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

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

                   For the fiscal year ended December 31, 2002
                         -------------------------------

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

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

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

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

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

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

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

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

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

    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,
$198,089,362 of our common stock was held by non-affiliates as of June 28, 2002.

    The number of shares of common stock outstanding as of February 19, 2003 was
52,036,790.

                       DOCUMENTS INCORPORATED BY REFERENCE

    Registrant   incorporates  by  reference  portions  of  the  CNL  Retirement
Properties,  Inc.  Definitive  Proxy  Statement  for the 2003 Annual  Meeting of
Stockholders  (Items  10,  11, 12 and 13 of Part III) to be filed no later  than
April 30, 2003.


<PAGE>
<TABLE>
<CAPTION>

<c>

                                    Contents

                                                                                                              Page
Part I
    Item 1.       Business                                                                                    1-6
    Item 2.       Properties                                                                                  7-8
    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
    Item 6.       Selected Financial Data                                                                     11-12
    Item 7.       Management's Discussion and Analysis of Financial Condition and
Results of Operations      13-23
    Item 7A.      Quantitative and Qualitative Disclosures About Market Risk                                  23
    Item 8.       Financial Statements and Supplementary Data                                                 24-42
    Item 9.       Changes in and Disagreements with Accountants on Accounting and
                           Financial Disclosure                                                               43

Part III
    Item 10.      Directors and Executive Officers of the Registrant                                          43
    Item 11.      Executive Compensation                                                                      43
    Item 12.      Security Ownership of Certain Beneficial Owners and Management                              43
    Item 13.      Certain Relationships and Related Transactions                                              43
    Item 14.      Controls and Procedures                                                                     43
Part IV
    Item 15.      Exhibits, Financial Statement Schedules and Reports on Form 8-K                             44-49

Signatures                                                                                                    50-51

Certifications                                                                                                52-53

Schedule III - Real Estate and Accumulated Depreciation                                                       54-56

Exhibits
</TABLE>

<PAGE>

                                     PART I

Item 1.  Business

    CNL  Retirement  Properties,  Inc.  is a  corporation,  which was  organized
pursuant  to the laws of the State of Maryland on  December  22,  1997.  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 properties.
The terms "Company" or "Registrant" include 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  acquires  real  estate  properties  ("Properties")  related to
seniors' housing and retirement  facilities  ("Retirement  Facilities")  located
across the United  States.  The  Retirement  Facilities  may include  congregate
living,  assisted  living  and  skilled  nursing  facilities,   continuing  care
retirement  communities and life care communities,  and medical office buildings
and walk-in  clinics.  The  Properties  are leased on a long-term,  "triple-net"
basis to  operators of  Retirement  Facilities  or to other  tenants that engage
third  party  managers.  Under the  Company's  triple-net  leases,  the  lessees
generally are responsible for repairs,  maintenance,  property taxes,  utilities
and  insurance as well as the payment of rent.  The lessees'  ability to satisfy
the lease obligations depends primarily on the Properties  operating results. In
addition,   with  respect  to  certain  Properties,   various  forms  of  credit
enhancements, such as corporate guarantees, secure the lessees' obligations. 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.

    The  Company  may  provide  mortgage  financing  (the  "Mortgage  Loans") to
operators of Retirement Facilities secured by real estate owned by the borrower.
However, because it prefers to focus on investing in Properties,  which have the
potential to appreciate, the Company currently expects to provide Mortgage Loans
in the aggregate principal amount of no more than 5 percent to 10 percent of the
Company's total assets. The Company expects that the interest rates and terms of
the Mortgage Loans will be similar to those of its leases.  The Company also may
provide  furniture,  fixtures and equipment  ("FF&E") financing through loans or
direct financing leases  (collectively,  the "Secured  Equipment  Leases").  The
aggregate  outstanding  principal  amount  of  Secured  Equipment  Leases is not
expected to exceed 10 percent of the  Company's  total  assets.  The Company has
retained  CNL  Retirement  Corp.  (the  "Advisor")  as its  advisor  to  provide
management, acquisition, advisory and administrative services.

    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
September  18,  1998,  the Company  commenced an offering to the public of up to
15,500,000  shares of common  stock  ($155,000,000)  pursuant to a  registration
statement  on Form S-11  under  the  Securities  Act of 1933,  as  amended  (the
"Initial  Offering").  Upon termination of the Initial Offering on September 18,
2000,  the Company had received  aggregate  subscription  proceeds of $9,718,974
(971,898 shares). Following the termination of the Initial Offering, the Company
commenced an offering of up to 15,500,000 shares of common stock  ($155,000,000)
(the "2000  Offering"),  which was completed on May 24, 2002. In connection with
the 2000 Offering,  the Company received  subscription  proceeds of $155,000,000
(15,500,000 shares). Upon completion of the 2000 Offering, the Company commenced
an offering of up to 45,000,000 shares ($450,000,000) (the "2002 Offering").  Of
the 45,000,000  shares offered,  up to 5,000,000  ($50,000,000) are available to
stockholders purchasing shares through the Company's reinvestment plan.

    On October 4, 2002, the Company filed a registration  statement on Form S-11
with the Securities and Exchange Commission in connection with the proposed sale
by the Company of up to 175,000,000  additional  shares  ($1,750,000,000)  in an
offering  expected to  commence  immediately  following  the  completion  of the
Company's  2002  Offering  (the  "2003  Offering").  Of the  175,000,000  shares
expected to be offered,  up to 25,000,000  are expected to be made  available to
stockholders  purchasing  shares  through the  reinvestment  plan.  The Board of
Directors  expects to submit,  for a vote of the stockholders at the 2003 annual
meeting,  a proposal to increase the number of authorized shares of common stock
of the Company from 100,000,000 to 450,000,000.  Until such time, if any, as the
stockholders  approve an increase in the number of  authorized  shares of common
stock of the Company, the 2003 Offering will be limited to 38,000,000 shares.

    As of  December  31,  2002,  the  Company had  received  total  subscription
proceeds from its Initial  Offering,  the 2000 Offering and the 2002 Offering of
$442,346,060 (44,234,603 shares),  including $1,208,302 (120,830 shares) through
the reinvestment plan.
<PAGE>
    As of December 31, 2002,  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  $392,300,000.  The
Company had used approximately $310,900,000 of net offering proceeds, $8,100,000
in advances  on a line of credit and  borrowings  of  $45,600,000  in  permanent
financing to invest approximately  $364,600,000 in 37 Properties. As of December
31,  2002,  the Company  had repaid the advance on its line of credit,  had paid
approximately  $32,500,000  in  acquisition  fees and  acquisition  expenses and
approximately  $400,000  to  redeem  44,037  shares  of  common  stock,  leaving
approximately $40,400,000 available for investment in Properties, Mortgage Loans
and Secured Equipment Leases.

    During the period  January 1, 2003,  through  February 19, 2003, the Company
received  additional net offering  proceeds of  approximately  $69,500,000.  The
Company  also  paid  acquisition  fees and  costs of  approximately  $3,100,000,
leaving approximately  $66,400,000 for investment in Properties,  Mortgage Loans
and Secured Equipment Leases as of February 19, 2003. The Company expects to use
the uninvested net offering proceeds,  plus any additional net offering proceeds
from the sale of shares from the 2002 Offering and the 2003 Offering to purchase
additional  Properties  and, to a lesser  extent,  invest in Mortgage  Loans and
Secured Equipment  Leases.  In addition,  the Company intends to borrow money to
acquire additional Properties, to invest in Mortgage Loans and Secured Equipment
Leases,  and to pay certain related fees. The Company intends to encumber assets
in connection with such borrowings. The maximum amount the Company may borrow is
300 percent of the  Company's  net assets.  The  Company  believes  that the net
proceeds  received  from the 2002 Offering and the 2003 Offering will enable the
Company to  continue to grow and take  advantage  of  acquisition  opportunities
until  such  time,  if any,  that the  Company  lists its  shares on a  national
securities exchange or over-the-counter market ("Listing"), although there is no
assurance that Listing will occur.

    The Company's  primary  investment  objectives are to preserve,  protect and
enhance  the  Company's  assets  while (i)  making  quarterly  distributions  to
stockholders;  (ii) obtaining fixed income through the receipt of base rent, and
increasing  the  Company's  income  (and   distributions  to  stockholders)  and
providing protection against inflation through automatic increases in base rent,
or increases in base rent based on 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, or (b) if Listing
does not occur by December 31, 2008,  the  commencement  of orderly sales of the
Company's  assets  (outside the ordinary  course of business and consistent with
its  objectives  of  qualifying  as a REIT)  and  distribution  of the  proceeds
thereof. There can be no assurance that these investment objectives will be met.

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

    In deciding the precise timing and terms of Property sales, the Advisor will
consider factors such as national and local market conditions, potential capital
appreciation,  cash flows and federal  income tax  considerations.  The terms of
certain  leases,  however,  may  require  the  Company to sell a Property  at an
earlier time if the tenant  exercises its option to purchase a Property  after a
specified  portion  of the lease  term has  elapsed.  The  Company  will have no
obligation  to sell all or any  portion of a Property  at any  particular  time,
except as may be required  under  Property  or joint  venture  purchase  options
granted to certain  tenants.  In connection  with sales of Properties,  purchase
money  obligations  may be taken by the Company as partial  payment of the sales
price.  The terms of payment will be affected by custom in the area in which the
Property is located and prevailing  economic  conditions.  When a purchase money
obligation is accepted in lieu of cash upon the sale of a Property,  the Company
will  continue to have a mortgage on the  Property  and the proceeds of the sale
will be realized over a period of years rather than at closing of the sale.
<PAGE>
    It is anticipated  that if the Company wishes at any time to sell a Property
pursuant to a bona fide offer from a third  party,  the tenant of that  Property
will have the right to purchase the Property for the same price, and on the same
terms and conditions,  as contained in the offer.  In certain cases,  the tenant
may also have the right to purchase  the  Property a  specified  number of years
after  commencement of the lease at a purchase price equal to the greater of (i)
the appraised value of the Property, or (ii) a specified amount, generally equal
to the Company's purchase price of the Property plus a predetermined  percentage
of the  Company's  purchase  price.  A third party's  willingness  to pursue the
purchase of a Property may be affected by the existence of such tenant's rights.

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

Property Leases

    At December 31, 2002, the Company owned 37 Properties  located in 16 states.
Twenty-five  of the  Properties  are subject to operating  leases and  generally
provide for an initial term of 15 years  (expiring  between 2015 and 2017).  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.  Eleven of the Properties  are subject to direct  financing
leases and each has a term of 35 years (expiring in 2037).  The direct financing
leases  contain  provisions  that allow  each  lessee to elect to  purchase  the
Property  at the end of the  lease  term for the  Company's  initial  investment
amount and also  permit  the  Company to require  each  lessee to  purchase  the
Property  at the end of the  lease  term  for the  same  amount.  The  remaining
Property is a parcel of land currently in a pre-construction  phase with planned
development for a seniors' housing complex.  Upon completion of the development,
the Company  expects to enter into a long-term  lease agreement with an operator
of the Retirement Facility to operate and manage the Property.

    The Company's  leases are on a triple-net  lease basis,  meaning the tenants
are required to pay all repairs,  maintenance,  property  taxes,  utilities  and
insurance.  The tenants are also required to pay for special assessments and the
cost of any  renovations  permitted  under the  leases.  The leases  provide for
minimum base annual rent payments,  generally  payable in monthly  installments.
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 annual base rent,  substantially
all tenants are subject to  contingent  rent  computed as a percentage  of gross
sales of 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.  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.

    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  ("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  cash reserve  accounts to be held at the
tenant level.  A guarantee  from a parent company 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 flow  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, 2002,  the Company  owned 36 Properties in 16 states that
are  subject  to  long-term,  triple-net  leases.  The  lessees  of 35 of  these
Properties are affiliates or wholly owned  subsidiaries  of American  Retirement
Corporation   ("ARC"),   HRA  Management   Corporation  ("HRA")  or  Prime  Care
Properties,  LLC ("Prime  Care") and  contributed  95.6 percent of the 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  are operated by
Marriott Senior Living Services,  Inc., a subsidiary of Marriott  International,
Inc. To mitigate credit risk,  substantially all of the lease agreements contain
Cross-Default  and Pooling  terms.  In addition,  as of December  31, 2002,  the
Company had  $4,866,973 in security  deposits  related to certain  Properties as
well as the guarantees described below.
<PAGE>

    In connection with five Properties  leased to HRA,  Marriott  International,
Inc. and Marriott Senior Living Services,  Inc. have, with certain  limitations,
guaranteed  the tenant's  obligation to pay minimum rent due under the leases up
to a maximum of $5,880,000. As of February 19, 2003, $1,086,078 of the guarantee
had been used to pay rent leaving a remaining guarantee balance of $4,793,922.

    Marriott International,  Inc. and Marriott Senior Living Services, Inc. have
also  guaranteed  the tenant's  obligation to pay minimum rent due under a lease
for a Property  located in Orland Park,  Illinois  purchased in April 2000.  The
maximum amount of the guarantee was $2,769,780,  and the remaining balance as of
February 19, 2003 was $996,181.

    An affiliate of Prime Care has  guaranteed  the tenants'  obligations to pay
minimum rent due under 11 leases up to a maximum of  $2,000,000.  As of February
19,  2003,  $308,341  of the  guarantee  had  been  used to pay rent  leaving  a
remaining guarantee balance of $1,691,659.

    In connection  with six 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.

    Although the Company  intends to acquire  additional  Properties  located in
various  states and  regions  and to  carefully  screen its  tenants in order to
reduce  risks of default,  failure of these  lessees,  their  guarantors  or the
Marriott  or  ARC  brand  chains  would  significantly  impact  the  results  of
operations of the Company.  It is expected  that the  percentage of total rental
income  contributed by the Company's current lessees will decrease as additional
Properties  are acquired and leased to  diversified  tenants  during  subsequent
periods.

    In a press release dated December 30, 2002,  Sunrise Assisted  Living,  Inc.
announced   it  had  entered   into  a  definitive   agreement   with   Marriott
International,  Inc. to acquire all of the outstanding  stock of Marriott Senior
Living Services,  Inc. When the sale of Marriott Senior Living Services,  Inc.'s
stock to Sunrise  Assisted  Living,  Inc. is completed,  it is expected that the
long-term management agreements in which the Company's tenants have entered into
with Marriott Senior Living  Services,  Inc. will be assumed by Sunrise Assisted
Living,  Inc.  to operate all of the  Company's  Properties  that are  currently
operated by Marriott Senior Living  Services,  Inc. In regards to nine of the 12
proposed  Properties for which the Company has entered into initial  commitments
to acquire as of February  19, 2003,  it is expected  that until the sale of the
Marriott Senior Living Services,  Inc.'s stock to Sunrise Assisted Living,  Inc.
is  completed,   Marriott  Senior  Living  Services,  Inc.  will  operate  these
Properties.  Sunrise Assisted Living,  Inc. has agreed to assume the obligations
to the Company  under the  guarantees  from  Marriott  International,  Inc.  and
Marriott  Senior  Living  Services,  Inc.  upon its purchase of Marriott  Senior
Living Services, Inc.'s stock. There can be no assurance that these transactions
will be consummated.

Maturity of Debt Obligations of American Retirement Corporation

    As of December 31, 2002, ARC was the parent company of the lessees to six of
the Company's 37  Properties.  ARC also operates the Properties and is obligated
to fund shortfall reserves relating to the Properties. According to its December
31, 2001 audited financial statements, ARC had significant debt obligations that
matured in 2002,  as well as a net working  capital  deficit as a result of such
maturities  and  significant  lease  obligations.  At December 31,  2001,  ARC's
current cash  balances and  internally  developed  cash were not  sufficient  to
satisfy its scheduled  debt  maturities in 2002.  Since the latter part of 2001,
ARC had been  executing a  refinancing  plan that included the  consummation  of
sale-leaseback  transactions and various other  refinancing and  capital-raising
transactions to repay debt and fund related reserve and escrow requirements.  On
September  30,  2002,  ARC  announced  that it had  successfully  completed  the
refinancing  of all debt that was due in 2002 and 2003.  According to ARC's Form
10-Q for the third quarter  period ended  September 30, 2002,  ARC reported that
although they had  successfully  completed their  refinancing  plan, they remain
highly leveraged with a substantial  amount of debt and lease  obligations,  and
they have increased  interest and lease costs. As part of the refinancings,  ARC
has  replaced a  significant  amount of mortgage  debt with debt  having  higher
interest rates or higher lease costs, increasing ARC's estimated annual debt and
lease payments from prior  periods.  As of February 19, 2003, ARC had met all of
its obligations relating to the six Properties.
<PAGE>
Certain Management Services

    Pursuant to an advisory  agreement (the "Advisory  Agreement"),  the Advisor
provides  management  services  relating to the  Company,  the  Properties,  the
Mortgage Loans and the Secured  Equipment  Lease program.  Under this agreement,
the Advisor is  responsible  for  assisting the Company in  negotiating  leases,
Mortgage  Loans,  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 one-twelfth of 0.60 percent of the total
amount invested in the Properties, exclusive of acquisition fees and acquisition
expenses (the "Real Estate Asset  Value"),  plus  one-twelfth of 0.60 percent of
the  outstanding  principal  amount of any Mortgage  Loans, as of the end of the
preceding  month. For negotiating  Secured  Equipment Leases and supervising the
Secured  Equipment Lease program,  the Advisor will receive,  upon entering into
each lease, a Secured Equipment Lease servicing fee, payable out of the proceeds
of borrowings, equal to 2 percent of the purchase price of the equipment subject
to each Secured  Equipment Lease (the "Secured  Equipment Lease Servicing Fee").
For  identifying  the  Properties,  structuring the terms of the acquisition and
leases of the Properties and structuring  the terms of the Mortgage  Loans,  the
Advisor  receives an acquisition fee equal to 4.5 percent of gross proceeds from
the offerings 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 percent of amounts outstanding on the line of credit, if any, at the time of
Listing.

    The Advisory  Agreement  continues until May 14, 2003, 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.

Borrowings

    As of December  31, 2002,  the Company had three  permanent  loans  totaling
$45.3 million secured by mortgages on seven Properties with an aggregate cost of
$103.4  million.  Two  of the  loans  require  monthly  principal  and  interest
payments.  These loans bear  interest  at a variable  rate based on LIBOR plus a
premium  and mature in October  2003 and August  2007.  The third loan is in the
form of a five-year commercial paper backed loan secured by five Properties. The
loan is funded from proceeds  received from the sale of 30-day commercial paper.
The commercial paper is re-marketed every 30 days upon maturity. The Company has
a  liquidity  facility  in  place in the  event  that the  marketing  effort  is
unsuccessful.  The commercial  paper loan bears interest at the commercial paper
rate as determined by market demand plus a margin that is inclusive of liquidity
fees and  administrative  costs.  Interest is payable monthly with principal due
when the commercial paper loan matures in June 2007.

    As of February  19,  2003,  the Company  plans to replace its  existing  $25
million  line of credit with a new line of credit.  The Company has a commitment
to obtain a two-year,  $75 million  revolving line of credit that may be amended
to allow the line of credit to be increased by $50  million.  Eleven  Properties
with an aggregate  cost of $115.2 million are expected to be mortgaged to secure
the $75 million revolving line of credit.  This facility will require payment of
interest only at LIBOR plus a premium until  maturity 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 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.
The line of credit may be increased at the discretion of the Board of Directors.

    The Board of Directors  anticipates  that the permanent  financing  will not
exceed 30 percent of the Company's total assets. However, in accordance with the
Company's  Articles of  Incorporation,  the aggregate maximum amount the Company
may  borrow is 300  percent  of the  Company's  net  assets  (as  defined in the
Company's  prospectus).  The Board of Directors may elect to encumber  assets in
connection with any borrowing.
<PAGE>
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.

Competition

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

Employees

    Reference  is made to Item  10.  Directors  and  Executive  Officers  of the
Registrant for a listing of the Company's Executive Officers. The Company has no
other  employees.  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.
<PAGE>
Item 2.  Properties

    As of December  31,  2002,  the Company had  invested  approximately  $392.4
million  in 37  retirement  Properties  located  in 16  states.  Seven  of those
Properties  with an aggregate  cost of $103.4  million are  mortgaged  for $45.3
million.  As of February  19,  2003,  the Company  had  initial  commitments  to
purchase 12  additional  Properties  for an aggregate  purchase  price of $298.7
million. Generally, Properties acquired or to be acquired by the Company conform
to the following specifications of size, cost and type of land and buildings:

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

    Assisted Living  Facilities.  Assisted living  facilities  provide a special
combination of housing, supportive services,  personalized assistance and health
care to their  residents in a manner which is designed to respond to  individual
needs.  These  facilities  offer a  lower-cost  alternative  to skilled  nursing
facilities for those who do not require intensive nursing care.  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 are also generally
freestanding,  but are  typically  more  institutional  in nature,  allowing for
efficient  cleaning and  sterilization.  The rooms in skilled nursing facilities
are equipped with patient monitoring devices and emergency call systems.  Oxygen
systems may also be present.  Both  multiple  floor and single floor designs are
common.  Individual  rooms in skilled nursing  facilities may be as small as 100
square feet, with common areas varying greatly in size.

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

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

    Either before or after construction or renovation,  the Properties  acquired
by the Company are one of a Retirement  Facility  operator's  approved  designs.
Generally, Properties acquired by the Company consist of both land and building,
although in a number of cases the Company may acquire  only the land  underlying
the building  with the building  owned by the tenant or a third party,  and also
may acquire the building only with the land owned by a third party.  In general,
the  Properties  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  Properties  are leased on a  long-term,  triple-net  basis to unrelated
third parties,  whereby the tenants are generally  responsible for all operating
expenses  relating  to  the  Property,   including  property  taxes,  insurance,
maintenance  and  repairs.  A tenant  generally  will be  required  by the lease
agreement  to  make  capital  expenditures  as may be  reasonably  necessary  to
refurbish buildings, premises, signs and equipment and maintain the leasehold in
a  manner  that  allows  operation  for  its  intended  purpose.  These  capital
expenditures generally will be paid by the tenant during the term of the lease.
<PAGE>
    The following  table  summarizes the location,  property type,  year opened,
number of units or beds in each Retirement Facility and the Company's investment
amount as of December 31, 2002. Dollar amounts are in thousands.
<TABLE>
<CAPTION>

<c>
                                                                           Year                        Investment
        Property Concept and Location             Property Type (1)       Opened      Units/Beds       (in 000's)
----------------------------------------------   ---------------------   ----------   ------------    --------------
Marriott
  Brighton Gardens:
    Orland Park, Illinois                                ALF               1999           102              $  14,740
    Camarillo, California                             ALF & SNF            1999           161                 19,880
    Towson, Maryland                                     ALF               1999           89                  15,722
    Hoffman Estates, Illinois                            ALF               1999           120                  8,081
    Tulsa, Oklahoma                                      ALF               1999           120                  5,039
    Atlanta, Georgia                                     ALF               1999           116                  7,871
    Oklahoma City, Oklahoma                              ALF               1999           120                  3,930
    Santa Rosa, California                            ALF & SNF            2000           162                 17,773
    Bellevue, Washington                                 ALF               1999           117                 11,028
    Brentwood, Tennessee                                 ALF               1997           115                  7,027
    Buckhead, Georgia                                    ALF               1998           115                  8,446
    Charlotte, North Carolina                            ALF               1997           115                  3,613
    Chevy Chase, Maryland                                ALF               1997           132                 21,430
    Middletown, New Jersey                               ALF               1997           115                 12,541
    Mountainside, New Jersey                             ALF               1997           123                 13,575
    Naples, Florida                                   ALF & SNF            1998           133                  8,805
    Raleigh, North Carolina                              ALF               1997           115                 10,581
    Stamford, Connecticut                                ALF               1997           115                 14,798
    Venice, Florida                                   ALF & SNF            1996           147                  7,211
    Winston-Salem, North Carolina                        ALF               1997           115                  7,756
  MapleRidge:
    Laguna Creek, California                             ALF               1999           84                   8,601
    Clayton, Ohio                                        ALF               1999           84                   8,680
    Dartmouth, Massachusetts                             ALF               1999           86                  10,155
    Plymouth, Massachusetts                              ALF               2000           84                   4,944
    Cleveland, Ohio                                      ALF               1999           84                   5,323
    Hemet, California                                    ALF               1999           84                   4,433
  Pleasant Hills:
    Little Rock, Arkansas                             ALF & ILF            1984           163                 11,351
  Hearthside:
    Lynnwood, Washington                                 ALF               1989           72                   6,829
    Snohomish,Washington                                 ALF               1993           84                   9,315

American Retirement Corporation
  Broadway Plaza:
    Arlington, Texas                                     ALF               2000           95                  11,120
  Homewood Residence:
    Boca Raton, Florida                                  ALF               2000           72                  10,200
    Coconut Creek, Florida                               ALF               2000           94                  10,223
    Brookmont, Tennessee                                 ALF               2000           98                   9,446
  Holley Court Terrace:
    Oak Park, Illinois                                   ILF               1992           178                 19,510
  Heritage Club:
    Greenwood Village, Colorado                       ALF & SNF            1999           178                 20,850

Erickson Retirement Communities
    Peabody, Massachusetts                               Land               N/A           --                  18,345

Other
    Vero Beach, Florida                                  Land               N/A           --                   3,244
                                                                                      ------------    --------------
                                                                                             3,987         $ 392,416
                                                                                      ============    ==============
</TABLE>

(1) Assisted  Living  Facility   ("ALF");   Skilled  Nursing  Facility  ("SNF");
    Independent Living Facility ("ILF")

<PAGE>
Item 3.  Legal Proceedings

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


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

    None.
<PAGE>
                                     PART II

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

    As of February 19, 2003, there were 22,311  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 within six years, there is no assurance that
a public  market for the shares  will  develop.  Prior to such time,  if any, as
Listing occurs,  any stockholder (other than the Advisor) may present all or any
portion equal to at least 25 percent of such stockholders' shares to the Company
for redemption at any time, in accordance  with the  procedures  outlined in the
Company's prospectus.  At such time, the Company may, at its sole option, redeem
such shares  presented for redemption  for cash, at a redemption  price equal to
the then  current  offering  price less a discount of 8.0  percent.  The current
offering price is $10.00 per share;  thereby the current net redemption price is
$9.20 per share.  Redemptions  are  limited to the extent  sufficient  funds are
available.  In addition, the Company may, at its discretion,  use up to $100,000
per calendar  quarter of the proceeds of any public offering of its common stock
for  redemptions.  There is no  assurance  that there will be  sufficient  funds
available for redemptions and,  accordingly,  a stockholder's  shares may not be
redeemed.  Any shares  acquired  pursuant to a redemption will be retired and no
longer  available  for  issuance by the  Company.  The Board of Directors of the
Company, in its discretion, may amend or suspend the redemption plan at any time
they  determine that such amendment or suspension is in the best interest of the
Company.  During the years ended  December  31, 2002 and 2001,  37,306 and 3,415
shares, respectively,  were redeemed at $9.20 per share (for a total of $343,212
and $31,420,  respectively) and retired from shares outstanding of common stock.
Although the Company is not aware of any transfers or resale of stock in 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, 2002,  the offering  price per share of common stock was
$10. Based on the continued  sale of shares  through  February 19, 2003, for $10
per share, the Company  estimates that the value of its shares is $10 per share.
The Company's  shares are not publicly  traded.  Investors  are  cautioned  that
common  stock not  publicly  traded is  generally  considered  illiquid  and the
estimated  value  per  share  may not be  realized  when an  investor  seeks  to
liquidate his or her common stock.

    The Company expects to make  distributions to the  stockholders  pursuant to
the  provisions of the Articles of  Incorporation.  For the years ended December
31, 2002 and 2001, the Company  declared cash  distributions  of $14,379,477 and
$1,507,322,  respectively, to stockholders. For each of the years ended December
31,  2002  and  2001,   approximately  65  percent  of  distributions   paid  to
stockholders  were considered  ordinary income and approximately 35 percent were
considered  a return of capital  for  federal  income tax  purposes.  No amounts
distributed to stockholders for the years ended December 31, 2002 and 2001, were
required  to be or have been  treated by the  Company as a return of capital for
purposes of calculating the stockholders'  return on their invested capital. The
following table presents total distributions and distributions per share:
<TABLE>
<CAPTION>

<c>
               2002 Quarter                First          Second         Third          Fourth          Year
      -------------------------------   ------------    -----------    -----------    -----------    ------------

      Total distributions declared        $1,552,344     $2,586,745      $4,097,267     $6,143,121     $14,379,477
      Distributions per share                0.1749         0.1749         0.1749           0.1755          0.7002

               2001 Quarter                First          Second         Third          Fourth          Year
      -------------------------------   ------------    -----------    -----------    -----------    ------------

      Total distributions declared          $219,887       $247,922        $312,583       $726,930     $1,507,322
      Distributions per share                 0.1749         0.1749          0.1749         0.1749         0.6996
</TABLE>
    On January 1, 2003 and February 1, 2003, the Company declared  distributions
to stockholders  totaling $2,604,002 and $2,878,892,  respectively  ($0.0589 per
share),  payable  by March  31,  2003,  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.
<PAGE>
Item 6.  Selected Financial Data

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

<c>
                                              2002             2001            2000           1999 (1)          1998 (2)
                                          -------------    ------------     -----------    -------------     ------------
Year Ended December 31:
     Revenues                              $ 18,852,028    $  1,899,619     $ 1,084,730    $      86,231     $         --
     General operating and
       administrative expenses (3)            1,388,706         395,268         340,086           79,261               --
     Organizational costs                            --              --              --           35,000               --
     Net earnings (loss)                     11,371,856         915,965         224,778          (28,390)              --
     Cash distributions declared             14,379,477       1,507,322         502,078           50,404               --
     Cash from operating activities          16,784,763       2,173,379       1,096,019           12,851               --
     Cash used in investing
       activities                          (358,090,103)    (22,931,469)    (14,428,703)              --               --
     Cash from (used in) financing
       activities                           355,384,104      47,301,313       8,766,346         4,731,279        (199,908)
     Funds from operations (4)               14,609,538       1,439,908         527,962           (28,390)             --
     Earnings (loss) per share                     0.52            0.38            0.27             (0.07)             --
     Cash distributions declared
       per share                                   0.70            0.70            0.58              0.13              --

     Weighted average number
       of shares outstanding                 22,034,955       2,391,072         845,833           412,713(5)           --

At December 31:
     Total assets                         $ 441,765,453    $ 64,446,889    $ 14,688,560     $   5,088,560    $    976,579
     Total mortgages payable                 45,326,677              --              --                --              --
     Total stockholders' equity             389,795,024      60,910,042       9,203,548         3,292,137         200,000
</TABLE>
(1)      No operations  commenced until the Company  received  minimum  offering
         proceeds of $2,500,000  and funds were released from escrow on July 14,
         1999.

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

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

(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, based on the
         revised  definition  adopted by the Board of  Governors of the National
         Association  of Real Estate  Investment  Trusts  ("NAREIT") and as used
         herein,  means net earnings  determined  in accordance  with  generally
         accepted accounting principles ("GAAP"), excluding gains or losses from
         debt  restructuring  and  sales  of  property,  plus  depreciation  and
         amortization   of  real  estate  assets  and  after   adjustments   for
         unconsolidated   partnerships   and  joint   ventures.   (Net  earnings
         determined  in  accordance  with GAAP  includes  the noncash  effect of
         straight-lining   rent  increases   throughout  the  lease  term.  This
         straight-lining is a GAAP convention requiring real estate companies to
         report rental  revenue based on the average rent per year over the life
         of the lease.  During the years ended December 31, 2002, 2001 and 2000,
         net earnings included $1,374,665, $76,665 and $21,128, respectively, of
         these  amounts.) FFO was  developed by NAREIT as a relative  measure of
         performance  and liquidity of an equity REIT in order to recognize that
         income-producing  real estate  historically  has not depreciated on the
         basis determined under GAAP.  However,  FFO (i) does not represent cash
         generated from operating activities  determined in accordance with GAAP
         (which, unlike FFO, generally reflects all cash effects of transactions
         and other events that enter into the  determination  of net  earnings),
         (ii) is not necessarily  indicative of cash flow available to fund cash
         needs and (iii)  should  not be  considered  as an  alternative  to net
         earnings  determined  in  accordance  with GAAP as an indication of the
         Company's  operating  performance,  or  to  cash  flow  from  operating
         activities  determined in  accordance  with GAAP as a measure of either
         liquidity  or the  Company's  ability  to  make  distributions.  FFO as
         presented  may  not  be  comparable  to  amounts  calculated  by  other
         companies.   Accordingly,   the  Company  believes  that  in  order  to
         facilitate  a  clear  understanding  of  the  consolidated   historical
         operating  results  of  the  Company,   FFO  should  be  considered  in
         conjunction  with the Company's net earnings and cash flows as reported
         in  the  accompanying   consolidated  financial  statements  and  notes
         thereto.
<PAGE>
    The following is a reconciliation of net earnings to FFO for the years ended
December 31, 2002, 2001 and 2000:
<TABLE>
<CAPTION>

<c>
                                                                          Year Ended
                                                                         December 31,
                                                     2002            2001           2000            1999
                                                  ------------    -----------    ------------    ------------
               Net earnings                       $ 11,371,856    $   915,965    $    224,778     $   (28,390)
                  Adjustments:
                     Effect of unconsolidated
                       subsidiaries                    149,801             --              --              --
                     Effect of minority interest      (233,691)            --              --              --
                     Depreciation of real estate
                       assets                        3,321,572        523,943         303,184              --
                                                 -------------   ------------   -------------   -------------
               FFO                                $ 14,609,538   $  1,439,908    $    527,962     $   (28,390)
                                                 =============   ============   =============   =============
               Weighted average shares:             22,034,955      2,391,072         845,833         412,713
                                                 =============   ============   =============   =============
</TABLE>

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

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

    This information contains  forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933, 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 real
estate  conditions,  availability of capital from borrowings under the Company's
line of credit, continued availability of proceeds from the Company's offerings,
the  ability  of  the  Company  to  obtain  additional  permanent  financing  on
satisfactory  terms, the ability of the Company to continue to identify suitable
investments,  the ability of the Company to continue to locate suitable  tenants
for its Properties  and borrowers for its Mortgage  Loans and Secured  Equipment
Leases,  and the ability of such tenants and  borrowers to make  payments  under
their respective leases, Mortgage Loans or Secured Equipment Leases. Given these
uncertainties,  readers  are  cautioned  not to  place  undue  reliance  on such
statements.

                                  Introduction

The Company

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

                         Liquidity and Capital Resources

Common Stock Offerings

    In 1998, the Company  registered its Initial Offering of common stock and in
connection with the Initial Offering, the Company received subscription proceeds
of $9,718,974 (971,898 shares). Following termination of the Initial Offering on
September 18, 2000, the Company  commenced its 2000  Offering.  On May 24, 2002,
the Company  completed  its 2000  Offering  from which it received  subscription
proceeds  of  $155,000,000   (15,500,000  shares).   Immediately  following  the
completion of the 2000 Offering,  the Company  commenced its 2002 Offering of up
to an  additional  45,000,000  shares of  common  stock  ($450,000,000).  Of the
45,000,000 shares of common stock offered in the 2002 Offering,  up to 5,000,000
are  available  to   stockholders   purchasing   shares  through  the  Company's
reinvestment plan.

    On October 4, 2002, the Company filed a registration  statement on Form S-11
with the Securities and Exchange Commission in connection with the proposed sale
by  the  Company  of  up  to  175,000,000  additional  shares  of  common  stock
($1,750,000,000) in an offering expected to commence  immediately  following the
completion of the Company's 2002 Offering.  Of the 175,000,000  shares of common
stock  expected to be offered,  up to 25,000,000 are expected to be available to
stockholders  purchasing  shares  through the  reinvestment  plan.  The Board of
Directors  expects to submit,  for a vote of the stockholders at the 2003 annual
meeting,  a proposal to increase the number of authorized shares of common stock
of the Company from 100,000,000 to 450,000,000.  Until such time, if any, as the
stockholders  approve an increase in the number of  authorized  shares of common
stock of the Company, the 2003 Offering will be limited to 38,000,000 shares.

    From its formation in December 1997 through  December 31, 2002,  the Company
has received an initial $200,000  contribution from the Advisor and subscription
proceeds of $442,346,060  (44,234,603  shares),  including  $1,208,302  (120,830
shares)  through  the  reinvestment  plan.  The  Company  believes  that the net
proceeds  received from the 2002 Offering,  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.  As of December 31, 2002, the
Company  had  used  approximately  $319,000,000  of net  offering  proceeds  and
approximately $45,600,000 of loan proceeds to invest in 37 Properties located in
16 states (see "Property  Acquisitions  and Investments"  below),  approximately
$32,500,000 to pay acquisition fees and expenses and  approximately  $400,000 to
redeem  44,037  shares  of  common  stock,  leaving  approximately   $40,400,000
available for investment in Properties and Mortgage Loans.
<PAGE>
    During the period January 1 through  February 19, 2003, the Company received
additional offering proceeds of approximately  $78,300,000.  The Company expects
to use any  uninvested net offering  proceeds,  plus any additional net offering
proceeds  from the 2002  Offering and the 2003  Offering to purchase  additional
Properties  and to a lesser  extent,  to invest in  Mortgage  Loans and  Secured
Equipment  Leases.  In addition,  the Company intends to borrow money to acquire
assets and to pay certain  related fees. The Company  intends to encumber assets
in connection with such borrowing.  The Company has obtained permanent financing
in connection with certain  Properties and has an initial commitment to obtain a
two-year,  $75 million revolving line of credit that may be amended to allow the
line of credit to increase by $50 million. The aggregate amount of any permanent
financing is not expected to exceed 30 percent of the Company's total assets and
the maximum  amount the Company may borrow is 300 percent of the  Company's  net
assets.

Redemptions

    In October 1998,  the Board of Directors  elected to implement the Company's
redemption  plan.  Under the  redemption  plan,  prior to such time,  if any, as
Listing  occurs,  any  stockholder who has held shares for at least one year may
present all or any portion  equal to at least 25 percent of their  shares to the
Company  for  redemption  in  accordance  with the  procedures  outlined  in the
redemption plan. Upon presentation,  the Company may, at its option,  redeem the
shares,  subject to certain  conditions  and  limitations.  However,  at no time
during a 12-month period may the number of shares redeemed by the Company exceed
5 percent of the number of shares of the Company's  outstanding  common stock at
the beginning of the 12-month period.  During the years ended December 31, 2002,
2001 and 2000, 37,306,  3,415 and 3,316 shares,  respectively,  were redeemed at
$9.20 per share (for a total of $343,212, $31,420 and $30,508, respectively) and
retired. No shares were redeemed prior to 2000.

Property Acquisitions and Investments

    At December 31, 2002, the Company owned 37 Properties  located in 16 states,
including one Property in a pre-construction  phase with planned development for
a seniors'  housing  complex.  Upon completion of the  development,  the Company
expects  to enter into a  long-term  lease  agreement  with an  operator  of the
Retirement Facility to operate and manage the Property.  The Company, as lessor,
has entered into long-term lease  agreements  relating to the other  Properties.
The leases are on a triple-net lease basis,  meaning the tenants are required to
pay  all  repairs,   maintenance,   property  taxes,  utilities  and  insurance.
Generally,  the tenants are also required to make capital expenditures as may be
reasonably necessary to refurbish buildings,  premises,  signs and equipment and
maintain  the  leasehold  in a manner that  allows  operation  for its  intended
purpose.

    During the year ended December 31, 2002, the Company  acquired 22 Properties
for an aggregate  purchase price of $222.3 million that are subject to operating
leases and generally provide for an initial term of 15 years.  Substantially all
of the  operating  leases  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.  The leases provide for minimum annual base rent,  generally
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 computed as a percentage of gross sales of 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. Substantially all of
the operating leases contain Cross-Default and Pooling terms. The Properties are
operated and managed by ARC,  Marriott Senior Living Services,  Inc. or Erickson
Retirement  Communities,  LLC. As discussed in the "Major Tenants and Operators"
section  above,  it is  expected  that when the sale of Marriott  Senior  Living
Services,  Inc.'s  stock to Sunrise  Assisted  Living,  Inc. is  completed,  the
long-term management agreements in which the Company's tenants have entered into
with Marriott Senior Living  Services,  Inc. will be assumed by Sunrise Assisted
Living,  Inc.  to operate all of the  Company's  Properties  that are  currently
operated by Marriott Senior Living Services, Inc. There can be no assurance that
these transactions will be consummated.

    In  conjunction  with the  purchase  of five of the  Properties  subject  to
operating leases,  Marriott  International,  Inc. has, with certain limitations,
guaranteed  the tenant's  obligation to pay minimum rent due under the leases up
to a maximum of  $5,880,000.  As of February  19,  2003,  the  remaining  amount
available under the limited guarantee was $4,793,922.
<PAGE>
    On September 30, 2002, the Company  acquired 11 Properties  located in seven
states through a direct  financing  transaction  with two  subsidiaries of Prime
Care for  $105,250,000  plus closing costs and a working  capital  advance.  The
Company,  as lessor,  entered into 35-year lease agreements that require minimum
annual rent of  $11,520,600  through  December 31, 2003,  and 2.5 percent annual
increases thereafter. In addition to minimum rent, the leases require additional
rent, which is based on a percentage of the tenants' gross revenues.  The leases
also provide for the tenant to fund, in addition to its lease payments,  an FF&E
reserve fund.  All property  purchased with the funds from the FF&E reserve will
remain the property of the tenants. The leases contain provisions that allow the
lessees  to  purchase  the  Properties  at the end of the  lease  terms  for the
Company's  investment  amount. The leases also permit the Company to require the
lessees to purchase  the  Properties  at the end of the lease terms for the same
amount. The leases of the 11 Properties contain Cross-Default and Pooling terms.
In addition, an affiliate of the tenants has guaranteed the tenants' obligations
to pay minimum  rent due under the leases up to a maximum of  $2,000,000.  As of
February 19, 2003,  the  remaining  amount  available  under the  guarantee  was
$1,691,659. The 11 Properties are operated and managed by Marriott Senior Living
Services, Inc.

         In connection with the acquisition of seven Properties, the Company
obtained three permanent loans totaling $45.3 million secured by mortgages on
the Properties. See "Borrowings" below.

    On May 30,  2002,  the Company  acquired a 10 percent  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
Company's  original  equity  investment in the  partnership  was  $300,000.  The
Company's share in the limited partnership's distributions will be equivalent to
its equity interest in the limited  partnership.  During the year ended December
31, 2002, the Company received  $190,922 in distributions  from the partnership.
The remaining interest in the limited partnership is owned by several affiliates
of the Advisor.  In connection with this  investment,  the Company has severally
guaranteed 16.67 percent or $2,583,333,  of a $15,500,000  unsecured  promissory
note of the limited partnership.

    On August 12, 2002, the Company  originated a Mortgage Loan in the principal
amount of  $1,870,000  secured by a parcel of land  owned by a joint  venture in
which the Company  acquired a 99% interest on December 20, 2002.  The loan bears
interest at 9.35  percent per annum and  requires  monthly  payments of interest
only.  The  loan  matures  on  December  31,  2006.  The  land,  which  contains
approximately  39.8 acres,  is planned to be developed  into a seniors'  housing
complex.  The Company had incurred  approximately  $1,400,000 in pre-development
costs as of December 31, 2002.

Borrowings

    In February 2002, the Company assumed a mortgage of $12,974,397 that matures
on October 2, 2003, in  conjunction  with the purchase of a Property  located in
Oak Park,  Illinois.  The mortgage  bears interest at a floating rate of (i) 350
basis  points  over the  30-day  LIBOR if LIBOR is over 2.6  percent or (ii) 440
basis points over the 30-day LIBOR if LIBOR is under 2.6 percent not to exceed 8
percent.  As of December  31,  2002,  the  interest  rate was 5.84  percent.  In
accordance with the provisions of the mortgage,  the Company has placed $277,821
in  escrow,  which  represents  three  months  of debt  service  related  to the
mortgage.  In connection with the loan, the Company incurred  assumption fees of
$16,156  that are being  amortized  over the  remaining  term of the  loan.  The
Company anticipates refinancing the loan prior to its maturity date. However, if
such financing is not available,  the Company expects to have adequate  offering
proceeds available to repay this debt.

    In connection  with the purchase of five  Properties,  the Company  borrowed
$23,520,000  in June 2002 in the form of a commercial  paper backed loan secured
by these five  Properties.  The loan is funded from  proceeds  received from the
sale of 30-day  commercial  paper. The commercial paper is re-marketed  every 30
days upon maturity.  The Company has a liquidity  facility in place in the event
that the re-marketing effort is unsuccessful. The liquidity agent has provided a
liquidity  facility  for up to 102  percent  of the  outstanding  loan  balance.
Interest is payable  monthly with principal due when the  commercial  paper loan
matures on June 6,  2007.  The  commercial  paper  loan  bears  interest  at the
commercial  paper  rate as  determined  by market  demand  (1.51  percent  as of
December  31,  2002)  plus a  margin  of 1.23  percent,  which is  inclusive  of
liquidity fees and administrative costs. As of December 31, 2002, the commercial
paper loan  interest rate was 2.74 percent.  In  connection  with the loan,  the
Company  incurred  loan  fees and  closing  costs  of  $539,215  that are  being
amortized over the term of the loan.

    On August 8, 2002, the Company  entered into a commitment for $11,000,000 of
permanent  financing  secured by a mortgage on the Property located in Greenwood
Village,  Colorado. On August 29, 2002, the Company obtained an advance totaling
$9,100,000 with a possible future advance in the amount of $1,900,000 subject to
certain operating  performance  thresholds being achieved by this Property prior
to February 27, 2004. The loan bears interest at a variable rate based on 90-day
LIBOR plus 3.90 percent per annum,  but in no event shall the  interest  rate be
less than 6.50  percent.  As of December  31, 2002,  the interest  rate was 6.50
percent.  The loan  requires  monthly  principal and interest  payments  through
August 31, 2007,  with all unpaid  principal  and interest due at that time.  In
connection  with the loan,  the Company  incurred loan fees and closing costs of
$329,933 that are being amortized over the term of the loan.
<PAGE>
    As of February  19,  2003,  the Company  plans to replace its  existing  $25
million  line of credit with a new line of credit.  The Company has a commitment
to obtain a two-year,  $75 million  revolving line of credit that may be amended
to allow the line of credit to be increased by $50  million.  Eleven  Properties
with an aggregate  cost of $115.2 million are expected to be mortgaged to secure
the $75 million  revolving  line of credit.  This credit  facility  will require
payment of interest only at LIBOR plus a premium until  maturity 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 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 connection  with the new revolving line of credit,  the Company has
incurred $211,640 in loan fees and costs as of December 31, 2002.

Contractual Obligations and Commitments

         The following table presents the Company's contractual cash obligations
and related payment periods as of December 31, 2002:
<TABLE>
<CAPTION>

<c>
                                          Less than
   Contractual Cash Obligations            1 Year        2-3 Years        4-5 Years      Thereafter         Total
------------------------------------     -----------    -----------     ------------    ------------    ------------
Mortgages payable                        $12,896,864    $   338,599     $ 32,091,214    $         --    $ 45,326,677
Refundable tenant security
   deposits                                       --             --               --       4,866,973       4,866,973
                                         -----------    -----------     ------------    ------------    ------------
Total Contractual Cash
   Obligations                           $12,896,864    $  338,599      $ 32,091,214    $  4,866,973    $ 50,193,650
                                         ===========    ===========     ============    ============    ============
</TABLE>
         The following table presents the Company's commitments, contingencies
and guarantees and related expiration periods as of December 31, 2002:
<TABLE>
<CAPTION>

<c>
  Commitments, Contingencies and         Less than
            Guarantees                     1 Year        2-3 Years       4-5 Years      Thereafter         Total
-----------------------------------     -------------    -----------    ------------   ------------    -------------
Guarantee of unsecured
   promissory note of
   unconsolidated subsidiary            $          --    $ 2,583,333    $         --   $         --    $   2,583,333
Earnout provisions (1)                             --     11,834,233              --             --       11,834,233
Pending investments (2)                   298,700,000             --              --             --      298,700,000
                                        -------------    -----------    ------------   ------------    -------------
Total Commitments, Contingencies
and Guarantees                          $ 298,700,000    $14,417,566    $         --   $         --    $ 313,117,566
                                        =============    ===========    ============   ============    =============
</TABLE>

(1)      In connection with the acquisition of five 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 lease will be amended  and annual  minimum
         rent will increase accordingly.

(2)      See "Pending Investments" section below for a description of Properties
         for which the Company  had  commitments  to acquire as of December  31,
         2002.
Market Risk

    All of the  Company's  mortgage  loans  payable at December 31,  2002,  were
subject to variable interest rates, adjusted monthly or quarterly,  as described
in the "Borrowings" section above.  Therefore,  the Company is exposed to market
changes in interest rates.  To mitigate  interest rate risk, the Company can pay
down  the  mortgages  with  offering   proceeds   should   interest  rates  rise
substantially.
<PAGE>
    The Company has  mitigated  its exposure to variable  interest  rates on its
commercial paper loan by providing  fluctuating  lease payments under the leases
for the Properties securing the loan as a result of changes in periodic interest
rates due under the  commercial  paper loan.  The loan is funded  from  proceeds
received  from the sale of 30-day  commercial  paper.  The  commercial  paper is
re-marketed every 30 days upon maturity.  The Company has mitigated its exposure
to liquidity risk by obtaining a liquidity facility that guarantees  proceeds in
the event that the marketing effort is unsuccessful.

    The Company may also be subjected to interest rate risk through  outstanding
balances on its variable rate line of credit. The Company may mitigate this risk
by paying down its line of credit from offering  proceeds  should interest rates
rise substantially.  There were no amounts outstanding on the variable rate line
of credit at December 31, 2002.

    Management  estimates that a one-percentage point increase in interest rates
for the year ended December 31, 2002, would have resulted in additional interest
costs of  approximately  $263,612.  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.

Pending Investments

    As of  February  19,  2003,  the  Company  had  commitments  to  acquire  12
additional  Properties  located  in  eight  states.  The  anticipated  aggregate
purchase price is  approximately  $298.7  million,  and the  acquisition of each
Property is subject to the fulfillment of certain conditions.  The Company plans
to assume permanent  financing of approximately $20.6 million in connection with
the acquisition of two Properties and to secure up to $75 million in a revolving
line of credit for the acquisition of nine of these Properties. In addition, the
Company  anticipates  that it will assume  obligations  of  approximately  $88.8
million in non-interest bearing bonds payable to certain residents of two of the
Properties.  In  regards  to nine of the 12  proposed  Properties  for which the
Company has entered into initial commitments to acquire as of February 19, 2003,
it is  expected  that until the sale of the  Marriott  Senior  Living  Services,
Inc.'s stock to Sunrise  Assisted  Living,  Inc. is completed,  Marriott  Senior
Living Services, Inc will operate these Properties.  It is expected that Sunrise
Assisted Living, Inc. or Erickson Retirement  Communities,  LLC will operate the
remaining  three  proposed  Properties.  There can be no  assurance  that  these
transactions will be consummated.

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, 2002, the Company had  $40,799,871  invested in such  short-term
investments as compared to $26,721,107 at December 31, 2001. 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, 2002, partially offset by the purchase of 33 Properties.  The funds
remaining at December  31,  2002,  along with  additional  funds  expected to be
received from the sale of shares,  will be used primarily to purchase additional
Properties,  to make Mortgage Loans or Secured Equipment Leases, 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.

Notes and Other Receivables

    The Company's notes and other receivables balance increased from $180,163 at
December  31, 2001 to  $3,192,203  as of December  31,  2002.  The  increase was
primarily  due to a  $2,000,000  loan to an  affiliate  of one of the  Company's
lessees related to the anticipated acquisition of two additional Properties.  As
of December  31,  2002,  the Company had an initial  commitment  to purchase two
additional  Properties  located in Maryland for  approximately  $22,600,000.  In
connection  with this  anticipated  purchase,  the  Company  loaned  the  seller
$2,000,000  to pay off debt at a discounted  amount,  making the purchase of the
Properties  economically  viable.  The note bears  interest at 15% per annum and
matures  March 31,  2003.  As security  for this note,  the seller has pledged a
membership  interest  in  its  company.  Additionally,  certain  members  of the
seller's company guaranteed the note.
<PAGE>
    Other amounts included in the Company's  accounts  receivable  balance as of
December 31, 2002 and 2001,  include normal  operating  receivables such as rent
payments  due  under  the  Company's   long-term  lease   agreements  and  other
receivables. As of February 19, 2003, management believes the receivable balance
as of December 31, 2002 is fully collectible.

Liquidity Requirements

    During  the years  ended  December  31,  2002,  2001 and 2000,  the  Company
generated cash from operating  activities (which includes cash received from its
tenants and  interest,  less cash paid for operating  expenses) of  $16,784,763,
$2,173,379 and $1,096,019,  respectively. For the years ended December 31, 2002,
2001 and 2000,  cash from operating  activities  includes  security  deposits of
$3,502,987,  $810,030 and $553,956,  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 Secured
Equipment Leases, through cash flow provided by operating activities. Management
believes that cash flow provided by operating  activities  will be sufficient to
fund normal recurring operating expenses,  regular debt service requirements and
distributions  to  stockholders.  To the  extent  that the  Company's  cash flow
provided by  operating  activities  is not  sufficient  to meet such  short-term
liquidity  requirements as a result, for example,  of unforeseen expenses due to
the tenants  defaulting under the terms of their lease  agreements,  the Company
will use  borrowings  under its proposed  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 Secured  Equipment Leases,
with proceeds from its offerings,  advances under its proposed 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.

    An FF&E reserve fund has been  established in accordance with  substantially
all of the lease  agreements.  In accordance with such  agreements,  the tenants
deposit funds into restricted FF&E reserve  accounts and  periodically use these
funds to cover the cost of the replacement,  renewal and additions to FF&E. With
respect to the Properties  subject to operating  leases,  generally all funds in
the FF&E reserve,  all interest  earned on the funds and all property  purchased
with  funds  from the FF&E  reserve  are and will  remain  the  property  of the
Company.  However,  six  Properties  subject to  operating  leases  include FF&E
reserve  accounts  which will be held by each tenant  until the end of the lease
term at which time all  property  purchased  with  funds  from the FF&E  reserve
accounts  will become the property of the  Company.  The  Properties  subject to
direct  financing  leases  include FF&E reserve  accounts  that are held by each
tenant. All property purchased with funds from the FF&E accounts will remain the
property of the tenants. In the event that the FF&E reserve is not sufficient to
maintain the Property in good working condition and repair, the Company may make
fixed asset expenditures,  in which case annual rent will be increased.  For the
years ended  December  31,  2002,  2001 and 2000,  revenue  relating to the FF&E
reserve totaled  $153,454,  $39,199 and $19,672,  respectively.  Due to the fact
that the Properties  are leased on a long-term,  triple-net  basis,  meaning the
tenants are required to pay repairs and maintenance,  property taxes,  insurance
and utilities,  management does not believe that other working capital  reserves
are necessary at this time.  However,  management may maintain  additional  cash
required to meet the Company's working capital needs.

    Management believes that its Properties are adequately covered by insurance.
In addition, the Advisor has obtained contingent liability and property coverage
for the  Company.  This  insurance  policy is intended  to reduce the  Company's
exposure in the 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
$14,379,477,  $1,507,322 and $502,078  during the years ended December 31, 2002,
2001 and 2000,  respectively.  In  addition,  on January 1, 2003 and February 1,
2003, the Company declared distributions of $0.0589 per share of common stock to
stockholders  of record as of each  respective  date.  These  distributions  are
payable by March 31, 2003.

    For the years ended  December  31,  2002,  2001 and 2000,  approximately  65
percent, 65 percent and 54 percent,  respectively, of the distributions received
by  stockholders  were  considered to be ordinary  income and  approximately  35
percent,  35 percent and 46 percent,  respectively,  were considered a return of
capital for federal income tax purposes.  No amounts distributed to stockholders
for the years ended  December 31, 2002,  2001 and 2000,  were  required to be or
have  been  treated  by the  Company  as  return  of  capital  for  purposes  of
calculating  the  stockholders'  return on their invested  capital.  The Company
intends to continue to make  distributions of cash available for such purpose to
the stockholders on a monthly basis, payable monthly or quarterly.
<PAGE>
Related Party Transactions

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

    CNL Securities Corp.  receives  commissions  amounting to 7.5 percent of the
total amount raised from the sale of shares for services in connection  with the
offerings,  a  substantial  portion  of  which  has  been  or  will  be  paid as
commissions to other  broker-dealers.  During the years ended December 31, 2002,
2001 and 2000,  the  Company  incurred  $27,835,104,  $4,463,981  and  $486,846,
respectively, of which $26,341,693,  $4,175,827 and $437,940,  respectively, was
or will be paid by CNL Securities Corp. as commissions to other broker-dealers.

    In addition,  CNL Securities Corp. receives a marketing support fee equal to
0.5 percent of the total amount raised from the sale of shares, all or a portion
of which may be  reallowed  to other  broker-dealers.  During  the  years  ended
December 31, 2002, 2001 and 2000, the Company incurred $1,855,674,  $297,599 and
$32,456,  respectively,  the majority of which was or will be reallowed to other
broker-dealers.

    CNL  Securities  Corp.  will  also  receive,  in  connection  with  the 2000
Offering,  a soliciting  dealer  servicing  fee payable  annually by the Company
beginning  on December  31,  2003,  in the amount  equal to 0.20  percent of the
aggregate  investment of stockholders who purchased shares in the 2000 Offering.
CNL  Securities  Corp.  in turn may  reallow  all or a  portion  of such fees to
soliciting  dealers  whose  clients hold shares on such date. As of December 31,
2002, no such fees had been incurred.

    The Advisor receives acquisition fees for services in identifying Properties
and  structuring  the terms of the Company's  leases and Mortgage Loans equal to
4.5  percent  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 percent of amounts outstanding on
a line of  credit,  if any,  at the time of  Listing.  During  the  years  ended
December 31, 2002, 2001 and 2000, the Company incurred  $18,736,538,  $2,676,430
and  $292,108,  respectively,  of such fees.  These fees are  included  in other
assets prior to being allocated to individual Properties.

    The Company and the Advisor have entered into an Advisory Agreement pursuant
to which the Advisor  receives a monthly asset  management fee of one-twelfth of
0.60  percent of the  Company's  real  estate  asset  value and the  outstanding
principal  balance of any Mortgage  Loan as of the end of the  preceding  month.
During the years ended December 31, 2002,  2001 and 2000,  the Company  incurred
$770,756, $93,219 and $55,396, respectively, of such fees.

    During the years ended December 31, 2002, 2001 and 2000, affiliates incurred
on behalf of the Company $5,613,049, $1,626,405, and $387,704, respectively, for
certain offering expenses and due diligence expense reimbursements. In addition,
during the years ended December 31, 2002 and 2001, affiliates incurred on behalf
of the Company  $451,238 and  $353,852,  respectively,  for certain  acquisition
expenses  and  $565,013  and  $206,211,   respectively,  for  certain  operating
expenses. As of December 31, 2002 and 2001, the Company owed affiliates $347,786
and   $1,772,807,   respectively,   for  such   amounts   and  unpaid  fees  and
administrative  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  percent  of the
proceeds raised in connection with the 2002 Offering.

    The  Company  incurs  operating  expenses  relating  to its  administration.
Pursuant to the Advisory  Agreement,  the Advisor is required to  reimburse  the
Company the amount by which the total operating expenses paid or incurred by the
Company in any Expense Year exceeds the Expense  Cap.  During the Expense  Years
ended June 30, 2001 and June 30, 2000,  operating  expenses exceeded the Expense
Cap by $145,015 and $213,886,  respectively;  therefore,  the Advisor reimbursed
the  Company  such  amounts  in  accordance  with the  Advisory  Agreement.  The
Company's operating expenses did not exceed the Expense Cap in any other Expense
Years during the years ended December 31, 2002, 2001 and 2000.

    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  $23,520,000  commercial  paper  loan  described  in Note 7 to the  Notes to
Consolidated  Financial  Statements  of the  Company in Item 8. CCM was paid a 2
percent  structuring fee  ($470,400),  which was recorded as deferred loan costs
and is being  amortized  over the term of the loan.  In  addition,  the  monthly
interest  payment due under the  commercial  paper loan  includes a margin of 30
basis points payable to CCM for the monthly  services it provides related to the
administration of the commercial paper loan.
<PAGE>
    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 $5,740,852 and $3,000,000 at December 31,
2002 and 2001, respectively.

    On May 30,  2002,  the Company  acquired a 10 percent  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 year ended  December 31,  2002,  the Company  received
$190,922 in distributions from the partnership.

Other

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

Critical Accounting Policies

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

    Acquisition  fees and  miscellaneous  acquisition  costs  that are  directly
identifiable with Properties that are probable of being acquired are capitalized
and included in other assets.  Upon  purchase of a Property,  the fees and costs
directly  identifiable with that Property are reclassified to land, building and
equipment.  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.

                              Results of Operations

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  $11,371,856  or
$0.52 per share of common  stock.  This  compares to net earnings of $915,965 or
$0.38 per  share of common  stock  for the  corresponding  period in 2001.  This
increase in net earnings and net earnings per share is the result of the various
factors described below.

    As of December 31, 2002 and 2001, the Company owned 37 Properties, including
one Property currently under development,  and 3 Properties,  respectively.  The
Company has entered into long-term,  triple-net lease agreements  relating to 36
and 3 of these Properties in 2002 and 2001, respectively. The leases provide for
minimum annual base rent generally payable in monthly  installments.  The leases
also require  minimum annual base rents to increase at  predetermined  intervals
during the lease term. In addition to annual base rent, substantially all of the
leases require the payment of contingent  rent computed as a percentage of gross
revenues of the Property above specified thresholds.

    For the  years  ended  December  31,  2002  and  2001,  the  Company  earned
$16,777,611 and $1,725,018,  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 $153,454 and $39,199 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. Because
the  majority  of the  Properties  were  owned  for only a  portion  of 2002 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.
<PAGE>
    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 and
contributed  95.6 percent 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  are  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. Although the Company acquires Properties located
in various  states and  regions  and  carefully  screens its tenants in order to
reduce risks of default,  failure of these lessees,  their guarantors or the ARC
or Marriott brand chains 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.

    During the years ended  December 31, 2002 and 2001,  the Company also earned
$1,913,205 and $135,402,  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. 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  income for the year
ended December 31, 2002 was approximately $191,200 in interest income related to
notes receivable.

    Operating   expenses,   including  interest  expense  and  depreciation  and
amortization  expense, were $7,052,564 and $983,654 for the years ended December
31, 2002 and 2001, respectively (37.4 percent and 51.8 percent, 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  $105,056  for the year  ended
December 31, 2001 to  $1,408,611  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 $439,456,
exceeding the Expense Cap by $145,015;  therefore the Advisor has 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.

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

    In May 2002,  a joint  venture in which the  Company  owned a 76.75  percent
equity interest,  purchased five Properties. The 23.25 percent 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  percent  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 $433,012 for the year ended December 31, 2002.

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

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

    During the years ended December 31, 2001 and 2000, the Company earned rental
income  from  operating  leases  and FF&E  reserve  revenue  of  $1,764,217  and
$981,672,  respectively.  The increase in rental income and FF&E reserve  income
was due to the Company  owning three  Properties  during the year ended December
31, 2001, as compared to one Property  during the year ended  December 31, 2000.
In addition,  the Orland Park Property was owned for only a portion of 2000, and
a full year in 2001.
<PAGE>
    During the years  ended  December  31,  2001 and 2000,  the  Company  earned
$135,402 and $103,058,  respectively,  in interest  income from  investments  in
money market accounts and other short-term  highly liquid  investments and other
income.  The  increase  in  interest  income was  primarily  attributable  to an
increase in the dollar amount invested in short-term liquid  investments and the
period of time the funds were invested as compared to 2000.

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

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

New Accounting Standards

    In April 2002, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 145,  "Rescission of FASB Statements No. 4, 44, and 64,  Amendment
of FASB Statement No. 13, and Technical  Corrections."  This statement  rescinds
FASB Statement No. 4, "Reporting Gains and Losses from  Extinguishment of Debt,"
and an amendment of that Statement,  FASB Statement No. 64,  "Extinguishments of
Debt Made to Satisfy  Sinking-Fund  Requirements."  This statement also rescinds
FASB Statement No. 44,  "Accounting  for Intangible  Assets of Motor  Carriers."
This  statement  amends  FASB  Statement  No. 13,  "Accounting  for  Leases," to
eliminate an inconsistency  between the required  accounting for  sale-leaseback
transactions and the required  accounting for certain lease  modifications  that
have  economic  effects that are similar to  sale-leaseback  transactions.  This
statement  also  amends  other  existing  authoritative  pronouncements  to make
various technical corrections, clarify meanings, or describe their applicability
under  changed  conditions.  The  provisions  of this  statement  related to the
rescission  of FASB  Statement No. 4 are  applicable  in fiscal years  beginning
after May 15, 2002. The  provisions of this statement  related to FASB Statement
No. 13 are effective for  transactions  occurring  after May 15, 2002. All other
provisions of this statement are effective for financial statements issued on or
after May 15, 2002.  The provisions of this statement are not expected to have a
significant  impact on the  financial  position or results of  operations of the
Company.

    In July 2002, the FASB issued FASB Statement No. 146,  "Accounting for Costs
Associated with Exit or Disposal  Activities." The statement  requires companies
to recognize  costs  associated  with exit or disposal  activities when they are
incurred  rather than at the date of a commitment  for an exit or disposal plan.
Examples of costs covered by the statement  include lease  termination costs and
certain  employee  severance  costs that are  associated  with a  restructuring,
discontinued operations,  plant closing, or other exit or disposal activity. The
statement  is to  be  applied  prospectively  to  exit  or  disposal  activities
initiated  after  December  31,  2002.  The  adoption of this  statement  is not
expected to have a significant  impact on the  financial  position or results of
operations of the Company.

    In  November  2002,  FASB  issued  FASB  Interpretation  No. 45 ("FIN  45"),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect   Guarantees  of  Indebtedness   of  Others".   FIN  45  clarifies  the
requirements  relating to a guarantor's  accounting  for, and disclosure of, the
issuance of certain types of guarantees. FIN 45 requires that upon issuance of a
guarantee,  the guarantor  must  recognize a liability for the fair value of the
obligation  it assumes under that  guarantee.  FIN 45's  provisions  for initial
recognition  and  measurement  are  to be  applied  on a  prospective  basis  to
guarantees  issued or modified after  December 31, 2002. The Company's  previous
accounting for guarantees issued prior to January 1, 2003 are not required to be
revised or  restated to reflect the effect of the  recognition  and  measurement
provisions of FIN 45.
<PAGE>
    In  January  2003,  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 considered 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. Prior to FIN 46, a company  generally
included  another entity in its  consolidated  financial  statements  only if it
controlled  the entity  through  voting  interests.  Consolidation  of  variable
interest  entities will provide more complete  information  about the resources,
obligations,   risks  and  opportunities  of  the  consolidated   company.   The
consolidation  requirements  of FIN 46 apply  immediately  to variable  interest
entities  created  after  January 31, 2003,  and to older  entities in the first
fiscal year or interim period  beginning after June 15, 2003. As of December 31,
2002,  the  Company did not have any  entities  that would be  characterized  as
variable interest entities under FIN 46.

Other

    The  Company  has made an  election  under  Internal  Revenue  Code  Section
856(c)(1),  to be taxed as a REIT under Sections 856 through 860 of the Internal
Revenue  Code of 1986,  as amended,  and  related  regulations.  As a REIT,  for
federal  income  tax  purposes,  the  Company  generally  will not be subject to
federal  income tax on income that it distributes  to its  stockholders.  If the
Company  fails to qualify as a REIT in any taxable  year,  it will be subject to
federal income tax on its taxable income at regular corporate rates and will not
be permitted to qualify for treatment as a REIT for federal  income tax purposes
for four years  following the year during which  qualification  is lost. Such an
event could materially affect the Company's net earnings.  However,  the Company
believes  that it is  organized  and operates in such a manner as to qualify for
treatment as a REIT for the years ended  December 31,  2002,  2001 and 2000.  In
addition, the Company intends to continue to operate the Company so as to remain
qualified as a REIT for federal income tax purposes.

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

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


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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


<PAGE>


Item 8. Financial Statements and Supplementary Data

                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

                                    CONTENTS



                                                                        Page

Report of Independent Certified Public Accountants                       25

Financial Statements:

    Consolidated Balance Sheets                                          26

    Consolidated Statements of Earnings                                  27

    Consolidated Statements of Stockholders' Equity                      28

    Consolidated Statements of Cash Flows                                29-30

    Notes to Consolidated Financial Statements                           31-42


<PAGE>







               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, 2002 and 2001,
and the results of their  operations  and their cash flows for each of the three
years in the period ended  December  31, 2002,  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 19, 2003
<PAGE>
                     CNL RETIREMENT PROPERTIES, INC.
                             AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

<c>
                                                                                            December 31,
                                                                                 2002                         2001
                                                                            ---------------              --------------

                                ASSETS

Investment Properties:
   Accounted for using the operating method, net                           $   272,483,664              $    35,232,568
   Accounted for using the direct financing method                             115,783,256                           --
Cash and cash equivalents                                                       40,799,871                   26,721,107
Restricted cash                                                                  1,684,684                       35,109
Notes and other receivables                                                      3,192,203                      180,163
Investment in unconsolidated subsidiary                                            154,148                           --
Loan costs, less accumulated amortization of $88,650 and $18,981                 1,220,108                       36,936
Accrued rental income                                                            1,472,458                       97,793
Other assets                                                                     4,975,061                    2,143,213
                                                                           ---------------              ---------------
                                                                           $   441,765,453              $    64,446,889
                                                                           ===============              ===============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
    Mortgages payable                                                         $ 45,326,677              $            --
    Due to related parties                                                         347,786                    1,772,807
    Accounts payable and accrued expenses                                        1,337,296                      294,839
    Security deposits                                                            4,866,973                    1,363,986
    Rent paid in advance                                                            91,432                      105,215
                                                                           ---------------              ---------------
          Total liabilities                                                     51,970,164                    3,536,847
                                                                           ---------------              ---------------

Minority interest                                                                      265                           --
                                                                           ---------------              ---------------
Commitments and Contingencies (Note 13)


Stockholders' equity:
    Preferred stock, without par value.
       Authorized and unissued 3,000,000 shares
    Excess shares, $.01 par value per share.
       Authorized and unissued 103,000,000 shares
    Common stock, $.01 par value per share.
       Authorized 100,000,000 shares, issued 44,254,603 and 7,141,131
       shares, respectively, outstanding 44,210,556 and 7,134,400
       shares, respectively                                                        442,106                       71,344
    Capital in excess of par value                                             393,307,990                   61,786,149
    Accumulated distributions in excess of net earnings                         (3,955,072)                    (947,451)
                                                                           ---------------              ----------------
          Total stockholders' equity                                           389,795,024                   60,910,042
                                                                           ---------------              ----------------
                                                                             $ 441,765,453                 $  64,446,889
                                                                           ===============              ================


</TABLE>




          See accompanying notes to consolidated financial statements.


<PAGE>


                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>

<c>

                                                                         Year Ended December 31,
                                                               2002                2001                2000
                                                            ------------        ------------       ------------

Revenues:
    Rental income from operating leases                   $  13,257,739       $   1,725,018      $      962,000
    Earned income from direct financing leases                3,519,872                  --                  --
    Contingent rent                                               7,758                  --                  --
    FF&E reserve income                                         153,454              39,199              19,672
    Interest and other income                                 1,913,205             135,402             103,058
                                                          -------------       -------------      --------------
                                                             18,852,028           1,899,619           1,084,730
                                                          -------------       -------------      --------------

Expenses:
    Interest                                                  1,408,611             105,056             367,374
    General operating and administrative                      1,388,706             395,268             340,086
    Property expenses                                            23,212                  --                  --
    Asset management fees to related party                      770,756              93,219              55,396
    Reimbursement of operating expenses
       from related party                                            --            (145,015)           (213,886)
    Depreciation and amortization                             3,461,279             535,126             310,982
                                                          -------------       -------------      --------------
                                                              7,052,564             983,654             859,952
                                                          -------------       -------------      --------------

 Earnings Before Equity in Earnings of
    Unconsolidated Subsidiary and Minority
    Interest in Earnings of Consolidated
    Joint Ventures                                           11,799,464             915,965             224,778

Equity in Earnings of Unconsolidated
     Subsidiary                                                   5,404                  --                  --

Minority Interest in Earnings of
     Consolidated Joint Ventures                               (433,012)                 --                  --
                                                          -------------       -------------      --------------
Net Earnings                                              $  11,371,856       $     915,965      $      224,778
                                                          =============       =============      ==============
Net Earnings Per Share of Common
    Stock (Basic and Diluted)                             $        0.52       $        0.38      $         0.27
                                                          =============       =============      ==============
Weighted Average Number of Shares of
    Common Stock Outstanding (Basic
    and Diluted)                                             22,034,955           2,391,072             845,833
                                                          =============       =============      ==============
</TABLE>
          See accompanying notes to consolidated financial statements.


<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  Years Ended December 31, 2002, 2001 and 2000
<TABLE>
<CAPTION>

<c>


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


Balance at December 31, 1999                            540,028  $    5,400   $   3,365,531   $       (78,794) $   3,292,137

   Subscriptions received for common stock
       through public offerings and reinvestment
       plan                                             625,628       6,256       6,250,054                --      6,256,310
   Subscriptions released from escrow                    23,500         235         234,765                --        235,000
   Retirement of common stock                            (3,316)        (33)        (30,475)               --        (30,508)
   Stock issuance costs                                      --          --      (1,027,216)               --     (1,027,216)
   Adjustment to previously accrued stock
       issuance costs                                        --          --         755,125                --        755,125
   Net earnings                                              --          --              --           224,778        224,778
   Distributions  declared  and paid  ($0.5785 per
       share)                                                --          --              --          (502,078)      (502,078)
                                                    -----------  ----------   -------------   ---------------  -------------
Balance at December 31, 2000                          1,185,840      11,858       9,547,784          (356,094)     9,203,548
   Subscriptions received for common stock
       through  public  offering and  reinvestment
       plan                                           5,951,975      59,520      59,460,231               --      59,519,751
   Retirement of common stock                            (3,415)        (34)        (31,386)              --         (31,420)
   Stock issuance costs                                      --          --      (7,190,480)              --      (7,190,480)
   Net earnings                                              --          --              --          915,965         915,965
   Distributions  declared  and paid  ($0.6996 per
       share)                                                --          --              --       (1,507,322)     (1,507,322)
                                                    -----------  ----------   -------------   ---------------  -------------
Balance at December 31, 2001                          7,134,400      71,344     61,786,149           (947,451)    60,910,042
   Subscriptions received for common stock
       through  public  offering and  reinvestment
       plan                                          37,113,472     371,135     370,763,581               --    371,134,716
   Retirement of common stock                           (37,306)       (373)       (342,839)              --       (343,212)
   Stock issuance costs                                      --          --     (38,898,901)              --    (38,898,901)
   Net earnings                                              --          --              --       11,371,856     11,371,856
   Distributions  declared  and paid  ($0.7002 per
      share)                                                 --          --              --       (14,379,477)   (14,379,477)
                                                    -----------  ----------   -------------   ---------------  -------------
Balance at December 31, 2002                        44,210,566   $  442,106   $ 393,307,990   $    (3,955,072) $ 389,795,024
                                                    ===========  ==========   =============   ===============  =============

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


<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

<c>
                                                                               Year Ended December 31,
                                                                   2002               2001               2000
                                                                -----------       -------------      --------------
Increase (decrease) in cash and cash equivalents:
     Operating activities:
       Net earnings                                             $11,371,856         $   915,965         $   224,778
       Adjustments to reconcile net earnings to
         net cash provided by operating activities:
           Depreciation                                           3,321,572             523,943             303,184
           Amortization                                             139,707              11,183               7,798
           Changes in operating assets and liabilities:
              Receivables                                          (827,287)           (177,691)             (2,472)
              Accrued rental income                              (1,374,665)            (76,665)            (21,128)
              Other assets                                          (36,107)             (5,737)              1,798
              Interest payable                                      114,801             (11,045)             11,045
              Accounts payable and other accrued expenses           484,199              45,469             (14,173)
              Due to related parties                               (331,794)             34,060              29,885
              Security deposits                                   3,502,987             810,030             553,956
              Rent paid in advance                                  (13,783)            103,867               1,348
              Minority interest in income                           433,277                  --                  --
                                                              -------------      --------------     ---------------
                  Net cash provided by operating activities      16,784,763           2,173,379           1,096,019
                                                              -------------      --------------     ---------------
     Investing activities:
       Additions to land, buildings and equipment on
         operating leases                                      (219,929,327)        (20,269,138)       (13,848,900)
       Investment in direct financing leases                   (109,720,000)                 --                  --
       Purchase of minority interest                             (8,500,000)                 --                  --
       Investment in notes receivable                            (2,000,000)                 --                  --
       Investment in unconsolidated subsidiary                     (350,364)                 --                  --
       Distributions received from unconsolidated                                            --                  --
         subsidiaries                                               190,922
       Payment of acquisition costs                             (16,131,759)         (2,644,534)          (562,491)
       Increase in restricted cash                               (1,649,575)            (17,797)           (17,312)
                                                              -------------      --------------     ---------------
                  Net cash used in investing activities        (358,090,103)        (22,931,469)       (14,428,703)
                                                              -------------      --------------     ---------------
     Financing activities:
       Proceeds from borrowings on mortgages payable             32,620,000                  --                  --
       Principal payments on mortgages payable                     (267,720)                 --                  --
       Payment of loan costs                                     (1,308,758)                 --             (55,917)
       Proceeds from line of credit                                      --                  --           8,100,000
       Repayment of borrowings on line of credit                         --          (3,795,000)         (4,305,000)
       Subscriptions received from stockholders                 371,134,716          59,519,751           6,491,310
       Distributions to stockholders                            (14,379,477)         (1,507,322)           (502,078)
       Retirement of common stock                                  (173,839)            (13,020)            (30,508)
       Payment of stock issuance costs                          (40,231,933)         (6,903,096)           (931,461)
       Contributions by minority interest                         8,500,000                  --                  --
       Distributions to minority interest                          (508,885)                 --                  --
                                                              -------------      --------------     ---------------
                  Net cash provided by financing activities     355,384,104          47,301,313          8,766,346
                                                              -------------      --------------     ---------------

Net increase (decrease) in cash and cash equivalents             14,078,764          26,543,223         (4,566,338)
Cash and cash equivalents at beginning of year                   26,721,107             177,884          4,744,222
                                                              -------------      --------------     ---------------
Cash and cash equivalents at end of year                        $40,799,871        $ 26,721,107         $  177,884
                                                              =============      ==============     ===============

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


<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>

<c>

                                                                            Year Ended December 31,
                                                                  2002                 2001               2000
                                                              -------------        -------------       ------------
Supplemental schedule of non-cash investing and
  financing activities:

       Amounts incurred by the Company and paid by
        related parties on behalf of the Company
        and its subsidiaries were as follows:
           Acquisition costs                                 $      451,238       $      353,852     $      112,961
           Stock issuance costs                                   5,613,049            1,626,405            387,704
                                                             --------------       --------------     --------------
                                                             $    6,064,287       $    1,980,257     $      500,665
                                                             ==============       ==============     ==============

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

       Mortgage assumed on property purchase                 $   12,974,397       $           --     $           --
                                                             ==============       ==============     ==============

Supplemental disclosure of cash flow information:

       Cash paid during the year for interest                $    1,293,810       $      116,101     $      356,329
                                                             ==============       ==============     ==============

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


<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  Years Ended December 31, 2002, 2001 and 2000

1. Significant Accounting Policies:

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

The Company  acquires  investment  properties  (the  "Property  or  Properties")
related to health care and seniors' housing facilities located across the United
States.  The  Properties  may include  congregate  living,  assisted  living and
skilled nursing facilities, continuing care retirement communities and life care
communities,  and medical office buildings and walk-in clinics.  The Company may
provide mortgage financing  ("Mortgage Loans") in the aggregate principal amount
of  approximately  5 to 10 percent of the  Company's  total assets and may offer
furniture,  fixture and  equipment  financing  ("Secured  Equipment  Leases") to
operators of  retirement  and medical  Properties.  The Company has retained CNL
Retirement  Corp.  (the  "Advisor")  as  its  advisor  to  provide   management,
acquisition, advisory and administrative services.

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

Investment in Unconsolidated Subsidiary - The Company owns a 10 percent interest
in a limited  partnership  that  owns an office  building  located  in  Orlando,
Florida,  in which 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  leased  on a
long-term,  triple-net basis to unrelated third parties, whereby the tenants are
generally  responsible  for all  operating  expenses  relating to the  Property,
including  property taxes,  insurance,  maintenance  and repairs.  For the years
ended  December 31, 2002 and 2001,  the Company's  tenants paid  $1,124,997  and
$138,159,  respectively,  in property taxes on behalf of the Company. The leases
are accounted for using either the operating or direct financing method.

         Operating method - Under the operating method,  Properties are recorded
         at cost.  Revenue is recognized as rents are earned and depreciation is
         charged  to  operations  as  incurred.   Buildings  and  equipment  are
         depreciated on the  straight-line  method over their  estimated  useful
         lives of 40 years and three years to seven years, respectively.  Income
         is  recognized  on a  straight-line  basis so as to  produce a constant
         periodic  rent over the lease term  commencing on the date the Property
         is placed in service. Accrued rental income is the aggregate difference
         between  scheduled  rental payments that vary during the lease term and
         minimum rental revenue recognized on a straight-line basis.

         Direct  financing method - For leases accounted for as direct financing
         leases, future minimum lease payments are recorded as a receivable. The
         difference  between the  receivable and the estimated  residual  values
         less the cost of the Properties  has been 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.
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

1. Significant Accounting Policies - Continued:

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.  Management  reviews  its  Properties  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount  of the  assets  may  not be  recoverable  through  operations.
Management  determines whether impairment in value has occurred by comparing the
estimated future  undiscounted  cash flows,  including the residual value of the
Property,  with the carrying cost. If an impairment is indicated,  an impairment
charge is recorded, reducing the Property to fair value.

FF&E Reserve Income - A furniture,  fixtures and equipment  ("FF&E") reserve has
been established in accordance with  substantially  all of the lease agreements.
In accordance  with such  agreements,  the tenants deposit funds into restricted
FF&E reserve  accounts and periodically use these funds to cover the cost of the
replacement,  renewal and  additions  to FF&E.  With  respect to the  Properties
subject  to  operating  leases,  generally  all funds in the FF&E  reserve,  all
interest earned on the funds and all property purchased with funds from the FF&E
reserve are and will remain the property of the Company;  therefore, the Company
recognizes the FF&E reserve payments as income upon receipt. 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  reflected  in  property
expenses.  Six  Properties  subject to  operating  leases  include  FF&E reserve
accounts  that will be held by each  tenant  until the end of the lease  term at
which time all property purchased with funds from the FF&E reserve accounts will
become the property of the Company.  The Company has not recognized FF&E reserve
income  related  to these  six  Properties.  The  Properties  subject  to direct
financing  leases include FF&E reserve accounts that 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 the direct  financing  leases.  In the event that the
FF&E  reserve  is not  sufficient  to  maintain  the  Property  in good  working
condition and repair,  the Company may make fixed asset  expenditures,  in which
case annual rent will be increased.

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 being amortized over the terms
of the loans using the straight-line  method,  which  approximates the effective
interest method.

Income  Taxes - The  Company  has made an  election  to be taxed as a REIT under
Sections 856 through 860 of the Internal  Revenue Code of 1986, as amended,  and
related  regulations.  The  Company  generally  will not be  subject  to federal
corporate  income taxes on amounts  distributed  to  stockholders,  providing it
distributes  at least 90 percent of its REIT  taxable  income and meets  certain
other  requirements  for  qualifying  as a REIT.  Accordingly,  a provision  for
federal income taxes is not reported in the accompanying  consolidated financial
statements.

Earnings  Per Share - Basic  earnings  per share is  calculated  based  upon net
earnings  (income  available  to common  stockholders)  divided by the  weighted
average number of shares of common stock  outstanding  during the period.  As of
December  31,  2002,  2001 and 2000,  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 2002  presentation  including a change in
presentation  of the  statement  of cash flows  from the direct to the  indirect
method.  These  reclassifications  had  no  effect  on  reported  equity  or net
earnings.
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

1. Significant Accounting Policies - Continued:

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 April 2002, the Financial  Accounting  Standards
Board ("FASB") issued FASB Statement No. 145, "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections."
This statement  rescinds FASB Statement No. 4, "Reporting  Gains and Losses from
Extinguishment of Debt," and an amendment of that Statement,  FASB Statement No.
64,  "Extinguishments of Debt Made to Satisfy  Sinking-Fund  Requirements." This
statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets
of Motor Carriers." This statement amends FASB Statement No. 13, "Accounting for
Leases," to  eliminate an  inconsistency  between the  required  accounting  for
sale-leaseback  transactions  and the  required  accounting  for  certain  lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions.   This  statement   also  amends  other   existing   authoritative
pronouncements  to make various  technical  corrections,  clarify  meanings,  or
describe their applicability  under changed  conditions.  The provisions of this
statement  related to the  rescission of FASB  Statement No. 4 are applicable in
fiscal years  beginning  after May 15, 2002.  The  provisions of this  statement
related to FASB Statement No. 13 are effective for transactions  occurring after
May 15, 2002. All other provisions of this statement are effective for financial
statements issued on or after May 15, 2002. The provisions of this statement are
not expected to have a significant  impact on the financial  position or results
of operations of the Company.

In July 2002,  the FASB issued FASB  Statement  No. 146,  "Accounting  for Costs
Associated with Exit or Disposal  Activities." The statement  requires companies
to recognize  costs  associated  with exit or disposal  activities when they are
incurred  rather than at the date of a commitment  for an exit or disposal plan.
Examples of costs covered by the statement  include lease  termination costs and
certain  employee  severance  costs that are  associated  with a  restructuring,
discontinued operations,  plant closing, or other exit or disposal activity. The
statement  is to  be  applied  prospectively  to  exit  or  disposal  activities
initiated  after  December  31,  2002.  The  adoption of this  statement  is not
expected to have a significant  impact on the  financial  position or results of
operations of the Company.

In  November  2002,  FASB  issued  FASB   Interpretation   No.  45  ("FIN  45"),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect   Guarantees  of  Indebtedness   of  Others".   FIN  45  clarifies  the
requirements  relating to a guarantor's  accounting  for, and disclosure of, the
issuance of certain types of guarantees. FIN 45 requires that upon issuance of a
guarantee,  the guarantor  must  recognize a liability for the fair value of the
obligation  it assumes under that  guarantee.  FIN 45's  provisions  for initial
recognition  and  measurement  are  to be  applied  on a  prospective  basis  to
guarantees  issued or modified after  December 31, 2002. The Company's  previous
accounting for guarantees issued prior to January 1, 2003 are not required to be
revised or  restated to reflect the effect of the  recognition  and  measurement
provisions of FIN 45.

In  January  2003,   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.  Prior to FIN 46, a company
generally included another entity in its consolidated  financial statements only
if it controlled the entity through voting interests.  Consolidation of variable
interest  entities will provide more complete  information  about the resources,
obligations,   risks  and  opportunities  of  the  consolidated   company.   The
consolidation  requirements  of FIN 46 apply  immediately  to variable  interest
entities  created  after  January 31, 2003,  and to older  entities in the first
fiscal year or interim period  beginning after June 15, 2003. As of December 31,
2002,  the  Company did not have any  entities  that would be  characterized  as
variable interest entities under FIN 46.

<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

2. Public Offerings:

On September 18, 2000, the Company  completed its initial offering and commenced
a subsequent offering of up to 15,500,000 shares of common stock  ($155,000,000)
(the  "2000  Offering"),  which  included  up  to  500,000  shares  ($5,000,000)
available  to   stockholders   who  elected  to  participate  in  the  Company's
reinvestment  plan.  On May 24, 2002,  the Company  completed  its 2000 Offering
pursuant to which it received subscription proceeds of $155,000,000  (15,500,000
shares), including $418,670 (41,867 shares) through the reinvestment plan.

Upon the completion of the 2000 Offering,  the Company  commenced an offering of
up to 45,000,000 shares of common stock ($450,000,000) (the "2002 Offering"). Of
the 45,000,000 shares of common stock offered,  up to 5,000,000 are available to
stockholders  purchasing  shares  through the Company's  reinvestment  plan. The
price per share and other terms of the 2002  Offering,  including the percentage
of gross proceeds payable (i) to the managing dealer for selling commissions and
expenses in connection with the offering and (ii) to the Advisor for acquisition
fees,  are  substantially  the same as for the Company's  2000  Offering.  As of
December 31, 2002, the Company had received total subscription proceeds from its
initial public offering, the 2000 Offering and the 2002 Offering of $442,346,060
(44,234,603   shares),   including   $1,208,302  (120,830  shares)  through  the
reinvestment plan.

On October 4, 2002, the Company filed a registration statement on Form S-11 with
the Securities and Exchange  Commission in connection  with the proposed sale by
the  Company  of  up  to   175,000,000   additional   shares  of  common   stock
($1,750,000,000) in an offering expected to commence  immediately  following the
completion  of  the  Company's  2002  Offering  (the  "2003  Offering").  Of the
175,000,000 shares of common stock expected to be offered,  up to 25,000,000 are
expected  to  be  available  to  stockholders   purchasing  shares  through  the
reinvestment  plan. The Board of Directors expects to submit,  for a vote of the
stockholders  at the 2003 annual  meeting,  a proposal to increase the number of
authorized   shares  of  common  stock  of  the  Company  from   100,000,000  to
450,000,000. Until such time, if any, as the stockholders approve an increase in
the  number  of  authorized  shares  of common  stock of the  Company,  the 2003
Offering will be limited to 38,000,000 shares.

3. Investment Properties:

Accounted for Using the Operating  Method - As of December 31, 2002, the Company
owned 25 Properties that are subject to operating leases and a parcel of land in
which a  seniors'  housing  facility  is  being  constructed.  Properties  under
operating leases consisted of the following at December 31:
<TABLE>
<CAPTION>

<c>
                                                               2002                      2001
                                                         ----------------          ---------------

           Land                                          $     53,311,856          $     4,649,497
           Buildings                                          210,891,405               29,209,418
           Equipment                                           11,023,962                2,200,780
                                                         ----------------          ---------------
                                                              275,227,225               36,059,695
           Less accumulated depreciation                       (4,148,699)                (827,127)
                                                         ----------------          ---------------
                                                              271,078,526               35,232,568
          Construction in progress                              1,405,138                       --
                                                         ----------------          ---------------
                                                            $ 272,483,664             $ 35,232,568
                                                         ================          ===============
</TABLE>
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 the  lease  commencing  on the date the
Property was placed in service.  For the years ended December 31, 2002, 2001 and
2000, the Company recognized $1,374,665,  $76,665 and $21,128,  respectively, of
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.
<PAGE>

                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

3. Investment Properties - Continued:

Future minimum lease payments due under the  noncancellable  operating leases at
December 31, 2002 are as follows:

                 2003                                        $ 24,801,231
                 2004                                          25,216,537
                 2005                                          25,642,909
                 2006                                          26,080,656
                 2007                                          27,012,268
                 Thereafter                                   362,025,974
                                                          ---------------
                                                             $490,779,575
                                                          ===============

Since the leases are  renewable  at the option of the  tenants,  the above table
only presents  future minimum lease payments due during the initial lease terms.
In  addition,  this table does not include  any  amounts  for future  contingent
rents, which may be received on the leases based on a percentage of the tenants'
gross sales.  The Company defers  recognition of percentage  rental income until
the thresholds  requiring  such payments in accordance  with the lease terms are
met.

Accounted for Using the Direct Financing Method - Eleven  Properties  located in
seven states were  purchased  in 2002 and are subject to  long-term  leases that
have  been  classified  as  direct  financing  leases.  The  components  of  net
investment in direct financing leases consisted of the following at December 31,
2002:

  Minimum lease payments receivable                          $ 626,137,430
  Estimated residual values                                    109,720,000
  Less unearned income                                        (620,074,174)
                                                           ---------------

  Net investment in direct financing leases                  $ 115,783,256
                                                           ===============

The direct financing leases have initial terms of 35 years and provide for
minimum and contingent rent. The leases contain provisions that allow the
lessees to elect to purchase the Properties at the end of the lease terms for
the Company's aggregate initial investment amount of $109,720,000 plus
adjustments, if any, as defined in the lease agreements. The leases also permit
the Company to require the lessees 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, 2002 are as follows:

                 2003                                           $  11,520,600
                 2004                                              11,808,615
                 2005                                              12,103,830
                 2006                                              12,406,426
                 2007                                              12,716,587
                 Thereafter                                       565,581,372
                                                               --------------

                                                                $ 626,137,430
                                                               ==============

The above  table does not  include  any  amounts  for  future  rents that may be
received on the leases based on a percentage of the tenants' gross sales.
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

4. Purchase of Minority Interest:

On December 20, 2002, the Company purchased 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 for  $8,500,000.  In May 2002,  the
joint venture  purchased five  Properties  that are 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.  In conjunction with the purchase of the Properties,
Marriott  International,  Inc. and Marriott Senior Living  Services,  Inc., with
certain limitations, jointly and severally guaranteed the tenant's obligation to
pay minimum rent to the joint venture under the leases, as described in Note 12.
Subsequent  to  the  Company's  purchase  of  the  minority  interest,  Marriott
International,  Inc. and Marriott Senior Living Services, Inc. remain liable for
the remaining  guarantee  available to pay the tenant's  minimum rent obligation
under the leases. The remaining guarantee at December 31, 2002 was $5,039,125.

If the  purchase of the minority  interest had occurred at the  inception of the
joint  venture,  net income  would have been  $11,804,868  or $0.54 per share of
common stock. There would have been no effect on revenues as reported.

5. Notes and Other Receivables:

Notes and other receivables include the following at December 31:

                                                    2002              2001
                                               -------------      ------------
Rental revenues receivable                     $     809,279      $    180,163
Notes receivable                                   2,000,000                --
Other receivables                                    345,424                --
Accrued interest receivable                           37,500                --
                                               -------------      ------------
                                               $   3,192,203      $    180,163
                                               =============      ============

Notes  receivable is comprised of a loan to an affiliate of one of the Company's
lessees related to the anticipated  acquisition of additional Properties.  As of
December  31,  2002,  the Company  had an initial  commitment  to  purchase  two
additional Properties for approximately  $22,600,000 as described in Note 13. In
connection  with this  anticipated  purchase,  the  Company  loaned  the  seller
$2,000,000  to pay off debt at a  discounted  amount  making the purchase of the
Properties  economically viable. The note bears interest at 15 percent per annum
and matures March 31, 2003. As security for this note,  the seller has pledged a
membership  interest  in  its  company.  Additionally,  certain  members  of the
seller's company guarantee the note.

As of  February  19,  2003,  the rental  revenues  and other  receivables  as of
December 31, 2002, had been fully collected.

6. Other Assets:

Other assets as of December 31, 2002 and 2001,  were  $4,975,061 and $2,143,213,
respectively,  and consisted of miscellaneous prepaid expenses and miscellaneous
acquisition costs that will be capitalized to land, buildings and equipment upon
the purchase of Properties.

7.       Indebtedness:

In February 2002, the Company assumed a mortgage of $12,974,397  that matures on
October 2, 2003,  in  connection  with the purchase of a Property.  The mortgage
bears  interest at a floating rate of (i) 350 basis points over the 30-day LIBOR
if LIBOR is over 2.6 percent or (ii) 440 basis  points over the 30-day  LIBOR if
LIBOR is under 2.6 percent not to exceed 8 percent. As of December 31, 2002, the
interest  rate was 5.84  percent.  In  accordance  with  the  provisions  of the
mortgage,  the Company has placed  $277,821 in escrow,  which  represents  three
months of debt service related to the mortgage. This escrow reserve was included
in restricted cash at December 31, 2002.
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

7. Indebtedness - Continued:

In  connection  with the  purchase  of five  Properties,  the  Company  borrowed
$23,520,000  in June 2002 in the form of a commercial  paper backed loan secured
by the five Properties.  The loan is funded from proceeds received from the sale
of 30-day  commercial  paper. The commercial paper is re-marketed  every 30 days
upon maturity.  The Company has a liquidity  facility in place in the event that
the  re-marketing  effort  is  unsuccessful.  The  liquidity  agent  provides  a
liquidity  facility  for up to 102  percent  of the  outstanding  loan  balance.
Interest is payable  monthly with principal due when the  commercial  paper loan
matures on June 6,  2007.  The  commercial  paper  loan  bears  interest  at the
commercial  paper  rate as  determined  by market  demand  (1.51  percent  as of
December  31,  2002)  plus a  margin  of 1.23  percent,  which is  inclusive  of
liquidity fees and administrative costs. As of December 31, 2002, the commercial
paper loan interest rate was 2.74 percent.

On August 8, 2002,  the Company  entered into a commitment  for  $11,000,000  of
permanent financing secured by a mortgage on a Property. On August 29, 2002, the
Company obtained an advance  totaling  $9,100,000 with a possible future advance
in the amount of $1,900,000 subject to certain operating performance  thresholds
being  achieved by this  Property  prior to February  27,  2004.  The loan bears
interest at a variable  rate based on 90-day  LIBOR plus 3.90 percent per annum,
but in no event  shall  the  interest  rate be less  than  6.50  percent.  As of
December 31, 2002, the interest rate was 6.50 percent. The loan requires monthly
principal  and  interest  payments  through  August  31,  2007,  with all unpaid
principal and interest due at that time.

The  following  is a schedule of  maturities  for all  long-term  borrowings  at
December 31, 2002:

           2003                                                  $12,896,864
           2004                                                      163,814
           2005                                                      174,785
           2006                                                      186,491
           2007                                                   31,904,723
           Thereafter                                                     --
                                                              --------------
                Total                                            $45,326,677
                                                              ==============
8. Redemption of Shares:

The  Company has a  redemption  plan under which the Company may elect to redeem
shares,  subject to certain  conditions  and  limitations.  Under the redemption
plan,  prior to such time, if any, as listing of the Company's common stock on a
national securities exchange or over-the-counter  market occurs, any stockholder
who has held shares for at least one year may  present all or any portion  equal
to at  least 25  percent  of their  shares  to the  Company  for  redemption  in
accordance   with  the  procedures   outlined  in  the  redemption   plan.  Upon
presentation,  the Company  may, at its  option,  redeem the shares,  subject to
certain conditions and limitations. However, at no time during a 12-month period
may the number of shares  redeemed by the Company exceed 5 percent of the number
of shares of the  Company's  outstanding  common  stock at the  beginning of the
12-month  period.  During the years  ended  December  31,  2002,  2001 and 2000,
37,306, 3,415 and 3,316 shares, respectively,  of common stock were redeemed for
$343,212, $31,420 and $30,508, respectively, and retired.

9. 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 will not exceed
13 percent of the proceeds raised in connection with the 2002 Offering.
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

9. Stock Issuance Costs - Continued:

During the years ended December 31, 2002,  2001 and 2000,  the Company  incurred
$39,050,685, $7,190,480 and $1,027,216,  respectively, in offering costs and due
diligence  expense   reimbursements,   including  $29,690,777,   $4,761,580  and
$519,302,  respectively,  in commissions and marketing support fees. All amounts
incurred for the years ended December 31, 2002, 2001 and 2000, have been treated
as stock issuance costs and charged to stockholders' equity.

10. Distributions:

For the years ended December 31, 2002, 2001 and 2000,  approximately 65 percent,
65  percent  and  54  percent,   respectively,  of  the  distributions  paid  to
stockholders were ordinary income and  approximately 35 percent,  35 percent and
46 percent,  respectively,  were  considered a return of capital to stockholders
for federal income tax purposes.  No amounts distributed to the stockholders for
the years ended  December  31, 2002,  2001 and 2000,  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.

11. Related Party Arrangements:

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

CNL Securities Corp. receives commissions  amounting to 7.5 percent of the total
amount  raised  from the sale of shares  for  services  in  connection  with the
offerings,  a  substantial  portion  of  which  has  been  or  will  be  paid as
commissions to other  broker-dealers.  During the years ended December 31, 2002,
2001 and 2000,  the  Company  incurred  $27,835,104,  $4,463,981  and  $486,846,
respectively, of which $26,341,693,  $4,175,827 and $437,940,  respectively, was
or will be paid by CNL Securities Corp. as commissions to other broker-dealers.

In addition,  CNL Securities Corp. receives a marketing support fee equal to 0.5
percent of the total amount raised from the sale of shares,  all or a portion of
which may be reallowed to other broker-dealers.  During the years ended December
31, 2002, 2001 and 2000, the Company incurred $1,855,674,  $297,599 and $32,456,
respectively,  the  majority  of  which  was  or  will  be  reallowed  to  other
broker-dealers.

CNL Securities Corp. will also receive, in connection with the 2000 Offering,  a
soliciting  dealer  servicing fee payable  annually by the Company  beginning on
December  31,  2003,  in the  amount  equal  to 0.20  percent  of the  aggregate
investment  of  stockholders  who  purchased  shares in the 2000  Offering.  CNL
Securities Corp. in turn may reallow all or a portion of such fees to soliciting
dealers whose clients hold shares on such date. As of December 31, 2002, no such
fees had been incurred.

The Advisor receives acquisition fees for services in identifying Properties and
structuring the terms of their leases and Mortgage Loans equal to 4.5 percent 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 percent 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, 2002,
2001 and 2000,  the  Company  incurred  $18,736,538,  $2,676,430  and  $292,108,
respectively,  of such fees.  These fees are  included in other  assets prior to
being allocated to individual Properties.

The Company and the Advisor have entered into an advisory  agreement pursuant to
which the Advisor receives a monthly asset management fee of one-twelfth of 0.60
percent of the Company's real estate asset value and the  outstanding  principal
balance of any Mortgage  Loan as of the end of the preceding  month.  During the
years ended  December 31, 2002,  2001 and 2000, the Company  incurred  $770,756,
$93,219 and $55,396, respectively, of such fees.
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

11. Related Party Arrangements - Continued:

The Company incurs operating expenses relating to its  administration.  Pursuant
to the advisory agreement,  the Advisor is required to reimburse the Company the
amount by which the total  operating  expenses  paid or  incurred by the Company
exceed in any four consecutive  fiscal quarters (the "Expense Year") the greater
of 2 percent  of  average  invested  assets or 25  percent  of net  income  (the
"Expense Cap").  During the Expense Years ended June 30, 2001 and June 30, 2000,
operating   expenses   exceeded  the  Expense  Cap  by  $145,015  and  $213,886,
respectively;  therefore,  the Advisor  reimbursed  the Company  such amounts in
accordance with the advisory agreement. The Company's operating expenses did not
exceed  the  Expense  Cap in any other  Expense  Years  during  the years  ended
December 31, 2002, 2001 and 2000.

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
$23,520,000  commercial paper loan described in Note 7. CCM was paid a 2 percent
structuring  fee  ($470,400),  which was recorded as deferred  loan costs and is
being  amortized  over the term of the loan. In addition,  the monthly  interest
payment due under the commercial paper loan includes a margin of 30 basis points
payable  to  CCM  for  the  monthly   services   it  provides   related  to  the
administration of the commercial paper loan.

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 $5,740,852 and $3,000,000 at December 31,
2002 and 2001, respectively.

On May 30,  2002,  the  Company  acquired  a 10  percent  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 year ended  December 31,  2002,  the Company  received
$190,922 in distributions from the partnership.

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 are
classified as follows:
<TABLE>
<CAPTION>

<c>
                                                                  Years Ended December 31,
                                                           2002             2001             2000
                                                        ------------     ------------     ------------

               Stock issuance costs                     $  2,941,152     $    769,853     $    117,679
               Land, buildings and equipment on
                    operating leases and other
                    assets                                    25,320           37,053           31,370
               General operating and
                    administrative expenses                  565,013          199,726          197,869
                                                        ------------     ------------     ------------
                                                        $  3,531,485     $  1,006,632     $    346,918
                                                        ============     ============     ============
</TABLE>

During the years ended December 31, 2002, 2001 and 2000,  affiliates incurred on
behalf of the Company  $5,613,049,  $1,626,405 and $387,704,  respectively,  for
certain offering expenses. In addition, during the years ended December 31, 2002
and 2001,  affiliates  incurred on behalf of the Company  $451,238 and $353,852,
respectively,  for certain  acquisition  expenses  and  $565,013  and  $206,211,
respectively, for certain operating expenses.
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

11. Related Party Arrangements - Continued:

Amounts due to related parties at December 31 are as follows:
<TABLE>
<CAPTION>

<c>
                                                                            2002               2001
                                                                        ------------       -------------

                   Due to the Advisor and its affiliates:
                      Expenditures incurred for offering expenses
                           on behalf of the Company                    $       1,366      $    1,328,123
                      Accounting and administrative
                           Services                                           75,944              62,313
                      Acquisition fees and miscellaneous
                           acquisition expenses                              125,366             226,986
                                                                       -------------      --------------
                                                                             202,676           1,617,422
                                                                       -------------      --------------

                   Due to CNL Securities Corp.:
                      Commissions                                            145,110             145,670
                      Marketing support fee and due diligence
                           expense reimbursements                                 --               9,715
                                                                       -------------      --------------
                                                                       $     347,786      $    1,772,807
                                                                       =============      ==============
</TABLE>

12. Concentration of Credit Risk:

As of December 31, 2002,  the Company owned 25 Properties in various states that
are  subject to  operating  leases.  The lessees of 24 of these  Properties  are
affiliates  or wholly  owned  subsidiaries  of American  Retirement  Corporation
("ARC") or HRA Management  Corporation  ("HRA") and contributed  74.8 percent of
the Company's  total rental income during the year ended  December 31, 2002. Six
of these  Properties  are  operated  under the ARC brand and 18  Properties  are
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  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.  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.  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.

In  connection  with  purchase  of  five  Properties  leased  to  HRA,  Marriott
International, Inc. and Marriott Senior Living Services, Inc. have, with certain
limitations,  guaranteed  the tenant's  obligation to pay minimum rent due under
the leases up to a maximum of $5,880,000.  As of December 31, 2002,  $840,875 of
the guarantee had been used to pay rent leaving a remaining guarantee balance of
$5,039,125.

As of December 31, 2002,  the Company had invested in 11  Properties  located in
seven states through a direct financing transaction with two affiliates of Prime
Care Properties,  LLC. The direct  financing leases  contributed 20.8 percent of
the Company's  total rental income during the year ended  December 31, 2002. The
Properties are operated by Marriott Senior Living Services, Inc. An affiliate of
the tenants has  guaranteed  the  tenants'  obligations  to pay minimum rent due
under the lease up to a maximum of $2,000,000. As of December 31, 2002, $308,341
of the guarantee had been used to pay rent leaving a remaining guarantee balance
of $1,691,659.
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

12. Concentration of Credit Risk - Continued:

Although the Company acquires  Properties  located in various states and regions
and carefully  screens its tenants in order to reduce risks of default,  failure
of these  lessees,  their  guarantors or the ARC or Marriott  brand chains 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.

In a press  release  dated  December 30, 2002,  Sunrise  Assisted  Living,  Inc.
announced   it  had  entered   into  a  definitive   agreement   with   Marriott
International,  Inc. to acquire all of the outstanding  stock of Marriott Senior
Living Services,  Inc. When the sale of Marriott Senior Living Services,  Inc.'s
stock to Sunrise  Assisted  Living,  Inc. is completed,  it is expected that the
long-term management agreements in which the Company's tenants have entered into
with Marriott Senior Living  Services,  Inc. will be assumed by Sunrise Assisted
Living,  Inc.  to operate all of the  Company's  Properties  that are  currently
operated by Marriott Senior Living  Services,  Inc. In regards to nine of the 12
proposed  Properties for which the Company has entered into initial  commitments
to acquire as of February  19, 2003,  it is expected  that until the sale of the
Marriott Senior Living Services,  Inc.'s stock to Sunrise Assisted Living,  Inc.
is  completed,   Marriott  Senior  Living  Services,   Inc  will  operate  these
Properties.   There  can  be  no  assurance  that  these  transactions  will  be
consummated.

13. Commitments and Contingencies:

In  connection  with the  acquisition  of five  Properties,  the  Company may be
required to make additional  payments (the "Earnout  Amount") if certain earnout
provisions  are  achieved  by the  earnout  date (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  lease  will  be  amended  and  annual   minimum  rent  will  increase
accordingly.  During  the  year  ended  December  31,  2002,  one  Property  was
performing at a level sufficient to satisfy the  requirements  under the earnout
provisions,  and the Company  funded an additional  payment of  $1,775,000.  The
lease was amended to increase the annual minimum rent by $177,500. The remaining
Earnout  Dates  expire over the period  August 2004  through  April 2005 and the
Company  has a maximum  obligation  of  $11,834,233  relating  to the  aggregate
Earnout Amounts.

In connection with the acquisition of a 10 percent limited partnership  interest
in CNL Plaza,  Ltd.,  the Company has severally  guaranteed  16.67  percent,  or
$2,583,333,   of  a  $15,500,000   unsecured  promissory  note  of  the  limited
partnership that matures November 30, 2004. 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.

As of December 31, 2002,  the Company had a commitment  to obtain a two-year $75
million revolving line of credit.  The $75 million line of credit may be amended
to allow the line of credit to be increased by $50  million.  Eleven  Properties
with an  aggregate  cost of $115.2  million  will be  mortgaged  to  secure  the
revolving line of credit. This facility will require payment of interest only at
LIBOR plus a premium until maturity and has several covenants typically found in
revolving loan facilities,  including  covenants to maintain a minimum net worth
and minimum collateral value.

As of December 31, 2002,  the Company had  commitments  to acquire 12 additional
Properties located in eight states. The anticipated  aggregate purchase price is
approximately $298.7 million, and the acquisition of each Property is subject to
the  fulfillment of certain  conditions.  The Company plans to assume  permanent
financing of  approximately  $20.6 million in connection with the acquisition of
two  Properties  and to draw up to $75 million on a revolving line of credit for
the  acquisition  of  nine  of  these  Properties.   In  addition,  the  Company
anticipates that it will assume  obligations of  approximately  $88.8 million in
non-interest   bearing  bonds  payable  to  certain  residents  of  two  of  the
Properties.  Marriott Senior Living Services, Inc. has committed to operate 9 of
the these Properties, if acquired.
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000

14. Selected Quarterly Financial Data:

The following table presents selected unaudited quarterly financial data for
each full quarter during the years ended December 31, 2002 and 2001:
<TABLE>
<CAPTION>

<c>
        2002 Quarter                         First          Second          Third          Fourth           Year
        ------------                         -----          ------          -----          ------           ----

        Revenues                          $1,667,761     $3,305,669      $4,726,716      $9,151,882     $18,852,028
        Net income                           828,604      1,702,338       2,508,526       6,332,388      11,371,856
        Earnings per share:
             Basic and Diluted                  0.09           0.11            0.10            0.22            0.52

        2001 Quarter                         First          Second          Third           Fourth           Year
        ------------                         -----          ------          -----           ------           ----

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

During the period  January 1, 2003,  through  February  19,  2003,  the  Company
received  subscription proceeds for an additional 7,826,224 shares ($78,262,237)
of common stock.

On January 1, 2003 and  February  1, 2003,  the Company  declared  distributions
totaling $2,604,002 and $2,878,892,  respectively, or $.0589 per share of common
stock,  payable by March 31, 2003, to  stockholders of record on January 1, 2003
and February 1, 2003, respectively.
<PAGE>
Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

         None.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

    Stuart J. Beebe became an executive officer of the Company on July 15, 2002.
Although an Initial  Statement of  Beneficial  Ownership of Securities on Form 3
was not filed on behalf of Mr. Beebe on July 25, 2002, as required by Section 16
(a) of the Exchange Act and the rules regulations adopted  thereunder,  a Form 3
concerning  his  appointment  as an  executive  officer of the Company was filed
shortly thereafter on August 12, 2002.

    Other 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, 2003.

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, 2003.


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, 2003.

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, 2003.

Item 14. Controls and Procedures

    As required by Rule 13a-15 under the  Securities  Exchange  Act of 1934,  as
amended  (the  "Exchange  Act"),  within the 90 days prior to the filing date of
this report,  the Company carried out an evaluation of the  effectiveness of the
design and operation of the Company's  disclosure controls and procedures.  This
evaluation was carried out under the supervision and with the  participation  of
the Company's management,  including the Company's Chief Executive Officer along
with the Company's  Chief Financial  Officer.  Based upon that  evaluation,  the
Company's  Chief  Executive  Officer  along with the Company's  Chief  Financial
Officer  concluded  that the Company's  disclosure  controls and  procedures are
effective.  There have been no  significant  changes in the  Company's  internal
controls or in other factors, which could significantly affect internal controls
subsequent to the date the Company carried out its evaluation.

    Disclosure  controls and procedures are controls and other  procedures  that
are  designed to ensure that  information  required to be  disclosed  in Company
reports  filed or  submitted  under the  Exchange  Act is  recorded,  processed,
summarized and reported, within the time periods specified in the Securities and
Exchange  Commission's  rules and  forms.  Disclosure  controls  and  procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information required to be disclosed in Company reports filed under the Exchange
Act is accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer,  as appropriate,  to allow timely
decisions regarding required disclosure.
<PAGE>
                                     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, 2002 and 2001

                  Consolidated Statements of Earnings for the years ended
                  December 31, 2002, 2001 and 2000

                  Consolidated Statements of Stockholders' Equity for the years
                  ended December 31, 2002, 2001 and 2000

                  Consolidated Statements of Cash Flows for the years ended
                  December 31, 2002, 2001 and 2000

                  Notes to Consolidated Financial Statements

2.       Financial Statement Schedules

                  Schedule III - Real Estate and Accumulated Depreciation at
                  December 31, 2002 Notes to Schedule III - Real Estate and
                  Accumulated Depreciation at December 31, 2002

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

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

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

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

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

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

                  10.1     Advisory Agreement, dated as of May 14, 2002, between
                           CNL Retirement Properties, Inc. and CNL Retirement
                           Corp. (Included as Exhibit 10.1 to the Registrant's
                           September 30, 2002, Report on Form 10-Q filed with
                           the Securities and Exchange Commission on November
                           12, 2002, and incorporated herein by reference.)
<PAGE>
                  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  with the  Securities  and
                           Exchange  Commission on May 3, 2000, and incorporated
                           herein by reference.)

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

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

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

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

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

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

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

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

                  10.11    Lease Agreement  between CNL Retirement - AM/Illinois
                           LP and ARC Holley Court, LLC dated February 11, 2002,
                           relating  to the  Holley  Court  Terrace  - Oak Park,
                           Illinois.  (Included as Exhibit 10.18 to Registration
                           Statement No. 333-37480 on Form S-11 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
                           Registration Statement No. 333-37480 on Form S-11 and
                           incorporated herein by reference.)
<PAGE>
                  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 Registration Statement No. 333-37480 on Form
                           S-11 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 Registration  Statement
                           No. 333-37480 on Form S-11 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 as
                           Exhibit 10.22 to Registration Statement No. 333-76538
                           on Form S-11 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 Registration  Statement
                           No. 333-76538 on Form S-11 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  to
                           Registration Statement No. 333-76538 on Form S-11 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 Registration Statement No. 333-76538
                           on Form S-11 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 Registration Statement No. 333-76538 on Form
                           S-11 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
                           Registration Statement No. 333-76538 on Form S-11 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 Registration  Statement No. 333-76538 on Form S-11
                           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 Registration  Statement
                           No. 333-76538 on Form S-11 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 Registration Statement No. 333-76538 on Form
                           S-11 and incorporated herein by reference.)
<PAGE>
                  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 10.31 to Registration Statement No. 333-76538
                           on Form S-11 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-Q filed with the  Securities  and Exchange
                           Commission  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  September 30, 2002,  Report on Form
                           10-Q  filed   with  the   Securities   and   Exchange
                           Commission  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  with the  Securities  and
                           Exchange   Commission  on  November  12,  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  with the  Securities  and  Exchange
                           Commission  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 Registration  Statement
                           No. 333-76538 on Form S-11 and incorporated herein by
                           reference.)
<PAGE>
                  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 Registration  Statement
                           No. 333-76538 on Form S-11 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 as Exhibit 10.38 to Registration  Statement
                           No. 333-76538 on Form S-11 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
                           as  Exhibit  10.39  to  Registration   Statement  No.
                           333-76538  on Form  S-11 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 10.40 to Registration Statement No. 333-76538
                           on Form S-11 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 Registration Statement No. 333-76538
                           on Form S-11 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 Registration Statement No. 333-76538
                           on Form S-11 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 Registration Statement No. 333-76538
                           on Form S-11 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
                           Registration Statement No. 333-76538 on Form S-11 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
                           Registration Statement No. 333-76538 on Form S-11 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 Registration Statement No. 333-76538 on Form
                           S-11 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 Registration Statement No. 333-76538
                           on Form S-11 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 Registration  Statement No. 333-76538 on Form S-11
                           and incorporated herein by reference.)
<PAGE>
                  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 Registration Statement No. 333-76538
                           on Form S-11 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
                           Registration Statement No. 333-76538 on Form S-11 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 Registration Statement No. 333-76538
                           on Form S-11 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 Registration
                           Statement No. 333-76538 on Form S-11 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
                           Registration Statement No. 333-76538 on Form S-11 and
                           incorporated herein by reference.)

                  21.      Subsidiaries of the Registrant (Filed herewith.)

                  99.1     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.)

                  99.2     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)      The  Company  filed the  following  reports  during the  quarter  ended
         December  31,  2002,  on Form 8-K:  Form 8-K filed on October  15, 2002
         disclosing the acquisition of 12 Properties; Form 8-K filed on November
         18, 2002 disclosing the acquisition of one Property.

(d)      Other Financial Information.

         The Company is required to file audited financial  information of Prime
         Care One, LLC and Prime Care Two, LLC (collectively "Prime Care"), as a
         result of Prime Care  leasing  more than 20  percent  of the  Company's
         total assets for the year ended December 31, 2002.  Prime Care is not a
         public company and its audited  financial  statements are not available
         to the Company to include in this  filing.  The Company  will file this
         financial  information  under  cover of a Form  10-K/A as soon as it is
         available, but no later than March 31, 2003.
<PAGE>
                                   SIGNATURES

    Pursuant  to the  requirements  of  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 24th day of
February 2003.

                                   CNL RETIREMENT PROPERTIES, INC.

                                   By:      JAMES M. SENEFF, JR.
                                            Chairman of the Board and
                                            Chief Executive Officer
                                            (Principal Executive Officer)

                                            /s/ James M. Seneff, Jr.
                                            ---------------------------
                                            JAMES M. SENEFF, JR.

                                   By:      STUART J. BEEBE
                                            Chief Financial Officer
                                            (Principal Financial and
                                            Accounting Officer)

                                            /s/ Stuart J. Beebe
                                            ----------------------------
                                            STUART J. BEEBE


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

<c>
              Signature                                           Title                                  Date


/s/ James M. Seneff, Jr.                   Chairman of the Board and Chief Executive Officer      February 24, 2003
---------------------------
James M. Seneff, Jr.                       (Principal Executive Officer)

/s/ Robert A. Bourne                       Vice Chairman of the Board and Treasurer               February 24, 2003
---------------------------
Robert A. Bourne

/s/ Stuart J. Beebe                        Chief Financial Officer                                February 24, 2003
----------------------------
Stuart J. Beebe                            (Principal Financial and Accounting Officer)

/s/ David W. Dunbar                        Independent Director                                   February 24, 2003
---------------------------
David W. Dunbar

/s/ James W. Duncan, Jr.                   Independent Director                                   February 24, 2003
---------------------------
James W. Duncan, Jr.

/s/ Edward A. Moses                        Independent Director                                   February 24, 2003
---------------------------
Edward A. Moses
</TABLE>
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.

                                 CERTIFICATIONS

I, James M. Seneff, Jr., 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 annual 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
                  annual report;

         3.       Based on my  knowledge,  the financial  statements,  and other
                  financial  information included in this annual 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 annual report;

         4.       The   Registrant's   other   certifying   officer  and  I  are
                  responsible  for  establishing   and  maintaining   disclosure
                  controls  and  procedures  (as defined in  Exchange  Act Rules
                  13a-14 and 15d-14) for the Registrant and we have:

                  a) designed such disclosure  controls and procedures 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 annual report is being prepared;

                  b) evaluated the effectiveness of the Registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

                  c) presented in this annual report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5.       The  Registrant's   other   certifying   officer  and  I  have
                  disclosed,  based  on  our  most  recent  evaluation,  to  the
                  Registrant's   auditors   and  the  audit   committee  of  the
                  Registrant's board of directors:

                  a) all significant  deficiencies in the design or operation of
                  internal   controls   which   could   adversely   affect   the
                  Registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  Registrant's
                  auditors any material weaknesses in internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
                  management or other  employees who have a significant  role in
                  the Registrant's internal controls; and

         6.       The Registrant's other certifying officer and I have indicated
                  in this annual  report  whether or not there were  significant
                  changes in internal  controls or in other  factors  that could
                  significantly  affect internal controls subsequent to the date
                  of  our  most  recent  evaluation,  including  any  corrective
                  actions with regard to significant  deficiencies  and material
                  weaknesses.



Date: February 24, 2003                      By:  /s/ James M. Seneff, Jr.
                                                  --------------------------
                                                  JAMES M. SENEFF, JR.
                                                  Chairman of the Board and
                                                  Chief Executive Officer
                                                  (Principal Executive Officer)

<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.

                                 CERTIFICATIONS

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 annual 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
                  annual report;

         3.       Based on my  knowledge,  the financial  statements,  and other
                  financial  information included in this annual 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 annual report;

         4.       The   Registrant's   other   certifying   officer  and  I  are
                  responsible  for  establishing   and  maintaining   disclosure
                  controls  and  procedures  (as defined in  Exchange  Act Rules
                  13a-14 and 15d-14) for the Registrant and we have:

                  a) designed such disclosure  controls and procedures 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 annual report is being prepared;

                  b) evaluated the effectiveness of the Registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

                  c) presented in this annual report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

         5.       The  Registrant's   other   certifying   officer  and  I  have
                  disclosed,  based  on  our  most  recent  evaluation,  to  the
                  Registrant's   auditors   and  the  audit   committee  of  the
                  Registrant's board of directors:

                  a) all significant  deficiencies in the design or operation of
                  internal   controls   which   could   adversely   affect   the
                  Registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  Registrant's
                  auditors any material weaknesses in internal controls; and

                  b)  any  fraud,   whether  or  not  material,   that  involves
                  management or other  employees who have a significant  role in
                  the Registrant's internal controls; and

         6.       The Registrant's other certifying officer and I have indicated
                  in this annual  report  whether or not there were  significant
                  changes in internal  controls or in other  factors  that could
                  significantly  affect internal controls subsequent to the date
                  of  our  most  recent  evaluation,  including  any  corrective
                  actions with regard to significant  deficiencies  and material
                  weaknesses.


Date: February 24, 2003                      By:  /s/ Stuart J. Beebe
                                                  ----------------------------
                                                  STUART J. BEEBE
                                                  Chief Financial Officer
                                                  (Principal Financial and
                                                  Accounting Officer)
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 2002

    Properties the Company
        has Invested in Under
        Operating Leases:
<TABLE>
<CAPTION>

<c>
                                                                                                              Costs Capitalized
                                                                           Initial Costs                  Subsequent to Acquisition

                                                         ---------------------------------------------- ----------------------------
                                                                                                                         Carrying
                                         Encumbrances        Land          Buildings       Equipment    Improvements      Costs
                                        --------------- -------------- --------------- --------------- --------------  ------------
    Brighton Gardens by Marriott:
        Orland Park, Illinois           $           --  $    2,162,388  $   11,533,074  $    1,044,018  $          --   $        --
        Camarillo, California                7,477,879       2,486,381      16,852,469         541,453             --            --
        Towson, Maryland                     5,780,928         989,914      14,375,847         355,731             --            --
        Hoffman Estates, Illinois                   --       1,724,422       5,843,963         512,316             --            --
        Tulsa, Oklahoma                             --       1,538,284       2,987,889         512,425             --            --
        Atlanta, Georgia                            --       1,772,658       5,652,512         446,313             --            --
        Oklahoma City, Oklahoma                     --         784,454       2,701,571         444,105             --            --
        Santa Rosa, California                      --       2,161,222      15,025,466         586,516             --            --
        Bellevue, Washington                        --       2,164,828       8,360,448         502,884             --            --

    MapleRidge by Marriott:
        Laguna Creek, California             3,221,644         811,596       7,571,613         217,689             --            --
        Clayton, Ohio                        3,244,228         813,317       7,656,922         209,314             --            --
        Dartmouth, Massachusetts             3,795,321         920,430       9,028,929         205,663             --            --
        Plymouth, Massachusetts                     --       1,090,254       3,460,628         393,579             --            --
        Cleveland, Ohio                             --       1,090,639       3,886,167         345,981             --            --
        Hemet, California                           --       1,175,581       2,891,964         365,263             --            --

    Pleasant Hills by Marriott:
        Little Rock, Arkansas                       --         523,295      10,457,948         370,052             --            --

    Hearthside by Marriott:
        Lynnwood, Washington                        --       1,529,738       5,175,159         124,291             --            --
        Snohomish, Washington                       --         645,494       8,559,082         109,911             --            --

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

    Homewood Residence:
        Boca Raton, Florida                         --       1,143,571       8,501,806         554,536             --            --
        Coconut Creek, Florida                      --       1,682,701       7,981,073         559,197             --            --
        Brookmont, Tennessee                        --         463,957       8,350,191         631,429             --            --

    Holley Court Terrace:
        Oak Park, Illinois                  12,743,332       2,144,134      16,918,724         447,007             --            --

    Heritage Club:
        Greenwood Village, Colorado          9,063,345       1,964,700      17,943,422         942,063             --            --

    Erickson Retirement Communities:
        Peabody, Massachusetts                      --      18,345,033              --              --             --            --

    Other:
        Vero Beach, Florida                         --       1,839,329              --              --       1,405,138           --
                                        --------------- --------------- --------------- --------------- --------------  ------------
                                        $    45,326,677 $    53,311,858 $   210,891,405 $    11,023,962 $    1,405,138  $         --
                                        =============== =============== =============== =============== ==============  ============

</TABLE>

<PAGE>









<TABLE>
<CAPTION>

<c>
             Gross Amount at Which Carried
                   at Close of Period
---------------------------------------------------------

---------------------------------------------------------
                                                                                 Accumulated         Date of            Date
      Land               Buildings           Equipment           Total           Depreciation      Construction       Acquired
-----------------     ----------------     --------------    ---------------     -------------     -------------     -----------

     $ 2,162,388         $ 11,533,074        $ 1,044,018       $ 14,739,480       $ 1,177,269          1999             4/00
       2,486,381           16,852,469            541,453         19,880,303           312,334          1999             5/02
         989,914           14,375,847            355,731         15,721,492           256,936          1999             5/02
       1,724,422            5,843,963            512,316          8,080,701             9,137          1999            12/02
       1,538,284            2,987,889            512,425          5,038,598             6,163          1999            12/02
       1,772,658            5,652,512            446,313          7,871,483             8,545          1996            12/02
         784,454            2,701,571            444,105          3,930,130             5,458          1999            12/02
       2,161,222           15,025,466            586,516         17,773,204            19,143          2000            12/02
       2,164,828            8,360,448            502,884         11,028,160            11,702          1999            12/02


         811,596            7,571,613            217,689          8,600,898           138,039          1999             5/02
         813,317            7,656,922            209,314          8,679,553           138,031          1999             5/02
         920,430            9,028,929            205,663         10,155,022           159,783          1999             5/02
       1,090,254            3,460,628            393,579          4,944,461             5,948          2000            12/02
       1,090,639            3,886,167            345,981          5,322,787             6,108          1999            12/02
       1,175,581            2,891,964            365,263          4,432,808             5,187          1998            12/02


         523,295           10,457,948            370,052         11,351,295            13,096          1984            12/02


       1,529,738            5,175,159            124,291          6,829,188             6,131          1989            12/02
         645,494            8,559,082            109,911          9,314,487             9,570          1993            12/02


       1,343,538            9,174,538            602,226         11,120,302           361,454          2000            11/01


       1,143,571            8,501,806            554,536         10,199,913           334,064          2000            11/01
       1,682,701            7,981,073            559,197         10,222,971           248,075          2000             2/02
         463,957            8,350,191            631,429          9,445,577            49,825          2000            11/02


       2,144,134           16,918,724            447,007         19,509,865           432,681          1992             2/02


       1,964,700           17,943,422            942,063         20,850,185           434,020          1999             3/02


      18,345,033                   --                 --         18,345,033                --                          10/02


       3,244,467                   --                 --          3,244,467                --                           8/02
----------------     ----------------     --------------    ---------------     -------------
$     54,716,996         $210,891,405        $11,023,962    $   276,632,363     $   4,148,699
================     ================     ==============    ===============     =============

</TABLE>


<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES
        NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 2002

(a)      Transactions in real estate and accumulated  depreciation  during 2000,
         2001 and 2002 are summarized as follows:
<TABLE>
<CAPTION>

<c>
                                                                                            Accumulated
                                                                       Cost (b) (d)         Depreciation
                                                                       --------------      ---------------

                   Properties the Company has Invested
                      in Under Operating Leases:
                        Balance, December 31, 1999                     $          --       $            --
                        Acquisitions                                      14,721,092                    --
                        Depreciation Expense (c)                                  --               303,184
                                                                       --------------      ---------------

                        Balance, December 31, 2000
                        Acquisitions                                       14,721,092              303,184
                        Depreciation Expense (c)                           21,338,603                   --
                                                                                   --              523,943
                                                                       --------------      ---------------
                        Balance, December 31, 2001                                                 827,127
                        Acquisitions                                       36,059,695                   --
                        Depreciation expense (c)                          240,572,668            3,330,399
                                                                                   --
                                                                       --------------      ---------------
                        Balance, December 31, 2002                     $  276,632,363       $    4,157,526
                                                                       ==============      ===============
</TABLE>

(b)      As of December 31, 2002,  2001,  and 2000,  the  aggregate  cost of the
         Properties owned by the Company and its subsidiaries for federal income
         tax   purposes   was   $276,489,406,   $36,059,695   and   $14,721,092,
         respectively.  The leases are treated as  operating  leases for federal
         income tax purposes.

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

(d)      Acquisition fees and miscellaneous expenses of $27,143,799,  $1,941,656
         and $872,192 are included in land, buildings and equipment on operating
         leases at December 31, 2002, 2001 and 2000, respectively.
<PAGE>
















                                    EXHIBITS


<PAGE>


                                  EXHIBIT INDEX

Exhibit Index

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

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

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

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

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

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

10.1     Advisory  Agreement,  dated as of May 14, 2002,  between CNL Retirement
         Properties,  Inc. and CNL Retirement Corp. (Included as Exhibit 10.1 to
         the Registrant's September 30, 2002, Report on Form 10-Q filed with the
         Securities   and  Exchange   Commission  on  November  12,  2002,   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 with the Securities  and Exchange  Commission
         on May 3, 2000, and incorporated herein by reference.)

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

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

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

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

10.7     Real Estate Purchase and Sale Contract between CNL Retirement Corp. and
         American  Retirement  Corporation,  relating to the  Broadway  Plaza at
         Pecan  Park  -  Arlington,   Texas.   (Included  as  Exhibit  10.14  to
         Registration  Statement  No.  333-37480  on Form S-11 and  incorporated
         herein by reference.)
<PAGE>
10.8     Lease  Agreement  between CNL  Retirement - AM/Texas,  LP and ARC Pecan
         Park,  L.P. dated  November 9, 2001,  relating to the Broadway Plaza at
         Pecan  Park  -  Arlington,   Texas.   (Included  as  Exhibit  10.15  to
         Registration  Statement  No.  333-37480  on Form S-11 and  incorporated
         herein by reference.)

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

10.10    Lease  Agreement  between CNL Retirement - AM/Florida,  LP and ARC Boca
         Raton, Inc. dated November 9, 2001,  relating to the Homewood Residence
         of Boca Raton - Boca  Raton,  Florida.  (Included  as Exhibit  10.17 to
         Registration  Statement  No.  333-37480  on Form S-11 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 Registration  Statement
         No. 333-37480 on Form S-11 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
         Registration  Statement  No.  333-37480  on Form S-11 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 Registration  Statement No.  333-37480 on Form S-11 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 Registration  Statement No.  333-37480 on Form S-11
         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 as
         Exhibit 10.22 to Registration  Statement No. 333-76538 on Form S-11 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 Registration  Statement No.  333-76538 on
         Form S-11 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 to
         Registration  Statement  No.  333-76538  on Form S-11 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 Registration  Statement No. 333-76538 on Form S-11 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
         Registration  Statement  No.  333-76538  on Form S-11 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
         Registration  Statement  No.  333-76538  on Form S-11 and  incorporated
         herein by reference.)
<PAGE>
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 Registration  Statement No. 333-76538 on Form S-11 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 Registration  Statement No.  333-76538 on
         Form S-11 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 Registration  Statement No. 333-76538 on Form S-11 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 10.31 to Registration  Statement No. 333-76538 on Form S-11 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-Q filed with the  Securities and
         Exchange  Commission 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  September  30,  2002,  Report on Form 10-Q filed with the
         Securities   and  Exchange   Commission  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 with the
         Securities   and  Exchange   Commission  on  November  12,  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 with the
         Securities   and  Exchange   Commission  on  November  12,  2002,   and
         incorporated herein by reference.)
<PAGE>
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 Registration  Statement No.  333-76538 on
         Form S-11 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.
         (Included as Exhibit 10.37 to Registration  Statement No.  333-76538 on
         Form S-11 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 as
         Exhibit 10.38 to Registration  Statement No. 333-76538 on Form S-11 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 as
         Exhibit 10.39 to Registration  Statement No. 333-76538 on Form S-11 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 10.40
         to Registration  Statement No.  333-76538 on Form S-11 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 Registration  Statement No. 333-76538 on Form S-11 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 Registration  Statement No. 333-76538 on Form S-11 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  Registration  Statement  No.  333-76538  on  Form  S-11  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
         Registration  Statement  No.  333-76538  on Form S-11 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
         Registration  Statement  No.  333-76538  on Form S-11 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  Registration  Statement  No.  333-76538  on  Form  S-11  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  Registration  Statement  No.  333-76538  on  Form  S-11  and
         incorporated herein by reference.)
<PAGE>
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
         Registration  Statement  No.  333-76538  on Form S-11 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  Registration  Statement  No.  333-76538  on  Form  S-11  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
         Registration  Statement  No.  333-76538  on Form S-11 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 Registration  Statement No. 333-76538 on Form S-11 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 Registration  Statement No.  333-76538 on
         Form S-11 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  Registration
         Statement  No.  333-76538  on Form  S-11  and  incorporated  herein  by
         reference.)

21       Subsidiaries of the Registrant (Filed herewith.)

99.1     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.)

99.2     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.)
<PAGE>
                         CNL RETIREMENT PROPERTIES, INC.
                                AND SUBSIDIARIES

                                   EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT

The following is a list of the subsidiaries of the registrant and the state of
incorporation for each:
<TABLE>
<CAPTION>

<c>
                 Name of Subsidiary                                       State of Incorporation
------------------------------------------------------             --------------------------------------
------------------------------------------------------             --------------------------------------
CNL Retirement Properties, Inc.                                                  Maryland
CNL Retirement GP Corp.                                                          Delaware
CNL Retirement GP / Holding Corp.                                                Delaware
CNL Retirement GP / Florida Corp.                                                Delaware
CNL Retirement GP / Texas Corp.                                                  Delaware
CNL Retirement GP / Colorado Corp.                                               Delaware
CNL Retirement GP / Illinois Corp.                                               Delaware
CNL Retirement GP / Tennessee Corp.                                              Delaware
CNL Retirement LP Corp.                                                          Delaware
CNL Retirement GP National Corp.                                                 Delaware
CNL Retirement MA1, LP                                                           Delaware
CNL Retirement MA1 GP, LLC                                                       Delaware
CNL Retirement TRS Corp.                                                         Delaware
CNL Retirement PC1, LP                                                           Delaware
CNL Retirement PC1 GP Holding, LLC                                               Delaware
CNL Retirement PC1 GP Naples FL, LLC                                             Delaware
CNL Retirement PC1 GP Venice FL, LLC                                             Delaware
CNL Retirement PC1 GP, LLC                                                       Delaware
CNL Retirement ER1 GP, LLC                                                       Delaware
CNL Retirement MA2, LP                                                           Delaware
CNL Retirement MA2 GP Holding, LLC                                               Delaware
CNL Retirement MA3, LP                                                           Delaware
CNL Retirement MA3 GP Holding, LLC                                               Delaware
CNL Retirement RP-VB1, LLC                                                       Delaware
CNL Retirement Partners, LP                                                      Delaware
CNL Retirement AM / Florida LP                                                   Delaware
CNL Retirement AM / Texas LP                                                     Delaware
CNL Retirement AM / Colorado LP                                                  Delaware
CNL Retirement AM / Illinois LP                                                  Delaware
CNL Retirement AM / Tennessee LP                                                 Delaware
CNL Retirement Clayton OH, LP                                                    Delaware
CNL Retirement Laguna Creek CA, LP                                               Delaware
CNL Retirement Dartmouth MA, LP                                                  Delaware
CNL Retirement Towson MD, LP                                                     Delaware
CNL Retirement Camarillo CA, LP                                                  Delaware
CNL Retirement PC1 Naples FL, LP                                                 Delaware
CNL Retirement PC1 Venice FL, LP                                                 Delaware
CNL Retirement PC1 New Jersey, LP                                                Delaware
CNL Retirement PC1 Friendship Heights MD, LP                                     Delaware
CNL Retirement PC1 North Carolina, LP                                            Delaware
CNL Retirement PC1 Stamford CT, LP                                               Delaware
CNL Retirement PC1 Buckhead GA, LP                                               Delaware
CNL Retirement PC1 Brentwood TN, LP                                              Delaware
CNL Retirement ER1, LP                                                           Delaware
CNL Retirement MA2 Illinois, LP                                                  Delaware
CNL Retirement MA2 Massachusetts, LP                                             Delaware
CNL Retirement MA2 Ohio, LP                                                      Delaware
CNL Retirement MA2 Oklahoma, LP                                                  Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

<c>
                 Name of Subsidiary                                       State of Incorporation
------------------------------------------------------             --------------------------------------
CNL Retirement MA2 Arkansas, LP                                                  Delaware
CNL Retirement MA2 California, LP                                                Delaware
CNL Retirement MA2 Utah, LP                                                      Delaware
CNL Retirement MA3 California, LP                                                Delaware
CNL Retirement MA3 Georgia, LP                                                   Delaware
CNL Retirement MA3 Kentucky, LP                                                  Delaware
CNL Retirement MA3 Oklahoma, LP                                                  Delaware
CNL Retirement MA3 Pennsylvania, LP                                              Delaware
CNL Retirement MA3 South Carolina, LP                                            Delaware
CNL Retirement MA3 Virginia, LP                                                  Delaware
CNL Retirement MA3 Washington, LP                                                Delaware
</TABLE>
<PAGE>


                    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 99.1

    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,  2002,  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,
2002 and 2001 and its  results of  operations  for the three year  period  ended
December 31, 2002.


Date: February 24, 2003                        /s/ James M. Seneff, Jr.
                                               ---------------------------------
                                               James M. Seneff, Jr.
                                               Chief Executive Officer
<PAGE>


                    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 99.2

    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,  2002,  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,
2002 and 2001 and its  results of  operations  for the three year  period  ended
December 31, 2002.


Date: February 24, 2003                        /s/ Stuart J. Beebe
                                               ---------------------------------
                                               Stuart J. Beebe
                                               Chief Financial Officer