UNITED STATES    SECURITIES
AND EXCHANGE COMMISSION   Washington,
D. C. 20549FORM 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, 2003

OR

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

For the transition
period from
to

Commission file
number 000-32607

CNL RETIREMENT
PROPERTIES, INC.

(Exact name of
registrant as specified in its charter)

|Maryland(State or other jurisdiction of incorporation ororganization) |  | 59-3491443(I.R.S. Employment Identification No.)
|--------------------------------------------------------------------- |  | ------------------------------------------------

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:    
                
            None |  | Name of exchange on which registered:
                      
        Not Applicable
|---------------------------------------------------------- |  | -----------------------------------------------------------------------------------

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

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

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No

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

Indicate
 by check mark  whether  the  registrant  is an  accelerated  filer (as  defined in Rule
12b-2 of the Act).  Yes X No

Aggregate
market value of the common stock held by nonaffiliates of the registrant: No established
market exists for the Registrants shares of common stock, so 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, $837,995,130 of our common stock was held by non-affiliates
as of June 30, 2003.

The
number of shares of common stock outstanding as of February 25, 2004 was 173,338,186.

DOCUMENTS INCORPORATED
BY REFERENCE

Registrant
incorporates by reference portions of the CNL Retirement Properties, Inc. Definitive Proxy
Statement for the 2004 Annual Meeting of Stockholders (Items 10, 11, 12 and 13 of Part
III) to be filed no later than April 30, 2004.

---

Contents

|Part I                                                                                                                                     | Page 
|------------------------------------------------------------------------------------------------------------------------------------------ | -----
|Item 1.     Business                                                                                                                       | 1-6  
|Item 2.     Properties                                                                                                                     | 7-9  
|Item 3.     Legal Proceedings                                                                                                              | 9    
|Item 4.     Submission of Matters to a Vote of Security Holders                                                                            | 9    
|                                                                                                                                           |      
|Part II                                                                                                                                    |      
|Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters                                                          | 10-11
|Item 6.     Selected Financial Data                                                                                                        | 11-12
|Item 7.     Management's Discussion and Analysis of Financial Condition and
                 
             
         Results of Operations | 13-26
|Item 7A.  Quantitive and Qualitive Disclosures About Market Risk                                                                           | 27   
|Item 8.     Financial Statements and Supplementary Data                                                                                    | 28-49
|Item 9.     Changes in and Disagreements with Accountants on Accounting and
                 
             
         Financial Disclosure  | 50   
|Item 9A.  Controls and Procedures                                                                                                          | 50   
|                                                                                                                                           |      
|Part III                                                                                                                                   |      
|Item 10.     Directors and Executive Officers of the Registrant                                                                            | 50   
|Item 11     Executive Compensation                                                                                                         | 50   
|Item 12.     Security Ownership of Certain Beneficial Owners and Management                                                                | 50   
|Item 13.     Certain Relationship and Related Transactions                                                                                 | 50   
|Item 14.     Principal Accountant Fees and Services                                                                                        | 50   
|                                                                                                                                           |      
|Part IV                                                                                                                                    |      
|Item 15.     Exhibits, Financial Statment Schedules and Reports on Form 8-K                                                                | 51-58
|                                                                                                                                           |      
|Signatures                                                                                                                                 | 59-60
|                                                                                                                                           |      
|Schedule III-Real Estate and Accumulated Depreciation                                                                                      | 61-65
|                                                                                                                                           |      
|Exhibits                                                                                                                                   |      

---

# PART I

# Item 1. Business

General

CNL
Retirement Properties, Inc. is a corporation which was organized pursuant to the laws of
the State of Maryland on December 22, 1997. Various other wholly owned subsidiaries of CNL
Retirement Properties, Inc. have been and will be formed in the future for the purpose of
acquiring and owning real estate properties. The term Company includes CNL
Retirement Properties, Inc. and its subsidiaries. The Company operates for federal income
tax purposes as a real estate investment trust (a REIT). The Company has
retained CNL Retirement Corp. (the Advisor) as its advisor to provide
management, acquisition, advisory and administrative services.

The
Company acquires real estate properties related to seniors housing and health care
facilities (Properties) primarily located across the United States. The
Properties may include congregate living, assisted living and skilled nursing facilities,
continuing care retirement communities, life care communities, specialty clinics, medical
office buildings, walk-in clinics and similar types of health care-related facilities. The
Properties are generally leased on a long-term, triple-net basis. The Company may also
lease medical office space on a shorter-term, gross basis. In addition, the Company may
provide mortgage financing loans (Mortgage Loans) and secured equipment leases
(Secured Equipment Leases) to operators.

Upon
formation in December 1997, the Company received an initial capital contribution of
$200,000 for 20,000 shares of common stock from the Advisor. On April 3, 2003, the Company
completed its third public offering and immediately commenced a fourth public offering
which continues as of February 25, 2004. As of December 31, 2003, the Company had received
subscription proceeds of $1.5 billion (150,232,736 shares), including $11.4 million
(1,141,295 shares) through its distribution reinvestment plan. The Company has used
substantially all of the proceeds received from the offerings, after deduction of selling
commissions and offering fees and expenses, to invest in Properties. On July 30, 2003, the
Company filed a registration statement on Form S-11 with the Securities and Exchange
Commission for the proposed sale of up to 400 million shares of common stock
(approximately $4 billion) expected to commence in the second quarter of 2004.

The
Companys primary investment objectives are to preserve, protect and enhance the
Companys assets while (i) making distributions to stockholders; (ii) obtaining fixed
income through the receipt of base rent, and increasing the Companys income (and
distributions to stockholders) and providing protection against inflation through
automatic increases in base rent, or increases in base rent based on increases in consumer
price indices over the term of the leases 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 (Listing or Listed), or (b) if Listing
does not occur by December 31, 2008, the commencement of orderly sales of the
Companys assets and distribution of the proceeds.

The
Company intends to capitalize on the growing real estate needs in the seniors
housing and health care industries by investing in additional Properties or Mortgage Loans
using proceeds received from its public offerings and permanent financings. Management
expects to acquire Properties with a view to diversify among facility types, tenants,
operators, and in the geographic location of the Properties.

Industry

Management
believes that changes and trends in the health care industry will continue to create
opportunities for growth of retirement facilities, including (i) the growth of operators
serving specific health care niches, (ii) the consolidation of providers and facilities
through mergers, integration of physician practices, and elimination of duplicative
services, (iii) the pressures to reduce the cost of providing quality health care, (iv)
more dual-income and single-parent households leaving fewer family members available for
in-home care of aging parents and necessitating more senior care facilities, and (v) an
anticipated increase in the number of insurance companies and health care networks
offering privately funded long-term care insurance.

The
Company believes that demographic trends are significant when looking at the potential for
future growth in the health care industry. For 2003, the U.S. Census Bureau projected that
there would be over 35.6 million Americans over the age of 65, representing approximately
12.6% of the U.S. population or about one in eight Americans. Todays baby boomers
(those born between 1946 and 1964) will begin reaching age 65 as early as 2011. According
to the U.S. Census Bureau, the number of Americans age 65 and older will grow in number to
approximately 75 million by the year 2035. More than half of these older adults, 38.6
million, will be age 75 and over. In addition, the 65 plus population is projected to more
than double between now and the year 2050, to 82 million. Most of this growth is expected
to occur between 2010 and 2030 when the number of older adults is projected to grow by an
average of 2.8% annually.

Management
believes, based on historical costs of properties owned by publicly traded health care
REITs, that only a small portion of facilities in the United States are owned by
REITs. Management believes that this fact, coupled with the industry trends
discussed above, provides a significant investment opportunity for the Company.
Demographic trends may vary depending on the Properties and regions selected for
investment. The success of the future operations of the Companys Properties will
depend largely on each tenant and operators ability to adapt to dominant trends in
the industry in each specific region, including, among others, greater competitive
pressures, increased consolidation and changing demographics.

Investment Properties

Portfolio
of Properties.At December 31, 2003, the Company owned 119 Properties, which were
managed by five operators and were located in 27 states. The following table is a summary
of the types of facilities, amounts invested and number of facilities and units for the
Properties owned as of December 31, 2003 (dollars in thousands):

|                                        |  |  | Number of
|--------------------------------------- |  |  | ---------
|
|Assisted Living                         |  |  | $        
|Assisted Living with Skilled Nursing    |  |  |          
|                                        |  |  |          
|Independent Living                      |  |  |          
|Independent Living with Assisted Living |  |  |          
|Continuing Care Retirement Communities  |  |  |          
|                                        |  |  |          
|                                        |  |  |          
|Land Only Leases                        |  |  |          
|                                        |  |  |          
|                                        |  |  |          
|Properties Under Development            |  |  |          
|                                        |  |  |          
|                                        |  |  | $        
|                                        |  |  |          

Property
Leases.The seniors housing Properties are leased on a long-term, triple-net
basis, whereby the tenants are generally responsible for all operating expenses relating
to the Property, including property taxes, maintenance, repairs, utilities and insurance
as well as capital expenditures that may be reasonably necessary to maintain the leasehold
in a manner that allows operation for its intended purpose. In the event the Company
invests in medical office buildings, it generally expects to enter into 5 to 10 year gross
leases, whereby the tenants will be responsible for only a portion of property taxes,
maintenance, repairs, utilities and insurance.

The
seniors housing leases provide for minimum annual base rent payments, payable in
monthly installments. The leases provide that the minimum base rent required under the
terms of the leases will increase at predetermined intervals (typically on an annual
basis) during the terms of the leases. In addition to minimum annual base rent,
substantially all tenants are subject to contingent rent if the Properties achieve
specified operating performance thresholds. The amount of contingent rent payable is based
on factors such as percentage of gross revenues, occupancy rates of the Properties or a
percentage of the Companys investment in the Property. The majority of the leases
also provide for the tenant to fund, in addition to its lease payments, a furniture,
fixture and equipment (FF&E) reserve fund. The tenant deposits funds into
the FF&E reserve account and periodically uses these funds to cover the cost of the
replacement, renewal and additions to furniture, fixtures and equipment. The Company may
be responsible for capital expenditures or repairs in excess of the amounts in the reserve
fund, and the tenant generally will be responsible for replenishing the reserve fund and
for paying a specified return on the amount of capital expenditures or repairs paid for by
the Company in excess of amounts in the reserve fund.

At
December 31, 2003, 87 of the Companys Properties were accounted for as operating
leases and generally provide for an initial term of 15 years (expiring between 2015 and
2018). Five of the Properties subject to operating leases were in various stages of
development. The operating leases generally provide options that allow the tenants to
renew the leases from 5 to 20 successive years subject to the same terms and conditions as
the initial leases. Thirty-one of the Companys Properties were accounted for as
direct financing leases with terms that range from 10 to 35 years (expiring between 2013
and 2038). Certain direct financing leases contain provisions that allow the lessee to
elect to purchase the Property during or at the end of the lease term for the
Companys initial investment amount. Certain leases also permit the Company to
require the tenants to purchase the Properties at the end of the lease terms for the same
amount. The remaining Property is a parcel of land currently in the construction phase of
a seniors housing complex. Upon completion of the development, the Company expects
to enter into a long-term, triple-net lease agreement with an operator of the retirement
facility to operate and manage the Property.

The
lessees ability to satisfy the lease obligations depends primarily on the
Properties operating results. The Company selects its Properties for investment
based on a credit underwriting process designed to identify those Properties that
management believes will be able to fund such lease obligations. To mitigate credit risk,
certain leases are combined into portfolios that contain cross-default terms, meaning that
if a tenant of any of the Properties in a portfolio defaults on its obligations under its
lease, the Company may pursue its remedies under the lease with respect to any of the
tenants Properties in the portfolio (Cross-Default). In addition, certain portfolios
contain terms whereby the net operating profits of the Properties are combined for the
purpose of funding rental payments due under each lease (Pooling). For certain
Properties, the Company has also required security deposits, guarantees from the
tenants parent company or additional types of income support. Guarantees or other
forms of credit support may be necessary if a Property was recently opened and is still in
the process of achieving a stable occupancy rate, in which case the Property would not be
able to generate minimum rent until reaching occupancy stabilization. In order to
determine the amount of the guarantee that would be needed to fund minimum rent, the
Company develops estimates of future cash flows available to the tenant to pay minimum
rent based on rent rolls and an analysis of the surrounding real estate market, including
demographic information and industry standards, to predict operating expenses. The
Companys estimates are based on assumptions and there can be no assurances as to
what actual amounts will need to be paid under the guarantees.

Major
Tenants and Operators.As of December 31, 2003, the Company leased its Properties to
15 tenants, three of which independently contributed between 11% and 18% (an aggregate of
42%) of the Companys total rental income from operating leases and earned income
from direct financing leases for the year ended December 31, 2003.

The
Advisors parent company owns a 30% voting membership interest in HRA Holdings, LLC
(HRA), which is affiliated with eight of the Companys tenants that
leased 69 of the Companys 119 Properties as of December 31, 2003. These eight
tenants, which are thinly capitalized, contributed 35% of total rental income from
operating leases and earned income from direct financing leases for the year ended
December 31, 2003.

The
following tables summarize information about the Companys operator concentration as
of December 31, 2003 (dollars in thousands):

|Concentration by Investment                     | Number of
Facilities | Total
Investment | Percent of
Investment
|----------------------------------------------- | -------------------- | ---------------- | ---------------------
|Sunrise Senior Living Services, Inc.            |                      | 98               |                      
|American Retirement Corporation                 |                      | 8                |                      
|Erickson Retirement Communities, LLC            |                      | 4                |                      
|Harbor Assisted Living, LLC (subsidiary of HRA) |                      | 5                |                      
|CateredLife Communities, Inc.                   |                      | 4                |                      
|                                                |                      |                  |                      
|                                                |                      | 119              |                      
|                                                |                      |                  |                      

|Concentration by Revenue                        | Number of
Facilities | Annualized
Revenue (1) | Percent of
Revenue
|----------------------------------------------- | -------------------- | ---------------------- | ------------------
|Sunrise Senior Living Services, Inc.            |                      | 98                     |                   
|American Retirement Corporation                 |                      | 8                      |                   
|Erickson Retirement Communities, LLC            |                      | 4                      |                   
|Harbor Assisted Living, LLC (subsidiary of HRA) |                      | 5                      |                   
|CateredLife Communities, Inc.                   |                      | 4                      |                   
|                                                |                      |                        |                   
|                                                |                      | 119                    |                   
|                                                |                      |                        |                   

|(1) |  | For operating leases, reflects annual base rent and for direct financing leases,
               reflects annual interest earned, straight-lined over the term of the lease in
               accordance with generally accepted accounting principles.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Although
the Company acquires Properties located in various states and regions and screens its
tenants in order to reduce risks of default, failure of these tenants, their guarantors or
the Sunrise or American Retirement Corporation brands would significantly impact the Companys results of operations. It
is expected that the percentage of total rental income contributed by these tenants will
decrease as additional Properties are acquired and leased to diversified tenants during
subsequent periods.

Other Permitted
Investments

The
Company may also provide Mortgage Loans to operators of Properties secured by real estate
owned by the borrower. The Company expects that the interest rates and terms of the
Mortgage Loans will be similar to those of its leases. However, because the Company
prefers to focus on investing in Properties, which have the potential to appreciate, the
Company currently expects to provide Mortgage Loans in the aggregate principal amount of
no more than 5% to 10% of the Companys total assets.

To
a lesser extent, the Company also may provide Secured Equipment Leases to operators,
pursuant to which the Company will finance the equipment through loans or direct financing
leases. It is expected that the leases or loans will have a term of no more than 7 years,
will be secured by the personal property and include an option for the lessee to acquire
the subject equipment at the end of the term. The aggregate outstanding principal amount
of Secured Equipment Leases is not expected to exceed 10% of the Companys total
assets.

In
addition, the Company may invest up to a maximum of 5% of total assets in equity interests
in businesses, including those that provide services to or are otherwise ancillary to the retirement and
health care industries.

Advisory Services

Pursuant
to an advisory agreement (the Advisory Agreement), the Advisor provides
management services relating to the Company, the Properties, the Mortgage Loans and the
Secured Equipment Lease program. Under this agreement, the Advisor is responsible for
assisting the Company in negotiating leases, Mortgage Loans, Secured Equipment Leases,
lines of credit and permanent financing; collecting rental, Mortgage Loan and Secured
Equipment Lease payments; inspecting the Properties and the tenants books and
records; and responding to tenants inquiries and notices. The Advisor is also
responsible for providing information to the Company about the status of the leases,
Properties, Mortgage Loans, Secured Equipment Leases, any lines of credit and any
permanent financing. In exchange for these services, the Advisor is entitled to receive
certain fees from the Company. For supervision of the Properties and the Mortgage Loans,
the Advisor receives an asset management fee, which is payable monthly, in an amount equal
to 0.05% of the total amount invested in the Properties, exclusive of acquisition fees and
acquisition expenses, plus 0.05% of the
outstanding principal amount of any Mortgage Loans, as of the end of the preceding month.
For negotiating Secured Equipment Leases and supervising the Secured Equipment Lease
program, the Advisor will receive, upon entering into each lease, a Secured Equipment
Lease servicing fee, payable out of the proceeds of borrowings, equal to 2% of the
purchase price of the equipment subject to each Secured Equipment Lease. For identifying
the Properties, structuring the terms of the acquisition and leases of the Properties and
structuring the terms of the Mortgage Loans, the Advisor receives an acquisition fee equal
to 4.5% of gross proceeds from the offerings and loan proceeds from permanent financing,
excluding that portion of the permanent financing used to finance Secured Equipment
Leases. In addition, if there is a Listing, the Advisor will receive an acquisition fee of
4.5% of amounts outstanding on the line of credit, if any, at the time of Listing.

In
accordance with the Advisory Agreement, the Advisor is required to reimburse the Company
the amount by which the total operating expenses incurred by the Company in any four
consecutive fiscal quarters (the Expense Year) exceed the greater of 2% of
average invested assets or 25% of net income (the Expense Cap).

The
Advisory Agreement continues until May 14, 2004, 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. The
Company expects that the Board of Directors will approve to extend the Advisory Agreement
an additional year upon its expiration.

---

Borrowings

The
Company has and will continue to borrow money to acquire Properties, make Mortgage Loans
and pay certain fees and intends to encumber Properties in connection with the borrowings.
The Company may also borrow to enter into Secured Equipment Leases. The Company has
obtained an $85 million line of credit that may be amended to allow the line of credit to
be increased by $40 million. The line of credit may be increased at the discretion of the
Board of Directors and may be repaid with offering proceeds, proceeds from the sale of
assets, working capital or permanent financing. The Company has also obtained permanent
financing. The Board of Directors anticipates that the aggregate amount of any permanent
financing will not exceed 50% of the Companys total assets. As of December 31, 2003,
permanent financing and bonds payable represented 21% of the Companys total assets.
The maximum amount the Company may borrow is 300% of the Companys net assets.  The line of credit
and permanent financing are the only sources of funds for making Secured Equipment Leases.

Competition

The
Company competes with other REITs, real estate partnerships, health care providers and
other investors, including, but not limited to, banks and insurance companies, many of
which may have greater financial resources than the Company, in the acquisition, leasing
and financing of seniors housing and health care-related 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, facilities owned by non-profit
entities are exempt from taxes on real property. As profitability increases for investors
in retirement or health care facilities, competition among investors likely will become
increasingly intense.

Risk Factors

Company-Related
Risks.The Advisor, subject to approval by the Board of Directors, is responsible for
the Companys investments and daily management. The Advisor and its affiliates may be
engaged in other activities that would result in potential conflicts of interest with the
services that the Advisor and affiliates provide to the Company. Those officers could take
actions that are more favorable to other entities than the Company. The resolution of
conflicts in favor of other entities could have a negative impact on the Companys
financial performance.

A
REIT generally is not taxed at the federal corporate level on income provided it
distributes at least 90% of its annual taxable income to its stockholders and meets
certain other requirements under sections 856 through 860 of the Internal Revenue Code of
1986. If the Company fails to qualify as a REIT, it would be subject to federal income tax
at regular corporate rates and the funds available for distribution to stockholders would
be reduced by the amount of federal taxes owed.

At
December 31, 2003, the Company had aggregate outstanding borrowings equal to
approximately 30% of its net assets.  Pursuant to the Company's Articles of
Incorporation, the Company is entitled to borrow up to 300% of its net assets, although
it does not presently expect to borrow more than 100% of its net assets.  Borrowing may
be risky if the cash flow from the Properties and other investments is insufficient to
meet the Company's debt obligations.

Real
Estate and Other Investment Risks. Lack of diversification increases investment risk.
The Companys profitability and ability to diversify investments is limited by the
amount of future funds the Company receives through its public offerings and borrowings.
The Company may not be able to achieve diversification by tenant, operator, brand, facility type
or geographic location. There is no limit on the number of Properties of a particular
brand or facility type which the Company may acquire, and the Company is not obligated to
invest in more than one type of facility. Presently, the Companys investments are concentrated
in certain tenants, operators, brands and types of facilities and any adverse
development affecting any of them could materially adversely affect the Company's financial condition
and its ability to make distributions.  In addition, to the extent the Companys assets are
geographically concentrated, an economic downturn in one or more of the markets in which
the Company has invested could have an adverse effect on the Companys financial
condition and its ability to make distributions.

Under
the Companys triple-net lease agreements, the Companys tenants are responsible
for maintenance and other day-to-day management of the Properties either directly or by
entering into operating agreements with third-party operators. The Companys
financial condition is dependent on the ability of tenants or third-party operators to
operate the Properties successfully. Failure of the Companys tenants or third-party
operators to operate the Properties successfully or adapt to dominant trends in the health
care and seniors housing industry may limit their ability to pay their rent, which
could adversely affect the Companys financial condition.

The
value of the Companys Properties depends principally upon the value of the
underlying leases. Tenants may lease more than one Property, and as a result, a default by
the tenant could cause more than one Property to become vacant. Vacancies would reduce the
Companys revenue and could decrease the Properties value until the Company is
able to re-lease the affected Properties. Generally, the Properties are special purpose
properties and may not be readily converted into general residential, retail or office
use.

Industry-Related
Risks.The health care industry is highly regulated by federal, state and local
licensing requirements, facility inspections, reimbursement policies, regulations
concerning capital and other expenditures, certification requirements and other laws,
regulations and rules. In addition, regulators require compliance with a variety of
safety, health, staffing and other requirements relating to the design and conditions of
the licensed facility and quality of care provided. Additional laws and regulations may
be enacted or adopted that could require changes in the design of the Properties and
certain operations of the Companys tenants and third-party operators. The failure
of any tenant or operator to comply with such laws, requirements and regulations could
affect a tenants or operators ability to operate the retirement facilities
that the Company owns.

The
health care industry is facing various challenges, including increased government and
private payor pressure on health care providers to control costs and the vertical and
horizontal consolidation of health care providers. The pressure to control health care
costs has intensified in recent years as a result of the national health care reform
debate and has continued as Congress attempts to slow the rate of growth of federal health
care expenditures as part of its effort to balance the federal budget. Similar debates are
ongoing at the state level in many states. These trends are likely to lead to reduced or
slower growth in reimbursement for services provided by some of the Companys
tenants. Management cannot predict whether governmental reforms will be adopted and, if
adopted, whether the implementation of these reforms will have a material adverse effect
on the Companys financial condition or results of operations.

The
Companys tenants, particularly those operating skilled nursing facilities and those leasing
space in medical office buildings, may
derive a significant portion of their revenues from governmentally funded programs, such
as Medicaid and Medicare. Although, the Companys lease payments are not linked to
the level of government reimbursement received by the tenants, to the extent that changes
in government funding programs adversely affect the revenues received by those tenants,
such changes could adversely affect the ability of the tenants to make lease payments to
the Company.

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 employees. The Company has
retained the Advisor to provide management, acquisition, advisory and certain
administrative services and has retained certain other affiliates of the Advisor to
provide additional administrative services.

Available Information

The
Company makes available free of charge on or through its Internet website
(http://www.cnlonline.com) the Companys Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended, as soon as reasonably practicable after the Company
electronically files such material with, or furnishes it to the Securities and Exchange
Commission.

---

# Item 2. Properties

As
of December 31, 2003, the Company had invested approximately $1.5 billion in 119
retirement Properties located in 27 states. Generally, the Companys Properties
conform to the following specifications of size and type of land and buildings:

Congregate
Living Facilities. Congregate living facilities, that are more commonly referred to as
independent living facilities, are primarily apartment buildings which contain a
significant amount of common area 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. Assisted living facilities may include units for residents with
Alzheimers and related memory disorders. 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 may also be freestanding, but are typically more
institutional in nature, allowing for efficient cleaning and sterilization. The rooms in
skilled nursing facilities are equipped with patient monitoring devices and emergency call
systems. Oxygen systems may also be present. Both multiple floor and single floor designs
are common. Individual rooms in skilled nursing facilities may be as small as 100 square
feet, with common areas varying greatly in size.

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

Specialty
Clinics.Specialty clinics are facilities that provide health services such as
outpatient surgeries, dialysis treatments and MRI screenings in a less institutional
environment than hospital facilities.

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) to up to 150,000 square feet (medical office building).

Generally,
Properties acquired by the Company consist of both land and building, however, in certain
cases the Company may acquire only the land underlying the building with the building
owned by the tenant or a third party, and the Company also may acquire the building only
with the land owned by a third party. The Company owns fee title to all Properties, except
for one Property which is owned by a joint venture. The joint venture has fee title
ownership. In general, the Properties are 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.

---

The
following table summarizes the facility type, location, number of units, the
Companys investment amount at December 31, 2003, and the annualized rental income
and rental income for the year ended December 31, 2003 (dollars in thousands):

|                                     |  |  |  | Rental Income
|------------------------------------ |  |  |  | -------------
|
|Assisted Living Facilities:          |  |  |  |              
|Alabama                              |  |  |  | 1            
|California                           |  |  |  | 3            
|Connecticut                          |  |  |  | 1            
|Florida                              |  |  |  | 6            
|Georgia                              |  |  |  | 10           
|Illinois                             |  |  |  | 5            
|Indiana                              |  |  |  | 3            
|Kentucky                             |  |  |  | 2            
|Massachusetts                        |  |  |  | 2            
|Maryland                             |  |  |  | 6            
|Michigan                             |  |  |  | 2            
|North Carolina                       |  |  |  | 6            
|New Jersey                           |  |  |  | 5            
|New York                             |  |  |  | 2            
|Ohio                                 |  |  |  | 5            
|Oklahoma                             |  |  |  | 2            
|South Carolina                       |  |  |  | 5            
|Tennessee                            |  |  |  | 2            
|Texas                                |  |  |  | 6            
|Virginia                             |  |  |  | 3            
|Washington                           |  |  |  | 4            
|                                     |  |  |  |              
|                                     |  |  |  | 81           
|                                     |  |  |  |              
|Assisted Living with Skilled Nursing |  | 
|Facilities:                          |  | 
|California                           |  |  |  | 5            
|Colorado                             |  |  |  | 4            
|Florida                              |  |  |  | 3            
|Kansas                               |  |  |  | 1            
|Maryland                             |  |  |  | 1            
|Nebraska                             |  |  |  | 1            
|South Carolina                       |  |  |  | 1            
|Utah                                 |  |  |  | 1            
|                                     |  |  |  |              
|                                     |  |  |  | 17           
|                                     |  |  |  |              
|Independent Living Facilities:       |  | 
|Kentucky                             |  |  |  | 1            
|Texas                                |  |  |  | 2            
|                                     |  |  |  |              
|                                     |  |  |  | 3            
|                                     |  |  |  |              
|Independent Living with Assisted     |  | 
|Living Facilities:                   |  | 
|Alabama                              |  |  |  | 2            
|Arkansas                             |  |  |  | 1            
|Illinois                             |  |  |  | 1            
|Virginia                             |  |  |  | 2            
|                                     |  |  |  |              
|                                     |  |  |  | 6            
|                                     |  |  |  |              

|                              |  |  |  | Rental Income
|----------------------------- |  |  |  | -------------
|
|Continuing Care Retirement    |  |  |  |              
|Communities:                  |  | 
|Pennsylvania                  |  |  |  | 1            
|Virginia                      |  |  |  | 1            
|                              |  |  |  |              
|                              |  |  |  | 2            
|                              |  |  |  |              
|Land Only Leases:             |  | 
|Massachusetts                 |  |  |  | 2            
|Michigan                      |  |  |  | 1            
|Pennsylvania                  |  |  |  | 1            
|                              |  |  |  |              
|                              |  |  |  | 4            
|                              |  |  |  |              
|Properties Under Development: |  | 
|California                    |  |  |  | 1            
|Florida                       |  |  |  | 1            
|Georgia                       |  |  |  | 1            
|New Jersey                    |  |  |  | 2            
|Washington                    |  |  |  | 1            
|                              |  |  |  |              
|                              |  |  |  | 6            
|                              |  |  |  |              
|                              |  |  |  | 119          
|                              |  |  |  |              

|(1) |  | Annualized rental income reflects annual base rent for operating leases and
          annual interest earned for direct financing leases per the lease agreements,
          straight-lined over the term of the lease in accordance with generally accepted
          accounting principles.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Item 3. Legal Proceedings

On February 6, 2004, a complaint
was filed in the Superior Court of the State of California for the County of Los Angeles by
California Public Interest Research Group, Inc. and Congress of California Seniors, Inc. against 94
named defendants, including the Company, the Advisor and two operators that manage certain Properties owned by the Company.
The plaintiffs seek restitution
with respect to deposits and fees collected from residents by the operators of the senior living facilities that, the complaint alleges,
were designated and treated as nonrefundable deposits and fees in violation of the California Civil Code.  This matter is in the preliminary
stages and although management is not able to predict the outcome, management has been advised by counsel that a number of valid
defenses exist.

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

None.

---

# PART II

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

As
of January 31, 2004, there were 64,176 stockholders of record of common stock. There is no
public trading market for the shares of common stock, and even though the Company intends
to list the shares on a national securities exchange or over-the-counter market on or before
December 31, 2008, if market conditions are satisfactory, there is no assurance that a public
market for the shares will develop, even if Listed. 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% 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.
The current redemption price is $9.20 per share. Redemptions are limited to the extent
sufficient funds are available. The full amount of proceeds available from the
Companys distribution reinvestment plan is available for redemptions. In addition,
the Company may, at its discretion, use up to $100,000 per calendar quarter of the
proceeds of any public offering of its common stock for redemptions. There is no assurance
that there will be sufficient funds available for redemptions and, accordingly, a
stockholders shares may not be redeemed. No more than 5% of the Companys
outstanding stock may be redeemed during a 12-month period. Any shares acquired pursuant
to a redemption will be retired and no longer available for re-issuance by the Company.
The Board of Directors of the Company, in its discretion, may amend or suspend the
redemption plan at any time they determine that such amendment or suspension is in the
best interest of the Company. During the years ended December 31, 2003, 2002 and 2001,
131,781 shares, 37,306 shares and 3,415 shares, respectively, were redeemed at $9.20 per
share (for a total of $1.2 million, $0.3 million and $31,420, respectively) and retired
from shares outstanding of common stock. Although the Company is not aware of any material
transfers or resale of stock in 2003, 2002 or 2001, the price to be paid for any share
transferred other than pursuant to the redemption plan is subject to negotiation by the
purchaser and the selling stockholder.

As
of December 31, 2003, the offering price per share of common stock was $10. The offering
price per share was determined by the Company in its sole discretion based upon the price
the Company believed investors would pay for the shares and on certain other
considerations. The Companys shares are not publicly traded and there is no public
market for the shares on which to base market value. The Company did not take into account
the value of the underlying assets in determining the price per share. Investors are
cautioned that common stock not publicly traded is generally considered illiquid and the
estimated value per share may not be realized when an investor seeks to liquidate his or
her common stock.

The
Company expects to make distributions to the stockholders pursuant to the provisions of
the Articles of Incorporation. For the years ended December 31, 2003 and 2002, the Company
declared cash distributions of $59.8 million and $14.4 million, respectively, to
stockholders. For the years ended December 31, 2003 and 2002, approximately 71% and 65%,
respectively, of distributions paid to stockholders were considered ordinary income and
approximately 29% and 35%, respectively, were considered a return of capital for federal
income tax purposes. No amounts distributed to stockholders for the years ended December
31, 2003 and 2002, 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. Certain fees payable to the Advisor upon Listing, orderly liquidation
or other sales of Properties are subordinate to the return of 100% of the stockholders'
invested capital plus the achievement of
a cumulative, noncompounded annual 8% return on stockholders invested capital. The following table presents total
distributions (in thousands) and distributions per share:

|2003 Quarter                 | First | Second | Third | Fourth | Year
|---------------------------- | ----- | ------ | ----- | ------ | ----
|Total distributions declared |       |        | $     | 8,689  |     
|Distributions per share      |       |        |       | 0.1766 |     

|2002 Quarter                 | First | Second | Third | Fourth | Year
|---------------------------- | ----- | ------ | ----- | ------ | ----
|Total distributions declared |       |        | $     | 1,552  |     
|Distributions per share      |       |        |       | 0.1749 |     

On
January 1, 2004 and February 1, 2004, the Company declared distributions to stockholders
totaling $8.9 million and $9.6 million, respectively ($0.0592 per share), payable by March
31, 2004, to stockholders of record as of each respective date.

---

The
Company intends to continue to declare distributions of cash to stockholders on a monthly
basis during the offering period, and quarterly thereafter. The Company is required to
distribute annually at least 90% of its real estate investment trust taxable income to
maintain its objective of qualifying as a REIT. Distributions will be made at the
discretion of the Board of Directors, depending primarily on net cash from operating
activities and the general financial condition of the Company, subject to the obligation
of the Board of Directors to cause the Company to remain qualified as a REIT for federal
income tax purposes.

# 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 (amounts in thousands except per
share data).

|                                    | For the Year Ended December 31,
|----------------------------------- | -------------------------------
|
|Revenues                            |                                
|General and administrative expenses |                                
|Organizational costs                |                                
|Net earnings (loss)                 |                                
|Cash distributions paid             |                                
|Cash from operating activities      |                                
|Cash used in investing activities   |                                
|Cash from financing activities      |                                
|Funds from operations               |                                
|Earnings (loss) per share           |                                
|Cash distributions paid per share   |                                
|                                    |                                
|Weighted average number             |                                
|of shares outstanding               |                                

|                                  | December 31,
|--------------------------------- | ------------
|
|Total assets                      |             
|Long-term obligations             |             
|Total liabilities                 |             
|Total stockholders' equity        |             
|                                  |             
|Properties owned at end of period |             
|Properties acquired during period |             

|(1) |  | Operations commenced when the Company received minimum offering proceeds of $2.5
               million and funds were released from escrow on July 14, 1999.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | During the Expense Years ended June 30, 2001 and June 30, 2000, operating
               expenses exceeded the Expense Cap by $0.1 million and $0.2 million,
               respectively; therefore, the Advisor reimbursed the Company such amounts in
               accordance with the Advisory Agreement.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Cash distributions are declared by the Board of Directors and generally are
               based on various factors, including cash available from operations. For the
               years ended December 31, 2003, 2002, 2001, 2000, and 1999, approximately 2%,
               21%, 39%, 55% and 100% of cash distributions, respectively, represent a return
               of capital in accordance with generally accepted accounting principles
               (GAAP). Cash distributions treated as a return of capital on a GAAP
               basis represent the amount of cash distributions in excess of net earnings on a
               GAAP basis, including deductions for depreciation expense. The Company has not
               treated such amounts as a return of capital for purposes of calculating the
               stockholders return on their invested capital.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Management considers funds from operations (FFO) to be an indicative
               measure of operating performance due to the significant effect of depreciation
               of real estate assets on net earnings. FFO is 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 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 non-cash
               effect of straight-lining rent increases throughout the lease terms. 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 leases.
               During the years ended December 31, 2003, 2002 and 2001, net earnings included
               $13.4 million, $1.2 million and $77,000, respectively, of these amounts.) Management believes that by
excluding the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based
on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons
of operating performance between periods and between other equity REITs.  FFO
               was developed by NAREIT as a relative measure of performance and liquidity of an
               equity REIT in order to recognize that income-producing real estate historically
               has not depreciated on the basis determined under GAAP. However, FFO (i) does
               not represent cash generated from operating activities determined in accordance
               with GAAP (which, unlike FFO, generally reflects all cash effects of
               transactions and other events that enter into the determination of net
               earnings), (ii) is not necessarily indicative of cash flow available to fund
               cash needs and (iii) should not be considered as an alternative to net earnings
               determined in accordance with GAAP as an indication of the Companys
               operating performance, or to cash flow from operating activities determined in
               accordance with GAAP as a measure of either liquidity or the Companys
               ability to make distributions. FFO as presented may not be comparable to amounts
               calculated by other companies. Accordingly, the Company believes that in order
               to facilitate a clear understanding of the consolidated historical operating
               results of the Company, FFO should be considered in conjunction with the
               Companys net earnings and cash flows as reported in the accompanying
               consolidated financial statements and notes thereto.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following is a reconciliation of net earnings to FFO for each of the years in the
five-year period ended December 31, 2003 (in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------------------------

|                                   | Year Ended December 31,
|---------------------------------- | -----------------------
|
|Net earnings                       |                        
|                                   |                        
|Adjustments:                       |                        
|Effect of unconsolidated           |                        
|subsidiary                         |                        
|Effect of minority interest        |                        
|Depreciation of real estate assets |                        
|Amortization of lease intangibles  |                        
|                                   |                        
|FFO                                |                        
|                                   |                        

|(5) |  | The weighted average number of shares outstanding for the year ended December
               31, 1999, is based upon the period the Company was operational.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

---

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

# Overview

The
Companys primary focus during 2003 was the investment of proceeds from its public
offerings in Properties. During the year ended December 31, 2003, the Company received net
offering proceeds of $959.0 million and invested $1.2 billion in 82 Properties, consisting
primarily of assisted living and independent living facilities. The Company also obtained
or assumed $332.1 million of permanent financings, including $88.5 million in non-interest
bearing bonds payable. As of December 31, 2003, the Company had real estate assets of
approximately $1.5 billion that consisted of 119 Properties. In February 2004, the Company
acquired an additional 19 retirement Properties for $537.3 million and in connection with
the acquisition, assumed $274.6 million in permanent financing. As of February 25, 2004,
the Company had commitments to purchase an additional 26 Properties, including four
retirement facilities and 22 medical office buildings, for an aggregate amount of $308.3
million and had committed $123.7 million for the construction of six retirement
facilities. The Company anticipates that it will receive additional offering proceeds and
will assume permanent financings to fund the acquisition of these proposed Properties. The
Company has obtained construction financing to fund construction costs related to the
Properties under development.

# Liquidity and Capital
Resources

Common Stock Offerings

Upon
formation in December 1997, the Company received an initial capital contribution of
$200,000 for 20,000 shares of common stock from the Advisor. Since its inception through
December 31, 2003, the Company has made four public offerings and received subscriptions
as follows (in thousands):

|                 |  | Offering | Subscriptions 
|---------------- |  | -------- | --------------
|
|Initial Offering |  |          | September 2000
|2000 Offering    |  |          | May 2002      
|2002 Offering    |  |          | April 2003    
|2003 Offering    |  |          | Open          
|                 |  |          |               
|                 |  |          |               
|                 |  |          |               

| | (a)              Includes
distribution reinvestment plan shares of 500 in the 2000 Offering, 5,000 in the
2002 Offering and 25,000 in the 2003 Offering.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)              Includes
distribution reinvestment plan shares of 42 in the 2000 Offering, 129           in the
2002 Offering and 966 in the 2003 Offering.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------

The
price per share and other terms of all the offerings, including the percentage of gross
proceeds payable (i) to the managing dealer for selling commissions and expenses in
connection with the offering and (ii) to the Advisor for acquisition fees, are
substantially the same.

On
July 30, 2003, the Company filed a registration statement on Form S-11 with the Securities
and Exchange Commission for the proposed sale by the Company of up to 400 million shares
of common stock (approximately $4 billion) in an offering expected to commence immediately
following the completion of the Companys 2003 Offering. The Board of Directors has
approved a resolution to amend the Articles of Incorporation to increase the number of
authorized shares of common stock from 450 million to one billion. The Board of Directors
expects to submit this matter to the stockholders for approval at the 2004 annual meeting.
Until such time, if any, that the stockholders approve an increase in the number of
authorized shares of common stock of the Company, the proposed offering will be limited to
213 million shares.

As
of December 31, 2003, net proceeds to the Company from its offerings of shares and capital
contributions from the Advisor, after deduction of selling commissions, marketing support
fees, due diligence expense reimbursements and organizational and offering expenses,
totaled approximately $1.4 billion. The Company has used net offering proceeds, proceeds
from permanent financing and advances from its revolving line of credit to invest in 119
Properties located in 27 states.

---

The
following table summarizes the Companys proceeds, investment activity and cash
available for investment from inception to December 31, 2003 (dollars in thousands):

|                                      | 
|------------------------------------- | 
|Sources of equity and debt proceeds:  | 
|Net proceeds from offerings           | 
|Proceeds from permanent financing (1) | 
|Proceeds from construction financing  | 
|Advances on line of credit            | 
|                                      | 
|                                      | 
|                                      | 
|Uses of equity and debt proceeds:     | 
|Investment in 119 Properties (1)      | 
|Payment of acquisition fees and costs | 
|Payment of loan costs                 | 
|Deposits on pending acquisitions      | 
|Repayments on line of credit          | 
|Repayment of permanent financing      | 
|Stock redemptions (175,818 shares)    | 
|                                      | 
|                                      | 
|                                      | 
|Cash available for investment         | 
|                                      | 

| | (1)                 Net
of assumed mortgage loans of $72,762 and bonds of $88,511
| | ---------------------------------------------------------------------------------

During
the period January 1, 2004 through February 25, 2004, the Company received additional net
offering proceeds of approximately $207.8 million and paid acquisition fees and costs of
approximately $19.9 million. The Company also used $262.7 million in connection with the acquisition of 19 Properties,
leaving approximately $89.7 million for investment in Properties, Mortgage Loans and other
permitted investments as of February 25, 2004.

The
Company expects to use uninvested net offering proceeds, plus additional net offering
proceeds from the sale of shares from the 2003 Offering and future offerings to purchase
additional Properties, and to a lesser extent, to invest in Mortgage Loans and other
permitted investments. The Company also intends to obtain additional borrowings to acquire
assets and to pay certain related fees. The number of Properties to be acquired and
Mortgage Loans and other permitted investments in which the Company may invest will depend
upon the amount of net offering proceeds and loan proceeds available to the Company.

The
Company believes that the net proceeds received from the 2003 Offering and any additional
offerings will enable the Company to continue to grow and take advantage of acquisition
opportunities until such time, if any, that the Companys shares are listed on a
national securities exchange or over-the-counter market. Under the Companys Articles
of Incorporation, if the Company does not List by December 31, 2008, it will commence an
orderly liquidation of its assets and the distribution of net proceeds to its
stockholders.

Redemptions

The
Company has a redemption plan under which the Company may elect to redeem shares, subject
to certain conditions and limitations. Under the redemption plan, prior to such time, if
any, as listing of the Companys common stock on a national securities exchange or
over-the-counter market occurs, any stockholder who has held shares for at least one year
may present all or any portion equal to at least 25% 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 any 12-month period may the number
of shares redeemed by the Company exceed 5% of the number of shares of the Companys
outstanding common stock at the beginning of the 12-month period. During the years ended
December 31, 2003, 2002 and 2001, 131,781 shares, 37,306 shares and 3,415 shares,
respectively, of common stock were redeemed at $9.20 per share and retired for $1.2
million, $0.3 million and $31,420, respectively.

Property Acquisitions

At
December 31, 2003, the Companys investment portfolio consisted of 119 Properties
located in 27 states with an aggregate investment amount of approximately $1.5 billion
compared to 37 Properties located in 16 states with an aggregate investment amount of
approximately $388.3 million at December 31, 2002. During the year ended December 31,
2003, the Company invested $1.2 billion in 82 Properties. The Properties acquired were
primarily assisted living and independent living facilities and included five Properties
in various stages of development. With the exception of one Property under development,
the Company, as lessor, has entered into long-term, triple-net lease agreements relating
to the Properties.

---

During
the year ended December 31, 2003, the Company acquired 63 Properties that are subject to
operating leases for an aggregate purchase price of approximately $810.8 million plus
closing costs. The operating leases provide for initial terms of 15 years with options
that allow the tenants to renew the leases from 5 to 25 successive years subject to the
same terms and conditions as the initial leases. The leases provide for minimum annual
base rent, generally payable in monthly installments, with increases at predetermined
intervals (typically on an annual basis) during the terms of the leases. In addition to
minimum annual base rent, substantially all of the leases require contingent rent if
operating performance or occupancy rate thresholds, as defined in the lease agreement, are
achieved by the Properties. The majority of the leases also provide for the tenant to
fund, in addition to its lease payments, an FF&E reserve fund. The tenant deposits
funds into the FF&E reserve account and periodically uses these funds to cover the
cost of the replacement, renewal and additions to furniture, fixtures and equipment.

In
addition, during the year ended December 31, 2003, the Company acquired 19 Properties that
are accounted for as direct financing leases, as described below.

On
March 31, 2003, the Company acquired two Properties for $22.6 million plus closing costs
through a direct financing transaction. The Company, as lessor, has entered into a 35-year
lease agreement that requires minimum annual rent, FF&E reserves and additional rent,
which is based on a percentage of the tenants gross revenues if the Properties
achieve specified occupancy rates. All property purchased with the funds from the FF&E
reserve will remain the property of the tenant. The lease contains provisions that allow
the tenant to purchase the Properties at the end of the lease term for the Companys
initial investment amount. The lease also permits the Company to require the tenant to
purchase the Properties at the end of the lease term for the same amount.

On
August 29, 2003, the Company acquired 14 Properties for an aggregate purchase price of
$184.5 million. The Company, as lessor, has entered into 21.5-year lease agreements
related to the Properties. The transactions were classified as direct financing
transactions due to the present value of the minimum lease payments being greater than 90
percent of the fair market value of the Properties at the lease commencement date. In
addition to minimum rent, the leases provide for the tenant to fund an FF&E reserve
fund. All property purchased with the funds from the FF&E reserve will be owned by the
Company.

During
the year ended December 31, 2003, the Company also acquired three parcels of land for an
aggregate purchase price of approximately $54.7 million. The Company, as lessor, has
entered into a 10-year lease agreement relating to each Property. The transactions were
classified as direct financing transactions due to the leases providing a bargain purchase
option that may be exercised by the tenants at the beginning of the fifth lease year.
Minimum lease payments under the lease agreements are subordinate to first mortgage
construction loans entered into by the tenants to fund development costs related to the
Properties.

At
December 31, 2003, 93 of the 119 Properties owned by the Company were operated and managed
by Sunrise Senior Living Services, Inc. Additionally, five Properties owned by the Company
at December 31, 2003, are being developed by Sunrise Development, Inc., a wholly owned
subsidiary of Sunrise Senior Living, Inc. Four additional operators manage the remaining
21 Properties owned by the Company as of December 31, 2003.

At
December 31, 2003, the Companys restricted cash balance included $9.8 million that
was held in escrow to fund the acquisition of a Property pending certain regulatory
approvals. The Company expects to acquire the Property in the second quarter of 2004.

Investments Subsequent to
December 31, 2003 and Pending Investments

In
February 2004, the Company acquired an additional 19 Properties for $537.3 million in a
sale-lease back transaction. The Properties are primarily independent living and assisted
living facilities and are operated by Horizon Bay Management, L.L.C.

As
of February 25, 2004, the Company had commitments to acquire 26 additional Properties,
which include four retirement facilities and 22 multi-tenant medical office buildings. The
anticipated aggregate purchase price is $308.0 million, and the acquisition of each
Property is subject to the fulfillment of certain conditions. The Company expects to
receive additional offering proceeds and plans to assume permanent financing of
approximately $89.4 million in connection with the acquisition of 16 Properties. It is
expected that Horizon Bay Management, L.L.C. will operate one of the proposed retirement
facilities, a subsidiary of Harbor Assisted Living, LLC will operate two of the proposed
retirement facilities and Sunrise Senior Living Services, Inc. will operate the remaining
proposed retirement facility. It is expected that the 22 medical office buildings will be
leased, primarily on a gross basis, to various health care providers and physicians and
managed by various third party property managers. There can be no assurance that these
transactions will be consummated.

---

Borrowings

Line
of Credit. In March 2003, the Company replaced its existing $25 million line of credit
with a two-year, $85 million revolving line of credit that may be amended to allow the
line of credit to be increased up to $125 million. Eleven Properties with an aggregate
real estate value of $118.6 million collateralize the $85 million revolving line of
credit; however, the collateral provided by these 11 Properties only allows the Company to
draw up to $71.4 million under the revolving line of credit. The Company will be required
to pledge additional Properties as collateral to fully maximize the $85 million liquidity
available under the revolving line of credit. This credit facility requires monthly
payments of interest only at LIBOR plus a percentage that fluctuates until maturity,
depending on the Companys aggregate amount of debt outstanding in relation to the
Companys total assets, and has several covenants typically found in revolving loan
facilities, including covenants to maintain a minimum net worth and minimum collateral
value. The Company may use the revolving line of credit to fund acquisitions, pay fees,
make distributions and fund working capital for general business purposes. Periodically,
the Company expects to repay amounts drawn under the revolving line of credit with
proceeds received from equity offerings, permanent financing, the sale of assets or
working capital. In March 2003, the Company borrowed $71.4 million on the line of credit
to acquire several Properties, of which $50.4 million has been repaid using proceeds
received from the Companys 2003 Offering. As of February 25, 2004, the Company had
an outstanding balance of $20 million on the line of credit. In connection with the $85
million revolving line of credit, the Company incurred $1.9 million in loan fees and
costs.

On
September 9, 2003, the Company entered into a six-month, $50 million credit facility
agreement that has a 120-day funding option with a commercial lender. The loan may be
extended for two additional three-month periods and may be used to fund the acquisition
and development of Properties and investments in Mortgage Loans and other permitted
investments. During the initial term, the loan bears interest at a variable rate, as
selected by the Company, equal to LIBOR plus 300 basis points or the higher of (i) the
banks prime rate plus 100 basis points or (ii) the Federal Funds rate plus 150 basis
points, payable monthly, and requires monthly principal payments of $2.5 million until
maturity. As of February 25, 2004, there were no amounts outstanding under this loan. In
January 2004, the Company exercised its first option to extend the loan term to June 7,
2004.

Permanent
Financing. Permanent debt increased from $45.3 million at December 31, 2002, to $275.1
million at December 31, 2003, as a result of the Company acquiring 82 Properties during
2003 and either assuming existing debt on the Properties acquired or encumbering the
Properties with new debt. At December 31, 2003, the Company had 31 mortgage notes payable
with an aggregate outstanding balance of $275.1 million collateralized by 36 Properties
with a net book value of $517.3 million. Approximately 38% of the Companys mortgage
notes payable at December 31, 2003, were subject to variable interest rates that are
adjustable monthly or quarterly. Fixed interest rates range from 5.79% to 8.375%.
Substantially all of the loans have financial covenants which are typically found in
commercial loans and which are primarily based on the operations of the Properties.
Certain loans contain extension options with terms similar to the initial loan terms.

The
table below summarizes the Companys permanent financing at December 31, 2003,
(dollars in thousands):

|Date Funded or Assumed | Mortgage
Payable | OriginalTerm
(Years) | Maturity Date | Interest Rate                      |  |  |  | 
|---------------------- | ---------------- | -------------------- | ------------- | ---------------------------------- |  |  |  | 
|Fixed Rate Debt:       |                  |                      |               |                                    |  |  |  | 
|March  2003            | $  20,332        | 10                   | 10/1/2008     | 7.83%                              |  |  |  | 
|August  2003           | $  50,114        | 9                    | 9/1/2012      | 5.79%                              |  |  |  | 
|August, 2003 (1)       | $  92,500        | 7                    | 9/1/2010      | 6.09%                              |  |  |  | 
|November 2003          | $  2,444         | 35                   | 11/1/2038     | 8.375%                             |  |  |  | 
|November 2003          | $  4,683         | 34                   | 3/1/2038      | 8.25%                              |  |  |  | 
|                       | 170,073          |                      |               |                                    |  |  |  | 
|Variable Rate Debt:    |                  |                      |               |                                    |  |  |  | 
|June 2002              | 23,520           | 5                    | 6/6/2007      | 30-day LIBOR plus 2.62%            |  |  |  | 
|August  2002           | 10,811           | 5                    | 8/31/2007     | 90-day LIBOR plus 3.9%, 6.5% floor |  |  |  | 
|March 2003 (2)         | 25,652           | 2                    | 3/31/2005     | 30-day LIBOR plus 3.25%, 5% floor  |  |  |  | 
|November 2003          | 45,000           | 3                    | 11/1/2006     | 30-day LIBOR plus 2.6% to 3.0%     |  |  |  | 
|                       | 104,983          |                      |               |                                    |  |  |  | 
|                       | $   275,056      |                      |               |                                    |  |  |  | 

|(1) |  | Represents borrowings under subordinated mortgage notes collateralized by the 14
               Properties, payable to the seller. The seller remains liable for existing first
               mortgage notes collateralized by the 14 Properties. The seller has agreed to
               indemnify the Company for any claims against the Properties under the first
               mortgage notes. The subordinated mortgage notes have an interest rate of 5.13%
               for 2003, 5.38% for 2004, 6.06% for 2005, and the interest rate increases by 3%
               of the prior years per annum interest rate each calendar year thereafter
               to a maximum rate of 7.25% to maturity. Interest on the loan is recorded using
               the effective interest rate of 6.09%. At the end of the initial loan terms, the
               Company has three consecutive renewal options of five years each with terms
               similar to the initial loan terms.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | In January 2004, this debt was paid in full using proceeds from new permanent
               financing.
|--- |  | -------------------------------------------------------------------------------------------------------

On
 January 27, 2004, the Company obtained permanent financing comprised of three loans
in the aggregate amount of $130 million from a commercial lender collateralized by 22
Properties owned by the Company. At loan closing, the Company drew $30 million and is
required to draw an additional $30 million and $70 million within 90 days and 12 months,
respectively, of the loan closing date. Upon final funding, the loans will bear interest
at 5.79% per annum. The loans require interest only payments through January 2005, and
principal and interest payments thereafter until maturity on January 27, 2009.

On
January 29, 2004, the Company obtained permanent financing comprised of 12 loans in the
aggregate amount of $74.6 million from a commercial lender collateralized by 12
Properties owned by the Company. The loans have terms of seven years and bear interest at
a rate of 5.96% per annum. The loans require monthly interest only payments for the first
24 months with monthly payments of principal and interest due thereafter until maturity.

In
February 2004, the Company assumed $274.6 million in permanent financing comprised of 16
loans in connection with the acquisition of 19 Properties. The majority of the debt,
$192.7 million comprised of 11 loans, is agency debt through Fannie Mae. These loans are
interest only loans that bear interest at 30-day LIBOR plus a premium of either 90 basis
points or 104 basis points and mature in either November 2005 or May 2008. Three loans in
an aggregate amount of $38.4 million payable to a commercial lender bear interest at
30-day LIBOR plus 370 basis points with a minimum rate of 5.95%. These loans require
monthly interest only payments through July 2004 with principal and interest payments
thereafter until maturity in May 2008. An additional $10.4 million, variable rate loan
payable to a commercial lender bears interest at 30-day LIBOR plus 370 basis points with
a minimum rate of 4.80%. The loan requires monthly interest only payments through January
2005 with principal and interest payments thereafter until maturity in May 2008. The
remaining loan in the amount of $33.1 million has a fixed interest rate of 8.17% with
principal and interest payable monthly until maturity in April 2008.

Construction
Financing.On October 23, 2003, the Company obtained an $8.9 million construction
loan related to one of the Companys Properties that is under construction. The loan
requires interest only payments at a variable rate of LIBOR plus a premium that ranges
from 225 basis points to 275 basis points based on the Propertys occupancy levels
until maturity in November 2006. As of December 31, 2003, the Company had drawn $6.8
million to fund construction costs.

On
December 2, 2003, the Company obtained four construction loans in the aggregate amount of
$74.2 million relating to four of the Companys Properties that are in various
stages of construction. The loans require interest only payments at a variable rate of
LIBOR plus a premium that ranges from 225 basis points to 275 basis points based on the
Propertys occupancy levels, until maturity on November 26, 2006, with all unpaid
principal and interest due at that time. At December 31, 2003, the Company had not drawn
on these construction loans.

On
December 19, 2003, the Company obtained a construction loan in the amount of $48 million
relating to one of the Companys Properties that is under construction. The loan
requires interest only payments at a variable rate of the banks prime rate plus
2.25% with a minimum rate of 6.5% per annum. The loan matures on December 19, 2007 and
all unpaid principal and interest are due at that time. The loan may be extended for two
additional 12-month periods. At the time of closing, the Company drew $0.6 million to
fund loan closing costs.

Bonds
Payable. In connection with the acquisition of two continuing care retirement
communities (CCRCs) in March 2003, the Company assumed approximately
$88.5 million in non-interest bearing life care bonds payable to certain residents of the
two retirement facilities. Generally, the bonds are refundable to a resident upon the
resident moving out of the CCRC or to a residents estate upon the residents
death. In some instances, the bonds are not refundable until the unit has been
successfully remarketed to a new resident. The Company issues new bonds to new residents
of these retirement facilities, and the proceeds from the new bonds are used to retire
the existing bonds. As of December 31, 2003, the bonds payable had an outstanding balance
of $90.1 million.

Contractual Obligations
and Commitments

The
following table presents the Companys contractual cash obligations and related
payment periods as of December 31, 2003 (in thousands):

|Contractual Cash Obligations        | Less than
   1 Year | 2-3 Years | 4-5 Years | Thereafter | Total
|----------------------------------- | ------------------- | --------- | --------- | ---------- | -----
|Mortgages payable                   |                     |           | $         | 27,278     |      
|Revolving line of credit            |                     |           |           |           |      
|Refundable life care bonds (1)      |                     |           |           |           |      
|Construction loans payable          |                     |           |           |           |      
|Refundable tenant security deposits |                     |           |           |           |      
|                                    |                     |           |           |            |      
|Total Contractual Cash              |                     |          
|Obligations                         |                     |           | $         | 27,278     |      
|                                    |                     |           |           |            |      

|(1) |  | It
is expected that the proceeds  from the issuance of new bonds will be used to retire the
existing  bonds;  therefore,  bond          redemptions are not expected to create a
current net cash obligation for the Company.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table presents the Company's  commitments,  contingencies  and guarantees and
related  expiration  periods as of December 31, 2003 (in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|Contractual Cash Obligations                                               | Less than
   1 Year | 2-3 Years | 4-5 Years | Thereafter | Total
|-------------------------------------------------------------------------- | ------------------- | --------- | --------- | ---------- | -----
|Guarantee of unsecured  promissory note of
  unconsolidated subsidiary (1) |                     |           | $         | 2,451      |      
|Earnout provisions (2)                                                     |                     |           |           | 4,050      |      
|Capital improvements to  investment Properties                             |                     |           |           | 8,840      |      
|Available construction facility                                            |                     |           |           |           |      
|Pending Investments (3)                                                    |                     |           |           | 589,080    |      
|                                                                           |                     |           |           |            |      
|Total Commitments,                                                         |                     |          
|Contingencies and
         Guarantees                                      |                     |           | $         | 604,421    |      
|                                                                           |                     |           |           |            |      

|(1) |  | In connection with the acquisition of a 10% limited partnership interest in CNL
               Plaza, Ltd., the Company severally guaranteed 16.67%, or $2.6 million, of a
               $15.5 million unsecured promissory note of the limited partnership that matures
               November 30, 2004. As of December 31, 2003, the unsecured promissory note has an
               outstanding balance of $14.7 million. The Company has not been required to fund
               any amounts under this guarantee. In the event the Company is required to fund
               amounts under the guarantee, management believes that such amounts would be
               recoverable either from operations of the related asset or proceeds upon
               liquidation.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | In connection with the acquisition of seven Properties, the Company may be
               required to make additional payments (the Earnout Amount) if certain
               earnout provisions are achieved by the earnout date for each Property. The
               calculation of the Earnout Amount generally considers the net operating income
               for the Property, the Companys initial investment in the Property and the
               fair value of the Property. In the event an Earnout Amount is due, the
               applicable lease will be amended and annual minimum rent will increase
               accordingly. Earnout Amounts related to 24 Properties are subject to future
               values and events, which are not quantifiable at December 31, 2003, and are not
               included in the table above.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | As of December 31, 2003, the Company had commitments to acquire 23 Properties,
               subject to the fulfillment of certain conditions, including one Property for which $9.8 million
is held in escrow pending certain regulatory approvals.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Cash and Cash Equivalents

Until
Properties are acquired or Mortgage Loans or Secured Equipment Leases 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 or Secured
Equipment Leases. At December 31, 2003, the Company had $167.1 million invested in such
short-term investments as compared to $40.8 million at December 31, 2002. The increase in
the amount invested in short-term investments was primarily attributable to subscription
proceeds received from the sale of shares during the year ended December 31, 2003, offset
by the purchase of 82 Properties. The funds remaining at December 31, 2003, along with
additional funds expected to be received from the sale of shares, will be used to purchase
additional Properties, to make Mortgage Loans or other permitted investments, 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.

Accounts and Other
Receivables

The
Companys accounts and other receivables balance increased from $3.2 million at
December 31, 2002 to $12.2 million as of December 31, 2003. The increase was primarily due
to an increase in rental revenues receivable from $0.8 million at December 31, 2002 to
$11.2 million at December 31, 2003 as a result of lease agreements relating to 43 of the
Companys 119 Properties owned as of December 31, 2003, providing for monthly rent
payments earned under the lease agreements to be paid one month in arrears. The increase
in rental revenues receivable was partially offset by the repayment of a $2.0 million loan
the Company had made to the seller of two Properties. Prior to the Companys purchase
of the two Properties, the Company loaned the seller $2.0 million to extinguish debt at a
discounted amount, making the purchase of the Properties economically viable. The Company
acquired the two Properties on March 31, 2003, and the note was repaid at that time. As of
February 25, 2004, management believes the receivable balance as of December 31, 2003 is
fully collectible.

Loan Costs

The
Companys net loan costs increased from $1.2 million at December 31, 2002 to $7.4
million at December 31, 2003, as a result of the Company borrowing $170.8 million in the
form of 19 new mortgage loans, the assumption of 11 mortgage loans in an aggregate amount
of $72.8 million and a new $85 million revolving line of credit. Loan cost amortization
was $1.4 million for the year ended December 31, 2003.

Lease Intangible Costs

In
connection with the acquisition of Properties that are subject to operating leases, the
Company allocates costs associated with having an in-place lease at the date of
acquisition to a lease intangible asset that is amortized over the initial term of each
applicable lease (generally 15 years). The Companys net lease intangible costs
increased from $8.2 million at December 31, 2002 to $30.2 million at December 31, 2003, as
a result of the Company purchasing 63 Properties that are subject to operating leases
during the year ended December 31, 2003. Lease intangible costs amortization
was $1.2 million for the year ended December 31, 2003.

Liquidity Requirements

During
the years ended December 31, 2003, 2002 and 2001, the Company generated cash from
operating activities (which includes cash received from its tenants and interest, less
cash paid for operating expenses) of $60.7 million, $16.8 million and $2.2 million,
respectively. For the years ended December 31, 2003, 2002 and 2001, cash from operating
activities includes security deposits of $3.1 million, $3.5 million and $0.8 million,
respectively, which were received from the Companys tenants. Management expects the
Company to meet its short-term liquidity requirements, other than for offering expenses,
the acquisition and development of Properties, and the investment in Mortgage Loans and
other permitted investments, through cash flow provided by operating activities.
Management believes that cash flow provided by operating activities will be sufficient to
fund normal recurring operating expenses, regular debt service requirements and
distributions to stockholders. In February 2004, the Company, the Advisor and two
operators that manage Properties located in California were named in
a complaint with respect to certain fees and deposits collected by operators
from residents of the Properties as described in Item 3. To the extent that the Companys cash flow provided by
operating activities is not sufficient to meet such short-term liquidity requirements as a
result, for example, of unforeseen expenses due to the tenants defaulting under the terms
of their lease agreements, the Company will use borrowings under its revolving line of
credit. Management expects the Company to meet its other short-term liquidity
requirements, including payment of offering expenses, the acquisition and development of
Properties, and the investment in Mortgage Loans and other permitted investments, with
proceeds from its offerings, advances under its revolving line of credit and permanent
financing. Management expects the Company to meet its long-term liquidity requirements
through short- or long-term, unsecured or secured debt financing or equity financing.

Properties
are generally leased on a long-term, triple-net basis, meaning the tenants are required to
pay repairs and maintenance, property taxes, insurance and utilities. Generally, the
tenants are also required to maintain an FF&E reserve account which is used to fund
expenditures to refurbish buildings, premises and equipment to maintain the leasehold in a
manner that allows operation for its intended purpose. In the event that the FF&E
reserve is not sufficient, the Company may make fixed asset expenditures, in which case
the annual minimum rent will be increased. Management does not believe that working
capital or additional FF&E reserves are necessary as of December 31, 2003.

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

Distributions

The
Company declared and paid distributions to its stockholders totaling $59.8 million, $14.4
million and $1.5 million during the years ended December 31, 2003, 2002 and 2001,
respectively. In addition, on January 1, 2004 and February 1, 2004, the Company declared
distributions of $0.0592 per share of common stock to stockholders of record as of each
respective date. These distributions are payable by March 31, 2004.

For
the years ended December 31, 2003, 2002 and 2001, approximately 71%, 65% and 65%,
respectively, of the distributions received by stockholders were considered to be ordinary
income and approximately 29%, 35% and 35%, respectively, were considered a return of
capital for federal income tax purposes. No amounts distributed to stockholders for the
years ended December 31, 2003, 2002 and 2001, 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 monthly or
quarterly.

# Results of Operations

Comparison of the year
ended December 31, 2003 to the year ended December 31, 2002

Net
earnings for the year ended December 31, 2003 totaled $58.5 million or $0.66 per share of
common stock. This compares to net earnings of $11.4 million or $0.52 per share of common
stock in 2002. The increase in net earnings and net earnings per share was the result of
the various factors described below.

For
the years ended December 31, 2003 and 2002, the Company earned $91.3 million and $16.8
million, respectively, in rental income from its Properties under operating leases and
earned income from its Properties subject to direct financing leases. The Company also
earned $2.6 million and $0.2 million in FF&E reserve income during the years ended
December 31, 2003 and 2002, respectively. The increase in rental and FF&E reserve
income was due to the Company owning 118 Properties subject to lease agreements during the
year ended December 31, 2003, as compared to 36 Properties during the year ended December
31, 2002. Since 82 Properties were owned for only a portion of 2003 and additional
Property acquisitions are expected to occur, results of operations are not expected to be
indicative of future periods and rental income from operating leases, earned income from
direct financing leases and FF&E reserve income are expected to increase in subsequent
periods.

In
addition to minimum annual base rent, certain leases require the payment of contingent
rent if certain operating performance or occupancy rate thresholds, as defined in the
lease agreements, are achieved by the Properties. During the years ended December 31, 2003
and 2002, the Company recognized $47,610 and $7,758, respectively, of contingent rent.

During
the years ended December 31, 2003 and 2002, the Company also earned $1.6 million and $1.9
million, respectively, in interest income from investments in money market accounts and
other short-term, highly liquid investments. Although the average amount invested in
short-term investments increased during the year ended December 31, 2003, as compared to
the year ended December 31, 2002, interest income decreased due to a decrease in interest
rates earned on the short-term investments. As net offering proceeds are used to invest in
Properties and make Mortgage Loans, the percentage of the Companys total revenues
earned from interest income from investments in money market accounts or other short-term,
highly liquid investments is expected to decrease. Included in interest and other income
for the years ended December 31, 2003 and 2002, was $0.1 million and $0.2 million,
respectively, in interest income related to accounts and other receivables.

---

Operating
expenses, excluding interest and depreciation, were $10.0 million and $2.2 million for the
years ended December 31, 2003 and 2002, respectively (10.5% and 11.6%, respectively, of
total revenues). The increase in operating expenses for the year ended December 31, 2003,
as compared to the year ended December 31, 2002, was the result of the Company incurring
asset management fees and general and administrative expenses relating to the Company
acquiring 82 additional Properties during 2003. Interest expense increased from $1.5
million for the year ended December 31, 2002 to $9.6 million for the year ended December
31, 2003, as a result of the Company increasing the average amount of debt outstanding
during 2003, offset partially by a decrease in interest rates. Depreciation and
amortization increased from $3.3 million for the year ended December 31, 2002 to $17.6
million for the year ended December 31, 2003, as a result of the Company acquiring 82
additional Properties during 2003. The dollar amount of operating expenses is expected to
increase as the Company acquires additional Properties, invests in Mortgage Loans, obtains
permanent financing and draws funds on its revolving line of credit. However, general and
administrative expenses as a percentage of total revenues are expected to decrease as the
Company acquires additional Properties and invests in Mortgage Loans.

The
following unaudited condensed pro forma information assumes that the Properties acquired
during 2003 and 2002, were owned on January 1, 2002. Additionally, it assumes that the
effect of the sale of the Companys common stock and assumption or issuance of
mortgage debt had occurred on January 1, 2002 (in thousands, except per share data):

|                                         | For the Year Ended December 31,
|---------------------------------------- | -------------------------------
|
|Revenues                                 |                                
|Expenses                                 |                                
|Net earnings                             |                                
|Basic and diluted earnings per share     |                                
|                                         |                                
|Weighted average number of common shares |                                
|outstanding - basic and diluted          |                                

At
December 31, 2003, the Company leased its Properties to 15 tenants, three of which
independently contributed between 11% and 18% (an aggregate of 42%) of the Companys
total rental income from operating leases and earned income from direct financing leases
for the year ended December 31, 2003.

The
Advisors parent company is affiliated with eight of the Companys tenants that
leased 69 of the Companys 119 Properties as of December 31, 2003. These eight
tenants contributed 35% of total rental income from operating leases and earned income
from direct financing leases for the year ended December 31, 2003. Each of the eight
tenants is a thinly capitalized corporation that is affiliated with HRA. The
Companys other tenants include subsidiaries or affiliates of: American Retirement
Corporation (ARC); Erickson Retirement Communities, LLC; Greenwalt
Corporation; Prime Care Properties, LLC; Summit Companies, Incorporated; Solomon Senior
Living Holdings, LLC; and Sunrise Senior Living Services, LLC (Sunrise).

To
mitigate credit risk, certain leases are combined into portfolios that contain
Cross-Default and Pooling terms. In addition, as of December 31, 2003, the Company had
$8.0 million in security deposits related to certain Properties as well as various
guarantees or required cash reserves to be held by the tenant for payment of minimum rent.

In
connection with eight Properties leased to wholly owned subsidiaries of ARC, ARC has
unconditionally guaranteed all of the tenants obligations under the terms of the
leases, including the payment of minimum rent.

In
connection with the purchase of five Properties that are in various stages of development
and being developed by Sunrise Development, Inc., Sunrise has guaranteed the tenants
obligations to pay minimum rent and the FF&E reserve due under the leases from the
date of acquisition until the later of (i) 30 months (March 2007) or (ii) 18 months after
the final development date.

---

The
Company had the following additional limited guarantees as of December 31, 2003 (in
thousands):

|                       |  |  | Guarantee
|---------------------- |  |  | ---------
|
|Sunrise                |  |  |          
|                       |  |  |          
|Marriott International |  |  |          
|Sunrise/cash reserves  |  |  |          

At
December 31, 2003, 93 of the 119 Properties owned by the Company were operated by Sunrise,
a wholly owned subsidiary of Sunrise Senior Living, Inc., formerly known as Sunrise
Assisted Living, Inc. Additionally, five Properties owned by the Company as of December
31, 2003, are being developed by Sunrise Development, Inc., a wholly owned subsidiary of
Sunrise Senior Living, Inc. Upon completion of each development, each Property will be
operated by Sunrise. Four additional operators manage the remaining 21 Properties owned by
the Company as of December 31, 2003.

Although
the Company acquires Properties located in various states and regions and screens its
tenants in order to reduce risks of default, failure of these tenants, their guarantors or
the Sunrise or American Retirement Corporation brands would significantly impact the results of operations of the Company. It
is expected that the percentage of total rental income contributed by these tenants will
decrease as additional Properties are acquired and leased to diversified tenants during
subsequent periods.

Comparison of the year
ended December 31, 2002 to the year ended December 31, 2001

Net
earnings for the year ended December 31, 2002 totaled $11.4 million or $0.52 per share of
common stock. This compares to net earnings of $0.9 million or $0.38 per share of common
stock for 2001. The increase in net earnings and net earnings per share was the result of
the various factors described below.

For
the years ended December 31, 2002 and 2001, the Company earned $16.8 million and $1.7
million, respectively, in rental income from its Properties accounted for as operating
leases and earned income from its Properties accounted for as direct financing leases. The
Company also earned $0.2 million and $39,000 in FF&E reserve income during the years
ended December 31, 2002 and 2001, respectively. The increase in rental and FF&E
reserve income was due to the Company owning 36 Properties subject to lease agreements
during the year ended December 31, 2002, as compared to three Properties during the year
ended December 31, 2001.

Of
the 36 Properties subject to lease agreements, 35 of these Properties are leased to
affiliates or wholly owned subsidiaries of ARC, HRA or Prime Care Properties, LLC and
contributed 95.6% of Companys total rental income during the year ended December 31,
2002. Six of these Properties are operated under the ARC brand and 29 Properties were
operated by Marriott Senior Living Services, Inc., a subsidiary of Marriott International,
Inc. To mitigate credit risk, certain leases are combined into portfolios that contain
Cross-Default and Pooling terms. For certain Properties, the Company has also required
security deposits, guarantees from the tenants parent company or additional cash
reserve accounts to be held at the tenant level.

During
the years ended December 31, 2002 and 2001, the Company also earned $1.9 million and $0.1
million, respectively, in interest income from investments in money market accounts and
other short-term, highly liquid investments. Interest income increased during the year
ended December 31, 2002, as compared to the year ended December 31, 2001, due to the
Company having a larger amount of offering proceeds temporarily invested pending the
acquisition of Properties. Included in interest income for the year ended December 31,
2002 was approximately $0.2 million in interest income related to notes receivable.

Operating
expenses, including interest expense and depreciation and amortization expense, were
approximately $7.1 million and $1.0 million for the years ended December 31, 2002 and
2001, respectively (37.4% and 51.8%, respectively, of total revenues). The increase in
operating expenses during the year ended December 31, 2002, as compared to 2001, was the
result of the Company owning and overseeing 37 Properties during 2002 compared to the
three Properties in 2001. Additionally, interest expense increased from $0.1 million for
the year ended December 31, 2001 to $1.5 million for the year ended December 31, 2002, as
a result of the Company entering into additional borrowing in 2002.

Pursuant
to the Advisory Agreement, the Advisor is required to reimburse the Company the amount by
which total operating expenses paid or incurred by the Company exceed in any four
consecutive quarters the Expense Cap. During the four quarters ended June 30, 2001, the
Companys operating expenses totaled $0.4 million, exceeding the Expense Cap by $0.1
million; therefore, the Advisor reimbursed the Company such amount in accordance with the
Advisory Agreement. The Companys operating expenses did not exceed the Expense Cap
for any other Expense Years during the years ended December 31, 2002 and 2001.

---

In
May 2002, a joint venture in which the Company owned a 76.75% equity interest, purchased
five Properties. The 23.25% minority interest in this joint venture was held by Marriott
Senior Living Services, Inc. until December 20, 2002, when the Company purchased the
23.25% minority interest. Prior to December 20, 2002, each joint venture partner shared in
the costs and benefits of the joint venture in proportion to its percentage equity
interest. The minority interest in earnings of the consolidated joint venture was $0.4
million for the year ended December 31, 2002.

# Other

Inflation and Trends

The
Companys current leases are triple-net leases and contain provisions that management
believes will mitigate the effect of inflation. Such provisions include clauses requiring
automatic increases in base rent at specified times during the term of the lease
(generally on an annual basis) and the payment of contingent rent if Properties achieve
specified operating thresholds (based on factors such as a percentage of gross sales above
a specified level). It is expected that future leases will generally be triple-net leases,
however, the Company expects to invest in medical office buildings, which typically are
leased on a shorter-term, gross basis. The gross leases are expected to also contain
provisions that mitigate the effect of inflation, such as scheduled base rent increases
during the lease terms and the reimbursement of future increases in operating expenses
(including real estate taxes, insurance, repairs, maintenance and utilities) over a
specified base amount. Inflation and changing prices may have an adverse impact on the
potential disposition of the Properties and on capital appreciation of the Properties.

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. Assuming the
inflation rate remains low and long-term interest rates do not increase significantly,
management believes that inflation will not impact the availability of equity and debt
financings. Management expects that the cash to be generated from operations will be
adequate to pay operating expenses and to make distributions to stockholders.

Related Party Transactions

Certain
directors and officers of the Company hold similar positions with the Advisor, the parent
company of the Advisor and the managing dealer of the Companys public offerings, CNL
Securities Corp. (CNL Securities). A director of the Company indirectly owns a
controlling interest in the parent company of the Advisor. These affiliates receive fees
and compensation in connection with the offerings, permanent financing and the
acquisition, management and sale of the Companys assets.

For
services in connection with the sale of the Companys shares, CNL Securities receives
fees based on the amounts raised from the Companys offerings for: (i) commissions of
7.5%, (ii) a marketing support fee of 0.5% and (iii) beginning in December 31, 2003, an
annual soliciting dealer servicing fee equal to 0.2% of the aggregate proceeds raised in
the 2000 Offering. The majority of such fees were re-allowed to other broker dealers. As
of December 31, 2003, 2002 and 2001, the Company incurred the following costs related to
such fees (in thousands):

|                                | Years Ended December 31,
|------------------------------- | ------------------------
|
|Commissions                     |                         
|Marketing support fee           |                         
|Soliciting dealer servicing fee |                         
|                                |                         
|                                |                         
|                                |                         

The
Advisor receives acquisition fees for services in identifying Properties and structuring
the terms of their leases and Mortgage Loans equal to 4.5% of the gross proceeds of the
offering and loan proceeds from permanent financing, excluding that portion of the
permanent financing used to finance Secured Equipment Leases. In addition, if there is a
Listing, the Company will receive an acquisition fee of 4.5% of amounts outstanding on a
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. During the years ended December
31, 2003, 2002 and 2001, the Company incurred $59.0 million, $18.7 million and $2.7
million, respectively, of such fees, including $11.3 million, $2.1 million and $0,
respectively, of acquisition fees on permanent financing. These fees are recorded as other
assets in the Consolidated Financial Statements of the Company in Item 8 prior to being allocated to individual
Properties or lease intangible costs.

---

The
Company and the Advisor have entered into an Advisory Agreement pursuant to which the
Advisor receives a monthly asset management fee of 0.05% of the Companys real estate
asset value and the outstanding principal balance of any Mortgage Loan as of the end of
the preceding month. During the years ended December 31, 2003, 2002 and 2001, the Company
incurred $4.4 million, $0.8 million and $0.1 million, respectively, of such fees.

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).
The expenses incurred for these services for the years ended December 31 are as follows
(in thousands):

|                                          | Years Ended December 31,
|----------------------------------------- | ------------------------
|
|Stock issuance costs                      |                         
|Investment Properties on operating leases |                         
|General and administrative expenses       |                         
|                                          |                         
|                                          |                         
|                                          |                         

During
the years ended December 31, 2003, 2002 and 2001, affiliates of the Advisor incurred on
behalf of the Company $17.2 million, $5.6 million and $1.6 million, respectively, for
certain offering expenses. Offering expenses paid by the Company, together with selling
commissions, the marketing support fee and due diligence expense reimbursements incurred
by the Company will not exceed 13% of the proceeds raised in connection with the
offerings. In addition, during the years ended December 31, 2003, 2002 and 2001 affiliates
incurred on behalf of the Company $0.4 million, $0.5 million and $0.4 million,
respectively, for certain acquisition expenses and $2.2 million, $0.6 million and $0.2
million, respectively, for certain operating expenses.

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 in any Expense Year
exceed the Expense Cap. During the Expense Year ended June 30, 2001, operating expenses
exceeded the Expense Cap by $0.1 million; therefore, the Advisor reimbursed the Company
such amounts. The Companys operating expenses did not exceed the Expense Cap in any
other subsequent Expense Year.

CNL
Capital Corp., an affiliate of the Advisor, is a non-voting Class C member of Century
Capital Markets, LLC (CCM). CCM made the arrangements for the $23.5 million
loan described in Note 8 to the Notes to Consolidated Financial Statements of the Company
in Item 8, for which CCM was paid a $0.5 million structuring fee in June 2002. Prior to
August 18, 2003, the monthly interest payments due under the loan included a margin of 30
basis points payable to CCM for the monthly services it provided related to the
administration of the loan. From its origination in June 2002, the loan was a commercial
paper backed loan with an interest rate at the commercial paper rate, as determined by
market demand, plus a margin of 1.86% that was inclusive of liquidity fees and
administrative costs. The Company paid CCM $0.2 million for each of the two years ended
December 31, 2003 and 2002, related to these services. On August 18, 2003, the loan
converted from a commercial paper loan to a direct loan with a third party commercial
lender.

During
the year ended December 31, 2003, the Company also paid CCM a $0.2 million finders
fee related to the acquisition of two Properties.

The
Company maintains bank accounts in a bank in which certain officers and directors of the
Company serve as directors, and in which an affiliate of the Advisor and certain executive
officers of the Company are stockholders. The amounts deposited with this bank were $15.8
million and $5.7 million at December 31, 2003 and 2002, respectively.

On
May 30, 2002, the Company acquired a 10% interest in a limited partnership, CNL Plaza,
Ltd., that owns an office building located in Orlando, Florida, in which the Advisor and
its affiliates lease office space. The remaining interest in the limited partnership is
owned by several affiliates of the Advisor. During the years ended December 31, 2003 and
2002, the Company received $0.1 million and $0.2 million, respectively, in distributions
from the partnership.

---

In
March 2003, the Advisors parent company purchased a 30% voting membership interest
in a limited liability company which is affiliated with eight of the Companys
tenants that leased 69 of the Companys 119 Properties as of December 31, 2003. These
eight thinly capitalized tenants contributed 35% of total rental income from operating
leases and earned income from direct financing leases for the year ended December 31,
2003.

Amounts
due to related parties at December 31 are as follows (in thousands):

|                                            | 2003 | 2002
|------------------------------------------- | ---- | ----
|
|Due to CNL Securities:                      |      |     
|Commissions                                 |      |     
|Marketing support fee and due diligence     |      |     
|expense reimbursements                      |      |     
|Soliciting dealer service fee               |      |     
|                                            |      |     
|                                            |      |     
|                                            |      |     
|Due to the Advisor and its affiliates:      |      |     
|Expenditures incurred for offering expenses |      |     
|on behalf of the Company                    |      |     
|Accounting and administrative services      |      |     
|Acquisition fees and miscellaneous          |      |     
|acquisition expenses                        |      |     
|                                            |      |     
|                                            |      |     
|                                            |      |     
|                                            |      |     
|                                            |      |     

Critical Accounting
Policies

Allocation
of Purchase Price for Acquisition of Properties. The Company allocates the purchase
costs of Properties to the tangible and intangible assets acquired and the liabilities
assumed as provided by Statement of Accounting Standard No. 141, Business
Combinations. For each acquisition, the Company assesses the value of the land,
building, equipment and its intangible assets, including in-place leases, the
above or below market lease values and the value of tenant relationships based on their
estimated fair values. The value of the buildings acquired are determined on an as-if
vacant basis. The values determined are based on independent appraisals or on
managements estimates reflecting the facts and circumstances of each acquisition.

Acquisition
Fees and Costs. Acquisition fees and miscellaneous acquisition costs that are directly
identifiable with Properties that are probable of being acquired are capitalized and
included in other assets. Upon the purchase of a Property, the fees and costs directly
identifiable with that Property are reclassified to land, building, equipment and lease
intangibles or to investment in direct financing leases. In the event a Property is not
acquired or no longer is expected to be acquired, costs directly related to the Property
will be charged to expense.

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

Impairments.The Company periodically (no less than once per year) evaluates its investments in real estate and any unconsolidated
          joint ventures for impairment  and
          whenever events or changes in circumstances indicate that the carrying amounts
          of the assets may not be recoverable through operations. Management determines
          whether impairment in the value has occurred by comparing the undiscounted cash
          flows, including the estimated residual value of the asset with the carrying
          amount of the individual asset. If impairment is indicated, the asset is
          adjusted to its estimated fair value.

---

New Accounting Standards

In
January 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest
Entities, to expand upon and strengthen existing accounting guidance that addresses
when a company should include the assets, liabilities and activities of another entity in
its financial statements. To improve financial reporting by companies involved with
variable interest entities (more commonly referred to as special-purpose entities or
off-balance sheet structures), FIN 46 requires that a variable interest entity be
consolidated by a company if that company is subject to a majority risk of loss from the
variable interest entitys activities or entitled to receive a majority of the entitys
residual returns or both. The consolidation requirements of FIN 46 apply immediately to
variable interest entities created after January 31, 2003, and a result of a revision to
FIN 46 (FIN46-R), and to older entities which are non-special purpose
entities in the first fiscal year or interim period ending after March 15, 2004. The
consolidation of these entities, if required, is not expected to have a significant
effect on the Companys financial position results of operations.

In
May 2003, the FASB issued Statement of Financial Accounting Standard No. 150 (SFAS
150), Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity. SFAS 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of both
liabilities and equity. SFAS 150 requires issuers to classify certain financial
instruments as liabilities (or assets in some circumstances) that previously were
classified as equity. Financial instruments covered by SFAS 150 include shares that are
mandatorily redeemable, and other financial instruments that contain obligations to
repurchase outstanding shares or contain conditional obligations that require settlement
by issuance of a variable number of that issuers shares. SFAS 150 is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after September 15,
2003, except for the provisions related to the mandatorily redeemable non-controlling
interests. On October 29, 2003, the FASB delayed the effective date of the implementation
of the provisions that relate to the mandatorily redeemable non-controlling interests.
The Company does not expect the adoption of this statement to have a significant impact
on the financial position or results of operations of the Company.

REIT Qualification

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, 2003, 2002 and 2001. In addition, the Company intends to
continue to operate the Company so as to remain qualified as a REIT for federal income
tax purposes.

# Statement Regarding
Forward Looking Information

The
preceding information contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements 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 local and national 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 continue to locate suitable tenants for
its Properties and borrowers for its Mortgage Loans and Secured Equipment Leases, and the
ability of 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.

---

# Item 7A.     Quantitative
and Qualitative Disclosures About Market Risk

Approximately
38% of the Companys mortgage notes payable at December 31, 2003 were subject to
variable interest rates. Therefore, the Company is exposed to market changes in interest
rates. At December 31, 2003, a hypothetical 100 basis point increase in the US Treasury
and LIBOR rates would have resulted in additional interest costs of approximately $0.9
million. This sensitivity analysis contains certain simplifying assumptions (for example,
it does not consider the impact of changes in prepayment risk or credit spread risk).
Therefore, although it gives an indication of the Companys exposure to interest
rate change, it is not intended to predict future results and the Companys actual
results will likely vary.

The
Company is also subject to interest rate risk through outstanding balances on its
variable rate line of credit. The Company had $20 million outstanding at December 31,
2003.

To
mitigate interest rate risk, the Company may pay down the mortgages or the line of credit
prior to their maturity dates with offering proceeds should interest rates rise
substantially.  Certain loans contain substantial prepayment penalties and/or defeasance provisions
that could preclude the repayment of the loans prior to their maturity dates.

Following
is a summary of the Companys permanent financing obligations at December 31, 2003
(in thousands):

|                      | Expected Maturing Permanent Financing |  |  
|--------------------- | ------------------------------------- |  | -
|
|Fixed Rate Debt:      |                                       |  | $
|Average Interest Rate |                                       |  |  
|                      |                                       | 
|Variable Rate Debt:   |                                       |  | $
|Average Interest Rate |                                       |  |  

---

# Item 8.     Financial
Statements and Supplementary Data

CNL RETIREMENT PROPERTIES, INC.AND SUBSIDIARIES



CONTENTS

|                                                   |  | Page 
|-------------------------------------------------- |  | -----
|                                                   |  |      
|Report of Independent Certified Public Accountants |  | 29   
|                                                   |  |      
|Financial Statements:                              |  |      
|                                                   |  |      
|Consolidated Balance Sheets                        |  | 30   
|                                                   |  |      
|Consolidated Statements of Earnings                |  | 31   
|                                                   |  |      
|Consolidated Statements of Stockholders' Equity    |  | 32   
|                                                   |  |      
|Consolidated Statements of Cash Flows              |  | 3334
|                                                   |  |      
|Notes to Consolidated Financial Statements         |  | 35-49
|                                                   |  |      

---

Report of
Independent Certified Public Accountants

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

In our opinion, the accompanying
consolidated balance sheets and related consolidated statements of earnings, of
stockholders equity and of cash flows present fairly, in all material respects, the
financial position of CNL Retirement Properties, Inc. and its subsidiaries at December
31, 2003 and 2002, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2003 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
15(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 February 25, 2004

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS (in thousands, except
per share data)

|                                                                | December 31,
|--------------------------------------------------------------- | ------------
|
|Assets                                                          |             
|Investment properties:                                          |             
|Accounted for using the operating method, net                   |             
|Accounted for using the direct financing method                 |             
|Cash and cash equivalents                                       |             
|Restricted cash                                                 |             
|Accounts and other receivables                                  |             
|Loan costs, less accumulated amortization of $1,429 and $89     |             
|Lease intangible costs, less accumulated amortization of $1,423 |             
|and $254                                                        |             
|Accrued rental income                                           |             
|Other assets                                                    |             
|Investment in unconsolidated subsidiary                         |             
|                                                                |             
|                                                                |             
|                                                                |             
|Liabilities and Stockholders' Equity                            |             
|Liabilities:                                                    |             
|Mortgage notes payable                                          |             
|Bonds payable                                                   |             
|Lines of credit                                                 |             
|Construction loans payable                                      |             
|Due to related parties                                          |             
|Accounts payable and accrued expenses                           |             
|Deferred income                                                 |             
|Security deposits                                               |             
|Rents paid in advance                                           |             
|                                                                |             
|Total liabilities                                               |             
|                                                                |             
|Commitments and contingencies (Note 9)                          |             
|                                                                |             
|Stockholders' equity:                                           |             
|Preferred stock, without par value                              |             
|Authorized and unissued 3,000 shares                            |             
|Excess shares, $.01 par value per share                         |             
|Authorized and unissued 103,000 shares                          |             
|Common stock, $.01 par value per share                          |             
|Authorized 450,000 and 100,000 shares, respectively,            |             
|issued 150,253 and 44,255 shares, respectively,                 |             
|outstanding 150,077 and 44,211 shares, respectively             |             
|Capital in excess of par value                                  |             
|Accumulated distributions in excess of net earnings             |             
|                                                                |             
|Total stockholders' equity                                      |             
|                                                                |             
|                                                                |             
|                                                                |             

See
accompanying notes to condensed consolidated financial statements.

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF EARNINGS (in thousands, except
per share data)

|                                           | Year Ended December 31,
|------------------------------------------ | -----------------------
|
|Revenues:                                  |                        
|Rental income from operating leases        |                        
|Earned income from direct financing leases |                        
|Contingent rent                            |                        
|FF&E reserve income                        |                        
|Interest and other income                  |                        
|                                           |                        
|                                           |                        
|                                           |                        
|Expenses:                                  |                        
|Interest and loan cost amortization        |                        
|General and administrative                 |                        
|Property operating                         |                        
|Asset management fees to related party     |                        
|Reimbursement of operating expenses        |                        
|from related party                         |                        
|Depreciation and amortization              |                        
|                                           |                        
|                                           |                        
|                                           |                        
|Earnings before equity in earnings of      |                        
|unconsolidated subsidiary and minority     |                        
|interest in earnings of consolidated       |                        
|joint venture                              |                        
|Equity in earnings of unconsolidated       |                        
|subsidiary                                 |                        
|Minority interest in earnings of           |                        
|consolidated joint venture                 |                        
|                                           |                        
|Net earnings                               |                        
|                                           |                        
|Net earnings per share of common           |                        
|stock (basic and diluted)                  |                        
|                                           |                        
|Weighted average number of shares of       |                        
|common stock outstanding (basic            |                        
|and diluted)                               |                        
|                                           |                        

See
accompanying notes to consolidated financial statements.

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended December 31, 2003, 2002 and 2001(in thousands, except
per share data)

|                                                    |  |         |   | Accumulated
distributions |  
|--------------------------------------------------- |  | ------- | - | ------------------------- | -
|
|
|Balance at December 31, 2000                        |  | 1,186   |   | $        12               |  
|Subscriptions received for common stock             | 
|through public offering and reinvestment plan       |  | 5,952   |   | 59                        |  
|Stock issuance costs                                |  |        |   |                          |  
|Retirement of common stock                          |  | (3      | ) |                          |  
|Net earnings                                        |  |        |   |                          |  
|Distributions declared and paid ($0.6996 per share) |  |        |   |                          |  
|                                                    |  |         |   |                           |  
|Balance at December 31, 2001                        |  | 7,135   |   | 71                        |  
|Subscriptions received for common stock             | 
|through public offering and reinvestment plan       |  | 37,113  |   | 371                       |  
|Stock issuance costs                                |  |        |   |                          |  
|Retirement of common stock                          |  | (37     | ) |                          |  
|Net earnings                                        |  |        |   |                          |  
|Distributions declared and paid ($0.7002 per share) |  |        |   |                          |  
|                                                    |  |         |   |                           |  
|Balance at December 31, 2002                        |  | 44,211  |   | 442                       |  
|Subscriptions received for common stock             | 
|through  public  offerings  and  reinvestment plan  |  | 105,998 |   | 1,060                     |  
|Stock issuance costs                                |  |        |   |                          |  
|Retirement of common stock                          |  | (132    | ) | (1                        | )
|Net earnings                                        |  |        |   |                          |  
|Distributions declared and paid ($0.7067 per share) |  |        |   |                          |  
|                                                    |  |         |   |                           |  
|Balance at December 31, 2003                        |  | 150,077 |   | $       1,501             |  
|                                                    |  |         |   |                           |  

See
accompanying notes to consolidated financial statements.

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)

|                                                           | Year Ended December 31,
|---------------------------------------------------------- | -----------------------
|
|Increase (decrease) in cash and cash equivalents:          |                        
|Operating activities:                                      |                        
|Net earnings                                               |                        
|Adjustments to reconcile net earnings to net cash provided |                        
|by operating activities:                                   |                        
|Depreciation                                               |                        
|Amortization                                               |                        
|Equity in earnings of unconsolidated subsidiary            |                        
|Changes in operating assets and liabilities:               |                        
|Accounts and other receivables                             |                        
|Accrued rental income                                      |                        
|Other assets                                               |                        
|Interest payable                                           |                        
|Accounts payable and other accrued expenses                |                        
|Deferred income                                            |                        
|Due to related parties                                     |                        
|Security deposits                                          |                        
|Rents paid in advance                                      |                        
|Minority interest in income                                |                        
|                                                           |                        
|Net cash provided by operating activities                  |                        
|                                                           |                        
|Investing activities:                                      |                        
|Investment in land, buildings and equipment                |                        
|Investment in direct financing leases                      |                        
|Purchase of minority interest                              |                        
|Investment in lease intangibles                            |                        
|Investment in note receivable                              |                        
|Collection of note receivable                              |                        
|Investment in unconsolidated subsidiary                    |                        
|Distributions received from unconsolidated subsidiary      |                        
|Payment of acquisition fees and costs                      |                        
|Increase in restricted cash                                |                        
|                                                           |                        
|Net cash provided by investing activities                  |                        
|                                                           |                        
|Financing activities:                                      |                        
|Proceeds from borrowings on mortgage notes payable         |                        
|Principal payments on mortgage notes payable               |                        
|Proceeds from construction financing                       |                        
|Proceeds from borrowings on line of credit                 |                        
|Repayments on line of credit                               |                        
|Proceeds from issuance of life care bonds                  |                        
|Retirement of life care bonds                              |                        
|Payment of loan costs                                      |                        
|Contributions received from minority interest              |                        
|Distributions to minority interest                         |                        
|Subscriptions received from stockholders                   |                        
|Payment of stock issuance costs                            |                        
|Distributions to stockholders                              |                        
|Retirement of common stock                                 |                        
|                                                           |                        
|Net cash provided by financing activities                  |                        
|                                                           |                        
|Net increase in cash and cash equivalents                  |                        
|Cash and cash equivalents at beginning of year             |                        
|                                                           |                        
|Cash and cash equivalents at end of year                   |                        
|                                                           |                        

See
accompanying notes to consolidated financial statements.

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED

|                                                  | Year Ended December 31,
|------------------------------------------------- | -----------------------
|
|Supplemental schedule of non-cash investing       |                        
|and financing activities:                         |                        
|Amounts incurred by the Company and paid by       |                        
|related parties on behalf of the Company          |                        
|were as follows:                                  |                        
|Acquisition costs                                 |                        
|Stock issuance costs                              |                        
|                                                  |                        
|                                                  |                        
|                                                  |                        
|Mortgage assumed on property purchase             |                        
|                                                  |                        
|Bonds assumed on property purchase                |                        
|                                                  |                        
|Supplemental disclosure of cash flow information: |                        
|Cash paid during the year for interest            |                        
|                                                  |                        

See
accompanying notes to consolidated financial statements.

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Years Ended December
31, 2003, 2002 and 2001

1.          
          Significant Accounting Policies:

| | Organization
and Nature of Business  CNL Retirement Properties, Inc., a Maryland
corporation, was organized in December 1997 to operate as a real estate investment trust
(a REIT) for federal income tax purposes. CNL Retirement Properties, Inc.
owns CNL Retirement GP Corp. and CNL Retirement LP Corp., both of which are Delaware
corporations and are the general and limited partners, respectively, of CNL Retirement
Partners, LP, a Delaware limited partnership. The Companys investment properties
are generally held by CNL Retirement Partners, LP or its wholly owned subsidiaries. The
term Company includes CNL Retirement Properties, Inc. and its subsidiaries.
The Company has retained CNL Retirement Corp. (the Advisor) as its advisor to
provide management, acquisition, advisory and administrative services.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company acquires investment properties (the Property or Properties)
related to seniors housing and health care facilities located primarily across the
United States. As of December 31, 2003, the Company had 119 Properties located in 27
states, consisting of 81 assisted living facilities, 17 assisted living/skilled nursing
facilities, two continuing care retirement communities, six independent living/assisted
living facilities, three independent living facilities, six properties under various
stages of development and four land leases. Properties acquired in the future may include
independent living, assisted living and skilled nursing facilities, continuing care
retirement communities, life care communities, specialty clinics, medical office
buildings, walk-in clinics and similar types of health care-related facilities. The
Company also may provide mortgage financing (Mortgage Loans) and may offer
furniture, fixture and equipment financing (Secured Equipment Leases) to the
operators of the Properties.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Principles
of Consolidation  The accompanying consolidated financial statements include
the accounts of the Company, each of its wholly owned subsidiaries and an entity in which
the Company owns a 99% controlling interest. Interests of unaffiliated third parties for
less than 100% owned and majority controlled entities are reflected as minority
interests. All significant intercompany balances and transactions have been eliminated in
consolidation.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Investment
in Unconsolidated Subsidiary  The Company owns a 10% interest in a limited
partnership that owns an office building located in Orlando, Florida, in which the
Advisor and its affiliates lease office space. The Companys investment in the
partnership is accounted for using the equity method as the Company has significant
influence.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Investment
Properties and Lease Accounting Properties are generally leased on a long-term,
triple-net basis whereby the tenants are generally responsible for all operating expenses
relating to the Property, including property taxes, insurance, maintenance, repairs and
utilities. For the years ended December 31, 2003, 2002 and 2001, the Companys
tenants paid $8.1 million, $1.1 million and $0.1 million, respectively, in property taxes
on behalf of the Company. The leases are accounted for using either the operating or
direct financing method.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Operating
method  For leases accounted for as operating leases, Properties are recorded
at cost. Minimum rent payments contractually due under the leases are recognized as
revenue on a straight-line basis over the lease terms so as to produce constant periodic
rent recognition over the lease terms. The excess of rents recognized over amounts
contractually due are included in accrued rental income in the accompanying financial
statements. Buildings and equipment are depreciated on the straight-line method over
their estimated useful lives of 40 years and three years to seven years, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Direct
financing method  For leases accounted for as direct financing leases, future
minimum lease payments are recorded as a receivable. The difference between the rents
receivable and the estimated residual values less the cost of the Properties is recorded
as unearned income. Unearned income is deferred and amortized to income over the lease
terms to provide a constant rate of return. Investments in direct financing leases are
presented net of unamortized unearned income.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | When
a Property is sold, the related costs and accumulated depreciation, plus any accrued
rental income, are removed from the accounts and any gain or loss from sale is reflected
in income.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

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

| | FF&E
Reserve Income A furniture, fixtures and equipment (FF&E) cash
reserve has been established in accordance with substantially all of the lease
agreements. In accordance with the agreements, the tenants deposit funds into restricted
FF&E cash reserve accounts and periodically use these funds to cover the cost of the
replacement, renewal and additions to FF&E. In the event that the FF&E reserve is
not sufficient to maintain the Property in good working condition and repair, the Company
may make fixed asset expenditures, in which case annual rent would be increased.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | With
respect to the majority of the leases, all funds in the FF&E reserve, all interest
earned on the funds and all property purchased with the funds from the FF&E reserve
are the property of the Company; therefore, the Company recognizes the FF&E reserve
payments as income. FF&E purchased with FF&E reserve funds that improve or extend
the useful lives of the respective Properties are capitalized. All other FF&E costs
are recorded as property operating expenses in the accompanying consolidated financial
statements. In accordance with the terms of a few leases, FF&E reserve accounts are
held by each tenant until the end of the lease term at which time all property purchased
with funds from the FF&E reserve accounts will become the property of the Company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | With
respect to 13 Properties subject to direct financing leases, FF&E reserve accounts
are held by each tenant and all property purchased with funds from the FF&E accounts
will remain the property of the tenants. Accordingly, the Company does not recognize FF&E
reserve income relating to these direct financing leases.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Asset
Impairment Management reviews its Properties for impairment or potential loss
as events or circumstances indicate that the carrying amount of the assets may not be
recoverable through operations. Management compares the estimated future undiscounted
cash flows, including the residual value of the Property or collateral, with the carrying
cost of the individual asset. If impairment is indicated, the assets are adjusted to the
estimated fair value.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Development
Costs Development costs, including interest, taxes, insurance and other costs
incurred in developing new Properties, are capitalized during construction. Upon
completion of construction, development costs are amortized on a straight-line basis over
the useful lives of the respective assets.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Deferred
Income Rental income contractually due under leases from Properties that are
under development are recorded as deferred income. Upon completion of construction,
deferred income is amortized to revenue on a straight-line basis over the remaining lease
term. For the year ended December 31, 2003, rental income of $0.5 million related to five
Properties under various stages of development has been deferred and included as deferred
income in the accompanying consolidated financial statements. There were no projects
subject to leases under development during the year ended December 31, 2002.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Capitalized
Interest Interest, including loan costs for borrowings used to fund development
and construction, is capitalized as construction in progress and allocated to the
individual Property costs. For the year ended December 31, 2003, interest of $36,800 was capitalized
to construction in progress.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
and Cash Equivalents  All highly liquid investments with a maturity of three
months or less when purchased are considered 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 in demand deposits at commercial banks and money market funds may
exceed federally insured levels; however, the Company has not experienced any losses in
such accounts. Management believes the Company is not exposed to any significant credit
risk on cash and cash equivalents.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Loan
Costs  Loan costs are capitalized and are amortized as interest over the terms
of the respective loan agreements using the straight-line method, which approximates the
effective interest method. Unamortized loan costs are expensed when the associated debt
is retired before maturity.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

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

| | Lease Intangibles  In connection with the acquisition of a Property that is
subject to an operating lease, the Company allocates the value associated with having an
in-place lease at the date of acquisition to a lease intangible asset considering factors
associated with lease origination costs and above, at or below market leases. Such costs
are amortized on a straight-line basis over the term of the lease.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Bonds
Payable  In connection with the acquisition of two continuing care retirement
communities (CCRCs), the Company assumed non-interest bearing life care
bonds payable to certain residents of the CCRCs. Generally, the bonds are
refundable to the resident or to the residents estate upon termination or
cancellation of the CCRC agreement. Proceeds from the issuance of new bonds are used to
retire existing bonds. As the maturity of these obligations is not determinable, no
interest is imputed.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Income
Taxes  The Company is taxed as a REIT under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended, and related regulations. As a REIT, the
Company generally will not be subject to federal corporate income taxes on amounts
distributed to stockholders, providing it distributes at least 90% of its REIT taxable
income and meets certain other requirements for qualifying as a REIT. At December 31,
2003, 2002 and 2001, the Company was in compliance with all REIT requirements and was not
subject to federal income taxes.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Earnings
Per Share  Basic earnings per common 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. As of December 31, 2003, 2002
and 2001, the Company did not have any potentially dilutive common shares.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Reclassifications Certain
items in the prior years financial statements have been reclassified to conform
with the 2003 presentation. These reclassifications had no effect on reported equity or
net earnings.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Use
of Estimates Management has made 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | New
Accounting Standards In January 2003, the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable
Interest Entities, to expand upon and strengthen existing accounting guidance that
addresses when a company should consolidate the assets, liabilities and activities of
another entity in its financial statements. To improve financial reporting by companies
involved with variable interest entities (more commonly referred to as special-purpose
entities or off-balance sheet structures), FIN 46 requires that a variable interest
entity be consolidated by a company if that company is subject to a majority risk of loss
from the variable interest entitys activities or entitled to receive a majority of
the entitys residual returns or both. The consolidation requirements of FIN 46
apply immediately to variable interest entities created after January 31, 2003 , and as a
result of a revision to FIN 46 (FIN 46-R), to older entities which are
non-special purpose entities in the first fiscal year or interim period ending after
March 15, 2004. The consolidation of these entities, if required, is not expected to have
a significant effect on the Companys financial position or results of operations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
May 2003, the FASB issued Statement of Financial Accounting Standard No. 150 (SFAS
150), Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity. SFAS 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of both
liabilities and equity. SFAS 150 requires issuers to classify certain financial
instruments as liabilities (or assets in some circumstances) that previously were
classified as equity. Financial instruments covered by SFAS 150 include shares that are
mandatorily redeemable, and other financial instruments that contain obligations to
repurchase outstanding shares or contain conditional obligations that require settlement
by issuance of a variable number of that issuers shares. SFAS 150 is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after September 15,
2003, except for the provisions
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

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

| | related
to mandatorily redeemable non-controlling interests with finite lives. On October 29,
2003, the FASB delayed the effective date for the implementation of the provisions that
relate to mandatorily redeemable non-controlling interests with finite lives. The Company
does not expect the adoption of this statement to have a significant impact on the
financial position or results of operations of the Company.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Upon
formation in December 1997, the Company received an initial capital contribution of
$200,000 for 20,000 shares of common stock from the Advisor. Since its inception through
December 31, 2003, the Company has made four public offerings and received subscriptions
as follows (in thousands):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                 |  | Offering | Subscriptions 
|---------------- |  | -------- | --------------
|
|Initial Offering |  |          | September 2000
|2000 Offering    |  |          | May 2002      
|2002 Offering    |  |          | April 2003    
|2003 Offering    |  |          | Open          
|                 |  |          |               
|                 |  |          |               
|                 |  |          |               

| | (a)
         Includes distribution reinvestment
plan shares of 500 in the 2000 Offering,     5,000 in the 2002 Offering and 25,000 in the
2003 Offering.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
           Includes distribution  reinvestment plan shares of 42 in the 2000
Offering, 129   in the 2002 Offering and 966 in the 2003 Offering.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | The
price per share and other terms of all the offerings, including the percentage of gross
proceeds payable (i) to the managing dealer for selling commissions and expenses in
connection with the offering and (ii) to the Advisor for acquisition fees, are
substantially the same.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
July 30, 2003, the Company filed a registration statement on Form S-11 with the
Securities and Exchange Commission for the proposed sale by the Company of up to 400
million shares of common stock (approximately $4 billion) in an offering expected to
commence immediately following the completion of the Companys 2003 Offering. The
Board of Directors has approved a resolution to amend the Articles of Incorporation to
increase the number of authorized shares of common stock from 450 million to one billion.
The Board of Directors expects to submit this matter to the stockholders for approval at
the 2004 annual meeting. Until such time, if any, that the stockholders approve an
increase in the number of authorized shares of common stock of the Company, the proposed
offering will be limited to 213 million shares.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|3. | Investment Properties   Continued:
|-- | -----------------------------------

| | Accounted
for Using the Operating Method  Properties subject to operating leases
consisted of the following at December 31 (dollars in thousands):
| | ---------------------------------------------------------------------------------------------------------------------------------------------------

|                              | 2003 | 2002
|----------------------------- | ---- | ----
|Land                          |      |     
|Buildings                     |      |     
|Equipment                     |      |     
|                              |      |     
|                              |      |     
|Less accumulated depreciation |      |     
|                              |      |     
|                              |      |     
|Construction in progress      |      |     
|                              |      |     
|                              |      |     
|                              |      |     
|Number of Properties:         |      |     
|Operating                     |      |     
|Under construction            |      |     
|                              |      |     
|                              |      |     
|                              |      |     

| | Operating
leases generally have initial terms of 15 years and provide for minimum and contingent
rent. The operating leases generally provide options that allow the lessees to renew the
leases from 5 to 20 successive years subject to the same terms and conditions as the
initial leases.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
leases also require minimum annual rents to increase at predetermined intervals during
the lease terms. Increases in lease revenue are recognized on a straight-line basis over
the terms of each applicable lease commencing on the date the Property was placed in
service. For the years ended December 31, 2003, 2002 and 2001, the Company recognized
$13.4 million, $1.2 million and $0.1 million, respectively, of revenue from the
straight-lining of lease revenues over current contractually due amounts. This amount is
included in rental income from operating leases in the accompanying consolidated
statements of earnings.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Future
minimum lease payments due under the noncancellable operating leases at December 31,
2003, are as follows (in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------

|                    | 
|------------------- | 
|2004                | 
|2005                | 
|2006                | 
|2007                | 
|2008                | 
|2009 and thereafter | 
|                    | 
|                    | 
|                    | 

| | Since
the leases are renewable at the option of the tenants, the above table only presents
future minimum lease payments due during the initial lease terms. In addition, this table
does not include any amounts for future contingent rents, which may be received on the
leases based on factors such as percentage of the tenants gross revenues, occupancy rates of the
Properties or a percentage of the Companys investment in a Property. The Company defers
recognition of contingent rental income until the thresholds requiring such payments in
accordance with the lease terms are met.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|3. | Investment Properties   Continued:
|-- | -----------------------------------

| | Accounted
for Using the Direct Financing Method  The components of net investment in
direct financing leases consisted of the following at December 31, (dollars in
thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                              | 2003 | 2002
|--------------------------------------------- | ---- | ----
|Minimum lease payments receivable             |      |     
|Estimated residual values                     |      |     
|Less unearned income                          |      |     
|                                              |      |     
|Net investment in direct financing leases     |      |     
|                                              |      |     
|                                              |      |     
|Properties subject to direct financing leases |      |     

| | Direct
financing leases have initial terms that range from 10 to 35 years and provide for
minimum annual rent. Lease payments relating to four direct financing leases with a
carrying value of $78.0 million are subordinate to first mortgage construction loans
entered into by the tenants to fund development costs related to the Properties. Certain
leases contain provisions that allow the tenants to elect to purchase the Properties during or at
the end of the lease terms for the Companys aggregate initial investment amount
plus adjustments, if any, as defined in the lease agreements. Certain leases also permit
the Company to require the tenants to purchase the Properties at the end of the lease
terms for the same amount.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Future
minimum lease payments to be received on direct financing leases at December 31, 2003,
are as follows (in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------

|                    | 
|------------------- | 
|2004                | 
|2005                | 
|2006                | 
|2007                | 
|2008                | 
|2009 and thereafter | 
|                    | 
|                    | 
|                    | 

| | The
above table does not include any amounts for contingent rents that may be received on
certain leases based on a percentage of gross revenues if the Properties achieve
specified occupancy rates.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | Restricted Cash:
|-- | ----------------

| | Restricted
cash at December 31, 2003 and December 31, 2002, included $5.0 million and $1.7 million,
respectively, of FF&E reserves and other restricted funds as required by certain lenders. In addition, the
balance at December 31, 2003, includes $9.8 million held in escrow to fund the
acquisition of a Property pending certain regulatory approvals.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | Accounts and Other Receivables:
|-- | -------------------------------

| | Accounts
and other receivables include the following at December 31 (in thousands):
| | -----------------------------------------------------------------------------------

|                                      | 2003 | 2002
|------------------------------------- | ---- | ----
|Rental revenues receivable            |      |     
|Other receivables                     |      |     
|Notes and accrued interest receivable |      |     
|                                      |      |     
|                                      |      |     
|                                      |      |     

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|5. | Accounts and Other Receivables   Continued:
|-- | --------------------------------------------

| | Notes
receivable at December 31, 2002, was comprised of a loan to a seller of two Properties.
Prior to the Companys purchase of the two Properties, the Company made a $2.0
million loan to the seller to extinguish debt at a discounted amount making the purchase
of the Properties economically viable. The Company acquired the two Properties on March
31, 2003, and the note and accrued interest was repaid in full at that time.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | Lease Intangible Costs:
|-- | -----------------------

| | Lease
intangible costs include the following at December 31 (in thousands):
| | ---------------------------------------------------------------------------

|                              | 2003 | 2002
|----------------------------- | ---- | ----
|In-place lease value          |      |     
|Lease origination costs       |      |     
|                              |      |     
|                              |      |     
|Less accumulated amortization |      |     
|                              |      |     
|                              |      |     
|                              |      |     

|7. | Other Assets:
|-- | -------------

| | Other
assets as of December 31, 2003 and 2002, were $13.8 million and $5.0 million,
respectively, and consisted of miscellaneous prepaid expenses and miscellaneous
acquisition costs that will be capitalized to land, buildings, equipment, lease
intangible costs or investment in direct financing leases upon the purchase of
Properties.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. | Indebtedness:
|-- | -------------

| | Mortgage
Notes Payable:Mortgage notes payable and the net book value (NBV) of the
associated collateral consisted of the following at December 31, (in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                          | 2003 | 2002
|--------------------------------------------------------- | ---- | ----
|
|Three mortgages payable, each bearing interest at 30-day  |      |     
|LIBOR plus 325 basis points, with a minimum interest rate |      |     
|of 5.00% (5.00% at December 31, 2003), with monthly       |      |     
|principal and interest payments, maturing March, 2005     |      |     
|Loan was repaid in full in January 2004                   |      |     
|                                                          |      |     
|Seven mortgages payable, each bearing interest at 30-day  |      |     
|LIBOR plus 260 to 300 basis points, (3.81% at December    |      |     
|31, 2003) monthly principal and interest payments,        |      |     
|maturing November 2006                                    |      |     
|                                                          |      |     
|Mortgage payable, bearing interest at 90-day LIBOR plus   |      |     
|390 basis points, with a minimum interest rate of 6.50%   |      |     
|(6.50% at December 31, 2003), with monthly principal and  |      |     
|interest payments, maturing August 2007                   |      |     
|                                                          |      |     
|Mortgage payable, bearing interest at 30-day LIBOR plus   |      |     
|262 basis points (3.76% at December 31, 2003), with       |      |     
|monthly payments of interest only, maturing June 2007     |      |     
|                                                          |      |     
|Mortgage payable, bearing interest at 7.83%, with monthly |      |     
|principal and interest payments, maturing October 2008    |      |     

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|8. | Indebtedness   Continued:
|-- | --------------------------

|                                                          | 2003 | 2002
|--------------------------------------------------------- | ---- | ----
|
|Fourteen mortgages payable, each bearing interest at      |      |     
|5.13% until December 31, 2003, with rates increasing      |      |     
|annually to a maximum of 7.25%. Interest on the loan is   |      |     
|recorded using the effective interest rate of 6.09%       |      |     
|Interest only payments until December 31, 2005, and       |      |     
|principal and interest payments thereafter until maturity |      |     
|on September 2010                                         |      |     
|Two mortgages payable, each bearing interest at 5.79%,    |      |     
|with monthly principal and interest payments, maturing    |      |     
|September 2012                                            |      |     
|Mortgage payable, bearing interest at 8.25%, with monthly |      |     
|principal and interest payments, maturing March 2038      |      |     
|Mortgage payable, bearing interest at 8.375%, with        |      |     
|monthly principal and interest payments, maturing         |      |     
|November 2038                                             |      |     
|Mortgage payable, bearing interest at a variable rate     |      |     
|that ranged from 30-day LIBOR plus 350 basis points to    |      |     
|8.00%, was paid in full in August 2003                    |      |     
|                                                          |      |     
|                                                          |      |     
|                                                          |      |     

| | The
following is a schedule of maturities for all mortgage notes payable at December 31,
2003, (in thousands):
| | --------------------------------------------------------------------------------------------------------------

|                    | 
|------------------- | 
|2004                | 
|2005                | 
|2006                | 
|2007                | 
|2008                | 
|2009 and thereafter | 
|                    | 
|                    | 
|                    | 

| | Bonds
Payable: On March 28, 2003, in connection with the purchase of two CCRC Properties,
the Company assumed approximately $88.5 million in non-interest bearing life care bonds
refundable to certain residents of the two Properties. From the acquisition date to
December 31, 2003, the tenant of the CCRCs retired $6.6 million of existing bonds
and issued $8.2 million of new bonds to new residents on behalf of the Company. At
December 31, 2003, approximately $90.1 million was outstanding in bonds payable.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Lines of Credit: The Company has a revolving line of credit (the Revolving LOC) to
fund acquisition and development of Properties and investments in Mortgage Loans and
other permitted investments. Under the terms of the Revolving LOC, the Company is
entitled to receive cash advances of up to $85.0 million for a two-year period expiring
March 16, 2005. The Revolving LOC requires payment of interest only at LIBOR plus a
percentage that fluctuates depending on the Companys aggregate amount of debt
outstanding in relation to the Companys total assets until maturity (3.65% at
December 31, 2003), and is collateralized by certain Properties with a carrying value of
approximately $118.6 million. The Revolving LOC contains provisions that allow the
facility to be increased up to $125.0 million upon the Company pledging additional
Properties as collateral. This facility has financial covenants, including maintaining a
minimum net worth and minimum collateral value. At December 31, 2003, $20.0 million was
outstanding under the Revolving LOC.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|8. | Indebtedness   Continued:
|-- | --------------------------

| | On September 9, 2003, the Company entered into a six-month, $50.0 million credit facility
agreement that has a 120-day funding option with a commercial lender. The loan may be
extended for two additional three-month periods and may be used to fund the acquisition
and development of Properties and investments in Mortgage Loans and other permitted
investments. During the initial term, the loan bears interest at a variable rate, as
selected by the Company, equal to LIBOR plus 300 basis points or the higher of (i) the
banks prime rate plus 100 basis points or (ii) the Federal Funds rate plus 150
basis points, payable monthly, and requires monthly principal payments of $2.5 million
until maturity. As of December 31, 2003, there were no amounts outstanding under this
facility. In January 2004, the Company exercised its first option to extend the loan term
to June 7, 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Construction Loans Payable: On October 23, 2003, the Company obtained an $8.9 million construction
loan related to one of the Companys Properties that is under construction. The loan
requires interest only payments at a variable rate of LIBOR plus a premium that ranges
from 225 basis points to 275 basis points based on the Propertys occupancy levels
(4.5% at December 31, 2003) until maturity in November 2006. At December 31, 2003, $6.8
million was outstanding under this facility.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
December 2, 2003, the Company obtained four construction loans in the aggregate amount of
$74.2 million relating to four of the Companys Properties that are in various
stages of construction. The loans require interest only payments at a variable rate of
LIBOR plus a premium that ranges from 225 basis points to 275 basis points based on the
Propertys occupancy levels, until maturity on November 26, 2006. No amounts were
outstanding under these facilities at December 31, 2003.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
December 19, 2003, the Company obtained a $48.0 million construction loan related to one
of the Companys Properties that is under construction. The loan requires interest
only payments at the lenders Base Rate, as defined, plus 225 basis
points, with a minimum rate of 6.5% (6.5% at December 31, 2003), until maturity in
December 2007. At December 31, 2003, $0.6 million was outstanding under this facility.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company was in compliance with all its loan covenants as of December 31, 2003.
| | ----------------------------------------------------------------------------------

|9. | Commitments and Contingencies:
|-- | ------------------------------

| | From
time to time the Company is exposed to litigation arising from an unrecognized
preacquisition contingency or from the operations of its business.  At this time,
management does not believe that resolution of these matters will have a material adverse
effect on the Comany's financial condition or results of operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table presents the Companys commitments, contingencies and guarantees and
related expiration periods as of December 31, 2003 (in thousands):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|Commitments, Contingencies and
Guarantees | Less than
1 Year | 2-3 Years | 4-5 Years | Thereafter | Total
|----------------------------------------- | ---------------- | --------- | --------- | ---------- | -----
|Guarantee of unsecured promissory         |                  |           |           |            |      
|note of unconsolidated subsidiary (1)     |                  |           | $         | 2,451      |      
|Earnout provisions (2)                    |                  |           |           | 4,050      |      
|Capital improvements  to                  |                  |          
|investment Properties                     |                  |           |           | 8,840      |      
|Available construction facility           |                  |           |           |           |      
|Pending investments (3)                   |                  |           |           | 589,080    |      
|                                          |                  |           |           |            |      
|Total Commitments,                        |                  |          
|Contingencies and                         |                  |          
|Guarantees                                |                  |           | $         | 604,421    |      
|                                          |                  |           |           |            |      

---

CNL RETIREMENT
PROPERTIES, INC.AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|9. | Commitments and Contigencies   Continued:
|-- | ------------------------------------------

|(1) |  | In connection with the acquisition of a 10% limited partnership interest in CNL
               Plaza, Ltd., the Company severally guaranteed 16.67%, or $2.6 million, of a
               $15.5 million unsecured promissory note of the limited partnership that matures
               November 30, 2004. As of December 31, 2003, the unsecured promissory note had an
               outstanding balance of approximately $14.7 million. The Company has not been
               required to fund any amounts under this guarantee. In the event the Company is
               required to fund amounts under the guarantee, management believes that such
               amounts would be recoverable either from operations of the related asset or
               proceeds upon liquidation.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | In connection with the acquisition of seven Properties, the Company may be
               required to make additional payments (the Earnout Amount) if certain
               earnout provisions are achieved by the earnout date for each Property. The
               calculation of the Earnout Amount generally considers the net operating income
               for the Property, the Companys initial investment in the Property and the
               fair value of the Property. In the event an Earnout Amount is due, the
               respective lease will be amended and annual minimum rent will increase
               accordingly. Earnout Amounts related to 24 additional Properties are subject to
               future values and events that are not quantifiable at December 31, 2003, and are
               not included in the table above.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | As of December 31, 2003, the Company had commitments to acquire 23 Properties,
               subject to the fulfillment of certain conditions, including one Property for
               which $9.8 million is held in escrow pending certain regulatory approvals.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | Purchase of Minority Interest:
|--- | ------------------------------

| | On December 20, 2002, the Company purchased for $8.5 million the 23.25% minority interest
held by Marriott Senior Living Services, Inc. in a joint venture in which the Company
owned the remaining 76.75% equity interest. In May 2002, the joint venture purchased five
Properties that were operated by Marriott Senior Living Services, Inc. Prior to December
20, 2002, each joint venture partner shared in the costs and benefits of the joint
venture in proportion to its percentage equity interest.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | If
the purchase of the minority interest had occurred at the inception of the joint venture,
net income for the year ended December 31, 2002, would have been $11.8 million or $0.54
per share of common stock. There would have been no effect on revenues as reported.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11. | Redemption of Shares:
|--- | ---------------------

| | The
Company has a redemption plan under which the Company may elect to redeem shares, subject
to certain conditions and limitations. Under the redemption plan, prior to such time, if
any, as listing of the Companys common stock on a national securities exchange or
over-the-counter market occurs, any stockholder who has held shares for at least one year
may present all or any portion equal to at least 25% 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% of the number of shares of the Companys
outstanding common stock at the beginning of the 12-month period. During the years ended
December 31, 2003, 2002 and 2001, 131,781 shares, 37,306 shares and 3,415 shares,
respectively, of common stock were redeemed and retired for $1.2 million, $0.3 million
and $31,420, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12. | Stock Issuance Costs:
|--- | ---------------------

| | The Company has incurred offering expenses, including commissions, marketing support fees,
due diligence expense reimbursements, filing fees, and legal, accounting, printing and
escrow fees, which have been deducted from the gross proceeds of the offerings. Offering
expenses together with selling commissions, marketing support fees and due diligence
expense reimbursements cannot exceed 13% of the proceeds raised in connection with the
Companys public offering. During the years ended December 31, 2003, 2002 and 2001,
the Company incurred $101.3 million, $38.9 million and $7.1 million, respectively, in
offering costs and due diligence expense reimbursements, including $85.1 million, $29.7
million and $4.8 million, respectively, in commissions and marketing support fees. These
amounts are treated as stock issuance costs and charged to stockholders equity.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|13. | Distributions:
|--- | --------------

| | For
the years ended December 31, 2003, 2002 and 2001, approximately 71%, 65% and 65%,
respectively, of the distributions paid to stockholders were ordinary income and
approximately 29%, 35% and 35%, respectively, were considered a return of capital to
stockholders for federal income tax purposes. No amounts distributed to the stockholders
for the years ended December 31, 2003, 2002 and 2001, 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. Certain fees payable to the Advisor upon listing, orderly liquidation
or other sales of Properites are subordinate to the return of 100% of the stockholders invested capital plus
the achievement of a cumulative, noncompounded annual 8% return on stockholders invested capital.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14. | Related Party Arrangements:
|--- | ---------------------------

| | Certain
directors and officers of the Company hold similar positions with the Advisor, the parent
company of the Advisor and the managing dealer of the Companys public offerings,
CNL Securities Corp. (CNL Securities). A director of the Company indirectly
owns a controlling interest in the parent company of the Advisor. These affiliates
receive fees and compensation in connection with the offerings, permanent financing and
the acquisition, management and sale of the Companys assets.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
services in connection with the sale of the Companys shares, CNL Securities
receives fees based on the amounts raised from the Companys offerings for: (i)
commissions of 7.5%, (ii) a marketing support fee of 0.5% and (iii) beginning in December
31, 2003, an annual soliciting dealer servicing fee equal to 0.2% of the aggregate
proceeds raised in the 2000 Offering. The majority of such fees were re-allowed to other
broker dealers. As of December 31, 2003, 2002 and 2001, the Company incurred the
following costs related to such fees (in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                | Years Ended December 31,
|------------------------------- | ------------------------
|
|Commissions                     |                         
|Marketing support fee           |                         
|Soliciting dealer servicing fee |                         
|                                |                         
|                                |                         
|                                |                         

| | The
Advisor receives acquisition fees for services in identifying Properties and structuring
the terms of their leases and Mortgage Loans equal to 4.5% of the gross proceeds of the
offering and loan proceeds from permanent financing, excluding that portion of the
permanent financing used to finance Secured Equipment Leases. In addition, if there is a
listing, the Company will receive an acquisition fee of 4.5% of amounts outstanding on a
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. During the years ended December
31, 2003, 2002 and 2001, the Company incurred $59.0 million, $18.7 million and $2.7
million, respectively, of such fees, including $11.3 million and $2.1 million and $0,
respectively, of acquisition fees on permanent financing. These fees are included in
other assets in the accompanying balance sheets prior to being allocated to individual
Properties or lease intangible costs.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company and the Advisor have entered into an advisory agreement pursuant to which the
Advisor receives a monthly asset management fee of 0.05% of the Companys real
estate asset value and the outstanding principal balance of any Mortgage Loan as of the
end of the preceding month. During the years ended December 31, 2003, 2002 and 2001, the
Company incurred $4.4 million, $0.8 million and $0.1 million, respectively, of such fees.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|14. | Related Party Arrangements   Continued:
|--- | ----------------------------------------

| | The
expenses incurred for these services for the years ended December 31 are as follows (in
thousands):
| | -------------------------------------------------------------------------------------------------------

|                                          | Years Ended December 31,
|----------------------------------------- | ------------------------
|
|Stock issuance costs                      |                         
|Investment Properties on operating leases |                         
|General and administrative expenses       |                         
|                                          |                         
|                                          |                         
|                                          |                         

| | During
the years ended December 31, 2003, 2002 and 2001, affiliates of the Advisor incurred on
behalf of the Company $17.2 million, $5.6 million and $1.6 million, respectively, for
certain offering expenses. Offering expenses paid by the Company, together with selling
commissions, the marketing support fee and due diligence expense reimbursements incurred
by the Company will not exceed 13% of the proceeds raised in connection with the
offerings. In addition, during the years ended December 31, 2003, 2002 and 2001
affiliates incurred on behalf of the Company $0.4 million, $0.5 million and $0.4 million,
respectively, for certain acquisition expenses and $2.2 million, $0.6 million and $0.2
million, respectively, for certain operating expenses.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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% of average
invested assets or 25% of net income (the Expense Cap). During the Expense
Year ended June 30, 2001, operating expenses exceeded the Expense Cap by $0.1 million,
and accordingly, the Advisor reimbursed the Company such amounts. The Companys
operating expenses did not exceed the Expense Cap in any other Expense Years during the
years ended December 31, 2003, 2002 and 2001.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | CNL
Capital Corp., an affiliate of the Advisor, is a non-voting Class C member of Century
Capital Markets, LLC (CCM). CCM made the arrangements for the $23.5 million
loan described in Note 8, for which CCM was paid a $0.5 million structuring fee in June
2002. Prior to August 18, 2003, the monthly interest payments due under the loan included
a margin of 30 basis points payable to CCM for the monthly services it provided related
to the administration of the loan. From its origination in June 2002, the loan was a
commercial paper backed loan with an interest rate at the commercial paper rate, as
determined by market demand, plus a margin of 1.86% that was inclusive of liquidity fees
and administrative costs. The Company paid CCM $0.2 million for each of the two years
ended December 31, 2003 and 2002, related to these services. On August 18, 2003, the loan
converted from a commercial paper loan to a direct loan with a third party commercial
lender.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the year ended December 31, 2003, the Company also paid CCM a $0.2 million finders
fee related to the acquisition of two Properties.
| | --------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company maintains bank accounts in a bank in which certain officers and directors of the
Company serve as directors, and in which an affiliate of the Advisor and certain
executive officers of the Company are stockholders. The amounts deposited with this bank
were $15.8 million and $5.7 million at December 31, 2003 and 2002, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
May 30, 2002, the Company acquired a 10% interest in a limited partnership, CNL Plaza,
Ltd., that owns an office building located in Orlando, Florida, in which the Advisor and
its affiliates lease office space. The remaining interest in the limited partnership is
owned by several affiliates of the Advisor. During the years ended December 31, 2003 and
2002, the Company received $0.1 million and $0.2 million, respectively, in distributions
from the partnership.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
March 2003, the Advisors parent company purchased a 30% voting membership interest
in a limited liability company which is affiliated with eight of the Companys
tenants that leased 69 of the Companys 119 Properties as of December 31, 2003.
These eight tenants contributed 35% of total rental income from operating leases and
earned income from investments in direct financing leases for the year ended December 31,
2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|14. | Related Party Arrangements   Continued:
|--- | ----------------------------------------

| | Amounts
due to related parties at December 31 are as follows (in thousands):
| | ----------------------------------------------------------------------------

|                                            | 2003 | 2002  
|------------------------------------------- | ---- | ------
|Due to CNL Securities:                      |      |       
|Commissions                                 |      | $1,366
|Marketing support fee and due diligence     |     
|expense reimbursements                      |      | 91    
|Soliciting dealer service fee               |      | 310   
|                                            |      |       
|                                            |      | 1,767 
|                                            |      |       
|Due to the Advisor and its affiliates:      |     
|                                            |     
|Expenditures incurred for offering expenses |     
|on behalf of the Company                    |      | 372   
|Accounting and administrative services      |      | 304   
|Acquisition fees and miscellaneous          |     
|acquisition expenses                        |      | 815   
|                                            |      |       
|                                            |      | 1,491 
|                                            |      |       
|                                            |      | $3,258
|                                            |      |       

|15. | Concentration of Credit Risk   Continued:
|--- | ------------------------------------------

| | At
December 31, 2003, the Company leased its Properties to 15 tenants, three of which
independently contributed between 11% and 18% (an aggregate of 42%) of the Companys
total rental income from operating leases and earned income from direct financing leases
for the year ended December 31, 2003.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Advisors parent company is affiliated with eight of the Companys tenants that
leased 69 of the Companys 119 Properties as of December 31, 2003. These eight
tenants contributed 35% of total rental income from operating leases and earned income
from direct financing leases for the year ended December 31, 2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes information about the Companys operator concentration based on annualized rental
revenue as
of December 31, 2003 (dollars in thousands):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                   | Number of
Facilities | Annualized
Revenue (1) | Percent of
Revenue
|-------------------------------------------------- | -------------------- | ---------------------- | ------------------
|Sunrise Senior Living Services, Inc. ("Sunrise")   |                      | 98                     |                   
|American Retirement Corporation                    |                      | 8                      |                   
|Erickson Retirement Communities, LLC               |                      | 4                      |                   
|Harbor Assisted Living, LLC (affiliate of Advisor) |                      | 5                      |                   
|CateredLife Communities, Inc.                      |                      | 4                      |                   
|                                                   |                      |                        |                   
|                                                   |                      | 119                    |                   
|                                                   |                      |                        |                   

|(1) |  | For operating leases, reflects annual base rent and for direct financing leases,
               reflects annual interest earned, straight-lined over the term of the lease in
               accordance with generally accepted accounting principles.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|15. | Concentration of Credit Risk   Continued:
|--- | ------------------------------------------

| | To
mitigate credit risk, certain leases are combined into portfolios that contain
cross-default terms, meaning that if a tenant of any of the Properties in a portfolio
defaults on its obligations under its lease, the Company may pursue its remedies under
the lease with respect to any of the Properties in the portfolio. Certain portfolios also
contain terms whereby the net operating profits of the Properties are combined for the
purpose of funding rental payments due under each lease. In addition, as of December 31,
2003, the Company had $8.0 million in security deposits related to certain Properties as
well as various guarantees or required cash reserves to be held by the tenant for payment
of minimum rent.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with eight Properties leased to wholly owned subsidiaries of ARC, ARC has
unconditionally guaranteed all of the tenants obligations under the terms of the
leases, including the payment of minimum rent.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with the purchase of five Properties that are in various stages of development
and being developed by Sunrise Development, Inc., Sunrise has guaranteed the tenants obligations
to pay minimum rent and the FF&E reserve due under the leases from the date of
acquisition until the later of (i) 30 months (March 2007) or (ii) 18 months after the
final development date.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company had the following additional limited guarantees as of December 31, 2003 (in
thousands):
| | ---------------------------------------------------------------------------------------------------

|                       |  |    | Guarantee
|---------------------- |  | -- | ---------
|
|Sunrise                |  | 1  |          
|Marriott International |  | 5  |          
|Sunrise/cash reserves  |  | 22 |          

| | Although
the Company acquires Properties located in various states and regions and screens its
tenants in order to reduce risks of default, failure of these lessees, their guarantors
or the Sunrise or ARC brands would significantly impact the results of operations of the Company.
It is expected that the percentage of total rental income contributed by these lessees
will decrease as additional Properties are acquired and leased to diversified tenants
during subsequent periods.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16. | Selected Quarterly Financial Data:
|--- | ----------------------------------

| | The
following table presents selected unaudited quarterly financial data for each full
quarter during the years ended December 31, 2003 and 2002 (in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|2003 Quarter            | First | Second    | Third | Fourth    | Year
|----------------------- | ----- | --------- | ----- | --------- | ----
|Revenues                |       | $12,504   |       | $21,130   |     
|Net earnings            |       | 8,503     |       | 12,913    |     
|Net earnings per share: |      
|Basic and Diluted       |       | $    0.16 |       | $    0.18 |     

|2002 Quarter            | First | Second  | Third | Fourth  | Year
|----------------------- | ----- | ------- | ----- | ------- | ----
|Revenues                |       | $1,668  |       | $3,306  |     
|Net earnings            |       | 829     |       | 1,702   |     
|Net earnings per share: |      
|Basic and Diluted       |       | $  0.09 |       | $  0.11 |     

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  CONTINUED Years Ended December
31, 2003, 2002 and 2001

|17. | Subsequent Events:
|--- | ------------------

| | Property Acquisition In February 2004, the Company acquired 19 additional retirement
Properties in a sale lease-back transaction for an aggregate purchase price of $537.3
million. The Company assumed $274.6 million of existing debt and used cash available at
December 31, 2003, plus additional offering proceeds received in January and February
2004 as well as proceeds from permanent loans closed during the first quarter of 2004 to
purchase the Properties, which consist primarily of independent living and assisted
living facilities with an aggregate total of approximately 3,600 units. The Properties
are located in Alabama, Arizona, California, Florida, Illinois, Rhode Island and Texas.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
February 2004, the Company entered into an initial commitment to acquire 22 medical
office buildings containing approximately 1.3 million square feet for an aggregate
purchase price of $256.5 million. The Company intends to use proceeds received from the
2003 Offering as well as assume approximately $84.4 million of existing debt.
Substantially all of the leases are gross leases. The transaction is expected to close in
the second quarter of 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Permanent Financings  On January 27, 2004, the Company obtained permanent financing
comprised of three mortgage loans in the aggregate amount of $130.0 million from a
commercial lender collateralized by 22 Properties owned by the Company. Concurrent with
the loan closing, the Company drew $30.0 million to, in part, extinguish existing debt of
$25.7 million. The Company is required to draw an additional $30.0 million within 90 days
of the loan closing date and the balance is required to be drawn by January 27, 2005.  The
loans have a 5-year term and when fully drawn will bear interest at a rate of 5.79% per
annum. The loans require interest only payments for the first 12 months with monthly
principal and interest payments thereafter until maturity on January 27, 2009.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 29, 2004, the Company obtained permanent financing comprised of 12 loans in the
aggregate amount of $74.6 million from a commercial lender collateralized by 12
Properties owned by the Company. The loans have terms of seven years, bear interest at a
rate of 5.96% per annum and require monthly interest only payments for the first 24
months with monthly payments of principal and interest due thereafter until maturity.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
February 2004, the Company assumed $274.6 million in permanent financing comprised of 16
loans in connection with the acquisition of 19 Properties. The majority of the debt,
$192.7 million comprised of 11 loans, is agency debt through Fannie Mae. These loans are
interest only loans that bear interest at 30-day LIBOR plus a premium of either 90 basis
points or 104 basis points and mature in either November 2005 or May 2008. Three loans in
an aggregate amount of $38.4 million payable to a commercial lender bear interest at
30-day LIBOR plus 370 basis points with a minimum rate of 5.95%. These loans require
monthly interest only payments through July 2004 with principal and interest payments
thereafter until maturity in May 2008. An additional $10.4 million, variable rate loan
payable to a commercial lender bears interest at 30-day LIBOR plus 370 basis points with
a minimum rate of 4.80%. The loan requires monthly interest only payments through January
2005 with principal and interest payments thereafter until maturity in May 2008. The
remaining loan in the amount of $33.1 million has a fixed interest rate of 8.17% with
principal and interest payable monthly until maturity in April 2008.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | OtherDuring
the period January 1, 2004 through February 25, 2004, the Company received subscription
proceeds for an additional 23,085,450 shares ($230.9 million) of common
stock.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 1, 2004 and February 1, 2004, the Company declared distributions totaling $8.9
million and $9.6 million, respectively, or $0.0592 per share of common stock, payable by
March 31, 2004, to stockholders of record on January 1, 2004 and February 1, 2004,
respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
February 6, 2004, a complaint was filed in the Superior Court of the State of California
for the County of Los Angeles by California Public Interest Research Group, Inc. and
Congress of California Seniors, Inc. against 94 named defendants, including the Company,
the Advisor and two operators that manage certain Properties owned by the Company.  The
plaintiffs seek restitution with respect to deposits and fees collected from residents by
the operators of the senior living facilities that, the complaint alleges, were
designated and treated as nonrefundable deposits and fees in violation of the California
Civil Code.  This matter is in the preliminary stages and although management is not
able to predict the outcome, management has been advised by counsel that a number of
valid defenses exist.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

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

None.

# Item 9A. Controls and
Procedures

Pursuant
to Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the
Exchange Act), the Companys management, with the participation of the
Companys Chief Executive Officer and Chief Financial Officer, has carried out an
evaluation of the effectiveness of the Companys disclosure controls and procedures
(as defined under Rule 15d-15(e) under the Exchange Act) as of the end of the period
covered by this report. Based upon that evaluation, the Companys management,
including the Companys Chief Executive Officer and Chief Financial Officer, has
concluded that the Companys disclosure controls and procedures are effective in
alerting them in a timely manner to information required to be disclosed in the
Companys periodic SEC filings.

# PART III

# Item 10. Directors and
Executive Officers of the Registrant

The
information required by this Item is incorporated by reference to the Companys
Definitive Proxy Statement to be filed with the Commission no later than April 30, 2004.

# Item 11. Executive
Compensation

The information
required by this Item is incorporated by reference to the Companys Definitive Proxy
Statement to be filed with the Commission no later than April 30, 2004.

# Item 12. Security
Ownership of Certain Beneficial Owners and Management

The
information required by this Item is incorporated by reference to the Companys
Definitive Proxy Statement to be filed with the Commission no later than April 30, 2004.

# Item 13. Certain
Relationships and Related Transactions

The
information required by this Item is incorporated by reference to the Companys
Definitive Proxy Statement to be filed with the Commission no later than April 30, 2004.

# Item 14. Principal Accountant Fees and Services

The
information required by this Item is incorporated by reference to the Companys
Definitive Proxy Statement to be filed with the Commission no later than April 30, 2004.

---

# PART IV

# Item 15. 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, 2003 and 2002
| | ---------------------------------------------------------

| | Consolidated
Statements of Earnings for the years ended December 31, 2003, 2002 and 2001
| | ----------------------------------------------------------------------------------------

| | Consolidated
Statements of Stockholders Equity for the years ended December 31, 2003, 2002 and
2001
| | ----------------------------------------------------------------------------------------------------

| | Consolidated
Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001
| | ------------------------------------------------------------------------------------------

| | Notes
to Consolidated Financial Statements
| | ------------------------------------------

| | 2.
Financial Statement Schedules
| | --------------------------------

| | Schedule
III  Real Estate and Accumulated Depreciation at December 31, 2003
| | ----------------------------------------------------------------------------

| | Notes
to Schedule III  Real Estate and Accumulated Depreciation at December 31, 2003
| | -------------------------------------------------------------------------------------

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

| | 3.
  Exhibits
| | -------------

| |  | 3.1 |  | Articles
of Amendment and  Restatement of CNL  Retirement  Properties,  Inc. dated July 28, 2003.
 (Included as Exhibit 3.8 to                            the Registrant's  Registration
 Statement on Form S-11 (Registration No. 333-107486) filed on July 30, 2003,
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 |  | Amendment
 No.  1 to  the  Bylaws  of  CNL  Health  Care  Properties,  Inc.  (Included  as  Exhibit
 3.6  to                            Pre-effective  Amendment  No. One to the
 Registrant's  Registration  Statement on Form S-11 filed March 31, 2000,
and incorporated herein by reference.)
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 3.4 |  | Amendment
 No.  2  to  the  Bylaws  of  CNL  Retirement  Properties,   Inc.  (Included  as  Exhibit
 3.7  to                            Post-effective  Amendment No. One to the Registrant's
 Registration Statement on Form S-11 (Registration No.
                           333-100347) filed June 25, 2003, and incorporated herein by
reference.)
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | 10.1 |  | Advisory
Agreement, dated as of May 14, 2003, between CNL Retirement Properties, Inc. and CNL
Retirement Corp. (Included as Exhibit 10.2 to Post-Effective Amendment No. One to the
Registrants RegistrationStatement on Form S-11 filed June 25, 2003, and
incorporated herein by reference.)
| |  | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| |  | 10.2 |  | Indemnification
Agreement between CNL Health Care Properties, Inc. and Thomas J. Hutchison III dated
February 29, 2000. Each of the following directors and/or officers has signed a
substantially similar agreement as follows: James M. Seneff, Jr., Robert A. Bourne, David
W. Dunbar, Timothy S. Smick, Edward A. Moses, Jeanne A. Wall, and Lynn E. Rose dated
September 15, 1998, Phillip M. Anderson, Jr. dated February 19, 1999, James W. Duncan
dated February 22, 2002, and Stuart J. Beebe dated July 15, 2002. (Included asExhibit
10.2 to the March 31, 2000, Report on Form 10-Q filed on May 3, 2000, and incorporated
herein byreference.)
| |  | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.3 |  | Agreement
of Limited Partnership of CNL Health Care Partners, LP. (Included as Exhibit 10.10 toPost-Effective Amendment No. Two to the Registrants on Form S-11filed March
23, 2000, and incorporatedherein 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 theMarch 31, 2000, Report on Form 10-Q
filed on May 3, 2000, and incorporated herein by reference.)
| |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | 10.6 |  | Credit
Agreement between CNL Retirement Partners, LP as Borrower, CNL Retirement GP Corp., CNL
Retirement LP Corp. and CNL Retirement Properties, Inc., as Guarantors, Bank of America,
NA, as Administrative Agent and Bank of America Securities, LLC as Sole Lead Arranger and
Book Manager dated March 17, 2003. (Includedas Exhibit 10.47 to the Registrants
March 31, 2003, Report on Form 10-Q filed on May 15, 2003, andincorporated herein
by reference.)
| |  | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.7 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp. and American Retirement
Corporation, relating to the Broadway Plaza at Pecan Park  Arlington, Texas. (Included
as Exhibit 10.14 toPost-Effective Amendment No. Six to the Registrants
Registration Statement on Form S-11 (No. 333-37480)filed November 29, 2001, and incorporated
herein by reference.)
| |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.8 |  | Lease
Agreement between CNL Retirement  AM/Texas, LP and ARC Pecan Park, L.P. dated
November 9, 2001, relating to the Broadway Plaza at Pecan Park  Arlington, Texas.
(Included as Exhibit 10.15 toPost-Effective Amendment No. Six to the Registrants
Registration Statement on Form S-11 filed November 29,2001, and incorporated
herein by reference.)
| |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.9 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp. and American Retirement
Corporation, relating to the Homewood Residence of Boca Raton  Boca Raton, Florida.
(Included as Exhibit 10.16 toPost-Effective Amendment No. Six to the Registrants
Registration Statement on Form S-11 filed November 29,2001, and incorporated
herein by reference.)
| |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.10 |  | Lease
Agreement between CNL Retirement  AM/Florida, LP and ARC Boca Raton, Inc. dated
November 9, 2001, relating to the Homewood Residence of Boca Raton  Boca Raton,
Florida. (Included as Exhibit 10.17 toPost-Effective Amendment No. Six to the
Registrants Registration Statement on Form S-11 filed November 29,2001, and
incorporated herein by reference.)
| |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.11 |  | Lease
Agreement between CNL Retirement  AM/Illinois LP and ARC Holley Court, LLC dated
11, 2002, relating to the Holley Court Terrace  Oak Park, Illinois. (Included as
Exhibit 10.18 to Post-Effective AmendmentNo. Seven to the Registrants
Registration Statement on Form S-11 filed February 28, 2002, and incorporatedherein
by reference.)
| |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| |  | 10.12 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp., as Buyer, and ARC Holley
Court, LLC, as Seller, relating to the Holley Court Terrace  Oak Park, Illinois. (Included
as Exhibit 10.19 toPost-Effective Amendment No. Seven to the Registrants
Registration Statement on Form S-11 filed February28, 2002, and incorporated
herein by reference.)
| |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.13 |  | Lease
Agreement between CNL Retirement  AM/Florida, LP and ARC Coconut Creek, LLC dated
February 11, 2002, relating to the Homewood Residence of Coconut Creek Coconut
Creek, Florida. (Included as Exhibit 10.20to Post-Effective Amendment No.
Seven to the Registrants Registration Statement on Form S-11 filedFebruary
28, 2002, and incorporated herein by reference.)
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.14 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp., as Buyer, and American
Retirement Corporation, as Seller, relating to the Homewood Residence of Coconut Creek
 Coconut Creek, Florida. (Included as Exhibit 10.21 to Post-Effective Amendment
No. Seven to the Registrants Registration Statementon Form S-11 filed
February 28, 2002, and incorporated herein by reference.)
| |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.15 |  | Lease
Agreement between CNL Retirement  AM/Colorado LP and ARC Greenwood Village, Inc.
dated March 21, 2002, relating to the Heritage Club at Greenwood Village Greenwood
Village, Colorado. (Included asExhibit 10.22 to Pre-Effective Amendment No.
One to the Registrants Registration Statement on Form S-11(Registration No.
333-76538) filed May 10, 2002, and incorporated herein by reference.)
| |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.16 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp., as Buyer, and American
Retirement Corporation, as Seller, relating to the Heritage Club at Greenwood Village
 Greenwood Village, Colorado. (Included as Exhibit 10.23 to Pre-Effective
Amendment No. One to the Registrants Registration Statement onForm S-11
filed May 10, 2002, and incorporated herein by reference.)
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.17 |  | Loan
Agreement between ARC Holley Court, LLC, as Borrower, and GMAC Commercial Mortgage
Corporation, as Lender, relating to the Holley Court Terrace  Oak Park, Illinois.
(Included as Exhibit 10.24 toPre-Effective Amendment No. One to the Registrants
Registration Statement on Form S-11 filed May 10, 2002,and incorporated herein by
reference.)
| |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.18 |  | Lease
Agreement between CNL Retirement Camarillo CA, LP and HRA Management Corporation dated
May 16, 2002, relating to the Brighton Gardens Senior Living Community at Camarillo,
California. (Included as Exhibit10.25 to Post-Effective Amendment No. One to
the Registrants Registration Statement on Form S-11 filedJuly 31, 2002, and
incorporated herein by reference.)
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.19 |  | Lease
Agreement between CNL Retirement Towson MD, LP and HRA Management Corporation dated May
16, 2002, relating to the Brighton Gardens Senior Living Community at Towson, Maryland.
(Included as Exhibit 10.26to Post-Effective Amendment No. One to the Registrants
Registration Statement on Form S-11 filed July 31,2002, and incorporated herein
by reference.)
| |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.20 |  | Lease
Agreement between CNL Retirement Clayton OH, LP and HRA Management Corporation dated May
17, 2002, relating to the MapleRidge Senior Living Community at Clayton, Ohio. (Included
as Exhibit 10.27 toPost-Effective Amendment No. One to the Registrants
Registration Statement on Form S-11 filed July 31,2002, and incorporated herein
by reference.)
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.21 |  | Lease
Agreement between CNL Retirement Dartmouth MA, LP and HRA Management Corporation dated
May 16, 2002, relating to the MapleRidge Senior Living Community at Dartmouth,
Massachusetts. (Included as Exhibit 10.28to Post-Effective Amendment No. One
to the Registrants Registration Statement on Form S-11 filed July 31,2002,
and incorporated herein by reference.)
| |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| |  | 10.22 |  | Lease
Agreement between CNL Retirement Laguna Creek CA, LP and HRA Management Corporation dated
May 16, 2002, relating to the MapleRidge Senior Living Community at Laguna Creek, Elk
Grove, California. (Includedas Exhibit 10.29 to Post-Effective Amendment No.
One to the Registrants Registration Statement on FormS-11 filed July 31,
2002, and incorporated herein by reference.)
| |  | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.23 |  | Purchase
and Sale Agreement between Marriott Senior Living Services, Inc., VCS, Inc. and MSLS
 MapleRidge, Inc., as Sellers, Marriott International, Inc. and CNL Retirement MA1,
LP, as Purchaser, and HRA Management Corporation, as Tenant, relating to the Brighton
Gardens of Camarillo  Camarillo, California; Brighton Gardens of Towson Towson,
Maryland; Marriott MapleRidge of Clayton  Clayton, Ohio; Marriott MapleRidge of
Dartmouth  Dartmouth, Massachusetts; and Marriott MapleRidge of Laguna Creek  Elk
Grove, California. (Included as Exhibit 10.30 to Post-Effective Amendment No. One to
the Registrants Registration Statementon Form S-11 filed July 31, 2002, and
incorporated herein by reference.)
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.24 |  | Loan
Agreement between Five Pack Retirement 2002, LLC, Lender, and CNL Retirement Clayton OH,
LP, CNL Retirement Laguna Creek CA, LP, CNL Retirement Camarillo CA, LP, CNL Retirement
Dartmouth MA, LP, CNL Retirement Towson MD, LP, Borrowers, and U.S. Bank, National
Association, Collateral Agent, relating to the Brighton Gardens of Camarillo  Camarillo,
California; Brighton Gardens of Towson  Towson, Maryland; Marriott MapleRidge of
Clayton  Clayton, Ohio; Marriott MapleRidge of Dartmouth Dartmouth,
Massachusetts; and Marriott MapleRidge of Laguna Creek  Elk Grove, California. (Included
as Exhibit 10.31to Post-Effective Amendment No. One to the Registrants
Registration Statement on Form S-11 filed July 31,2002, and incorporated herein
by reference.)
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.25 |  | Loan
Agreement between General Electric Capital Corporation, as Lender, and CNL Retirement
 AM/Colorado, LP, as Borrower, dated August 8, 2002, related to the Heritage Club
at Greenwood Village  Greenwood Village, Colorado. (Included as Exhibit 10.25 to
the Registrants September 30, 2002, Report on Form 10-Qfiled on November
12, 2002, and incorporated herein by reference.)
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.26 |  | Mortgage
Loan Agreement between CNL Retirement Properties, Inc., as Lender, and DSTS, LLC, as
Borrower, dated August 12, 2002, related to the Vero Beach, Florida land. (Included as
Exhibit 10.26 to the Registrants September30, 2002, Report on Form 10-Q
filed on November 12, 2002, and incorporated herein by reference.)
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.27 |  | Refinancing
and Acquisition Agreement dated September 30, 2002, between CNL Retirement Partners, LP,
and Prime Care Properties, LLC, PC1, LLC, PC2, LLC, Prime Care One, LLC, Prime Care Two,
LLC and Thomas E. Phillippe, Jr., relating to the Brighton Gardens of Venice  Venice,
Florida; Brighton Gardens of Mountainside  Mountainside, New Jersey; Brighton
Gardens of Friendship Heights  Chevy Chase, Maryland; Brighton Gardens of Charlotte
 Charlotte, North Carolina; Brighton Gardens of Winston-Salem  Winston Salem,
North Carolina; Brighton Gardens of Raleigh  Raleigh, North Carolina; Brighton
Gardens of Brentwood  Brentwood, Tennessee; Brighton Gardens of Stamford  Stamford,
Connecticut; Brighton Gardens of Middleton  Middleton, New Jersey; Brighton Gardens
of Buckhead  Atlanta, Georgia; Brighton Gardens of Naples  Naples, Florida.
(Included as Exhibit 10.27 to the Registrants September 30, 2002, Report on Form
10-Q filed on November12, 2002, and incorporated herein by reference.)
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.28 |  | Lease
Agreement dated September 30, 2002, between CNL Retirement PC1 Naples FL, LP, CNL
Retirement PC1 Venice FL, LP, CNL Retirement PC1 New Jersey, LP, CNL Retirement PC1
Friendship Heights MD, LP, CNL Retirement PC1 North Carolina, LP, CNL Retirement PC1
Stamford CT, LP, CNL Retirement PC1 Buckhead GA, LP and CNL Retirement PC1 Brentwood TN,
LP, as Lessors, Prime Care One, LLC and Prime Care Two, LLC, as Lessees, relating to the
Brighton Gardens of Venice  Venice, Florida; Brighton Gardens of Mountainside Mountainside,
New Jersey; Brighton Gardens of Friendship Heights  Chevy Chase, Maryland; Brighton
Gardens of Charlotte  Charlotte, North Carolina; Brighton Gardens of Winston-Salem
 Winston Salem, North Carolina; Brighton Gardens of Raleigh Raleigh, North
Carolina; Brighton Gardens of Brentwood  Brentwood, Tennessee; Brighton Gardens of
Stamford  Stamford, Connecticut; Brighton Gardens of Middleton  Middleton,
New Jersey; Brighton Gardens of Buckhead  Atlanta, Georgia; Brighton Gardens of
Naples  Naples, Florida. (Included as Exhibit 10.28 to the Registrants
September 30, 2002, Report on Form 10-Q filed on November12, 2002, and
incorporated herein by reference.)
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.29 |  | Ground
Lease Agreement between CNL Retirement ER1, LP and Peabody Campus, LLC dated October 10,
2002, relating to the Brooksby Village Continuing Care Retirement Community  Peabody,
Massachusetts. (Includedas Exhibit 10.36 to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filedFebruary 14, 2003,and
incorporated herein by reference.)
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.30 |  | Purchase
and Sale Agreement between CNL Retirement ER1, LP, as Buyer, and Peabody Campus, LLC, as
Seller, relating to the Brooksby Village Continuing Care Retirement Community  Peabody,
Massachusetts. (Includedas Exhibit 10.37 to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filedFebruary 14, 2003, and
incorporated herein by reference.)
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.31 |  | Lease
Agreement between CNL Retirement AM/Tennessee LP and Homewood at Brookmont Terrace, LLC
dated October 31, 2002, relating to the Homewood Residence at Brookmont Terrace Nashville,
Tennessee. (Included asExhibit 10.38 to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filedFebruary 14, 2003, and
incorporated herein by reference.)
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.32 |  | Purchase
and Sale Agreement between CNL Retirement Corp., as Buyer, and Homewood at Brookmont
Terrace, LLC, as Seller, relating to the Homewood Residence at Brookmont Terrace  Nashville,
Tennessee. (Included asExhibit 10.39 to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filedFebruary 14, 2003, and
incorporated herein by reference.)
| |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.33 |  | Lease
Agreement between CNL Retirement MA3 Washington, LP and Eleven Pack Management Corp.
dated December 20, 2002, relating to the Brighton Gardens of Bellevue  Bellevue,
Washington. (Included as Exhibit 10.40to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filed February 14, 2003,and
incorporated herein by reference.)
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.34 |  | Lease
Agreement between CNL Retirement MA2 Illinois, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the Brighton Gardens of Hoffman Estates Hoffman
Estates, Illinois. (Included as Exhibit10.41 to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filed February 14,2003, and
incorporated herein by reference.)
| |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.35 |  | Lease
Agreement between CNL Retirement MA3 Oklahoma, LP and Eleven Pack Management Corp. dated
December 20, 2002, relating to the Brighton Gardens of Oklahoma City  Oklahoma
City, Oklahoma. (Included as Exhibit10.42 to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filed February 14,2003, and
incorporated herein by reference.)
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.36 |  | Lease
Agreement between CNL Retirement MA3 California, LP and Eleven Pack Management Corp.
dated December 20, 2002, relating to the Brighton Gardens of Santa Rosa  Santa
Rosa, California. (Included as Exhibit10.43 to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filed February 14,2003, and
incorporated herein by reference.)
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.37 |  | Lease
Agreement between CNL Retirement MA2 Oklahoma, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the Brighton Gardens of Tulsa  Tulsa, Oklahoma. (Included
as Exhibit 10.44 toPost-Effective No. Four to the Registrants Registration
Statement on Form S-11 filed February 14, 2003,and incorporated herein by
reference.)
| |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.38 |  | Lease
Agreement between CNL Retirement MA3 Georgia, LP and Eleven Pack Management Corp. dated
December 20, 2002, relating to the Brighton Gardens of Vinings  Atlanta, Georgia.
(Included as Exhibit 10.45 toPost-Effective No. Four to the Registrants
Registration Statement on Form S-11 filed February 14, 2003,and incorporated
herein by reference.)
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.39 |  | Lease
Agreement between CNL Retirement MA3 Washington, LP and Eleven Pack Management Corp.
dated December 20, 2002, relating to the Hearthside of Lynnwood  Lynnwood,
Washington. (Included as Exhibit 10.46 toPost-Effective No. Four to the
Registrants Registration Statement on Form S-11 filed February 14, 2003,and
incorporated herein by reference.)
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.40 |  | Lease
Agreement between CNL Retirement MA3 Washington, LP and Eleven Pack Management Corp.
dated December 20, 2002, relating to the Hearthside of Snohomish  Snohomish,
Washington. (Included as Exhibit 10.47 toPost-Effective No. Four to the
Registrants Registration Statement on Form S-11 filed February 14, 2003,and
incorporated herein by reference.)
| |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.41 |  | Lease
Agreement between CNL Retirement MA2 California, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the MapleRidge of Hemet  Hemet, California. (Included
as Exhibit 10.48 toPost-Effective No. Four to the Registrants Registration
Statement on Form S-11 filed February 14, 2003,and incorporated herein by
reference.)
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.42 |  | Lease
Agreement between CNL Retirement MA2 Massachusetts, LP and Eight Pack Management Corp.
dated December 20, 2002, relating to the MapleRidge of Plymouth  Plymouth,
Massachusetts. (Included as Exhibit 10.49 toPost-Effective No. Four to the
Registrants Registration Statement on Form S-11 filed February 14, 2003,and
incorporated herein by reference.)
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.43 |  | Lease
Agreement between CNL Retirement MA2 Ohio, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the MapleRidge of Willoughby  Willoughby, Ohio. (Included
as Exhibit 10.50 toPost-Effective No. Four to the Registrants Registration
Statement on Form S-11 filed February 14, 2003,and incorporated herein by
reference.)
| |  | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.44 |  | Lease
Agreement between CNL Retirement MA2 Arkansas, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the Pleasant Hills Retirement Community  Little
Rock, Arkansas. (Included as Exhibit10.51 to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filed February 14,2003, and
incorporated herein by reference.)
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.45 |  | Purchase
and Sale Agreement between Marriott Senior Living Services, Inc., MSLS-MapleRidge, Inc.,
and Marriott International, Inc., as Sellers, and CNL Retirement MA2, LP, as Purchaser,
CNL Retirement Partners, LP as the Orland Park Owner and Eight Pack Management Corp., as
Tenant, relating to the Brighton Gardens of Hoffman Estates Hoffman Estates,
Illinois; Brighton Gardens of Tulsa  Tulsa, Oklahoma; MapleRidge of Hemet  Hemet,
California; MapleRidge of Plymouth  Plymouth, Massachusetts; MapleRidge of
Willoughby  Willoughby, Ohio and Pleasant Hills Retirement Community  Little
Rock, Arkansas. (Includedas Exhibit 10.52 to Post-Effective No. Four to the
Registrants Registration Statement on Form S-11 filedFebruary 14, 2003, and
incorporated herein by reference.)
| |  | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.46 |  | Purchase
and Sale Agreement between Marriott Senior Living Services, Inc., MSLS-MapleRidge, Inc.,
and Marriott International, Inc., as Sellers, and CNL Retirement MA3, LP, as Purchaser,
and Eleven Pack Management Corp., as Tenant, relating to the Brighton Gardens of Bellevue
 Bellevue, Washington; Brighton Gardens of Oklahoma City  Oklahoma City,
Oklahoma; Brighton Gardens of Santa Rosa  Santa Rosa, California; Brighton Gardens
of Vinings  Atlanta, Georgia; Hearthside of Lynnwood  Lynnwood, Washington
and Hearthside of Snohomish  Snohomish, Washington. (Included as Exhibit 10.53
to Post-Effective No. Fourto the Registrants Registration Statement on Form
S-11 filed February 14, 2003, and incorporated herein byreference.)
| |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.47 |  | Purchase
and Sale Agreement between Marriott Continuing Care, LLC, as Sellers, and Marriott
International, Inc. and CNL Retirement MA3, LP, as Purchaser, relating to the Fairfax
Continuing Care Retirement Community  Fort Belvoir, Virginia and the Quadrangle
Continuing Care Retirement Community  Haverford, Pennsylvania. (Included as
Exhibit 10.54 to Post-Effective No. Four to the Registrants RegistrationStatement
on Form S-11 filed February 14, 2003, and incorporated herein by reference.)
| |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.48 |  | Lease
Agreement between CNL Retirement MA3 Virginia, LP and Marriott Continuing Care, LLC dated
March 28, 2003, relating to the Fairfax Continuing Care Retirement Community Fort
Belvoir, Virginia. (Included asExhibit 10.49 to the Registrants March
31, 2003, Report on Form 10-Q filed on May 15, 2003, andincorporated herein by
reference.)
| |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.49 |  | Lease
Agreement between CNL Retirement MA3 Pennsylvania, LP and Marriott Continuing Care, LLC
dated March 28, 2003, relating to the Quadrangle Continuing Care Retirement Community
 Haverford, Pennsylvania. (Included as Exhibit 10.50 to the Registrants
March 31, 2003, Report on Form 10-Q filed on May 15, 2003,and incorporated herein
by reference.)
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.50 |  | Assumption
and Reimbursement Agreement between Marriott International, Inc., as Assignor, Marriott
Continuing Care, LLC, as Assignor, CNL Retirement Properties, Inc., as Assignee, CNL
Retirement MA3 Pennsylvania, LP, as Assignee, and CNL Retirement MA3 Virginia, LP, as
Assignee, dated March 28, 2003. (Included as Exhibit 10.51 to the Registrants
March 31, 2003, Report on Form 10-Q filed on May 15, 2003,and incorporated herein
by reference.)
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.51 |  | Purchase
and Sale Agreement by and among WEC 99C-1, LLC, WEC 99C-2, LLC, WEC 99C-3, LLC, WEC
99C-4, LLC, WEC 99C-5, LLC, WEC 99C-6, LLC, WEC 99C-7, LLC, WEC 99C-8, LLC, WEC 99C-9,
LLC, WEC 99C-10, LLC, WEC 99C-11, LLC, WEC 99C-12, LLC, WEC 99C-13, LLC, and WEC 99C-14,
LLC, respectively, as Sellers, and CNL Retirement Properties, Inc., as Purchaser dated
August 29, 2003. (Included as Exhibit 10.59 to Post Effective Amendment No. Three tothe Registrants Registration Statement on Form S-11 (Registration No.
333-100347) filed October 21, 2003,and incorporated herein by reference.)
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.52 |  | Purchase
and Sale Agreement by and among Sunrise Assisted Living Limited Partnership, Sunrise
Farmington Hills Assisted Living, L.L.C., Atlantic-Sunrise, LLC, Sunrise Poland Assisted
Living, L.L.C., Sunrise Raleigh Assisted Living, LLC, Sunrise Assisted Living Limited
Partnership VIII, L.P., and ADG on Sheepshead Bay, LLC, as Seller and CNL Retirement
Corp., as Purchaser and Twenty Pack Management Corp. as Tenant dated September 29, 2003.
(Included as Exhibit 10.60 to Post Effective Amendment No. Three to the RegistrantsRegistration Statement on Form S-11 filed October 21, 2003, and incorporated
herein by reference.)
| |  | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 10.53 |  | Pooling
Agreement by and among Sunrise Senior Living Management, Inc., as Manager and Twenty Pack
Management Corp., Sunrise Five Forks Assisted Living, L.L.C., Sunrise Development, Inc.
and Sunrise Madison Senior Living, L.L.C., as Owners and CNL Retirement Sun1, LP, CNL
Retirement Sun1 Beverly Hills CA, LP, CNL Retirement Sun1 Cresskill NJ, LP, CNL
Retirement Sun1 Edmonds WA, LP, CNL Retirement Sun1 Lilburn GA, LP and CNL Retirement
Sun1 Madison NJ, LP, as Landlords dated September 30, 2003. (Included as Exhibit 10.61to Post Effective Amendment No. Three to the Registrants Registration
Statement on Form S-11 filed October21, 2003 and incorporated herein by
reference.)
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| |  | 21. |  | Subsidiaries
of the Registrant (Filed herewith.)
| |  | --- |  | ------------------------------------------------

| |  | 31.1 |  | Certification
 of the Chief Executive  Officer,  Pursuant to 18 U.S.C.  Section 1350 as Adopted
 Pursuant to                            Section 302 of the Sarbanes-Oxley Act of 2002.
 (Filed herewith.)
| |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 31.2 |  | Certification
 of the Chief Financial  Officer,  Pursuant to 18 U.S.C.  Section 1350 as Adopted
 Pursuant to                            Section 302 of the Sarbanes-Oxley Act of 2002.
 (Filed herewith.)
| |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 32.1 |  | Certification
 of the Chief Executive  Officer,  Pursuant to 18 U.S.C.  Section 1350 as Adopted
 Pursuant to                            Section 906 of the Sarbanes-Oxley Act of 2002.
 (Filed herewith.)
| |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 32.2 |  | Certification
 of the Chief Financial  Officer,  Pursuant to 18 U.S.C.  Section 1350 as Adopted
 Pursuant to                            Section 906 of the Sarbanes-Oxley Act of 2002.
 (Filed herewith.)
| |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | TheCompany filed the following
reports during the quarter ended December 31,
               2003: Form 8-K filed on October 15, 2003 which included disclosure under
Items 2                and 7 in connection with the acquisition of 19 Properties; Form
8-K/A filed on                October 17, 2003 which included disclosure under Item 7 to
include audited                financial statements as a result of one of the tenants
leasing 14                Properties with an aggregate carrying value that represented
more than 20% of                the Companys total assets; Form 8-K filed on
October 31, 2003 to attach a                press release as an exhibit under Item 7;
Form 8-K filed on November 10, 2003 to                attach a press release as an
exhibit under Item 7; Form 8-K filed on December                10, 2003 which included
disclosure under Items 2 and 7 in connection with the                acquisition of 27
Properties; Form 8-K/A filed on December 12, 2003 which                included
disclosure under Item 7 to include audited financial statements as a
               result of one of the tenants leasing 12 Properties with an aggregate
               carrying value that represented more than 20% of the Companys total
               assets; Form 8-K filed on December 29, 2003 to attach a press release as
an                exhibit under Item 7.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

# SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 27th day of February 2004.

| | CNL RETIREMENT PROPERTIES, INC.
| | -------------------------------

| |  | By: /s/ Thomas J. Hutchison, III
      THOMAS J. HUTCHISON, III      Chief Executive Officer and
                                                      President
                                                             (Principal Executive Officer)
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | By: /s/ Stuart J. Beebe
      STUART J. BEEBE      Chief Financial Officer and
                                                       Executive Vice President
                                                             (Principal Financial and
                                                       Accounting Officer)
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

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.

|Signature                     | Title | Date                                                
|----------------------------- | ----- | ----------------------------------------------------
|                              |      
|                              |      
|/s/ James M. Seneff, Jr.      |       | Chairman of the Board                               
|James M. Seneff, Jr.          |      
|                              |      
|/s/ Robert A. Bourne          |       | Vice Chairman of the Board and Treasurer            
|Robert A. Bourne              |      
|                              |      
|/s/ David W. Dunbar           |       | Independent Director                                
|David W. Dunbar               |      
|                              |      
|/s/ James W. Duncan, Jr.      |       | Independent Director                                
|James W. Duncan, Jr           |      
|                              |      
|/s/ Edward A. Moses           |       | Independent Director                                
|Edward A. Moses               |      
|                              |      
|/s/ Thomas J. Hutchinson, III |       | Chief Executive Officer and President               
|Thomas J. Hutchinson, III     |       | (Principal Executive Officer)                       
|                              |      
|/s/ Stuart J. Beebe           |       | Chief Financial Officer and Executive Vice President
|Stuart J. Beebe               |       | (Principal Financial and Accounting Officer)        

---



CNL Retirement
Properties, Inc.                                                               Schedule
III - Real Estate and Accumulated Depreciation December 31, 2003

|                                            |  | Initial Cost to
Company (2) | Costs Capitalized
Subsequent to
Acquisition (2) | Gross Amount at Which Carried at Close of
Period (2) |  |          
|------------------------------------------- |  | --------------------------- | ----------------------------------------------- | ---------------------------------------------------- |  | ---------
|
|Brighton Gardens of Orland Park, IL         |  | $                          |                                                 | $    2,162                                           |  | $  12,577
|Broadway Plaza at Pecan Park, TX            |  |                            |                                                 | 1,344                                                |  | 9,425    
|Homewood Residence at Boca Raton, FL        |  |                            |                                                 | 1,144                                                |  | 8,734    
|Holley Court Terrace, IL                    |  |                            |                                                 | 2,144                                                |  | 16,850   
|Homewood Residence at Coconut Creek, FL     |  |                            |                                                 | 1,683                                                |  | 8,193    
|Heritage Club at Greenwood Village, CO      |  | 10,811                      |                                                 | 1,965                                                |  | 18,025   
|Sunrise of Dartmouth, MA                    |  | 3,796                       |                                                 | 920                                                  |  | 8,799    
|Sunrise of Laguna Creek, CA                 |  | 3,222                       |                                                 | 812                                                  |  | 7,407    
|Brighton Gardens of Towson, MD              |  | 5,781                       |                                                 | 990                                                  |  | 14,109   
|Brighton Gardens of Camarillo, CA           |  | 7,477                       |                                                 | 2,487                                                |  | 16,676   
|Sunrise of Clayton, OH                      |  | 3,244                       |                                                 | 813                                                  |  | 7,483    
|Vero Beach, FL                              |  | 636                         |                                                 | 1,839                                                |  |         
|Homewood Residence at Brookmont Terrace, TN |  |                            |                                                 | 464                                                  |  | 8,652    
|Sunrise of Hemet, CA                        |  |                            |                                                 | 1,176                                                |  | 3,087    
|Brighton Gardens of Tulsa, OK               |  |                            |                                                 | 1,538                                                |  | 3,310    
|Pleasant Hills, AR                          |  |                            |                                                 | 523                                                  |  | 10,427   
|Brighton Gardens of Hoffman Estates, IL     |  |                            |                                                 | 1,724                                                |  | 6,064    
|Sunrise of  Willoughby, OH                  |  |                            |                                                 | 1,091                                                |  | 4,032    
|Sunrise of Plymouth, MA                     |  |                            |                                                 | 1,090                                                |  | 3,667    
|Sunrise of Lynwood, WA                      |  |                            |                                                 | 1,530                                                |  | 5,068    
|Sunrise of Snohomish, WA                    |  |                            |                                                 | 645                                                  |  | 8,364    
|Brighton Gardens of Vinings, GA             |  |                            |                                                 | 1,773                                                |  | 5,830    
|Brighton Gardens of Oklahoma City, OK       |  |                            |                                                 | 784                                                  |  | 3,000    
|Brighton Gardens of Bellevue, WA            |  |                            |                                                 | 2,165                                                |  | 8,506    
|Brighton Gardens of Santa Rosa, CA          |  |                            |                                                 | 2,161                                                |  | 15,044   
|Brighton Gardens of Denver, CO              |  | 8,624                       |                                                 | 1,084                                                |  | 17,245   
|Brighton Gardens of Colorado Springs, CO    |  | 7,952                       |                                                 | 1,073                                                |  | 15,829   
|Brighton Gardens of Lakewood, CO            |  | 9,076                       |                                                 | 1,073                                                |  | 18,221   
|Brighton Gardens of Rancho Mirage, CA       |  |                            |                                                 | 1,716                                                |  | 12,482   
|The Fairfax, VA                             |  |                            |                                                 | 17,641                                               |  | 60,643   
|The Quadrangle, PA                          |  |                            |                                                 | 23,148                                               |  | 90,769   
|Brighton Gardens of Yorba Linda, CA         |  |                            |                                                 | 2,397                                                |  | 11,410   
|Brighton Gardens of Salt Lake City, UT      |  |                            |                                                 | 392                                                  |  | 15,013   
|Brighton Gardens of Northridge, CA          |  |                            |                                                 | 3,486                                                |  | 11,634   
|Sunrise of Palm Springs, CA                 |  |                            |                                                 | 884                                                  |  | 1,873    
|Brighton Gardens of Edgewood, KY            |  |                            |                                                 | 886                                                  |  | 1,876    
|Brighton Gardens of Greenville, SC          |  |                            |                                                 | 352                                                  |  | 3,938    
|Brighton Gardens of Saddle River, NJ        |  |                            |                                                 | 2,155                                                |  | 10,968   
|Balmoral of Palm Harbor, FL                 |  |                            |                                                 | 1,002                                                |  | 11,493   
|Somerby at University Park, AL              |  | 35,149                      |                                                 | 2,676                                                |  | 49,166   
|Somerby at Jones Farm, AL                   |  | 14,964                      |                                                 | 739                                                  |  | 23,136   
|Brighton Gardens of Tampa, FL               |  |                            |                                                 | 1,670                                                |  |         
|Greentree at Ft. Benjamin Harrison, IN      |  |                            |                                                 | 469                                                  |  | 4,761    
|Greentree at Mt. Vernon, IL                 |  |                            |                                                 | 225                                                  |  | 7,244    
|Greentree at Post, IN                       |  |                            |                                                 | 287                                                  |  | 4,934    
|Greentree at West Lafayette, IN             |  |                            |                                                 | 319                                                  |  | 5,264    
|Sunrise of Arlington, VA                    |  |                            |                                                 | 765                                                  |  | 6,540    
|Sunrise of Bluemont Park, VA                |  |                            |                                                 | 2,359                                                |  | 26,502   
|Sunrise of Countryside, VA                  |  |                            |                                                 | 2,288                                                |  | 12,744   
|Sunrise of Falls Church, VA                 |  |                            |                                                 | 1,221                                                |  | 7,726    
|Sunrise of Farmington Hills, MI             |  |                            |                                                 | 1,212                                                |  | 8,517    
|Sunrise of Frederick, MD                    |  |                            |                                                 | 118                                                  |  | 7,046    
|Sunrise of Leesburg, VA                     |  |                            |                                                 | 399                                                  |  | 1,724    
|Sunrise of Mercer Island, WA                |  |                            |                                                 | 744                                                  |  | 7,310    
|Sunrise of Mill Basin, NY                   |  |                            |                                                 | 2,596                                                |  | 22,398   
|Sunrise of Poland, OH                       |  |                            |                                                 | 742                                                  |  | 8,138    
|Sunrise of Raleigh, NC                      |  |                            |                                                 | 457                                                  |  | 6,004    
|Sunrise of Sheepshead Bay, NY               |  |                            |                                                 | 3,856                                                |  | 22,675   
|Sunrise of Beverly Hills, CA                |  |                            |                                                 | 3,950                                                |  | 4,165    
|Sunrise of Cresskill, NJ                    |  |                            |                                                 | 4,632                                                |  | 5,569    
|Sunrise of Edmonds, WA                      |  |                            |                                                 | 968                                                  |  | 2,541    
|Sunrise of Five Forks, GA                   |  | 6,766                       |                                                 | 1,001                                                |  | 9,022    
|Sunrise of Madison, NJ                      |  |                            |                                                 | 1,608                                                |  | 2,846    
|Dogwood Forest of Dunwoody, GA              |  |                            |                                                 | 855                                                  |  | 4,952    
|EdenGardens of Gainesville, FL              |  |                            |                                                 | 436                                                  |  | 7,789    
|EdenBrook of Jacksonville, FL               |  |                            |                                                 | 1,111                                                |  | 6,114    
|EdenBrook of Tallahassee, FL                |  |                            |                                                 | 670                                                  |  | 11,664   
|EdenGardens of Aiken, SC                    |  | 5,000                       |                                                 | 369                                                  |  | 7,139    
|EdenBrook of Alpharetta, GA                 |  | 4,500                       |                                                 | 718                                                  |  | 6,330    
|EdenGardens of Arlington, TX                |  |                            |                                                 | 350                                                  |  | 8,538    
|EdenTerrace of Arlington, TX                |  |                            |                                                 | 668                                                  |  | 7,616    
|EdenBrook of Buckhead, GA                   |  | 4,500                       |                                                 | 782                                                  |  | 6,971    
|EdenBrook of Champions , TX                 |  |                            |                                                 | 530                                                  |  | 11,581   
|EdenBrook of Charleston, SC                 |  | 5,000                       |                                                 | 422                                                  |  | 8,827    
|EdenGardens of Columbia, SC                 |  |                            |                                                 | 300                                                  |  | 4,043    
|EdenGardens of Concord, NC                  |  | 2,444                       |                                                 | 393                                                  |  | 3,548    
|EdenBrook of Dunwoody, GA                   |  | 4,683                       |                                                 | 307                                                  |  | 4,620    
|EdenGardens of Greenwood, SC                |  |                            |                                                 | 299                                                  |  | 4,239    
|EdenBrook of Huntsville, AL                 |  |                            |                                                 | 605                                                  |  | 8,900    
|EdenGardens of Kingwood, TX                 |  |                            |                                                 | 467                                                  |  | 8,418    
|EdenTerrace of Kingwood, TX                 |  |                            |                                                 | 572                                                  |  | 10,527   
|EdenBrook of Louisville, KY                 |  | 6,673                       |                                                 | 623                                                  |  | 10,144   
|EdenTerrace of Louisville, KY               |  | 7,927                       |                                                 | 886                                                  |  | 11,897   
|EdenGardens of Marietta, GA                 |  |                            |                                                 | 565                                                  |  | 4,403    
|EdenBrook of Plano, TX                      |  | 6,400                       |                                                 | 464                                                  |  | 12,004   
|EdenGardens of Rock Hill, SC                |  |                            |                                                 | 277                                                  |  | 6,783    
|EdenGardens of Roswell, GA                  |  |                            |                                                 | 441                                                  |  | 2,006    
|EdenGardens of Sandy Springs, GA            |  |                            |                                                 | 556                                                  |  | 2,787    
|EdenBrook of The Woodlands, TX              |  | 5,000                       |                                                 | 391                                                  |  | 13,495   
|                                            |  |                             |                                                 |                                                      |  |          
|                                            |  | $169,625                    |                                                 | $141,614                                             |  | $948,030 
|                                            |  |                             |                                                 |                                                      |  |          

| | (1) |  | Excludes
encumbrances of $105.4 million that are carried on properties accounted           for
using the direct financing method.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------

| | (2) |  | Includes
Properties under           construction.
| | --- |  | -------------------------------------------------

| | (3) |  | Property
was under construction at December 31, 2003.
| | --- |  | -----------------------------------------------------

---

CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES NOTES TO SCHEDULE III
 REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 2003

|(a) |  | Transactions
in real estate and accumulated depreciation during 2001, 2002 and           2003 are
summarized as follows:
|--- |  | ------------------------------------------------------------------------------------------------------------------------

|                                    | Cost (b) (d) | Accumulated
  Depreciation
|----------------------------------- | ------------ | --------------------------
|Properties the Company has Invested |              |                           
|in Under Operating Leases:          |             
|Balance, December 31, 2000          |              | $     14,721              
|Acquisitions                        |              | 21,339                    
|Depreciation Expense (c)            |              |                          
|                                    |              |                           
|Balance, December 31, 2001          |              | 36,060                    
|Acquisitions                        |              | 213,820                   
|Depreciation Expense (c)            |              |                          
|                                    |              |                           
|Balance, December 31, 2002          |              | 249,880                   
|Acquisitions                        |              | 853,773                   
|Depreciation expense (c)            |              |                          
|                                    |              |                           
|Balance, December 31, 2003          |              | $1,103,653                
|                                    |              |                           

|(b) |  | As of December 31, 2003, 2002, and 2001, the aggregate cost of the Properties
               owned by the Company for federal income tax purposes, including Properties
               accounted for using the operating method and those accounted for using the
               direct financing method, was $1.3 billion, $258.3 million and $36.1 million,
               respectively. Certain leases accounted for under the direct financing method are
               treated as operating leases for federal income tax purposes.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(d) |  | Acquisition fees and miscellaneous closing costs of $60.1 million and $13.1
               million are included in land, buildings, equipment and intangible lease costs at
               December 31, 2003 and 2002, respectively.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

# EXHIBITS

---

# EXHIBIT INDEX

|Exhibit Index | 
|------------- | 

| | 3.1 |  | Articles
of Amendment and  Restatement of CNL  Retirement  Properties,  Inc. dated July 28, 2003.
 (Included as Exhibit 3.8 to          the Registrant's  Registration  Statement on Form
S-11  (Registration No. 333-107486) filed on July 30, 2003, 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 on March
5, 1999, and incorporated herein by reference.)
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.3 |  | Amendment
No. 1 to the Bylaws of CNL Health Care  Properties,  Inc.  (Included as Exhibit 3.6 to
 Pre-effective  Amendment No.          One to the Registrant's Registration Statement on
Form S-11 filed March 31, 2000, and incorporated herein by reference.)
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.4 |  | Amendment
No. 2 to the Bylaws of CNL Retirement  Properties,  Inc.  (Included as Exhibit 3.7 to
 Post-effective  Amendment No.          One to the  Registrant's  Registration  Statement
 on Form  S-11  (Registration  No.  333-100347)  filed  June 25,  2003,  and incorporated
herein by reference.)
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | 10.1 |  | Advisory
Agreement, dated as of May 14, 2003 between CNL Retirement Properties, Inc. and CNL
Retirement Corp. (Included asExhibit 10.2 to Post-Effective Amendment No. One
to the Registrants Registration Statement on Form S-11 filed June 25,2003,
and incorporated herein by reference.)
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2 |  | Indemnification
Agreement between CNL Health Care Properties, Inc. and Thomas J. Hutchison III dated
February 29, 2000. Each of the following directors and/or officers has signed a
substantially similar agreement as follows: James M. Seneff, Jr., Robert A. Bourne, David
W. Dunbar, Timothy S. Smick, Edward A. Moses, Jeanne A. Wall, and Lynn E. Rose dated
September 15, 1998, Phillip M. Anderson, Jr. dated February 19, 1999, James W. Duncan
dated February 22, 2002, and Stuart J. Beebe dated July 15, 2002. (Included as Exhibit
10.2 to the March 31, 2000, Report on Form 10-Q filed on May 3, 2000, andincorporated
herein by reference.)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.3 |  | Agreement
of Limited Partnership of CNL Health Care Partners, LP. (Included as Exhibit 10.10 to
Post-Effective AmendmentNo. Two to the Registrants on Form S-11 filed March
23, 2000, and incorporated herein by reference.)
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | 10.6 |  | Credit
Agreement between CNL Retirement Partners, LP as Borrower, CNL Retirement GP Corp., CNL
Retirement LP Corp. and CNL Retirement Properties, Inc., as Guarantors, Bank of America,
NA, as Administrative Agent and Bank of America Securities, LLC as Sole Lead Arranger and
Book Manager dated March 17, 2003. (Included as Exhibit 10.47 to the Registrants
March 31, 2003,Report on Form 10-Q filed on May 15, 2003, and incorporated herein
by reference.)
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.7 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp. and American Retirement
Corporation, relating to the Broadway Plaza at Pecan Park  Arlington, Texas. (Included
as Exhibit 10.14 to Post-Effective Amendment No. Six to theRegistrants
Registration Statement on Form S-11 (No. 333-37480) filed November 29, 2001, and
incorporated herein byreference.)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | 10.8 |  | Lease
Agreement between CNL Retirement  AM/Texas, LP and ARC Pecan Park, L.P. dated
November 9, 2001, relating to the Broadway Plaza at Pecan Park  Arlington, Texas.
(Included as Exhibit 10.15 to Post-Effective Amendment No. Six to theRegistrants
Registration Statement on Form S-11 filed November 29, 2001, and incorporated herein by
reference.)
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.9 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp. and American Retirement
Corporation, relating to the Homewood Residence of Boca Raton  Boca Raton, Florida.
(Included as Exhibit 10.16 to Post-Effective Amendment No. Six tothe Registrants
Registration Statement on Form S-11 filed November 29, 2001, and incorporated herein by
reference.)
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.10 |  | Lease
Agreement between CNL Retirement  AM/Florida, LP and ARC Boca Raton, Inc. dated
November 9, 2001, relating to the Homewood Residence of Boca Raton  Boca Raton,
Florida. (Included as Exhibit 10.17 to Post-Effective Amendment No. Six tothe
Registrants Registration Statement on Form S-11 filed November 29, 2001, and
incorporated herein by reference.)
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.11 |  | Lease
Agreement between CNL Retirement  AM/Illinois LP and ARC Holley Court, LLC dated
11, 2002, relating to the Holley Court Terrace  Oak Park, Illinois. (Included as
Exhibit 10.18 to Post-Effective Amendment No. Seven to the RegistrantsRegistration
Statement on Form S-11 filed February 28, 2002, and incorporated herein by reference.)
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.12 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp., as Buyer, and ARC Holley
Court, LLC, as Seller, relating to the Holley Court Terrace  Oak Park, Illinois. (Included
as Exhibit 10.19 to Post-Effective Amendment No. Sevento the Registrants
Registration Statement on Form S-11 filed February 28, 2002, and incorporated herein by
reference.)
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.13 |  | Lease
Agreement between CNL Retirement  AM/Florida, LP and ARC Coconut Creek, LLC dated
February 11, 2002, relating to the Homewood Residence of Coconut Creek Coconut
Creek, Florida. (Included as Exhibit 10.20 to Post-Effective Amendment No.Seven
to the Registrants Registration Statement on Form S-11 filed February 28, 2002, and
incorporated herein by reference.)
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.14 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp., as Buyer, and American
Retirement Corporation, as Seller, relating to the Homewood Residence of Coconut Creek
 Coconut Creek, Florida. (Included as Exhibit 10.21 toPost-Effective
Amendment No. Seven to the Registrants Registration Statement on Form S-11 filed
February 28, 2002, andincorporated herein by reference.)
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.15 |  | Lease
Agreement between CNL Retirement  AM/Colorado LP and ARC Greenwood Village, Inc.
dated March 21, 2002, relating to the Heritage Club at Greenwood Village Greenwood
Village, Colorado. (Included as Exhibit 10.22 to Pre-Effective AmendmentNo.
One to the Registrants Registration Statement on Form S-11 (Registration No.
333-76538) filed May 10, 2002, andincorporated herein by reference.)
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.16 |  | Real
Estate Purchase and Sale Contract between CNL Retirement Corp., as Buyer, and American
Retirement Corporation, as Seller, relating to the Heritage Club at Greenwood Village
 Greenwood Village, Colorado. (Included as Exhibit 10.23 toPre-Effective
Amendment No. One to the Registrants Registration Statement on Form S-11 filed May
10, 2002, and incorporatedherein by reference.)
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.17 |  | Loan
Agreement between ARC Holley Court, LLC, as Borrower, and GMAC Commercial Mortgage
Corporation, as Lender, relating to the Holley Court Terrace  Oak Park, Illinois.
(Included as Exhibit 10.24 to Pre-Effective Amendment No. One to theRegistrants
Registration Statement on Form S-11 filed May 10, 2002, and incorporated herein by
reference.)
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.18 |  | Lease
Agreement between CNL Retirement Camarillo CA, LP and HRA Management Corporation dated
May 16, 2002, relating to the Brighton Gardens Senior Living Community at Camarillo,
California. (Included as Exhibit 10.25 to Post-Effective AmendmentNo. One to
the Registrants Registration Statement on Form S-11 filed July 31, 2002, and
incorporated herein by reference.)
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.19 |  | Lease
Agreement between CNL Retirement Towson MD, LP and HRA Management Corporation dated May
16, 2002, relating to the Brighton Gardens Senior Living Community at Towson, Maryland.
(Included as Exhibit 10.26 to Post-Effective Amendment No.One to the Registrants
Registration Statement on Form S-11 filed July 31, 2002, and incorporated herein by
reference.)
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.20 |  | Lease
Agreement between CNL Retirement Clayton OH, LP and HRA Management Corporation dated May
17, 2002, relating to the MapleRidge Senior Living Community at Clayton, Ohio. (Included
as Exhibit 10.27 to Post-Effective Amendment No. One to theRegistrants
Registration Statement on Form S-11 filed July 31, 2002, and incorporated herein by
reference.)
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.21 |  | Lease
Agreement between CNL Retirement Dartmouth MA, LP and HRA Management Corporation dated
May 16, 2002, relating to the MapleRidge Senior Living Community at Dartmouth,
Massachusetts. (Included as Exhibit 10.28 to Post-Effective Amendment No.One
to the Registrants Registration Statement on Form S-11 filed July 31, 2002, and
incorporated herein by reference.)
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.22 |  | Lease
Agreement between CNL Retirement Laguna Creek CA, LP and HRA Management Corporation dated
May 16, 2002, relating to the MapleRidge Senior Living Community at Laguna Creek, Elk
Grove, California. (Included as Exhibit 10.29 to Post-EffectiveAmendment No.
One to the Registrants Registration Statement on Form S-11 filed July 31, 2002, and
incorporated herein byreference.)
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.23 |  | Purchase
and Sale Agreement between Marriott Senior Living Services, Inc., VCS, Inc. and MSLS
 MapleRidge, Inc., as Sellers, Marriott International, Inc. and CNL Retirement MA1,
LP, as Purchaser, and HRA Management Corporation, as Tenant, relating to the Brighton
Gardens of Camarillo  Camarillo, California; Brighton Gardens of Towson Towson,
Maryland; Marriott MapleRidge of Clayton  Clayton, Ohio; Marriott MapleRidge of
Dartmouth  Dartmouth, Massachusetts; and Marriott MapleRidge of Laguna Creek  Elk
Grove, California. (Included as Exhibit 10.30 to Post-Effective Amendment No. One to
theRegistrants Registration Statement on Form S-11 filed July 31, 2002, and
incorporated herein by reference.)
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.24 |  | Loan
Agreement between Five Pack Retirement 2002, LLC, Lender, and CNL Retirement Clayton OH,
LP, CNL Retirement Laguna Creek CA, LP, CNL Retirement Camarillo CA, LP, CNL Retirement
Dartmouth MA, LP, CNL Retirement Towson MD, LP, Borrowers, and U.S. Bank, National
Association, Collateral Agent, relating to the Brighton Gardens of Camarillo  Camarillo,
California; Brighton Gardens of Towson  Towson, Maryland; Marriott MapleRidge of
Clayton  Clayton, Ohio; Marriott MapleRidge of Dartmouth Dartmouth,
Massachusetts; and Marriott MapleRidge of Laguna Creek  Elk Grove, California. (Included
as Exhibit10.31 to Post-Effective Amendment No. One to the Registrants
Registration Statement on Form S-11 filed July 31, 2002, andincorporated herein
by reference.)
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.25 |  | Loan
Agreement between General Electric Capital Corporation, as Lender, and CNL Retirement
 AM/Colorado, LP, as Borrower, dated August 8, 2002, related to the Heritage Club
at Greenwood Village  Greenwood Village, Colorado. (Included as Exhibit10.25
to the Registrants September 30, 2002, Report on Form 10-Q filed on November 12,
2002, and incorporated herein byreference.)
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.26 |  | Mortgage
Loan Agreement between CNL Retirement Properties, Inc., as Lender, and DSTS, LLC, as
Borrower, dated August 12, 2002, related to the Vero Beach, Florida land. (Included as
Exhibit 10.26 to the Registrants September 30, 2002, Report onForm 10-Q
filed on November 12, 2002, and incorporated herein by reference.)
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.27 |  | Refinancing
and Acquisition Agreement dated September 30, 2002, between CNL Retirement Partners, LP,
and Prime Care Properties, LLC, PC1, LLC, PC2, LLC, Prime Care One, LLC, Prime Care Two,
LLC and Thomas E. Phillippe, Jr., relating to the Brighton Gardens of Venice  Venice,
Florida; Brighton Gardens of Mountainside  Mountainside, New Jersey; Brighton
Gardens of Friendship Heights  Chevy Chase, Maryland; Brighton Gardens of Charlotte
 Charlotte, North Carolina; Brighton Gardens of Winston-Salem  Winston Salem,
North Carolina; Brighton Gardens of Raleigh  Raleigh, North Carolina; Brighton
Gardens of Brentwood  Brentwood, Tennessee; Brighton Gardens of Stamford  Stamford,
Connecticut; Brighton Gardens of Middleton  Middleton, New Jersey; Brighton Gardens
of Buckhead  Atlanta, Georgia; Brighton Gardens of Naples  Naples, Florida.
(Included as Exhibit 10.27 to the Registrants September 30, 2002, Report on Form
10-Q filed on November 12, 2002, andincorporated herein by reference.)
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.28 |  | Lease
Agreement dated September 30, 2002, between CNL Retirement PC1 Naples FL, LP, CNL
Retirement PC1 Venice FL, LP, CNL Retirement PC1 New Jersey, LP, CNL Retirement PC1
Friendship Heights MD, LP, CNL Retirement PC1 North Carolina, LP, CNL Retirement PC1
Stamford CT, LP, CNL Retirement PC1 Buckhead GA, LP and CNL Retirement PC1 Brentwood TN,
LP, as Lessors, Prime Care One, LLC and Prime Care Two, LLC, as Lessees, relating to the
Brighton Gardens of Venice  Venice, Florida; Brighton Gardens of Mountainside Mountainside,
New Jersey; Brighton Gardens of Friendship Heights  Chevy Chase, Maryland; Brighton
Gardens of Charlotte  Charlotte, North Carolina; Brighton Gardens of Winston-Salem
 Winston Salem, North Carolina; Brighton Gardens of Raleigh Raleigh, North
Carolina; Brighton Gardens of Brentwood  Brentwood, Tennessee; Brighton Gardens of
Stamford  Stamford, Connecticut; Brighton Gardens of Middleton  Middleton,
New Jersey; Brighton Gardens of Buckhead  Atlanta, Georgia; Brighton Gardens of
Naples  Naples, Florida. (Included as Exhibit 10.28 to theRegistrants
September 30, 2002, Report on Form 10-Q filed on November 12, 2002, and incorporated
herein by reference.)
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.29 |  | Ground
Lease Agreement between CNL Retirement ER1, LP and Peabody Campus, LLC dated October 10,
2002, relating to the Brooksby Village Continuing Care Retirement Community  Peabody,
Massachusetts. (Included as Exhibit 10.36 to Post-EffectiveNo. Four to the
Registrants Registration Statement on Form S-11 filed February 14, 2003, and
incorporated herein byreference.)
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.30 |  | Purchase
and Sale Agreement between CNL Retirement ER1, LP, as Buyer, and Peabody Campus, LLC, as
Seller, relating to the Brooksby Village Continuing Care Retirement Community  Peabody,
Massachusetts. (Included as Exhibit 10.37 to Post-EffectiveNo. Four to the
Registrants Registration Statement on Form S-11 filed February 14, 2003, and
incorporated herein byreference.)
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.31 |  | Lease
Agreement between CNL Retirement AM/Tennessee LP and Homewood at Brookmont Terrace, LLC
dated October 31, 2002, relating to the Homewood Residence at Brookmont Terrace Nashville,
Tennessee. (Included as Exhibit 10.38 to Post-EffectiveNo. Four to the
Registrants Registration Statement on Form S-11 filed February 14, 2003, and
incorporated herein byreference.)
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.32 |  | Purchase
and Sale Agreement between CNL Retirement Corp., as Buyer, and Homewood at Brookmont
Terrace, LLC, as Seller, relating to the Homewood Residence at Brookmont Terrace  Nashville,
Tennessee. (Included as Exhibit 10.39 to Post-EffectiveNo. Four to the
Registrants Registration Statement on Form S-11 filed February 14, 2003, and
incorporated herein byreference.)
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.33 |  | Lease
Agreement between CNL Retirement MA3 Washington, LP and Eleven Pack Management Corp.
dated December 20, 2002, relating to the Brighton Gardens of Bellevue  Bellevue,
Washington. (Included as Exhibit 10.40 to Post-Effective No. Four to theRegistrants
Registration Statement on Form S-11 filed February 14, 2003, and incorporated herein by
reference.)
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.34 |  | Lease
Agreement between CNL Retirement MA2 Illinois, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the Brighton Gardens of Hoffman Estates Hoffman
Estates, Illinois. (Included as Exhibit 10.41 to Post-Effective No. Fourto the
Registrants Registration Statement on Form S-11 filed February 14, 2003, and
incorporated herein by reference.)
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.35 |  | Lease
Agreement between CNL Retirement MA3 Oklahoma, LP and Eleven Pack Management Corp. dated
December 20, 2002, relating to the Brighton Gardens of Oklahoma City  Oklahoma
City, Oklahoma. (Included as Exhibit 10.42 to Post-Effective No. Four tothe
Registrants Registration Statement on Form S-11 filed February 14, 2003, and
incorporated herein by reference.)
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.36 |  | Lease
Agreement between CNL Retirement MA3 California, LP and Eleven Pack Management Corp.
dated December 20, 2002, relating to the Brighton Gardens of Santa Rosa  Santa
Rosa, California. (Included as Exhibit 10.43 to Post-Effective No. Four to theRegistrants
Registration Statement on Form S-11 filed February 14, 2003, and incorporated herein by
reference.)
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.37 |  | Lease
Agreement between CNL Retirement MA2 Oklahoma, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the Brighton Gardens of Tulsa  Tulsa, Oklahoma. (Included
as Exhibit 10.44 to Post-Effective No. Four to the RegistrantsRegistration
Statement on Form S-11 filed February 14, 2003, and incorporated herein by reference.)
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.38 |  | Lease
Agreement between CNL Retirement MA3 Georgia, LP and Eleven Pack Management Corp. dated
December 20, 2002, relating to the Brighton Gardens of Vinings  Atlanta, Georgia.
(Included as Exhibit 10.45 to Post-Effective No. Four to theRegistrants
Registration Statement on Form S-11 filed February 14, 2003, and incorporated herein by
reference.)
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | 10.39 |  | Lease
Agreement between CNL Retirement MA3 Washington, LP and Eleven Pack Management Corp.
dated December 20, 2002, relating to the Hearthside of Lynnwood  Lynnwood,
Washington. (Included as Exhibit 10.46 to Post-Effective No. Four to theRegistrants
Registration Statement on Form S-11 filed February 14, 2003, and incorporated herein by
reference.)
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.40 |  | Lease
Agreement between CNL Retirement MA3 Washington, LP and Eleven Pack Management Corp.
dated December 20, 2002, relating to the Hearthside of Snohomish  Snohomish,
Washington. (Included as Exhibit 10.47 to Post-Effective No. Four to theRegistrants
Registration Statement on Form S-11 filed February 14, 2003, and incorporated herein by
reference.)
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.41 |  | Lease
Agreement between CNL Retirement MA2 California, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the MapleRidge of Hemet  Hemet, California. (Included
as Exhibit 10.48 to Post-Effective No. Four to the RegistrantsRegistration
Statement on Form S-11 filed February 14, 2003, and incorporated herein by reference.)
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.42 |  | Lease
Agreement between CNL Retirement MA2 Massachusetts, LP and Eight Pack Management Corp.
dated December 20, 2002, relating to the MapleRidge of Plymouth  Plymouth,
Massachusetts. (Included as Exhibit 10.49 to Post-Effective No. Four tothe
Registrants Registration Statement on Form S-11 filed February 14, 2003, and
incorporated herein by reference.)
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.43 |  | Lease
Agreement between CNL Retirement MA2 Ohio, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the MapleRidge of Willoughby  Willoughby, Ohio. (Included
as Exhibit 10.50 to Post-Effective No. Four to the RegistrantsRegistration
Statement on Form S-11 filed February 14, 2003, and incorporated herein by reference.)
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.44 |  | Lease
Agreement between CNL Retirement MA2 Arkansas, LP and Eight Pack Management Corp. dated
December 20, 2002, relating to the Pleasant Hills Retirement Community  Little
Rock, Arkansas. (Included as Exhibit 10.51 to Post-Effective No. Four tothe
Registrants Registration Statement on Form S-11 filed February 14, 2003, and
incorporated herein by reference.)
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.45 |  | Purchase
and Sale Agreement between Marriott Senior Living Services, Inc., MSLS-MapleRidge, Inc.,
and Marriott International, Inc., as Sellers, and CNL Retirement MA2, LP, as Purchaser,
CNL Retirement Partners, LP as the Orland Park Owner and Eight Pack Management Corp., as
Tenant, relating to the Brighton Gardens of Hoffman Estates Hoffman Estates,
Illinois; Brighton Gardens of Tulsa  Tulsa, Oklahoma; MapleRidge of Hemet  Hemet,
California; MapleRidge of Plymouth  Plymouth, Massachusetts; MapleRidge of
Willoughby  Willoughby, Ohio and Pleasant Hills Retirement Community  Little
Rock, Arkansas. (Included as Exhibit 10.52 to Post-Effective No. Four to the Registrants
Registration Statement on Form S-11filed February 14, 2003, and incorporated
herein by reference.)
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.46 |  | Purchase
and Sale Agreement between Marriott Senior Living Services, Inc., MSLS-MapleRidge, Inc.,
and Marriott International, Inc., as Sellers, and CNL Retirement MA3, LP, as Purchaser,
and Eleven Pack Management Corp., as Tenant, relating to the Brighton Gardens of Bellevue
 Bellevue, Washington; Brighton Gardens of Oklahoma City  Oklahoma City,
Oklahoma; Brighton Gardens of Santa Rosa  Santa Rosa, California; Brighton Gardens
of Vinings  Atlanta, Georgia; Hearthside of Lynnwood  Lynnwood, Washington
and Hearthside of Snohomish  Snohomish, Washington. (Included as Exhibit10.53
to Post-Effective No. Four to the Registrants Registration Statement on Form S-11
filed February 14, 2003, andincorporated herein by reference.)
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.47 |  | Purchase
and Sale Agreement between Marriott Continuing Care, LLC, as Sellers, and Marriott
International, Inc. and CNL Retirement MA3, LP, as Purchaser, relating to the Fairfax
Continuing Care Retirement Community  Fort Belvoir, Virginia and the Quadrangle
Continuing Care Retirement Community  Haverford, Pennsylvania. (Included as
Exhibit 10.54 to Post-EffectiveNo. Four to the Registrants Registration
Statement on Form S-11 filed February 14, 2003, and incorporated herein byreference.)
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.48 |  | Lease
Agreement between CNL Retirement MA3 Virginia, LP and Marriott Continuing Care, LLC dated
March 28, 2003, relating to the Fairfax Continuing Care Retirement Community Fort
Belvoir, Virginia. (Included as Exhibit 10.49 to the RegistrantsMarch
31, 2003, Report on Form 10-Q filed on May 15, 2003, and incorporated herein by
reference.)
| | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.49 |  | Lease
Agreement between CNL Retirement MA3 Pennsylvania, LP and Marriott Continuing Care, LLC
dated March 28, 2003, relating to the Quadrangle Continuing Care Retirement Community
 Haverford, Pennsylvania. (Included as Exhibit 10.50 to theRegistrants
March 31, 2003, Report on Form 10-Q filed on May 15, 2003, and incorporated herein by
reference.)
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.50 |  | Assumption
and Reimbursement Agreement between Marriott International, Inc., as Assignor, Marriott
Continuing Care, LLC, as Assignor, CNL Retirement Properties, Inc., as Assignee, CNL
Retirement MA3 Pennsylvania, LP, as Assignee, and CNL Retirement MA3 Virginia, LP, as
Assignee, dated March 28, 2003. (Included as Exhibit 10.51 to the Registrants
March 31, 2003, Reporton Form 10-Q filed on May 15, 2003, and incorporated herein
by reference.)
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.51 |  | Purchase
and Sale Agreement by and among WEC 99C-1, LLC, WEC 99C-2, LLC, WEC 99C-3, LLC, WEC
99C-4, LLC, WEC 99C-5, LLC, WEC 99C-6, LLC, WEC 99C-7, LLC, WEC 99C-8, LLC, WEC 99C-9,
LLC, WEC 99C-10, LLC, WEC 99C-11, LLC, WEC 99C-12, LLC, WEC 99C-13, LLC, and WEC 99C-14,
LLC, respectively, as Sellers, and CNL Retirement Properties, Inc., as Purchaser dated
August 29, 2003. (Included as Exhibit 10.59 to Post Effective Amendment No. Three to
the Registrants Registration Statement on FormS-11 (Registration No.
333-100347) filed October 21, 2003, and incorporated herein by reference.)
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.52 |  | Purchase
and Sale Agreement by and among Sunrise Assisted Living Limited Partnership, Sunrise
Farmington Hills Assisted Living, L.L.C., Atlantic-Sunrise, LLC, Sunrise Poland Assisted
Living, L.L.C., Sunrise Raleigh Assisted Living, LLC, Sunrise Assisted Living Limited
Partnership VIII, L.P., and ADG on Sheepshead Bay, LLC, as Seller and CNL Retirement
Corp., as Purchaser and Twenty Pack Management Corp. as Tenant dated September 29, 2003.
(Included as Exhibit 10.60 to Post EffectiveAmendment No. Three to the
Registrants Registration Statement on Form S-11 filed October 21, 2003, and
incorporated hereinby reference.)
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.53 |  | Pooling
Agreement by and among Sunrise Senior Living Management, Inc., as Manager and Twenty Pack
Management Corp., Sunrise Five Forks Assisted Living, L.L.C., Sunrise Development, Inc.
and Sunrise Madison Senior Living, L.L.C., as Owners and CNL Retirement Sun1, LP, CNL
Retirement Sun1 Beverly Hills CA, LP, CNL Retirement Sun1 Cresskill NJ, LP, CNL
Retirement Sun1 Edmonds WA, LP, CNL Retirement Sun1 Lilburn GA, LP and CNL Retirement
Sun1 Madison NJ, LP, as Landlords dated September 30, 2003. (Included as Exhibit 10.61
to Post Effective Amendment No. Three to the Registrants Registration Statement on
FormS-11 filed October 21, 2003, and incorporated herein by reference.)
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 21. |  | Subsidiaries
of the Registrant (Filed herewith.)
| | --- |  | ------------------------------------------------

| | 31.1 |  | Certification
 of the Chief Executive  Officer,  Pursuant to 18 U.S.C.  Section 1350 as Adopted
Pursuant to Section 302 of the          Sarbanes-Oxley Act of 2002.  (Filed herewith.)
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 |  | Certification
 of the Chief Financial  Officer,  Pursuant to 18 U.S.C.  Section 1350 as Adopted
Pursuant to Section 302 of the          Sarbanes-Oxley Act of 2002.  (Filed herewith.)
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 |  | Certification
 of the Chief Executive  Officer,  Pursuant to 18 U.S.C.  Section 1350 as Adopted
Pursuant to Section 906 of the          Sarbanes-Oxley Act of 2002.  (Filed herewith.)
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.2 |  | Certification
 of the Chief Financial  Officer,  Pursuant to 18 U.S.C.  Section 1350 as Adopted
Pursuant to Section 906 of the          Sarbanes-Oxley Act of 2002.  (Filed herewith.)
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# CNL RETIREMENT
PROPERTIES, INC. AND SUBSIDIARIES

# EXHIBIT 21

# SUBSIDIARIES OF THE
REGISTRANT

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

|Name of Subsidiary                               | State of Incorporation
|------------------------------------------------ | ----------------------
|CNL Retirement Properties, Inc.                  |                       
|CNL Retirement Partners, LP                      |                       
|Annapolis Assisted Living, LLC                   |                       
|CNL Retirement AM / Colorado LP                  |                       
|CNL Retirement AM / Florida LP                   |                       
|CNL Retirement AM / Illinois LP                  |                       
|CNL Retirement AM / Tennessee LP                 |                       
|CNL Retirement AM / Texas LP                     |                       
|CNL Retirement Camarillo CA, LP                  |                       
|CNL Retirement CH1 Saddle River GP, LLC          |                       
|CNL Retirement CH1 Saddle River, LP              |                       
|CNL Retirement Clayton OH, LP                    |                       
|CNL Retirement Dartmouth MA, LP                  |                       
|CNL Retirement DSL1 Alabama, LP                  |                       
|CNL Retirement DSL1 GP, LLC                      |                       
|CNL Retirement Eden1 Florida GP, LLC             |                       
|CNL Retirement Eden1 Gainesville FL, LLLP        |                       
|CNL Retirement Eden1 Jacksonville FL, LLLP       |                       
|CNL Retirement Eden1 Tallahassee FL, LLLP        |                       
|CNL Retirement Eden2 A Pack GP, LLC              |                       
|CNL Retirement Eden2 A Pack, LP                  |                       
|CNL Retirement Eden2 B Pack GP, LLC              |                       
|CNL Retirement Eden2 B Pack, LP                  |                       
|CNL Retirement Eden2 Georgia GP, LLC             |                       
|CNL Retirement Eden2 Georgia, LP                 |                       
|CNL Retirement Eden2 GP, LLC                     |                       
|CNL Retirement Eden2, LP                         |                       
|CNL Retirement Eden2 North Carolina GP, LLC      |                       
|CNL Retirement Eden2 North Carolina, LP          |                       
|CNL Retirement ER1 GP, LLC                       |                       
|CNL Retirement ER1, LP                           |                       
|CNL Retirement ER2 GP, LLC                       |                       
|CNL Retirement ER2, LP                           |                       
|CNL Retirement ER3 GP, LLC                       |                       
|CNL Retirement ER3, LP                           |                       
|CNL Retirement ER4 GP, LLC                       |                       
|CNL Retirement ER4, LP                           |                       
|CNL Retirement GP / Colorado Corp.               |                       
|CNL Retirement GP Corp.                          |                       
|CNL Retirement GP / Florida Corp.                |                       
|CNL Retirement GP / Holding Corp.                |                       
|CNL Retirement GP / Illinois Corp.               |                       
|CNL Retirement GP National Corp.                 |                       
|CNL Retirement GP / Tennessee Corp.              |                       
|CNL Retirement GP / Texas Corp.                  |                       
|CNL Retirement GT1 GP, LLC                       |                       
|CNL Retirement GT1 Illinois, LP                  |                       
|CNL Retirement GT1 Indiana, LP                   |                       
|CNL Retirement HB2 A Pack GP, LLC                |                       
|CNL Retirement HB2 A Pack, LP                    |                       
|CNL Retirement HB2 Boynton Beach A FL GP, LLC    |                       
|CNL Retirement HB2 Boynton Beach A FL, LP        |                       
|CNL Retirement HB2 Boynton Beach B FL GP, LLC    |                       
|CNL Retirement HB2 Boynton Beach B FL, LP        |                       
|CNL Retirement HB2 California GP, LLC            |                       
|CNL Retirement HB2 California, LP                |                       
|CNL Retirement HB2 Cumberland RI GP, LLC         |                       
|CNL Retirement HB2 Cumberland RI, LP             |                       
|CNL Retirement HB2 Dallas TX GP, LLC             |                       
|CNL Retirement HB2 Dallas TX, LP                 |                       
|CNL Retirement HB2 GP, LLC                       |                       
|CNL Retirement HB2 Hoover AL GP, LLC             |                       
|CNL Retirement HB2 Hoover AL, LP                 |                       
|CNL Retirement HB2 Largo FL GP, LLC              |                       
|CNL Retirement HB2 Largo FL, LP                  |                       
|CNL Retirement HB2, LP                           |                       
|CNL Retirement HB2 Niles IL GP, LLC              |                       
|CNL Retirement HB2 Niles IL, LP                  |                       
|CNL Retirement HB2 Palm Beach Gardens FL GP, LLC |                       
|CNL Retirement HB2 Palm Beach Gardens FL, LP     |                       
|CNL Retirement HB2 Sarasota FL GP, LLC           |                       
|CNL Retirement HB2 Sarasota FL, LP               |                       
|CNL Retirement HB2 Smithfield RI GP, LLC         |                       
|CNL Retirement HB2 Smithfield RI, LP             |                       
|CNL Retirement HB2 South Kingstown RI GP, LLC    |                       
|CNL Retirement HB2 South Kingstown RI, LP        |                       
|CNL Retirement HB2 Sun City AZ GP, LLC           |                       
|CNL Retirement HB2 Sun City AZ, LP               |                       
|CNL Retirement HB2 Tiverton RI GP, LLC           |                       
|CNL Retirement HB2 Tiverton RI, LP               |                       
|CNL Retirement HB2 West Palm Beach FL GP, LLC    |                       
|CNL Retirement HB2 West Palm Beach FL, LP        |                       
|CNL Retirement Laguna Creek CA, LP               |                       
|CNL Retirement LP Corp.                          |                       
|CNL Retirement MA1 GP, LLC                       |                       
|CNL Retirement MA1, LP                           |                       
|CNL Retirement MA2 Arkansas, LP                  |                       
|CNL Retirement MA2 California, LP                |                       
|CNL Retirement MA2 GP Holding, LLC               |                       
|CNL Retirement MA2 Illinois, LP                  |                       
|CNL Retirement MA2, LP                           |                       
|CNL Retirement MA2 Massachusetts, LP             |                       
|CNL Retirement MA2 Ohio, LP                      |                       
|CNL Retirement MA2 Oklahoma, LP                  |                       
|CNL Retirement MA2 Utah, LP                      |                       
|CNL Retirement MA3 A Pack GP, LLC                |                       
|CNL Retirement MA3 A Pack, LP                    |                       
|CNL Retirement MA3 California, LP                |                       
|CNL Retirement MA3 Georgia, LP                   |                       
|CNL Retirement MA3 GP Holding, LLC               |                       
|CNL Retirement MA3 Kentucky, LP                  |                       
|CNL Retirement MA3, LP                           |                       
|CNL Retirement MA3 Oklahoma, LP                  |                       
|CNL Retirement MA3 Pennsylvania, LP              |                       
|CNL Retirement MA3 South Carolina, LP            |                       
|CNL Retirement MA3 Virginia, LP                  |                       
|CNL Retirement MA3 Washington, LP                |                       
|CNL Retirement MA4 Cleveland OH, LP              |                       
|CNL Retirement MA4 Columbia MD, LP               |                       
|CNL Retirement MA4 Dayton OH, LP                 |                       
|CNL Retirement MA4 Dunwoody GA, LP               |                       
|CNL Retirement MA4 Florham Park NJ, LP           |                       
|CNL Retirement MA4 GP Cleveland OH, LLC          |                       
|CNL Retirement MA4 GP Columbia MD, LLC           |                       
|CNL Retirement MA4 GP Dayton OH, LLC             |                       
|CNL Retirement MA4 GP Dunwoody GA, LLC           |                       
|CNL Retirement MA4 GP Florham Park NJ, LLC       |                       
|CNL Retirement MA4 GP Florida Holding, LLC       |                       
|CNL Retirement MA4 GP Greensboro NC, LLC         |                       
|CNL Retirement MA4 GP Kansas City KS, LLC        |                       
|CNL Retirement MA4 GP, LLC                       |                       
|CNL Retirement MA4 GP Northville MI, LLC         |                       
|CNL Retirement MA4 GP Omaha NE, LLC              |                       
|CNL Retirement MA4 GP Rockville MD, LLC          |                       
|CNL Retirement MA4 GP St. Charles IL, LLC        |                       
|CNL Retirement MA4 GP West Orange NJ, LLC        |                       
|CNL Retirement MA4 GP Wheaton IL, LLC            |                       
|CNL Retirement MA4 Greensboro NC, LP             |                       
|CNL Retirement MA4 Kansas City KS, LP            |                       
|CNL Retirement MA4, LP                           |                       
|CNL Retirement MA4 Northville MI, LP             |                       
|CNL Retirement MA4 Omaha NE, LP                  |                       
|CNL Retirement MA4 Rockville MD, LP              |                       
|CNL Retirement MA4 St. Charles IL, LP            |                       
|CNL Retirement MA4 Tampa FL, LP                  |                       
|CNL Retirement MA4 West Orange NJ, LP            |                       
|CNL Retirement MA4 Wheaton IL, LP                |                       
|CNL Retirement Maitland FL GP, LLC               |                       
|CNL Retirement Maitland FL, LP                   |                       
|CNL Retirement MC1 GP, LLC                       |                       
|CNL Retirement MC1 Georgia, LP                   |                       
|CNL Retirement PC1 Buckhead GA, LP               |                       
|CNL Retirement PC1 Brentwood TN, LP              |                       
|CNL Retirement PC1 Friendship Heights MD, LP     |                       
|CNL Retirement PC1 GP Holding, LLC               |                       
|CNL Retirement PC1 GP, LLC                       |                       
|CNL Retirement PC1 GP Naples FL, LLC             |                       
|CNL Retirement PC1 GP Venice FL, LLC             |                       
|CNL Retirement PC1, LP                           |                       
|CNL Retirement PC1 Naples FL, LP                 |                       
|CNL Retirement PC1 New Jersey, LP                |                       
|CNL Retirement PC1 North Carolina, LP            |                       
|CNL Retirement PC1 Stamford CT, LP               |                       
|CNL Retirement PC1 Venice FL, LP                 |                       
|CNL Retirement PC2, LLC                          |                       
|CNL Retirement RP1-VB, LLC                       |                       
|CNL Retirement SLB Florida, LP                   |                       
|CNL Retirement SLB GP, LLC                       |                       
|CNL Retirement ST1 Colorado GP, LLC              |                       
|CNL Retirement ST1 Colorado, LP                  |                       
|CNL Retirement SU TRS Corp.                      |                       
|CNL Retirement Sun1 Beverly Hills CA GP, LLC     |                       
|CNL Retirement Sun1 Beverly Hills CA, LP         |                       
|CNL Retirement Sun1 Cresskill NJ GP, LLC         |                       
|CNL Retirement Sun1 Cresskill NJ, LP             |                       
|CNL Retirement Sun1 Edmonds WA GP, LLC           |                       
|CNL Retirement Sun1 Edmonds WA, LP               |                       
|CNL Retirement Sun1 GP, LLC                      |                       
|CNL Retirement Sun1 Lilburn GA GP, LLC           |                       
|CNL Retirement Sun1 Lilburn GA, LP               |                       
|CNL Retirement Sun1, LP                          |                       
|CNL Retirement Sun1 Madison NJ GP, LLC           |                       
|CNL Retirement Sun1 Madison NJ, LP               |                       
|CNL Retirement Towson MD, LP                     |                       
|CNL Retirement TRS Corp.                         |                       
|CNL Retirement Westgate1 Auburn Hills MI, LP     |                       
|CNL Retirement Westgate1 Michigan GP, LLC        |                       
|CNL Retirement Westgate1 Sterling Heights MI, LP |                       
|DSTS, LLC                                        |                       
|Pikesville Assisted Living, LLC                  |                       

---

# CERTIFICATION OF CHIEF
EXECUTIVE OFFICER

# PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO

# SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

# EXHIBIT 31.1

I, Thomas J. Hutchison, III, certify
that:

|1. |  | I
have reviewed this annual report on Form 10-K of CNL Retirement Properties,
               Inc. (the Registrant);
|-- |  | ---------------------------------------------------------------------------------------------------------------------

|2. |  | Based
on my knowledge, this report does not contain any untrue statement of a
               material fact or omit to state a material fact necessary to make the
statements                made, in light of the circumstances under which such statements
were made, not                misleading with respect to the period covered by this
report;
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Based
on my knowledge, the financial statements, and other financial information
               included in this report, fairly present in all material respects the
financial                condition, results of operations and cash flows of the
Registrant as of, and                for, the periods presented in this report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | The
Registrants other certifying officer and I are responsible for
               establishing and maintaining disclosure controls and procedures (as
defined in                the Securities Exchange Act of 1934, as amended, Rules
13a-15(e) and 15d-15(e))                for the Registrant and have:
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | Designed such disclosure controls and procedures, or caused such disclosure
               controls and procedures to be designed under our supervision, to ensure that
               material information relating to the Registrant, including its consolidated
               subsidiaries, is made known to us by others within those entities, particularly
               during the period in which this report is being prepared;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) |  | Evaluated the effectiveness of the Registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation; and
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) |  | Disclosed in this report any change in the Registrants internal control
               over financial reporting that occurred during the Registrants most recent
               fiscal quarter that has materially affected, or is reasonably likely to
               materially affect, the Registrants internal control over financial
               reporting; and
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The
Registrants other certifying officer and I have disclosed, based on
               our most recent evaluation of internal control over financial reporting,
to the                Registrants auditors and the audit committee of the Registrants
               board of directors:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | All significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the Registrants ability to record, process, summarize and
               report financial information; and
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) |  | Any fraud, whether or not material, that involves management or other employees
               who have a significant role in the Registrants internal control over
               financial reporting.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: February 27, 2004 | /s/ Thomas J. Hutchison, III                                      
|----------------------- | ------------------------------------------------------------------
|                        | Thomas J. Hutchison, III                                          
|                        | Chief Executive Officer and President(Principal Executive Officer)

---

# CERTIFICATION OF CHIEF
FINANCIAL OFFICER

# PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO

# SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

# EXHIBIT 31.2

I, Stuart J. Beebe, certify that:

|1. |  | I
have reviewed this annual report on Form 10-K of CNL Retirement Properties,
               Inc. (the Registrant);
|-- |  | ---------------------------------------------------------------------------------------------------------------------

|2. |  | Based
on my knowledge, this report does not contain any untrue statement of a
               material fact or omit to state a material fact necessary to make the
statements                made, in light of the circumstances under which such statements
were made, not                misleading with respect to the period covered by this
report;
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Based
on my knowledge, the financial statements, and other financial information
               included in this report, fairly present in all material respects the
financial                condition, results of operations and cash flows of the
Registrant as of, and                for, the periods presented in this report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | The
Registrants other certifying officer and I are responsible for
               establishing and maintaining disclosure controls and procedures (as
defined in                the Securities Exchange Act of 1934, as amended, Rules
13a-15(e) and 15d-15(e))                for the Registrant and have:
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | Designed such disclosure controls and procedures, or caused such disclosure
               controls and procedures to be designed under our supervision, to ensure that
               material information relating to the Registrant, including its consolidated
               subsidiaries, is made known to us by others within those entities, particularly
               during the period in which this report is being prepared;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) |  | Evaluated the effectiveness of the Registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation; and
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) |  | Disclosed in this report any change in the Registrants internal control
               over financial reporting that occurred during the Registrants most recent
               fiscal quarter that has materially affected, or is reasonably likely to
               materially affect, the Registrants internal control over financial
               reporting; and
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The
Registrants other certifying officer and I have disclosed, based on
               our most recent evaluation of internal control over financial reporting,
to the                Registrants auditors and the audit committee of the Registrants
               board of directors:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|a) |  | All significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the Registrants ability to record, process, summarize and
               report financial information; and
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) |  | Any fraud, whether or not material, that involves management or other employees
               who have a significant role in the Registrants internal control over
               financial reporting.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: February 27, 2004 | /s/ Stuart J. Beebe                                      
|----------------------- | ---------------------------------------------------------
|                        | Stuart J. Beebe                                          
|                        | Chief Financial Officer                                  
|                        | (Principal Financial and              Accounting Officer)

---

# CERTIFICATION OF CHIEF
EXECUTIVE OFFICER

# PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO

# SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

# EXHIBIT 32.1

Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, the undersigned certifies that (1) this Annual Report of CNL Retirement
Properties, Inc. (the Company) on Form 10-K for the year ended December 31,
2003, as filed with the Securities and Exchange Commission on the date hereof (this Report),
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended, and (2) the information contained in this Report fairly
presents, in all material respects, the financial condition of the Company as of December
31, 2003 and 2002 and its results of operations for the three year period ended December
31, 2003.

|Date: February 27, 2004 | /s/ Thomas J. Hutchison, III
|----------------------- | ----------------------------
|                        | Thomas J. Hutchison, III    
|                        | Chief Executive Officer     
|                        |                             

---

# CERTIFICATION OF CHIEF
FINANCIAL OFFICER

# PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO

# SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

# EXHIBIT 32.2

Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, the undersigned certifies that (1) this Annual Report of CNL Retirement Properties,
Inc. (the Company) on Form 10-K for the year ended December 31, 2003, as filed
with the Securities and Exchange Commission on the date hereof (this Report),
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended, and (2) the information contained in this Report fairly presents,
in all material respects, the financial condition of the Company as of December 31, 2003
and 2002 and its results of operations for the three year period ended December 31, 2003.

|Date: February 27, 2004 | /s/ Stuart J. Beebe    
|----------------------- | -----------------------
|                        | Stuart J. Beebe        
|                        | Chief Financial Officer
|                        |