UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K
(Mark One)

[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                      For the fiscal year ended       December 31, 2000
                                                 -------------------------------

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from                   to
                                    ----------------      --------------------

                        Commission file number 333-37480

                         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:

                                      None
                                (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,  $12,730,646  of our  common  stock  was held by
non-affiliates as of February 19, 2001.

         The number of Shares of common  stock  outstanding  as of February  19,
2001 was 1,293,872.


<PAGE>



                                     PART I

Item 1.  Business

         CNL  Retirement  Properties,  Inc.,  formerly  known as CNL Health Care
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 (the  "Partnership") is a Delaware limited partnership
formed in December 1999.  Properties  acquired are generally expected to be held
by the Partnership and, as a result,  owned by CNL Retirement  Properties,  Inc.
through  the  Partnership.  The terms  "Company"  or  "Registrant"  include  CNL
Retirement Properties,  Inc. and its subsidiaries,  CNL Retirement GP Corp., CNL
Retirement LP Corp. and CNL Retirement  Partners,  LP. 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 (the
"Properties")  related  to health  care and  seniors'  housing  facilities  (the
"Health Care  Facilities")  located  across the United  States.  The Health Care
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 Health Care Facilities. Under
the Company's  triple-net  leases,  the lessees will be responsible for repairs,
maintenance,  property taxes,  utilities and insurance.  The Company may provide
mortgage financing (the "Mortgage Loans") to operators of Health Care 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  approximately  5 percent to 10 percent of the Company's total assets.
The Company  expects that the interest rate 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 to operators
of  Health  Care   Facilities   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.

         The Company acquired its first private-pay  assisted living Property, a
Brighton  Gardens(R) by Marriott(R),  on April 20, 2000. The Property is located
in Orland Park, Illinois.  In connection with the purchase of the Property,  the
Company, as lessor, entered into a long-term, triple-net lease agreement.

         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 completion 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 completion 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 price per
Share and other terms of the 2000  Offering,  including the  percentage of gross
proceeds  payable (i) to the  managing  dealer for the selling  commissions  and
expenses in connection  with the offering and (ii) to CNL Retirement  Corp. (the
"Advisor"),   formerly  CNL  Health  Care  Corp.,  for  acquisition   fees,  are
substantially the same as for the Company's Initial Offering.  The 2000 Offering
will expire no later than September 5, 2001, unless the Company elects to extend
it to a date no later than  September 5, 2002, in states that permit the Company
to make this  election.  As of December 31, 2000, the Company had received total
proceeds from the Initial  Offering,  the 2000 Offering and the sale of warrants
of $11,691,593  (1,169,156  Shares),  including $134,919 (13,492 Shares) through
the distribution reinvestment plan.

         As of December 31, 2000, net proceeds to the Company from its offerings
of Shares and capital contributions from the Advisor, after deduction of selling
commissions,  marketing support and due diligence expense reimbursement fees and
organizational  and offering  expenses of three percent,  totaled  approximately
$10,570,000.  The  Company had used  approximately  $5,800,000  of net  offering
proceeds and  $8,100,000 in advances  relating to its line of credit,  described
below to invest approximately $13,900,000 in one assisted living Property. As of
December 31, 2000, the Company had repaid advances totaling  $4,305,000 relating
to its line of credit and had paid  approximately  $834,000 in acquisition  fees
and acquisition expenses.

         During the period  January 1, 2001,  through  February  19,  2001,  the
Company received additional net offering proceeds of approximately $1,080,000, a
majority  of  which  has been  used to  reduce  the  amount  outstanding  on the
Company's  line  of  credit.  The  Company  expects  to use the  uninvested  net
proceeds, plus any additional net proceeds from the sale of Shares from the 2000
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,  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  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. In addition,  if Listing
does not occur by December 31, 2008,  the Company will commence the orderly sale
of its assets and the  distribution  of the  proceeds.  Listing  does not assure
liquidity.

         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,
and/or  receipt of  percentage  rent,  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)  the  commencement  of  orderly  sales  of the
Company's  assets and distribution of the proceeds thereof (outside the ordinary
course of business and consistent  with its objectives of qualifying as a REIT).
There can be no assurance that these investment objectives will be met.

         For the next three to eight 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 of 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  of the  sale of a  Secured  Equipment  Lease to fund
additional  Secured Equipment Leases, or to reduce its outstanding  indebtedness
on the borrowings. At or prior to the end of such eight-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
reinvest in additional  Properties,  Mortgage Loans and Secured Equipment Leases
any net sales proceeds not required to be distributed to  stockholders  in order
to  preserve  the  Company's  status  as  a  REIT.  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, 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 part  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.


<PAGE>


         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 pre-determined  percentage
of the Company's purchase price.

         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,  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  secure  the  Mortgage  Loan  and the  sale of the
Property occurs, or (ii) the Company undertakes an orderly sale of its assets.

Property Lease

         As of December 31, 2000,  the Company had acquired one Property,  which
is subject to a long-term,  triple-net  lease. The lease provides for an initial
term of 15 years and expires in 2015. The lease is on a triple-net  lease basis,
and the tenant is  required to pay all  repairs,  maintenance,  property  taxes,
utilities  and  insurance.  The  tenant  is also  required  to pay  for  special
assessments and the cost of any renovations permitted under the lease. The lease
provides for minimum base annual rent  payments  (generally  payable  every four
weeks) totaling  $1,350,267.  The lease provides that, after 24 months, the base
rent required under the terms of the lease will increase.  In addition to annual
base rent, the tenant will pay contingent rent computed as a percentage of gross
sales of the Property commencing in the second year of the lease. The lease also
provides for the tenant to fund,  in addition to its lease  payments,  a reserve
fund.  Generally,  money  in that  fund  may be used  by the  tenant  to pay for
replacement  of  furniture  and  fixtures.  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 Tenant

         During  the year  ended  December  31,  2000,  the  Company  owned  one
Property.  The  lessee,  BG Orland  Park,  LLC,  contributed  100 percent of the
Company's  total rental  income.  The  Property is operated as a Marriott  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 this lessee or the  Marriott  brand chain
would  significantly  impact the results of operations of the Company.  However,
management  believes  that  the risk of such a  default  is  reduced  due to the
essential or important nature of this Property for the ongoing operations of the
lessee. It is expected that the percentage of total rental income contributed by
this lessee will  decrease as  additional  Properties  are  acquired  and leased
during subsequent years.

Certain Management Services

         Pursuant to an advisory  agreement (the "Advisory  Agreement") with the
Company,  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,  the line of credit (the "Line 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 also
provides  information  to the  Company  about  the  status  of the  leases,  the
Properties, the Mortgage Loans, the Secured Equipment Leases, the Line of Credit
and the  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 will receive 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 the  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 will receive 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  15,  2001,  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

         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 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  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. As of December 31, 2000, the Company had repaid  $4,305,000 of such amount
and had an  outstanding  balance of $3,795,000.  In connection  with the Line of
Credit,  the Company  incurred a commitment fee, legal fees and closing costs of
$55,917. The proceeds were used in connection with the purchase of the Company's
Property.

         The Company currently plans to obtain one or more additional  revolving
lines of  credit  in an  aggregate  amount  of up to  $45,000,000  and  may,  in
addition,  also obtain Permanent  Financing 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,  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).  There is no assurance that
the Company will obtain an additional  Line of Credit or 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 Health Care 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, Health Care Facilities
owned  by  non-profit  entities  are  exempt  from  taxes on real  property.  As
profitability  increases  for investors in health care  Properties,  competition
among investors likely will become increasingly intense.



<PAGE>


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, 2000,  the Company owned one  private-pay,  assisted
living Property located in Orland Park,  Illinois.  As of February 19, 2001, the
Company  had not  acquired  any  additional  Properties.  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.  In other words,  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 residents' 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).

         Either before or after construction or renovation, the Properties to be
acquired  by the  Company  will  be one of a  Health  Care  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.


<PAGE>


         A tenant generally will be required by the lease agreement to make such
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.


Item 3.  Legal Proceedings

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


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

         None.


<PAGE>


                                     PART II


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

(a) As of February 19,  2001,  there were 541  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 three to eight years, there is no assurance that
one will  develop,  and it is not known at this time if 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 of $9.20 per
Share to the extent it has sufficient funds 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  redemption  and,
accordingly,  a  stockholders'  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.  For the year ended  December
31, 2000, 3,316 Shares were retired pursuant to the redemption plan.

         As of December 31, 2000, the offering price per Share was $10.

         The Company expects to make distributions to the stockholders  pursuant
to the provisions of the Articles of Incorporation. For the years ended December
31, 2000 and 1999,  the Company  declared  cash  distributions  of $502,078  and
$50,404,  respectively,  to stockholders.  For the year ended December 31, 2000,
approximately 54 percent of distributions  paid to stockholders  were considered
ordinary income and approximately 46 percent were considered a return of capital
for federal  income tax  purposes.  For the year ended  December 31,  1999,  100
percent of distributions  paid to stockholders  were considered  ordinary income
for federal tax purposes.  No amounts  distributed to stockholders for the years
ended  December 31, 2000 and 1999,  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>
<S> <C>

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

Total distributions declared          $43,593       $108,932       $160,911       $188,642       $502,078
Distributions per Share                 0.075         0.1537         0.1749         0.1749         0.5785

         1999 Quarter                First          Second         Third          Fourth          Year
-------------------------------   ------------    -----------    -----------    -----------    -----------

Total distributions declared              (1)            (1)        $16,460        $33,944        $50,404
Distributions per Share                   (1)            (1)          0.050          0.075          0.125

</TABLE>

(1)      For the period December 22, 1997, (date of inception)  through July 13,
         1999,  the  Company  did  not  make  any  cash  distributions   because
         operations had not commenced.

         On  January  1,  2001  and  February  1,  2001,  the  Company  declared
distributions  to  stockholders  totalling  $69,134 and  $74,465,  respectively,
($0.0583 per Share) payable in March 2001, to  stockholders of record on January
1, 2001 and February 1, 2001, respectively.

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

(b) The information  required by this item is set forth in Item 7.  Management's
Discussion and Analysis of Financial  Condition and Results of Operations and is
hereby incorporated by reference.



<PAGE>


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>
<S> <C>
                                             2000             1999 (1)           1998 (2)         1997 (2)(3)
                                        ---------------    ---------------    ---------------    ---------------
Year Ended December 31:
     Revenues                             $ 1,084,730         $   86,231          $    --            $    --
     General operating and
       administrative expenses (4)            340,086             79,261               --                 --
     Organizational costs                          --             35,000               --                 --
     Net earnings (loss)                      224,778            (28,390 )             --                 --
     Cash distributions declared              502,078             50,404               --                 --
     Cash from operations                   1,096,019             12,851               --                 --
     Cash used in investing
       activities                         (14,428,703 )              --                --                 --
     Cash from financing activities         8,766,346          4,731,279         (199,908)           200,000
     Funds from operations (5)                425,806            (28,390 )             --                 --
     Earnings (loss) per Share                   0.27              (0.07 )             --                 --
     Cash distributions declared
       per Share                                 0.58               0.13               --                 --

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

At December 31:
     Total assets                         $14,688,560        $ 5,088,560       $  976,579         $  280,330
     Total stockholders' equity (7)         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
         "2 Percent/25  Percent  Guidelines"),  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 2  Percent/25  Percent  Guidelines.  During  the year ended
         December  31,  2000,  the Advisor  reimbursed  the Company  $213,886 in
         operating expenses. No such amounts were reimbursed in 1999.

(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 year ended  December  31, 2000,
         net earnings  included  $21,128 of these amounts.  No such amounts were
         earned during 1999.) 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.  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  is based upon the
         period the Company was operational.

(7)      Includes  subscriptions  received  in 2000 and 1999 of  $6,256,310  and
         $5,435,283, respectively, net of stock issuance costs of $1,027,216 and
         $2,029,352,  respectively.  Stock  issuance  costs  consist  of selling
         commissions,  marketing support and due diligence expense reimbursement
         fees and  offering  expenses.  The  ratio of  stock  issuance  costs to
         subscriptions  received  was 1:6 during 2000 and 1:3 during  1999.  The
         Company's  Advisor has agreed to pay all  organizational  and  offering
         expenses which exceed 3 percent of the gross offering proceeds received
         from the sale of Shares of the Company.


<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
Permanent  Financing on satisfactory terms, the ability of the Company 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 health care and
seniors' housing  facilities  located across the United States.  The Health Care
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 Health Care  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 Health Care 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. As of July 13, 1999,
the Company had received aggregate  subscription proceeds of $2,751,052 (275,105
Shares),  which  exceeded  the  minimum  offering  amount  of  $2,500,000,   and
$2,526,052 of the funds were released  from escrow.  The remaining  subscription
proceeds of $225,000  (representing funds received from Pennsylvania  investors)
were held in escrow  until the  Company  received  aggregate  subscriptions,  in
excess of $7,775,000 on June 13, 2000. The Initial  Offering of Shares concluded
on September  18, 2000.  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  an  offering  of up to  15,500,000  Shares of  common  stock
($155,000,000).  Of the 15,500,000 Shares of common stock offered, up to 500,000
are available to stockholders  purchasing Shares through the reinvestment  plan.
The  price  per  Share  and  other  terms of the 2000  Offering,  including  the
percentage  of gross  proceeds  payable (i) to the  managing  dealer for selling
commissions  and expenses in  connection  with the offering and (ii) the Advisor
for acquisition  fees, are  substantially  the same as for the Company's Initial
Offering.  The managing  dealer of the offerings of Shares of the Company is CNL
Securities Corp., an affiliate of the Advisor.

         As of December 31, 2000,  the Company had received  aggregate  proceeds
from  its  Initial  Offering,  the  2000  Offering,  the  sale of  warrants  and
contributions  from the Advisor of  $11,891,593  (1,189,156  Shares),  including
$134,919 (13,492 Shares) through its reinvestment plan. As of December 31, 2000,
the Company had  received  net offering  proceeds of  approximately  $10,570,000
following  the  deduction  of selling  commissions,  marketing  support  and due
diligence expense reimbursement fees and organizational and offering expenses of
approximately 3 percent.  The Company has used  approximately  $5,800,000 of the
net proceeds and  $8,100,000  in advances from its Line of Credit to invest in a
Brighten  Gardens by Marriott  property in Orland Park,  Illinois (see "Property
Acquisitions and Investments" below.)

         During the period  January 1, 2001 to February  19,  2001,  the Company
received additional net offering proceeds of $1,080,000, a majority of which was
used to reduce the amount outstanding on the Line of Credit. The Company expects
to use any  uninvested  net proceeds,  plus any additional net proceeds from the
2000 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 also plans to obtain 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.

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 year ended December 31, 2000,
3,316 Shares were redeemed at $9.20 per Share  ($30,508) and retired from Shares
outstanding of common stock. No Shares were redeemed in 1999 or1998.

Line of Credit and Security Agreement

         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 provides that the Company may 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 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. 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,  2000,  the  Company had repaid  $4,305,000
relating to the Line of Credit and had an outstanding balance of $3,795,000.

         In  connection  with the  advances  on the Line of Credit,  the Company
incurred an  origination  fee,  legal fees and closing costs of $55,917 that are
being amortized on the  straight-line  method over five years. The proceeds from
borrowing on the Line of Credit were used in connection with the purchase of the
Company's Property, described below.


<PAGE>


Market Risk

         As of  December  31,  2000,  the  Company  had a balance of  $3,795,000
outstanding on the Line of Credit.  As discussed above, the interest rate on the
first  $9,700,000  drawn on the  Company's  Line of Credit will be 8.75  percent
through  April 1, 2002.  However,  the Company is subject to interest  rate risk
through  advances  greater than  $9,700,000 on its variable rate Line of Credit.
The  Company  may  mitigate  this  risk by paying  down its Line of Credit  from
offering proceeds should interest rates rise substantially.

Property Acquisition

         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  a  private-pay
assisted  living  community for a total cost of  $13,848,900.  The Property is a
Brighton  Gardens  by  Marriott  in Orland  Park,  Illinois  (the  "Orland  Park
Property").  In connection  with the purchase of the Property,  the Company,  as
lessor, entered into a long-term, triple-net lease agreement.

         The Orland Park  Property,  which opened in October  1999,  includes 82
assisted  living units and 24 special care units for residents with  Alzheimer's
and related memory disorders. The facility provides assistance with daily living
activities such as bathing, dressing and medication reminders. Special amenities
include a common  activities room and common dining room, a private dining area,
library and garden.

         As of February  19, 2001,  the Company had not acquired any  additional
Properties or entered into any Mortgage Loans.  In addition,  as of February 19,
2001,  the Company had not entered into any  arrangements  creating a reasonable
probability  that any  additional  Properties  or a particular  Mortgage Loan or
Secured Equipment Lease would be funded.

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, 2000, the Company had $177,884  invested in
such short-term  investments as compared to $4,744,222 at December 31, 1999. The
decrease  in  the  amount  invested  in  short-term  investments  was  primarily
attributable  to the purchase of the  Company's  Property and  repayments on the
Line of Credit, partially offset by subscription proceeds received from the sale
of Shares  during the year ended  December  31,  2000.  The funds  remaining  at
December 31, 2000,  along with additional funds expected to be received from the
sale of Shares,  will be used primarily to repay amounts outstanding on the Line
of Credit,  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,  2000 and  1999,  the  Company
generated cash from operations (which includes cash received from its tenant and
interest,  less cash paid for  operating  expenses) of  $1,096,019  and $12,851,
respectively.  For the year  ended  December  31,  2000,  cash  from  operations
includes a security deposit of $553,956 which was received from the tenant.  The
Company expects 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.  The Company 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 tenant defaulting under the terms of
its lease  agreement,  the Company will use borrowings under its Line of Credit.
The  Company  expects  to meet  its  other  short-term  liquidity  requirements,
including payment of offering expenses,  property  acquisitions and development,
and investment in Mortgage Loans and Secured Equipment  Leases,  with additional
advances under its Line of Credit and proceeds from its  offerings.  The Company
expects  to  meet  its  long-term  liquidity   requirements  through  short-  or
long-term, unsecured or secured debt financing or equity financing.

         Management   believes  that  the  Property  is  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 the Property.

         As of  December  31,  2000,  the  tenant of the  Property  owned by the
Company had  established  a 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.  For the year ended December 31, 2000,  revenue  relating to the
FF&E Reserve totaled  $19,672.  Due to the fact that the Property is leased on a
long-term,  triple-net basis,  meaning the tenant is 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.
Management  has the right to cause the Company to maintain  additional  reserves
if, in their  discretion,  they determine such reserves are required to meet the
Company's working capital needs.

Distributions

         The  Company  declared  and  paid  distributions  to  its  stockholders
totaling $502,078 and $50,404 during the years ended December 31, 2000 and 1999,
respectively.  In addition, on January 1, 2001 and February 1, 2001, the Company
declared distributions of $0.0583 per Share of common stock. These distributions
are payable in March 2001.

         For the year ended December 31, 2000,  approximately  54 percent of the
distributions received by stockholders were considered to be ordinary income and
approximately  46 percent were considered a return of capital for federal income
tax purposes. For the year ended December 31, 1999, 100 percent of distributions
received by stockholders were considered  ordinary income for federal income tax
purposes.  No amounts  distributed to stockholders  for the years ended December
31,  2000 and 1999 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.

Due to Related Parties

         During the years ended  December  31, 2000,  1999 and 1998,  affiliates
incurred on behalf of the Company $387,704, $421,878 and $562,739, respectively,
for  certain  organizational  and  offering  expenses.  During  the years  ended
December  31,  2000 and 1999,  affiliates  incurred  on  behalf  of the  Company
$112,961  and  $98,206,  respectively,  for  certain  acquisition  expenses  and
$157,878 and $41,307,  respectively,  for certain operating expenses. No amounts
were incurred for acquisition or operating  expenses in 1998. As of December 31,
2000, the Company owed affiliates  $1,117,799,  for such amounts and unpaid fees
and  administrative  expenses.  The Advisor of the Company has agreed to pay all
organizational  and  offering  expenses   (excluding  selling   commissions  and
marketing support and due diligence expense  reimbursement  fees) in excess of 3
percent of gross offering proceeds.

         In connection with the Initial Offering,  the Company incurred $777,518
in selling  commissions  and marketing  support and due diligence  reimbursement
fees  to  related   parties,   a  majority  of  which  was  reallowed  to  other
broker-dealer firms. In addition,  in connection with the Initial Offering,  the
Company reimbursed  affiliates $291,569 for certain  organizational and offering
expenses incurred on behalf of the Company and  administrative  services related
to the Initial 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 in any Expense  Year the greater of 2 percent of
average invested assets or 25 percent of net income (the "Expense Cap").  During
the four quarters ended June 30, 2000, the Company's operating expenses exceeded
the Expense  Cap by $213,886  (the "June 2000  Reimbursement");  therefore,  the
Advisor  reimbursed  the Company  such amount in  accordance  with the  Advisory
Agreement.  During the Expense  Years ended  September 30, 2000 and December 31,
2000, the Company's operating expenses, net of the June 2000 Reimbursement,  did
not exceed the Expense Cap.

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.

                              Results of Operations

Comparison of year ended  December 31, 2000 to the years ended December 31, 1999
and December 31, 1998

         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, a Brighton Gardens by Marriott, 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. No rental income was earned for the years ended  December 31,
1999 and 1998.

         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 lessee or the Marriott brand chain would
significantly  impact  the  results  of  operations  of  the  Company.  However,
management  believes  that  the risk of such a  default  is  reduced  due to the
essential or important nature of this Property for the ongoing operations of the
lessee. It is expected that the percentage of total rental income contributed by
this lessee will  decrease as additional  Properties  are acquired in subsequent
periods.

         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. As net
offering  proceeds are invested in 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 decrease.

         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 Property and received an advance on its Line of Credit
in 2000.  As discussed  above,  during the year ended  December  31,  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.  The dollar  amount of operating  expenses is expected to increase as
the Company  acquires  additional  Properties  and  invests in  Mortgage  Loans.
Organizational  expenses  represent the cost related to forming a new entity and
are not expected to be incurred on an ongoing basis.

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, 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.


<PAGE>


         The Company  anticipates that its leases will be triple-net  leases and
will 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.


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
              (formerly known as CNL Health Care Properties, Inc.)



                                    CONTENTS






                                                                       Page

Report of Independent Certified Public Accountants                      17

Financial Statements:

    Consolidated Balance Sheets                                         18

    Consolidated Statements of Operations                               19

    Consolidated Statements of Stockholders' Equity                     20

    Consolidated Statements of Cash Flows                               21-22

    Notes to Consolidated Financial Statements                          23-30


<PAGE>




               Report of Independent Certified Public Accountants



To the Board of Directors
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, 2000 and 1999, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period  ended  December 31,  2000,  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 26, 2001


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
<S> <C>
                                                                                             December 31,
                                                                                 2000                         1999
                                                                            ---------------               -------------

                                ASSETS

Land, building and equipment on operating lease, net                         $ 14,417,908                     $    --
Cash and cash equivalents                                                         177,884                   4,744,222
Restricted cash                                                                    17,312                          --
Receivables                                                                         2,472                          --
Loan costs, less accumulated amortization of $7,798                                48,119                          --
Accrued rental income                                                              21,128                          --
Other assets                                                                        3,737                     344,338
                                                                           ---------------              --------------

                                                                             $ 14,688,560                 $ 5,088,560
                                                                           ===============              ==============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
    Line of credit                                                           $  3,795,000                     $    --
    Due to related parties                                                      1,117,799                   1,775,256
    Accounts payable and accrued expenses                                           5,864                      21,167
    Interest payable                                                               11,045                          --
    Security deposit                                                              553,956                          --
    Rent paid in advance                                                            1,348                          --
                                                                           ---------------              --------------
          Total liabilities                                                     5,485,012                   1,796,423
                                                                           ---------------              --------------


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 1,189,156
       and 540,028 shares, respectively, outstanding 1,185,840
       and 540,028 shares,respectively                                             11,858                       5,400
    Capital in excess of par value                                              9,547,784                   3,365,531
    Accumulated distributions in excess of net earnings                          (356,094 )                   (78,794 )
                                                                           ---------------              --------------
          Total stockholders' equity                                            9,203,548                   3,292,137
                                                                           ---------------              --------------

                                                                             $ 14,688,560                 $ 5,088,560
                                                                           ===============              ==============

</TABLE>




          See accompanying notes to consolidated financial statements.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C>
                                                                          Year Ended December 31,
                                                               2000                1999                1998
                                                            ------------        ------------      --------------

Revenues:
    Rental income from operating lease                       $ 962,000             $    --              $    --
    FF&E reserve income                                         19,672                  --                   --
    Interest income                                            103,058              86,231                   --
                                                          -------------       -------------      ---------------
                                                             1,084,730              86,231                   --
                                                          -------------       -------------      ---------------

Expenses:
    Interest                                                   367,374                  --                   --
    General operating and administrative                       340,086              79,621                   --
    Asset management fees to related party                      55,396                  --                   --
    Organizational costs                                            --              35,000                   --
    Reimbursement of operating expenses
       from related party                                     (213,886 )                --                   --
    Depreciation and amortization                              310,982                  --                   --
                                                          -------------       -------------      ---------------
                                                               859,952             114,621                   --
                                                          -------------       -------------      ---------------

Net Earnings (Loss)                                         $  224,778          $  (28,390 )            $    --
                                                          =============       =============      ===============

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

Weighted Average Number of Shares of
    Common Stock Outstanding (Basic
    and Diluted)                                               845,833             412,713                   --
                                                          =============       =============      ===============


</TABLE>





          See accompanying notes to consolidated financial statements.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  Years Ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
<S> <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, 1997                           20,000     $   200      $  199,800        $      --    $  200,000

Subscriptions received for common stock
   through public offering                              2,550          26          25,474               --
                                                                                                                  25,500

Subscriptions held in escrow at December 31, 1998      (2,550 )       (26 )       (25,474 )             --       (25,500 )
                                                    ----------  ----------   -------------  ---------------  ------------

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 offering 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
                                                    ==========  ==========   =============  ===============  ============

</TABLE>



          See accompanying notes to consolidated financial statements.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
<S> <C>
                                                                          Year Ended December 31,
                                                                 2000                 1999              1998
                                                             -------------        -------------      ------------
Increase (Decrease) in Cash and Cash Equivalents:

     Operating Activities:
       Cash received from tenant                              $ 1,513,376              $    --           $   --
       Interest received                                          103,058               86,231               --
       Cash paid for expenses                                    (377,972 )            (73,380 )             --
       Reimbursement of operating expenses from
         related party                                            213,886                   --               --
       Cash paid for interest                                    (356,329 )                 --               --
                                                            --------------       --------------     ------------
         Net cash provided by operating activities              1,096,019               12,851               --
                                                            --------------       --------------     ------------

     Investing Activities:
       Additions to land, building and equipment on
         operating lease                                      (13,848,900 )                 --               --
       Payment of acquisition costs                              (562,491 )                 --               --
       Increase in restricted cash                                (17,312 )                 --               --
                                                            --------------       --------------     ------------
         Net cash used in investing activities                (14,428,703 )                 --               --
                                                            --------------       --------------     ------------

     Financing Activities:
       Reimbursement of organizational, offering
         and acquisition costs paid by related party
         on behalf of the Company                                (411,875 )             (2,447 )       (135,339 )
       Proceeds from line of credit                             8,100,000                   --               --
       Payment of loan costs                                      (55,917 )                 --               --
       Repayment of borrowings on line of credit               (4,305,000 )                 --               --
       Subscriptions received from stockholders                 6,491,310            5,200,283               --
       Distributions to stockholders                             (502,078 )            (50,404 )             --
       Retirement of common stock                                 (30,508 )                 --               --
       Payment of stock issuance costs                           (519,586 )           (416,153 )        (64,569 )
                                                            --------------       --------------     ------------
         Net cash provided by (used in)
           financing activities                                 8,766,346            4,731,279         (199,908 )
                                                            --------------       --------------     ------------

Net Increase (Decrease) in Cash and Cash
     Equivalents                                               (4,566,338 )          4,744,130         (199,908 )

Cash and Cash Equivalents at Beginning of Year                  4,744,222                   92          200,000
                                                            --------------       --------------     ------------

Cash and Cash Equivalents at End of Year                       $  177,884          $ 4,744,222          $    92
                                                            ==============       ==============     ============

</TABLE>





          See accompanying notes to consolidated financial statements.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>
<S> <C>
                                                                            Year Ended December 31,
                                                                  2000                 1999               1998
                                                              -------------        -------------       ------------

Reconciliation of Net Earnings (Loss) to Net Cash
    Provided by Operating Activities:

       Net earnings (loss)                                      $  224,778           $  (28,390 )          $    --
       Adjustments to reconcile net earnings (loss) to
         net cash provided by operating activities:
           Depreciation                                            303,184                   --                 --
           Amortization                                              7,798                   --                 --
           Organizational costs                                         --               20,000                 --
           Changes in operating assets and liabilities:
                Receivables                                         (2,472 )                 --                 --
                Accrued rental income                              (21,128 )                 --                 --
                Other assets                                         1,798               (5,535 )               --
                Interest payable                                    11,045                   --                 --
                Accounts payable and other accrued
                  expenses                                         (14,173 )             20,037                 --
                Due to related parties                              29,885                6,739                 --
                Security deposit                                   553,956                   --                 --
                  Rent paid in advance                               1,348                   --                 --
                                                             --------------       --------------     --------------
                  Net cash provided by operating
                    activities                                 $ 1,096,019           $   12,851            $    --
                                                             ==============       ==============     ==============

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                                    $  112,961           $   98,206             $   --
           Organizational costs                                         --                   --             20,000
           Deferred offering costs                                      --                   --            542,739
           Stock issuance costs                                    387,704              421,878                 --
                                                             --------------       --------------     --------------
                                                                $  500,665           $  520,084          $ 562,739
                                                             ==============       ==============     ==============

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

</TABLE>




          See accompanying notes to consolidated financial statements.

<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  Years Ended December 31, 2000, 1999 and 1998


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

         Organization and Nature of Business - CNL Retirement Properties,  Inc.,
         formerly  known as CNL Health  Care  Properties,  Inc.,  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 was
         organized  pursuant  to the laws of the state of  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.  The term  "Company"  includes,  unless  the
         context  otherwise  requires,  CNL  Retirement  Properties,  Inc.,  CNL
         Retirement Partners,  LP, CNL Retirement GP Corp. and CNL Retirement LP
         Corp.

         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  ("Health Care  Facilities")  located
         across the  United  States.  The Health  Care  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 Health  Care
         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 Health Care 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.

         The Company was a development  stage  enterprise from December 22, 1997
         through  July 13,  1999.  Since  operations  had not begun,  activities
         through July 13, 1999, were devoted to organization of the Company.

         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.  and  CNL
         Retirement  LP  Corp.,  as  well  as the  accounts  of  CNL  Retirement
         Partners,  LP. All significant  intercompany  balances and transactions
         have been eliminated.

         Real Estate and Lease Accounting - The Company recorded the acquisition
         of land,  building,  and equipment at cost,  including  acquisition and
         closing costs. Land,  building and equipment are leased to an unrelated
         third party on a  triple-net  basis,  whereby  the tenant is  generally
         responsible  for  all  operating  expenses  relating  to the  Property,
         including property taxes, insurance, maintenance and repairs.

         The Property lease is accounted for using the operating  method.  Under
         the  operating  method,  land,  building and  equipment are recorded at
         cost,  revenue is recognized as rentals are earned and  depreciation is
         charged  to  operations   as  incurred.   Building  and  equipment  are
         depreciated on the  straight-line  method over their  estimated  useful
         lives  of 40 and 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
              (formerly known as CNL Health Care Properties, Inc.)

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -CONTINUED

                  Years Ended December 31, 2000, 1999 and 1998

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

         When  the  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.  The Company limits  investment of temporary cash investments
         to  financial  institutions  with  high  credit  standing;   therefore,
         management believes it 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 95 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, 2000 and 1999 was 845,833
         and  412,713,  respectively.  As of  December  31,  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  2000
         presentation.  These  reclassifications  had no effect on stockholders'
         equity or net earnings.

         Use of  Estimates  -  Management  of the  Company  has made a number of
         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
              (formerly known as CNL Health Care Properties, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  Years Ended December 31, 2000, 1999 and 1998

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

         New  Accounting  Standard  - In June  1998,  the  Financial  Accounting
         Standards Board issued Statement of Financial  Accounting Standards No.
         133,  "Accounting for Derivative  Instruments  and Hedging  Activities"
         ("FAS  133.") FAS 133, as amended by FAS 137,  "Deferral  of  Effective
         Date of FAS 133," is  effective  for all fiscal  quarters of all fiscal
         years  beginning after June 15, 2000 (January 1, 2001 for the Company.)
         FAS 133 requires  that all  derivative  instruments  be recorded on the
         balance  sheet at  their  fair  value.  Changes  in the  fair  value of
         derivatives  are  recorded  each  period in current  earnings  or other
         comprehensive  income,  depending  on the  type  of  derivative.  As of
         December 31, 2000, the Company has not engaged in any transactions that
         include  derivative  instruments.  Management  of the Company  plans to
         limit its use of derivative  instruments  and,  therefore,  anticipates
         that the adoption of FAS 133 will not have a significant  effect on the
         Company's results of operations or its financial position.

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

         On September  18,  2000,  the Company  completed  its offering of up to
         15,500,000  shares  of  common  stock   ($155,000,000)   (the  "Initial
         Offering"),  which included 500,000 shares ($5,000,000)  available only
         to   stockholders   who  elected  to   participate   in  the  Company's
         distribution  reinvestment plan. In addition, the Company registered up
         to 600,000 shares issuable upon the exercise of warrants granted to the
         managing  dealer of the  Initial  Offering  as  shares  were  sold.  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  distribution  reinvestment  plan and had  issued
         approximately  35,776  warrants to the  managing  dealer of the Initial
         Offering (see Note 9).

         Immediately  following  the  completion  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 price
         per  share  and  other  terms  of  the  2000  Offering,  including  the
         percentage of gross proceeds payable (i) to the managing dealer for the
         selling  commissions  and expenses in connection  with the offering and
         (ii) to CNL Retirement Corp. (the "Advisor") for acquisition  fees, are
         substantially  the same as for the Company's  Initial  Offering.  As of
         December 31, 2000,  the Company had received  total  proceeds  from the
         Initial  Offering,  the  2000  Offering  and the  sale of  warrants  of
         $11,691,593  (1,169,156  shares),  including  $134,919  (13,492 shares)
         through the distribution reinvestment plan.

3.       Land, Building and Equipment on Operating Lease:
         -----------------------------------------------

         As of December 31, 2000,  the Company owned one Property  consisting of
         land,  building  and  equipment,  which  was  leased  on  a  long-term,
         triple-net  basis to a Health  Care  Facility  operator.  The  lease is
         accounted for under the provisions of Statement of Financial Accounting
         Standards No. 13,  "Accounting  for Leases," and has been classified as
         an operating lease. The lease is for 15 years, provides for minimum and
         contingent  rent and requires  the tenant to pay  executory  costs.  In
         addition,  the  tenant  pays all  property  taxes and  assessments  and
         carries insurance coverage for public liability,  property damage, fire
         and extended coverage.  The lease options allow the tenant to renew the
         lease for four successive  five-year  periods subject to the same terms
         and  conditions  of the  initial  lease.  The lease 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 year ended  December 31, 2000,  revenues from
         the FF&E Reserve totaled $19,672.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999 and 1998

3.       Land, Building and Equipment on Operating Lease - Continued:
         -----------------------------------------------------------

         Land,  building  and  equipment  on  operating  lease  consisted of the
         following at December 31:

                                                      2000               1999
                                                 -------------      ------------

               Land                                $ 2,162,388       $      --
               Building                             11,533,074              --
               Equipment                             1,025,630              --
                                                 -------------      ------------
                                                    14,721,092              --
               Less accumulated depreciation          (303,184 )            --
                                                 -------------      ------------

                                                  $ 14,417,908       $      --
                                                 =============      ============

         The  lease  provides  for  an  increase  in  the  minimum  annual  rent
         commencing  at the  beginning  of the third lease year.  Such amount is
         recognized  on a  straight-line  basis  over  the  term  of  the  lease
         commencing on the date the Property was placed in service. For the year
         ended December 31, 2000, the Company  recognized $21,128 of such rental
         income.  This amount is included in rental income from operating  lease
         in the accompanying consolidated statements of operations.

         The  following  is a schedule of future  minimum  lease  payments to be
         received on the noncancellable operating lease at December 31, 2000:

                 2001                                         $ 1,350,267
                 2002                                           1,374,311
                 2003                                           1,384,890
                 2004                                           1,384,890
                 2005                                           1,384,890
                 Thereafter                                    12,892,959
                                                            --------------

                                                             $ 19,772,207
                                                            ==============

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

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

         Other  assets as of December  31,  2000,  were $3,737 and  consisted of
         miscellaneous  prepaid expenses.  Other assets as of December 31, 1999,
         were  $344,338 and  consisted  of  acquisition  fees and  miscellaneous
         acquisition  expenses that were allocated to the Company's Property and
         miscellaneous prepaid expenses.

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  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

<PAGE>

                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999 and 1998

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

         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 year ended  December 31, 2000,  3,316 shares of common stock
         were redeemed and retired. No shares were redeemed in 1999 or 1998.

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  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  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.  As of December  31,  2000,  the Company had repaid
         $4,305,000 of such amount and had an outstanding balance of $3,795,000.
         In  connection  with  the  Line  of  Credit,  the  Company  incurred  a
         commitment  fee, legal fees and closing costs of $55,917.  The proceeds
         were used in connection with the purchase of the Company's Property.

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.  Preliminary costs incurred prior to raising
         capital were  advanced  the Advisor.  The Advisor has agreed to pay all
         organizational  and  offering  expenses   (excluding   commissions  and
         marketing support and due diligence expense  reimbursement  fees) which
         exceed three  percent of the gross  proceeds  received from the sale of
         shares of the Company in connection with the offerings.

         During the years ended  December 31, 2000,  1999 and 1998,  the Company
         incurred  $1,027,216,   $1,089,013  and  $975,339,   respectively,   in
         organizational  and offering costs,  including  $519,302,  $413,983 and
         $2,040,  respectively,  in  commissions  and marketing  support and due
         diligence expense reimbursement fees (see Note 9). All amounts incurred
         for the year  ended  December  31,  2000,  have been  treated  as stock
         issuance  costs.  For the  years  ended  December  31,  1999 and  1998,
         $1,074,013 and $955,339,  respectively,  were treated as stock issuance
         costs, $15,000 and $20,000, respectively,  were treated as organization
         costs and expensed in 1999.  The stock issuance costs have been charged
         to  stockholders'  equity  subject to the three  percent cap  described
         above.

<PAGE>

                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999 and 1998

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

         For the  years  ended  December  31,  2000 and 1999,  approximately  54
         percent and 100 percent,  respectively,  of the  distributions  paid to
         stockholders  were considered  ordinary income,  and for the year ended
         December 31, 2000,  approximately 46 percent was considered a return of
         capital to  stockholders  for federal  income tax purposes.  No amounts
         distributed to the  stockholders  for the years ended December 31, 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:
         --------------------------

         On December  22,  1997 (date of  inception),  the  Advisor  contributed
         $200,000  in cash to the  Company  and  became  its  sole  stockholder.
         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, 2000,  1999 and 1998,  the Company
         incurred  $486,846,  $388,109  and  $1,912,  respectively,  in  selling
         commissions due to CNL Securities Corp. for services in connection with
         the  offerings.  A  substantial  portion  of these  amounts  ($437,940,
         $370,690  and  $1,785,  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,  a portion
         of which may be  reallowed  to other  broker-dealers.  During the years
         ended December 31, 2000, 1999 and 1998, the Company  incurred  $32,456,
         $25,874 and $128,  respectively,  of such fees,  the  majority of which
         were reallowed to other broker-dealers and from which all bona fide due
         diligence expenses were paid.

         In addition,  the Company  agreed to issue and sell  soliciting  dealer
         warrants  ("Soliciting  Dealer  Warrants") to CNL  Securities  Corp. in
         connection  with the Initial  Offering.  The price for each warrant was
         $0.0008  and one  warrant  was issued  for every 25 shares  sold by the
         managing  dealer in the Initial  Offering,  except when  prohibited  by
         federal or state  securities  laws.  All or a portion of the Soliciting
         Dealer  Warrants  may be  reallowed  to  soliciting  dealers with prior
         written  approval  from,  and in the sole  discretion  of the  managing
         dealer,  except where  prohibited by either federal or state securities
         laws.  The holder of a  Soliciting  Dealer  Warrant will be entitled to
         purchase  one  share of common  stock  from the  Company  at a price of
         $12.00  during the five year period  commencing  September 18, 1998. No
         Soliciting  Dealer Warrants,  however,  are exercisable  until one year
         from the date of issuance. During the year ended December 31, 2000, the
         Company issued approximately 35,776 Soliciting Dealer Warrants.

         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 of 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 clients hold shares on
         such date. As of December 31, 2000, no such fees had been incurred.

         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


<PAGE>



                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999 and 1998

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

         permanent  financing used to finance Secured Equipment  Leases.  During
         the years ended December 31, 2000, 1999 and 1998, the Company  incurred
         $292,108,  $232,865 and $1,148,  respectively,  of such fees. Such fees
         are  included in other assets  prior to being  allocated to  individual
         Properties.

         The Company incurs  operating  expenses  which,  in general,  are those
         expenses  relating to the  administration  of the Company on an ongoing
         basis.  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 four quarters ended June 30, 2000, the Company's operating expenses
         exceeded the Expense Cap by $213,886  (the "June 2000  Reimbursement");
         therefore, the Advisor reimbursed the Company such amount in accordance
         with the advisory  agreement.  During the Expense Years ended September
         30, 2000 and December 31, 2000, the Company's operating  expenses,  net
         of the June 2000 Reimbursement, did not exceed the Expense Cap. For the
         years  ended  December  31,  1999 and  1998,  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 year ended  December 31, 2000,
         the Company  incurred  $55,396 of such fees. No such fees were incurred
         by the Company for 1999 or 1998.

         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>
<S> <C>
                                                             Years Ended December 31,
                                                      2000             1999            1998
                                                   -----------      -----------     ------------

          Deferred offering costs                      $   --           $   --        $ 196,184
          Stock issuance costs                        117,679          328,229               --
          Land, building and equipment on
               operating lease and other
               assets                                  31,370            6,455               --
          General operating and
               administrative expenses                197,869           38,796               --
                                                   -----------      -----------     ------------
                                                     $346,918         $373,480        $ 196,184
                                                   ===========      ===========     ============

</TABLE>


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                  Years Ended December 31, 2000, 1999 and 1998

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

         Amounts due to related  parties  consisted of the following at December
         31:
<TABLE>
<CAPTION>
<S> <C>
                                                                2000                1999
                                                             ------------       -------------

        Due to the Advisor:
             Expenditures incurred for offering
                expenses on behalf of the Company            $   982,100       $  1,432,291
             Accounting and administrative
                services                                          32,964              6,739
             Acquisition fees and miscellaneous
                acquisition expenses                              96,526            336,226
                                                            -------------      -------------
                                                               1,111,590          1,775,256
                                                            -------------      -------------

        Due to CNL Securities Corp.:
             Commissions                                           5,819                 --
             Marketing support and due diligence
                expense reimbursement fee                            390                 --
                                                            -------------      -------------
                                                                   6,209                 --
                                                            -------------      -------------

                                                              $1,117,799         $1,775,256
                                                            =============      =============
</TABLE>

10.      Concentration of Credit Risk:
         -----------------------------

         All of the  Company's  rental  income for the year ended  December  31,
         2000, was earned from one lessee,  BG Orland Park,  LLC, which operates
         the Property as a Brighton Gardens by Marriott.

         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 lessee or the Marriott  brand chain would  significantly
         impact the results of  operations of the Company.  However,  management
         believes  that  the  risk  of  such a  default  is  reduced  due to the
         essential  or  important  nature  of  this  Property  for  the  ongoing
         operations of the lessee.

         It is expected that the  percentage of total rental income  contributed
         by this lessee will decrease as additional  Properties  are acquired in
         subsequent periods.

11.      Subsequent Events:
         -----------------

         During the period  January 1, 2001,  through  February  19,  2001,  the
         Company received subscription proceeds for an additional 108,031 shares
         ($1,080,311) of common stock.

         In  addition,  on January 1, 2001 and  February  1, 2001,  the  Company
         declared distributions totalling $69,134 and $74,465,  respectively, or
         $.0583  per  share  of  common   stock,   payable  in  March  2001,  to
         stockholders  of  record  on  January  1, 2001 and  February  1,  2001,
         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 directors and executive officers of the Company are listed below:

      Name               Age       Position with the Company
      ----               ---       -------------------------

James M. Seneff, Jr.     54        Director, Chairman of the Board and Chief
                                      Executive Officer
Robert A. Bourne         53        Director and President
David W. Dunbar          48        Independent Director
Timothy S. Smick         49        Independent Director
Edward A. Moses          58        Independent Director
Phillip M. Anderson, Jr. 41        Chief Operating Officer and Executive Vice
                                      President
Thomas J. Hutchison III  59        Executive Vice President
Lynn E. Rose             52        Secretary and Treasurer

         James  M.  Seneff,  Jr.  Director,  Chairman  of the  Board  and  Chief
Executive  Officer.  Mr.  Seneff is a director,  Chairman of the Board and Chief
Executive Officer of the Advisor.  Mr. Seneff is a principal  stockholder of CNL
Holdings,  Inc., the parent company of CNL Financial Group,  Inc., a diversified
real estate  company,  and has served as a  director,  Chairman of the Board and
Chief Executive Officer of CNL Financial Group, Inc. and its subsidiaries  since
its formation in 1973. CNL Financial Group,  Inc. is the parent company,  either
directly or indirectly through subsidiaries,  of CNL Real Estate Services, Inc.,
the  Advisor,  CNL  Capital  Markets,  Inc.,  CNL  Investment  Company  and  CNL
Securities  Corp., the managing dealer in the Company's  offerings.  CNL and the
entities it has  established  have more than $4 billion in assets,  representing
interests in  approximately  2,000  properties  and 1,000  mortgage  loans in 48
states.  He also serves as director,  Chairman of the Board and Chief  Executive
Officer of CNL  Hospitality  Properties,  Inc., a public,  unlisted  real estate
investment trust, as well as CNL Hospitality Corp., its advisor. Since 1992, Mr.
Seneff  has  served as a  director,  Chairman  of the Board and Chief  Executive
Officer of Commercial  Net Lease Realty,  Inc., a public real estate  investment
trust that is listed on the New York Stock Exchange.  In addition, he has served
as a director and Chairman of the Board since inception in 1994, served as Chief
Executive  Officer  from 1994  through  August  1999,  and  currently  serves as
Co-Chief  Executive  Officer of CNL American  Properties  Fund,  Inc., a public,
unlisted real estate investment trust. He also served as a director, Chairman of
the Board and Chief Executive Officer of CNL Fund Advisors, Inc., the advisor to
CNL American Properties Fund, Inc. until it merged with the company in September
1999. Mr. Seneff has also served as a director,  Chairman of the Board and Chief
Executive  Officer of CNL Securities  Corp.  since 1979; CNL Investment  Company
since 1990; and CNL Institutional  Advisors, a registered investment advisor for
pension  plans,  since 1990. Mr. Seneff  formerly  served as a director of First
Union National Bank of Florida,  N.A.,  and currently  serves as the Chairman of
the Board of CNLBank.  Mr.  Seneff  served on the Florida  State  Commission  on
Ethics  and is a  former  member  and past  Chairman  of the  State  of  Florida
Investment   Advisory  Council,   which  recommends  to  the  Florida  Board  of
Administration  investments for various Florida employee  retirement  funds. The
Florida Board of Administration is Florida's  principal  investment advisory and
money management  agency and oversees the investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration from
Florida State University in 1968.


<PAGE>


         Robert A.  Bourne.  Director  and  President.  Mr.  Bourne  serves as a
director and  President of the Advisor.  Mr.  Bourne is also the  President  and
Treasurer of CNL Financial  Group,  Inc; a director,  Vice Chairman of the Board
and  President of CNL  Hospitality  Properties,  Inc., a public,  unlisted  real
estate  investment  trust;  as well as director,  Vice Chairman of the Board and
President of CNL  Hospitality  Corp.,  its advisor.  Mr. Bourne also serves as a
director of CNLBank.  He has served as a director  since 1992,  Vice Chairman of
the Board since  February  1996,  Secretary  and  Treasurer  from  February 1996
through 1997, and President from July 1992 through  February 1996, of Commercial
Net Lease Realty Inc., a public,  real estate investment trust listed on the New
York Stock  Exchange.  Mr.  Bourne has served as a director  since  inception in
1994,  President from 1994 through  February 1999,  Treasurer from February 1999
through  August 1999,  and Vice Chairman of the Board since February 1999 of CNL
American Properties Fund, Inc., a public, unlisted real estate investment trust.
He also served as a director and held various  executive  positions for CNL Fund
Advisors,  Inc., the advisor to CNL American  Properties Fund, Inc. prior to its
merger with such company,  from 1994 through August 1999. Mr. Bourne also serves
as a director,  President and Treasurer for various  affiliates of CNL Financial
Group, Inc. including CNL Investment Company, CNL Securities Corp., the managing
dealer in the  Company's  offerings;  and CNL  Institutional  Advisors,  Inc., a
registered  investment  advisor for pension plans.  Since joining CNL Securities
Corp.  in 1979,  Mr. Bourne has overseen  CNL's real estate and capital  markets
activities  including  the  investment  of nearly $2  billion  in equity and the
financing,   acquisition,   construction  and  leasing  of  restaurants,  office
buildings,  apartment complexes,  hotels and other real estate. Mr. Bourne began
his  career as a  certified  public  accountant  employed  by Coopers & Lybrand,
Certified  Public  Accountants,  from 1971 through  1978,  where he attained the
position  of tax  manager in 1975.  Mr.  Bourne  graduated  from  Florida  State
University in 1970 where he received a B.A. in Accounting, with honors.

         David W. Dunbar.  Independent  Director.  Mr. Dunbar serves as chairman
and chief executive  officer of Peoples Bank,  which he organized and founded in
1996.  Mr.  Dunbar is also a member of the board of  trustees of Bay Care Health
System,  an alliance of ten non-profit  hospitals in the Tampa Bay area, as well
as vice  chairman of the board of  directors  of Morton Plant Mease Health Care,
Inc., an 841-bed, not-for-profit hospital and a member of the board of directors
of North Bay Hospital, a 122-bed facility. He is a former member of the board of
directors of Morton Plant Mease  Hospital  Foundation.  In addition,  Mr. Dunbar
serves as a member of the Florida Elections Commission, the body responsible for
investigating  and holding hearings  regarding  alleged  violations of Florida's
campaign  finance  laws.  During 1994 and 1995,  Mr.  Dunbar was a member of the
board of directors and an executive  officer of Peoples  State Bank.  Mr. Dunbar
was the chief executive officer of Republic Bank from 1981 through 1988 and from
1991 through 1993. From 1988 through 1991, Mr. Dunbar  developed  commercial and
medical office buildings and, through a financial consulting company he founded,
provided  specialized  lending  services  for real estate  development  clients,
specialized construction litigation support for national insurance companies and
strategic planning services for institutional  clients.  In 1990, Mr. Dunbar was
the chief executive officer, developer and owner of a 60,000 square foot medical
office building located on the campus of Memorial Hospital in Tampa, Florida. In
addition, in 1990, Mr. Dunbar served as the Governor's appointee to the State of
Florida  Taxation  and  Budget  Reform  Commission,  a 25  member,  blue  ribbon
commission established to review, study and make appropriate recommendations for
changes  to state tax  laws.  Mr.  Dunbar  began his  professional  career  with
Southeast  Banking  Corporation  in Miami,  from 1975 through  1981,  serving as
regional vice president of commercial  mortgage  lending.  Mr. Dunbar received a
B.S.  degree in finance  from Florida  State  University  in 1975.  He is also a
graduate of the American Bankers Association  National Commercial Lending School
at the  University  of  Oklahoma  and the  School  of  Banking  of the  South at
Louisiana State University.

         Timothy S. Smick.  Independent  Director.  Mr.  Smick is  currently  an
independent  investor.  From  1996  through  February  1998,  he served as chief
operating  officer,  executive  vice  president  and a  member  of the  board of
directors  of  Sunrise  Assisted  Living,  Inc.,  one  of the  nation's  leading
providers of assisted living care for seniors with 68 communities  located in 13
states. In addition, Mr. Smick served as president of Sunrise Management Inc., a
wholly owned subsidiary of Sunrise Assisted Living,  Inc. During 1995, Mr. Smick
served as a senior housing consultant to LaSalle Advisory,  Ltd., a pension fund
advisory  company.  From 1985  through  1994,  Mr.  Smick was chairman and chief
executive  officer of  PersonaCare,  Inc., a company he co-founded that provided
sub-acute,  skilled  nursing and assisted  living care with 12 facilities in six
states. Mr. Smick's health care industry experience also includes serving as the
regional  operations  director  for  Manor  Healthcare,   Inc.,  a  division  of
ManorCare,  Inc., and as operations  director for Allied Health and  Management,
Inc. Prior to co-founding PersonaCare, Inc., Mr. Smick was a partner in Duncan &
Smick, a commercial real estate  development  firm. Mr. Smick received a B.A. in
English from Wheaton College and pursued graduate studies at Loyola College.

         Edward A. Moses. Independent Director. Dr. Moses has served as the Bank
of America  professor of finance since 1989. Dr. Moses served as dean of the Roy
E.  Crummer  Graduate  School of Business at Rollins  College  from 1994 to June
2000,  and  as a  professor  of  finance.  As  dean,  Dr.  Moses  established  a
comprehensive  program of executive  education for health care management at the
Roy E. Crummer Graduate School of Business. From 1985 to 1989, he served as dean
and professor of finance at the University of North Florida.  He has also served
in academic and  administrative  positions at the  University of Tulsa,  Georgia
State  University and the University of Central  Florida.  Dr. Moses has written
six  textbooks in the fields of  investments  and  corporate  finance as well as
numerous articles in leading business journals.  He has held offices in a number
of professional  organizations,  including president of the Southern Finance and
Eastern  Finance  Associations;  served  on the Board of the  Southern  Business
Administration  Association;  and served as a consultant for major banks as well
as a number of Fortune 500 companies. He currently serves as a faculty member in
the Graduate School of Banking at Louisiana State  University and is a member of
the board of director of HTE, Inc. and DemandStar.com. Dr. Moses received a B.S.
in Accounting from the Wharton School at the University of Pennsylvania in 1965,
and a Masters of Business Administration in 1967 and a Ph.D. in Finance from the
University of Georgia in 1971.

         Phillip M.  Anderson,  Jr. Chief  Operating  Officer and Executive Vice
President.  Mr.  Anderson  joined the Advisor in January 1999 and is responsible
for the planning and  implementation  of CNL's  interest in health care industry
investments,  including  acquisitions,  development,  project  analysis  and due
diligence.  He  currently  serves as the  Chief  Operating  Officer  of both the
Advisor  and of CNL  Retirement  Development,  Inc.  (formerly  CNL Health  Care
Development, Inc.). From 1987 through 1998, Mr. Anderson was employed by Classic
Residence by Hyatt.  Classic  Residence by Hyatt  ("Classic") is affiliated with
Hyatt Hotels and Chicago's Pritzker family. Classic acquires, develops, owns and
operates  seniors'  housing,  assisted  living,  skilled nursing and Alzheimer's
facilities  throughout the United States. Mr. Anderson's  responsibilities  grew
from  overseeing  construction  of Classic's  first  properties to acquiring and
developing new properties.  After assuming responsibility for acquisitions,  Mr.
Anderson  doubled the number of senior living  apartments/beds  ("units") in the
portfolio  by adding  over 1,200  units.  In  addition,  the  development  of an
additional  1,000  units of  seniors'  housing  commenced  under Mr.  Anderson's
direction.  Mr. Anderson also served on Classic's  Executive  Committee  charged
with the  responsibility  of monitoring  performance of existing  properties and
development  projects.  Mr.  Anderson has been a member of the  American  Senior
Housing  Association  since 1994 and currently serves on the executive board and
insurance  committee.  He graduated from the Georgia  Institute of Technology in
1982, where he received a B.S. in Civil Engineering, with honors.

         Thomas J. Hutchison III.  Executive Vice President.  Mr. Hutchison also
serves as Executive  Vice  President of the Advisor of the Company,  as well as,
President and Chief Operating  Officer of CNL Real Estate Services,  Inc., which
is the parent company of the Advisor and CNL  Hospitality  Corp. He is President
and Chief Operating  Officer of CNL Realty and Development  Corp. Mr.  Hutchison
joined CNL  Financial  Group in  January  2000 with more than 30 years of senior
management and consulting experience in the real estate development and services
industries.  He currently serves on the board of directors of Restore Orlando, a
nonprofit community volunteer organization.  Prior to joining CNL, Mr. Hutchison
was  president  and owner of  numerous  real  estate  services  and  development
companies.  From 1995 to 2000,  he was chairman and chief  executive  officer of
Atlantic Realty Services, Inc. and TJH Development  Corporation.  Since 1990, he
has  fulfilled  a  number  of  long-term   consulting   assignments   for  large
corporations, including managing a number of large international joint ventures.
From 1990 to 1991,  Mr.  Hutchison was the  court-appointed  president and chief
executive officer of General  Development  Corporation,  a real estate community
development  company,  where he assumed the  day-to-day  management  of the $2.6
billion NYSE-listed company entering re-organization.  From 1986 to 1990, he was
the  chairman  and chief  executive  officer of a number of real  estate-related
companies  engaged  in  the  master  planning  and  land  acquisition  of  forty
residential,  industrial and office development projects. From 1978 to 1986, Mr.
Hutchison was the president and chief executive  officer of Murdock  Development
Corporation  and  Murdock  Investment  Corporation,  as well as  Murdock's  nine
service  divisions.  In this capacity,  he managed an average of $350 million of
new  development  per year for over nine years.  Additionally,  he expanded  the
commercial real estate  activities to a national basis,  and established  both a
new extended care division and a hotel division that grew to 14 properties.  Mr.
Hutchison  was  educated at Purdue  University  and the  University  of Maryland
Business School.


<PAGE>


         Lynn E. Rose.  Secretary and  Treasurer.  Ms. Rose serves as Secretary,
Treasurer  and a director of CNL  Retirement  Corp.,  the  Advisor.  Ms. Rose is
Secretary and Treasurer of CNL Hospitality  Properties,  Inc., a public unlisted
real estate investment  trust, and serves as Secretary of its  subsidiaries.  In
addition,  she serves as Secretary,  Treasurer and a director of CNL Hospitality
Corp.,  the  advisor to CNL  Hospitality  Properties,  Inc.  Ms.  Rose served as
Secretary to CNL American  Properties  Fund, Inc., a public unlisted real estate
investment  trust from  December  1994 to September  1999,  and  Secretary and a
director to CNL Fund  Advisors,  Inc.,  its advisor from March 1994 to September
1999.  She served as Secretary  and  Treasurer of  Commercial  Net Lease Realty,
Inc.,  a public  real  estate  investment  trust  listed  on the New York  Stock
Exchange,  from 1992 to February  1996,  and as Secretary  and a director of CNL
Realty Advisors, Inc., its advisor, from its inception in 1991 through 1997. She
also served as  Treasurer  of CNL Realty  Advisors,  Inc.  from 1992 to February
1996. Ms. Rose, a certified  public  accountant,  has served as Secretary of CNL
Financial  Group,  Inc. since 1987,  its  Controller  from 1987 to 1993, and its
Chief  Financial  Officer from 1993 to present.  She also serves as Secretary of
the subsidiaries of CNL Financial Group,  Inc. and hold various other offices in
such  subsidiaries.  In addition,  she serves as Secretary for  approximately 75
additional  corporations  affiliated  with CNL  Financial  Group,  Inc.  and its
subsidiaries.  Ms.  Rose  oversees  the tax and  legal  compliance  for over 375
corporations,  partnerships and joint ventures, and the accounting and financial
reporting  for over 200  entities.  Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose,  P.A.,  Certified
Public  Accountants.  Ms. Rose holds a B.A. in Sociology  from the University of
Central Florida. She was licensed as a certified public accountant in 1979.


Item 11.  Executive Compensation

         No annual or  long-term  compensation  was paid by the  Company  to the
Chief Executive Officer for services rendered in all capacities during the years
ended December 31, 2000,  1999, and 1998. In addition,  no executive  officer of
the  Company  received  an annual  salary or bonus from the  Company  during the
fiscal years ended December 31, 2000 and 1999. The Company's  executive officers
also  are  employees   and  executive   officers  of  the  Advisor  and  receive
compensation  from  CNL  Financial  Group,  Inc.  in part for  services  in such
capacities.  See Item 13 for a  description  of the fees  payable  and  expenses
reimbursed to the Advisor.



<PAGE>


Item 12.  Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth, as of February 19, 2001, the number and
percentage of outstanding shares  beneficially owned by all persons known by the
Company to own  beneficially  more than 5 percent of the Company's Common Stock,
by each  director  and nominee,  and by all  officers and  directors as a group,
based upon information  furnished to the Company by such stockholders,  officers
and directors.

   Name and Address                  Number of Shares                  Percent
 of Beneficial Owner                Beneficially Owned                of Shares
 -------------------                ------------------                ---------

 James M. Seneff, Jr.                   20,000 (1)                       1.5%

 Robert A. Bourne                           0                            --

 David W. Dunbar                            0                            --

 Timothy S. Smick                           0                            --

 Edward A. Moses                            0                            --

 Phillip M. Anderson, Jr.                 1,075                          (2)

 All directors and executive              21,075                         1.6%
 officers as a group (8 persons)



(1)  Includes  20,000  shares  held by the  Advisor  of which  Mr.  Seneff  is a
     director. Mr. Seneff and his wife share beneficial ownership of the Advisor
     through  their  ownership  of CNL  Financial  Group,  Inc. The Advisor is a
     wholly owned subsidiary of CNL Financial Group, Inc.

(2)  Less than 1 percent.


Item 13.  Certain Relationships and Related Transactions

         All of the executive  officers of the Company are executive officers of
the Advisor,  a wholly owned subsidiary of CNL Financial  Group,  Inc., of which
Messrs.  Seneff and Bourne are executive officers and directors and whose Shares
are  beneficially   owned  by  Mr.  Seneff  and  his  wife  through  its  parent
corporation,  CNL Holdings, Inc. In addition,  Messrs. Seneff and Bourne and Ms.
Rose are executive  officers of CNL Securities Corp., the managing dealer in the
Company's  offerings of shares of common stock, and a wholly owned subsidiary of
CNL  Financial  Group,  Inc.  Messrs.  Seneff and Bourne  are  directors  of the
Company, the Advisor and CNL Securities Corp., and Ms. Rose is a director of the
Advisor.  Administration of the day-to-day operations of the Company is provided
by the  Advisor,  pursuant to the terms of the Advisory  Agreement.  The Advisor
also serves as the Company's  consultant in connection with policy  decisions to
be made by the Company's  Board of Directors,  manages the Company's  assets and
renders such other  services as the Board of Directors  deems  appropriate.  The
Advisor also bears the expense of providing the  executive  personnel and office
space to the Company.  The Advisor is at all times subject to the supervision of
the Board of Directors of the Company and has only such  functions and authority
as the Company may delegate to it as the Company's agent.

         CNL  Securities  Corp.  is  entitled  to  receive  selling  commissions
amounting to 7.5 percent of the total  amount  raised from the sale of shares of
common  stock  for  services  in  connection  with the  offering  of  shares,  a
substantial   portion   of  which   will  be  paid  as   commissions   to  other
broker-dealers.  For the year ended  December  31,  2000,  the Company  incurred
$486,846 of such fees, the majority of which were 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.  For the year ended  December 31, 2000,  the
Company  incurred  $32,456 of such fees, the majority of which were reallowed to
other broker-dealers and from which all bona fide due diligence expenses will be
paid.

         The  Advisor is entitled to receive  acquisition  fees for  services in
identifying  the  Properties  and  structuring  the  terms of the  leases of the
Properties  and  Mortgage  Loans equal to 4.5  percent of gross  proceeds of the
Company's  stock  offering,  loan proceeds from Permanent  Financing and amounts
outstanding on the Company's Line of Credit, if any, at the time of Listing, but
excluding  that  portion of the  Permanent  Financing  used to  finance  Secured
Equipment  Leases.  For the year ended December 31, 2000,  the Company  incurred
$292,108 of such fees.

         The Advisor and its affiliates  provide  accounting and  administrative
services to the Company  (including  accounting and  administrative  services in
connection  with the  offering of shares) on a  day-to-day  basis.  For the year
ended  December  31,  2000,  the Company  incurred a total of $346,918 for these
services,  $117,679 of such costs  representing  stock issuance  costs,  $31,370
representing   acquisition  related  costs  and  $197,869  representing  general
operating and administrative expenses,  including costs related to preparing and
distributing reports required by the Securities and Exchange Commission.

         The Company has and will  continue to incur certain costs in connection
with the offerings,  including  filing fees,  legal,  accounting,  marketing and
printing  costs and escrow fees,  which will be deducted from the gross proceeds
of the offerings.  Certain  preliminary  costs incurred prior to raising capital
have been and will be advanced by an affiliate  of the Company.  The Advisor has
agreed to pay all  organizational and offering expenses  (excluding  commissions
and marketing support and due diligence expense reimbursement fees) which exceed
3 percent of the gross offering proceeds received from the sale of shares of the
Company. For the year ended December 31, 2000, the Company incurred $387,704 for
such costs.

         The  Company  agreed  to issue  and  sell  soliciting  dealer  warrants
("Soliciting  Dealer  Warrants") to CNL Securities  Corp. in connection with the
Initial  Offering.  The price for each  warrant  was $0.0008 and one warrant was
issued for every 25 shares sold by the managing dealer in the Initial  Offering,
except when prohibited by federal or state  securities laws. All or a portion of
the Soliciting Dealer Warrants may be reallowed to soliciting dealers with prior
written approval from, and in the sole discretion of the managing dealer, except
where  prohibited by either  federal or state  securities  laws. The holder of a
Soliciting Dealer Warrant will be entitled to purchase one share of common stock
from the  Company at a price of $12.00  during the five year  period  commencing
September 18, 1998. No Soliciting  Dealer  Warrants,  however,  are  exercisable
until one year from the date of  issuance.  During the year ended  December  31,
2000, the Company issued approximately 35,776 Soliciting Dealer Warrants.

         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 of 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
clients hold shares on such date. As of December 31, 2000, no such fees had been
incurred.

         The Company incurs  operating  expenses  which,  in general,  are those
expenses  relating to the  administration  of the  Company on an ongoing  basis.
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 four  quarters  ended June 30, 2000,  the Company's
operating  expenses  exceeded  the  Expense  Cap by  $213,886  (the  "June  2000
Reimbursement");  therefore,  the Advisor  reimbursed the Company such amount in
accordance with the advisory agreement. During the Expense Years ended September
30, 2000 and December 31, 2000,  the Company's  operating  expenses,  net of the
June 2000 Reimbursement, did not exceed the Expense Cap.



<PAGE>


         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 year ended December 31, 2000, the Company incurred
$55,396 of such fees.

         All  amounts  incurred by the Company to  affiliates  of CNL  Financial
Group,  Inc.  are believed by the Company to be fair and  comparable  to amounts
that would be paid for similar services provided by unaffiliated third parties.



<PAGE>


                                     PART IV

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, 2000 and 1999

                  Consolidated  Statements  of  Operations  for the years  ended
                  December 31, 2000, 1999 and 1998

                  Consolidated  Statements of Stockholders' Equity for the years
                  ended December 31, 2000, 1999 and 1998

                  Consolidated  Statements  of Cash  Flows for the  years  ended
                  December 31, 2000, 1999 and 1998

                  Notes to Consolidated Financial Statements

         2.    Financial Statement Schedules

                  Schedule  III - Real Estate and  Accumulated  Depreciation  at
                  December 31, 2000.

                  Notes  to  Schedule   III  -  Real   Estate  and   Accumulated
                  Depreciation at December 31, 2000.

                  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  16, 2000,
                         between  CNL  Retirement   Properties,   Inc.  and  CNL
                         Retirement Corp. (Filed herewith.)

                  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,  Jeanne A. Wall and Lynn E. Rose dated September
                         15, 1998 and Phillip M.  Anderson,  Jr. dated  February
                         19, 1999. (Included as Exhibit 10.2 to the Registrant's
                         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
                         Registrant's  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 Registrant's
                         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 Registrant's  March 31, 2000 Report
                         on Form 10-Q filed  with the  Securities  and  Exchange
                         Commission  on May 3, 2000 and  incorporated  herein by
                         reference.)

             (b)  No reports on Form 8-K were filed during the period October 1,
             2000 through December 31, 2000.

(b)      Other Financial Information

         The Company is  required to file  audited  financial  information  of a
         guarantor, Marriott International,  Inc. ("Marriott"), of its tenant as
         a result of Marriott  guaranteeing  lease  payments  for the  Company's
         tenant which leased more than 20 percent of the Company's  total assets
         for the year ended December 31, 2000.  Marriott is a public company and
         as the date  hereof,  had not  filed  its  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 22nd day of
February, 2001.

                                           CNL RETIREMENT PROPERTIES, INC.

                                           By:   ROBERT A. BOURNE
                                                 President (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>
<S> <C>

        Signature                                      Title                                            Date
        ---------                                      -----                                            ----

/s/ James M. Seneff, Jr.                   Chairman of the Board and Chief Executive Officer      February 22, 2001
---------------------------
James M. Seneff, Jr.                       (Principal Executive Officer)



/s/ Robert A. Bourne                       Director and President                                 February 22, 2001
---------------------------
Robert A. Bourne                           (Principal  Financial and Accounting  Officer)



/s/ David W. Dunbar                        Independent Director                                   February 22, 2001
---------------------------
David W. Dunbar



/s/ Timothy S. Smick                       Independent Director                                   February 22, 2001
---------------------------
Timothy S. Smick



/s/ Edward A. Moses                        Independent Director                                   February 22, 2001
---------------------------
Edward A. Moses

</TABLE>


<PAGE>




                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2000
<TABLE>
<CAPTION>
<S> <C>

                                                                                                          Costs Capitalized
                                                                  Initial Cost                       Subsequent To Acquisition
                                                 ------------------------------------------------    --------------------------

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

Property the Company has Invested
  in Under Operating Lease:

   Brighton Gardens by Marriott:
    Orland Park, Illinois                $  --     $2,162,388       $11,533,074       $1,025,630         $  --          $   --
                                     ==========  =============   ===============    =============    ==========     ===========


<PAGE>





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





  $2,162,388     $11,533,074       $1,025,630     $ 14,721,092     $  303,184         1999          4/00              (c)
=============  ==============    =============  ==============  ==============

</TABLE>


<PAGE>




                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
              (formerly known as CNL Health Care Properties, Inc.)

        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

                                December 31, 2000

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

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

         Property the Company has Invested
            in Under Operating Leases:

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

              Balance, December 31, 2000       $  14,721,092     $    303,184
                                               ==============   ==============

(b)      As of December 31, 2000,  the aggregate  cost of the Property  owned by
         the Company and its  subsidiaries  for federal  income tax purposes was
         $14,721,092.  The lease is treated as an  operating  lease for  federal
         income tax purposes.

(c)      Depreciation  expense is computed for building and equipment based upon
         estimated lives of 40 and seven years, respectively.

(d)      Acquisition fees and miscellaneous expenses of $872,192 are included in
         land, building and equipment on operating lease at December 31, 2000.


<PAGE>


SUPPLEMENTAL  INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.

An annual report and a proxy,  proxy statement and notice of annual meeting will
be sent to  stockholders  subsequent to the filing of this Annual Report on Form
10-K and  copies of such  material  shall be  furnished  to the  Securities  and
Exchange Commission when it is sent to stockholders.



<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 16, 2000,
                           between  CNL  Retirement  Properties,  Inc.  and  CNL
                           Retirement Corp. (Filed herewith.)

                  10.5     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,   Jeanne  A.  Wall  and  Lynn  E.  Rose  dated
                           September 15, 1998 and Phillip M. Anderson, Jr. dated
                           February 19,  1999.  (Included as Exhibit 10.2 to the
                           Registrant's 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     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.)

                  10.7     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  Registrant's  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>



                  10.8     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
                           Registrant's March 31, 2000 Report on Form 10-Q filed
                           with the Securities and Exchange Commission on May 3,
                           2000 and incorporated herein by reference.)

                  10.9     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  Registrant's  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>