CNL Lifestyle Properties, Inc.

CNL Lifestyle Properties, Inc. Risk Factors

An investment in CNL Lifestyle Properties, Inc. is subject to significant risks. We summarize some of the more important risks below. A more detailed description of the risks associated with this offering is found in the section of the prospectus entitled “Risk Factors.” Investors should read and understand all of the risk factors before making a decision to invest in shares of our common stock.

Please read the risk factors below and then click “OK” to proceed to the CNL Lifestyle Properties Web site.

The price of our shares is subjective and may not bear any relationship to what a stockholder could receive if their shares were resold.
There may be a delay in investing the proceeds from this offering due to the inability of our advisor to find suitable properties, loans or other permitted investments and/or tenants and operators for those investments. Therefore, we might experience a delay in the receipt of returns from such investments.
Selling your shares will be difficult, because there is no market for our common stock. Currently, there is no market for our shares, so stockholders may not be able to promptly sell their shares at a desired price. You should only consider purchasing our shares as a long-term investment.
Although our advisor, subject to approval by our board of directors, is responsible for our daily management, our advisor was formed in 2003 and its management has limited experience investing in or managing certain of the asset classes in which we have invested and intend to lend or invest.
We commenced active operations in June 2004, are still in the early stages of growth and have a limited performance history. As a result, you cannot be sure how we will be operated, whether we will achieve the objectives described in this prospectus or how we will perform financially. You should not rely on our past performance or the past performance of other real estate investment programs sponsored by CNL to predict our future results.
Our loss of key personnel could delay or hinder implementation of certain investment strategies, which could limit our ability to make distributions and decrease the value of an investment in our stock.
James M. Seneff, Jr. and Robert A. Bourne are also officers and directors of our advisor and may experience conflicts of interest in managing us because they also have management responsibilities for other companies including companies that may invest in some of the same types of assets in which we may invest. In addition, substantially all of the other companies that these officers and directors work for are affiliates of us and/or our advisor. For these reasons, these officers and directors will share their management time and services among those companies and us, and will not be able to devote all of their attention to us and could take actions that are more favorable to the other companies than to us.
Our advisor may immediately realize substantial commissions, fees and other compensation as a result of any investment in or sale of an asset by us. Our board of directors must approve each investment and sale, but our advisor’s recommendation to our board of directors may be influenced by the impact of the transaction on our advisor’s compensation.
Multiple property leases or loans with individual tenants or borrowers increase our risks in the event that such tenants or borrowers become financially impaired. As a result, a default by, or the financial failure of, a tenant or borrower could cause more than one property to become vacant or be in default or more than one lease or loan to become non-performing. Defaults or vacancies would reduce our cash receipts and funds available for distribution and could decrease the resale value of affected properties until they can be re-leased.
We will have no economic interest in ground lease properties and may not control the land beneath certain properties we have and will acquire in the future. If the entity owning the land under one of our properties chose to disrupt our use either permanently or for a significant period of time, then the value of our assets could be impaired and our results of operations could be adversely affected.
Income from our properties may be adversely affected by many factors including, but not limited to, an increase in the local supply of properties similar to our properties, a decrease in the number of people interested in participating in activities related to the businesses conducted on the properties that we acquire, adverse weather conditions, changes in government regulation, international, national or local economic deterioration, increases in energy costs and other expenses affecting travel, which factors may affect travel patterns and reduce the number of travelers and tourists, increases in operating costs due to inflation and other factors that may not be offset by increased room rates, and changes in consumer tastes.
The operations of certain properties in which we may invest will depend upon a number of factors relating to or affecting discretionary consumer spending for the types of services provided by businesses operated on these properties. Unfavorable local, regional, or national economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets where we own properties and adversely affect our tenants’ businesses. Such developments could in turn impact our tenants’ ability to pay rent and thereby have a negative impact on our results of operations.
As a result of the seasonal nature of certain business operations that may be conducted on properties we acquire, these businesses will experience seasonal variations in revenues that may require our operators to supplement revenue at their properties in order to be able to make scheduled rent payments to us.
We may not borrow more than 300% of the value of our net assets without the approval of a majority of our independent directors and the borrowing must be disclosed and explained to our stockholders in our first quarterly report after such approval. Borrowing may be risky if the cash flow from our properties and other permitted investments is insufficient to meet our debt obligations. In addition, our lenders may seek to impose restrictions on future borrowings, distributions and operating policies, including with respect to capital expenditures and asset dispositions. If we mortgage assets or pledge equity as collateral and we cannot meet our debt obligations, then the lender could take the collateral, and we would lose the asset or equity and the income we were deriving.
Borrowings may reduce the funds available for distribution and increase the risk of loss since defaults may cause us to lose the properties securing the loans.
If we fail to qualify as a REIT, we would be subject to federal income tax at regular corporate rates. Unless we are entitled to relief under specific statutory provisions, we also could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified. Therefore, if we fail to qualify as a REIT, the funds available for distribution to stockholders would be reduced substantially for each of the years involved.

Investing in real estate or REITs may not be suitable for all investors. They are subject to special risks of the program’s underlying investments and potential illiquidity of the shares. There is no assurance that the stated investment objectives will be met and redemption may be more or less than the original amount invested. For this reason, investors should carefully consider their personal investment time horizon and investment objectives before making an investment decision.

The shares will be offered to the public through CNL Securities Corp., which will act as the managing dealer, and through other members of the Financial Industry Regulatory Authority or with the assistance of registered investment advisors. Securities are not FDIC-insured, nor bank guaranteed, and may lose value.

This material must be read in conjunction with the prospectus in order to understand fully the implications and risks of the offering of securities to which it relates and must not be relied upon to make an investment.

Notice to New York Investors: This is not an offering. No offering is made except by a prospectus filed with the Department of Law of the State of New York. The Attorney General of the State of New York has not passed on or endorsed the merits of this offering.

Please see the prospectus for a complete list of defined terms and discussion of the risks associated with the offering.

This sales and advertising literature must be read with the prospectus in order to fully understand all of the implications and risks of
the offering of securities to which it relates. A copy of the prospectus must be made available to you in connection with this offering.