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Conservative Management Strategy*

CNL Lifestyle Properties, Inc. invests using sound investment principles to achieve its investment objectives and help ensure the long-term health of the company. This conservative management strategy* is anchored by three principles**:

Financial Strength
CNL Lifestyle Properties strives for the financial strength to achieve its investment objectives such as, continually pay distributions to investors and the flexibility to acquire properties that add value to its portfolio. This is evident in the historically low funds from operations (FFO) payout ratio and low leverage in the non-traded REIT space. FFO is a figure commonly used by REITs to measure the cash generated from operations, and is often used to determine the ability to pay distributions to shareholders.***

Leasing Structure
CNL Lifestyle Properties’ long-term triple-net leasing structures help to ensure a steady source of income to the REIT.** This strategy includes security deposits and cross-defaulted provisions, where appropriate. With cross-defaulted provisions, tenants who operate multiple properties may use funds from profitable properties to subsidize underperforming ones. Similarly, if a tenant defaults under one property lease, the company may place them in default under all of their leases, providing additional leverage in resolving an unfavorable situation.

Diversified Portfolio
CNL Lifestyle Properties strives to maintain a diversified portfolio of lifestyle real estate assets that reflect demographic trends and shifting utilization patterns. This approach positions the REIT to more easily endure seasonal or market fluctuations. In addition, the REIT establishes long-term relationships with operating partners who are generally considered to be significant industry leaders.

* CNL Lifestyle Properties’ board of directors has the authority to change these general strategies and make exceptions to them without notice. There is no assurance that these strategies will result in a steady or increased return on an investment in the shares or that its FFO payout ratio and distribution policy will remain the same. There are risks involved in investing in unlisted REITs. An investment in CNL Lifestyle Properties is subject to significant risks. A more detailed description of the risk factors is found in the section of the prospectus entitled “Risk Factors.” Investors should read the prospectus and carefully consider the investment objectives, risks, charges and expenses prior to investing.

** In light of the uncertainty arising from the current economic and real estate environments, there can be no assurance that CNL Lifestyle Properties’ strategy and ability to pay distributions will not be adversely affected by tenant defaults, bankruptcies or disagreements related to its leases.

*** FFO is defined by the National Association of Real Estate Investment Trusts as net income (loss), computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property, plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships, joint ventures and subsidiaries. FFO should not be considered as an alternative to net income (loss) or as an indication of CNL Lifestyle Properties’ liquidity, nor is it indicative of funds available to fund the company’s cash needs, including its ability to make distributions. There can be no assurance that distributions can be continued at current levels or that the FFO payout ratio will not increase in future periods.