8.75% through April 1, 2002. The
Company is subject to  interest  rate risk  through  advances  greater  than the
Initial Draw and/or amounts outstanding on the Initial Draw as of April 1, 2002,
on its variable rate Line of Credit.

Property Acquisitions

     On April 20, 2000,  the Company used offering  proceeds of  $5,748,900  and
advances under its Line of Credit of $8,100,000 to acquire its first Property, a
private-pay, assisted living community in Orland Park, Illinois. The Orland Park
Property  is a  Brighton  Gardens  by  Marriott  in Orland  Park,  Illinois.  In
connection  with the  purchase  of the Orland Park  Property,  the  Company,  as
lessor, entered into a long-term, triple-net lease agreement.

     On November 9, 2001, the Company used net offering  proceeds of $10,578,750
to acquire the Broadway Plaza at Pecan Park, an American Retirement  Corporation
assisted  living  property  located  in  Arlington,   Texas,  a  suburb  of  the
Dallas/Fort  Worth area.  The Arlington  Property,  which opened in August 2000,
includes 80 assisted  living units and 15 units for residents  with  Alzheimer's
and related memory  disorders.  In connection with the purchase of the Arlington
Property,  the Company,  as lessor,  entered into a long-term,  triple-net lease
agreement.  The  Company  and the  tenant of the  Arlington  Property  have also
entered into an agreement,  whereby,  the Arlington Property may be divided into
two  parcels  of land,  the  developed  land  that  includes  the  building  and
surrounding  grounds  (approximately  4.4  acres)  and  an  adjacent  parcel  of
undeveloped land (approximately 2.8 acres.) The tenant of the Arlington Property
has the option to purchase the  undeveloped  parcel of land for $1. The purchase
option  expires in 2011 and the Company may buy out the  purchase  option at any
time  prior  to its  expiration  for  $600,000,  the  fair  market  value of the
undeveloped  land at acquisition.  Development of the land is subject to certain
limitations  imposed by the  Company.  At  December  31,  2001,  the Company has
assigned  no value to the  undeveloped  parcel of land.  In the  event  that the
Company buys out the tenant's option,  the costs of the land will be capitalized
at that time.

     In addition, on November 9, 2001, the Company used net offering proceeds of
$9,672,000  to  acquire  the  Homewood  Residence  at Boca  Raton,  an  American
Retirement  Corporation assisted living Property located in Boca Raton, Florida,
approximately  20  miles  north of Fort  Lauderdale,  Florida.  The  Boca  Raton
Property, which opened in October 2000, includes 60 assisted living units and 14
units for residents with Alzheimer's and related memory disorders. In connection
with the purchase of the Boca Raton Property,  the Company,  as lessor,  entered
into a long-term, triple-net lease agreement.

     On  February  11,  2002,   the  Company  used  net  offering   proceeds  of
approximately  $9,700,000 to acquire the Homewood Residence at Coconut Creek, an
American  Retirement  Corporation  assisted living  property  located in Coconut
Creek,  Florida (the "Coconut Creek Property").  In connection with the purchase
of the Coconut Creek Property, the Company, as lessor, entered into a long-term,
triple-net lease agreement.

     In addition,  on February 11, 2002, the Company used net offering  proceeds
of  approximately  $5,500,000 and assumed  permanent  financing of approximately
$13,000,000 to acquire Holley Court Terrace, an American Retirement  Corporation
assisted  living  property  located  in  Oak  Park,   Illinois  (the  "Oak  Park
Property").  In  connection  with the  purchase  of the Oak Park  Property,  the
Company, as lessor, entered into a long-term, triple-net lease agreement.

     The Company has also made initial  commitments to acquire the Heritage Club
located in Greenwood Village,  Colorado (the "Greenwood Village Property").  The
Company's  estimated  purchase price for the Greenwood  Village Property will be
approximately   $17,900,000  and  may  be  partially  funded  through  Permanent
Financing.

     In addition,  the Company has made initial  commitments to acquire the five
additional  properties in  California,  Maryland,  Ohio and  Massachusetts.  The
Company's  estimated  purchase price for these  Properties will be approximately
$58,800,000 and may be partially funded through Permanent Financing and minority
interest.


<PAGE>


Cash and Cash Equivalents

     Until  Properties  are  acquired or Mortgage  Loans are entered  into,  net
offering proceeds are held in short-term (defined as investments with a maturity
of three months or less), highly liquid investments which management believes to
have appropriate  safety of principal.  This investment  strategy  provides high
liquidity in order to  facilitate  the  Company's  use of these funds to acquire
Properties at such time as Properties suitable for acquisition are located or to
fund Mortgage Loans. At December 31, 2001, the Company had $26,721,107  invested
in such short-term investments as compared to $177,884 at December 31, 2000. The
increase  in  the  amount  invested  in  short-term  investments  was  primarily
attributable  to subscription  proceeds  received from the sale of Shares during
the year ended  December  31,  2001,  partially  offset by the  purchase  of the
Arlington  Property and the Boca Raton  Property and  repayments  on the Line of
Credit.  The funds remaining at December 31, 2001,  along with additional  funds
expected  to be  received  from the sale of Shares,  will be used  primarily  to
purchase additional Properties, to make Mortgage Loans, to pay offering expenses
and acquisition  expenses,  to pay distributions to stockholders,  to meet other
Company expenses and, in management's discretion, to create cash reserves.

Liquidity Requirements

     During the years ended  December 31, 2001 and 2000,  the Company  generated
cash  from  operations  (which  includes  cash  received  from its  tenants  and
interest,  less cash paid for operating  expenses) of $2,173,379 and $1,096,019,
respectively.  For the  years  ended  December  31,  2001 and  2000,  cash  from
operations  includes security  deposits of $810,030 and $553,956,  respectively,
which were received from its tenants. Management expects the Company to meet its
short-term  liquidity  requirements,  other  than  for  offering  expenses,  the
acquisition and development of Properties,  and the investment in Mortgage Loans
and  Secured  Equipment   Leases,   through  cash  flow  provided  by  operating
activities.  Management believes that cash flow provided by operating activities
will be sufficient to fund normal  recurring  operating  expenses,  regular debt
service  requirements and distributions to stockholders.  To the extent that the
Company's  cash flow provided by operating  activities is not sufficient to meet
such short-term  liquidity  requirements as a result, for example, of unforeseen
expenses  due  to  the  tenants  defaulting  under  the  terms  of  their  lease
agreements, the Company will use borrowings under its Line of Credit. Management
expects  the  Company  to meet  its  other  short-term  liquidity  requirements,
including  payment of offering  expenses,  the  acquisition  and  development of
Properties,  and the investment in Mortgage Loans and Secured  Equipment Leases,
with  additional  advances  under  its  Line of  Credit  and  proceeds  from its
offerings.  Management  expects  the  Company  to meet its  long-term  liquidity
requirements through short- or long-term, unsecured or secured debt financing or
equity financing.

     An FF&E Reserve fund has been  established  in  accordance  with the Orland
Park Property lease  agreement with BG Orland Park, LLC. In accordance with such
agreement,  the tenant  deposits funds into the restricted  FF&E Reserve account
and periodically uses these funds to cover the cost of the replacement,  renewal
and  additions  to  furniture,  fixtures  and  equipment.  All funds in the FF&E
Reserve,  all interest earned on the funds and all property purchased with funds
from the FF&E Reserve are and will remain the  property of the  Company.  In the
event that the FF&E Reserve is not  sufficient  to maintain the Property in good
working condition and repair, the Company may make fixed asset expenditures,  in
which case annual rent will be increased.  The Arlington Property and Boca Raton
Property,  include FF&E Reserve accounts which will be held by each tenant until
the end of the lease term at which time all property  purchased  with funds from
the FF&E Reserve accounts will become the property of the Company. For the years
ended December 31, 2001 and 2000,  revenue  relating to the FF&E Reserve totaled
$39,199  and  $19,672,  respectively.  Due to the fact that the  Properties  are
leased on a long-term, triple-net basis, meaning the tenants are required to pay
repairs and  maintenance,  property taxes,  insurance and utilities,  management
does not believe that other working capital reserves are necessary at this time.
However,  management may maintain additional cash required to meet the Company's
working capital needs.

     Management   believes  that  its  Properties  are  adequately   covered  by
insurance.  In  addition,  the Advisor has  obtained  contingent  liability  and
property  coverage for the Company.  This insurance policy is intended to reduce
the Company's exposure in the unlikely event tenant's insurance policy lapses or
is insufficient to cover a claim relating to Property.



<PAGE>


Distributions

     The Company declared and paid  distributions  to its stockholders  totaling
$1,507,322  and  $502,078  during the years  ended  December  31, 2001 and 2000,
respectively.  In addition, on January 1, 2002 and February 1, 2002, the Company
declared distributions of $0.0583 per Share of common stock. These distributions
are payable in March 2002.

     For the years ended  December 31, 2001 and 2000,  approximately  65 percent
and 54 percent, respectively, of the distributions received by stockholders were
considered to be ordinary  income and  approximately  35 percent and 46 percent,
respectively,  were  considered  a return of  capital  for  federal  income  tax
purposes.  No amounts  distributed to stockholders  for the years ended December
31, 2001 and 2000,  were  required to be or have been  treated by the Company as
return of capital for purposes of calculating the stockholders'  return on their
invested capital.  The Company intends to continue to make distributions of cash
available  for such  purpose to the  stockholders  on a monthly  basis,  payable
quarterly.

Related Party Transactions

     During  the years  ended  December  31,  2001,  2000 and  1999,  affiliates
incurred  on  behalf  of  the  Company  $1,626,405,   $387,704,   and  $421,878,
respectively,  for certain  organizational and offering  expenses.  In addition,
during the years ended December 31, 2001 and 2000, affiliates incurred on behalf
of the Company  $353,852 and  $112,961,  respectively,  for certain  acquisition
expenses  and  $206,211  and  $157,878,   respectively,  for  certain  operating
expenses.  As of  December  31,  2001 and  2000,  the  Company  owed  affiliates
$1,772,807 and  $1,117,799,  respectively,  for such amounts and unpaid fees and
administrative  expenses.  The Advisor has agreed to pay all  offering  expenses
(excluding   commissions  and  marketing   support  and  due  diligence  expense
reimbursement  fees) which exceed 3 percent of the gross proceeds  received from
the sale of Shares of the Company in connection  with the 2000 Offering prior to
July 1, 2001.  Offering  expenses  paid by the  Company  together  with  selling
commissions,  the marketing support and due diligence expense  reimbursement fee
and the soliciting  dealer servicing fee incurred by the Company will not exceed
13 percent of the proceeds raised in connection with the 2000 Offering.

     Pursuant to the  Advisory  Agreement,  the Advisor is required to reimburse
the Company the amount by which the total operating expenses paid or incurred by
the Company exceed the Expense Cap. During the four quarters ended June 30, 2001
and 2000, the Company's  operating expenses exceeded the Expense Cap by $145,015
and $213,886,  respectively;  therefore, the Advisor reimbursed the Company such
amounts in accordance with the Advisory  Agreement.  Operating  expenses did not
exceed  the  Expense  Cap in any other  Expense  Years  during  the years  ended
December 31, 2001 and 2000.

     The board of directors of the Company has  authorized the Company to pursue
the opportunity to acquire a ten percent interest in a limited  partnership that
owns a building in which the Advisor leases office space.  If  consummated,  the
Company's  investment  in  the  partnership  is  expected  to  be  approximately
$300,000.  The remaining  interest in the limited  partnership is expected to be
owned by several affiliates of the Advisor.

Other

     Management is not aware of any material  trends,  favorable or unfavorable,
in either capital  resources or the outlook for long-term cash  generation,  nor
does management  expect any material  changes in the  availability  and relative
cost of such capital resources. Management expects that the cash to be generated
from  operations  will  be  adequate  to pay  operating  expenses  and  to  make
distributions to stockholders.

Critical Accounting Policies

     The Company's leases are accounted for under the provisions of Statement of
Accounting  Standard No. 13,  "Accounting  for Leases" ("FAS 13"), and have been
accounted for as operating  leases.  FAS 13 requires  management to estimate the
economic life of the leased property,  the residual value of the leased property
and the present value of minimum lease  payments to be received from the tenant.
In  addition,  management  assumes  that all  payments to be received  under its
leases  are  collectible.   Changes  in  management's  estimates  or  assumption
regarding  collectibility  of  lease  payments  could  result  in  a  change  in
accounting for the lease at the inception of the lease.



<PAGE>


     Acquisition  fees and  miscellaneous  acquisition  costs that are  directly
identifiable with Properties that are probable of being acquired are capitalized
and included in other assets.  Upon  purchase of a Property,  the fees and costs
that are directly  identifiable  with that  Property are  reclassified  to land,
building  and  equipment.  In the event a Property  is not  acquired  or becomes
probable of not being acquired,  any costs directly related to the Property will
be charged to expense.

                             Results of Operations

Comparison of the  year ended December 31, 2001 to the year ended
December 31, 2000

     As of December 31, 2001, the Company owned three Properties,  consisting of
land, buildings and equipment and had entered into long-term, "triple-net" lease
agreements relating to these Properties. The Property leases provide for minimum
annual base rent ranging from  approximately  $991,000 to $1,350,000,  which are
generally payable in monthly installments.  In addition, the leases also provide
that the annual base rent  required  under the terms of the leases will increase
at  predetermined  intervals.  In  addition  to annual  base rent,  tenants  pay
contingent  rent computed as a percentage  of gross sales of the  Property.  The
Company's lease for the Orland Park Property also requires the  establishment of
an FF&E Reserve.  The FF&E Reserve  established for the Orland Park Property has
been reported as additional rent for the years ended December 31, 2001 and 2000.

     During the years  ended  December  31, 2001 and 2000,  the  Company  earned
rental income from operating  leases and FF&E Reserve  revenue of $1,764,217 and
$981,672, respectively. The increase in rental income and FF&E Reserve income is
due to the Company  owning three  Properties  during the year ended December 31,
2001,  as compared to one Property  during the year ended  December 31, 2000. In
addition,  the Orland Park Property was owned for only a portion of 2000,  and a
full year in 2001.  Because  additional  Property  acquisitions  are expected to
occur,  revenues for the year ended December 31, 2001,  represent only a portion
of revenues which the Company is expected to earn in future periods.

     During the years  ended  December  31, 2001 and 2000,  the  Company  earned
$135,402 and $103,058,  respectively,  in interest  income from  investments  in
money market accounts and other short-term  highly liquid  investments and other
income.  The  increase  in  interest  income was  primarily  attributable  to an
increase in the dollar amount invested in short-term liquid  investments and the
period of time the funds were  invested  as compared  to 2000.  As net  offering
proceeds from the Company's  offering are invested in additional  Properties and
used to make Mortgage Loans, the percentage of the Company's total revenues from
interest  income from  investments in money market accounts or other short term,
highly liquid investments is expected to remain constant or decrease.

     Operating  expenses,   including  interest  expense  and  depreciation  and
amortization  expense,  were $983,654 and $859,952 for the years ended  December
31, 2001 and 2000,  respectively.  The increase in operating expenses during the
year ended  December 31, 2001, as compared to 2000,  was partially the result of
the Company  owning  three  Properties  during 2001  compared to one Property in
2000. Additionally, general operating and administrative expenses increased as a
result of Company growth.  Interest expense decreased from $367,374 for the year
ended  December 31, 2000 to $105,056 for the year ended  December 31, 2001.  The
decrease in interest  expense was a result of the Company  repaying  the amounts
outstanding under its Line of Credit during the year ended December 31, 2001.

     Pursuant to the  Advisory  Agreement,  the Advisor is required to reimburse
the Company the amount by which the total operating expenses paid or incurred by
the Company exceed the Expense Cap. During the Expense Years ended June 30, 2001
and 2000,  the  Company's  operating  expenses  totaled  $439,456 and  $287,084,
respectively,  exceeding the Expense Cap by $145,015 and $213,886, respectively;
therefore,  the Advisor has  reimbursed  the Company such amounts in  accordance
with the Advisory Agreement. The Company's operating expenses did not exceed the
Expense Cap in any other Expense Years during the years ended  December 31, 2001
and 2000.

     The dollar  amount of  operating  expenses  is  expected to increase as the
Company acquires additional  Properties and invests in Mortgage Loans.  However,
general operating and administrative  expenses as a percentage of total revenues
is  expected  to decrease as the  Company  acquires  additional  Properties  and
invests in Mortgage Loans.



<PAGE>


Comparison of the year ended December 31, 2000 to the year ended
December 31, 1999

     No operations  commenced  until the Company  received the minimum  offering
proceeds  of  $2,500,000  on July 14,  1999.  The  Company  acquired  its  first
private-pay,  assisted living Property,  the Orland Park Property,  on April 20,
2000.  As a result of the  acquisition,  the Company  earned  rental income from
operating  leases  and FF&E  Reserve  income of  $981,672  during the year ended
December  31,  2000.  All of the  Company's  rental  income  for the year  ended
December 31, 2000,  was earned from one lessee,  BG Orland Park,  LLC. No rental
income was earned for the year ended December 31, 1999.

     During the years  ended  December  31, 2000 and 1999,  the  Company  earned
$103,058 and $86,231, respectively, in interest income from investments in money
market  accounts.  The increase in interest  income is attributable to increased
subscription  proceeds  received  in 2000 being  temporarily  invested in highly
liquid investments pending investment in Properties and Mortgage Loans.

     Operating  expenses including  interest,  depreciation and amortization for
the  years  ended  December  31,  2000  and 1999  were  $859,952  and  $114,621,
respectively,  including  organizational  expenses of $35,000 in 1999. Operating
expenses increased during the year ended December 31, 2000, primarily due to the
fact that the Company did not commence  operations until July 14, 1999, and that
the Company  acquired its first  Property and received an advance on its Line of
Credit in 2000. As discussed above, during the Expense Year ended June 30, 2000,
the  Company's   operating  expenses  exceeded  the  Expense  Cap  by  $213,886;
therefore, the Advisor reimbursed the Company such amount in accordance with the
Advisory Agreement.

Other

     The  Company has made an  election  under  Internal  Revenue  Code  Section
856(c)(1),  to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue  Code of 1986,  as amended,  and  related  regulations.  As a REIT,  for
federal  income  tax  purposes,  the  Company  generally  will not be subject to
federal  income tax on income that it distributes  to its  stockholders.  If the
Company  fails to qualify as a REIT in any taxable  year,  it will be subject to
federal income tax on its 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 during which  qualification  is lost. Such an
event could materially affect the Company's net earnings.  However,  the Company
believes  that it is  organized  and operates in such a manner as to qualify for
treatment as a REIT for the years ended  December 31,  2001,  2000 and 1999.  In
addition, the Company intends to continue to operate the Company so as to remain
qualified as a REIT for federal income tax purposes.

     The Company's  current leases are, and it is anticipated that future leases
will be, triple-net leases and contain provisions that management  believes will
mitigate the effect of inflation. Such provisions will include clauses requiring
the payment of  percentage  rent based on certain  gross sales above a specified
level and/or automatic increases in base rent at specified times during the term
of the lease.  Management  expects that  increases in gross sales volumes due to
inflation  and real sales growth  should  result in an increase in rental income
over  time.  Continued  inflation  also may cause  capital  appreciation  of the
Company's Properties.  Inflation and changing prices,  however, also may have an
adverse  impact  on  the  sales  of the  Properties  and  on  potential  capital
appreciation of the Properties.

     Management  of the  Company  currently  knows of no trends that will have a
material  adverse  effect  on  liquidity,   capital   resources  or  results  of
operations.

     New Accounting Standards - In July 2001, the Financial Accounting Standards
Board  ("FASB")  issued  Statement of Financial  Accounting  Standards  No. 141,
"Business Combinations" ("FAS 141"), Statement of Financial Accounting Standards
No. 142,  "Goodwill  and  Intangible  Assets"  ("FAS  142"),  and  Statement  of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations" ("FAS 143"). FAS 141 requires business combinations initiated after
June 30, 2001, to be accounted for using the purchase  method of accounting  and
broadens the criteria for recording  intangible  assets  separate from goodwill.
FAS 142 requires the use of a nonamortization  approach to account for purchased
goodwill and certain intangibles. Under a nonamortization approach, goodwill and
certain intangibles must be reviewed for impairment and written down and charged
to results of  operations  only in the  periods in which the  recorded  value of
goodwill and certain  intangibles is more than its estimated fair value. FAS 143
requires that the fair value of a liability for an asset  retirement  obligation
be recognized in the period in which it is incurred if a reasonable  estimate of
the  fair  value  can  be  made.  The  associated  asset  retirement  costs  are
capitalized as part of the carrying  amount of the long-lived  asset. In October
2001,  the  FASB  issued  Statement  of  Financial   Accounting  Standards  144,
"Accounting  for the  Impairment  or Disposal of Long Lived Assets" ("FAS 144"),
which  requires long lived assets to be disposed of to be valued at the lower of
the carrying  amount or estimated fair value,  less the cost to sell the assets.
The Company expects that the implementation of these pronouncements will have no
material impact on the Company's results of operations.

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk

     See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Market Risk for information  related to quantitative and
qualitative disclosures about market risk.


Item 8.      Financial Statements and Supplementary Data


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES



                                    CONTENTS






                                                                           Page

Report of Independent Certified Public Accountants                         18

Financial Statements:

    Consolidated Balance Sheets                                            19

    Consolidated Statements of Operations                                  20

    Consolidated Statements of Stockholders' Equity                        21

    Consolidated Statements of Cash Flows                                  22-23

    Notes to Consolidated Financial Statements                             24-32


<PAGE>







               Report of Independent Certified Public Accountants



To the Board of Directors and Shareholders
CNL Retirement Properties, Inc.


In our opinion, the accompanying consolidated financial statements listed in the
index appearing under Item 14(a)(1)  present fairly,  in all material  respects,
the  financial  position  of  CNL  Retirement   Properties,   Inc.  (a  Maryland
corporation) and its subsidiaries at December 31, 2001 and 2000, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period  ended  December 31,  2001,  in  conformity  with  accounting  principles
generally accepted in the United States of America. In addition, in our opinion,
the  financial  statement  schedule  listed in the index  appearing  under  Item
14(a)(2)  presents fairly, in all material  respects,  the information set forth
therein when read in conjunction with the related  financial  statements.  These
financial statements and the financial statement schedule are the responsibility
of the  Company's  management;  our  responsibility  is to express an opinion on
these  financial  statements and the financial  statement  schedule based on our
audits.  We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates made by management,  and evaluating the overall financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.





/S/ PRICEWATERHOUSECOOPERS LLP

Orlando,  Florida
January 23, 2002, except as to Note 12 for which the date is February 11, 2002


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

<c>

                                                                                         December 31,
                                                                                 2001                   2000
                                                                             ------------           ------------

                                ASSETS

Land, buildings and equipment on operating leases, net                       $ 35,232,568           $ 14,417,908
Cash and cash equivalents                                                      26,721,107                177,884
Restricted cash                                                                    35,109                 17,312
Receivables                                                                       180,163                  2,472
Loan costs, less accumulated amortization of $18,981 and $7,798                    36,936                 48,119
Accrued rental income                                                              97,793                 21,128
Other assets                                                                    2,143,213                  3,737
                                                                             ------------           ------------
                                                                             $ 64,446,889           $ 14,688,560
                                                                             ============           ============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
    Line of credit                                                           $         --            $ 3,795,000
    Due to related parties                                                      1,772,807              1,117,799
    Accounts payable and accrued expenses                                         294,839                  5,864
    Interest payable                                                                   --                 11,045
    Security deposits                                                           1,363,986                553,956
    Rent paid in advance                                                          105,215                  1,348
                                                                             ------------           ------------
          Total liabilities                                                     3,536,847              5,485,012
                                                                             ------------           ------------


Stockholders' equity:
    Preferred stock, without par value.
       Authorized and unissued 3,000,000 shares                                        --                     --
    Excess shares, $.01 par value per share.
       Authorized and unissued 103,000,000 shares                                      --                     --
    Common stock, $.01 par value per share.
       Authorized 100,000,000 shares, issued 7,141,131 and 1,189,156
       shares, respectively, outstanding 7,134,400 and 1,185,840 shares,
       respectively                                                                71,344                 11,858
    Capital in excess of par value                                             61,786,149              9,547,784
    Accumulated distributions in excess of net earnings                          (947,451)              (356,094)
                                                                             ------------           ------------
          Total stockholders' equity                                           60,910,042              9,203,548
                                                                             ------------           ------------
                                                                             $ 64,446,889           $ 14,688,560
                                                                             ============           ============
</TABLE>






                See accompanying notes to consolidated financial statements.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

<c>
                                                                 Year Ended December 31,
                                                         2001              2000              1999
                                                     -----------       -----------       -----------

Revenues:
    Rental income from operating leases              $ 1,725,018       $   962,000       $        --
    FF&E reserve income                                   39,199            19,672                --
    Interest and other income                            135,402           103,058            86,231
                                                     -----------       -----------       -----------
                                                       1,899,619         1,084,730            86,231
                                                     -----------       -----------       -----------

Expenses:
    Interest                                             105,056           367,374                --
    General operating and administrative                 395,268           340,086            79,621
    Asset management fees to related party                93,219            55,396                --
    Organizational costs                                      --                --            35,000
    Reimbursement of operating expenses
       from related party                               (145,015)          213,886)               --
    Depreciation and amortization                        535,126           310,982                --
                                                     -----------       -----------       -----------
                                                         983,654           859,952           114,621
                                                     -----------       -----------       -----------
Net Earnings (Loss)                                  $   915,965       $   224,778       $   (28,390)
                                                     ===========       ===========       ===========

Net Earnings (Loss) Per Share of Common
    Stock (Basic and Diluted)                        $      0.38       $      0.27       $     (0.07)
                                                    ============       ===========       ===========

Weighted Average Number of Shares of
    Common Stock Outstanding (Basic
    and Diluted)                                       2,391,072           845,833           412,713
                                                    ============       ===========       ===========
</TABLE>




















          See accompanying notes to consolidated financial statements.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  Years Ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>

<c>

                                                              Common stock                           Accumulated
                                                          ----------------------    Capital in    distributions in
                                                            Number         Par      excess of       excess of net
                                                          of Shares       value     par value          earnings           Total
                                                          ----------    --------    ----------    ----------------     ------------

Balance at December 31, 1998                                  20,000      $  200    $  199,800    $             --     $    200,000

   Subscriptions received for common stock
       through public offering and distribution
       reinvestment plan                                     543,528       5,435     5,429,848                  --        5,435,283

   Subscriptions held in escrow at December 31, 1999         (23,500)       (235)     (234,765)                 --         (235,000)

   Stock issuance costs                                           --          --    (2,029,352)                 --       (2,029,352)

   Net loss                                                       --          --            --             (28,390)         (28,390)

   Distributions declared and paid ($0.125 per share)             --          --            --             (50,404)         (50,404)
                                                          ----------    --------    ----------    ----------------     ------------
Balance at December 31, 1999                                 540,028       5,400     3,365,531             (78,794)       3,292,137

   Subscriptions received for common stock
       through public offerings and distribution
       reinvestment plan                                     625,628       6,256     6,250,054                  --        6,256,310

   Subscriptions released from escrow                         23,500         235       234,765                  --          235,000

   Retirement of common stock                                 (3,316)        (33)      (30,475)                 --          (30,508)

   Stock issuance costs                                           --          --    (1,027,216)                 --       (1,027,216)

   Adjustment to previously accrued stock issuance costs          --          --       755,125                  --          755,125

   Net earnings                                                   --          --            --             224,778          224,778

   Distributions declared and paid ($0.5785 per share)            --          --            --            (502,078)        (502,078)
                                                          ----------    --------    ----------    ----------------     ------------
Balance at December 31, 2000                               1,185,840      11,858     9,547,784            (356,094)       9,203,548

   Subscriptions received for common stock
       through public offering and distribution
       reinvestment plan                                   5,951,975      59,520    59,460,231                  --       59,519,751

   Retirement of common stock                                 (3,415)       (34)       (31,386)                 --          (31,420)

   Stock issuance costs                                           --          --    (7,190,480)                 --       (7,190,480)

   Net earnings                                                   --          --            --             915,965          915,965

   Distributions declared and paid ($0.6996 per share)            --          --            --          (1,507,322)      (1,507,322)
                                                          ----------    --------   -----------    ----------------     ------------
Balance at December 31, 2001                               7,134,400    $ 71,344  $ 61,786,149    $       (947,451)    $ 60,910,042
                                                          ==========    ========  ============    ================     ============
</TABLE>












          See accompanying notes to consolidated financial statements.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

<c>
                                                                            Year Ended December 31,
                                                                    2001             2000             1999
                                                              ------------      ------------      ------------
Increase (Decrease) in Cash and Cash Equivalents:

     Operating Activities:
       Net earnings (loss)                                    $    915,965      $    224,778      $    (28,390)
       Adjustments to reconcile net earnings (loss) to
         net cash provided by operating activities:
           Depreciation                                            523,943           303,184                --
           Amortization                                             11,183             7,798                --
           Organizational costs                                         --                --            20,000
           Changes in operating assets and liabilities:
              Receivables                                         (177,691)           (2,472)               --
              Accrued rental income                                (76,665)           (21,12)               --
              Other assets                                          (5,737)            1,798            (5,535)
              Interest payable                                     (11,045)           11,045                --
              Accounts payable and other accrued
                 expenses                                           45,469           (14,173)           20,037
              Due to related parties                                34,060            29,885             6,739
         Security deposits                                         810,030           553,956                --
         Rent paid in advance                                      103,867             1,348                --
                                                              ------------      ------------      ------------
                  Net cash provided by operating
                    activities                                   2,173,379         1,096,019            12,851
                                                              ------------      ------------      ------------

     Investing Activities:
       Additions to land, buildings and equipment on
         operating leases                                      (20,269,138)      (13,848,900)               --
       Payment of acquisition costs                             (2,644,534)         (562,491)               --
       Increase in restricted cash                                 (17,797)          (17,312)               --
                                                              ------------      -------------     ------------
                  Net cash used in investing activities        (22,931,469)      (14,428,703)               --
                                                              ------------      ------------      ------------

     Financing Activities:
       Reimbursement of organizational, offering
         and acquisition costs paid by related party
         on behalf of the Company                               (1,735,996)         (411,875)           (2,447)
       Proceeds from line of credit                                     --         8,100,000                --
       Payment of loan costs                                            --           (55,917)               --
       Repayment of borrowings on line of credit                (3,795,000)       (4,305,000)               --
       Subscriptions received from stockholders                 59,519,751         6,491,310         5,200,283
       Distributions to stockholders                            (1,507,322)         (502,078)          (50,404)
       Retirement of common stock                                  (13,020)          (30,508)               --
       Payment of stock issuance costs                          (5,167,100)         (519,586)         (416,153)
                                                              ------------      ------------      ------------
                  Net cash provided by financing activities     47,301,313         8,766,346         4,731,279
                                                              ------------      ------------      ------------

Net Increase (Decrease) in Cash and Cash Equivalents            26,543,223        (4,566,338)        4,744,130
Cash and Cash Equivalents at Beginning of Year                     177,884         4,744,222                92
                                                              ------------      ------------      ------------
Cash and Cash Equivalents at End of Year                      $ 26,721,107      $    177,884      $  4,744,222
                                                              ============      ============      ============

          See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>

<c>
                                                                            Year Ended December 31,
                                                                  2001              2000              1999
                                                              ------------      ------------      ------------

Supplemental Schedule of Non-Cash Investing
    and Financing Activities:

       Amounts incurred by the Company and paid by
         related parties on behalf of the Company
         and its subsidiaries were as follows:
           Acquisition costs                                  $    353,852      $    112,961      $     98,206
           Stock issuance costs                                  1,626,405           387,704           421,878
                                                              ------------      ------------      ------------
                                                              $  1,980,257      $    500,665      $    520,084
                                                             ============       ============      ============

       Adjustment to previously accrued stock
         issuance costs                                       $         --      $    755,125      $         --
                                                              ============      ============      ============

Supplemental disclosure of cash flow information:

       Cash paid during the year for interest                 $    116,101      $    356,329      $         --
                                                              ============      ============      ============
</TABLE>


























          See accompanying notes to consolidated financial statements.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  Years Ended December 31, 2001, 2000 and 1999


1.       Significant Accounting Policies:
         -------------------------------

         Organization and Nature of Business - CNL Retirement  Properties,  Inc.
         was organized pursuant to the laws of the state of Maryland on December
         22, 1997. The Company was a development  stage enterprise from December
         22,  1997  through  July 13,  1999.  CNL  Retirement  GP Corp.  and CNL
         Retirement LP Corp.  are wholly owned  subsidiaries  of CNL  Retirement
         Properties, Inc. organized in Delaware in December 1999. CNL Retirement
         Partners, LP is a Delaware limited partnership formed in December 1999.
         CNL Retirement GP Corp. and CNL Retirement LP Corp. are the general and
         limited  partner,  respectively,  of CNL Retirement  Partners,  LP. CNL
         Retirement - GP/Holding  Corp. was formed in June 2001, to serve as the
         general partner of various other wholly owned  subsidiaries  which have
         been or will be formed for the purpose of acquiring future  properties.
         The term "Company" includes, unless the context otherwise requires, CNL
         Retirement   Properties,   Inc.,  CNL  Retirement  Partners,   LP,  CNL
         Retirement  GP  Corp.,  CNL  Retirement  LP  Corp.,  CNL  Retirement  -
         GP/Holding Corp. and each of their subsidiaries.

         The Company intends to use the proceeds from its public  offerings (see
         Note 2), after deducting offering  expenses,  primarily to acquire real
         estate properties (the "Property or Properties") related to health care
         and  seniors'  housing  facilities  ("Retirement  Facilities")  located
         across  the  United  States.  The  Retirement  Facilities  may  include
         congregate  living,  assisted  living and skilled  nursing  facilities,
         continuing care retirement  communities and life care communities,  and
         medical office buildings and walk-in  clinics.  The Company may provide
         mortgage  financing  ("Mortgage  Loans")  to  operators  of  Retirement
         Facilities in the aggregate  principal  amount of approximately 5 to 10
         percent of the  Company's  total  assets.  The  Company  also may offer
         furniture, fixture and equipment financing ("Secured Equipment Leases")
         to operators of Retirement Facilities. Secured Equipment Leases will be
         funded from the proceeds of a loan in an amount up to 10 percent of the
         Company's total assets.

         Principles of Consolidation - The accompanying  consolidated  financial
         statements include the accounts of CNL Retirement Properties,  Inc. and
         its wholly owned subsidiaries,  CNL Retirement GP Corp., CNL Retirement
         LP  Corp.,  CNL  Retirement  -  GP/Holding  Corp.  and  each  of  their
         subsidiaries.  All significant  intercompany  balances and transactions
         have been eliminated.

         Revenue Recognition - The Company follows Staff Accounting Bulletin No.
         101 ("SAB 101") which provides the  Securities and Exchange  Commission
         staff's views in applying generally accepted  accounting  principles to
         selected revenue  recognition  issues.  SAB 101 requires the Company to
         defer  recognition  of percentage  rental  income until the  thresholds
         requiring such payments in accordance with the lease terms are met.

         Real Estate and Lease  Accounting - Land,  buildings  and equipment are
         leased to unrelated  third parties on a triple-net  basis,  whereby the
         tenants are generally  responsible for all operating  expenses relating
         to the Property,  including property taxes, insurance,  maintenance and
         repairs.

         The Property leases are accounted for using the operating method. Under
         the  operating  method,  land,  buildings and equipment are recorded at
         cost including  acquisition and closing costs, revenue is recognized as
         rentals  are  earned and  depreciation  is  charged  to  operations  as
         incurred.  Buildings and equipment are depreciated on the straight-line
         method  over  their  estimated  useful  lives  of 40 and 3 to 7  years,
         respectively.  Income is recognized on a  straight-line  basis so as to
         produce a constant  periodic rent over the lease term commencing on the
         date  the  Property  is  placed  in  service.   Accrued  rental  income
         represents the aggregate amount of income recognized on a straight-line
         basis in excess of scheduled rental payments to date.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


1.       Significant Accounting Policies - Continued:
         -------------------------------------------

         When  a  Property   is  sold,   the  related   costs  and   accumulated
         depreciation,  plus any accrued rental income, will be removed from the
         accounts  and any gain or loss from sale will be  reflected  in income.
         Management reviews its assets for impairment whenever events or changes
         in  circumstances  indicate that the carrying  amount of the assets may
         not be recoverable  through operations.  Management  determines whether
         impairment  in value has occurred by  comparing  the  estimated  future
         undiscounted cash flows,  including the residual value of the Property,
         with the carrying cost of the Property.  If an impairment is indicated,
         the assets are adjusted to their fair value.

         Cash and Cash  Equivalents  - The Company  considers  all highly liquid
         investments  with a maturity of three months or less when  purchased to
         be cash  equivalents.  Cash  and cash  equivalents  consist  of  demand
         deposits at commercial  banks and money market funds (some of which are
         backed by government  securities).  Cash equivalents are stated at cost
         plus accrued interest, which approximates market value.

         Cash accounts maintained on behalf of the Company in demand deposits at
         commercial  banks and money market funds may exceed  federally  insured
         levels;  however,  the Company has not  experienced  any losses in such
         accounts.  Management  believes  the  Company  is  not  exposed  to any
         significant credit risk on cash and cash equivalents.

         Loan Costs - Loan costs incurred in connection  with the Company's line
         of credit have been  capitalized  and are being amortized over the term
         of the loan using the  straight-line  method,  which  approximates  the
         effective interest method.

         Income  Taxes - The  Company has made an election to be taxed as a real
         estate  investment trust ("REIT") under Sections 856 through 860 of the
         Internal Revenue Code of 1986, as amended, and related regulations. The
         Company generally will not be subject to federal corporate income taxes
         on amounts  distributed  to  stockholders,  providing it distributes at
         least 90 percent of its REIT  taxable  income and meets  certain  other
         requirements  for qualifying as a REIT.  Accordingly,  no provision for
         federal  income  taxes has been made in the  accompanying  consolidated
         financial statements.

         Earnings Per Share - Basic earnings per share is calculated  based upon
         net earnings (income available to common  stockholders)  divided by the
         weighted  average number of shares of common stock  outstanding  during
         the  period.  The  weighted  average  number of shares of common  stock
         outstanding  for the years ended December 31, 2001,  2000 and 1999 were
         2,391,072, 845,833 and 412,713,  respectively. As of December 31, 2001,
         2000 and 1999, the Company did not have any potentially dilutive common
         shares.

         Reclassification   -  Certain  items  in  the  prior  years'  financial
         statements have been reclassified to conform with the 2001 presentation
         including a change in  presentation of the statement of cash flows from
         the  direct to the  indirect  method.  These  reclassifications  had no
         effect on stockholders' equity or net earnings.

         Use of Estimates - Management of the Company has made certain estimates
         and assumptions  relating to the reporting of assets and liabilities to
         prepare these  consolidated  financial  statements  in conformity  with
         generally accepted accounting  principles.  Actual results could differ
         from those estimates.



<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000 and 1999


1.       Significant Accounting Policies - Continued:
         -------------------------------------------

         New  Accounting  Standards  - In July 2001,  the  Financial  Accounting
         Standards  Board  ("FASB")  issued  Statement of  Financial  Accounting
         Standards No. 141, "Business  Combinations"  ("FAS 141"),  Statement of
         Financial  Accounting  Standards  No.  142,  "Goodwill  and  Intangible
         Assets" ("FAS 142"),  and Statement of Financial  Accounting  Standards
         No. 143, "Accounting for Asset Retirement Obligations" ("FAS 143"). FAS
         141 requires business combinations initiated after June 30, 2001, to be
         accounted for using the purchase  method of accounting and broadens the
         criteria for recording  intangible  assets separate from goodwill.  FAS
         142  requires  the use of a  nonamortization  approach  to account  for
         purchased  goodwill and certain  intangibles.  Under a  nonamortization
         approach,  goodwill  and  certain  intangibles  must  be  reviewed  for
         impairment  and written down and charged to results of operations  only
         in the  periods in which the  recorded  value of  goodwill  and certain
         intangibles  is more than its  estimated  fair value.  FAS 143 requires
         that the fair value of a liability for an asset  retirement  obligation
         be  recognized  in the period in which it is incurred  if a  reasonable
         estimate of the fair value can be made. The associated asset retirement
         costs are  capitalized as part of the carrying amount of the long-lived
         asset.  In  October  2001,  the  FASB  issued  Statement  of  Financial
         Accounting Standards 144, "Accounting for the Impairment or Disposal of
         Long Lived Assets" ("FAS 144"),  which requires long lived assets to be
         disposed  of to be  valued  at the  lower  of the  carrying  amount  or
         estimated  fair value,  less the cost to sell the  assets.  The Company
         expects that the  implementation of these  pronouncements  will have no
         material impact on the Company's results of operations.

2.       Public Offerings:
         ----------------

         On September 18, 2000, the Company  completed its initial  offering and
         commenced a subsequent  2000  offering.  As of December  31, 2001,  the
         Company had received total  proceeds from the Initial  Offering and the
         2000 Offering of $71,211,344  (7,121,131  shares),  including  $381,407
         (38,141 shares) through the distribution reinvestment plan.

         On January 10, 2002, the Company filed a registration statement on Form
         S-11 with the Securities and Exchange Commission in connection with the
         proposed sale by the Company of up to 45,000,000  additional  shares of
         common  stock  ($450,000,000)  in  an  offering  expected  to  commence
         immediately following the completion of the Company's 2000 Offering. Of
         the  45,000,000  shares of common stock to be offered,  up to 5,000,000
         will  be  available  to  stockholders  purchasing  shares  through  the
         reinvestment plan.

3.       Land, Buildings and Equipment on Operating Leases:
         -------------------------------------------------

         As of December 31, 2001, the Company owned three Properties  consisting
         of land,  buildings  and  equipment,  each of  which  was  leased  on a
         long-term,  triple-net  basis to a Retirement  Facility  operator.  The
         leases are for 15 years,  provide for minimum and  contingent  rent and
         require the tenants to pay executory  costs.  In addition,  the tenants
         pay all property taxes and assessments and carry insurance coverage for
         public  liability,  property damage,  fire and extended  coverage.  The
         lease  options  allow the  tenants  to renew the leases for two or four
         successive  five-year  periods subject to the same terms and conditions
         of the  initial  leases.  The lease for the  Property  in Orland  Park,
         Illinois  also  requires  the  establishment  of a capital  expenditure
         reserve  fund,  which will be used for the  replacement  and renewal of
         furniture,  fixtures and equipment  relating to the Property (the "FF&E
         Reserve").  Funds in the FF&E  Reserve  have  been  paid,  granted  and
         assigned  to the  Company  as  additional  rent.  For the  years  ended
         December  31, 2001 and 2000,  revenues  from the FF&E  Reserve  totaled
         $39,199 and $19,672, respectively.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000 and 1999


3.       Land, Buildings and Equipment on Operating Leases - Continued:
         -------------------------------------------------------------

         Land,  buildings  and  equipment on operating  leases  consisted of the
         following at December 31:
<TABLE>
<CAPTION>

<c>
                                                                 2001               2000
                                                            ------------        ------------

                      Land                                  $  4,649,497        $  2,162,388
                      Buildings                               29,209,418          11,533,074
                      Equipment                                2,200,780           1,025,630
                                                            ------------        ------------
                                                              36,059,695          14,721,092
                      Less accumulated depreciation             (827,127)           (303,184)
                                                            ------------        ------------

                                                            $ 35,232,568        $ 14,417,908
                                                            ============        ============
</TABLE>

         The leases provide for increases in the minimum annual rents commencing
         at  predetermined   intervals  during  the  leases.  Such  amounts  are
         recognized  on a  straight-line  basis  over the  terms  of the  leases
         commencing on the date the Properties  were placed in service.  For the
         years ended December 31, 2001 and 2000, the Company  recognized $76,665
         and  $21,128,  respectively,  of such  rental  income.  This  amount is
         included in rental  income from  operating  leases in the  accompanying
         consolidated statements of operations.

         The  following  is a schedule of future  minimum  lease  payments to be
         received on the noncancellable operating leases at December 31, 2001:

                 2002                                         $ 3,453,472
                 2003                                           3,505,635
                 2004                                           3,548,049
                 2005                                           3,591,313
                 2006                                           3,635,441
                 Thereafter                                    36,243,659
                                                              -----------

                                                              $53,977,569
                                                              ===========

         Since the leases are renewable at the option of the tenants,  the above
         table  only  presents  future  minimum  lease  payments  due during the
         initial  lease  terms.  In  addition,  this table does not  include any
         amounts  for future  contingent  rents,  which may be  received  on the
         leases based on a percentage of the tenants' gross sales.

4.       Other Assets:
         ------------

         Other  assets as of December  31, 2001 and 2000,  were  $2,143,213  and
         $3,737,  respectively,  and consisted of miscellaneous prepaid expenses
         and  miscellaneous  acquisition costs that will be capitalized to land,
         buildings and equipment upon the purchase of Properties.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000 and 1999


5.       Redemption of Shares:
         --------------------

         The Company has a redemption  plan under which the Company may elect to
         redeem shares, subject to certain conditions and limitations. Under the
         redemption  plan,  prior  to such  time,  if  any,  as  listing  of the
         Company's   common   stock  on  a  national   securities   exchange  or
         over-the-counter market occurs, any stockholder who has held shares for
         at least one year may present  all or any portion  equal to at least 25
         percent of their  shares to the Company for  redemption  in  accordance
         with the procedures outlined in the redemption plan. Upon presentation,
         the Company may, at its option,  redeem the shares,  subject to certain
         conditions  and  limitations.  However,  at no time  during a  12-month
         period  may the  number  of shares  redeemed  by the  Company  exceed 5
         percent of the  number of shares of the  Company's  outstanding  common
         stock at the beginning of such 12-month period.  During the years ended
         December 31, 2001 and 2000,  3,415 and 3,316 shares,  respectively,  of
         common  stock were  redeemed and  retired.  No shares were  redeemed in
         1999.

6.       Line of Credit:
         --------------

         On April 20, 2000, the Company  entered into a revolving line of credit
         and security agreement with a bank to be used by the Company to acquire
         Properties (the "Line of Credit"). The Line of Credit provides that the
         Company  will be able to receive  advances of up to  $25,000,000  until
         April 19,  2005,  with an annual  review to be performed by the bank to
         indicate  that  there  has  been  no  substantial   deterioration,   as
         determined by the bank in its reasonable  discretion,  of the Company's
         credit  quality.  Interest  expense  on each  advance  shall be payable
         monthly,  with all unpaid interest and principal due no later than five
         years from the date of the advance. Generally,  advances under the Line
         of Credit  will bear  interest  at either (i) a rate per annum equal to
         the London Interbank  Offered Rate (LIBOR) plus the difference  between
         LIBOR and the  bank's  base rate at the time of the  advance  or (ii) a
         rate equal to the bank's base rate,  whichever  the Company  selects at
         the time advances are made. The interest rate will be adjusted daily in
         accordance with fluctuations with the bank's rate or the LIBOR rate, as
         applicable.  Notwithstanding  the above, the interest rate on the first
         $9,700,000  drawn  will be 8.75  percent  through  April 1,  2002,  and
         thereafter  will bear  interest at either (i) or (ii) above as of April
         1, 2002. In addition,  a fee of 0.5 percent per advance will be due and
         payable to the bank on funds as  advanced.  Each advance made under the
         Line of Credit will be  collateralized  by the  assignment of rents and
         leases. In addition,  the Line of Credit provides that the Company will
         not be able to further  encumber the applicable  Properties  during the
         term of the advance  without the bank's  consent.  The Company  will be
         required,  at each closing, to pay all costs, fees and expenses arising
         in  connection  with the Line of Credit.  The Company must also pay the
         bank's  attorney's  fees,   subject  to  a  maximum  cap,  incurred  in
         connection  with  the Line of  Credit  and each  advance.  The  Company
         obtained an advance of $8,100,000 relating to the Line of Credit during
         the year ended  December 31, 2000, in  connection  with the purchase of
         the Property in Orland  Park,  Illinois.  As of December 31, 2001,  the
         Company had repaid this advance and had no amounts  outstanding  on its
         Line of Credit.  In  connection  with the Line of Credit,  the  Company
         incurred $55,917 in closing costs.

7.       Stock Issuance Costs:
         --------------------

         The Company  has  incurred  certain  expenses  in  connection  with its
         offerings,  including commissions,  marketing support and due diligence
         expense  reimbursement  fees,  filing  fees,  and  legal,   accounting,
         printing  and  escrow  fees,  which have been  deducted  from the gross
         proceeds  of  the  offerings.  CNL  Retirement  Corp.  (the  "Advisor")
         advanced  preliminary  costs  incurred  prior to raising  capital.  The
         Advisor has agreed to pay all offering expenses (excluding  commissions
         and marketing  support and due diligence  expense  reimbursement  fees)
         which exceed 3 percent of the gross proceeds  received from the sale of
         shares of the Company in  connection  with the 2000  Offering  prior to
         July 1, 2001.  Offering  expenses  paid by the  Company  together  with
         selling  commissions,  the marketing  support and due diligence expense
         reimbursement  fee and the soliciting  dealer servicing fee incurred by
         the  Company  will not  exceed 13  percent  of the  proceeds  raised in
         connection with the 2000 Offering.


<PAGE>



                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000, and 1999


7.       Stock Issuance Costs - Continued:
         --------------------------------

         During the years ended  December 31, 2001,  2000 and 1999,  the Company
         incurred  $7,190,480,  $1,027,216  and  $1,089,013,   respectively,  in
         organizational and offering costs,  including $4,761,580,  $519,302 and
         $413,983,  respectively,  in commissions and marketing  support and due
         diligence expense reimbursement fees (see Note 9). All amounts incurred
         for the years ended  December  31, 2001 and 2000,  have been treated as
         stock issuance costs. For the year ended December 31, 1999,  $1,074,013
         were  treated  as  stock  issuance  costs,   $15,000  were  treated  as
         organization  costs and expensed.  The stock  issuance  costs have been
         charged to stockholders' equity subject to the cap described above.

8.       Distributions:
         -------------

         For the years ended December 31, 2001, 2000 and 1999,  approximately 65
         percent, 54 percent and 100 percent, respectively, of the distributions
         paid to stockholders were considered  ordinary income and for the years
         ended  December  31,  2001 and 2000,  approximately  35 percent  and 46
         percent,   respectively,   were  considered  a  return  of  capital  to
         stockholders for federal income tax purposes. No amounts distributed to
         the  stockholders for the years ended December 31, 2001, 2000 and 1999,
         are  required to be or have been  treated by the Company as a return of
         capital for purposes of calculating the  stockholders'  return on their
         invested capital.

9.       Related Party Arrangements:
         --------------------------

         Certain  directors  and officers of the Company hold similar  positions
         with the  Advisor  and the  managing  dealer  of the  Company's  public
         offerings,  CNL  Securities  Corp.  These  affiliates  are  entitled to
         receive fees and compensation in connection with the offerings, and the
         acquisition, management and sale of the assets of the Company.

         During the years ended  December 31, 2001,  2000 and 1999,  the Company
         incurred $4,463,981,  $486,846 and $388,109,  respectively,  in selling
         commissions due to CNL Securities Corp. for services in connection with
         the  offerings.  A substantial  portion of these  amounts  ($4,175,827,
         $437,940  and  $370,690,  respectively)  was or  will  be  paid  by CNL
         Securities Corp. as commissions to other broker-dealers.

         In addition,  CNL  Securities  Corp. is entitled to receive a marketing
         support  and due  diligence  expense  reimbursement  fee  equal  to 0.5
         percent of the total  amount  raised from the sale of shares,  all or a
         portion of which may be reallowed to other  broker-dealers.  During the
         years ended  December 31,  2001,  2000 and 1999,  the Company  incurred
         $297,599, $32,456 and $25,874, respectively, of such fees, the majority
         of which  was or will be  reallowed  to other  broker-dealers  and from
         which all bona fide due diligence expenses were paid.

         CNL Securities  Corp.  will also receive,  in connection  with the 2000
         Offering,  a soliciting  dealer  servicing fee payable  annually by the
         Company  beginning  on  December 31 of the year  following  the year in
         which  the 2000  Offering  is  completed  in the  amount  equal to 0.20
         percent of the aggregate investment of stockholders who purchase shares
         in the 2000 Offering. CNL Securities Corp. in turn may reallow all or a
         portion of such fees to soliciting  dealers whose client's holds shares
         on such date. As of December 31, 2001, no such fees had been incurred.




<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000 and 1999


9.       Related Party Arrangements - Continued:
         --------------------------------------

         The  Advisor is entitled to receive  acquisition  fees for  services in
         identifying  Properties  and  structuring  the  terms of  leases of the
         Properties  and  Mortgage  Loans  equal  to 4.5  percent  of the  gross
         proceeds of the offering,  loan proceeds from  permanent  financing and
         amounts  outstanding  on the  Line of  Credit,  if any,  at the time of
         listing the Company's common stock on a national securities exchange or
         over-the-counter  market,  but excluding  that portion of the permanent
         financing used to finance Secured  Equipment  Leases.  During the years
         ended  December  31,  2001,   2000  and  1999,  the  Company   incurred
         $2,676,430,  $292,108 and $232,865,  respectively,  of such fees.  Such
         fees  are  included  in  other  assets  prior  to  being  allocated  to
         individual Properties.

         The Company incurs operating  expenses relating to its  administration.
         Pursuant  to  the  advisory  agreement,  the  Advisor  is  required  to
         reimburse the Company the amount by which the total operating  expenses
         paid or incurred by the Company exceed in any four  consecutive  fiscal
         quarters  (the  "Expense  Year")  the  greater  of 2 percent of average
         invested assets or 25 percent of net income (the "Expense Cap"). During
         the  Expense  Years ended June 30,  2001 and June 30,  2000,  operating
         expenses   exceeded   the  Expense  Cap  by  $145,015   and   $213,886,
         respectively;  therefore,  the  Advisor  reimbursed  the  Company  such
         amounts  in  accordance  with the  advisory  agreement.  The  Company's
         operating  expenses did not exceed the Expense Cap in any other Expense
         Years during the years ended  December 31, 2001 and 2000.  For the year
         ended December 31, 1999, the Expense Cap was not applicable.

         The Company and the Advisor  have  entered  into an advisory  agreement
         pursuant to which the Advisor  receives a monthly asset  management fee
         of one-twelfth of 0.60 percent of the Company's real estate asset value
         and the  outstanding  principal  balance of any Mortgage Loan as of the
         end of the preceding  month.  During the years ended  December 31, 2001
         and 2000, the Company  incurred $93,219 and $55,396,  respectively,  of
         such fees. No such fees were incurred by the Company for 1999.

         The Advisor and its affiliates provide various administrative  services
         to the Company,  including  services related to accounting;  financial,
         tax and regulatory compliance reporting;  stockholder distributions and
         reporting;   due  diligence  and  marketing;   and  investor  relations
         (including  administrative  services in connection with the offerings),
         on a day-to-day  basis.  The expenses  incurred for these services were
         classified as follows:
<TABLE>
<CAPTION>

<c>
                                                                  Years Ended December 31,
                                                            2001             2000            1999
                                                        -----------      -----------      ----------

               Stock issuance costs                     $   769,853        $ 117,679      $  328,229
               Land, buildings and equipment on
                    operating leases and other
                    assets                                   37,053           31,370           6,455
               General operating and
                    administrative expenses                 199,726          197,869          38,796
                                                        -----------      -----------      ----------
                                                        $ 1,006,632      $   346,918      $  373,480
                                                        ===========      ===========      ==========
</TABLE>



<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000 and 1999


9.       Related Party Arrangements - Continued:
         --------------------------------------
<TABLE>
<CAPTION>

<c>
         Amounts due to related parties consisted of the following at December31:

                                                                            2001              2000
                                                                        ------------      ------------

                   Due to the Advisor and its affiliates:
                       Expenditures incurred for offering expenses
                           on behalf of the Company                     $  1,328,123      $    982,100
                        Accounting and administrative
                           services                                           62,313            32,964
                        Acquisition fees and miscellaneous
                           acquisition expenses                              226,986            96,526
                                                                        ------------      ------------
                                                                           1,617,422         1,111,590
                                                                        ------------      ------------

                   Due to CNL Securities Corp.:
                        Commissions                                          145,670             5,819
                        Marketing support and due diligence
                           expense reimbursement fee                           9,715               390
                                                                        ------------      ------------
                                                                             155,385             6,209
                                                                        ------------      ------------

                                                                        $  1,772,807      $  1,117,799
                                                                        ============      ============
</TABLE>

         The  Company  maintains  a bank  account  in a bank  in  which  certain
         officers and directors of the Company serve as directors,  and in which
         an affiliate of the Advisor is a stockholder. The amount deposited with
         this bank was $3,000,000 at December 31, 2001.

         In conjunction with a potential commercial paper borrowing transaction,
         the  Company  has  engaged an  affiliate  of the  Advisor to act as its
         structuring agent (the "Structuring Agent".) The Structuring Agent will
         receive an origination fee equal to 2 percent of the amount of the loan
         with $100,000 payable upon  engagement.  During the year ended December
         31, 2001, the Structuring Agent was paid the initial  engagement fee of
         $100,000. This amount is included in other assets at December 31, 2001,
         and will be capitalized as loan costs upon  completion of the borrowing
         transaction.

10.      Concentration of Credit Risk:

         The Company's  rental income for the year ended  December 31, 2001, was
         earned from three  lessees;  ARC Boca Raton,  Inc.  and ARC Pecan Park,
         LLC, which operate the Properties under American Retirement Corporation
         ("ARC"),  and BG Orland  Park,  LLC,  which  operates the Property as a
         Brighton  Gardens by Marriott.  All of the Company's  rental income for
         the year ended December 31, 2000, was earned from one lessee, BG Orland
         Park, LLC.

         Although  the  Company  intends  to  acquire   additional   Properties,
         including  Properties  located in various  states and  regions,  and to
         carefully  screen  its  tenants  in order to reduce  risks of  default,
         failure  of  the  lessees,  the  Marriott  brand  chain  or  ARC  would
         significantly impact the results of operations of the Company. However,
         management  believes  that the risk of such a default is reduced by the
         Company's initial and continuing due diligence procedures.



<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2001, 2000 and 1999


11.      Selected Quarterly Financial Data

         The following table presents  selected  unaudited  quarterly  financial
         data for each full quarter during the years ended December 31, 2001 and
         2000:
<TABLE>
<CAPTION>

<c>
        2001 Quarter                       First           Second        Third        Fourth           Year
        ------------                       -----           ------        -----        ------           ----

        Revenues                         $ 356,362      $ 356,336      $382,764      $804,157      $ 1,899,619
        Net income                          67,348        211,945       171,842       464,830          915,965
        Earnings per share:
           Basic and Diluted                  0.05           0.15          0.09          0.09             0.38



        2000 Quarter                       First          Second          Third       Fourth           Year
        ------------                       -----          ------          -----       ------           ----

        Revenues                         $  72,962      $ 295,622      $356,774      $359,372      $ 1,084,730
        Net income (loss)                  (25,178)       182,463        14,672        52,821          224,778
        Earnings (loss) per share:
           Basic and Diluted                 (0.04)          0.25          0.02          0.04             0.27
</TABLE>


12.      Subsequent Events:
         -----------------

         On  February  11,  2002,  the  Company  used net  offering  proceeds of
         approximately  $9,700,000 to acquire the Homewood  Residence at Coconut
         Creek,  an American  Retirement  Corporation  assisted  living property
         located in Coconut Creek,  Florida (the "Coconut Creek  Property").  In
         connection  with  the  purchase  of the  Coconut  Creek  Property,  the
         Company,  as  lessor,  entered  into  a  long-term,   triple-net  lease
         agreement.

         In  addition,  on February  11,  2002,  the Company  used net  offering
         proceeds of approximately $5,500,000 and assumed permanent financing of
         approximately  $13,000,000 to acquire Holley Court Terrace, an American
         Retirement  Corporation  assisted living property  located in Oak Park,
         Illinois (the "Oak Park Property").  In connection with the purchase of
         the  Oak  Park  Property,  the  Company,  as  lessor,  entered  into  a
         long-term, triple-net lease agreement.

         During the period  January 1, 2002,  through  February  11,  2002,  the
         Company  received  subscription  proceeds for an  additional  2,212,433
         shares ($22,124,327) of common stock.

         In  addition,  on January 1, 2002 and  February  1, 2002,  the  Company
         declared distributions  totalling $415,936 and $513,585,  respectively,
         or  $.0583  per  share of  common  stock,  payable  in March  2002,  to
         stockholders  of  record  on  January  1, 2002 and  February  1,  2002,
         respectively.



<PAGE>



Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         None.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

     The  information  required by this Item is incorporated by reference to the
Company's  Definitive  Proxy  Statement to be filed with the Commission no later
than April 30, 2002.


Item 11. Executive Compensation

     The  information  required by this Item is incorporated by reference to the
Company's  Definitive  Proxy  Statement to be filed with the Commission no later
than April 30, 2002.


Item 12. Security Ownership of Certain Beneficial Owners and Management

     The  information  required by this Item is incorporated by reference to the
Company's  Definitive  Proxy  Statement to be filed with the Commission no later
than April 30, 2002.


Item 13. Certain Relationships and Related Transactions

     The  information  required by this Item is incorporated by reference to the
Company's  Definitive  Proxy  Statement to be filed with the Commission no later
than April 30, 2002.


                                     PART IV
<TABLE>
<CAPTION>

<c>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)     The following documents are filed as part of this report.

         1.   Financial Statements

                  Report of Independent Certified Public Accountants

                  Consolidated Balance Sheets at December 31, 2001 and 2000

                  Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999

                  Consolidated  Statements of Stockholders'  Equity for the years ended December 31, 2001, 2000 and
                  1999

                  Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999

                  Notes to Consolidated Financial Statements

         2.   Financial Statement Schedules

                  Schedule III - Real Estate and Accumulated Depreciation at December 31, 2001

                  Notes to Schedule III - Real Estate and Accumulated Depreciation at December 31, 2001
</TABLE>

                  All other Schedules are omitted as the required information is
                  inapplicable  or is presented in the  financial  statements or
                  notes thereto.

         3.   Exhibits

              (a) Exhibits:

                  3.1      CNL Health Care Properties, Inc. Amended and Restated
                           Articles of  Incorporation.  (Included as Exhibit 3.1
                           to the  Registrant's  1998  Report on Form 10-K filed
                           with the Securities and Exchange  Commission on March
                           5, 1999, and incorporated herein by reference.)

                  3.2      CNL Health Care Properties, Inc. Bylaws. (Included as
                           Exhibit 3.2 to the  Registrant's  1998 Report on Form
                           10-K  filed   with  the   Securities   and   Exchange
                           Commission on March 5, 1999, and incorporated  herein
                           by reference.)

                  3.3      CNL  Health  Care   Properties,   Inc.   Articles  of
                           Amendment  to  Amended  and   Restated   Articles  of
                           Incorporation  dated  June  27,  2000.  (Included  as
                           Exhibit 3.3 to the Registrant's June 30, 2000, Report
                           on Form 10-Q filed with the  Securities  and Exchange
                           Commission on August 1, 2000, and incorporated herein
                           by reference.)

                  3.4      Articles of  Amendment  to the  Amended and  Restated
                           Articles   of   Incorporation   of  CNL  Health  Care
                           Properties,  Inc. dated August 24, 2000. (Included as
                           Exhibit 3.5 to Registration  Statement No.  333-37480
                           on Form S-11 and incorporated herein by reference.)

                  3.5      Amendment  No. 1 to the  Bylaws  of CNL  Health  Care
                           Properties,   Inc.   (Included   as  Exhibit  3.6  to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  4.1      Reinvestment   Plan   (Included  as  Exhibit  4.4  to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  10.1     Advisory  Agreement,  dated as of September 17, 2001,
                           between  CNL  Retirement  Properties,  Inc.  and  CNL
                           Retirement  Corp.  (Included  as Exhibit  10.1 to the
                           September  30,  2001,  Report on Form 10-Q filed with
                           the Securities and Exchange Commission on November 9,
                           2001, and incorporated herein by reference).

                  10.2     Indemnification  Agreement  between  CNL Health  Care
                           Properties,  Inc. and Thomas J.  Hutchison  III dated
                           February 29, 2000.  Each of the  following  directors
                           and/or  officers has signed a  substantially  similar
                           agreement as follows: James M. Seneff, Jr., Robert A.
                           Bourne, David W. Dunbar,  Timothy S. Smick, Edward A.
                           Moses, and Lynn E. Rose dated September 15, 1998, and
                           Phillip M.  Anderson,  Jr.  dated  February 19, 1999.
                           (Included  as  Exhibit  10.2 to the March  31,  2000,
                           Report on Form 10-Q  filed  with the  Securities  and
                           Exchange  Commission on May 3, 2000, and incorporated
                           herein by reference.)

                  10.3     Agreement of Limited  Partnership  of CNL Health Care
                           Partners,   LP.   (Included   as  Exhibit   10.10  to
                           Registration Statement No. 333-47411 on Form S-11 and
                           incorporated herein by reference.)

                  10.4     Purchase and Sale  Agreement  between CNL Health Care
                           Partners,  LP and Marriott  Senior  Living  Services,
                           Inc.,  relating to the Brighton Gardens by Marriott -
                           Orland Park,  Illinois.  (Included as Exhibit 10.4 to
                           the March 31,  2000,  Report on Form 10-Q  filed with
                           the  Securities  and  Exchange  Commission  on May 3,
                           2000, and incorporated herein by reference.)

                  10.5     Lease Agreement between CNL Health Care Partners,  LP
                           and  BG  Orland  Park,  LLC  dated  April  20,  2000,
                           relating to the Brighton Gardens by Marriott - Orland
                           Park,  Illinois.  (Included  as  Exhibit  10.5 to the
                           March 31,  2000,  Report on Form 10-Q  filed with the
                           Securities  and Exchange  Commission  on May 3, 2000,
                           and incorporated herein by reference.)

                  10.6     Revolving  Line of Credit  Agreement  with CNL Health
                           Care Properties,  Inc., CNL Health Care Partners,  LP
                           and Colonial Bank, dated April 20, 2000. (Included as
                           Exhibit  10.6 to the March 31,  2000,  Report on Form
                           10-Q  filed   with  the   Securities   and   Exchange
                           Commission on May 3, 2000, and incorporated herein by
                           reference.)

                  10.7     Real Estate  Purchase and Sale  Contract  between CNL
                           Retirement Corp. and American Retirement Corporation,
                           relating  to  the  Broadway  Plaza  at  Pecan  Park -
                           Arlington,  Texas.  (Included  as  Exhibit  10.14  to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  10.8     Lease Agreement between CNL Retirement - AM/Texas, LP
                           and ARC Pecan  Park,  L.P.  dated  November  9, 2001,
                           relating  to  the  Broadway  Plaza  at  Pecan  Park -
                           Arlington,  Texas.  (Included  as  Exhibit  10.15  to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  10.9     Real Estate  Purchase and Sale  Contract  between CNL
                           Retirement Corp. and American Retirement Corporation,
                           relating to the  Homewood  Residence  of Boca Raton -
                           Boca Raton,  Florida.  (Included as Exhibit  10.16 to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  10.10    Lease Agreement  between CNL Retirement - AM/Florida,
                           LP and ARC Boca Raton,  Inc.  dated November 9, 2001,
                           relating to the  Homewood  Residence  of Boca Raton -
                           Boca  Raton,  Florida.  (Included  as  Exhibit  10.17
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  21       Subsidiaries of the Registrant (Filed herewith.)

               (b)  The  Registrant  filed a report on Form 8-K on November  20,
                    2001, relating to the acquisition of two properties.

(b)     Other Financial Information

        The  Company  is  required  to file  audited  financial  information  of
        guarantors,  Marriott  International,  Inc.  ("Marriott")  and  American
        Retirement  Corporation  ("ARC"), of its tenants as a result of Marriott
        and ARC  guaranteeing  lease  payments for the  Company's  tenants which
        lease more than 20 percent of the Company's total assets at December 31,
        2001.  Marriott and ARC are public companies and as the date hereof, had
        not filed their Form 10-K;  therefore,  the financial statements are not
        available  to the Company to include in this  filing.  The Company  will
        file this financial  information under cover of a Form 10-K/A as soon as
        it is available.




<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 13th day of
February 2002.

                                    CNL RETIREMENT PROPERTIES, INC.

                           By:      ROBERT A. BOURNE
                                    Vice Chairman, President and Treasurer
                                    (Principal Financial and Accounting Officer)

                                    /s/ Robert A. Bourne
                                    ---------------------------
                                    ROBERT A. BOURNE


<PAGE>


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

<c>
              Signature                                    Title                                  Date

/s/ James M. Seneff, Jr.            Chairman of the Board and Chief Executive Officer      February 13, 2002
---------------------------
James M. Seneff, Jr.                (Principal Executive Officer)



/s/ Robert A. Bourne                Vice Chairman of the Board, President and Treasurer    February 13, 2002
---------------------------
Robert A. Bourne                    (Principal Financial and Accounting Officer)



/s/ David W. Dunbar                 Independent Director                                   February 13, 2002
---------------------------
David W. Dunbar



/s/ James W. Duncan, Jr.            Independent Director                                   February 13, 2002
---------------------------
James W. Duncan, Jr.



/s/ Edward A. Moses                 Independent Director                                   February 13, 2002
---------------------------
Edward A. Moses

</TABLE>


<PAGE>




                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2001




<TABLE>
<CAPTION>

<c>
                                                                                                                Costs Capitalized
                                                                                                                   Subsequent To
                                                                            Initial Cost                            Acquisition
                                                           ---------------------------------------------     ----------------------


                                             Encum-                                                           Improve     Carrying
                                             brances           Land          Building         Equipment       -ments        Costs
                                            ----------     -----------     ------------     ------------     ---------    ---------

Properties the Company has Invested
  in Under Operating Leases:

   Brighton Gardens by Marriott:
    Orland Park, Illinois                   $       --     $ 2,162,388     $ 11,533,074     $  1,044,018     $      --    $      --

   Broadway Plaza:
    Arlington, Texas                                --       1,343,538        9,174,538          602,226            --           --

   Homewood Residence:
    Boca Raton, Florida                             --       1,143,571        8,501,806          554,536            --           --
                                            ----------     -----------     ------------     ------------     ---------    ---------
                                            $       --     $ 4,649,497     $ 29,209,418     $  2,200,780     $      --    $      --
                                            ==========     ===========     ============     ============     =========    =========
</TABLE>




<PAGE>













<TABLE>
<CAPTION>

<c>
          Gross Amount at Which Carried
              At Close of Period (d)                                                                                Life on Which
---------------------------------------------------                                                                 Depreciation
                                                                                                                      in Latest
                                                                    Accumulated         Date of         Date       Income Statement
     Land          Building        Equipment          Total         Depreciation     Construction     Acquired       is Computed
-----------     ------------     ------------     ------------      ------------     ------------     --------     ----------------





$ 2,162,388     $ 11,533,074     $  1,044,018     $ 14,739,480      $    739,426         1999           4/00             (c)


  1,343,538        9,174,538          602,226       11,120,302            45,557         2000           11/01            (c)


  1,143,571        8,501,806          554,536       10,199,913            42,144         2000           11/01            (c)
-----------     ------------     ------------     ------------      ------------
$ 4,649,497     $ 29,209,418     $  2,200,780     $ 36,059,695      $    827,127
===========     ============     ============     ============      ============
</TABLE>



<PAGE>










                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2001
<TABLE>
<CAPTION>

<c>
(a)      Transactions in real estate and accumulated depreciation during 2000 and 2001 are summarized as follows:

                                                                                       Accumulated
                                                                    Cost (b) (d)       Depreciation
                                                                   -------------      --------------

                   Properties the Company has Invested
                      in Under Operating Leases:

                        Balance, December 31, 1999                 $          --      $           --
                        Acquisitions                                  14,721,092                  --
                        Depreciation Expense (c)                              --             303,184
                                                                   -------------      --------------

                        Balance, December 31, 2000                    14,721,092             303,184
                        Acquisitions                                  21,338,603                  --
                        Depreciation expense (c)                              --             523,943
                                                                   -------------      --------------

                        Balance, December 31, 2001                 $  36,059,695          $  827,127
                                                                   =============      ==============
</TABLE>

(b)     As of December 31, 2001 and 2000,  the aggregate  cost of the Properties
        owned  by the  Company  and its  subsidiaries  for  federal  income  tax
        purposes was $36,059,695 and $14,721,092,  respectively.  The leases are
        treated as operating leases for federal income tax purposes.

(c)     Depreciation  expense is computed for buildings and equipment based upon
        estimated lives of 40 and 3 to 7 years, respectively.

(d)     Acquisition fees and  miscellaneous  expenses of $1,941,656 and $872,192
        are included in land,  buildings  and  equipment on operating  leases at
        December 31, 2001 and 2000, respectively.







<PAGE>




















                                    EXHIBITS


<PAGE>



                                  EXHIBIT INDEX

Exhibit Number

                  3.1      CNL Health Care Properties, Inc. Amended and Restated
                           Articles of  Incorporation.  (Included as Exhibit 3.1
                           to the  Registrant's  1998  Report on Form 10-K filed
                           with the Securities and Exchange  Commission on March
                           5, 1999, and incorporated herein by reference.)

                  3.2      CNL Health Care Properties, Inc. Bylaws. (Included as
                           Exhibit 3.2 to the  Registrant's  1998 Report on Form
                           10-K  filed   with  the   Securities   and   Exchange
                           Commission on March 5, 1999, and incorporated  herein
                           by reference.)

                  3.3      CNL  Health  Care   Properties,   Inc.   Articles  of
                           Amendment  to  Amended  and   Restated   Articles  of
                           Incorporation  dated  June  27,  2000.  (Included  as
                           Exhibit 3.3 to the Registrant's June 30, 2000, Report
                           on Form 10-Q filed with the  Securities  and Exchange
                           Commission on August 1, 2000, and incorporated herein
                           by reference.)

                  3.4      Articles of  Amendment  to the  Amended and  Restated
                           Articles   of   Incorporation   of  CNL  Health  Care
                           Properties,  Inc. dated August 24, 2000. (Included as
                           Exhibit 3.5 to Registration  Statement No.  333-37480
                           on Form S-11 and incorporated herein by reference.)

                  3.5      Amendment  No. 1 to the  Bylaws  of CNL  Health  Care
                           Properties,   Inc.   (Included   as  Exhibit  3.6  to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  4.1      Reinvestment   Plan   (Included  as  Exhibit  4.4  to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  10.1     Advisory  Agreement,  dated as of September 17, 2001,
                           between  CNL  Retirement  Properties,  Inc.  and  CNL
                           Retirement  Corp.  (Included  as Exhibit  10.1 to the
                           September  30,  2001,  Report on Form 10-Q filed with
                           the Securities and Exchange Commission on November 9,
                           2001, and incorporated herein by reference).

                  10.2     Indemnification  Agreement  between  CNL Health  Care
                           Properties,  Inc. and Thomas J.  Hutchison  III dated
                           February 29, 2000.  Each of the  following  directors
                           and/or  officers has signed a  substantially  similar
                           agreement as follows: James M. Seneff, Jr., Robert A.
                           Bourne, David W. Dunbar,  Timothy S. Smick, Edward A.
                           Moses, and Lynn E. Rose dated September 15, 1998, and
                           Phillip M.  Anderson,  Jr.  dated  February 19, 1999.
                           (Included  as  Exhibit  10.2 to the March  31,  2000,
                           Report on Form 10-Q  filed  with the  Securities  and
                           Exchange  Commission on May 3, 2000, and incorporated
                           herein by reference.)

                  10.3     Agreement of Limited  Partnership  of CNL Health Care
                           Partners,   LP.   (Included   as  Exhibit   10.10  to
                           Registration Statement No. 333-47411 on Form S-11 and
                           incorporated herein by reference.)

                  10.4     Purchase and Sale  Agreement  between CNL Health Care
                           Partners,  LP and Marriott  Senior  Living  Services,
                           Inc.,  relating to the Brighton Gardens by Marriott -
                           Orland Park,  Illinois.  (Included as Exhibit 10.4 to
                           the March 31,  2000,  Report on Form 10-Q  filed with
                           the  Securities  and  Exchange  Commission  on May 3,
                           2000, and incorporated herein by reference.)


<PAGE>


                  10.5     Lease Agreement between CNL Health Care Partners,  LP
                           and  BG  Orland  Park,  LLC  dated  April  20,  2000,
                           relating to the Brighton Gardens by Marriott - Orland
                           Park,  Illinois.  (Included  as  Exhibit  10.5 to the
                           March 31,  2000,  Report on Form 10-Q  filed with the
                           Securities  and Exchange  Commission  on May 3, 2000,
                           and incorporated herein by reference.)

                  10.6     Revolving  Line of Credit  Agreement  with CNL Health
                           Care Properties,  Inc., CNL Health Care Partners,  LP
                           and Colonial Bank, dated April 20, 2000. (Included as
                           Exhibit  10.6 to the March 31,  2000,  Report on Form
                           10-Q  filed   with  the   Securities   and   Exchange
                           Commission on May 3, 2000, and incorporated herein by
                           reference.)

                  10.7     Real Estate  Purchase and Sale  Contract  between CNL
                           Retirement Corp. and American Retirement Corporation,
                           relating  to  the  Broadway  Plaza  at  Pecan  Park -
                           Arlington,  Texas.  (Included  as  Exhibit  10.14  to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  10.8     Lease Agreement between CNL Retirement - AM/Texas, LP
                           and ARC Pecan  Park,  L.P.  dated  November  9, 2001,
                           relating  to  the  Broadway  Plaza  at  Pecan  Park -
                           Arlington,  Texas.  (Included  as  Exhibit  10.15  to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  10.9     Real Estate  Purchase and Sale  Contract  between CNL
                           Retirement Corp. and American Retirement Corporation,
                           relating to the  Homewood  Residence  of Boca Raton -
                           Boca Raton,  Florida.  (Included as Exhibit  10.16 to
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  10.10    Lease Agreement  between CNL Retirement - AM/Florida,
                           LP and ARC Boca Raton,  Inc.  dated November 9, 2001,
                           relating to the  Homewood  Residence  of Boca Raton -
                           Boca  Raton,  Florida.  (Included  as  Exhibit  10.17
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)

                  21       Subsidiaries of the Registrant (Filed herewith.)


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

                                   EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT

The following is a list of the  subsidiaries  of the registrant and the state of
incorporation for each:


       Name of Subsidiary                            State of Incorporation
-----------------------------------------        -------------------------------
CNL Retirement Properties, Inc.                            Maryland
CNL Retirement GP Corp.                                    Delaware
CNL Retirement GP / Holding Corp.                          Delaware
CNL Retirement GP / Florida Corp.                          Delaware
CNL Retirement GP / Texas Corp.                            Delaware
CNL Retirement GP / Colorado Corp.                         Delaware
CNL Retirement GP / Illinois Corp.                         Delaware
CNL Retirement LP Corp.                                    Delaware
CNL Retirement Partners, LP                                Delaware
CNL Retirement - AM Texas LP                               Delaware
CNL Retirement - AM Florida LP                             Delaware
CNL Retirement - AM Illinois LP                            Delaware
CNL Retirement - AM Colorado LP                            Delaware