Signs of Improvement at CNL Lifestyle in Q2 after REIT's Rough Ride

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Orlando-based CNL Lifestyle Properties, Inc., a diversified real estate investment trust with holdings in senior housing, as well as vacation properties, water parks, golf courses, marinas and hotels, held a conference call on Wednesday afternoon, August 15th,  to discuss second quarter 2012 results.

Although there was a net loss in the second quarter of $19.9 million, compared to a net loss of $15.7 million for the same quarter in 2011 and net loss per share of $.07 compared to a net loss of $.05 for the same quarter in 2011--their president and CEO, Steve Mauldin, expressed optimism about the company's future.  Speaking after the earnings call, he told World Property Channel, "Our portfolio is diversified across the country and we have many different kinds of assets. Plus, we saw improvement across the board in every sector, even in golf and lodging properties," which have suffered during the recession.

Total revenues for the quarter ending June 30, 2012 were $120.8 million versus $105.6 million in the quarter ending June 2011. For the six month period ending June 30, 2012, the company's revenues totaled $210.7 million compared to $187.8 million for the same period in 2011. While total revenue was up from last year, so were net losses, $44.7 million for the six-month period ending June 30, 2012 compared to $36.4 million for the same period in 2011.

In two of CNL's assets, one in Wisconsin Dells, Wisconsin and the other in Sandusky, Ohio, both managed by Great Wolf Lodge, a chain of 11 indoor water park resorts (which include hotels), results have been disappointing, says Mauldin. "I think the Midwestern location of those two assets," and the fact that they are older versions of Great Wolf's product, are the reasons for their under-performance. Also, there is a lot competition in these markets, he says. These assets are busy during the weekends and not so much during midweek, says Mauldin. "The newer Great Wolf assets have meeting and conference spaces."

At the end of July, CNL Lifestyle Properties purchased land and assets tied to Rapids Water Park in West Palm Beach, Florida, for $51.85 million. It was the latest addition to the company's portfolio.

As of August 15, 2012, CNL Lifestyle Properties owns 177 properties, 78 of which are wholly-owned by CNL and run by third-party operators under long-term, triple net leases. With most of the other properties, CNL has hired third party managers and receives income from operations of the properties.  There are also 50 joint venture properties, 36 of which are being managed by third party management companies, while the other 14 are leased. There is also one property being held for development.

According to the second quarter report, for the quarter ended June 30, 2012, CNL's tenants and managers reported an increase in revenue and property-level EBITDA of 1% and 21.1% respectively, compared to the same period in the prior year. The increase was primarily attributed to quarter-over- quarter improvements at golf properties and "additional lifestyle properties," a category which includes three water park hotels. ("Our golf portfolio was challenged throughout the recession," says Mauldin.

For the six month period ending June 30, 2012 though, there was a decline of 3.9% in revenue and a 9.9% decrease in EBITDA for all properties compared to the same period the year before. As for the property types that suffered the most, ski and mountain lifestyle properties took the biggest hit, with declining revenue of 13.2% for the six month period ending June 30, 2012, and a decline of 20.6% in EBITDA compared to the same period the year before. For the quarter ending June 30, 2012, however, while this category had a 14.9% decline in revenue, it had a 12.6% increase in EBITDA, compared to the same period in 2011.

Commenting on the situation, Mauldin says: "This past ski season had little snowfall, but the season before set all time records for snow. We own a significant number of ski resorts in the eastern and western parts of the US and in Canada, so we have good geographic diversification. And, frankly, our ski resorts are under long-term leases with tenants who did well. The ski business was coming off good years before last winter."