CNL HOSPITALITY PROPERTIES INC
424B3, 2000-10-23
LESSORS OF REAL PROPERTY, NEC
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                        CNL HOSPITALITY PROPERTIES, INC.


                    Supplement No. 2, dated October 23, 2000

                        to Prospectus, dated May 23, 2000

===============================================================================



         This Supplement is part of, and should be read in conjunction with, the
Prospectus  dated May 23, 2000.  Capitalized  terms used in this Supplement have
the same meaning as in the Prospectus unless otherwise stated herein.


         Information  as to  proposed  properties  for  which  the  Company  has
received  initial  commitments  and as to the  number  and  types of  Properties
acquired by the Company is presented as of October 9, 2000,  and all  references
to commitments or Property acquisitions should be read in that context. Proposed
properties  for which  the  Company  receives  initial  commitments,  as well as
property  acquisitions  that occur after October 9, 2000,  will be reported in a
subsequent Supplement.


         At the annual meeting of stockholders  of the Company,  held on May 23,
2000, the  stockholders  of the Company  approved  amendments to the Articles of
Incorporation  proposed  by the Board of  Directors  to  increase  the number of
authorized  shares of Common Stock and to expand the range of borrowers to which
the Company may make loans.  These amendments  became effective upon filing with
the Maryland State Department of Assessments and Taxation on June 27, 2000.


                               RECENT DEVELOPMENTS


         On August 22, 2000, the Company  acquired a Courtyard(R) by Marriott(R)
located in Alpharetta,  Georgia,  a Residence Inn (R) by Marriott(R)  located in
Salt Lake City,  Utah,  in the  community of  Cottonwood,  and three  TownePlace
Suites(R)  by  Marriott(R)   Properties  located  in  Mt.  Laurel,  New  Jersey;
Scarborough, Maine, which is a suburb of Portland; and Tewksbury, Massachusetts.
The Alpharetta Property, which opened in January 2000, includes 153 guest rooms,
two meeting rooms with approximately  1,100 square feet, an indoor pool and spa,
an exercise  room and a restaurant  and lounge and is 26 miles north of downtown
Atlanta.  The  Cottonwood  Property,  which opened in August 1999,  includes 144
guest  rooms,  a 690  square-foot  meeting  room,  an  outdoor  pool and spa,  a
SportCourt(R)  and an exercise room. The Mt. Laurel  Property opened in November
1999, the Scarborough  Property  opened in June 1999 and the Tewksbury  Property
opened in July 1999. The Mt. Laurel,  Scarborough and Tewksbury  Properties each
include 95 guest rooms, an outdoor  swimming pool and an exercise room . The Mt.
Laurel   Property  is  located   within  15  miles  of  downtown   Philadelphia,
Pennsylvania,  and the  Tewksbury  Property  is 25 miles  northwest  of downtown
Boston.

         As of October 9, 2000, the Company owned interests in 22 Properties and
had  commitments  to acquire an  additional  eight  properties  directly  and an
interest in one property through a joint venture. All of the Properties owned by
the Company are leased on a long-term,  triple-net  basis and the hotels are all
operated as national hotel chains.

         On October 1, 2000, the Board of Directors  declared a distribution  of
$0.0625 per Share to stockholders  of record on October 1, 2000  representing an
annualized distribution rate of 7.50%.




<PAGE>


                                  THE OFFERINGS

GENERAL

         Upon  completion of its Initial  Offering on June 17, 1999, the Company
had  received   aggregate   subscriptions   for  15,007,264   Shares   totalling
$150,072,637 in gross proceeds, including 7,264 Shares ($72,637) issued pursuant
to the Reinvestment Plan. Following the completion of the Initial Offering,  the
Company commenced the 1999 Offering of up to 27,500,000 Shares. On September 14,
2000,  the  1999  Offering  closed  upon  receipt  of  subscriptions   totalling
approximately  $275,000,000.  Following  completion  of  the  1999  Offering  on
September  14, 2000,  the Company  commenced  this  offering of up to 45,000,000
Shares. As of October 9, 2000, the Company had received aggregate  subscriptions
for  44,707,232  Shares  totalling  $447,072,321  in gross  proceeds,  including
136,974 Shares  ($1,369,740)  issued pursuant to the Reinvestment  Plan from its
Initial  Offering , the 1999 Offering and this offering.  As of October 9, 2000,
net  proceeds  to  the  Company  from  its   offerings  of  Shares  and  capital
contributions  from  the  Advisor,   after  deduction  of  selling  commissions,
marketing   support   and  due   diligence   expense   reimbursement   fees  and
organizational and offering expenses, totalled approximately  $397,800,000.  The
Company has used the net offering  proceeds to invest,  directly or  indirectly,
approximately $297,400,000 in 22 hotel Properties, to pay $5,680,000 as deposits
on four additional hotel Properties, to redeem 75,761 Shares of Common Stock for
$696,997 and to pay  approximately  $26,700,000 in Acquisition  Fees and certain
Acquisition Expenses,  leaving approximately  $67,300,000 available to invest in
Properties  and  Mortgage  Loans.  See  "Business  -- Pending  Investments"  for
information on the eight  properties the Company has entered into commitments to
acquire directly and the interest in one property through a joint venture.


         The following  information  updates and replaces the last  paragraph on
page 123 of the Prospectus.

         A maximum of 45,000,000  Shares  ($450,000,000)  are being offered at a
purchase price of $10.00 per Share.  Included in the 45,000,000  Shares offered,
the Company has  registered  5,000,000  Shares  ($50,000,000)  available only to
stockholders  purchasing  Shares  in this  offering  who  receive a copy of this
Prospectus or to stockholders who purchased Shares in one of the Prior Offerings
and who received a copy of the related  prospectus  and who elect to participate
in the Reinvestment  Plan.  Prior to the conclusion of this offering,  if any of
the  5,000,000  Shares remain after meeting  anticipated  obligations  under the
Reinvestment  Plan,  the Company may decide to sell a portion of these Shares in
this  offering.  Any  participation  in such  plan by a  person  who  becomes  a
stockholder  otherwise  than by  participating  in this  offering  will  require
solicitation under a separate  prospectus.  See "Summary of Reinvestment  Plan."
The Board of Directors  may  determine  to engage in future  offerings of Common
Stock  of up to the  number  of  unissued  authorized  shares  of  Common  Stock
available following termination of this offering.


                             MANAGEMENT COMPENSATION

         For information  concerning  compensation  and fees paid to the Advisor
and its  Affiliates  since the date of inception  of the  Company,  see "Certain
Transactions."


                              CONFLICTS OF INTEREST

         The following  sentence replaces the first sentence in item 3 under the
heading  " --  Certain  Conflict  Resolution  Procedures"  on  page  35  of  the
Prospectus.

         The  Company  will not make loans to  Affiliates,  except (A) to wholly
owned subsidiaries of the Company,  or (B) Mortgage Loans to Joint Ventures (and
joint  ventures  of  wholly  owned  subsidiaries  of the  Company)  in  which no
co-venturer is the Sponsor, the Advisor, the Directors or any Affiliate of those
persons or of the Company (other than a wholly owned  subsidiary of the Company)
subject  to  the  restrictions  governing  Mortgage  Loans  in the  Articles  of
Incorporation  (including  the  requirement  to  obtain  an  appraisal  from  an
independent expert).




<PAGE>


                                    BUSINESS

GENERAL

         The following  information updates and replaces the second paragraph on
page 42 and the last paragraph on page 43 of the Prospectus.

         Revenue per  available  room  increased  by 3.2% from $49.86 in 1998 to
$51.44 in 1999. In 1999,  growth in room supply  exceeded  growth in room demand
and resulted in a decrease in occupancy. In 1999, total occupancy fell 0.8% from
63.8% in 1998 to 63.3%.  Growth in room demand  exceeded  the growth in new room
supply  for  each  year  from  1992  through  1996 and  industry-wide  occupancy
increased  from a 20 year low of 61.8%  in 1991 to 65% in  1996.  Demand  in the
hospitality  industry has increased in 11 of the past 12 years,  with an average
compounded growth rate of 2.2% between 1987 and 1999.


         As  of  October  9,  2000,  the  Company  had  acquired,   directly  or
indirectly,  22 hotel Properties  consisting of land, building and equipment and
had initial  commitments to acquire eight additional  Properties directly and an
interest in one  property  through a joint  venture.  However,  as of October 9,
2000, the Company had not entered into any arrangements that create a reasonable
probability  that the  Company  will  enter  into any  Mortgage  Loan or Secured
Equipment Lease.

PROPERTY ACQUISITIONS

Western International Portfolio.

         The  following  information  updates and  replaces  the fifth and sixth
paragraph on page 46 of the Prospectus.

         In return for their respective investments,  Five Arrows received a 51%
common stock  interest and the Company  received a 49% common stock  interest in
Hotel Investors. Five Arrows received 48,337 shares of Hotel Investors' 8% Class
A  cumulative,  preferred  stock  ("Class A Preferred  Stock"),  and the Company
received 37,979 shares of Hotel Investors'  9.76% Class B cumulative,  preferred
stock ("Class B Preferred Stock"). In October 2000, Five Arrows, the Company and
Hotel Investors  entered into an agreement under which Hotel Investors agreed to
redeem  2,104  shares of Class A  Preferred  Stock and an  equivalent  number of
shares of common stock of Hotel Investors held by Five Arrows. In addition,  the
Company  purchased 7,563 shares of both Class A Preferred Stock and common stock
of Hotel Investors from Five Arrows for  $11,395,000.  Hotel Investors agreed to
redeem 1,653 shares of Class B Preferred Stock and an aggregate of 10,115 shares
of common stock of Hotel Investors held by the Company.  Five Arrows'  remaining
38,670 shares of Class A Preferred Stock and the Company's 7,563 shares of Class
A Preferred  Stock were exchanged for an equivalent  number of shares of Class E
Preferred  Stock,  par  value  $0.01  ("Class  E  Preferred  Stock"),  of  Hotel
Investors.  Upon the  consummation  of this  transaction,  the  Company  owns an
interest of approximately  53% and Five Arrows owns an interest of approximately
47%, in the common stock of Hotel  Investors.  Pursuant to this  agreement,  the
Company  repurchased 65,285 Shares held by Five Arrows for an aggregate price of
$620,207.50.  Additionally,  Five  Arrows  granted  the  Company  the  following
options:  (1) on or before  January  31,  2001,  the  Company  has the option to
purchase  7,250 shares of Class E Preferred  Stock and an equal number of shares
of common  stock held by Five  Arrows  for $1,000 per pair of Class E  Preferred
Stock and common stock,  and (2) provided that the Company  purchased all of the
shares under the first option, the Company will have the option,  until June 30,
2001, to purchase 7,251 shares of Class E Preferred Stock and an equal number of
shares of common  stock for $1,000 for each pair.  If the Company  elects not to
purchase the remaining  shares under the first and second  options,  Five Arrows
will have the right,  at certain  defined dates, to exchange its shares in Hotel
Investors  for Common  Stock of the  Company at an exchange  rate of  157.000609
Shares of the Company's  Common Stock for each share of Class E Preferred Stock,
subject to adjustment in the event of stock dividends,  stock splits and certain
other corporate actions by the Company.

         Cash available for  distributions  of Hotel  Investors is paid first to
Five Arrows  under a  contractual  right of Five  Arrows to receive  payments as
consideration  for  agreeing  to defer the  conversion  of its Class A Preferred
Stock (prior to its  conversion  to Class E Preferred  Stock) to Common Stock of
the  Company.  These  payments  are  equivalent  to the  difference  between any
distributions received by Five Arrows from Hotel Investors and the distributions
that Five  Arrows  would  have  received  from the  Company  if Five  Arrows had
converted its Class A preferred  Stock into the  Company's  Common Stock on June
30, 2000.  Then, cash available for  distributions is distributed to the Company
with  respect  to  its  Class  B  Preferred  Stock.  Next,  cash  available  for
distributions  is  distributed  to  100  CNL  Holdings,   Inc.  and  affiliates'
associates who each own one share of Class C preferred stock in Hotel Investors,
to provide a quarterly,  cumulative,  compounded 8% return.  All remaining  cash
available for distributions is distributed pro rata with respect to the interest
in the common shares.


         Wyndham  Portfolio.  On June 1, 2000,  the Company  acquired  two hotel
Properties.   The  Properties  are  a  WyndhamSM  Hotel  located  in  Billerica,
Massachusetts,  a suburb of Boston (the "Wyndham BillericaSM  Property"),  and a
Wyndham  Hotel  located in Denver,  Colorado,  in the Denver  Tech  Center  (the
"Wyndham Denver Tech CenterSM Property").

         The Company  acquired the Wyndham  Billerica  Property for  $25,092,000
from PAH  Billerica  Realty  Company,  LLC and the  Wyndham  Denver  Tech Center
Property for  $18,353,000  from WII Denver  Tech,  LLC. In  connection  with the
purchase  of the two  Properties,  the  Company,  as  lessor,  entered  into two
separate,  long-term  lease  agreements.  The  leases  on  both  Properties  are
cross-defaulted.  The general terms of the lease agreements are described in the
section of the Prospectus entitled "Business -- Description of Property Leases."
The principal features of the leases are as follows:

o        The initial term of each lease is approximately 15 years.

o        At the end of the  initial  lease  term,  the  tenant  will have  three
         consecutive renewal options of five years each.

o        The leases  require  minimum rent payments to the Company of $2,509,200
         per year for the Wyndham Billerica Property and $1,835,300 per year for
         the Wyndham Denver Tech Center Property.

o        Minimum rent  payments  will  increase to  $2,571,930  per year for the
         Wyndham  Billerica  Property  and  $1,881,183  per year for the Wyndham
         Denver Tech Center Property after the first lease year.

o        In addition to minimum rent, for each calendar year, the leases require
         percentage  rent equal to 10% of the  aggregate  amount of all revenues
         combined,  for the Wyndham Billerica and the Wyndham Denver Tech Center
         Properties, in excess of $13,683,000.

o        A  security  deposit  equal to  $1,254,600  for the  Wyndham  Billerica
         Property and $917,650 for the Wyndham  Denver Tech Center  Property has
         been  retained by the Company as security for the tenant's  obligations
         under the leases.

o        Management fees payable to Wyndham  International,  Inc., for operation
         of the Wyndham  Billerica and Wyndham Denver Tech Center Properties are
         subordinated to minimum rents due to the Company.

o        The tenant of the  Wyndham  Billerica  and  Wyndham  Denver Tech Center
         Properties  has  established  a reserve fund which will be used for the
         replacement and renewal of furniture,  fixtures and equipment  relating
         to the hotel  Properties  (the "FF&E  Reserve").  Deposits  to the FF&E
         Reserve are made monthly as follows: 3% of gross receipts for the first
         lease year; 4% of gross  receipts for the second lease year;  and 5% of
         gross receipts every lease year  thereafter.  Funds in the FF&E Reserve
         and all property  purchased  with funds from the FF&E Reserve  shall be
         paid, granted and assigned to the Company as additional rent.

         In connection with the acquisition of these two Properties, the Company
may be required to make an additional  payment (the  "Earnout  Amount") of up to
$2,471,500 if certain  earnout  provisions  are achieved by June 1, 2003.  After
June 1, 2003, the Company will no longer be obligated to make any payments under
the earnout  provision.  The Earnout Amount is equal to the  difference  between
earnings before interest,  taxes, depreciation and amortization expense adjusted
by the earnout factor (7.33), and the initial purchase price. Rental income will
be adjusted upward in accordance  with the lease  agreements for any such amount
paid.

         The federal income tax basis of the depreciable  portion of the Wyndham
Billerica  Property and the Wyndham Denver Tech Center Property is approximately
$21,500,000 and $14,700,000, respectively.

         The Wyndham Billerica Property,  which opened in May 1999, is a Wyndham
Hotel with a new prototype design located in Billerica,  Massachusetts, a suburb
of Boston.  The Wyndham  Billerica  Property has 210 guest  rooms,  including 14
suites,  4,346 square feet of meeting  space,  a 64-seat  restaurant,  a 33-seat
lounge, a library, an


<PAGE>


indoor pool and a fitness  center and spa. Other lodging  facilities  located in
proximity to the Wyndham Billerica  Property include a Courtyard by Marriott,  a
Doubletree  Hotel, a Homewood Suites, a Marriott,  a Renaissance(R)  Hotel and a
Wyndham Garden(R) Hotel.

         The Wyndham  Denver Tech Center  Properties,  which  opened in November
1999,  is a  Wyndham  Hotel  with a new  prototype  design  located  in  Denver,
Colorado. The Wyndham Denver Tech Center Property has 180 guest rooms, including
18 suites,  4,040 square feet of meeting space, a 64-seat restaurant,  a 33-seat
lounge,  a library,  an indoor pool and a fitness  center and spa. Other lodging
facilities  located in  proximity  to the Wyndham  Denver  Tech Center  Property
include a Hyatt Regency,  a Marriott,  an Embassy  Suites,  a Sheraton  Hotel, a
Hilton and a Summerfield  Suites by WyndhamSM.  The average  occupancy rate, the
average daily room rate and the revenue per  available  room for the periods the
hotels have been operational are as follows:

<TABLE>
<CAPTION>
<S> <C>

                            Wyndham Billerica Property                        Wyndham Denver Tech Center Property
                ---------------------------------------------------    ---------------------------------------------------
                  Average           Average            Revenue           Average           Average            Revenue
                 Occupancy         Daily Room       per Available       Occupancy         Daily Room       per Available
   Year             Rate              Rate              Room               Rate              Rate               Room
------------    -------------    ---------------   ----------------    -------------    ---------------    ---------------


      *1999        60.25%           $109.38             $65.89            31.17%            $76.40               $23.76
     **2000        75.40%           118.72              89.57             65.10%             89.99                58.62

</TABLE>



*        Data for the Wyndham Billerica  Property  represents the period May 15,
         1999  through  December  31, 1999 and data for the Wyndham  Denver Tech
         Center  Property  represents  the  period  November  15,  1999  through
         December 31, 1999.

**       Data for 2000  represents the period January 1, 2000 through August 15,
         2000.


         The Company  believes that the results  achieved by the Properties,  as
shown in the  table  above,  may or may not be  indicative  of  their  long-term
operating potential, as the Properties had only been open since May and November
1999, respectively.

         Wyndham  Brands.  The brand,  Wyndham  Hotels & Resorts(R),  is part of
Wyndham  International,   Inc.'s  portfolio  of  lodging  brands.  According  to
Wyndham's company overview,  Wyndham  International,  Inc. is one of the world's
largest hospitality and lodging companies serving business and leisure travelers
with  hotels and  resorts  located in major  metropolitan  business  centers and
leading vacation markets in the United States, Canada, the Caribbean, Mexico and
Europe.

         Palm Desert Portfolio. On June 16, 2000, the Company acquired two hotel
Properties.  The  Properties  are a Courtyard by Marriott and a Residence Inn by
Marriott,  both located in Palm Desert,  California  (the "Courtyard Palm Desert
Property" and the "Residence Inn Palm Desert Property").

         The  Company  acquired  the Palm  Desert  Properties  for an  aggregate
purchase price of $30,250,000  from PDH Associates  LLC. In connection  with the
purchase of the two Properties, the Company, as lessor, entered into a long-term
lease  agreement.  Both hotels are managed by Marriott  International,  Inc. The
general  terms of the  lease  agreement  are  described  in the  section  of the
Prospectus  entitled "Business -- Description of Property Leases." The principal
features of the lease are as follows:

o        The initial term of each lease is approximately 15 years.

o        At the  end of the  initial  lease  term,  the  tenant  will  have  two
         consecutive renewal options of ten years each.

o        The lease  requires  minimum rent payments to the Company of $3,025,000
         per year  allocated as follows:  $1,351,000  per year for the Courtyard
         Palm Desert Property and $1,674,000 per year for the Residence Inn Palm
         Desert Property.

o        In addition to minimum rent, for each lease year after the second lease
         year, the leases require percentage rent equal to seven percent of room
         revenues, in excess of room revenues for the second lease year.

o        A security  deposit equal to  approximately  $416,000 for the Courtyard
         Palm Desert Property and  approximately  $519,000 for the Residence Inn
         Palm Desert  Property has been  retained by the Company as security for
         the tenant's obligations under the lease.

o        The tenant of the  Courtyard  Palm Desert and Residence Inn Palm Desert
         Properties  has  established  an FF&E  Reserve.  Deposits  to the  FF&E
         Reserve are made monthly as follows: 3% of gross receipts for the first
         lease year; 4% of gross  receipts for the second lease year;  and 5% of
         gross receipts every lease year  thereafter.  Funds in the FF&E Reserve
         and all property  purchased  with funds from the FF&E Reserve  shall be
         paid, granted and assigned to the Company as additional rent.

o        Marriott International,  Inc. has guaranteed the tenant's obligation to
         pay  minimum  rent under the lease.  The  guarantee  terminates  on the
         earlier  of the end of the third  lease year or at such time as the net
         operating  income from the Property  exceeds minimum rent due under the
         lease by 25% for any trailing  12-month  period.  The maximum amount of
         the guarantee is $3,025,000.  Upon  acquisition of the Newark Property,
         as described  in "-- Pending  Investments,"  the maximum  amount of the
         guarantee  will  increase to $6,405,400  and the  guarantee  will cover
         minimum rent  payments for the pending  investment  listed  above,  the
         Gaithersburg  and Merrifield  Properties  described  below and the Mira
         Mesa Property described in the Prospectus under the heading "Business--
         Property  Acquisitions,"  in  addition  to the Palm  Desert  Properties
         (collectively,  the "Pooled Properties"). From this time, net operating
         income from all of the Pooled  Properties will be pooled in determining
         whether the Pooled  Properties'  aggregate net operating income exceeds
         the aggregate minimum rent due under the leases by 25%.

o        In addition,  upon the acquisition of the Little Lake Bryan Properties,
         as  described in " -- Pending  Investments,"  the leases for the Little
         Lake Bryan Properties will contain  cross-default terms with respect to
         the leases for the Pooled Properties, meaning that if the tenant to any
         of the Little Lake Bryan Properties or the Pooled  Properties  defaults
         on its obligations  under its lease,  the Company will have the ability
         to pursue  its  remedies  under the leases  with  respect to all of the
         Little Lake Bryan Properties and the Pooled  Properties,  regardless of
         whether  the tenant of any such  Property  is under  default  under its
         lease.

         The  federal  income  tax  basis  of  the  depreciable  portion  of the
Courtyard  Palm Desert  Property and the Residence  Inn Palm Desert  Property is
approximately $12,109,000 and $14,680,000, respectively.

         The Courtyard Palm Desert Property, which opened in September 1999, has
151 guest rooms, three meeting rooms, a 60-seat dining room and lounge/bar area,
tennis  courts,  exercise room,  pool and putting green.  The Residence Inn Palm
Desert  Property,  which opened in February 1999, has seven two-story  buildings
with 130 guest suites and a separate  building with a lobby,  hearth room, three
meeting  rooms and a ballroom.  Additional  amenities  include a swimming  pool,
whirlpool,  two tennis  courts and a putting  green.  The hotel  Properties  are
located in the Coachella  Valley,  which  according to  Hospitality  Real Estate
Counselors,  Inc. (HREC) is one of the fastest growing areas in California.  The
Residence  Inn  and  Courtyard  Properties  are  the  first  new  hotels  to  be
constructed  in Palm Desert in ten years.  Other lodging  facilities  located in
proximity to the Courtyard Palm Desert and Residence Inn Palm Desert  Properties
include the Marriott  Desert  Springs,  an Embassy  Suites,  the Shadow Mountain
Resort,  the Indian  Wells  Resort,  the  Miramonte  Resort and the  Renaissance
Esmeralda.  The average  occupancy  rate,  the  average  daily room rate and the
revenue per available room for the periods the hotels have been  operational are
as follows:

<TABLE>
<CAPTION>
<S> <C>

                          Courtyard Palm Desert Property                       Residence Inn Palm Desert Property
                ---------------------------------------------------    ---------------------------------------------------
                  Average           Average            Revenue           Average           Average            Revenue
                 Occupancy         Daily Room       per Available       Occupancy         Daily Room       per Available
   Year             Rate              Rate              Room               Rate              Rate               Room
------------    -------------    ---------------   ----------------    -------------    ---------------    ---------------

      *1999        50.50%          $  92.33             $46.62            50.50%           $122.25               $61.74
     **2000        68.20%            110.38              75.28            63.60%            149.33                94.97

</TABLE>

*        Data for the  Courtyard  Palm  Desert  Property  represents  the period
         September 1, 1999 through  December 31, 1999 and data for the Residence
         Inn Palm  Desert  Property  represents  the period  February  19,  1999
         through December 31, 1999.

**       Data for 2000  represents  the period  January 1, 2000 through July 26,
         2000.

         The Company  believes that the results  achieved by the  Properties for
1999,  as  shown in the  table  above,  are not  indicative  of their  long-term
operating  potential,  as the Properties had only been open since  September and
February 1999, respectively.

         SpringHill SuitesTM by Marriott(R)  located in Gaithersburg,  Maryland.
On  July  28,  2000,  the  Company  acquired  a  SpringHill  Suites  located  in
Gaithersburg,  Maryland  (the  "Gaithersburg  Property")  for  $15,214,600  from
SpringHill SMC Corporation. The Company, as lessor, has entered into a long-term
lease  agreement  relating  to this  Property.  The  general  terms of the lease
agreement are described in the Prospectus  under the heading " -- Description of
Property Leases." The principal features of the lease are as follows:


o        The initial term of the lease expires in approximately 15 years.

o        At the  end of the  initial  lease  term,  the  tenant  will  have  two
         consecutive renewal options of ten years each.

o        The lease requires minimum rent payments of $1,521,460 per year.

o        In addition to minimum rent, for each lease year after the second lease
         year, the lease requires percentage rent equal to seven percent of room
         revenues, in excess of room revenues for the second lease year.

o        A security  deposit  equal to $468,142 has been retained by the Company
         as security for the tenant's obligations under the lease.

o        The  tenant  has  established  an FF&E  Reserve.  Deposits  to the FF&E
         Reserve are made every four weeks as follows:  4% of gross receipts for
         the  first  lease  year  and 5% of  gross  receipts  every  lease  year
         thereafter.  Funds in the FF&E Reserve and all property  purchased with
         funds from the FF&E Reserve shall be paid,  granted and assigned to the
         Company as additional rent.

o        Marriott International,  Inc. has guaranteed the tenant's obligation to
         pay  minimum  rent under the lease.  The  guarantee  terminates  on the
         earlier  of the end of the third  lease year or at such time as the net
         operating  income  from the hotel  exceeds  minimum  rent due under the
         lease by 25% for any trailing  12-month  period.  The maximum amount of
         the guarantee is $1,521,460.

o        The  Gaithersburg  Property is one of the Pooled  Properties  described
         above in "Palm Desert Portfolio."

         The estimated  federal income tax basis of the  depreciable  portion of
the Gaithersburg Property is approximately $12.8 million.

         The Gaithersburg  Property,  which opened in June 2000, is a SpringHill
Suites by Marriott located in Gaithersburg,  Maryland. The Gaithersburg Property
includes 162 guest suites and  approximately  500 square feet of meeting  space.
The  Property  is  located  approximately  15 miles  northwest  of the  nation's
capital.  Other  lodging  facilities  located in proximity  to the  Gaithersburg
Property include two Courtyard by Marriott properties and a Quality Suites.

         Residence Inn by Marriott located in Merrifield,  Virginia. On July 28,
2000, the Company acquired a Residence Inn located in Merrifield,  Virginia (the
"Merrifield Property") for $18,816,000 from Residence Inn by Marriott,  Inc. The
Company,  as lessor,  has entered into a long-term lease  agreement  relating to
this  Property.  The general  terms of the lease  agreement are described in the
Prospectus under the heading " -- Description of Property Leases." The principal
features of the lease are as follows:

o        The initial term of the lease expires in approximately 15 years.

o        At the  end of the  initial  lease  term,  the  tenant  will  have  two
         consecutive renewal options of ten years each.

o        The lease requires minimum rent payments of $1,881,600 per year.

o        In addition to minimum rent, for each lease year after the second lease
         year, the lease requires percentage rent equal to seven percent of room
         revenues, in excess of room revenues for the second lease year.

o        A security  deposit  equal to $578,954 has been retained by the Company
         as security for the tenant's obligations under the lease.



<PAGE>


o        The  tenant  has  established  an FF&E  Reserve.  Deposits  to the FF&E
         Reserve are made every four weeks as follows:  2% of gross receipts for
         the first lease year;  4% of gross  receipts for the second lease year;
         and 5% of gross receipts every lease year thereafter. Funds in the FF&E
         Reserve and all  property  purchased  with funds from the FF&E  Reserve
         shall be paid, granted and assigned to the Company as additional rent.

o        Marriott International,  Inc. has guaranteed the tenant's obligation to
         pay  minimum  rent under the lease.  The  guarantee  terminates  on the
         earlier  of the end of the third  lease year or at such time as the net
         operating  income  from the hotel  exceeds  minimum  rent due under the
         lease by 25% for any trailing  12-month  period.  The maximum amount of
         the guarantee is $1,881,600.

o        The Merrifield Property is one of the Pooled Properties described above
         in "Palm Desert Portfolio."

         The estimated  federal income tax basis of the  depreciable  portion of
the Merrifield Property is approximately $16.4 million.

         The Merrifield Property,  which opened in June 2000, is a Residence Inn
by Marriott located in Merrifield,  Virginia.  The Merrifield  Property includes
159 guest suites,  approximately  500 square feet of meeting space,  an exercise
room and  SportCourt(R).  The  Property  is  located in  Fairfax  County,  which
according  to  Hospitality   Valuation  Services  (HVS)  data,  is  one  of  the
fastest-growing  areas in the Washington,  D.C. area.  Located  approximately 12
miles  west/southwest  of the  nation's  capital,  the hotel is  within  driving
distance  of the  legislative,  judicial  and  executive  branches of the United
States  government.  Other  lodging  facilities  located  in  proximity  to  the
Merrifield Property include a Residence Inn by Marriott, a Homewood Suites and a
Homestead Village.


<TABLE>
<CAPTION>
<S> <C>

                              Gaithersburg Property                                   Merrifield Property
                ---------------------------------------------------    ---------------------------------------------------
                  Average           Average            Revenue           Average           Average            Revenue
                 Occupancy         Daily Room       per Available       Occupancy         Daily Room       per Available
   Year             Rate              Rate              Room               Rate              Rate               Room
------------    -------------    ---------------   ----------------    -------------    ---------------    ---------------
      *2000        51.80%            $95.67             $49.52            61.00%           $137.74               $83.98

</TABLE>

*        Data for the Gaithersburg  Property represents the period June 30, 2000
         through  September  8,  2000  and  data  for  the  Merrifield  Property
         represents the period June 24, 2000 through September 8, 2000.

         Courtyard by Marriott located in Alpharetta,  Georgia, Residence Inn by
Marriott located in Salt Lake City, Utah and three TownePlace Suites by Marriott
located  in  Mt.  Laurel,   New  Jersey,   Scarborough,   Maine  and  Tewksbury,
Massachusetts.  On August 22, 2000, the Company purchased five Properties for an
aggregate  purchase  price of  approximately  $52 million.  The Properties are a
Courtyard  by  Marriott   located  in  Alpharetta,   Georgia  (the   "Alpharetta
Property"),  a Residence Inn by Marriott located in Salt Lake City, Utah, in the
community of Cottonwood (the "Cottonwood  Property") and three TownePlace Suites
Properties  located  in  each  of  Mt.  Laurel,  New  Jersey  (the  "Mt.  Laurel
Property"),  Scarborough,  Maine (the  "Scarborough  Property")  and  Tewksbury,
Massachusetts (the "Tewksbury Property").

         The Company  acquired  the  Alpharetta  Property for  $13,877,000  from
Courtyard Management  Corporation,  the Cottonwood Property for $14,573,000 from
Residence Inn by Marriott,  Inc. and the Mt. Laurel,  Scarborough  and Tewksbury
Properties  for  $7,711,000,  $7,160,000  and  $9,050,000,   respectively,  from
TownePlace Management  Corporation.  In connection with the purchase of the five
Properties, the Company, as lessor, entered into five separate,  long-term lease
agreements.  The tenant of the Properties is the same unaffiliated  lessee.  The
leases on all five  Properties  are  cross-defaulted.  The general  terms of the
lease  agreements  are  described  in the  section  of the  Prospectus  entitled
"Business --  Description  of Property  Leases." The  principal  features of the
leases are as follows:

o        The initial term of each lease expires in approximately 15 years.

o        At the  end of the  initial  lease  term,  the  tenant  will  have  two
         consecutive renewal options of ten years.


<PAGE>

o        The leases require minimum rent payments as follows:

<TABLE>
<CAPTION>
<S> <C>

                                                                            Minimum
                  Property                        Location                Annual Rent
         ----------------------------       ----------------------      -----------------

         Alpharetta Property                 Alpharetta, GA                   $1,387,700
         Cottonwood Property                 Salt Lake City, UT                1,457,300
         Mt. Laurel Property                 Mt. Laurel, NJ                      771,100
         Scarborough Property                Scarborough, ME                     716,000
         Tewksbury Property                  Tewksbury, MA                       905,000

</TABLE>


o        A security  deposit for each of the Properties has been retained by the
         Company as security  for the tenant's  obligations  under the leases as
         follows:

                      Alpharetta Property                     $693,850
                      Cottonwood Property                      728,650
                      Mt. Laurel Property                      385,550
                      Scarborough Property                     358,000
                      Tewksbury Property                       452,500

o        The tenant of the five  Properties has  established an FF&E Reserve for
         each  Property  which will be used for the  replacement  and renewal of
         furniture,  fixtures and  equipment  relating to the hotel  Properties.
         Deposits to the FF&E Reserve are made once every four weeks as follows:
         (i) for the  Alpharetta  Property,  3% of gross  receipts for the first
         lease year; 4% of gross  receipts for the second lease year;  and 5% of
         gross  receipts  every lease year  thereafter,  (ii) for the Cottonwood
         Property,  2% of gross  receipts for the first lease year;  4% of gross
         receipts  for the second  lease year;  and 5% of gross  receipts  every
         lease year  thereafter  and (iii) for the Mt. Laurel,  Scarborough  and
         Tewksbury Properties, 4% of gross receipts for the first lease year; 5%
         of gross  receipts for the second lease year;  and 6% of gross receipts
         every lease year thereafter. Fund sin the FF&E Reserve and all property
         purchased  with funds from the FF&E Reserve shall be paid,  granted and
         assigned to the Company as additional rent.


o        Marriott  International,  Inc. has entered  into an agreement  with the
         tenant in which Marriott International,  Inc. has agreed to advance and
         loan to the tenant any  amounts  needed to pay  minimum  rent under the
         leases (the "Liquidity  Facility  Agreement").  The Liquidity  Facility
         Agreement terminates on the earlier of the end of the fourth lease year
         or at such time as the net operating income from the Properties exceeds
         minimum  rent due under the  leases  by 25% for any  trailing  12-month
         period.  The maximum  amount of the liquidity  facility is  $5,237,100.
         Upon acquisition of the Courtyard  Overland Park Property and the three
         SpringHill  Suites  by  Marriott  Properties  located  in  Centreville,
         Virginia,  and Charlotte and Raleigh,  North Carolina,  as described in
         "-- Pending  Investments," the maximum amount of the liquidity facility
         will increase to $10,017,000  and the agreement will cover minimum rent
         payments for the pending investments listed above, in addition to these
         five  Properties.  From such time,  net operating  income from all nine
         properties  will be  pooled  in  determining  whether  the  properties'
         aggregatenet  operating  income exceeds the aggregate  minimum rent due
         under the lease by 25%.  The tenant has  assigned its rights to receive
         advances under the Liquidity Facility Agreement to the lessor.


         The estimated  federal income tax basis of the  depreciable  portion of
the five Properties is as follows:

                          Alpharetta Property                    $12,280,000
                          Cottonwood Property                     12,896,000
                          Mt. Laurel Property                      6,824,000
                          Scarborough Property                     6,336,000
                          Tewksbury Property                       8,009,000

         The Alpharetta  Property,  which opened in January 2000, is a Courtyard
by Marriott located in Alpharetta, Georgia. The Alpharetta Property includes 153
guest rooms, two meeting rooms with  approximately  1,100 square feet, an indoor
pool and spa, an exercise  room and a  restaurant  and lounge.  The  property is
located  approximately  26  miles  north  of  downtown  Atlanta.  Other  lodging
facilities   located  in  proximity  to  the  Alpharetta   Property  include  an
AmeriSuites,  a Hampton Inn & Suites, a Residence Inn by Marriott,  a SpringHill
Suites by Marriott and a Sumner Suites.

         The  Cottonwood  Property,  which opened in August 1999, is a Residence
Inn by Marriott located in Salt Lake City, Utah, in the community of Cottonwood.
The  Cottonwood  Property  includes 144 guest  rooms,  a 690 square foot meeting
room, an outdoor pool and spa, a SportCourt and an exercise room.  Other lodging
facilities located in proximity to the Cottonwood  Property include a Candlewood
Suites, a Homewood Suites and a Residence Inn by Marriott.

         The Mt. Laurel Property, which opened in November 1999, is a TownePlace
Suites by Marriott  located in Mt. Laurel,  New Jersey.  The Mt. Laurel Property
includes 95 guest rooms,  an outdoor  swimming  pool and an exercise  room.  The
property  is located  within 15 miles of  downtown  Philadelphia,  Pennsylvania.
Other lodging facilities located in proximity to the Mt. Laurel Property include
a Courtyard by Marriott and a Fairfield Inn(R) by Marriott(R).

         The  Scarborough  Property,  which opened in June 1999, is a TownePlace
Suites by Marriott located in Scarborough, Maine, which is a suburb of Portland.
The Scarborough  Property  includes 95 guest rooms, an outdoor swimming pool and
an  exercise  room.  Other  lodging  facilities  located  in  proximity  to  the
Scarborough  Property include an AmeriSuites,  a Comfort Inn, a Fairfield Inn by
Marriott,  a Hampton  Inn, a Residence  Inn by Marriott  and another  TownePlace
Suites by Marriott.

         The  Tewksbury  Property,  which  opened in July 1999,  is a TownePlace
Suites by Marriott located in Tewksbury,  Massachusetts.  The Tewksbury Property
includes 95 guest rooms,  an outdoor  swimming  pool and an exercise  room.  The
property is located  approximately 25 miles northwest of downtown Boston.  Other
lodging  facilities  located in proximity to the  Tewksbury  Property  include a
Hawthorn  Suites,  a Homewood  Suites,  a Residence  Inn by Marriott and another
TownePlace Suites by Marriott.

         The average occupancy rate, the average daily room rate and the revenue
per  available  room for the  periods the hotels  have been  operational  are as
follows:

<TABLE>
<CAPTION>
<S> <C>
                                                                                                             Revenue
                                                                          Average           Average            per
                                                                         Occupancy           Daily          Available
         Property                     Location              Year            Rate           Room Rate          Room
----------------------------     --------------------     ----------    -------------     -------------    ------------

Alpharetta Property              Alpharetta, GA              **2000        50.60%             $96.83           $54.72

Cottonwood Property              Salt Lake City, UT           *1999        29.20%             $85.10           $27.00
                                                             **2000        70.70%              90.97            66.90

Mt. Laurel Property              Mt. Laurel, NJ               *1999        26.10%             $55.65           $15.04
                                                             **2000        68.60%              67.72            48.13

Scarborough Property             Scarborough, ME              *1999        65.70%             $70.38           $47.44
                                                             **2000        64.20%              62.13            41.22

Tewksbury Property               Tewksbury, MA                *1999        72.60%             $83.16           $62.60
                                                             **2000        83.00%              84.58            72.64

</TABLE>


*        Data for the Cottonwood  Property represents the period August 11, 1999
         through December 31, 1999, data for the Mt. Laurel Property  represents
         the period  November 22, 1999 through  December 31, 1999,  data for the
         Scarborough  Property  represents  the  period  June 25,  1999  through
         December 31, 1999 and data for the Tewksbury  Property  represents  the
         period July 15, 1999 through December 31, 1999.
**       Data for the Alpharetta  Property represents the period January 7, 2000
         through  August  11,  2000  and data for the  Cottonwood,  Mt.  Laurel,
         Scarborough and Tewksbury  Properties  represents the period January 1,
         2000 through August 11, 2000.

         The Company  believes that the results  achieved by the Properties,  as
shown in the  table  above,  may or may not be  indicative  of  their  long-term
operating  potential,  as the  Properties  opened  between June 1999 and January
2000.

PENDING INVESTMENTS

         The following  information updates and replaces the last two paragraphs
on page  53,  the  table  beginning  on page 54 and the  chart on page 60 of the
Prospectus.

         As of October 9, 2000,  the Company had initial  commitments to acquire
eight  additional  hotel  properties  directly.  These eight  Properties are two
Courtyard by Marriott  properties (one in each of Orlando,  Florida and Overland
Park,  Kansas),  one  Fairfield  Inn by Marriott  (in  Orlando,  Florida),  four
SpringHill Suites by Marriott (one in each of Centreville,  Virginia; Charlotte,
North Carolina;  Orlando,  Florida and  Raleigh/Durham,  North Carolina) and one
TownePlace Suites by Marriott (in Newark,  California).  The acquisition of each
of these properties is subject to the fulfillment of certain  conditions.  There
can be no assurance that any or all of the  conditions  will be satisfied or, if
satisfied, that one or more of these properties will be acquired by the Company.
If acquired,  the leases of these  properties are expected to be entered into on
substantially the same terms described in the section of the Prospectus entitled
"Business -- Description  of Property  Leases." In order to acquire all of these
properties,  the Company  must obtain  additional  funds  through the receipt of
additional offering proceeds and/or debt financing.

         Leases.  Set forth below are summarized  terms expected to apply to the
leases for each of the  properties.  More  detailed  information  relating  to a
property  and its related  lease will be  provided at such time,  if any, as the
property is acquired.





<PAGE>
<TABLE>
<CAPTION>
<S> <C>



                                               Estimated Purchase           Lease Term and
Property                                             Price                  Renewal Options
--------                                       ------------------           ---------------

Courtyard by Marriott                                 (2)                  15 years; two ten-year
Orlando, FL (1)                                                            renewal options
(the "Courtyard Little Lake Bryan
Property")
Hotel under construction

Fairfield Inn by Marriott                             (2)                  15 years; two ten-year
Orlando, FL (1)                                                            renewal options
(the "Fairfield Inn Little Lake
Bryan Property")
Hotel under construction

SpringHill Suites by Marriott                         (2)                  15 years; two ten-year
Orlando, FL (1)                                                            renewal options
(the "SpringHill Suites Little Lake
Bryan Property")
Hotel under construction

TownePlace Suites                                 $13,600,000              15 years; two ten-year
Newark, CA (3)                                                             renewal options
(the "TownePlace Suites Newark
Property")
Hotel under construction

Courtyard by Marriott                             $15,790,000              15 years; two ten-year
Overland Park, KS (4)                                                      renewal options
(the "Courtyard Overland Park
Property")
Hotel under construction

SpringHill Suites by Marriott                    $11,414,000               15 years; two ten-year
Centreville, VA (4)                                                        renewal options
(the "SpringHill Suites Centreville
Property")
Hotel under construction

SpringHill Suites by Marriott                     $11,773,000              15 years; two ten-year
Charlotte, NC (4)                                                          renewal options
(the "SpringHill Suites Charlotte
Property")
Hotel under construction




                        Minimum Annual
                             Rent                        Percentage Rent
                        --------------                   ---------------

                10% of the Company's total          for each lease year after the
                cost to purchase the property       second lease year, 7% of
                                                    revenues in excess of revenues
                                                    for the second lease year


                10% of the Company's total          for each lease year after the
                cost to purchase the property       second lease year, 7% of
                                                    revenues in excess of revenues
                                                    for the second lease year


                10% of the Company's total          for each lease year after the
                cost to purchase the property       second lease year, 7% of
                                                    revenues in excess of revenues
                                                    for the second lease year


                10% of the Company's total          for each lease year after the
                cost to purchase the property       second lease year, 7% of
                                                    revenues in excess of revenues
                                                    for the second lease year


                10% of the Company's total          for each lease year after the
                cost to purchase the property       second lease year, 7% of
                                                    revenues in excess of revenues
                                                    for the second lease year



                10% of the Company's total          for each lease year after the
                cost to purchase the property       second lease year, 7% of
                                                    revenues in excess of revenues
                                                    for the second lease year
                10% of the Company's total          for each lease year after the
                cost to purchase the property       second lease year, 7% of
                                                    revenues in excess of revenues
                                                    for the second lease year







<PAGE>



                                               Estimated Purchase           Lease Term and
Property                                            Price                   Renewal Options
--------                                       ------------------           ---------------

SpringHill Suites by Marriott                     $8,822,000               15 years; two ten-year
Raleigh/Durham, NC (4)                                                     renewal options
(the "SpringHill Suites
Raleigh/Durham Property")
Hotel under construction



                        Minimum Annual
                             Rent                        Percentage Rent
                        --------------                   ---------------




                10% of the Company's total          for each lease year after the
                cost to purchase the property       second lease year, 7% of
                                                      revenues in excess of revenues
                                                      for the second lease year



</TABLE>




------------------------------
FOOTNOTES:

(1)      The leases for the  Courtyard  Little Lake  Bryan,  the  Fairfield  Inn
         Little Lake Bryan and  SpringHill  Suites Little Lake Bryan  Properties
         are expected to be with the same unaffiliated lessee.

(2)      The anticipated  aggregate purchase price for the Courtyard Little Lake
         Bryan,  Fairfield  Inn Little Lake Bryan and  SpringHill  Suites Little
         Lake Bryan Properties is approximately $100 million.

(3)      The Company may be obligated to fund up to an  additional $1 million in
         construction costs relating to this Property.


(4)      The leases for the  Courtyard  Overland  Park,  the  SpringHill  Suites
         Centreville,  the SpringHill Suites Charlotte and the SpringHill Suites
         Raleigh/Durham Properties are expected to be with the same unaffiliated
         lessee.


<PAGE>



         In  addition to the above  commitments,  on August 28, 2000 the Company
entered  into an  agreement  in  principle  to invest in a property  in Phoenix,
Arizona (the "Desert Ridge  Property").  The Desert Ridge Property will be owned
by a Joint  Venture  (the  "Desert  Ridge Joint  Venture")  between the Company,
Marriott International, Inc. or an affiliate thereof, and a partnership of which
an  Affiliate  of the  Advisor  will be the  general  partner.  The  Company  is
anticipated to have a 44% equity interest in the Desert Ridge Joint Venture, and
an equivalent  interest in the Desert Ridge Joint Venture's  profits and losses.
The overall cost of the Property (including acquisition of land, development and
construction) is estimated to be approximately $293,000,000. The Company expects
that the Desert Ridge Joint Venture will obtain permanent financing from a third
party lender for  approximately  60% of this amount,  with such  financing to be
secured by a mortgage  on the  Desert  Ridge  Property.  In  addition,  Marriott
International,  Inc. is expected to provide  financing for an additional  20% of
this  amount to the  Desert  Ridge  Joint  Venture,  secured  by  pledges of the
co-venturers'  equity interests in the Desert Ridge Joint Venture. The remaining
20% of the  costs  are  expected  to be  financed  by the  co-venturers'  equity
contributions  to the  Desert  Ridge  Joint  Venture.  In  connection  with  the
development  of the Desert  Ridge  Property,  the Company  anticipates  that the
Desert  Ridge  Joint  Venture  will  pay  Development  Fees  to  a  wholly-owned
subsidiary  of the Advisor  that will act,  along with an  affiliate of Marriott
International,  Inc.,  as  co-developer  of the  Property.  The Property will be
leased to a subsidiary of the Desert Ridge Joint Venture  (which will also be an
indirect  subsidiary  of the Company and will make an election  after January 1,
2001 to be  treated  as a taxable  REIT  subsidiary  under the Code) and will be
managed by Marriott International, Inc.

         The Desert Ridge  Property  will be  constructed  on a 400 acre site as
part of a 5,700 acre  master-planned  development in northeastern  Phoenix.  The
Property will be operated as a Marriott  Resort & Spa and will include 950 guest
rooms  (including  85 suites),  approximately  78,700 square feet of meeting and
banquet  facilities,  a full service health spa, eating and beverage  facilities
that seat 947 people,  two 18-hole golf courses and 8 tennis courts.  The Desert
Ridge  Property  is  currently  anticipated  to open to the public in January of
2003.


         The following chart provides additional information on occupancy levels
for Marriott systemwide lodging brands and Wyndham Hotels:

                          Total Occupancy Rate for 1999
                Marriott Brand and Wyndham Hotels as Compared to
                              U.S. Lodging Industry

                                                         Occupancy Rate

U.S. Lodging Industry                                         63.3%
Fairfield Inn by Marriott                                     68.7%
Wyndham Hotels                                                69.3%
Courtyard by Marriott                                         73.2%
Marriott Hotels, Resorts and Suites                           73.8%
Residence Inn by Marriott                                     79.0%

Source:  Smith  Travel  Research  (U.S.   Lodging   Industry   only),   Marriott
         International, Inc. 1999 Form 10-K and Wyndham International, Inc. 1999
         Form 10-K




<PAGE>



                             SELECTED FINANCIAL DATA

         The following  table sets forth certain  financial  information for the
Company,  and should be read in conjunction  with  "Management's  Discussion and
Analysis of Financial  Condition  and Results of  Operations"  and the Financial
Statements included in Appendix B.


<TABLE>
<CAPTION>
<S> <C>


                                      Six Months Ended
                                 June 30,          June 30,                            Year Ended December 31,


<PAGE>

                                   2000              1999
                               (Unaudited)        (Unaudited)           1999               1998          1997 (1)       1996(1)(2)
                               ===========        ===========           ====               ====          ========       ==========
Revenues                         $12,271,839        $3,420,429        $10,677,505       $1,955,461      $ 46,071           $ --
Net earnings                       8,588,024         1,892,529          7,515,988          958,939        22,852             --
Cash distributions
  declared (3)                    11,936,334         3,052,616         10,765,881        1,168,145        29,776             --
Funds from operations (4)         11,778,538         2,870,479         10,478,103        1,343,105        22,852             --
Earnings per Share
  Basic                                 0.25              0.20               0.47             0.40          0.03             --
  Diluted                               0.25              0.20               0.45             0.40          0.03             --
Cash distributions declared
  per Share                             0.36              0.36               0.72             0.47          0.05             --
Weighted average number
  of Shares outstanding (5)
     Basic                        33,693,585         9,391,870         15,890,212        2,402,344       686,063             --
     Diluted                      33,693,585         9,391,870         21,437,859        2,402,344       686,063             --



                                 June 30,          June 30,
                                   2000              1999                                   December 31,

<PAGE>
                               (Unaudited)        (Unaudited)           1999              1998             1997            1996
                               ===========        ===========           ====              ====             ====            ====
Total assets                    $350,340,779      $141,107,865       $266,968,274      $48,856,690       $9,443,476       $598,190
Total stockholders' equity       329,881,544       138,605,679        253,054,839       37,116,491        9,233,917        200,000

</TABLE>


(1)      No operations commenced until the Company received minimum offering
         proceeds and funds were released from escrow on October 15, 1997.

(2)      Selected  financial  data for 1996  represents the period June 12, 1996
         (date of inception) through December 31, 1996.

(3)      Cash distributions are declared by the Board of Directors and generally
         are based on various factors, including cash available from operations.
         Approximately  28%, 38%, 30%, 18% and 23% of cash distributions for the
         six months ended June 30, 2000 and 1999,  and the years ended  December
         31, 1999, 1998 and 1997, respectively, represent a return of capital in
         accordance with generally accepted accounting principles ("GAAP"). Cash
         distributions  treated as a return of capital on a GAAP basis represent
         the amount of cash  distributions in excess of accumulated net earnings
         on a GAAP basis,  including  deductions for depreciation  expense.  The
         Company has not treated such amount as a return of capital for purposes
         of calculating Invested Capital and the Stockholders' 8% Return.

(4)      Funds from operations ("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 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.  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.  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  financial  statements  and  notes  thereto.  See
         Appendix B-- Financial Information.

(5)      The weighted  average  number of Shares  outstanding  is based upon the
         period the Company was operational.



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The following  information contains  forward-looking  statements within
the meaning of Section 27A of the  Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements generally are characterized by
the use of terms such as  "believe,"  "expect"  and "may."  Although the Company
believes that the expectations reflected in such forward-looking  statements are
based upon  reasonable  assumptions,  the Company's  actual results could differ
materially  from  those set  forth in the  forward-looking  statements.  Certain
factors that might cause such a  difference  include the  following:  changes in
general  economic  conditions,   changes  in  local  and  national  real  estate
conditions, the availability of capital from borrowings under the Company's Line
of Credit,  availability of proceeds from the Company's offering, the ability of
the Company to obtain 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. The Company undertakes
no obligation to update these  forward-looking  statements to reflect any future
events or circumstances.

                                  Introduction

The Company

         The Company is a Maryland  corporation  that was  organized on June 12,
1996. CNL  Hospitality  GP Corp.  and CNL  Hospitality LP Corp. are wholly owned
subsidiaries of CNL Hospitality Properties,  Inc., organized in Delaware in June
1998. CNL Hospitality  Partners,  LP is a Delaware limited partnership formed in
June 1998. CNL Hospitality GP Corp. and CNL Hospitality LP Corp. are the general
and limited  partner,  respectively,  of CNL Hospitality  Partners,  LP. In this
section, the term "Company" includes, unless the context otherwise requires, CNL
Hospitality  Properties,  Inc., CNL Hospitality Partners, LP, CNL Hospitality GP
Corp., CNL Hospitality LP Corp. and CNL Philadelphia Annex, LLC.

         The Company was formed to acquire  Properties located across the United
States to be leased on a long-term,  "triple-net" basis to operators of selected
national and regional  limited  service,  extended  stay and full service  Hotel
Chains. The Company may also provide Mortgage Loans and Secured Equipment Leases
to operators of Hotel Chains.  Secured  Equipment Leases will be funded from the
proceeds of financing to be obtained by the Company.  The aggregate  outstanding
principal  amount of  Secured  Equipment  Leases  will not  exceed  10% of Gross
Proceeds from the Company's offerings of Shares of Common Stock.

                         Liquidity and Capital Resources

Common Stock Offerings

         The Company was formed in June 1996, at which time it received  initial
capital  contributions  from the Advisor of $200,000 for 20,000 Shares of Common
Stock. On July 9, 1997, the Company  commenced its Initial Offering of Shares of
Common  Stock.  Upon  completion of the Initial  Offering on June 17, 1999,  the
Company had received  aggregate  subscriptions  for 15,007,264  Shares totalling
$150,072,637  in Gross  Proceeds,  including  $72,637 (7,264 Shares) through the
Company's  Reinvestment Plan.  Following the completion of its Initial Offering,
the Company  commenced the 1999  Offering of up to  27,500,000  Shares of Common
Stock   ($275,000,000).   As  of  June  30,  2000,   the  Company  had  received
subscriptions  for 23,521,199  Shares  totalling  $235,211,997 in Gross Proceeds
from the 1999 Offering, including $965,145 (96,514 Shares) through the Company's
Reinvestment  Plan.  Upon completion of the 1999 Offering on September 14, 2000,
the Company had  received  subscriptions  for  approximately  27,500,000  Shares
totalling  approximately  $275,000,000  in Gross  Proceeds,  including  $965,194
(96,520  Shares)  through  the  Company's   Reinvestment  Plan.   Following  the
completion of the 1999  Offering,  the Company  commenced this offering of up to
45,000,000  Shares of Common  Stock  ($450,000,000).  Of the  45,000,000  Shares
offered, up to 5,000,000 are available to stockholders purchasing Shares through
the Reinvestment Plan.

         As of June 30, 2000 and December 31, 1999,  net proceeds to the Company
from its offerings of Shares and capital  contributions from the Advisor,  after
deduction of Selling  Commissions,  marketing  support and due diligence expense
reimbursement   fees  and   Organizational   and  Offering   Expenses   totalled
approximately $340,000,000 and $257,000,000,  respectively. As of June 30, 2000,
the Company had used net proceeds from the Prior Offerings to invest directly or
indirectly, approximately $224,300,000 in 15 hotel Properties, to pay $7,381,500
as deposits on six  additional  hotel  Properties,  to redeem  75,761  Shares of
Common Stock for $696,997 and to pay  approximately  $20,900,000  in Acquisition
Fees  and  certain  Acquisition  Expenses,   leaving  approximately  $87,000,000
available for investment in Properties and Mortgage Loans.

         During the period  July 1, 2000  through  October 9, 2000,  the Company
received  additional  net  offering  proceeds  from its 1999  Offering  and this
offering  of   approximately   $61,800,000  and  as  of  October  9,  2000,  had
approximately  $67,300,000  available for  investment in Properties and Mortgage
Loans.  The  Company  expects  to use  the  uninvested  net  proceeds  plus  any
additional  net  proceeds  from the sale of Shares in this  offering to purchase
additional  Properties and, to a lesser extent,  invest in Mortgage  Loans.  See
"Investment Objectives and Policies." 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 borrowings.  The Company currently has a
$30,000,000 Line of Credit available, as described below. Borrowings on the Line
of Credit  may be  repaid  with  offering  proceeds,  proceeds  from the sale of
assets,  working capital or Permanent Financing.  The maximum amount the Company
may borrow,  absent a  satisfactory  showing that a higher level of borrowing is
appropriate as approved by a majority of the Independent  Directors,  is 300% 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, the Company elected to
redeem Shares,  subject to certain  conditions and  limitations.  During the six
months  ended June 30, 2000 and the year ended  December  31,  1999,  62,876 and
12,885  Shares,  respectively,  were  redeemed at $9.20 per Share for a total of
$578,455  and  $118,542,  respectively.  These  Shares were  retired from Shares
outstanding of Common Stock. No Shares were redeemed in 1998.

Indebtedness

         On July 31,  1998,  the Company  entered into an initial Line of Credit
and security  agreement  with a bank to be used by the Company to acquire  hotel
Properties. The initial Line of Credit provides that the Company will be able to
receive advances of up to $30,000,000 until July 30, 2003, with an annual review
to be  performed  by the bank to  indicate  that  there has been no  substantial
deterioration,  as determined by the bank in its reasonable  discretion,  of the
credit quality.  Interest expense on each advance shall be payable monthly, with
all unpaid  interest and principal due no later than five years from the date of
the advance.  Advances under the Line of Credit will bear interest at either (i)
a rate per annum equal to 318 basis  points above the London  Interbank  Offered
Rate  (LIBOR) or (ii) a rate per annum equal to 30 basis points above the bank's
base rate,  whichever  the Company  selects at the time  advances  are made.  In
addition, a fee of 0.5% per advance will be due and payable to the bank on funds
as advanced.  Each advance made under the Line of Credit will be  collateralized
by an assignment of rents and leases.  In addition,  the Line of Credit provides
that the  Company  will not be able to further  encumber  the  applicable  hotel
Property during the term of the advance without the bank's consent.  The Company
will be required,  at each closing,  to pay all costs, fees and expenses arising
in  connection  with the Line of Credit.  The  Company  must also pay the bank's
attorney's fees,  subject to a maximum cap, incurred in connection with the Line
of Credit and each advance.  In connection with the Line of Credit,  the Company
incurred  a  commitment  fee,  legal  fees and  closing  costs of  approximately
$138,000.  Proceeds  from the Line of Credit  were used in  connection  with the
purchase of two hotel  Properties and the commitment to acquire three additional
Properties  during 1998. As of June 30, 2000 and December 31, 1999,  the Company
had no amounts  outstanding  under the Line of Credit.  The  Company has not yet
received a commitment for any Permanent Financing and there is no assurance that
the Company will obtain any Permanent Financing on satisfactory terms.

         In March 2000, the Company through the LLC entered into a Tax Increment
Financing Agreement with the Philadelphia  Authority for Industrial  Development
("TIF  Note")  for $10  million  which  is  collateralized  by the  LLC's  hotel
Property.  The  principal  and  interest on the TIF Note is expected to be fully
paid by the LLC's hotel Property's  incremental  property taxes over a period of
20 years. The payment of the incremental property taxes is the responsibility of
the  tenant  of the  hotel  Property.  Interest  on the TIF Note is  12.85%  and
payments are due yearly  through  2017. In the event that  incremental  property
taxes are  insufficient  to cover  the  principal  and  interest  due,  Marriott
International, Inc. is required to fund such shortfall pursuant to its guarantee
of the TIF Note.

Market Risk

         The  Company  may  be  subject  to  interest   rate  risk  through  any
outstanding  balances  on its  variable  rate Line of Credit.  The  Company  may
mitigate this risk by paying down any outstanding balances on the Line of Credit
from offering proceeds should interest rates rise  substantially.  There were no
amounts outstanding on its variable Line of Credit at June 30, 2000 and December
31, 1999.

Property Acquisitions and Investments

         As of December  31,  1998,  the  Company  owned two  Properties  in the
Atlanta,  Georgia area which were each being operated by Crestline Capital Corp.
as Residence Inn by Marriott. In February 1999, the Company executed a series of
agreements with Five Arrows pursuant to which the Company and Five Arrows formed
a jointly owned real estate investment trust,  Hotel Investors,  for the purpose
of acquiring up to eight Properties. At the time the agreement was entered into,
the eight  Properties  were either  newly  constructed  or in various  stages of
completion.

         In February 1999 and June 1999, Hotel Investors  purchased seven of the
eight Properties for an aggregate  purchase price of approximately  $167 million
and  paid  $3  million  as a  deposit  on  the  one  remaining  Property.  For a
description of the Properties acquired,  see "Business -- Property  Acquisitions
-- Western  International  Portfolio."  The $3 million  deposit  relating to the
eighth Property was refunded to Hotel Investors by the seller in January 2000 as
a result of Hotel Investors exercising its option to terminate its obligation to
purchase the Property under the purchase and sale agreement.

         In order to fund these  purchases,  Five Arrows invested  approximately
$48  million  and the  Company  invested  approximately  $38  million  in  Hotel
Investors.  Hotel Investors  funded the remaining  amount of  approximately  $88
million with permanent financing, collateralized by the Hotel Investors Loan. In
return for their respective investments, Five Arrows received a 51% common stock
interest  and  the  Company  received  a 49%  common  stock  interest  in  Hotel
Investors. Five Arrows received 48,337 shares of Class A Preferred Stock and the
Company received 37,979 shares of Class B Preferred Stock.

         In October 2000, Five Arrows,  the Company and Hotel Investors  entered
into an agreement under which Hotel  Investors  agreed to redeem 2,104 shares of
Class A Preferred  Stock and an  equivalent  number of shares of common stock of
Hotel Investors held by Five Arrows.  In addition,  the Company  purchased 7,563
shares of both Class A Preferred  Stock and common stock of Hotel Investors from
Five Arrows for  $11,395,000.  Hotel Investors  agreed to redeem 1,653 shares of
Class B Preferred  Stock and an  aggregate  of 10,115  shares of common stock of
Hotel  Investors held by the Company.  Five Arrows'  remaining  38,670 shares of
Class A  Preferred  Stock and the  Company's  7,563  shares of Class A Preferred
Stock were  exchanged  for an  equivalent  number of shares of Class E Preferred
Stock, par value $0.01 ("Class E Preferred Stock"), of Hotel Investors. Upon the
consummation of this transaction,  the Company owns an interest of approximately
53% and Five Arrows owns an interest of  approximately  47%, in the common stock
of Hotel Investors.  Pursuant to this agreement,  the Company repurchased 65,285
Shares held by Five Arrows for an aggregate price of $620,207.50.  Additionally,
Five Arrows granted the Company the following options:  (1) on or before January
31,  2001,  the  Company  has the  option to  purchase  7,250  shares of Class E
Preferred  Stock and an equal  number of  shares  of common  stock  held by Five
Arrows for $1,000 per pair of Class E Preferred Stock and common stock,  and (2)
provided  that the Company  purchased  all of the shares under the first option,
the Company will have the option,  until June 30, 2002, to purchase 7,251 shares
of Class E  Preferred  Stock and an equal  number of shares of common  stock for
$1,000 for each pair. If the Company elects not to purchase the remaining shares
under the first and second options,  Five Arrows will have the right, at certain
defined dates, to exchange its shares in Hotel Investors for Common Stock of the
Company at an exchange rate of 157.000609  Shares of the Company's  Common Stock
for each share of Class E Preferred Stock, subject to adjustment in the event of
stock  dividends,  stock  splits  and  certain  other  corporate  actions by the
Company.

         Cash available for  distributions  of Hotel  Investors is paid first to
Five Arrows  under a  contractual  right of Five  Arrows to receive  payments as
consideration  for  agreeing  to defer the  conversion  of its Class A Preferred
Stock (prior to its  conversion  to Class E Preferred  Stock) to Common Stock of
the  Company.  These  payments  are  equivalent  to the  difference  between any
distributions received by Five Arrows from Hotel Investors and the distributions
that Five  Arrows  would  have  received  from the  Company  if Five  Arrows had
converted its Class A preferred  Stock into the  Company's  Common Stock on June
30, 2000.  Then, cash available for  distributions is distributed to the Company
with  respect  to  its  Class  B  Preferred  Stock.  Next,  cash  available  for
distributions  is  distributed  to  100  CNL  Holdings,   Inc.  and  affiliates'
associates who each own one share of Class C preferred stock in Hotel Investors,
to  provide a  quarterly,  cumulative,  compounded  eight  percent  return.  All
remaining cash available for  distributions is distributed pro rata with respect
to the interest in the common shares.

         Five  Arrows  also  invested  approximately  $14 million in the Company
through the purchase of Common Stock pursuant to the Company's  Initial Offering
and the 1999  Offering,  the  proceeds of which were used by the Company to fund
approximately  38% of its funding  commitment to Hotel  Investors.  During 1999,
approximately $3.7 million of this amount was initially treated as a loan due to
the  stock  ownership   limitations  specified  in  the  Company's  Articles  of
Incorporation at the time of investment.  Subsequently,  this loan was converted
to Common Stock.

         In  addition  to the above  investments,  Five  Arrows  purchased a 10%
interest in the  Advisor.  In  connection  with Five Arrow's  investment  in the
Company,  the Advisor and Hotel Investors,  certain  Affiliates  agreed to waive
certain fees otherwise  payable to them by the Company.  The Advisor is also the
advisor to Hotel  Investors  pursuant  to a  separate  advisory  agreement.  The
Company will not pay the Advisor fees,  including the Company's pro rata portion
of Hotel  Investors'  advisory  fees,  in excess of  amounts  payable  under its
Advisory Agreement.

         On November 16, 1999,  the Company  acquired an 89% interest in the LLC
for approximately  $58 million.  The sole purpose of the LLC is to own and lease
the Courtyard by Marriott hotel Property located in Philadelphia,  Pennsylvania.
This historic  Property was recently  renovated and converted into a hotel which
commenced operations in late November 1999.

         In  addition,  on  December  10,  1999,  the  Company  acquired a newly
constructed Property located in Mira Mesa,  California,  for approximately $15.5
million.   The  Property  is  being   operated  by  a  subsidiary   of  Marriott
International, Inc. as a Residence Inn by Marriott.

         On June 1, 2000,  the Company  acquired  two Wyndham  hotel  Properties
located in Billerica, Massachusetts and Denver, Colorado for approximately $43.5
million. These Properties are being operated by Wyndham  International,  Inc. as
Wyndham Hotels.

         Additionally,  on June 16, 2000,  the Company  acquired two  Properties
located in Palm  Desert,  California  for  approximately  $30.3  million.  These
Properties are being operated by the tenant as a Residence Inn by Marriott and a
Courtyard by Marriott.

         On July 28,  2000,  the  Company  acquired  two  Properties  located in
Gaithersburg,  Maryland and Merrifield,  Virginia for approximately $34 million.
These  Properties are being operated by a subsidiary of Marriott  International,
Inc. as a Courtyard by Marriott and a SpringHill Suites by Marriott.

         On August 22, 2000,  the Company  acquired five  Properties  located in
Alpharetta,  Georgia; Salt Lake City, Utah; Mt. Laurel, New Jersey; Scarborough,
Maine  and  Tewksbury,   Massachusetts  for  approximately  $52  million.  These
Properties are being operated by a subsidiary of Marriott International, Inc. as
a Courtyard by Marriott, a Residence Inn by Marriott and three TownePlace Suites
by Marriott.

         Hotel Investors, the LLC and the Company, as lessors, have entered into
long-term,  triple-net leases with operators of Hotel Chains, as described below
in "Liquidity Requirements."

Commitments

         As of October 9, 2000,  the Company had initial  commitments to acquire
eight additional hotel Properties directly for an anticipated aggregate purchase
price of  approximately  $161 million and an interest in one property  through a
joint venture for  approximately  $25 million.  The acquisition of each of these
Properties  is subject to the  fulfillment  of certain  conditions.  In order to
acquire all of these  Properties,  the  Company  must  obtain  additional  funds
through the receipt of additional  offering proceeds and/or advances on the Line
of Credit.  In  connection  with three of these  agreements,  the  Company has a
deposit,  in the form of a letter of credit,  collateralized by a certificate of
deposit,  amounting  to $5  million.  In  connection  with one of the  remaining
agreements,  the Company has a deposit of approximately $680,000 held in escrow.
There can be no assurance  that any or all of the  conditions  will be satisfied
or, if satisfied,  that one or more of these  Properties will be acquired by the
Company.

         As  of  October  9,  2000,   the  Company  had  not  entered  into  any
arrangements  creating a reasonable  probability  a particular  Mortgage Loan or
Secured Equipment Lease would be funded. The Company is presently negotiating to
acquire  additional  Properties,  but as of October 9, 2000, the Company had not
acquired any such Properties or entered into any Mortgage Loans.

Cash and Cash Equivalents

         Until Properties are acquired,  or Mortgage Loans 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,  such as demand  deposit
accounts at commercial banks, certificates of deposit and money market accounts,
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. At June 30, 2000, the Company
had  $105,926,387  invested  in  such  short-term  investments  as  compared  to
$101,972,441  at December  31,  1999.  The  increase  in the amount  invested in
short-term  investments was primarily attributable to proceeds received from the
sale of Shares of Common Stock from the 1999 Offering.  These funds will be used
to purchase  additional  Properties,  to make  Mortgage  Loans,  to pay Offering
Expenses and Acquisition  Expenses,  to pay  Distributions  to stockholders  and
other Company expenses and, in management's discretion, to create cash reserves.

Liquidity Requirements

         The  Company  expects to meet its  short-term  liquidity  requirements,
other  than  for  Offering  Expenses  and the  acquisition  and  development  of
Properties  and  investment  in  Mortgage  Loans and Secured  Equipment  Leases,
through cash flow provided by operating  activities.  The Company  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
tenants  defaulting under the terms of their lease agreements,  the Company will
use borrowings under its Line of Credit.

         Management  believes  that the  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 unlikely event a tenant's insurance policy lapses
or is insufficient to cover a claim relating to a Property.

         The   Company   expects   to  meet  its  other   short-term   liquidity
requirements,  including payment of Offering Expenses, Property acquisitions and
development and investment in Mortgage Loans and Secured Equipment Leases,  with
additional  advances  under its Line of Credit and proceeds from this  offering.
The Company expects to meet its long-term liquidity  requirements through short-
or long-term, unsecured or secured debt financing or equity financing.

Distributions

         During the six months ended June 30, 2000 and 1999, and the years ended
December 31, 1999,  1998 and 1997, the Company  generated  cash from  operations
(which  includes cash received  from tenants,  and dividend,  interest and other
income  received,  less  cash  paid  for  operating  expenses)  of  $14,746,948,
$2,033,757,  $12,890,161,  $2,776,965 and $22,469,  respectively.  Based on cash
from  operations  and  dividends  due to the Company from Hotel  Investors,  the
Company  declared and paid  Distributions  to its  stockholders  of $11,936,334,
$3,052,616, $10,765,881, $1,168,145 and $29,776 during the six months ended June
30,  2000 and 1999,  and the  years  ended  December  31,  1999,  1998 and 1997,
respectively.  In  addition,  on July 1,  August 1 and  September  1, 2000,  the
Company declared Distributions to stockholders of record on July 1, August 1 and
September 1, 2000, totalling $2,402,051, $2,513,735 and $2,614,001, respectively
(each  representing  $0.0625 per Share),  which were paid in September  2000. On
October 1, 2000, the Company declared Distributions to stockholders of record on
October 1, 2000, totalling  $2,766,393 ($0.0625 per Share),  payable in December
2000. For the six months ended June 30, 2000 and 1999,  approximately 51 percent
and 64 percent, respectively, of the Distributions received by stockholders were
considered to be ordinary  income and  approximately  49 percent and 36 percent,
respectively,  were  considered  a return of  capital  for  federal  income  tax
purposes. For the years ended December 31, 1999, 1998 and 1997, approximately 75
percent, 76 percent and 100 percent, respectively, of the Distributions received
by  stockholders  were  considered to be ordinary  income and  approximately  25
percent and 24 percent were  considered  a return of capital for federal  income
tax purposes for the years ended  December 31, 1999 and 1998,  respectively.  No
amounts  distributed to the  stockholders for the six months ended June 30, 2000
and 1999, and the years ended December 31, 1999,  1998 and 1997, are required to
be or have been  treated by the Company as a return of capital  for  purposes of
calculating the Stockholders' 8% Return on Invested Capital.

Related Party Transactions

         During the six months ended June 30, 2000 and 1999, and the years ended
December 31, 1999, 1998 and 1997,  Affiliates of the Company  incurred on behalf
of the  Company  $2,841,899,  $1,539,215,  $3,257,822,  $459,250  and  $638,274,
respectively,  for  certain  Organizational  and  Offering  Expenses,  $368,037,
$418,353, $653,231, $392,863 and $26,149,  respectively, for certain Acquisition
Expenses, and $438,451, $169,220,  $325,622, $98,212 and $11,003,  respectively,
for certain Operating  Expenses.  As of June 30, 2000 and 1999, the Company owed
the Advisor and other related parties $948,585 and $443,914,  respectively,  for
expenditures  incurred on behalf of the Company and for  Acquisition  Fees.  The
Advisor has agreed to pay or  reimburse  to the Company  all  Offering  Expenses
(excluding   commissions  and  marketing   support  and  due  diligence  expense
reimbursement fees) in excess of three percent of gross offering proceeds.

         During 1999,  the Company opened three 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 is a  stockholder.  The amount  deposited  with this
Affiliate  at  June  30,  2000  and  December  31,  1999,  was  $15,947,271  and
$15,275,629, respectively.

Other

         The tenants of the Properties have established FF&E Reserve funds which
will  be used  for the  replacement  and  renewal  of  furniture,  fixtures  and
equipment relating to the hotel Properties.  Funds in the FF&E Reserve have been
paid,  granted  and  assigned  to the  Company,  or in  the  case  of the  seven
Properties owned indirectly,  to Hotel Investors.  For the six months ended June
30, 2000 and 1999,  and the years  ended  December  31, 1999 and 1998,  revenues
relating to the FF&E  Reserve of the  Properties  directly  owned by the Company
totalled  $480,113,  $126,033,  $320,356  and  $98,099,  respectively,  of which
$100,777,  $275,630 and $82,407 was  classified as a receivable at June 30, 2000
and December 31, 1999 and 1998, respectively.  For the six months ended June 30,
2000 and the year ended December 31, 1999, revenues relating to the FF&E Reserve
of the Properties indirectly owned through Hotel Investors totalled $428,309 and
$343,264,  respectively,  of  which  $80,107  and  $288,624,  respectively,  was
classified as a receivable.  No such amounts were  outstanding  or earned during
1997. Due to the fact that the Properties are leased on a long-term,  triple-net
basis,  management  does not believe  that other  working  capital  reserves are
necessary  at this  time.  Management  has the  right to cause  the  Company  to
maintain  additional  reserves  if, in their  discretion,  they  determine  such
reserves are required to meet the Company's working capital needs.

         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,  other than as referred to in this
Prospectus.

         Management  expects that the cash to be generated from  operations will
be adequate to pay Operating Expenses and to make Distributions to stockholders.

                              Results of Operations

         As of June 30, 2000 and December 31, 1999,  the Company had acquired 15
and 11 Properties,  respectively,  either directly or indirectly,  consisting of
land,  buildings  and  equipment,  and had entered into a long-term,  triple-net
lease  agreement  relating  to each of these  Properties.  The  Property  leases
provide for minimum  base annual  rental  payments  ranging  from  approximately
$1,204,000  to  $6,500,000,  which  are  payable  in  monthly  installments.  In
addition,  certain of the leases also  provide  that,  commencing  in the second
lease  year,  the annual base rent  required  under the terms of the leases will
increase.  In  addition to annual base rent,  the tenant  pays  contingent  rent
computed as a percentage  of gross sales of the Property.  The Company's  leases
also  require  the  establishment  of  the  FF&E  Reserves.  The  FF&E  Reserves
established  for the  Properties,  directly or indirectly  owned by the Company,
have been reported as additional rent for the quarters and six months ended June
30, 2000 and 1999 and the years ended December 31, 1999 and 1998.



<PAGE>

Comparison  of quarter  and six months  ended June 30,  2000 to quarter  and six
months ended June 30, 1999

         During the six months ended June 30, 2000 and 1999,  the Company earned
rental income from  operating  leases and FF&E Reserve  income of $6,456,916 and
$1,612,559, respectively ($3,571,785 and $813,914 of which was earned during the
quarters  ended June 30,  2000 and 1999,  respectively).  No  contingent  rental
income was earned for the  quarters and six months ended June 30, 2000 and 1999.
The increase in rental  income and FF&E Reserve  income was due to the fact that
the Company and the LLC owned eight  Properties  directly during the quarter and
six months ended June 30, 2000, as compared to two  Properties  directly  during
the quarter and six months ended June 30, 1999.  Because the Company has not yet
acquired all of its Properties, revenues for the six months ended June 30, 2000,
represent  only a portion of  revenues  which the Company is expected to earn in
future periods.

         During 1999, the Company owned and leased seven  Properties  indirectly
through its investment in Hotel Investors,  as described above in "Liquidity and
Capital Resources -- Property  Acquisitions and Investments." In connection with
its  investment  during the six months ended June 30, 2000 and 1999, the Company
recorded $1,853,735 and $900,131,  respectively, in dividend income and $260,437
and $390,450, respectively, in equity in loss after deduction of preferred stock
dividends,  resulting in net earnings of $1,593,298  and $509,681,  respectively
($786,284 and $452,377  represented  net earnings from this  investment  for the
quarters ended June 30, 2000 and 1999, respectively).

         During the six months  ended June 30, 2000 and 1999,  the Company  also
earned   $3,961,188  and  $907,739,   respectively,   in  interest  income  from
investments  in money  market  accounts  and  other  short-term,  highly  liquid
investments and other income ($2,191,979 and $614,875 of which was earned during
the  quarters  ended June 30,  2000 and 1999,  respectively).  The  increase  in
interest income was primarily attributable to increased offering proceeds in the
current  year being  temporarily  invested  in money  market  accounts  or other
short-term,  highly liquid  investments  pending  investment  in Properties  and
Mortgage  Loans.  As net  offering  proceeds  from  the 1999  Offering  and this
offering  are  invested  in  Properties  and used to make  Mortgage  Loans,  the
percentage of the Company's total revenues from interest income from investments
in money market  accounts or other  short-term,  highly  liquid  investments  is
expected to decrease.

         During the six months ended June 30, 2000,  Crestline Capital Corp. and
City Center Annex Tenant  Corporation  each contributed more than ten percent of
the Company's  total rental income.  In addition,  the majority of the Company's
rental  income was earned from  Properties  operating  as Marriott  brand chains
during the six months  ended June 30,  2000.  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 or the Marriott chains could  significantly  impact the results of
operations of the Company. However,  management believes that the risk of such a
default is reduced due to the essential or important  nature of these Properties
for the ongoing operations of the lessees. It is expected that the percentage of
total rental  income  contributed  by these  lessees will decrease as additional
Properties are acquired and leased during 2000 and subsequent years.

         Operating  expenses,  including  interest  expense and depreciation and
amortization  expense,  were  $3,157,168 and $1,137,450 for the six months ended
June 30,  2000 and 1999,  respectively  ($1,765,588  and  $418,917  of which was
incurred  during the quarters ended June 30, 2000 and 1999,  respectively).  The
increase in the dollar amount of operating  expenses  during the quarter and six
months  ended June 30,  2000,  as  compared to the same  periods  for 1999,  was
primarily as a result of the Company and the LLC owning two Properties  directly
during  the  quarter  and six  months  ended June 30,  1999,  compared  to eight
properties  during the quarter and six months ended June 30, 2000. This resulted
in an  increase  in Asset  Management  Fees of  $217,987  and  $294,844,  and an
increase in depreciation  and  amortization  expense of $843,846 and $1,506,729,
for the quarter and six months ended June 30, 2000, respectively, as compared to
the same periods for 1999.  Additionally,  general operating and  administrative
expenses  increased  as a result of  Company  growth,  while  interest  expense,
including  loan cost  amortization,  decreased  from $233,330 for the six months
ended June 30,  1999 to $16,222 for the six months  ended June 30, 2000  ($8,112
and $32,757 of which was incurred  during the  quarters  ended June 30, 2000 and
1999,  respectively).  The  decrease  in  interest  expense  was a result of the
Company not having any amounts  outstanding on its Line of Credit during the six
months ended June 30, 2000.

         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.

Comparison of year ended December 31, 1999 to year ended December 31, 1998

         During the years ended  December 31, 1999 and 1998,  the Company earned
rental income from operating  leases,  contingent rental income and FF&E Reserve
income of $4,230,995 and $1,316,599,  respectively.  The 221% increase in rental
income,  contingent  rental  income and FF&E Reserve  income was due to the fact
that the Company owned two Properties for the full year ended December 31, 1999,
as compared to two Properties for approximately six months during the year ended
December  31,  1998.  In  addition,  the  Company  invested  in  two  additional
Properties  during  1999.  Because the Company had not yet  acquired  all of its
Properties,  revenues for the year ended  December 31,  1999,  represent  only a
portion of revenues which the Company is expected to earn in future periods.

         During the year ended  December  31,  1999,  the Company  acquired  and
leased seven Properties indirectly through its investment in Hotel Investors, as
described above in "Liquidity and Capital Resources -- Property Acquisitions and
Investments."  In  connection  with  its  investment,   the  Company  recognized
$2,753,506 in dividend  income and $778,466 in equity in loss of  unconsolidated
subsidiary  after  deduction  of  preferred  stock  dividends,  resulting in net
earnings attributable to this investment of $1,975,040.

         During the years ended  December  31, 1999 and 1998,  the Company  also
earned   $3,693,004  and  $638,862,   respectively,   in  interest  income  from
investments  in money  market  accounts  and  other  short-term,  highly  liquid
investments and other income. The 478% increase in interest income was primarily
attributable  to  increased   offering   proceeds  received  during  1999  being
temporarily invested in money market accounts or other short-term, highly liquid
investments pending investment in Properties and Mortgage Loans. As net offering
proceeds  are  invested  in  Properties  and used to make  Mortgage  Loans,  the
percentage of the Company's total revenues from interest income from investments
in money market  accounts or other  short-term,  highly  liquid  investments  is
expected to decrease.

         During the year ended  December  31,  1999,  two  lessees,  STC Leasing
Associates,  LLC ("STC") (which operates and leases two Properties) and WI Hotel
Leasing,  LLC (which  leases the seven  Properties  in which the Company owns an
interest through Hotel Investors), each contributed more than ten percent of the
Company's  total rental income  (including  the Company's  share of total rental
income from Hotel  Investors).  In addition,  all of the Company's rental income
(including the Company's share of total rental income from Hotel  Investors) was
earned from Properties operating as Marriott brand chains.

         Operating  expenses,  including  interest  expense and depreciation and
amortization  expense, were $2,318,717 and $996,522 for the years ended December
31,  1999  and  1998,  respectively  (21.7%  and  51%,  respectively,  of  total
revenues). The increase in operating expenses during the year ended December 31,
1999, as compared to 1998,  was primarily as a result of the Company  owning two
Properties  for  approximately  six months  during 1998  compared to a full year
during  1999.  Additionally,   general  operating  and  administrative  expenses
increased as a result of Company growth,  while interest expense  decreased from
$350,322  for the year ended  December  31, 1998 to $248,094  for the year ended
December 31, 1999.  The decrease in interest  expense of 29.2% was the result of
the Line of Credit being  outstanding  for two months in 1999 as compared to the
majority of 1998.

         For the year ended December 31, 1999, the Company's  Operating Expenses
did not exceed the  Expense  Cap.  For the year ended  December  31,  1998,  the
Company's Operating Expenses exceeded the Expense Cap by $92,733; therefore, the
Advisor  reimbursed  the Company  such amount in  accordance  with the  Advisory
Agreement.

Comparison of year ended December 31, 1998 to year ended December 31, 1997

         Operations  of the  Company  commenced  on October 15,  1997,  when the
Company received the minimum offering proceeds of $2,500,000. As of December 31,
1998, the Company had acquired two Properties, each consisting of land, building
and  equipment,  and had entered into a long-term,  triple-net  lease  agreement
relating to each of the  Properties.  The Company  earned  $1,316,599  in rental
income from  operating  leases and FF&E Reserve  income from the two  Properties
during the year ended December 31, 1998.

         During the years ended  December 31, 1998 and 1997,  the Company earned
$638,862 and $46,071, respectively, in interest income from investments in money
market accounts and other short-term,  highly liquid  investments.  The increase
was attributable to offering proceeds being temporarily invested in money market
accounts or other short-term, highly liquid investments.

         Operating  expenses,  including  interest  expense and depreciation and
amortization expense, were $996,522 and $23,219 for the years ended December 31,
1998 and 1997, respectively.  Operating expenses increased during the year ended
December 31, 1998 as compared to the year ended December 31, 1997,  primarily as
a result of the fact that the Company did not commence  operations until October
15, 1997, and due to the fact that the Company acquired  Properties and received
advances under the Line of Credit during 1998. As discussed  above, for the year
ended December 31, 1998, the Company's  Operating  Expenses exceeded the Expense
Cap by $92,733;  therefore,  the Advisor  reimbursed  the Company such amount in
accordance  with the Advisory  Agreement.  For the year ended December 31, 1997,
the Expense Cap was not applicable.

Other

         The Company has  elected,  pursuant to 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,  1999,  1998 and 1997.  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  anticipates that its leases will be triple-net  leases and
will contain  provisions  that  management  believes will mitigate the effect of
inflation.  Such  provisions  will  include  clauses  requiring  the  payment of
contingent  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 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.



                                                    MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

         The  following  information  updates and  replaces the  "Directors  and
Executive Officers" section beginning on page 84 of the Prospectus.

         The Directors and executive officers of the Company are listed below:

      Name                        Age               Position with the Company


James M. Seneff, Jr.       54   Director, Chairman of the Board, and
                                 Chief Executive Officer
Robert A. Bourne           53   Director, Vice Chairman of the Board, and
                                 President
Matthew W. Kaplan          37   Director
Charles E. Adams           38   Independent Director
Lawrence A. Dustin         55   Independent Director
John A. Griswold           51   Independent Director
Craig M. McAllaster        49   Independent Director
Charles A. Muller          42   Chief Operating Officer and Executive Vice
                                 President
C. Brian Strickland        38   Senior Vice President of Finance and
                                 Administration
Thomas J. Hutchison III    59   Executive Vice President
Lynn E. Rose               51   Secretary and Treasurer

         James  M.  Seneff,  Jr.  Director,  Chairman  of the  Board  and  Chief
Executive  Officer.  Mr.  Seneff is a director,  Chairman of the Board and Chief
Executive Officer of CNL Hospitality Corp., the Advisor to the Company,  and CNL
Hotel Investors,  Inc., a real estate investment trust in which the Company owns
an interest.  Mr. Seneff is a principal  stockholder of CNL Holdings,  Inc., the
parent  company of CNL  Financial  Group,  Inc.  (formerly CNL Group,  Inc.),  a
diversified real estate company,  and has served as a director,  Chairman of the
Board  and  Chief  Executive  Officer  of CNL  Financial  Group,  Inc.  and  its
subsidiaries  since CNL's  formation in 1973. CNL Financial  Group,  Inc. is the
parent company, either directly or indirectly through subsidiaries,  of CNL Real
Estate Services,  Inc., CNL Hospitality  Corp.,  CNL Capital Markets,  Inc., CNL
Investment  Company  and CNL  Securities  Corp.,  the  Managing  Dealer  in this
offering.  CNL and the entities it has established  have more than $4 billion in
assets,  representing  interests in more than 2,000  properties and 900 mortgage
loans in 48 states. Mr. Seneff also serves as a director,  Chairman of the Board
and Chief Executive  Officer of CNL Retirement  Properties,  Inc.  (formerly CNL
Health Care Properties,  Inc.), a public, unlisted real estate investment trust,
as well as CNL Retirement Corp.  (formerly CNL Health Care Corp.),  its advisor.
Since 1992, Mr. Seneff has served as a director, Chairman of the Board and Chief
Executive  Officer of Commercial  Net Lease  Realty,  Inc., a public real estate
investment trust that is listed on the New York Stock Exchange.  In addition, he
has served as a director and Chairman of the Board since  inception in 1994, and
served as Chief Executive Officer from 1994 through August 1999, of CNL American
Properties Fund, Inc., a public,  unlisted real estate investment trust. He also
served as a director,  Chairman of the Board and Chief Executive  Officer of CNL
Fund Advisors, Inc., the advisor to CNL American Properties Fund, Inc., until it
merged with such  company in  September  1999.  Mr.  Seneff has also served as a
director,  Chairman of the Board and Chief  Executive  Officer of CNL Securities
Corp.,  since 1979; CNL Investment  Company,  since 1990; and CNL  Institutional
Advisors,  a registered  investment  advisor for pension plans,  since 1990. Mr.
Seneff  formerly  served as a director of First Union  National Bank of Florida,
N.A., and currently  serves as the Chairman of the Board of CNLBank.  Mr. Seneff
served on the Florida State Commission on Ethics and is a former member and past
chairman of the State of Florida Investment  Advisory Council,  which recommends
to the Florida Board of Administration  investments for various Florida employee
retirement  funds. The Florida Board of  Administration  is Florida's  principal
investment  advisory and money management  agency and oversees the investment of
more than $60 billion of retirement  funds.  Mr.  Seneff  received his degree in
Business Administration from Florida State University in 1968.

         Robert A. Bourne.  Director,  Vice Chairman of the Board and President.
Mr. Bourne serves as a director, Vice Chairman of the Board and President of CNL
Hospitality Corp., the Advisor to the Company, and director and President of CNL
Hotel Investors,  Inc., a real estate investment trust in which the Company owns
an interest.  Mr.  Bourne is also the  President  and Treasurer of CNL Financial
Group,  Inc.; a director and  President of CNL  Retirement  Properties,  Inc., a
public,  unlisted  real  estate  investment  trust;  as well as, a director  and
President of CNL  Retirement  Corp.,  its advisor.  Mr.  Bourne also serves as a
director of CNLBank.  He has served as a director  since 1992,  Vice Chairman of
the Board since  February  1996,  Secretary  and  Treasurer  from  February 1996
through 1997, and President from July 1992 through  February 1996, of Commercial
Net Lease Realty Inc., a public real estate  investment  trust listed on the New
York Stock Exchange.  Mr. Bourne has served as director since inception in 1994,
President from 1994 through February 1999,  Treasurer from February 1999 through
August 1999,  and Vice Chairman of the Board since February 1999 of CNL American
Properties Fund, Inc., a public,  unlisted real estate investment trust. He also
served as a director and held various executive positions for CNL Fund Advisors,
Inc., the advisor to CNL American Properties Fund, Inc. prior to its merger with
such  company,  from 1994  through  August  1999.  Mr.  Bourne  also serves as a
director, President and Treasurer for various affiliates of CNL Financial Group,
Inc.,  including CNL  Investment  Company,  CNL Securities  Corp.,  the Managing
Dealer for this offering,  and CNL  Institutional  Advisors,  Inc., a registered
investment  advisor for pension  plans.  Since joining CNL  Securities  Corp. in
1979, Mr. Bourne has overseen CNL's real estate and capital  markets  activities
including  the  investment  of nearly $2 billion  in equity  and the  financing,
acquisition,   construction  and  leasing  of  restaurants,   office  buildings,
apartment  complexes,  hotels and other real estate. Mr. Bourne began his career
as a certified public accountant employed by Coopers & Lybrand, Certified Public
Accountants,  from 1971  through  1978,  where he attained  the  position of tax
manager in 1975.  Mr. Bourne  graduated  from Florida  State  University in 1970
where he received a B.A. in Accounting, with honors.


         Matthew W. Kaplan.  Director.  Mr.  Kaplan  serves as a director of the
Advisor and Hotel  Investors.  Mr.  Kaplan is a managing  director of Rothschild
Realty Inc.  where he has served  since 1992,  and where he is  responsible  for
securities  investment  activities including acting as portfolio manager of Five
Arrows Realty Securities LLC, a $900 million private investment fund. Mr. Kaplan
has been a director of WNY Group, Inc., a private corporation,  since 1999. From
1990  to  1992,  Mr.  Kaplan  served  in the  corporate  finance  department  of
Rothschild, Inc., an affiliate of Rothschild Realty, Inc. Mr. Kaplan served as a
director of Ambassador  Apartments Inc. from August 1996 through May 1998 and is
a member of the Urban Land  Institute.  Mr.  Kaplan  received a B.A. with honors
from  Washington  University  in 1984 and an M.B.A.  from the Wharton  School of
Finance and Commerce at the University of Pennsylvania in 1988.

         Charles E. Adams.  Independent Director. Mr. Adams is the president and
a founding principal with Celebration  Associates,  Inc., a real estate advisory
and development firm with offices in Celebration,  Florida and Charlotte,  North
Carolina.  Celebration  Associates  specializes  in  large-scale  master-planned
communities,  seniors' housing and specialty commercial developments.  Mr. Adams
joined The Walt  Disney  Company in 1990 and from 1996 until May 1997  served as
vice president of community business development for The Celebration Company and
Walt  Disney  Imagineering.   He  was  responsible  for  Celebration  Education,
Celebration Network,  Celebration Health, and Celebration Foundation, as well as
new  business  development,  strategic  alliances,  retail  sales  and  leasing,
commercial  sales  and  leasing,  the  development  of  Little  Lake  Bryan  and
Celebration.  Previously, Mr. Adams was responsible for the initial residential,
amenity, sales and marketing,  consumer research and master planning efforts for
Celebration.   Additionally,   Mr.  Adams   participated  in  the  planning  for
residential development at EuroDisney in Paris, France. He was a founding member
of the Celebration School Board of Trustees and served as president and founding
member of the Celebration Foundation Board of Directors. Mr. Adams is a founding
member  of the  Health  Magic  Steering  Committee  and  council  member  on the
Recreation Development Council for the Urban Land Institute.  Before joining The
Walt Disney  Company in 1990,  Mr. Adams worked with Trammell  Crow  Residential
developing luxury apartment communities in the Orlando and Jacksonville, Florida
areas. Mr. Adams received a B.A. from Northeast Louisiana University in 1984 and
an M.B.A. from Harvard Graduate School of Business in 1989.

         Lawrence A Dustin. Independent Director. Mr. Dustin is president of the
lodging  division  of  Travel  Services   International,   Inc.,  a  specialized
distributor of leisure travel products and services.  Mr. Dustin was a principal
of BBT, an advisory  company  specializing  in hotel  operations,  marketing and
development, from September 1998 to August 1999. Mr. Dustin has over 30 years of
experience in the hospitality industry.  From 1994 to September 1998, Mr. Dustin
served as senior  vice  president  of lodging of  Universal  Studios  Recreation
Group,  where he was  responsible  for  matters  related  to hotel  development,
marketing,  operations and management. Mr. Dustin supervised the overall process
of developing the five highly themed hotels and related  recreational  amenities
within  Universal  Studios  Escape and provided  guidance for hotel  projects in
Universal City, California,  Japan, and Singapore. From 1989 to 1994, Mr. Dustin
served as a shareholder,  chief  executive  officer,  and director of AspenCrest
Hospitality,  Inc.,  a  professional  services  firm which  helped  hotel owners
enhance both the operating performance and asset value of their properties. From
1969 to 1989, Mr. Dustin held various positions in the hotel industry, including
14 years in management with Westin Hotel & Resorts. Mr. Dustin received a B.A.
from Michigan State University in 1968.

         John  A.  Griswold.   Independent  Director.  Mr.  Griswold  serves  as
president of Tishman Hotel  Corporation,  an operating  unit of Tishman Realty &
Construction  Co., Inc.,  founded in 1898.  Tishman Hotel Corporation is a hotel
developer,  owner and operator,  and has provided such services for more than 85
hotels,  totalling  more than 30,000 rooms.  Mr.  Griswold  joined Tishman Hotel
Corporation in 1985.  From 1981 to 1985, Mr.  Griswold served as general manager
of the Buena Vista Palace Hotel in The Walt Disney World  Village.  From 1978 to
1981, he served as vice president and general manager of the Homestead Resort, a
luxury  condominium  resort in Glen Arbor,  Michigan.  Mr. Griswold served as an
operations  manager  for The Walt  Disney  Company  from  1971 to  1978.  He was
responsible for operational, financial and future planning for multi-unit dining
facilities in Walt Disney World Village and Lake Buena Vista Country Club. He is
a member of the board of  directors  of the Florida  Hotel & Motel  Association,
Orlando/Orange  County Convention & Visitors Bureau,  Inc. and the First Orlando
Foundation. Mr. Griswold received a B.S. from the School of Hotel Administration
at Cornell University in Ithaca, New York.

         Craig M. McAllaster. Independent Director. Dr. McAllaster has served as
director of the executive MBA program at the Roy E. Crummer  Graduate  School of
Business at Rollins College since 1994. Besides his duties as director, he is on
the  management  faculty and serves as executive  director of the  international
consulting  practicum programs at the Crummer School.  Prior to Rollins College,
Dr.  McAllaster  was on the  faculty  at the  School  of  Industrial  and  Labor
Relations  and the  Johnson  Graduate  School  of  Management,  both at  Cornell
University, and the University of Central Florida. Dr. McAllaster spent over ten
years  in  the  consumer  services  and  electronics   industry  in  management,
organizational and executive development  positions.  He is a consultant to many
domestic and  international  companies in the areas of strategy and  leadership.
Dr.  McAllaster  received a B.S. from the University of Arizona in 1973, an M.S.
from  Alfred  University  in  1981  and an  M.A.  and  Doctorate  from  Columbia
University in 1987.

         Charles  A.  Muller.   Chief  Operating   Officer  and  Executive  Vice
President.  Mr.  Muller  joined CNL  Hospitality  Corp.  in October  1996 and is
responsible  for the  planning  and  implementation  of CNL's  interest in hotel
industry investments, including acquisitions,  development, project analysis and
due diligence.  He currently serves as the Chief Operating Officer and Executive
Vice President of CNL Hospitality  Corp., the Advisor,  and CNL Hotel Investors,
Inc., a real estate investment trust in which the Company owns an interest.  Mr.
Muller also serves as Executive Vice President of CNL Hotel Development Company.
Mr. Muller joined CNL following more than 15 years of broad-based hotel industry
experience  with firms  such as  Tishman  Hotel  Corporation,  Wyndham  Hotels &
Resorts, PKF Consulting and AIRCOA Hospitality Services. Mr. Muller's background
includes  responsibility  for market  review  and  valuation  efforts,  property
acquisitions and development, capital improvement planning, hotel operations and
project  management for renovations and new  construction.  Mr. Muller served on
the former  Market,  Finance and Investment  Analysis  Committee of the American
Hotel & Motel  Association  and is a  founding  member of the  Lodging  Industry
Investment  Council.  He holds a bachelor's degree in Hotel  Administration from
Cornell University.


         C.  Brian   Strickland.   Senior   Vice   President   of  Finance   and
Administration.  Mr.  Strickland  currently  serves as Senior Vice  President of
Finance and  Administration of CNL Hospitality  Corp., and CNL Hotel Development
Company. Mr. Strickland supervises the companies' financial reporting, financial
control and  accounting  functions as well as  forecasting,  budgeting  and cash
management activities. He is also responsible for regulatory compliance,  equity
and debt financing  activities and insurance for the companies.  Mr.  Strickland
joined  CNL  Hospitality  Corp.  in  April  1998  with an  extensive  accounting
background.  Prior to joining CNL, he served as vice  president of taxation with
Patriot American Hospitality,  Inc., where he was responsible for implementation
of tax planning  strategies on corporate  mergers and  acquisitions and where he
performed or assisted in strategic processes in the REIT industry.  From 1989 to
1997,  Mr.  Strickland  served as a  director  of tax and asset  management  for
Wyndham  Hotels  &  Resorts  where he was  integrally  involved  in  structuring
acquisitive  transactions,   including  the  consolidation  and  initial  public
offering of Wyndham Hotel  Corporation  and its  subsequent  merger with Patriot
American Hospitality,  Inc. In his capacity as director of asset management,  he
was  instrumental  in the  development  and opening of a hotel and casino in San
Juan,  Puerto Rico. Prior to 1989, Mr.  Strickland was senior tax accountant for
Trammell  Crow  Company  where he provided tax  consulting  services to regional
developmental  offices. From 1986 to 1988, Mr. Strickland was tax accountant for
Ernst & Whinney  where he was a member of the real estate  practice  group.  Mr.
Strickland is a certified  public  accountant  and holds a bachelor's  degree in
accounting.

         Thomas J. Hutchison III. Executive Vice President. Mr. Hutchison serves
as an Executive  Vice  President of CNL  Hospitality  Corp.,  the Advisor of the
Company,  and Hotel  Investors.  Mr.  Hutchison  serves as  President  and Chief
Operating Officer of CNL Real Estate Services, Inc., which is the parent company
of CNL  Hospitality  Corp. and CNL Retirement  Corp. He also serves as the Chief
Operating Officer of CNL Community Development Corp. In addition,  Mr. Hutchison
serves as an Executive  Vice President of CNL  Retirement  Properties,  Inc. Mr.
Hutchison  joined CNL  Financial  Group,  Inc. in January 2000 with more than 30
years  of  senior  management  and  consulting  experience  in the  real  estate
development  and  services  industries.  He  currently  serves  on the  board of
directors of Restore  Orlando,  a nonprofit  community  volunteer  organization.
Prior to joining CNL, Mr.  Hutchison  was  president  and owner of numerous real
estate  services and development  companies.  From 1995 to 2000, he was chairman
and  chief  executive  officer  of  Atlantic  Realty  Services,   Inc.  and  TJH
Development  Corporation.  Since 1990,  he has  fulfilled a number of  long-term
consulting  assignments for large  corporations,  including managing a number of
large  international  joint ventures.  From 1990 to 1991, Mr.  Hutchison was the
court-appointed  president and chief  executive  officer of General  Development
Corporation,  a real estate community development company,  where he assumed the
day-to-day   management  of  the  $2.6  billion   NYSE-listed  company  entering
re-organization.  From 1986 to 1990,  he was the  chairman  and chief  executive
officer  of a number of real  estate-related  companies  engaged  in the  master
planning  and land  acquisition  of forty  residential,  industrial  and  office
development  projects.  From 1978 to 1986,  Mr.  Hutchison was the president and
chief  executive  officer  of  Murdock   Development   Corporation  and  Murdock
Investment  Corporation,  as well as Murdock's nine service  divisions.  In this
capacity,  he managed an average of $350 million of new development per year for
over nine years. Additionally, he expanded the commercial real estate activities
to a national  basis,  and  established  both a new extended care division and a
hotel division that grew to 14 properties.  Mr. Hutchison was educated at Purdue
University and the University of Maryland Business School.

         Lynn E.  Rose.  Secretary  and  Treasurer.  Ms.  Rose  also  serves  as
Secretary, Treasurer and a director of CNL Hospitality Corp., the Advisor to the
Company,  and as  Secretary  of the  subsidiaries  of the  Company.  Ms. Rose is
Secretary and Treasurer of CNL Retirement Properties,  Inc., a public,  unlisted
real estate investment  trust, and serves as Secretary of its  subsidiaries.  In
addition,  she serves as Secretary,  Treasurer and a director of CNL  Retirement
Corp.,  its advisor.  Ms. Rose served as  Secretary  of CNL American  Properties
Fund, Inc., a public,  unlisted real estate  investment trust, from 1994 through
August 1999, and served as Treasurer  from 1994 through  February 1999. She also
served as Treasurer of CNL Fund Advisors, Inc., from 1994 through July 1998, and
served as Secretary and a director from 1994 through  August 1999, at which time
it merged with CNL American  Properties  Fund, Inc. Ms. Rose served as Secretary
and  Treasurer  of  Commercial  Net Lease  Realty,  Inc.,  a public  real estate
investment  trust  listed on the New York  Stock  Exchange,  from  1992  through
February 1996, and as Secretary and a director of CNL Realty Advisors, Inc., its
advisor,  from its inception in 1991 through 1997.  She also served as Treasurer
of CNL Realty  Advisors,  Inc.  from 1991  through  February  1996.  Ms. Rose, a
certified  public  accountant,  has served as Secretary of CNL Financial  Group,
Inc. since 1987,  served as Controller from 1987 to 1993 and has served as Chief
Financial  Officer since 1993. She also serves as Secretary of the  subsidiaries
of  CNL  Financial   Group,   Inc.  and  holds  various  other  offices  in  the
subsidiaries.  In  addition,  she  serves  as  Secretary  for  approximately  75
additional  corporations  affiliated  with CNL  Financial  Group,  Inc.  and its
subsidiaries.  Ms. Rose has served as Chief  Financial  Officer and Secretary of
CNL  Securities  Corp.  since  July  1994.  Ms Rose  oversees  the tax and legal
compliance for over 375 corporations,  partnerships and joint ventures,  and the
accounting and financial reporting for over 200 entities.  Prior to joining CNL,
Ms. Rose was a partner with Robert A. Bourne in the accounting  firm of Bourne &
Rose,  P.A.,  Certified Public  Accountants.  Ms. Rose holds a B.A. in Sociology
from the University of Central  Florida.  She was licensed as a certified public
accountant in 1979.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

         The following  information  updates and replaces the first paragraph on
page 89 of the Prospectus.

         Each Director is entitled to receive $6,000 annually for serving on the
Board of Directors,  as well as fees of $750 per meeting attended ($375 for each
telephonic  meeting in which the  Director  participates),  including  committee
meetings.  In  addition  to the above  compensation,  the  Director  serving  as
Chairman of the Audit  Committee is entitled to receive fees of $750 per meeting
attended with the Company's  independent  accountants  ($375 for each telephonic
meeting in which the Chairman  participates)  as a  representative  of the Audit
Committee.  No executive officer or Director of the Company has received a bonus
from the Company.  The Company will not pay any compensation to the officers and
Directors  of the  Company  who also  serve as  officers  and  directors  of the
Advisor.



                     THE ADVISOR AND THE ADVISORY AGREEMENT

THE ADVISOR

         The following  information  updates and replaces "The Advisor"  section
beginning on page 89 of the Prospectus.

         CNL Hospitality Corp.  (formerly CNL Hospitality  Advisors,  Inc.) is a
Florida corporation  organized in January 1997 to provide  management,  advisory
and  administrative  services.  The Company originally entered into the Advisory
Agreement with the Advisor  effective July 9, 1997. CNL  Hospitality  Corp.,  as
Advisor, has a fiduciary responsibility to the Company and the stockholders.

The directors and executive officers of the Advisor are as follows:

James M. Seneff, Jr. ..................  Chairman of the Board, Chief Executive
                                          Officer, and Director
Robert A. Bourne.......................  Vice Chairman of the Board, President,
                                          and Director
Matthew W. Kaplan......................  Director
Charles A. Muller......................  Chief Operating Officer and Executive
                                          Vice President
C. Brian Strickland....................  Senior Vice President of Finance and
                                          Administration
Thomas J. Hutchison III................  Executive Vice President
Lynn E. Rose...........................  Secretary, Treasurer and Director

         The  backgrounds  of  these   individuals  are  described  above  under
"Management  -- Directors and Executive  Officers." In addition to the directors
and executive  officers listed above, the following  individuals are involved in
the acquisition, development and management of the Company's Properties:

         Gregory A. Denton, age 36, joined CNL Hospitality Corp. in July 1999 as
Director of Portfolio  Management.  Mr. Denton is responsible for overseeing the
Company's  portfolio  performance and acquisition due diligence  processes.  Mr.
Denton has twelve years of experience in the appraisal,  financial  analysis and
asset management of hotel properties. Prior to joining the Advisor, he served as
vice  president  of asset  management  for  White  Lodging  Services  Corp.,  in
Merrillville,  Indiana.  In this capacity,  he provided  operational  oversight,
strategic  planning,  and construction  monitoring services on a portfolio of 58
hotels in eight states.  Mr.  Denton  served as associate  director of the Miami
office of HVS International  from 1994 to 1996, where he managed hotel appraisal
and   consulting   assignments,    trained   new   associates   and   supervised
hospitality-related  research throughout the southeastern  United States,  Latin
America,   and  the   Caribbean.   Mr.  Denton   previously   served  as  senior
associate/director of research for HVS International's Mineola, New York office.
He received his B.S. and M.S. from the Cornell School of Hotel Administration.

         Brian Guernier,  age 38, joined CNL Hospitality Corp. in August 1999 as
Director  of  Acquisitions  and  Development  and in August  2000,  became  Vice
President of Acquisitions  and  Development.  In this capacity,  Mr. Guernier is
responsible for hotel acquisitions,  site acquisition/selection for development,
identifying  and assessing  tenants and maintaining  professional  relationships
with current and potential project partners.  Prior to joining the Advisor,  Mr.
Guernier  worked at Marriott  International  starting in 1995,  most recently as
director in Feasibility  and  Development  Planning at Marriott  Vacation Club's
headquarters in Orlando, Florida. His responsibilities included internal project
planning for development of several timeshare resorts from the early feasibility
stage  through  site  acquisition.  He also  focused  on  hotel/timeshare  joint
projects and the negotiation of use agreements  between timeshare  operators and
hotel  owner/operators  for  shared use of campus  facilities.  Prior to joining
Marriott's  timeshare  division,  Mr.  Guernier  worked  as  director  in Market
Planning  &  Feasibility  for  Marriott   International's  Lodging  Division  in
Bethesda,  Maryland, where his responsibilities  included pro forma development,
brand  recommendations  to  development,  preparation of feasibility  and market
planning reports,  presentation of projects to Hotel Development Committee,  and
reviewing outside appraisals for Marriott's  Treasury  Department in conjunction
with credit  enhancements.  Before joining  Marriott,  Mr. Guernier was a senior
consultant  with  Arthur  Andersen's  Real  Estate  Services  Group  focusing on
property tax appeals for hospitality  clients. Mr. Guernier holds an M.P.S. from
the  Hotel  School  at  Cornell  University  and a  B.S.  from  the  College  of
Agriculture and Life Sciences at Cornell University.


         Tammie A. Quinlan,  age 37, joined CNL Hospitality Corp. in August 1999
as Director of Financial  Reporting and Analysis and in August 2000, became Vice
President of Corporate Finance and Accounting.  In this capacity, Ms. Quinlan is
responsible  for  all  accounting  and  financial  reporting  requirements,  and
corporate  finance  functions.  Prior to joining the Advisor,  Ms. Quinlan,  was
employed  by KPMG LLP from  1987 to 1999,  most  recently  as a senior  manager,
performing  services for a variety of clients in the real  estate,  hospitality,
and financial  services  industries.  During her tenure at KPMG LLP, Ms. Quinlan
assisted  several  clients  through their initial  public  offerings,  secondary
offerings,  securitizations  and complex  business and  accounting  issues.  Ms.
Quinlan is a certified  public  accountant  and holds a B.S. in  accounting  and
finance from the University of Central Florida.


         Management  anticipates that any transaction by which the Company would
become self-advised would be submitted to the stockholders for approval.

         The Advisor  currently owns 20,000 Shares of Common Stock.  The Advisor
may not sell these Shares while the  Advisory  Agreement is in effect,  although
the Advisor may  transfer  such shares to  Affiliates.  Neither the  Advisor,  a
Director,  or any  Affiliate  may vote or consent on  matters  submitted  to the
stockholders  regarding  removal  of the  Advisor,  Directors,  or any of  their
Affiliates,  or  any  transaction  between  the  Company  and  any of  them.  In
determining  the  requisite  percentage  in interest  of shares of Common  Stock
necessary to approve a matter on which the Advisor, Directors, and any Affiliate
may not vote or  consent,  any shares of Common  Stock owned by any of them will
not be included.


                              CERTAIN TRANSACTIONS


         The  following  information  updates and replaces  the first,  second ,
fourth,  fifth and seventh  paragraphs under the heading "Certain  Transactions"
beginning on page 92 of the Prospectus.

         The  Managing  Dealer  is  entitled  to  receive  Selling   Commissions
amounting to 7.5% of the total  amount  raised from the sale of Shares of Common
Stock for  services in  connection  with the offering of Shares,  a  substantial
portion of which may be paid as  commissions  to other  broker-dealers.  For the
years ended  December 31, 1998 and 1997,  the Company  incurred  $2,377,026  and
$849,405, respectively, of such fees in connection with the Initial Offering, of
which $2,200,516 and $792,832,  respectively, was paid by the Managing Dealer as
commissions to other broker-dealers.  In addition,  during the period January 1,
1999 through  June 17, 1999,  the Company  incurred  $6,904,047  of such fees in
connection  with the Initial  Offering,  during the period June 18, 1999 through
September 14, 2000, the Company incurred  $20,624,924 of such fees in connection
with the 1999 Offering, and during the period September 15, 2000 through October
9, 2000, the Company  incurred  $1,650,052 of such fees in connection  with this
offering, the majority of which has been or will be paid by CNL Securities Corp.
as commissions to other broker-dealers.

         In  addition,  the  Managing  Dealer is entitled to receive a marketing
support and due diligence  expense  reimbursement fee equal to 0.5% of the total
amount  raised from the sale of Shares,  a portion of which may be  reallowed to
other  broker-dealers.  For the years  ended  December  31,  1998 and 1997,  the
Company incurred $158,468 and $56,627,  respectively, of such fees in connection
with the  Initial  Offering,  the  majority  of which  were  reallowed  to other
broker-dealers and from which all bona fide due diligence expenses were paid. In
addition,  during the period  January 1, 1999 through June 17, 1999, the Company
incurred $460,270 of such fees in connection with the Initial  Offering,  during
the period  June 18, 1999  through  September  14,  2000,  the Company  incurred
$1,374,995  of such fees in  connection  with the 1999  Offering  and during the
period September 15, 2000 through October 9, 2000, the Company incurred $110,004
of such fees in connection with this offering, the majority of which has been or
will be  reallowed  to other  broker-dealers  and from  which  all bona fide due
diligence expenses were paid.

         The  Advisor is entitled to receive  Acquisition  Fees for  services in
identifying  the Properties and  structuring  the terms of the  acquisition  and
leases of the Properties and  structuring  the terms of the Mortgage Loans equal
to 4.5% of the total amount  raised from the sale of Shares,  and loan  proceeds
from  Permanent  Financing  and the Line of  Credit  that  are  used to  acquire
Properties,  but  excluding  that  portion of the  Permanent  Financing  used to
finance  Secured  Equipment  Leases.  For the years ended  December 31, 1998 and
1997, the Company incurred $1,426,216 and $509,643,  respectively,  of such fees
in connection with the Initial Offering. In addition,  during the period January
1, 1999 through June 17, 1999, the Company  incurred  $4,712,413 of such fees in
connection  with the Initial  Offering,  during the period June 18, 1999 through
September 14, 2000, the Company incurred  $12,374,954 of such fees in connection
with the 1999 Offering and during the period  September 15, 2000 through October
9, 2000,  the Company  incurred  $990,031 of such fees in  connection  with this
offering.  Additionally,  during the period June 18, 1999 through  September 14,
2000, the Company incurred  Acquisition Fees totalling  $1,935,794 as the result
of permanent financing used to acquire certain Properties.

         The Company and the Advisor  have  entered  into an Advisory  Agreement
pursuant to which the Advisor will  receive a monthly  Asset  Management  Fee of
one-twelfth  of  0.60%  of  the  Company's  Real  Estate  Asset  Value  and  the
outstanding  principal  balance  of any  Mortgage  Loans  as of  the  end of the
preceding  month. The Asset Management Fee, which will not exceed fees which are
competitive for similar  services in the same geographic area, may or may not be
taken,  in  whole  or in part as to any  year,  in the  sole  discretion  of the
Advisor.  All or any  portion  of the Asset  Management  Fee not taken as to any
fiscal year shall be deferred  without  interest  and may be taken in such other
fiscal year as the Advisor shall determine. During the six months ended June 30,
2000 and the years  ended  December  31,  1999 and 1998,  the  Company  incurred
$362,280, $106,788 and $68,114,  respectively,  of such fees. Additionally,  the
Company's unconsolidated subsidiary, Hotel Investors,  incurred asset management
fees and subordinated  incentive fees to the Advisor, of which the Company's pro
rata  share  totalled  $41,086  and  $114,133,  respectively,  and  $55,741  and
$164,428,  respectively,  during the six months ended June 30, 2000 and the year
ended December 31, 1999.

         The Advisor and its Affiliates  provide  accounting and  administrative
services to the Company  (including  accounting and  administrative  services in
connection  with the  offering  of Shares) on a  day-to-day  basis.  For the six
months ended June 30,  2000,  and the years ended  December  31, 1999,  1998 and
1997,  the Company  incurred a total of  $2,204,229,  $4,206,709,  $644,189  and
$192,224, respectively, for these services, $2,064,571, $3,854,739, $494,729 and
$185,335,  respectively,  of such costs representing stock issuance costs, $735,
$124, $9,084 and $0,  respectively,  representing  acquisition related costs and
$138,923,  $351,846,  $140,376 and $6,889,  respectively,  representing  general
operating and administrative expenses,  including costs related to preparing and
distributing reports required by the Securities and Exchange Commission.



<PAGE>


                          PRIOR PERFORMANCE INFORMATION

         The  information  presented in this section  represents  the historical
experience  of certain real estate  programs  organized by certain  officers and
directors  of the  Advisor.  Prior  public  programs  have not invested in hotel
properties. Investors in the Company should not assume that they will experience
returns,  if any,  comparable  to those  experienced  by investors in such prior
public real estate  programs.  Investors who purchase Shares in the Company will
not thereby acquire any ownership  interest in any  partnerships or corporations
to which the following information relates.

         Two  Directors  of the  Company,  Robert A. Bourne and James M. Seneff,
Jr.,  individually  or with others have served as general  partners of 88 and 89
real estate limited  partnerships,  respectively,  including 18 publicly offered
CNL Income Fund  partnerships,  and as directors and/or officers of two unlisted
public REITs. None of these limited partnerships or the unlisted REITs have been
audited by the IRS. Of course,  there is no guarantee  that the Company will not
be audited. Based on an analysis of the operating results of the prior programs,
Messrs.  Bourne  and Seneff  believe  that each of such  programs  has met or is
meeting its principal investment objectives in a timely manner.

         CNL Realty Corporation, which was organized as a Florida corporation in
November  1985 and whose  sole  stockholders  are  Messrs.  Bourne  and  Seneff,
currently serves as the corporate general partner with Messrs. Bourne and Seneff
as individual general partners of 18 CNL Income Fund limited  partnerships,  all
of which were organized to invest in fast-food,  family-style and in the case of
two of the  partnerships,  casual-dining  restaurant  properties.  In  addition,
Messrs.  Bourne  and  Seneff  currently  serve  as  directors  of  CNL  American
Properties Fund, Inc., an unlisted public REIT organized to invest in fast-food,
family-style and casual-dining restaurant properties, mortgage loans and secured
equipment  leases;  and as directors and officers of CNL Retirement  Properties,
Inc.,  an unlisted  public REIT  organized to invest in health care and seniors'
housing facilities. Both of the unlisted public REITs have investment objectives
similar to those of the Company.  As of June 30, 2000, the 18  partnerships  and
the two unlisted REITs had raised a total of  approximately  $1.5 billion from a
total  of  approximately   81,000  investors,   and  owned  approximately  1,500
fast-food,  family-style and casual-dining restaurant properties, and one health
care  property.  Certain  additional  information  relating to the offerings and
investment  history of the 18 public  partnerships  and the two unlisted  public
REITs is set forth below.

<TABLE>
<CAPTION>
<S> <C>

                                                                                   Number of           Date 90% of Net
                                                                                   Limited             Proceeds Fully
                           Maximum                                                 Partnership         Invested or
Name of                    Offering                                                Units or            Committed to
Entity                     Amount (1)                Date Closed                   Shares Sold         Investment (2)
------                     ----------                -----------                   -----------         --------------

CNL Income                 $15,000,000               December 31, 1986             30,000              December 1986
Fund, Ltd.                 (30,000 units)

CNL Income                 $25,000,000               August 21, 1987               50,000              November 1987
Fund II, Ltd.              (50,000 units)

CNL Income                 $25,000,000               April 29, 1988                50,000              June 1988
Fund III, Ltd.             (50,000 units)

CNL Income                 $30,000,000               December 6, 1988              60,000              February 1989
Fund IV, Ltd.              (60,000 units)

CNL Income                 $25,000,000               June 7, 1989                  50,000              December 1989
Fund V, Ltd.               (50,000 units)

CNL Income                 $35,000,000               January 19, 1990              70,000              May 1990
Fund VI, Ltd.              (70,000 units)

CNL Income                 $30,000,000               August 1, 1990                30,000,000          January 1991
Fund VII, Ltd.             (30,000,000 units)




<PAGE>


                                                                                   Number of           Date 90% of Net
                                                                                   Limited             Proceeds Fully
                           Maximum                                                 Partnership         Invested or
Name of                    Offering                                                Units or            Committed to
Entity                     Amount (1)                Date Closed                   Shares Sold         Investment (2)
------                     ----------                -----------                   -----------         --------------

CNL Income                 $35,000,000               March 7, 1991                 35,000,000          September 1991
Fund VIII, Ltd.            (35,000,000 units)

CNL Income                 $35,000,000               September 6, 1991             3,500,000           November 1991
Fund IX, Ltd.              (3,500,000 units)

CNL Income                 $40,000,000               April 22, 1992                4,000,000           June 1992
Fund X, Ltd.               (4,000,000 units)

CNL Income                 $40,000,000               October 8, 1992               4,000,000           September 1992
Fund XI, Ltd.              (4,000,000 units)

CNL Income                 $45,000,000               April 15, 1993                4,500,000           July 1993
Fund XII, Ltd.             (4,500,000 units)

CNL Income                 $40,000,000               September 13, 1993            4,000,000           August 1993
Fund XIII, Ltd.            (4,000,000 units)

CNL Income                 $45,000,000               March 23, 1994                4,500,000           May 1994
Fund XIV, Ltd.             (4,500,000 units)

CNL Income                 $40,000,000               September 22, 1994            4,000,000           December 1994
Fund XV, Ltd.              (4,000,000 units)

CNL Income                 $45,000,000               July 18, 1995                 4,500,000           August 1995
Fund XVI, Ltd.             (4,500,000 units)

CNL Income                 $30,000,000               October 10, 1996              3,000,000           December 1996
Fund XVII, Ltd.            (3,000,000 units)

CNL Income                 $35,000,000               February 6, 1998              3,500,000           December 1997
Fund XVIII, Ltd.           (3,500,000 units)

CNL American               $747,464,413              January 20, 1999 (3)          37,373,221 (3)      February 1999 (3)
Properties Fund, Inc.      (37,373,221 shares)

CNL Retirement             $164,718,974              September 18, 2000 (4)        971,898 (4)         April 2000 (4)
Properties, Inc.           (16,471,898 shares)
</TABLE>


(1)      The amount stated includes the exercise by the general partners of each
         partnership  of their option to increase by $5,000,000 the maximum size
         of the offering of CNL Income Fund, Ltd., CNL Income Fund II, Ltd., CNL
         Income Fund III,  Ltd.,  CNL Income Fund IV, Ltd.,  CNL Income Fund VI,
         Ltd.,  CNL Income Fund VIII,  Ltd., CNL Income Fund X, Ltd., CNL Income
         Fund XII,  Ltd.,  CNL Income Fund XIV,  Ltd., CNL Income Fund XVI, Ltd.
         and CNL Income Fund XVIII,  Ltd.  The number of shares of common  stock
         for CNL American  Properties  Fund, Inc. ("APF") reflects a one-for-two
         reverse stock split, which was effective on June 3, 1999.

(2)      For a description of the property  acquisitions by these programs,  see
         the table set forth on the following page.

(3)      In April 1995,  APF  commenced  an offering of a maximum of  16,500,000
         shares of common stock ($165,000,000). On February 6, 1997, the initial
         offering closed upon receipt of  subscriptions  totalling  $150,591,765
         (15,059,177  shares),  including  $591,765  (59,177 shares) through the
         reinvestment  plan.  Following  completion  of the initial  offering on
         February  6, 1997,  APF  commenced  a  subsequent  offering  (the "1997
         Offering ") of up to 27,500,000 shares  ($275,000,000) of common stock.
         On  March  2,  1998,   the  1997   Offering   closed  upon  receipt  of
         subscriptions  totalling  $251,872,648  (25,187,265 shares),  including
         $1,872,648  (187,265 shares) through the reinvestment  plan.  Following
         completion  of the 1997  Offering  on March 2, 1998,  APF  commenced  a
         subsequent  offering (the "1998 Offering ") of up to 34,500,000  shares
         ($345,000,000)  of common  stock.  As of  December  31,  1998,  APF had
         received  subscriptions  totalling  $345,000,000  (34,500,000  shares),
         including  $3,107,848  (310,785 shares) through the reinvestment  plan,
         from the 1998 Offering.  The 1998 Offering closed in January 1999, upon
         receipt of the proceeds  from the last  subscriptions.  As of March 31,
         1999,   net  proceeds  to  APF  from  its  three   offerings   totalled
         $670,151,200  and all of such amount had been invested or committed for
         investment in properties and mortgage loans.

(4)      Effective  September 18, 1998,  CNL  Retirement  Properties,  Inc. (the
         "Retirement Properties REIT") commenced an offering of up to 15,500,000
         shares  ($155,000,000)  of common  stock.  On September  18, 2000,  the
         initial  offering  closed  upon  receipt  of  subscriptions   totalling
         $9,718,974  (971,898 shares),  including $50,463 (5,046 shares) through
         the reinvestment plan.  Following completion of the initial offering on
         September  18,  2000,  the  Retirement   Properties  REIT  commenced  a
         subsequent  offering (the "2000  Offering") of up to 15,500,000  shares
         ($155,000,000) of common stock. The Retirement Properties REIT acquired
         its first property on April 20, 2000.

         As of June 30, 2000,  Mr.  Seneff and Mr.  Bourne,  directly or through
affiliated  entities,  also had served as joint general partners of 69 nonpublic
real estate  limited  partnerships.  The  offerings of all of these 69 nonpublic
limited  partnerships  had terminated as of June 30, 2000. These 69 partnerships
raised  a  total  of  $185,927,353  from  approximately  4,600  investors,   and
purchased,  directly  or  through  participation  in a joint  venture or limited
partnership, interests in a total of 216 projects as of June 30, 2000. These 216
projects  consist of 19 apartment  projects  (comprising 10% of the total amount
raised by all 69 partnerships),  11 office buildings (comprising 4% of the total
amount  raised  by  all  69  partnerships),  169  fast-food,   family-style,  or
casual-dining  restaurant properties and business investments (comprising 69% of
the total amount raised by all 69  partnerships),  one  condominium  development
(comprising  0.5% of the  total  amount  raised  by all 69  partnerships),  four
hotels/motels (comprising 5% of the total amount raised by all 69 partnerships),
ten commercial/retail  properties  (comprising 11% of the total amount raised by
all 69 partnerships), and two tracts of undeveloped land (comprising 0.5% of the
total amount raised by all 69 partnerships).

         Mr. Bourne also has served, without Mr. Seneff, as a general partner of
one additional  nonpublic real estate limited partnership program which raised a
total of $600,000 from 37 investors and purchased,  through  participation  in a
limited  partnership,  one apartment building located in Georgia with a purchase
price of $1,712,000.

         Mr. Seneff also has served, without Mr. Bourne, as a general partner of
two additional  nonpublic real estate limited  partnerships which raised a total
of  $240,000  from 12  investors  and  purchased  two office  buildings  with an
aggregate  purchase price of $928,390.  Both of the office buildings are located
in Florida.

         Of the 90 real estate limited  partnerships  whose offerings had closed
as of June 30, 2000 (including 18 CNL Income Fund limited partnerships) in which
Mr.  Seneff  and/or Mr.  Bourne serve or have served as general  partners in the
past,  39 invested in  restaurant  properties  leased on a  "triple-net"  basis,
including  eight  which  also  invested  in  franchised   restaurant  businesses
(accounting  for  approximately  93% of the total  amount  raised by all 90 real
estate limited partnerships).

         The  following  table sets forth  summary  information,  as of June 30,
2000, regarding property acquisitions by the 18 limited partnerships and the two
unlisted REITs.

<TABLE>
<CAPTION>
<S> <C>

Name of                     Type of                                           Method of           Type of
Entity                      Property              Location                    Financing           Program
------                      --------              --------                    ---------           -------

CNL Income                  22 fast-food or       AL, AZ, CA, FL, GA,          All cash            Public
Fund, Ltd.                  family-style          LA, MD, OK, PA, TX,
                            restaurants           VA, WA

CNL Income                  50 fast-food or       AL, AZ, CO, FL, GA,          All cash            Public
Fund II, Ltd.               family-style          IL, IN, KS, LA, MI,
                            restaurants           MN, MO, NC, NM, OH,
                                                  TN, TX, WA, WY



<PAGE>



Name of                     Type of                                           Method of           Type of
Entity                      Property              Location                    Financing           Program
------                      --------              --------                    ---------           -------

CNL Income                  40 fast-food or       AL, AZ, CA, CO, FL,          All cash            Public
Fund III, Ltd.              family-style          GA, IA, IL, IN, KS,
                            restaurants           KY, MD, MI, MN, MO,
                                                  NC, NE, OK, TX

CNL Income                  47 fast-food or       AL, DC, FL, GA, IL,          All cash            Public
Fund IV, Ltd.               family-style          IN, KS, MA, MD, MI,
                            restaurants           MS, NC, OH, PA, TN,
                                                  TX, VA

CNL Income                  36 fast-food or       AZ, FL, GA, IL, IN,          All cash            Public
Fund V, Ltd.                family-style          MI, NH, NY, OH, SC,
                            restaurants           TN, TX, UT, WA

CNL Income                  60 fast-food or       AR, AZ, CA, FL, GA,          All cash            Public
Fund VI, Ltd.               family-style          IL, IN, KS, MA, MI,
                            restaurants           MN, NC, NE, NM, NY,
                                                  OH, OK, PA, TN, TX,
                                                  VA, WA, WY

CNL Income                  52 fast-food or       AL, AZ, CO, FL, GA,          All cash            Public
Fund VII, Ltd.              family-style          IN, LA, MI, MN, NC,
                            restaurants           OH, PA, SC, TN, TX,
                                                  UT, WA

CNL Income                  43 fast-food or       AZ, FL, IN, LA, MI,          All cash            Public
Fund VIII, Ltd.             family-style          MN, NC, NY, OH, TN,
                            restaurants           TX, VA

CNL Income                  46 fast-food or       AL, CA, CO, FL, GA,          All cash            Public
Fund IX, Ltd.               family-style          IL, IN, LA, MI, MN,
                            restaurants           MS, NC, NH, NY, OH,
                                                  SC, TN, TX

CNL Income                  55 fast-food or       AL, AZ, CA, CO, FL,          All cash            Public
Fund X, Ltd.                family-style          ID, IL, LA, MI, MO,
                            restaurants           MT, NC, NE, NH, NM,
                                                  NY, OH, PA, SC, TN,
                                                  TX, WA

CNL Income                  44 fast-food or       AL, AZ, CA, CO, CT,          All cash            Public
Fund XI, Ltd.               family-style          FL, KS, LA, MA, MI,
                            restaurants           MS, NC, NH, NM, OH,
                                                  OK, PA, SC, TX, VA,
                                                  WA


<PAGE>


Name of                     Type of                                           Method of           Type of
-------                     -------                                           ---------           -------
Entity                      Property              Location                    Financing           Program

CNL Income                  52 fast-food or       AL, AZ, CA, FL, GA,          All cash            Public
Fund XII, Ltd.              family-style          LA, MO, MS, NC, NM,
                            restaurants           OH, SC, TN, TX, WA

CNL Income                  50 fast-food or       AL, AR, AZ, CA, CO,          All cash            Public
Fund XIII, Ltd.             family-style          FL, GA, IN, KS, LA,
                            restaurants           MD, NC, OH, PA, SC,
                                                  TN, TX, VA

CNL Income                  68 fast-food or       AL, AZ, CO, FL, GA,          All cash            Public
Fund XIV, Ltd.              family-style          IL, KS, LA, MN, MO,
                            restaurants           MS, NC, NJ, NV, OH,
                                                  SC, TN, TX, VA

CNL Income                  57 fast-food or       AL, CA, FL, GA, KS,          All cash            Public
Fund XV, Ltd.               family-style          KY, MN, MO, MS, NC,
                            restaurants           NJ, NM, OH, OK, PA,
                                                  SC, TN, TX, VA

CNL Income                  49 fast-food or       AZ, CA, CO, DC, FL,          All cash            Public
Fund XVI, Ltd.              family-style          GA, ID, IN, KS, MN,
                            restaurants           MO, NC, NM, NV, OH,
                                                  PA, TN, TX, UT, WI

CNL Income                  32 fast-food,         CA, FL, GA, IL, IN,       All cash           Public
Fund XVII, Ltd.             family-style or       MI, NC, NV, OH, SC,
                            casual-dining         TN, TX, WA
                            restaurants

CNL Income                  26 fast-food,         AZ, CA, FL, GA, IL,       All cash           Public
Fund XVIII, Ltd.            family-style or       KY, MD, MN, NC, NV,
                            casual-dining         NY, OH, PA, TN, TX,
                            restaurants           VA

CNL American                703 fast-food,        AL, AZ, CA, CO, CT,            (1)           Public REIT
Properties Fund, Inc.       family-style or       DE, FL, GA, IA, ID,
                            casual-dining         IL, IN, KS, KY, LA,
                            restaurants           MD, MI, MN, MO, MS,
                                                  NC, NE, NH, NJ, NM,
                                                  NV, NY, OH, OK, OR,
                                                  PA, RI, SC, TN, TX,
                                                  UT, VA, WA, WI, WV

CNL Retirement              1 assisted                                           (2)           Public REIT
Properties, Inc.            living facility       IL
</TABLE>


(1)      As of March 31,  1999,  all of APF's  net  offering  proceeds  had been
         invested or committed for investment in properties and mortgage  loans.
         Since April 1, 1999,  APF has used proceeds from its line of credit and
         other borrowing to acquire and develop  properties and to fund mortgage
         loans and secured equipment leases.

(2)      As of June 30,  2000,  the  Retirement  Properties  REIT  had  invested
         approximately  $13,900,000  in  one  assisted  living  property,  which
         includes $8,100,000 in advances relating to the line of credit.

         A more detailed  description of the acquisitions by real estate limited
partnerships  and the two unlisted REITs sponsored by Messrs.  Bourne and Seneff
is set  forth  in  prior  performance  Table  VI,  included  in  Part  II of the
registration  statement  filed with the Securities  and Exchange  Commission for
this offering.  A copy of Table VI is available to stockholders from the Company
upon  request,  free of charge.  In addition,  upon request to the Company,  the
Company will provide, without charge, a copy of the most recent Annual Report on
Form 10-K filed with the Securities and Exchange Commission for CNL Income Fund,
Ltd.,  CNL Income Fund II, Ltd.,  CNL Income Fund III, Ltd., CNL Income Fund IV,
Ltd.,  CNL Income Fund V, Ltd.,  CNL Income Fund VI, Ltd.,  CNL Income Fund VII,
Ltd.,  CNL Income Fund VIII,  Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X,
Ltd., CNL Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII,
Ltd.,  CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI,
Ltd.,  CNL Income Fund XVII,  Ltd.,  CNL Income Fund XVIII,  Ltd.,  CNL American
Properties Fund, Inc. and CNL Retirement Properties, Inc. as well as a copy, for
a reasonable fee, of the exhibits filed with such reports.

         In order to provide potential  purchasers of Shares in the Company with
information  to enable  them to  evaluate  the prior  experience  of the Messrs.
Seneff and Bourne as general partners of real estate limited partnerships and as
directors and officers of the two unlisted  REITs,  including those set forth in
the foregoing table,  certain financial and other  information  concerning those
limited  partnerships  and the two unlisted REITs,  with  investment  objectives
similar to one or more of the Company's  investment  objectives,  is provided in
the Prior  Performance  Tables  included as Appendix  C.  Information  about the
previous  public  partnerships,  the offerings of which became fully  subscribed
between July 1995 and June 2000, is included therein. Potential stockholders are
encouraged to examine the Prior  Performance  Tables  attached as Appendix C (in
Table III), which include information as to the operating results of these prior
programs,  for more detailed  information  concerning  the experience of Messrs.
Seneff and Bourne.



                       INVESTMENT OBJECTIVES AND POLICIES

         The following  sentence replaces item 16 under the heading " -- Certain
Investment Limitations" on page 102 of the Prospectus.

         The  Company  will not make  loans to the  Advisor  or its  Affiliates,
except (A) to wholly owned subsidiaries of the Company, or (B) Mortgage Loans to
Joint Ventures (and joint ventures of wholly owned  subsidiaries of the Company)
in which no  co-venturer  is the  Sponsor,  the  Advisor,  the  Directors or any
Affiliate  of  those  persons  or of the  Company  (other  than a  wholly  owned
subsidiary of the Company) to the restrictions  governing  Mortgage Loans in the
Articles of Incorporation (including the requirement to obtain an appraisal from
an independent expert).




<PAGE>


                               DISTRIBUTION POLICY

DISTRIBUTIONS

         The following  information updates and replaces the table and footnotes
(1) and (3) under the heading " -- Distributions" on page 103 of the Prospectus.

         The following table presents total  Distributions and Distributions per
Share:

<TABLE>
<CAPTION>
<S> <C>


        2000 Quarter                   First           Second             Third
-----------------------------       ------------     ------------      ------------

Total Distributions declared        $5,522,124       $6,414,210       $7,529,787
Distributions per Share                  0.181             0.181            0.188


        1999 Quarter                   First           Second             Third             Fourth             Year
-----------------------------       ------------     ------------      ------------      -------------     --------------

Total Distributions declared           $998,652       $2,053,964        $3,278,456         $4,434,809        $10,765,881
Distributions per Share                   0.175            0.181             0.181              0.181              0.718


        1998 Quarter                   First           Second             Third             Fourth             Year
-----------------------------       ------------     ------------      ------------      -------------     --------------

Total Distributions declared           $101,356         $155,730          $362,045           $549,014         $1,168,145
Distributions per Share                   0.075            0.075             0.142              0.175              0.467

</TABLE>



(1)      In  October  2000,  the  Company   declared   Distributions   totalling
         $2,766,393  (representing $0.0625 per Share), payable in December 2000,
         representing  a  distribution  rate of 7.50% of Invested  Capital on an
         annualized basis.


(3)      Distributions  declared and paid for the years ended  December 31, 1999
         and  1998,   represent   distribution   rates  of  7.18%   and   4.67%,
         respectively,  of Invested  Capital.  Distributions  for the six months
         ended June 30, 2000, represent a distribution rate of 7.25% of Invested
         Capital on an annualized basis.


                                 SUMMARY OF THE
                      ARTICLES OF INCORPORATION AND BYLAWS


DESCRIPTION OF CAPITAL STOCK

         The following  sentences  replace the first and third  sentences of the
first paragraph under the heading " -- Description of Capital Stock" on page 104
of the Prospectus.

         The Company has  authorized  a total of  216,000,000  shares of capital
stock,  consisting of  150,000,000  shares of Common Stock,  $0.01 par value per
share,  3,000,000 shares of Preferred Stock ("Preferred  Stock"), and 63,000,000
additional shares of excess stock ("Excess Shares"),  $0.01 par value per share.
As of  October  9, 2000,  the  Company  had  44,727,232  Shares of Common  Stock
outstanding  (including  20,000  Shares  issued  to  the  Advisor  prior  to the
commencement  of the Initial  Offering and 136,974 Shares issued pursuant to the
Reinvestment Plan) and no Preferred Stock or Excess Shares outstanding.

         The second  paragraph  under the  heading " --  Description  of Capital
Stock" on page 105 of the Prospectus is deleted in its entirety.

         The  following  information  updates and replaces  the third  paragraph
under  the  heading  " --  Description  of  Capital  Stock"  on page  105 of the
Prospectus.

         The Company will not issue share  certificates  except to  stockholders
who make a written request to the Company. Each stockholder's investment will be
recorded  on  the  books  of  the  Company,   and  information   concerning  the
restrictions  and rights  attributable  to Shares (whether in connection with an
initial issuance or a transfer) will be sent to the stockholder receiving Shares
in connection  with an issuance or transfer.  A stockholder  wishing to transfer
his or her Shares will be required to send only an executed form to the Company,
and the Company will provide the required form upon a stockholder's request. The
executed  form and any other  required  documentation  must be  received  by the
Company on or before the 15th of the month for the transfer to be effective  the
following  month.  Subject to  restrictions  in the  Articles of  Incorporation,
transfers of Shares shall be effective, and the transferee of the Shares will be
recognized  as the  holder of such  Shares as of the first day of the  following
month  on  which  the  Company   receives   properly   executed   documentation.
Stockholders  who are  residents  of New York may not  transfer  fewer  than 250
shares at any time.


<PAGE>


                                   ADDENDUM TO
                                   APPENDIX B

                              FINANCIAL INFORMATION


            -------------------------------------------------------

                   THE UPDATED PRO FORMA FINANCIAL STATEMENTS
                           AND THE UNAUDITED FINANCIAL
                 STATEMENTS OF CNL HOSPITALITY PROPERTIES, INC.
                        CONTAINED IN THIS ADDENDUM SHOULD
                  BE READ IN CONJUNCTION WITH APPENDIX B TO THE
                    ATTACHED PROSPECTUS, DATED MAY 23, 2000.

            -------------------------------------------------------



<PAGE>




                          INDEX TO FINANCIAL STATEMENTS



                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES

<TABLE>
<CAPTION>
<S> <C>
                                                                                                          Page


Pro Forma Consolidated Financial Information (unaudited):

    Pro Forma Consolidated Balance Sheet as of June 30, 2000                                              B-2

    Pro Forma Consolidated Statement of Earnings for the six months ended June 30, 2000                   B-3

    Pro Forma Consolidated Statement of Earnings for the year ended December 31, 1999                     B-4

    Notes to Pro Forma Consolidated Financial Statements for the six months ended
      June 30, 2000 and the year ended December 31, 1999                                                  B-5

Updated Unaudited Condensed  Consolidated Financial Statements as recently filed
    in CNL Hospitality Properties, Inc.'s June 30, 2000 Form 10-Q:

    Condensed Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999                       B-8

    Condensed Consolidated Statements of Earnings for the quarters and six months ended
      June 30, 2000 and 1999                                                                              B-9

    Condensed Consolidated Statements of Stockholders' Equity for the six months ended
      June 30, 2000 and year ended December 31, 1999                                                      B-10

    Condensed Consolidated Statements of Cash Flows for the six months ended
      June 30, 2000 and 1999                                                                              B-11

    Notes to Condensed Consolidated Financial Statements for the quarters and six months
      ended June 30, 2000 and 1999                                                                        B-13


</TABLE>

<PAGE>


                  PRO FORMA CONSOLIDATED FINANCIAL INFORMATION



         The  following  Unaudited Pro Forma  Consolidated  Balance Sheet of CNL
Hospitality  Properties,  Inc. and subsidiaries  (the "Company") gives effect to
(i) the receipt of an initial capital contribution of $200,000 from the Advisor,
$385,084,634  in gross offering  proceeds from the sale of 38,508,463  shares of
common  stock for the period  from  inception  through  June 30,  2000,  and the
application of such funds to purchase seven properties, to acquire an 89 percent
interest in a limited liability company which owns one property, to invest in an
unconsolidated  subsidiary  which owned seven properties as of June 30, 2000, to
place deposits on four additional properties,  to redeem 75,791 shares of common
stock pursuant to the Company's  redemption plan, and to pay offering  expenses,
acquisition fees and miscellaneous acquisition expenses, (ii) the application of
such  funds  to  pay  offering  expenses,  acquisition  fees  and  miscellaneous
acquisition expenses, all as reflected in the pro forma adjustments described in
the  related  notes,  (iii)  the  acquisition  of  certain  shares of 8% Class A
Cumulative  Preferred  Stock and common stock of CNL Hotel  Investors,  Inc. and
(iv) the purchase of seven additional properties,  as reflected in the pro forma
adjustments described in the related notes. The Unaudited Pro Forma Consolidated
Balance Sheet as of June 30, 2000,  includes the  transactions  described in (i)
above,  from its  historical  balance  sheet,  adjusted  to give  effect  to the
transactions in (iii) and (iv) above as if they had occurred on June 30, 2000.

         The Unaudited Pro Forma Consolidated Statements of Earnings for the six
months ended June 30, 2000 and for the year ended  December  31, 1999,  includes
the historical  operating results of the properties  described in (i), (iii) and
(iv) above from the date of their  acquisitions  plus operating results from (A)
the later of (1) the date the  property  became  operational  or (2)  January 1,
1999,  to (B) the  earlier  of (1) the date the  property  was  acquired  by the
Company or (2) the end of the pro forma period presented.

         This pro forma  consolidated  financial  information  is presented  for
informational  purposes  only and  does  not  purport  to be  indicative  of the
Company's  financial results or condition if the various events and transactions
reflected  therein  had  occurred  on the  dates,  or been in effect  during the
periods, indicated. This pro forma consolidated financial information should not
be viewed as indicative of the Company's  financial results or conditions in the
future.


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2000
<TABLE>
<CAPTION>
<S> <C>

                                             CNL Hospitality         CNL Hotel
                                             Properties, Inc.      Investors, Inc.
                                            and subsidiaries        Historical          Pro Forma
          ASSETS                               Historical               (b)            Adjustments            Pro Forma
                                            ------------------    ----------------    ---------------        -------------
Land, buildings and equipment
  on operating leases                          $ 188,691,001        $ 162,776,797       $102,640,426 (a)(b)    $454,108,225
Investment in unconsolidated
  subsidiary                                      37,526,856                   --        (37,526,856 )(b)                --
Cash and cash equivalents                        105,926,387            7,701,129        (98,106,103 )(a)(b)     15,521,413
Restricted cash                                      720,985              652,314                 --              1,373,299
Certificate of deposit                             5,000,000                   --                 --              5,000,000
Receivables                                          411,521               80,107                 --                491,628
Prepaid expenses                                     254,470               92,658                 --                347,128
Dividends receivable                               1,191,431                   --         (1,191,431 )(b)                --
Loan costs                                            50,749              678,232                 --                728,981
Accrued rental income                                 95,555              407,599                 --                503,154
Other assets                                      10,471,824                   --         (7,832,175 )(a)         2,639,649
                                           ------------------    -----------------   ----------------        ---------------
                                               $ 350,340,779         $172,388,836       $(42,016,138 )         $480,713,477
                                           ==================    =================   ================        ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

Note payable                                    $ 10,000,000         $ 87,553,029            $    --            $97,553,029
Accounts payable and accrued expenses                758,481              638,210                 --              1,396,691
Distribution payable                                 175,594            2,312,695         (1,191,431 )(b)         1,296,858
Due to related parties                               948,585              306,249                 --              1,254,834
Security deposits                                  8,404,002                   --          2,658,513  (a)        11,062,515
Rents paid in advance                                172,573              789,835                 --                962,408
                                           ------------------    -----------------   ----------------        ---------------
       Total liabilities                          20,459,235           91,600,018          1,467,082            113,526,335
                                           ------------------    -----------------   ----------------        ---------------

Minority Interest                                         --                   --         37,305,598             37,305,598
                                           ------------------    -----------------   ----------------        ---------------

Redeemable Preferred Stock:
  Class A 8%: 50,886 share authorized;
   48,337 issued and outstanding                          --           47,802,692        (47,802,692 )(b)                --
  Class B 9.76%: 39,982 share authorized;
   37,979 issued and outstanding                          --           37,559,172        (37,559,172 )(b)                --
                                           ------------------    -----------------   ----------------        ---------------
                                                          --           85,361,864        (85,361,864 )                   --
                                           ------------------    -----------------   ----------------        ---------------
Stockholders' equity:
  Preferred stock, without par value.
     Authorized and unissued
      3,000,000 shares                                    --                    1                 (1 )(b)                --
  Excess shares, $.01 par value per
     share.  Authorized and unissued
      63,000,000 shares                                   --                    --                  --                  --
  Common stock, $.01 par value per
     share.  150,000,000 authorized
      shares; issued and outstanding
      38,452,693 shares                              384,527                  948               (948 )(b)           384,527
  Capital in excess of par value                 339,270,298               99,999            (99,999 )(b)       339,270,298
  Accumulated distributions in excess
     of net earnings                               (6,814,333 )         (4,673,994 )        4,673,994  (b)        (6,814,333 )
  Minority interest distributions in
     excess of contributions and
      accumulated earnings                         (2,958,948 )                 --                 --             (2,958,948 )
                                            ------------------    -----------------   ----------------        ---------------
           Total stockholders' equity             329,881,544           (4,573,046 )        4,573,046            329,881,544
                                            ------------------    -----------------   ----------------        ---------------
                                                $ 350,340,779        $ 172,388,836       $(42,016,138 )        $ 480,713,477
                                            ------------------    -----------------   ----------------        ---------------
</TABLE>

                     See accompanying notes to unaudited pro
                    forma consolidated financial statements.

<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
                         SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
<S> <C>
                                           CNL Hospitality
                                             Properties,         CNL Hotel
                                              Inc. and          Investors,
                                            subsidiaries           Inc.
                                             Historical         Historical           Pro Forma
                                                                    (b)             Adjustments            Pro Forma
                                           ----------------    --------------      ---------------      ----------------

Revenues:
    Rental income from
       operating leases                         $ 5,976,803       $ 8,820,734         $  6,303,300  (1)     $ 21,100,837
    FF&E reserve income                             480,113           428,309              510,465  (2)        1,418,887
    Dividend income                               1,853,735                --           (1,853,735 )(7)               --
    Interest and other income                     3,961,188           317,847           (1,585,856 )(3)        2,693,179
                                             ---------------   ---------------     ----------------       --------------

                                                 12,271,839         9,566,890            3,374,174            25,212,903
                                             ---------------   ---------------     ----------------       --------------

Expenses:
    Interest and loan cost amortization              16,222          3,378,447                   --            3,394,669
    General operating and
       administrative                               696,885            389,528                   --            1,086,413
    Professional services                            81,637                 --                   --               81,637
    Asset management fees to
       related party                                362,280             83,849              381,980  (4)         828,109
    Depreciation and amortization                 2,000,144          2,429,326            2,176,668  (5)(7)    6,606,138
                                             ---------------    ---------------     ----------------       --------------
                                                  3,157,168          6,281,150            2,558,648           11,996,966
                                             ---------------    ---------------     ----------------       --------------

Earnings Before Equity in Loss
    of Unconsolidated Subsidiary
    After Deduction of Preferred
    Stock Dividends and Minority Interest         9,114,671          3,285,740              815,526           13,215,937

Equity in Loss of Unconsolidated
    Subsidiary After Deduction of
    Preferred Stock Dividends                      (260,437 )               --              260,437  (7)              --

Minority Interest                                  (266,210 )               --           (1,539,041 )(7)      (1,805,251 )
                                             ---------------    ---------------     ----------------       --------------

Net Earnings                                    $ 8,588,024       $  3,285,740          $  (463,078 )       $ 11,410,686
                                             ---------------    ---------------     ----------------       --------------

Earnings Per Share of Common Stock (6):
    Basic                                         $    0.25                                                  $      0.34
                                             ---------------                                               --------------
    Diluted                                       $    0.25                                                  $      0.34
                                             ---------------                                               --------------

Weighted Average Number of Shares of
    Common Stock Outstanding (6):
       Basic                                     33,693,585                                                   33,693,585
                                             ---------------                                               --------------
       Diluted                                   33,693,585                                                   33,693,585
                                             ---------------                                               --------------

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


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
                          YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
<S> <C>
                                                CNL
                                            Hospitality         CNL Hotel
                                            Properties,        Investors,
                                             Inc. and             Inc.
                                           subsidiaries        Historical          Pro Forma
                                            Historical             (b)            Adjustments              Pro Forma
                                           --------------     --------------    ----------------          -------------

Revenues:
    Rental income from
       operating leases                        $ 3,910,639       $ 12,452,195         $ 5,380,191  (1)      $ 21,743,025
    FF&E reserve income                            320,356            343,264             436,667  (2)         1,100,287
    Dividend income                              2,753,506                 --          (2,753,506 )(7)                --
    Interest and other income                    3,693,004            230,519          (1,948,596 )(3)         1,974,927
                                             --------------    ---------------   -----------------         --------------
                                                10,677,505         13,025,978           1,114,756             24,818,239
                                             --------------    ---------------   -----------------         --------------

Expenses:
    Interest and loan cost amortization            248,094          4,785,818                  --              5,033,912
    General operating and
       administrative                              626,649            563,826                  --              1,190,475
    Professional services                           69,318                 --                  --                 69,318
    Asset management fees to
       related party                               106,788            113,757             326,040  (4)           546,585
    Depreciation and amortization                1,267,868          3,457,641           1,825,497  (5)(7)      6,551,006
                                             --------------    ---------------   -----------------         --------------
                                                 2,318,717          8,921,042           2,151,537             13,391,296
                                             --------------    ---------------   -----------------         --------------

Earnings Before Equity in Loss
    of Unconsolidated Subsidiary
    After Deduction of Preferred
    Stock Dividends and Minority Interest        8,358,788          4,104,936          (1,036,780 )           11,426,944

Equity in Loss of Unconsolidated
    Subsidiary After Deduction of
    Preferred Stock Dividends                     (778,466 )               --             778,466  (7)                --

Minority Interest                                  (64,334 )               --          (1,922,752 )(7)        (1,987,086 )
                                             --------------    ---------------   -----------------         --------------
Net Earnings                                   $ 7,515,988       $  4,104,936       $  (2,181,066 )          $ 9,439,858
                                             --------------    ---------------   -----------------         --------------

Earnings Per Share of Common Stock (6):
    Basic                                        $    0.47                                                   $     0.59
                                             ---------------                                               --------------
    Diluted                                      $    0.45                                                   $     0.59
                                             ---------------                                               --------------

Weighted Average Number of Shares of
    Common Stock Outstanding (6):
       Basic                                    15,890,212                                                    15,890,212
                                             ---------------                                               --------------
       Diluted                                  21,437,859                                                    15,890,212
                                             ---------------                                               --------------
</TABLE>




                     See accompanying notes to unaudited pro
                          forma consolidated financial
                                   statements.


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
         NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
                        THE YEAR ENDED DECEMBER 31, 1999

Unaudited Pro Forma Consolidated Balance Sheet:

(a)      Represents  the receipt of  $2,658,513  from the  lessees for  security
         deposits  net of  $84,607,103  of cash  and  cash  equivalents  used to
         purchase seven properties for $95,097,792 (which includes closing costs
         of $864,016 and  acquisition  fees and costs of  $7,832,176,  which had
         been recorded as other assets as of June 30, 2000).

<TABLE>
<CAPTION>
<S> <C>
                                                                             Acquisition
                                                                              Fees and
                                                                               Closing
                                                                           Costs Allocated
                                                                            to Investment
                                                    Purchase Price                                 Total
                                                 ---------------------     ----------------    ---------------

         Residence Inn in Merrifield, VA                 $ 18,816,000          $ 1,357,045       $ 20,173,045
         Spring Hill Suites in Gaithersburg, MD            15,214,600            1,097,312         16,311,912
         Courtyard in Alpharetta, GA                       13,877,000            1,656,579         13,533,579
         Residence Inn in Salt Lake City, UT               14,573,000            1,739,665         16,312,665
         TownePlace Suites in Tewksbury, MA                 9,050,000            1,080,352         10,130,352
         TownePlace Suites in Mt. Laurel, NJ                7,711,000              910,508          8,621,508
         TownePlace Suites in Scarborough, ME               7,160,000              854,731          8,014,731
                                                  --------------------    -----------------    ---------------
                                                         $ 86,401,600          $ 8,696,192       $ 95,097,792

                                                  --------------------    -----------------    ---------------
</TABLE>

(b)      In October 2000, Five Arrows,  the Company and Hotel Investors  entered
         into an agreement  under which Hotel  Investors  agreed to redeem 2,104
         shares of Class A Preferred Stock and an equivalent number of shares of
         common stock of Hotel Investors held by Five Arrows.  In addition,  the
         Company  purchased  7,563  shares of both Class A  Preferred  Stock and
         common stock of Hotel Investors from Five Arrows for $11,395,000. Hotel
         Investors  agreed to redeem 1,653 shares of Class B Preferred Stock and
         an aggregate of 10,115 shares of common stock of Hotel  Investors  held
         by the  Company.  Five  Arrows'  remaining  38,670  shares  of  Class A
         Preferred  Stock and the  Company's  7,563  shares of Class A Preferred
         Stock  were  exchanged  for an  equivalent  number of shares of Class E
         Preferred Stock, par value $0.01 ("Class E Preferred Stock"),  of Hotel
         Investors. Upon the consummation of this transaction,  the Company owns
         an  interest of  approximately  53% and Five Arrows owns an interest of
         approximately 47%, in the common stock of Hotel Investors.  Pursuant to
         this  agreement,  the Company  repurchased  65,285  Shares held by Five
         Arrows for an aggregate price of $620,207.50. Additionally, Five Arrows
         granted the Company the following options: (1) on or before January 31,
         2001,  the Company has the option to purchase  7,250  shares of Class E
         Preferred  Stock and an equal  number of shares of common stock held by
         Five Arrows for $1,000 per pair of Class E  Preferred  Stock and common
         stock,  and (2) provided  that the Company  purchased all of the shares
         under the first  option,  the Company will have the option,  until June
         30, 2001,  to purchase  7,251 shares of Class E Preferred  Stock and an
         equal number of shares of common stock for $1,000 for each pair. If the
         Company elects not to purchase the remaining shares under the first and
         second  options,  Five Arrows will have the right,  at certain  defined
         dates,  to exchange its shares in Hotel  Investors  for Common Stock of
         the Company at an exchange rate of 157.0000609  Shares of the Company's
         Common  Stock for each  share of Class E  Preferred  Stock,  subject to
         adjustment  in the event of stock  dividends,  stock splits and certain
         other corporate actions by the Company.

Unaudited Pro Forma Consolidated Statements of Earnings:

(1)      Represents  adjustment to rental income from  operating  leases for the
         properties  acquired  by the  Company  as of  October 9, 2000 (the "Pro
         Forma Properties"),  for the period commencing (A) the later of (i) the
         date the Pro Forma Property became operational by the previous owner or
         (ii) January 1, 1999, to (B) the earlier of


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
         NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
                        THE YEAR ENDED DECEMBER 31, 1999

 Unaudited Pro Forma Consolidated Statements of Earnings - Continued:

         (i) the date the Pro Forma Property was acquired by the Company or (ii)
         the end of the pro forma period presented.  The following  presents the
         actual date the Pro Forma Properties were acquired or placed in service
         by the Company as compared  to the date the Pro Forma  Properties  were
         treated as becoming  operational  as a rental  property for purposes of
         the Pro Forma Consolidated Statements of Earnings.

<TABLE>
<CAPTION>
<S> <C>
                                                                                             Date Pro Forma
                                                                  Date Placed                Property became
                                                                  in Service                 Operational as
                                                                by  the Company              Rental Property
                                                               ----------------              ---------------

               Residence Inn in Mira Mesa, CA                  December 10, 1999             September 20, 1999
               Courtyard in Philadelphia, PA                   November 20, 1999             November 20, 1999
               Wyndham in Billerica, MA                        June 1, 2000                  May 15, 1999
               Wyndham in Denver, CO                           June 1, 2000                  November 15, 1999
               Residence Inn in Palm Desert, CA                June 16, 2000                 February 19, 1999
               Courtyard in Palm Desert, CA                    June 16, 2000                 September 1, 1999
               Residence Inn in Merrifield ,VA                 July 28, 2000                 June 24, 2000
               Spring Hill Suites in Gaithersburg, MD          July 28, 2000                 June 30, 2000
               Courtyard in Alpharetta, GA                     August 22, 2000               January 7, 2000
               Residence Inn in Salt Lake City, UT             August 22, 2000               August 11, 1999
               TownePlace Suites in Tewksbury, MA              August 22, 2000               July 15, 1999
               TownePlace Suites in Mt. Laurel, NJ             August 22, 2000               November 22, 1999
               TownePlace Suites in Scarborough, ME            August 22, 2000               June 25, 1999
</TABLE>

         Generally,  the leases  provide for the payment of  percentage  rent in
         addition  to base  rental  income.  However,  due to the  fact  that no
         percentage  rent was due under the leases for the Pro Forma  Properties
         during  1999 and the six months  ended June 30,  2000 that the  Company
         held the  properties,  no pro forma  adjustment was made for percentage
         rental  income for the year ended  December 31, 1999 and the six months
         ended June 30, 2000.

(2)      Represents  reserve  funds which will be used for the  replacement  and
         renewal of furniture,  fixtures and equipment relating to the Pro Forma
         Properties (the "FF&E Reserve").  The funds in the FF&E Reserve and all
         property  purchased  with  funds  from the FF&E  Reserve  will be paid,
         granted and assigned to the Company as  additional  rent. In connection
         therewith,  FF&E  reserve  income  was  earned at  approximately  three
         percent of estimated annual gross revenues, per Pro Forma Property.

(3)      Represents  adjustment  to interest  income due to the  decrease in the
         amount of cash  available for investment in interest  bearing  accounts
         during the  periods  commencing  (A) the later of (i) the dates the Pro
         Forma  Properties  became  operational  by the previous  owners or (ii)
         January 1, 1999, through (B) the earlier of (i) the actual date the Pro
         Forma  Properties were acquired or (ii) the end of the pro forma period
         presented,  as  described  in Note (1) and Note (3)  above for the year
         ended  December 31, 1999.  The estimated pro forma  adjustment is based
         upon the fact that interest income from interest  bearing  accounts was
         earned at a rate of approximately four percent per annum by the Company
         during the year ended  December  31, 1999 and the six months ended June
         30, 2000.

(4)      Represents  increase in asset management fees relating to the Pro Forma
         Properties for the period  commencing (A) the later of (i) the date the
         Pro Forma Properties became  operational by the previous owners or (ii)
         January 1, 1999,  through (B) the earlier of (i) the date the Pro Forma
         Properties  were  acquired  or (ii)  the end of the  pro  forma  period
         presented,  as described in Notes (1) and (3) above.  Asset  management
         fees for the Company are equal to 0.60% per year of the Company's  Real
         Estate Asset Value, as defined in the Company's prospectus.


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
         NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
                        THE YEAR ENDED DECEMBER 31, 1999

Unaudited Pro Forma Consolidated Statements of Earnings - Continued:

(5)      Represents incremental increase in depreciation expense of the building
         and the furniture,  fixture and equipment  ("FF&E") portions of the Pro
         Forma   Properties   accounted  for  as  operating   leases  using  the
         straight-line  method.  The  buildings  and FF&E are  depreciated  over
         useful lives of 40 and seven years, respectively.

(6)      Historical  earnings per share were calculated  based upon the weighted
         average  number of shares of common stock  outstanding  during the year
         ended December 31, 1999 and the six months ended June 30, 2000.

(7)      Represents  certain  elimination  adjustments and pro forma adjustments
         due to the consolidation of CNL Hotel Investors,  Inc.  consistent with
         note (b) above.



<PAGE>


                                         CNL HOSPITALITY PROPERTIES, INC.
                                                 AND SUBSIDIARIES
                                       CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>
                                                                        June 30, 2000          December 31,1999
                                                                       -----------------     ---------------------

                           ASSETS
Land, buildings and equipment on operating leases, less
    accumulated depreciation of $3,532,719 and $1,603,334,
    respectively                                                          $ 188,691,001          $112,227,771
Investment in unconsolidated subsidiary                                      37,526,856            38,364,157
Cash and cash equivalents                                                   105,926,387           101,972,441
Restricted cash                                                                 720,985               275,630
Certificate of deposit                                                        5,000,000             5,000,000
Dividends receivable                                                          1,191,431             1,215,993
Receivables                                                                     411,521               112,184
Prepaid expenses                                                                254,470                41,165
Loan costs, less accumulated amortization of $102,847 and
    $86,627, respectively                                                        50,749                51,969
Accrued rental income                                                            95,555                79,399
Other assets                                                                 10,471,824             7,627,565
                                                                         ---------------     -----------------

                                                                           $350,340,779          $266,968,274
                                                                         ===============     =================


                  LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable                                                               $ 10,000,000              $     --
Accounts payable and accrued expenses                                           758,481               405,855
Distributions payable                                                           175,594                89,843
Due to related parties                                                          948,585               995,500
Security deposits                                                             8,404,002             5,042,054
Rents paid in advance                                                           172,573               255,568
                                                                         ---------------     -----------------
       Total liabilities                                                     20,459,235             6,788,820
                                                                         ---------------     -----------------

Commitments and contingencies (Note 12)

Minority interest                                                                     --             7,124,615
                                                                         ---------------     -----------------

Stockholders' equity:
    Preferred stock, without par value.
       Authorized and unissued  3,000,000 shares                                      --                     --
    Excess shares,  $.01 par value per share.
       Authorized and unissued 63,000,000 shares                                      --                     --
    Common stock, $.01 par value per share. 150,000,000
       and 60,000,000 authorized shares, respectively;
       issued and outstanding  38,452,693 and 28,902,914
       shares, respectively                                                     384,527               289,029
    Capital in excess of par value                                          339,270,298           256,231,833
    Accumulated distributions in excess of net earnings                      (6,814,333 )          (3,466,023 )
    Minority interest distributions in excess of contributions
       and accumulated earnings                                              (2,958,948 )                  --
                                                                         ---------------     -----------------
          Total stockholders' equity                                        329,881,544           253,054,839
                                                                         ---------------     -----------------

                                                                           $350,340,779         $ 266,968,274
                                                                         ===============     =================


     See accompanying notes to condensed consolidated financial statements.


<PAGE>


                                         CNL HOSPITALITY PROPERTIES, INC.
                                                 AND SUBSIDIARIES
                                   CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS


                                                      Quarter Ended                           Six Months Ended
                                                        June 30,                                  June 30,
                                               2000                  1999                 2000                1999
                                           --------------       ---------------       -------------        ------------

Revenues:
    Rental income from operating
       leases                                 $3,250,909           $ 748,908          $ 5,976,803          $1,486,526
    FF&E Reserve income                          320,876              65,006              480,113             126,033
    Dividend income                              926,918             658,288            1,853,735             900,131
    Interest and other income                  2,191,979             614,875            3,961,188             907,739
                                          ---------------     ---------------       --------------      --------------
                                               6,690,682           2,087,077           12,271,839           3,420,429
                                          ---------------     ---------------       --------------      --------------

Expenses:
    Interest and loan cost amortization            8,112              32,757               16,222             233,330
    General operating and
       administrative                            401,815             120,566              696,885             313,997
    Professional services                         36,300               8,066               81,637              29,272
    Asset management fees to
       related party                             235,858              17,871              362,280              67,436
    Depreciation and amortization              1,083,503             239,657            2,000,144             493,415
                                          ---------------     ---------------       --------------      --------------
                                               1,765,588             418,917            3,157,168           1,137,450
                                          ---------------     ---------------       --------------      --------------

Earnings Before Equity in Loss of
    Unconsolidated Subsidiary                  4,925,094           1,668,160            9,114,671           2,282,979

Equity in Loss of Unconsolidated
    Subsidiary After Deduction of
    Preferred Stock Dividends                   (140,634 )          (205,911 )           (260,437 )          (390,450 )

Minority Interest                               (141,520 )                --             (266,210 )                --
                                          ---------------     ---------------       --------------      --------------

Net Earnings                                  $4,642,940          $1,462,249          $ 8,588,024          $1,892,529
                                          ===============     ===============       ==============      ==============

Earnings Per Share of Common Stock:
    Basic                                       $   0.13            $   0.12            $    0.25            $   0.20
                                          ===============     ===============       ==============      ==============
    Diluted                                     $   0.13            $   0.12            $    0.25            $   0.20
                                          ===============     ===============       ==============      ==============

Weighted Average Number of Shares
    of Common Stock Outstanding:
         Basic                                36,163,184          12,330,853           33,693,585           9,391,870
                                          ===============     ===============       ==============      ==============
         Diluted                              36,163,184          12,330,853           33,693,585           9,391,870
                                          ===============     ===============       ==============      ==============




      See accompanying notes to condensed consolidated financial statements.


<PAGE>


                                         CNL HOSPITALITY PROPERTIES, INC.
                                                 AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                          Six Months Ended June 30, 2000 and Year Ended December 31, 1999


                                                                                                Minority interest
                                                                                                 distributions in
                                           Common stock                           Accumulated     excess of con-
                                   ---------------------------    Capital in     distributions    tributions and
                                      Number          Par         excess of     in excess of net  accumulated
                                     of Shares       value        par value         earnings       earnings           Total
                                   --------------   ----------  --------------  ----------------- --------------  ---------------

Balance at December 31, 1998           4,321,908     $ 43,219     $37,289,402      $ (216,130 )     $      --        $37,116,491

Subscriptions received for
    common stock through public
    offerings and distribution
    reinvestment plan                 24,593,891      245,939     245,692,968              --                --       245,938,907

Retirement of common stock               (12,885 )       (129 )      (118,413 )            --                --          (118,542 )

Stock issuance costs                          --           --     (26,632,124 )            --                --       (26,632,124 )

Net earnings                                  --           --              --       7,515,988                --         7,515,988

Distributions declared and paid
    ($.72 per share)                          --           --              --     (10,765,881 )              --       (10,765,881 )
                                   --------------   ---------- ---------------  --------------    --------------  ----------------

Balance at December 31, 1999          28,902,914      289,029     256,231,833      (3,466,023 )              --       253,054,839

Subscriptions received for
    common stock through public
    offerings and distribution
    reinvestment plan                  9,612,655       96,127      96,030,423              --                --        96,126,550

Retirement of common stock               (62,876 )       (629 )      (577,826 )            --               --           (578,455 )

Stock issuance costs                          --           --     (12,414,132 )            --               --        (12,414,132 )

Net earnings                                  --           --              --       8,588,024                --         8,588,024

Minority interest distributions in
    excess of contributions and
    accumulated earnings                      --           --              --              --        (2,958,948 )      (2,958,948 )

Distributions declared and paid
    ($.36 per share)                          --           --              --     (11,936,334 )              --       (11,936,334 )
                                   --------------   ---------- ---------------  --------------    --------------  ----------------

Balance at June 30, 2000              38,452,693     $384,527   $ 339,270,298    $ (6,814,333 )    $ (2,958,948 )    $329,881,544
                                   ==============   ========== ===============  ==============    ==============  ================





     See accompanying notes to condensed consolidated financial statements.


<PAGE>


                                         CNL HOSPITALITY PROPERTIES, INC.
                                                 AND SUBSIDIARIES
                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                          Six Months Ended June 30,
                                                                          2000                 1999
                                                                      -------------         ------------

Cash flows from operating activities:
   Net earnings                                                        $ 8,588,024          $ 1,892,529
    Adjustments to reconcile net earnings to net cash
      provided by operating activities:
        Depreciation                                                     1,958,763              461,459
        Amortization                                                        41,381               90,839
        Distributions received from investment in
          unconsolidated subsidiary, net
          of equity in loss                                                812,142              393,670
        Minority interest                                                  266,210                   --
        Changes in operating assets and
          liabilities:
            Dividends receivable                                            24,562             (707,373 )
            Receivables                                                   (299,337 )             (5,402 )
            Prepaid expenses                                              (213,305 )              3,810
            Accrued rental income                                          (16,156 )            (31,810 )
            Accounts payable and accrued
              expenses                                                     352,626              (51,689 )
            Due to related parties - operating expenses                    (46,915 )             (8,787 )
            Security deposits                                            3,361,948                   --
            Rents paid in advance                                          (82,995 )             (3,489 )
                                                                    ---------------      ---------------

                Net cash provided by operating activities               14,746,948            2,033,757
                                                                    ---------------      ---------------

Cash flows from investing activities:
   Additions to land, buildings and equipment on
       operating leases                                                (78,421,993 )                 --
    Investment in unconsolidated subsidiary                                     --          (37,172,643 )
    Increase in restricted cash                                           (445,355 )           (121,725 )
    Additions to other assets                                           (2,844,259 )         (4,509,931 )
                                                                    ---------------      ---------------

              Net cash used in investing activities                    (81,711,607 )        (41,804,299 )
                                                                    ---------------      ---------------




     See accompanying notes to condensed consolidated financial statements.


<PAGE>


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



                                                                        Six Months Ended June 30,
                                                                        2000                 1999
                                                                   ----------------      --------------

Cash flows from financing activities:
   Proceeds from note payable                                           10,000,000                 --
   Repayment of borrowings on line of credit                                    --         (9,600,000 )
   Subscriptions received from stockholders                             96,126,550        114,711,315
   Distributions to stockholders                                       (11,936,334 )       (3,052,616 )
   Distributions to minority interest                                  (10,264,022 )               --
   Retirement of common stock                                             (578,455 )           (4,600 )
   Payment of stock issuance costs                                     (12,414,132 )      (11,833,363 )
   Other                                                                   (15,002 )           (9,863 )
                                                                  -----------------     --------------

         Net cash provided by financing activities                      70,918,605         90,210,873
                                                                  -----------------     --------------

Net increase in cash and cash equivalents                                3,953,946         50,440,331

Cash and cash equivalents at beginning of period                       101,972,441         13,228,923
                                                                  -----------------     --------------

Cash and cash equivalents at end of period                           $ 105,926,387       $ 63,699,254
                                                                  =================     ==============


Supplemental schedule of non-cash financing activities:

      Distributions declared but not paid to minority
         interest                                                      $   175,594            $    --
                                                                  =================     ==============

</TABLE>



     See accompanying notes to condensed consolidated financial statements.


<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              Quarters and Six Months Ended June 30, 2000 and 1999


1.       Significant Accounting Policies:

         Organization and Nature of Business - CNL Hospitality Properties,  Inc.
         was organized in Maryland on June 12, 1996.  CNL  Hospitality  GP Corp.
         and CNL  Hospitality  LP Corp.  are wholly  owned  subsidiaries  of CNL
         Hospitality  Properties,  Inc., organized in Delaware in June 1998. CNL
         Hospitality  Partners,  LP is a Delaware limited  partnership formed in
         June 1998. CNL  Hospitality  GP Corp. and CNL  Hospitality LP Corp. are
         the general  and  limited  partner,  respectively,  of CNL  Hospitality
         Partners, LP. The term "Company" includes, unless the context otherwise
         requires, CNL Hospitality  Properties,  Inc., CNL Hospitality Partners,
         LP,  CNL  Hospitality  GP  Corp.,  CNL  Hospitality  LP  Corp.  and CNL
         Philadelphia Annex, LLC (the "LLC").

         The  Company  was  formed   primarily   to  acquire   properties   (the
         "Properties")  located  across  the  United  States  to be  leased on a
         long-term,  "triple-net" basis to hotel operators. The Company may also
         provide  mortgage  financing  (the  "Mortgage  Loans")  and  furniture,
         fixture  and  equipment   financing  ("Secured  Equipment  Leases")  to
         operators of hotel chains. The aggregate  outstanding  principal amount
         of Secured  Equipment Leases will not exceed 10% of gross proceeds from
         the Company's offerings of shares of common stock.

         The accompanying  unaudited condensed consolidated financial statements
         include the accounts of the Company, CNL Hospitality Properties,  Inc.,
         and its wholly owned  subsidiaries,  CNL  Hospitality  GP Corp. and CNL
         Hospitality  LP  Corp.,  as well  as the  accounts  of CNL  Hospitality
         Partners,  LP and CNL  Philadelphia  Annex,  LLC (an 89% owned  limited
         liability   company).   All  significant   intercompany   balances  and
         transactions  have been  eliminated  in  consolidation.  Interest of an
         unaffiliated third party is reflected as minority interest.

         Basis  of   Presentation  -  The   accompanying   unaudited   condensed
         consolidated financial statements have been prepared in accordance with
         the instructions to Form 10-Q and do not include all of the information
         and  note  disclosures   required  by  generally  accepted   accounting
         principles. The condensed consolidated financial statements reflect all
         adjustments,  consisting of normal recurring adjustments, which are, in
         the opinion of management, necessary to a fair statement of the results
         for the interim periods  presented.  Operating  results for the quarter
         and six months ended June 30, 2000 may not be indicative of the results
         that may be expected for the year ending December 31, 2000.  Amounts as
         of December 31, 1999, included in the condensed  consolidated financial
         statements  have  been  derived  from  audited  consolidated  financial
         statements as of that date.

         These unaudited  consolidated  financial  statements  should be read in
         conjunction  with  the  consolidated  financial  statements  and  notes
         thereto included in the Company's Form 10-K for the year ended December
         31, 1999.

         Certain  items in the prior  period's  financial  statements  have been
         reclassified to conform with the 2000 presentation,  including a change
         in the  presentation  of the cash flow from the direct to the  indirect
         method. These  reclassifications  had no effect on stockholders' equity
         or net earnings.

         In December 1999, the Securities and Exchange Commission released Staff
         Accounting  Bulletin  No. 101 ("SAB  101") which  provides  the staff's
         views in applying generally accepted accounting  principles to selected
         revenue  recognition issues. SAB 101 is not expected to have a material
         impact on the  Company's  results of  operations.  SAB 101 requires the
         Company to defer recognition of certain  percentage rental income until
         certain  thresholds are met. We have adopted SAB 101 beginning  January
         1, 2000 without restatement of prior periods.



<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              Quarters and Six Months Ended June 30, 2000 and 1999


2.       Public Offerings:

         On June 17, 1999,  the Company  completed  its  offering of  16,500,000
         shares of common stock ($165,000,000) (the "Initial  Offering"),  which
         included 1,500,000 shares ($15,000,000)  available only to stockholders
         who  elected  to  participate  in  the  Company's   reinvestment  plan.
         Following the completion of the Initial Offering, the Company commenced
         an  offering  of up to  27,500,000  additional  shares of common  stock
         ($275,000,000)  (the  "1999  Offering").  The price per share and other
         terms of the 1999 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 CNL Hospitality  Corp. (the
         "Advisor")  for  acquisition  fees, are  substantially  the same as the
         Company's Initial  Offering.  As of June 30, 2000, the Company received
         total  subscription  proceeds  from  the  Initial  Offering,  the  1999
         Offering and the sale of warrants of $385,084,634  (38,508,463 shares),
         including $1,037,782 (103,778 shares) through the reinvestment plan.

         On October 26, 1999, 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 45,000,000  additional  shares of
         common  stock  ($450,000,000)  (the  "2000  Offering")  in an  offering
         expected  to  commence  immediately  following  the  completion  of the
         Company's  current offering of up to 27,500,000  shares of common stock
         ("the 1999 Offering").  Of the 45,000,000  shares of common stock to be
         offered,  up to 5,000,000 will be available to stockholders  purchasing
         shares  through the  reinvestment  plan.  The price per share and other
         terms of the 2000 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 the Company's 1999 Offering.  The
         Company  expects  to use the net  proceeds  from the 2000  Offering  to
         purchase  additional  Properties and, to a lesser extent, make Mortgage
         Loans.

3.       Investment in Unconsolidated Subsidiary:

         During 1999,  the Company with Five Arrows Realty  Securities II L.L.C.
         ("Five  Arrows") formed a jointly owned real estate  investment  trust,
         CNL Hotel  Investors,  Inc. ("Hotel  Investors"),  which acquired seven
         hotel  Properties.  In order to fund the acquisition of the Properties,
         Five Arrows invested approximately $48 million and the Company invested
         approximately  $38 million in Hotel  Investors.  Hotel Investors funded
         the  remaining  amount of  approximately  $88  million  with  permanent
         financing,   collateralized  by  Hotel  Investors'   interests  in  the
         Properties.  In return for their  respective  investments,  Five Arrows
         received a 51% common  stock  interest  and the Company  received a 49%
         common stock interest in Hotel  Investors.  Five Arrows received 48,337
         shares  of Hotel  Investors'  8% Class A  cumulative,  preferred  stock
         ("Class A Preferred Stock"),  and the Company received 37,979 shares of
         Hotel Investors' 9.76% Class B cumulative, preferred stock. The Class A
         Preferred  Stock is  exchangeable  upon demand into common stock of the
         Company,  using an exchange ratio based on the relationship between the
         Company's operating results and those of Hotel Investors.

         Five  Arrows  also  invested  approximately  $14 million in the Company
         through the purchase of common stock pursuant to the Company's  Initial
         Offering and the 1999 Offering,  the proceeds of which were used by the
         Company to fund  approximately  38% of its funding  commitment to Hotel
         Investors.



<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              Quarters and Six Months Ended June 30, 2000 and 1999


3.       Investment in Unconsolidated Subsidiary - Continued:

         The  following  presents  condensed  financial  information  for  Hotel
         Investors as of and for the six months  ended and year ended:
<TABLE>
<CAPTION>
<S> <C>
                                                                        June 30,       December 31,
                                                                          2000             1999
                                                                  ----------------- ----------------

      Land, buildings and equipment on operating leases, net         $162,776,797      $165,088,059
      Cash and cash equivalents (including restricted cash)             8,353,443         5,172,658
      Loan costs, net                                                     678,232           708,006
      Accrued rental income                                               407,599           283,914
      Prepaid expenses, receivables and other assets                      172,765         3,422,806
      Liabilities                                                      91,600,018        92,229,193
      Redeemable preferred stock - Class A and Class B                 85,361,864        85,361,864
      Stockholders' deficit                                            (4,573,046 )      (2,915,614  )
      Revenues                                                          9,566,890        13,025,978
      Net earnings                                                      3,285,740         4,104,936
      Preferred stock dividends                                        (3,817,244 )       5,693,642
      Loss applicable to common stockholders                             (531,504 )      (1,588,706  )
</TABLE>

         During  the six  months  ended  June 30,  2000 and  1999,  the  Company
         recorded $1,853,735 and $900,131,  respectively, in dividend income and
         $260,437 and $390,450,  respectively, in equity in loss after deduction
         of preferred  stock  dividends  resulting in net earnings of $1,593,298
         and $509,681,  respectively  attributable to this investment  ($786,284
         and $452,377 which  represented  net earnings from this  investment for
         the quarters ended June 30, 2000 and 1999, respectively).

4.       Other Assets:

         Other assets consist of acquisition fees and miscellaneous  acquisition
         expenses that will be allocated to future Properties and deposits.

5.       Redemption of Shares:

         The Company has a redemption  plan under which the Company may elect to
         redeem shares,  subject to certain  conditions and limitations.  During
         the  quarter  and six months  months  ended June 30,  2000,  48,271 and
         62,876  shares  of  common  stock ,  respectively,  were  redeemed  and
         retired.

6.       Indebtedness:

         The  Company  has a line of credit in the amount of  $30,000,000  which
         expires on July 30, 2003.  Advances  under the line of credit will bear
         interest at either (i) a rate per annum equal to 318 basis points above
         the  London  Interbank  Offered  Rate  (LIBOR) or (ii) a rate per annum
         equal to 30 basis  points  above the bank's  base rate,  whichever  the
         Company  selects at the time advances are made.  In addition,  a fee of
         .5% per  advance  will be due  and  payable  to the  bank on  funds  as
         advanced.   Each  advance  made  under  the  line  of  credit  will  be
         collateralized  by the  assignment of rents and leases.  As of June 30,
         2000 and  December  31,  1999,  the Company had no amounts  outstanding
         under the line of credit.



<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              Quarters and Six Months Ended June 30, 2000 and 1999


6.       Indebtedness - Continued:

         In March 2000, the Company through the LLC entered into a Tax Increment
         Financing  Agreement  with the  Philadelphia  Authority for  Industrial
         Development ("TIF Note") for $10 million which is collateralized by the
         LLC's hotel  Property.  The  principal  and interest on the TIF Note is
         expected  to be fully paid by the LLC's  hotel  Property's  incremental
         property  taxes  over a period  of twenty  years.  The  payment  of the
         incremental  property taxes is the  responsibility of the tenant of the
         hotel property. Interest on the TIF Note is 12.85% and payments are due
         yearly through 2017. In the event that  incremental  property taxes are
         insufficient  to  cover  the  principal  and  interest  due,   Marriott
         International,  Inc. is required to fund such shortfall pursuant to its
         guarantee of the TIF Note.

7.       Stock Issuance Costs:

         The Company  has  incurred  certain  expenses  in  connection  with its
         offerings of common stock, including commissions, marketing support and
         due  diligence   expense   reimbursement   fees,  filing  fees,  legal,
         accounting, printing and escrow fees, which have been deducted from the
         gross proceeds of the offerings.  CNL Hospitality Corp. ("the Advisor")
         has agreed to pay all  offering  expenses  (excluding  commissions  and
         marketing support and due diligence expense  reimbursement  fees) which
         exceed three  percent of the gross  proceeds  received from the sale of
         shares of the Company in connection with the offerings.

         During  the six  months  ended  June 30,  2000 and  1999,  the  Company
         incurred $12,414,132 and $12,057,440,  respectively,  in stock issuance
         costs,   including   $7,690,132  and   $7,976,937,   respectively,   in
         commissions   and   marketing   support  and  due   diligence   expense
         reimbursement  fees (see Note 9).  The stock  issuance  costs have been
         charged  to  stockholders'  equity  subject  to the three  percent  cap
         described above.

8.       Distributions:

         For the six  months  ended  June 30,  2000 and 1999,  approximately  51
         percent  and 64 percent,  respectively,  of the  distributions  paid to
         stockholders  were considered  ordinary  income,  and  approximately 49
         percent  and 36  percent,  respectively,  were  considered  a return of
         capital to  stockholders  for federal  income tax purposes.  No amounts
         distributed to the  stockholders for the six months ended June 30, 2000
         and 1999 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.  The  characterization  for tax purposes of
         distributions  declared  for the six months ended June 30, 2000 may not
         be  indicative of the  characterization  of  distributions  that may be
         expected for the year ended December 31, 2000.

9.       Related Party Transactions:

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

         During  the six  months  ended  June 30,  2000 and  1999,  the  Company
         incurred   $7,209,499   and   $7,478,378,   respectively,   in  selling
         commissions due to CNL Securities Corp. for services in connection with
         its offerings.  A substantial  portion of these amounts ($7,151,903 and
         $6,978,557,  respectively)  was or will be paid by CNL Securities Corp.
         as commissions to other broker-dealers.

         In addition,  CNL  Securities  Corp. is entitled to receive a marketing
         support and due diligence  expense  reimbursement  fee equal to 0.5% of
         the total amount raised from the sale of shares, a portion of which may
         be reallowed to other broker-dealers.  During the six months ended June
         30,  2000  and  1999,  the  Company  incurred  $480,633  and  $498,559,
         respectively,  of such fees,  the  majority of which were  reallowed to
         other  broker-dealers  and  from  which  all bona  fide  due  diligence
         expenses were paid.


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              Quarters and Six Months Ended June 30, 2000 and 1999


9.       Related Party Transactions - Continued:

         CNL  Securities  Corp.  will  also  receive,  in  connection  with  the
         Company's  initial offering of up to 16,500,000  shares of common stock
         (the "Initial  Offering"),  a soliciting  dealer  servicing fee payable
         annually by the Company beginning on December 31, 2000 in the amount of
         0.20% of "invested  capital",  as defined in the Company's  prospectus,
         from the Initial Offering. CNL Securities Corp. in turn may reallow all
         or a portion  of such fee to  soliciting  dealers  whose  clients  hold
         shares  on such  date.  As of June  30,  2000,  no such  fees  had been
         incurred.

         In addition,  in  connection  with its 1999  Offering,  the Company has
         agreed to issue and sell soliciting dealer warrants ("Soliciting Dealer
         Warrants") to CNL  Securities  Corp. The price for each warrant will be
         $0.0008 and one warrant  will be issued for every 25 shares sold by the
         managing dealer. All or a portion of the Soliciting Dealer Warrants may
         be reallowed to soliciting  dealers with prior written  approval  from,
         and in the sole  discretion  of,  the  managing  dealer,  except  where
         prohibited by either federal or state  securities laws. The holder of a
         Soliciting  Dealer  Warrant  will be entitled to purchase  one share of
         common stock from the Company at a price of $12.00 during the five year
         period  commencing the date the current  offering  began. No Soliciting
         Dealer Warrants,  however,  will be exercisable until one year from the
         date of  issuance.  During the six  months  ended  June 30,  2000,  the
         Company issued approximately  650,550 Soliciting Dealer Warrants to CNL
         Securities Corp. In addition, as of June 30, 2000, CNL Securities Corp.
         was entitled to  approximately  168,500  additional  Soliciting  Dealer
         Warrants for shares sold during the quarter then ended.

         The  Advisor is entitled to receive  acquisition  fees for  services in
         identifying  Properties  and  structuring  the  terms of  leases of the
         Properties  and Mortgage  Loans equal to 4.5% of the gross  proceeds of
         the  offerings,  loan  proceeds  from  permanent  financing and amounts
         outstanding on the line of credit, if any, at the time of listing,  but
         excluding  that  portion  of the  permanent  financing  used to finance
         Secured Equipment Leases. During the six months ended June 30, 2000 and
         1999, the Company incurred $6,241,911 and $5,057,012,  respectively, of
         such fees.  Such fees are included in land,  buildings and equipment on
         operating  leases,  investment in  unconsolidated  subsidiary and other
         assets.

         The Company incurs  operating  expenses  which,  in general,  are those
         expenses relating to administration of the Company on an ongoing basis.
         Pursuant to the  advisory  agreement  described  below,  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 two
         percent of  average  invested  assets or 25 percent of net income  (the
         "Expense Cap"). For the Expense Years ended June 30, 2000 and 1999, the
         Company's operating expenses did not exceed the Expense Cap.

         The Company and the Advisor  have  entered  into an advisory  agreement
         pursuant to which the Advisor will receive a monthly  asset  management
         fee of  one-twelfth  of 0.60% of the Company's  real estate asset value
         and the outstanding  principal  balance of any Mortgage Loans as of the
         end of the preceding  month.  The management fee, which will not exceed
         fees which are competitive for similar  services in the same geographic
         area,  may or may not be taken,  in whole or in part as to any year, in
         the  sole  discretion  of  the  Advisor.  All  or  any  portion  of the
         management  fee not  taken as to any  fiscal  year  shall  be  deferred
         without  interest and may be taken in such other  fiscal  year,  as the
         Advisor shall determine.  During the six months ended June 30, 2000 and
         1999, the Company incurred $362,280 and $67,436,  respectively, of such
         fees.



<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              Quarters and Six Months Ended June 30, 2000 and 1999


9.       Related Party Transactions - Continued:

         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),
         on a day-to-day  basis.  The expenses  incurred for these services were
         classified as follow for the six months ended June 30:

                                                     2000            1999
                                                  -------------  -------------

               Stock issuance costs                $ 2,064,571   $  1,709,008
               General operating and
                   administrative expenses             138,923        150,380
               Land, buildings and equipment
                   on operating leases and other
                   assets                                  735              --
                                                  -------------  -------------
                                                   $ 2,204,229   $  1,859,388
                                                  =============  =============

     The amounts due to related parties consisted of the following at:
<TABLE>
<CAPTION>
<S> <C>
                                                            June 30, 2000        December 31,1999
                                                          ------------------    --------------------
               Due to the Advisor:
                    Expenditures incurred on behalf
                       of the Company for accounting
                       and administrative services                $ 30,412            $  387,690
                    Acquisition fees                               305,204               337,797
                    Management fees                                362,270                19,642
                                                            ---------------      ----------------
                                                                   697,886               745,129
                                                            ---------------      ----------------
               Due to CNL Securities Corp.:
                    Commissions                                    235,030               229,834
                    Marketing support and due diligence
                       expense reimbursement fee                    15,669                16,764
                                                            ---------------      ----------------
                                                                   250,699               246,598
                                                            ---------------      ----------------

               Due to other related party                                --                 3,773
                                                            ---------------      ----------------
                                                                  $948,585            $  995,500
                                                            ===============      ================
</TABLE>

         During 1999,  the Company opened three 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  is a  stockholder.  The amount
         deposited with this affiliate was  $15,947,271  and $15,275,629 at June
         30, 2000 and December 31, 1999, respectively.

10.      Concentration of Credit Risk:

         Crestline Capital Corp., which operates and leases two Properties,  and
         City Center Annex Tenant Corporation  contributed more than ten percent
         of the  Company's  total  rental  income for the quarter and six months
         ended  June  30,  2000.  In  addition,  a  significant  portion  of the
         Company's  rental  income  was  earned  from  Properties  operating  as
         Marriott(R)  brand  chains.  Although  the  Company  intends to acquire
         Properties  located in  various  states and  regions  and to  carefully
         screen its  tenants  in order to reduce  risks of  default,  failure of
         these lessees or the Marriott brand chains could  significantly  impact
         the results of operations of the Company. However,  management believes
         that the risk of such a default  is  reduced  due to the  essential  or
         important nature of these Properties for the ongoing  operations of the
         lessees.

         It is expected that the  percentage of total rental income  contributed
         by these lessees will decrease as  additional  Properties  are acquired
         and leased during 2000 and subsequent years.


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              Quarters and Six Months Ended June 30, 2000 and 1999


11.      Earnings Per Share:

         Basic earnings per share ("EPS")  excludes  dilution and is computed by
         dividing  income  available  to  common  stockholders  by the  weighted
         average number of common shares outstanding for the period. Diluted EPS
         reflects the potential  dilution that could occur if other contracts to
         issue  common  stock were  exercised  and shared in the earnings of the
         Company.  For the six months  ended June 30,  2000,  approximately  7.3
         million shares related to the  conversion of Hotel  Investors'  Class A
         Preferred  Stock  into  the  Company's  common  stock  were  considered
         dilutive after the  application  of the "if converted  method" and were
         included  in  the  denominator  of the  diluted  EPS  calculation.  The
         numerator in the diluted EPS calculation includes an adjustment for the
         net earnings of Hotel Investors for the applicable period.

         The following  represents the calculation of earnings per share and the
         weighted average number of shares of potentially  dilutive common stock
         for the quarters and six months ended June 30:

<TABLE>
<CAPTION>
<S> <C>
                                                         Quarter Ended June 30,         Six Months Ended June 30,
                                                        2000               1999          2000               1999
                                                --------------    ---------------    --------------     -------------
Basic Earnings Per Share:

   Net earnings                                   $ 4,642,940         $1,462,249       $ 8,588,024        $1,892,529
                                                ==============    ===============    ==============     =============

   Weighted average number of shares
      outstanding                                  36,163,184         12,330,853        33,693,585         9,391,870
                                                ==============    ===============    ==============     =============

   Basic earnings per share                       $      0.13         $     0.12          $   0.25          $   0.20
                                                ==============    ===============    ==============     =============

Diluted Earnings Per Share:

   Net earnings                                    $4,642,940         $1,462,249        $8,588,024        $1,892,529

   Additional income attributable to
      investment in unconsolidated
      subsidiary assuming all Class A
      Preferred Shares were converted                 835,331                 --         1,692,802                --
                                                --------------    ---------------    --------------     -------------

         Adjusted net earnings assuming
             dilution                              $5,478,271         $1,462,249       $10,280,826        $1,892,529
                                                ==============    ===============    ==============     =============

Weighted average number of shares
    outstanding                                    36,163,184         12,330,853        33,693,585         9,391,870

Assumed conversion of Class A Preferred
    Stock                                           7,362,682                 --         7,281,774                --
                                                --------------    ---------------    --------------     -------------

         Adjusted weighted average
             number of shares outstanding          43,525,866         12,330,853        40,975,359         9,391,870
                                                ==============    ===============    ==============     =============

Diluted earnings per share                           $   0.13           $   0.12          $   0.25          $   0.20
                                                ==============    ===============    ==============     =============

</TABLE>


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              Quarters and Six Months Ended June 30, 2000 and 1999


12.      Commitments and Contingencies:

         The  Company  has  commitments  to acquire 15 hotel  Properties  for an
         anticipated  aggregate purchase price of approximately $255 million. In
         connection  with  these  commitments,   the  Company  has  deposits  of
         approximately $7.4 million held in escrow.

         In connection  with the  acquisition  of two  Properties  in 1998,  the
         Company may be required to make an  additional  payment  (the  "Earnout
         Amount") of up to $1 million if certain earnout provisions are achieved
         by July 31, 2001.  After July 31,  2001,  the Company will no longer be
         obligated to make any payments under the earnout provision. The Earnout
         Amount is equal to the difference  between  earnings  before  interest,
         taxes,  depreciation  and  amortization  expense adjusted by an earnout
         factor (7.44),  and the initial  purchase price.  Rental income will be
         adjusted upward in accordance with the lease  agreements for any amount
         paid.  As of June 30, 2000,  approximately  $135,000 was payable  under
         this agreement.

         In connection  with the purchase of two  Properties  in June 2000,  the
         Company may be required to make an  additional  payment  (the  "Earnout
         Provision") not to exceed $2,471,500 if certain earnout  provisions are
         achieved by the  thirty-sixth  month  following the closing date of the
         two  properties   ("Earnout   Termination  Date").  After  the  Earnout
         Termination  Date,  the Company will no longer be obligated to make any
         payments under the earnout provision. The Earnout Provision is equal to
         the difference  between earnings before interest,  taxes,  depreciation
         and amortization expense adjusted by the earnout factor (7.33), and the
         initial  purchase  price.  Rental  income  will be  adjusted  upward in
         accordance  with the lease  agreements  for any amount paid. As of June
         30, 2000 no such amounts were payable under this agreement.

         In addition,  in connection with the acquisition of the 89% interest in
         the LLC,  the Company and the  minority  interest  holder each have the
         right  to  obligate  the  other to sell or buy,  respectively,  the 11%
         interest in the LLC.  These rights are  effective  five years after the
         hotel's  opening or November  2004.  The price for the 11%  interest is
         equal to 11% of the lesser of (a) an amount equal to the product of 8.5
         multiplied times net house profit (defined as total hotel revenues less
         property  expenses)  for the 13 period  accounting  year  preceding the
         notice of the option exercise, or (b) the appraised fair market value.

13.      Subsequent Events:

         During the period  July 1, 2000  through  August 7, 2000,  the  Company
         received  subscription  proceeds  for an  additional  2,128,424  shares
         ($21,284,244) of common stock.

         On July 1, 2000 and August 1, 2000, the Company declared  distributions
         totaling  $2,404,414 and $2,513,813,  respectively or $0.0625 per share
         of common stock,  payable in September  2000, to stockholders of record
         on July 1 and August 1, 2000, respectively.

         On July 28,  2000,  the  Company  acquired  two  Properties  located in
         Gaithersburg, Maryland and Merrifield, Virginia for approximately $34.0
         million. The Company has entered into long-term,  triple-net leases, as
         landlord,  in connection with each of the Properties.  These Properties
         are  being   operated  by  the  tenant,   a   subsidiary   of  Marriott
         International, Inc., as a Courtyard by Marriott and a SpringHill Suites
         by Marriott.



<PAGE>


                                  ADDENDUM TO
                                   APPENDIX C

                            PRIOR PERFORMANCE TABLES


                   -----------------------------------------

                     The following information updates and
                     replaces the corresponding information
                   in Appendix C to the attached prospectus,
                               dated May 23, 2000

                   -----------------------------------------



<PAGE>



                                   APPENDIX C

                            PRIOR PERFORMANCE TABLES

         The information in this Appendix C contains  certain  relevant  summary
information  concerning  certain prior public  programs  sponsored by two of the
Company's  principals (who also serve as the Chairman of the Board and President
of the Company) and their  Affiliates (the "Prior Public  Programs")  which were
formed to invest  in  restaurant  properties  leased  on a  triple-net  basis to
operators of national and regional fast-food and family-style restaurant chains,
or in the case of CNL  Retirement  Properties,  Inc.  (formerly  CNL Health Care
Properties, Inc.), to invest in health care properties. No Prior Public Programs
sponsored by the Company's  Affiliates have invested in hotel properties  leased
on a triple-net  basis to  operators  of national and regional  limited-service,
extended-stay and full-service hotel chains.

         A more detailed  description  of the  acquisitions  by the Prior Public
Programs is set forth in Part II of the  registration  statement  filed with the
Securities  and Exchange  Commission for this Offering and is available from the
Company upon request,  without charge. In addition, upon request to the Company,
the Company  will  provide,  without  charge,  a copy of the most recent  Annual
Report on Form 10-K filed with the  Securities  and Exchange  Commission for CNL
Income Fund,  Ltd.,  CNL Income Fund II, Ltd.,  CNL Income Fund III,  Ltd.,  CNL
Income Fund IV, Ltd.,  CNL Income Fund V, Ltd.,  CNL Income Fund VI,  Ltd.,  CNL
Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL
Income Fund X, Ltd.,  CNL Income Fund XI, Ltd.,  CNL Income Fund XII,  Ltd., CNL
Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL
Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd., CNL Income Fund XVIII,  Ltd.,
CNL American Properties Fund, Inc., and CNL Retirement Properties,  Inc. as well
as a copy, for a reasonable fee, of the exhibits filed with such reports.

         The  investment  objectives  of the  Prior  Public  Programs  generally
include  preservation  and  protection  of capital,  the potential for increased
income and protection against inflation, and potential for capital appreciation,
all through investment in properties.  In addition, the investment objectives of
the Prior Public Programs included making partially tax-sheltered distributions.

         Stockholders  should not construe  inclusion of the following tables as
implying  that the Company will have results  comparable  to those  reflected in
such tables.  Distributable cash flow,  federal income tax deductions,  or other
factors  could be  substantially  different.  Stockholders  should note that, by
acquiring shares in the Company,  they will not be acquiring any interest in any
prior public programs.

Description of Tables

         The following Tables are included herein:

                  Table I - Experience in Raising and Investing Funds

                  Table II - Compensation to Sponsor

                  Table III - Operating Results of Prior Programs

                  Table V - Sales or Disposal of Properties

         Unless otherwise indicated in the Tables, all information  contained in
the Tables is as of June 30, 2000.  The following is a brief  description of the
Tables:

         Table I - Experience in Raising and Investing Funds

         Table  I  presents  information  on  a  percentage  basis  showing  the
experience  of two of the  principals  of the  Company and their  Affiliates  in
raising and  investing  funds for the Prior Public  Programs,  the  offerings of
which became fully subscribed between July 1995 and June 2000.

         The Table sets forth  information on the offering expenses incurred and
amounts  available  for  investment  expressed as a percentage  of total dollars
raised.  The Table  also  shows the  percentage  of  property  acquisition  cost
leveraged, the date the offering commenced, and the time required to raise funds
for investment.

         Table II - Compensation to Sponsor

         Table II  provides  information,  on a total  dollar  basis,  regarding
amounts and types of  compensation  paid to two of the Company's  principals and
their Affiliates which sponsored the Prior Public Programs.

         The Table indicates the total offering proceeds and the portion of such
offering proceeds paid or to be paid to two of the principals of the Company and
their Affiliates in connection with the Prior Public Programs,  the offerings of
which became fully  subscribed  between July 1995 and June 2000.  The Table also
shows  the  amounts  paid to two of the  principals  of the  Company  and  their
Affiliates  from cash  generated  from  operations  and from cash generated from
sales or refinancing by each of the Prior Public Programs on a cumulative  basis
commencing with inception and ending June 30, 2000.

         Table III - Operating Results of Prior Programs

         Table III presents a summary of  operating  results for the period from
inception through June 30, 2000, of the Prior Public Programs,  the offerings of
which became fully subscribed between July 1995 and June 2000.

         The  Table  includes  a summary  of income or loss of the Prior  Public
Programs,  which are  presented  on the basis of generally  accepted  accounting
principles ("GAAP"). The Table also shows cash generated from operations,  which
represents  the cash  generated  from  operations of the properties of the Prior
Public  Programs,  as  distinguished  from cash  generated  from  other  sources
(special  items).  The section of the Table entitled  "Special  Items"  provides
information  relating  to cash  generated  from or used by items  which  are not
directly  related  to the  operations  of the  properties  of the  Prior  Public
Programs,  but rather are related to items of an investing or financing  nature.
These items  include  proceeds  from  capital  contributions  of  investors  and
disbursements  made from these sources of funds,  such as syndication  (or stock
issuance) and  organizational  costs,  acquisition  of the  properties and other
costs  which  are  related  more  to the  organization  of the  entity  and  the
acquisition of properties than to the actual operations of the entities.

         The Table also presents  information  pertaining to investment  income,
returns of capital on a GAAP basis, cash  distributions  from operations,  sales
and  refinancing   proceeds  expressed  in  total  dollar  amounts  as  well  as
distributions and tax results on a per $1,000 investment basis.

         Table IV - Results of Completed Programs

         Table IV is  omitted  from this  Appendix  C because  none of the Prior
Public  Programs  have  completed   operations  (meaning  they  no  longer  hold
properties).

         Table V - Sales or Disposal of Properties

         Table  V  provides  information  regarding  the  sale  or  disposal  of
properties owned by the Prior Public Programs between July 1995 and June 2000.

         The Table  includes the selling price of the property,  the cost of the
property, the date acquired and the date of sale.




<PAGE>


                                                      TABLE I
                                     EXPERIENCE IN RAISING AND INVESTING FUNDS

<TABLE>
<CAPTION>
<S> <C>
                                                    CNL American       CNL Income          CNL Income       CNL Retirement
                                                  Properties Fund,     Fund XVII,          Fund XVIII,        Properties,
                                                        Inc.              Ltd.                Ltd.               Inc.
                                                  -----------------   --------------      --------------   ------------------
                                                      (Note 1)                                                 (Note 2)

Dollar amount offered                                 $747,464,420      $30,000,000         $35,000,000
                                                  =================   ==============      ==============

Dollar amount raised                                         100.0 %          100.0 %             100.0 %
                                                  -----------------   --------------      --------------

Less offering expenses:

   Selling commissions and discounts                          (7.5 )           (8.5 )              (8.5 )
   Organizational expenses                                    (2.2 )           (3.0 )              (3.0 )
   Marketing support and due diligence
     expense reimbursement fees
     (includes amounts reallowed to
     unaffiliated entities)                                   (0.5 )           (0.5 )              (0.5 )
                                                  -----------------   --------------      --------------
                                                             (10.2 )          (12.0 )             (12.0 )
                                                  -----------------   --------------      --------------
Reserve for operations                                          --               --                  --
                                                  -----------------   --------------      --------------

Percent available for investment                              89.8 %           88.0 %              88.0 %
                                                  =================   ==============      ==============

Acquisition costs:

   Cash down payment                                          85.3 %           83.5 %             83.5%
   Acquisition fees paid to affiliates                         4.5              4.5                4.5%
   Loan costs                                                   --               --                  --
                                                  -----------------   --------------      --------------

Total acquisition costs                                       89.8 %           88.0 %              88.0 %
                                                  =================   ==============      ==============

Percent leveraged (mortgage financing
   divided by total acquisition costs)                          --               --                  --

Date offering began                               4/19/95, 2/06/97          9/02/95             9/20/96
                                                       and 3/02/98

Length of offering (in months)                       22, 13 and 9,               12                  17
                                                      respectively

Months to invest 90% of amount
   available for investment measured
   from date of offering                            23, 16 and 11,               15                  17
                                                      respectively
</TABLE>


Note 1:   Pursuant  to a  Registration  Statement  on Form  S-11  under  the
          Securities  Act of 1933,  as amended,  effective  March 29, 1995,  CNL
          American   Properties   Fund,   Inc.   ("APF")   registered  for  sale
          $165,000,000  of shares  of common  stock  (the  "Initial  Offering"),
          including $15,000,000 available only to stockholders  participating in
          the company's reinvestment plan. The Initial Offering of APF commenced
          April  19,  1995,  and upon  completion  of the  Initial  Offering  on
          February 6, 1997, had received  subscription  proceeds of $150,591,765
          (7,529,588 shares), including $591,765 (29,588 shares) issued pursuant
          to the reinvestment plan. Pursuant to a Registration Statement on Form
          S-11 under the Securities Act of 1933, as amended,  effective  January
          31, 1997,  APF registered  for sale  $275,000,000  of shares of common
          stock (the "1997 Offering"),  including  $25,000,000 available only to
          stockholders  participating  in the company's  reinvestment  plan. The
          1997 Offering of APF commenced following the completion of the Initial
          Offering on February 6, 1997, and upon completion of the 1997 Offering
          on March 2, 1998, had received  subscription  proceeds of $251,872,648
          (12,593,633  shares),  including  $1,872,648  (93,632  shares)  issued
          pursuant  to  the  reinvestment  plan.   Pursuant  to  a  Registration
          Statement on Form S-11 under the  Securities  Act of 1933, as amended,
          effective May 12, 1998, APF registered for sale $345,000,000 of shares
          of common  stock  (the  "1998  Offering").  The 1998  Offering  of APF
          commenced  following  the  completion of the 1997 Offering on March 2,
          1998. As of January 31, 1999, APF had received subscriptions totalling
          approximately   $345,000,000   (17,250,000  shares),   from  the  1998
          Offering, including $3,107,848 (155,393 shares) issued pursuant to the
          company's reinvestment plan. The 1998 Offering became fully subscribed
          in  December  1998  and  proceeds  from the  last  subscriptions  were
          received in January 1999.

Note 2:   Pursuant  to a  Registration  Statement  on Form  S-11  under  the
          Securities Act of 1933, as amended,  effective September 18, 1998, CNL
          Retirement  Properties,   Inc.  ("CRP")  registered  for  sale  up  to
          $155,000,000  of shares  of common  stock  (the  "Initial  Offering"),
          including up to $5,000,000 available to stockholders  participating in
          the company's reinvestment plan. The Initial Offering of CRP commenced
          September 18, 1998. As of June 30, 2000, CRP had received subscription
          proceeds of  $8,521,527  (852,153  shares) from the Initial  Offering,
          including  $50,427 (5,043 shares) through the reinvestment  plan. Upon
          termination  of the  Initial  Offering  on  September  18,  2000,  CRP
          commenced  an offering of up to  $155,000,000  (the "2000  Offering"),
          including up to $5,000,000 available to stockholders  participating in
          the company's reinvestment plan.


<PAGE>


                                                     TABLE II
                                              COMPENSATION TO SPONSOR

<TABLE>
<CAPTION>
<S> <C>
                                                   CNL American        CNL Income       CNL Income      CNL Retirement
                                                 Properties Fund,      Fund XVII,       Fund XVIII,       Properties,
                                                       Inc.               Ltd.             Ltd.               Inc.
                                                 ------------------  ---------------  ----------------  -----------------
                                                  (Notes 1, 2 and                                           (Note 4)
                                                        6)
Date offering commenced                           4/19/95, 2/06/97          9/02/95           9/20/96
                                                       and 3/02/98

Dollar amount raised                                  $747,464,420      $30,000,000       $35,000,000
                                                 ==================  ===============  ================
Amount paid to sponsor from proceeds of offering:
     Selling commissions and discounts                  56,059,832        2,550,000         2,975,000
     Real estate commissions                                    --               --                --
     Acquisition fees (Notes 5 and 6)                   33,604,618        1,350,000         1,575,000
     Marketing support and due diligence
       expense reimbursement fees
       (includes amounts reallowed to
unaffiliated entities)                                   3,737,322          150,000           175,000
                                                 ------------------  ---------------  ----------------
Total amount paid to sponsor                            93,401,772        4,050,000         4,725,000
                                                 ==================  ===============  ================
Dollar amount of cash generated from (used in)
   operations before deducting payments
   to sponsor:
     2000 (6 months) (Note 7)                          (46,945,156 )      1,051,688         1,342,621
     1999 (Note 7)                                     311,630,414        2,567,164         2,921,071
     1998                                               42,216,874        2,638,733         2,964,628
     1997                                               18,514,122        2,611,191         1,471,805
     1996                                                6,096,045        1,340,159            30,126
     1995                                                  594,425           11,671                --
     1994                                                       --               --                --
     1993                                                       --               --                --
Amount paid to sponsor from operations
   (administrative, accounting and
management fees) (Note 6):
     2000 (6 months)                                       956,233           66,591            72,061
     1999                                                4,369,200          117,146           124,031
     1998                                                3,100,599          117,814           132,890
     1997                                                1,437,908          116,077           110,049
     1996                                                  613,505          107,211             2,980
     1995                                                   95,966            2,659                --
     1994                                                       --               --                --
     1993                                                       --               --                --
Dollar amount of property sales and
   refinancing before deducting payments to
   sponsor:
     Cash (Note 3)                                      25,163,154        1,675,385           688,997
     Notes                                                      --               --                --
Amount paid to sponsors from property sales
   and refinancing:
     Real estate commissions                                    --               --                --
     Incentive fees                                             --               --                --
     Other                                                      --               --                --

</TABLE>


Note 1:   Pursuant  to a  Registration  Statement  on Form  S-11  under  the
          Securities  Act of 1933,  as amended,  effective  March 29, 1995,  CNL
          American   Properties   Fund,   Inc.   ("APF")   registered  for  sale
          $165,000,000  of shares  of common  stock  (the  "Initial  Offering"),
          including $15,000,000 available only to stockholders  participating in
          the company's reinvestment plan. The Initial Offering of APF commenced
          April  19,  1995,  and upon  completion  of the  Initial  Offering  on
          February 6, 1997, had received  subscription  proceeds of $150,591,765
          (7,529,588 shares), including $591,765 (29,588 shares) issued pursuant
          to the reinvestment plan. Pursuant to a Registration Statement on Form
          S-11 under the Securities Act of 1933, as amended,  effective  January
          31, 1997,  APF registered  for sale  $275,000,000  of shares of common
          stock (the "1997 Offering"),  including  $25,000,000 available only to
          stockholders  participating  in the company's  reinvestment  plan. The
          1997 Offering of APF commenced following the completion of the Initial
          Offering on February 6, 1997, and upon completion of the 1997 Offering
          on March 2, 1998, had received  subscription  proceeds of $251,872,648
          (12,593,633  shares),  including  $1,872,648  (93,632  shares)  issued
          pursuant  to  the  reinvestment  plan.   Pursuant  to  a  Registration
          Statement on Form S-11 under the  Securities  Act of 1933, as amended,
          effective May 12, 1998, APF registered for sale $345,000,000 of shares
          of common  stock  (the  "1998  Offering").  The 1998  Offering  of APF
          commenced  following  the  completion of the 1997 Offering on March 2,
          1998. As of January 31, 1999, APF had received subscriptions totalling
          approximately   $345,000,000   (17,250,000  shares),   from  the  1998
          Offering, including $3,107,848 (155,393 shares) issued pursuant to the
          company's reinvestment plan. The 1998 Offering became fully subscribed
          in  December  1998  and  proceeds  from the  last  subscriptions  were
          received in January  1999.  The amounts  shown  represent the combined
          results  of the  Initial  Offering,  the  1997  Offering  and the 1998
          Offering as of January 31, 1999,  including  shares issued pursuant to
          the company's reinvestment plan.


<PAGE>


TABLE II - COMPENSATION TO SPONSOR - CONTINUED




Note 2:   For  negotiating  secured  equipment  leases  and  supervising  the
          secured equipment lease program,  APF was required to pay its external
          advisor  a  one-time  secured  equipment  lease  servicing  fee of two
          percent of the purchase  price of the equipment that is the subject of
          a secured  equipment  lease  (see  Note 6).  During  the  years  ended
          December 31, 1999, 1998, 1997 and 1996, APF incurred $77,317, $54,998,
          $87,665  and  $70,070,   respectively,   in  secured  equipment  lease
          servicing fees.

Note 3:   Excludes   properties  sold  and  substituted   with   replacement
          properties, as permitted under the terms of the lease agreements.

Note 4:   Pursuant  to a  Registration  Statement  on Form  S-11  under  the
          Securities Act of 1933, as amended,  effective September 18, 1998, CNL
          Retirement  Properties,   Inc.  ("CRP")  registered  for  sale  up  to
          $155,000,000  of shares  of common  stock  (the  "Initial  Offering"),
          including up to $5,000,000 available to stockholders  participating in
          the  company's  reinvestment  plan.  The  offering  of  shares  of CRP
          commenced  September 18, 1998.  As of June 30, 2000,  CRP had received
          subscription  proceeds of $8,521,527 (852,153 shares) from the Initial
          Offering,  including  $50,427 (5,043 shares) through the  reinvestment
          plan. From the  commencement of the Initial  Offering through June 30,
          2000, total selling commissions and discounts were $639,115, marketing
          support and due diligence expense reimbursement fees were $42,608, and
          acquisition  fees were  $383,469,  for a total due to the  sponsor  of
          $1,065,192. CRP had cash generated from operations for the period July
          13, 1999 (the date funds were originally released from escrow) through
          June 30,  2000 of  $670,519.  CRP made  payments  of  $287,902  to the
          sponsor from operations for this period.

Note 5:   In addition to  acquisition  fees paid on gross  proceeds  from the
          offerings,  prior to becoming  self advised on September 1, 1999,  APF
          also incurred  acquisition  fees relating to proceeds from its line of
          credit to the extent  the  proceeds  were used to acquire  properties.
          Such fees were paid using proceeds from the line of credit,  and as of
          December 31, 1999, APF had incurred  $6,175,521 of such fees (see Note
          6).

Note 6:   On September 1, 1999, APF issued  6,150,000  shares of common stock
          (with an  exchange  value of $20 per  share) to  affiliates  of APF to
          acquire its external  advisor and two companies which make and service
          mortgage loans and securitize  portions of such loans.  As a result of
          the   acquisition,   APF   ceased   payment   of   acquisition   fees,
          administrative,  accounting,  management and secured  equipment  lease
          servicing  fees.  APF  continues  to  outsource  several  functions to
          affiliates  such as investor  services,  public  relations,  corporate
          communications, knowledge and technology management, and tax and legal
          compliance.

Note 7:   In  September  1999,  APF  acquired  two  companies  which make and
          service  mortgage  loans and securitize  portions of loans.  Effective
          with these  acquisitions,  APF classifies its  investments in mortgage
          loans,  proceeds from sale of mortgage loans,  collections of mortgage
          loans,  proceeds  from  securitization  transactions  and purchases of
          other investments as operating activities in its financial statements.
          Prior  to  these  acquisitions,   these  types  of  transactions  were
          classified as investing activities in its financial statements.




<PAGE>


                               TABLE III Operating
                            Results of Prior Programs
                       CNL AMERICAN PROPERTIES FUND, INC.


<TABLE>
<CAPTION>
<S> <C>
                                                            1994                                                1997
                                                          (Note 1)          1995              1996            (Note 2)
                                                         ------------    ------------     -------------     -------------

Gross revenue                                                $     0       $ 539,776        $4,363,456      $ 15,516,102
Equity in earnings of joint venture                                0               0                 0                 0
Gain (loss) on sale of assets (Notes 7, 15 and 18)                 0               0                 0                 0
Provision for losses on assets (Notes 12, 14 and 17)               0               0                 0                 0
Interest income                                                    0         119,355         1,843,228         3,941,831
Less:  Operating expenses                                          0        (186,145 )        (908,924 )      (2,066,962 )
       Transaction costs                                           0               0                 0                 0
       Interest expense                                            0               0                 0                 0
       Depreciation and amortization                               0        (104,131 )        (521,871 )      (1,795,062 )
       Advisor acquisition expense (Note 16)                       0               0                 0                 0
       Minority interest in income of consolidated
         joint ventures                                            0             (76 )         (29,927 )         (31,453 )
                                                         ------------    ------------     -------------     -------------
Net income (loss) - GAAP basis                                     0         368,779         4,745,962        15,564,456
                                                         ============    ============     =============     =============
Taxable income
    -  from operations (Note 8)                                    0         379,935         4,894,262        15,727,311
                                                         ============    ============     =============     =============
    -  from gain (loss) on sale (Notes 7, 15 and 18)               0               0                 0           (41,115 )
                                                         ============    ============     =============     =============

Cash generated from (used in) operations (Notes 4, 5               0         498,459         5,482,540        17,076,214
       and 19)
Cash generated from sales (Notes 7, 15, 18 and 20)                 0               0                 0         6,289,236
Cash generated from refinancing                                    0               0                 0                 0
                                                         ------------    ------------     -------------     -------------
Cash generated from (used in) operations, sales and                0         498,459         5,482,540        23,365,450
       refinancing
Less:  Cash distributions to investors (Note 9)
      -  from operating cash flow (Note 4)                         0        (498,459 )      (5,439,404 )     (16,854,297 )
      -  from sale of properties                                   0               0                 0                 0
      -  from cash flow from prior period                          0               0                 0                 0
      -  from return of capital (Note 10)                          0        (136,827 )               0                 0
                                                         ------------    ------------     -------------     -------------
Cash generated (deficiency) after cash distributions               0        (136,827 )          43,136         6,511,153
Special items (not including sales of real estate and
    refinancing):
      Subscriptions received from stockholders                     0      38,454,158       100,792,991       222,482,560
      Sale of common stock to CNL Fund
        Advisors, Inc.                                       200,000               0                 0                 0
      Retirement of shares of common stock
       (Note 13)                                                   0               0                 0                 0
      Contributions from minority interest                         0         200,000            97,419                 0
      Distributions to holder of minority interest                 0               0           (39,121 )         (34,020 )
      Stock issuance costs                                       (19 )    (3,680,704 )      (8,486,188 )     (19,542,862 )
      Acquisition of land and buildings                            0     (18,835,969 )     (36,104,148 )    (143,542,667 )
      Investment in direct financing leases                        0      (1,364,960 )     (13,372,621 )     (39,155,974 )
      Proceeds from sales of equipment direct
        financing leases                                           0               0                 0           962,274
      Investment in joint venture                                  0               0                 0                 0
      Increase in restricted cash                                  0               0                 0                 0
      Purchase of other investments (Note 19)                      0               0                 0                 0
      Investment in mortgage notes receivable (Note 19)            0               0       (13,547,264 )      (4,401,982 )
      Collections on mortgage notes receivable (Note19)            0               0           133,850           250,732
      Investment in equipment and other notes
        receivable                                                 0               0                 0       (12,521,401 )
      Collections on equipment and other notes
        receivable                                                 0               0                 0                 0
      Investment in (redemption of) certificates of
deposit                                                            0               0                 0        (2,000,000 )
      Proceeds of borrowing on line of credit and
note payables                                                      0               0         3,666,896        19,721,804
      Payment on line of credit                                    0               0          (145,080 )     (20,784,577 )
      Reimbursement of organization, acquisition, and
        deferred offering and stock issuance costs paid
        on behalf of CNL American Properties Fund,
        Inc. by related parties                             (199,036 )    (2,500,056 )        (939,798 )      (2,857,352 )
      Increase in intangibles and other assets                     0        (628,142 )      (1,103,896 )               0
      Proceeds from borrowings on mortgage
warehouse facility                                                 0               0                 0                 0
      Payments on mortgage warehouse facility                      0               0                 0                 0
      Payments of loan costs                                       0               0                 0                 0
      Other                                                        0               0           (54,533 )          49,001
                                                         ------------    ------------     -------------     -------------
Cash generated (deficiency) after cash distributions
    and special items                                            945      11,507,500        30,941,643         5,136,689
                                                         ============    ============     =============     =============



<PAGE>

                                      6 months
     1998              1999             2000
   (Note 3)          (Note 3)         (Note 3)
---------------   ---------------   --------------

   $33,202,491      $ 62,165,451     $ 42,275,405
        16,018            97,307           48,665
             0        (1,851,838 )        198,682
      (611,534 )      (7,779,195 )       (174,641 )
     8,984,546        13,335,146       10,110,235
    (5,354,859 )     (12,078,868 )    (11,481,633 )
             0        (6,798,803 )     (6,702,955 )
             0       (10,205,197 )    (18,288,098 )
    (4,054,098 )     (10,346,143 )     (7,742,567 )
             0       (76,333,516 )              0

       (30,156 )         (41,678 )       (208,663 )
---------------   ---------------   --------------
    32,152,408       (49,837,334 )      8,034,430
===============   ===============   ==============

    33,553,390        58,152,473        7,777,866
===============   ===============   ==============
      (149,948 )        (789,861 )       (482,056 )
===============   ===============   ==============

    39,116,275       307,261,214      (47,901,389 )

     2,385,941         5,302,433        6,486,944
             0                 0                0
---------------   ---------------   --------------
    41,502,216       312,563,647      (41,414,445 )


   (39,116,275 )     (60,078,825 )              0
             0                 0                0
      (265,053 )               0      (33,164,804 )
       (67,821 )               0                0
---------------   ---------------   --------------
     2,053,067       252,484,822      (74,579,249 )


   385,523,966           210,736                0

             0                 0                0

      (639,528 )         (50,891 )              0
             0           740,621                0
       (34,073 )         (66,763 )        (52,585 )
   (34,579,650 )        (737,190 )              0
  (200,101,667 )    (286,411,210 )    (27,279,430 )
   (47,115,435 )     (63,663,720 )    (23,301,254 )

             0         2,252,766          483,669
      (974,696 )        (187,452 )              0
             0                 0       (3,467,086 )
   (16,083,055 )               0                0
    (2,886,648 )      (4,041,427 )              0
       291,990           393,468                0

    (7,837,750 )     (26,963,918 )     (4,152,100 )

     1,263,633         3,500,599        1,712,462

             0         2,000,000                0

     7,692,040       439,941,245      333,401,000
        (8,039 )     (61,580,289 )   (278,000,000 )



    (4,574,925 )      (1,492,310 )     (1,422,056 )
    (6,281,069 )      (1,862,036 )     (1,776,564 )

             0        27,101,067       71,481,448
             0      (352,808,966 )       (549,093 )
             0        (5,947,397 )     (3,209,908 )
       (95,101 )               0                0
---------------   ---------------   --------------

    75,613,060       (77,188,245 )    (10,710,746 )
===============   ===============   ==============


<PAGE>


TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)





                                                    1994                                                    1997
                                                  (Note 1)             1995              1996             (Note 2)
                                                --------------     -------------     --------------     -------------

TAX AND DISTRIBUTION DATA PER
    $1,000 INVESTED (Note 6)
Federal income tax results:
Ordinary income (loss) (Notes 9 and 11)
    -  from operations (Note 8)                             0                20                 61                67
                                                ==============     =============     ==============     =============
    -  from recapture                                       0                 0                  0                 0
                                                ==============     =============     ==============     =============
Capital gain (loss) (Notes 7, 15 and 18)                    0                 0                  0                 0
                                                ==============     =============     ==============     =============
Cash distributions to investors
    Source (on GAAP basis)
    -  from investment income                               0                19                 59                66
    -  from capital gain                                    0                 0                  0                 0
    -  from investment income from prior
       period                                               0                 0                  0                 0
   -  from return of capital (Note 10)                      0                14                  8                 6
                                                --------------     -------------     --------------     -------------
Total distributions on GAAP basis (Note 11)                 0                33                 67                72
                                                ==============     =============     ==============     =============
   Source (on cash basis)
    -  from sales                                           0                 0                  0                 0
    -  from refinancing                                     0                 0                  0                 0
    -  from operations (Note 4)                             0                26                 67                72
    -  from cash flow from prior period                     0                 0                  0                 0
    -  from return of capital (Note 10)                     0                 7                  0                 0
                                                --------------     -------------     --------------     -------------
Total distributions on cash basis (Note 11)                 0                33                 67                72
                                                ==============     =============     ==============     =============
Total cash distributions as a percentage of
    original $1,000 investment (Notes 6 and              0.00 %            5.34 %             7.06 %            7.45 %
    21)
Total cumulative cash distributions per
    $1,000 investment from inception                        0                33                100               172
Amount (in percentage terms) remaining
    invested in program properties at the
end
    of each year (period) presented
(original
    total acquisition cost of properties
    retained, divided by original total                   N/A               100 %              100 %             100 %
    acquisition cost of all properties in
    program)  (Notes 7, 15 and 18)

</TABLE>


Note 1:   Pursuant  to a  Registration  Statement  on Form  S-11  under  the
          Securities  Act of 1933,  as amended,  effective  March 29, 1995,  CNL
          American   Properties   Fund,   Inc.   ("APF")   registered  for  sale
          $165,000,000  of shares  of common  stock  (the  "Initial  Offering"),
          including $15,000,000 available only to stockholders  participating in
          the company's reinvestment plan. The Initial Offering of APF commenced
          April  19,  1995,  and upon  completion  of the  Initial  Offering  on
          February 6, 1997, had received  subscription  proceeds of $150,591,765
          (7,529,588 shares), including $591,765 (29,588 shares) issued pursuant
          to the reinvestment plan. Pursuant to a Registration Statement on Form
          S-11 under the Securities Act of 1933, as amended,  effective  January
          31, 1997,  APF registered  for sale  $275,000,000  of shares of common
          stock (the "1997 Offering"),  including  $25,000,000 available only to
          stockholders  participating  in the company's  reinvestment  plan. The
          1997 Offering of APF commenced following the completion of the Initial
          Offering on February 6, 1997, and upon completion of the 1997 Offering
          on March 2, 1998, had received  subscription  proceeds of $251,872,648
          (12,593,633  shares),  including  $1,872,648  (93,632  shares)  issued
          pursuant  to  the  reinvestment  plan.   Pursuant  to  a  Registration
          Statement on Form S-11 under the  Securities  Act of 1933, as amended,
          effective May 12, 1998, APF registered for sale $345,000,000 of shares
          of common  stock  (the  "1998  Offering").  The 1998  Offering  of APF
          commenced  following  the  completion of the 1997 Offering on March 2,
          1998. As of January 31, 1999, APF had received subscriptions totalling
          approximately   $345,000,000   (17,250,000  shares),   from  the  1998
          Offering, including $3,107,848 (155,393 shares) issued pursuant to the
          company's reinvestment plan. The 1998 Offering became fully subscribed
          in  December  1998  and  proceeds  from the  last  subscriptions  were
          received  in January  1999.  Activities  through  June 1,  1995,  were
          devoted to organization of APF and operations had not begun.

Note 2:   The amounts  shown  represent  the combined  results of the Initial
          Offering and the 1997 Offering.

Note 3:   The amounts  shown  represent  the combined  results of the Initial
          Offering, 1997 Offering and 1998 Offering.

Note 4:   Cash generated from  operations  from inception  through  September
          1999 included cash received from tenants, less cash paid for expenses,
          plus interest received.  In September 1999, APF acquired two companies
          which make and  service  mortgage  loans and  securitize  portions  of
          loans.   Effective  with  these   acquisitions,   APF  classifies  its
          investments in mortgage  loans,  proceeds from sale of mortgage loans,
          collections   of  mortgage   loans,   proceeds   from   securitization
          transactions and


<PAGE>







                                           6 months
      1998                 1999              2000
    (Note 3)             (Note 3)          (Note 3)
------------------    ---------------   ---------------





               63                 74                 9
==================    ===============   ===============
                0                  0                 0
==================    ===============   ===============
                0                 (1 )              (1 )
==================    ===============   ===============


               60                  0                 9
                0                  0                 0

                0                  0                 0
               14                 76                29
------------------    ---------------   ---------------
               74                 76                38
==================    ===============   ===============

                0                  0                 0
                0                  0                 0
               73                 76                 0
                1                  0                38
                0                  0                 0
------------------    ---------------   ---------------
               74                 76                38
==================    ===============   ===============

            7.625 %            7.625 %           7.625 %

              246                322               360






              100 %              100 %             100 %


Note 4
  (Continued):   purchases of other investments as operating activities  in its
          financial statements.  Prior to these  acquisitions,  these  types  of
          transactions were classified as investing activities in its  financial
          statements.

Note 5:   Cash  generated  from  operations  per this  table  agrees to cash
          generated from  operations per the statement of cash flows included in
          the financial statements of APF.

Note 6:   Total  cash  distributions  as a  percentage  of  original  $1,000
          investment are calculated based on actual  distributions  declared for
          the period.

Note 7:   In May  1997 and  July  1997,  APF  sold  four  properties  and one
          property,  respectively,  to a tenant for $5,254,083  and  $1,035,153,
          respectively,  which was equal to the carrying value of the properties
          at the  time of  sale.  In May and  July  1998,  APF  sold two and one
          properties,   respectively,   to  third  parties  for  $1,605,154  and
          $1,152,262,   respectively   (and  received  net  sales   proceeds  of
          approximately $1,233,700 and $629,435,  respectively,  after deduction
          of  construction  costs incurred but not paid by APF as of the date of
          the sale),  which approximated the carrying value of the properties at
          the time of sale.  As a  result,  no gain or loss was  recognized  for
          financial reporting purposes.

Note 8:   Taxable income presented is before the dividends paid deduction.

Note 9:   For the six months ended June 30, 2000 and the years ended December
          31, 1999, 1998, 1997, 1996 and 1995, 67%, 97%, 84.87%,  93.33%, 90.25%
          and   59.82%,   respectively,   of  the   distributions   received  by
          stockholders  were  considered  to be  ordinary  income and 33%,  15%,
          15.13%,  6.67%,  9.75% and 40.18%,  respectively,  were  considered  a
          return  of  capital  for  federal  income  tax  purposes.  No  amounts
          distributed to stockholders for the six months ended June 30, 2000 and
          the years ended  December  31,  1999,  1998,  1997,  1996 and 1995 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.



<PAGE>


TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)



Note 10:  Cash  distributions  presented  above as a return of capital on a
          GAAP basis  represent  the amount of cash  distributions  in excess of
          accumulated net income on a GAAP basis.  Accumulated net income (loss)
          includes  deductions for  depreciation  and  amortization  expense and
          income from certain non-cash items.  This amount is not required to be
          presented  as a return of capital  except for  purposes of this table,
          and APF has not  treated  this  amount as a return of capital  for any
          other purpose.  During the year ended  December 31, 1999,  accumulated
          net loss  included a non-cash  deduction  for the advisor  acquisition
          expense of $76,333,516 (see Note 16).

Note 11:  Tax and  distribution  data and total  distributions on GAAP basis
          were computed based on the weighted average dollars outstanding during
          each period presented.

Note 12:  During the year ended December 31, 1998,  APF recorded  provisions
          for  losses  on land and  buildings  in the  amount  of  $611,534  for
          financial  reporting purposes relating to two Shoney's  properties and
          two  Boston  Market  properties.   The  tenants  of  these  properties
          experienced  financial  difficulties and ceased payment of rents under
          the terms of their lease  agreements.  The  allowances  represent  the
          difference  between the carrying  value of the  properties at December
          31, 1998 and the estimated net realizable value for these properties.

Note 13:  In  October  1998,  the  Board of  Directors  of APF  elected  to
          implement  APF's  redemption  plan.  Under the  redemption  plan,  APF
          elected  to  redeem   shares,   subject  to  certain   conditions  and
          limitations.  During the year ended  December 31, 1998,  69,514 shares
          were  redeemed at $9.20 per share  ($639,528)  and retired from shares
          outstanding  of  common  stock.  During  1999,  as  a  result  of  the
          stockholders  approving a  one-for-two  reverse  stock split of common
          stock, the Company agreed to redeem fractional shares (2,545 shares).

Note 14:  During the year ended December 31, 1999,  APF recorded  provisions
          for losses on  buildings  in the amount of  $7,779,495  for  financial
          reporting  purposes  relating  to several  properties.  The tenants of
          these properties experienced financial difficulties and ceased payment
          of rents under the terms of their  lease  agreements.  The  allowances
          represent the difference  between the carrying value of the properties
          at December 31, 1999 and the estimated net realizable  value for these
          properties.

Note 15:  During the year ended  December 31, 1999,  APF sold six properties
          and  received  aggregate  net  sales  proceeds  of  $5,302,433,  which
          resulted in a total aggregate loss of $781,192 for financial reporting
          purposes.  APF  reinvested the proceeds from the sale of properties in
          additional   properties.   In   addition,   APF  recorded  a  loss  on
          securitization of $1,070,646 for financial reporting purposes.

Note 16:  On September 1, 1999, APF issued  6,150,000 shares of common stock
          to affiliates of APF to acquire its external advisor and two companies
          which make and  service  mortgage  loans and  securitize  portions  of
          loans.  APF  recorded an advisor  acquisition  expense of  $76,333,516
          relating to the acquisition of the external advisor, which represented
          the excess purchase price over the net assets acquired.

Note 17:  During the six months ended June 30, 2000, APF recorded  provision
          for  losses on  buildings  in the  amount of  $174,641  for  financial
          reporting  purposes  relating  to several  properties.  The tenants of
          these properties experienced financial difficulties and ceased payment
          of rents under the terms of their  lease  agreements.  The  allowances
          represent the difference  between the carrying value of the properties
          at June 30,  2000 and the  estimated  net  realizable  value for these
          properties.

Note 18:  During  the six  months  ended  June  30,  2000,  APF  sold  nine
          properties  for  aggregate  net sales  proceeds of  $9,262,269  (after
          deduction of construction costs incurred but not paid by APF as of the
          date of the sale).  As of June 30, 2000, APF had collected  $6,486,944
          of these net sales proceeds and in July 2000,  collected the remaining
          $2,775,325 in net sales proceeds.

Note 19:  In  September  1999,  APF acquired  two  companies  which make and
          service  mortgage  loans and securitize  portions of loans.  Effective
          with these  acquisitions,  APF classifies its  investments in mortgage
          loans,  proceeds from sale of mortgage loans,  collections of mortgage
          loans,  proceeds  from  securitization  transactions  and purchases of
          other investments as operating activities in its financial statements.
          Prior  to  these  acquisitions,   these  types  of  transactions  were
          classified as investing activities in its financial statements.

Note 20:  Cash  generated  from sales  during the six months  ended June 30,
          2000 do not include net sales proceeds totaling $2,775,325 relating to
          the June 30,  2000  sales  of the  properties  in  Nanuet,  New  York,
          Jefferson City, Missouri and Alton,  Illinois.  The net sales proceeds
          were recorded as accounts  receivable for financial reporting purposes
          at June 30, 2000 due to receiving the net sales proceeds in July 2000.

Note 21:  Certain data for columns  representing  less than 12 months have  been
          annualized.


<PAGE>


                                    TABLE III
                     Operating Results of Prior Programs CNL
                             INCOME FUND XVII, LTD.

<TABLE>
<CAPTION>
<S> <C>
                                                          1995
                                                        (Note 1)            1996               1997               1998
                                                      --------------    --------------     -------------      --------------

Gross revenue                                              $      0       $ 1,195,263       $ 2,643,871         $ 2,816,845
Equity in earnings of unconsolidated joint                        0             4,834           100,918             140,595
ventures
Loss on dissolution of consolidated joint
venture  (Note 7)                                                 0                 0                 0                   0
Provision for loss on land and buildings (Note 8)                 0                 0                 0                   0
Interest income                                              12,153           244,406            69,779              51,240
Less:  Operating expenses                                    (3,493 )        (169,536 )        (181,865 )          (168,542 )
       Transaction costs                                          0                 0                 0             (14,139 )
       Interest expense                                           0                 0                 0                   0
       Depreciation and amortization                           (309 )        (179,208 )        (387,292 )          (369,209 )
       Minority interest in income of
         consolidated joint venture (Note 7)                      0                 0           (41,854 )           (62,632 )
                                                      --------------    --------------     -------------      --------------
Net income - GAAP basis                                       8,351         1,095,759         2,203,557           2,394,158
                                                      ==============    ==============     =============      ==============
Taxable income
    -  from operations                                       12,153         1,114,964         2,058,601           2,114,039
                                                      ==============    ==============     =============      ==============
    -  from gain (loss) on sale (Note 7)                          0                 0                 0                   0
                                                      ==============    ==============     =============      ==============
Cash generated from operations (Notes
    2 and 3)                                                  9,012         1,232,948         2,495,114           2,520,919
Cash generated from sales (Note7)                                 0                 0                 0                   0
Cash generated from refinancing                                   0                 0                 0                   0
                                                      --------------    --------------     -------------      --------------
Cash generated from operations, sales and
    refinancing                                               9,012         1,232,948         2,495,114           2,520,919
Less:  Cash distributions to investors (Note 4)
      -  from operating cash flow                            (1,199 )        (703,681 )      (2,177,584 )        (2,400,000 )
      -  from prior period                                        0                 0                 0                   0
                                                      --------------    --------------     -------------      --------------
Cash generated (deficiency) after cash
    distributions                                             7,813           529,267           317,530             120,919
Special items (not including sales and
refinancing):
      Limited partners' capital contributions             5,696,921        24,303,079                 0                   0
      General partners' capital contributions                 1,000                 0                 0                   0
      Contributions from minority interest                        0           140,676           278,170                   0
      Distribution to holder of minority interest                 0                 0           (41,507 )           (49,023 )
      Distribution to holder of minority
interest                            from
dissolution of consolidated joint                                 0                 0                 0                   0
venture
      Syndication costs                                    (604,348 )      (2,407,317 )               0                   0
      Acquisition of land and buildings                    (332,928 )     (19,735,346 )      (1,740,491 )                 0
      Investment in direct financing leases                       0        (1,784,925 )      (1,130,497 )                 0
      Investment in joint ventures                                0          (201,501 )      (1,135,681 )          (124,452 )
      Reimbursement of organization, syndication
        and acquisition costs paid on behalf of
        CNL Income Fund XVII, Ltd. by related
        parties                                            (347,907 )        (326,483 )         (25,444 )                 0
      Increase in other assets                             (221,282 )               0                 0                   0
      Reimbursement from developer of
         construction costs                                       0                 0                 0             306,100
      Other                                                    (410 )             410                 0                   0
                                                      --------------    --------------     -------------      --------------
Cash generated (deficiency) after cash
    distributions and special items                       4,198,859           517,860        (3,477,920 )           253,544
                                                      ==============    ==============     =============      ==============
TAX AND DISTRIBUTION DATA PER
    $1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
    -  from operations                                           36                37                69                  70
                                                      ==============    ==============     =============      ==============
    -  from recapture                                             0                 0                 0                   0
                                                      ==============    ==============     =============      ==============
Capital gain (loss) (Note 7)                                      0                 0                 0                   0
                                                      ==============    ==============     =============      ==============



<PAGE>







                       6 months
      1999               2000
-----------------    --------------

     $ 2,403,040       $ 1,042,922
         182,132            90,427

         (82,914 )               0
               0          (353,622 )
          44,184            14,771
        (219,361 )        (157,897 )
         (71,366 )         (23,382 )
               0                 0
        (384,985 )        (199,123 )

         (31,461 )               0
-----------------    --------------
       1,839,269           414,096
=================    ==============

       2,003,243           898,708
=================    ==============
         (23,150 )               0
=================    ==============

       2,450,018           985,097
       2,094,231                 0
               0                 0
-----------------    --------------

       4,544,249           985,097

      (2,400,000 )        (985,097 )
               0          (214,903 )
-----------------    --------------

       2,144,249          (214,903 )

               0                 0
               0                 0
               0                 0
         (46,567 )               0


        (417,696 )               0
               0                 0
               0        (1,630,164 )
               0                 0
        (527,864 )             (12 )



               0                 0
               0                 0

               0                 0
               0                 0
-----------------    --------------

       1,152,122        (1,845,079 )
=================    ==============




              66                30
=================    ==============
               0                 0
=================    ==============
              (1 )               0
=================    ==============


<PAGE>


TABLE III - CNL INCOME FUND XVII, LTD. (continued)




                                                    1995
                                                  (Note 1)             1996              1997               1998
                                                --------------     -------------     -------------      -------------

Cash distributions to investors
    Source (on GAAP basis)
    -  from investment income                               4                23                73                 79
    -  from capital gain                                    0                 0                 0                  0
    -  from investment income from prior
       period                                               0                 0                 0                  1
     -  from return of capital                              0                 0                 0                  0
                                                --------------     -------------     -------------      -------------
Total distributions on GAAP basis (Note 4)                  4                23                73                 80
                                                ==============     =============     =============      =============
   Source (on cash basis)
    -  from sales                                           0                 0                 0                  0
    -  from prior period                                    0                 0                 0                  0
    -  from operations                                      4                23                73                 80
                                                --------------     -------------     -------------      -------------
Total distributions on cash basis (Note 4)                  4                23                73                 80
                                                ==============     =============     =============      =============
Total cash distributions as a percentage of
    original $1,000 investment (Notes 5 and 9)           5.00 %            5.50 %           7.625 %             8.00 %
Total cumulative cash distributions per
    $1,000 investment from inception                        4                27               100                180
Amount (in percentage terms) remaining
    invested in program properties at the end
    of each year (period) presented (original
    total acquisition cost of properties
    retained, divided by original total
    acquisition cost of all properties in
    program)  (Notes 6 and 7)                             N/A               100 %             100 %              100 %

</TABLE>

Note 1:   Pursuant  to a  registration  statement  on Form  S-11  under  the
          Securities  Act of 1933, as amended,  effective  August 11, 1995,  CNL
          Income Fund XVII,  Ltd.  ("CNL XVII") and CNL Income Fund XVIII,  Ltd.
          each  registered  for sale  $30,000,000  units of limited  partnership
          interests  ("Units").  The  offering of Units of CNL Income Fund XVII,
          Ltd.  commenced  September  2,  1995.  Pursuant  to  the  registration
          statement, CNL XVIII could not commence until the offering of Units of
          CNL Income Fund XVII, Ltd. was terminated.  CNL Income Fund XVII, Ltd.
          terminated  its offering of Units on September 19, 1996, at which time
          subscriptions  for the maximum  offering  proceeds of $30,000,000  had
          been  received.  Upon the  termination of the offering of Units of CNL
          Income Fund XVII,  Ltd.,  CNL XVIII  commenced  its offering of Units.
          Activities  through  November 3, 1995, were devoted to organization of
          the partnership and operations had not begun.

Note 2:   Cash generated from operations includes cash received from tenants,
          plus distributions  from joint ventures,  less cash paid for expenses,
          plus interest received.

Note 3:   Cash  generated  from  operations  per this  table  agrees to cash
          generated from  operations per the statement of cash flows included in
          the financial statements of CNL XVII.

Note 4:   Distributions  declared for the quarters  ended December 31, 1995,
          1996,  1997, 1998 and 1999 are reflected in the 1996, 1997, 1998, 1999
          and  2000   columns,   respectively,   due  to  the  payment  of  such
          distributions   in  January   1996,   1997,   1998,   1999  and  2000,
          respectively.  As a result of distributions  being presented on a cash
          basis,  distributions  declared  and unpaid as of December  31,  1995,
          1996,  1997, 1998 and 1999, and June 30, 2000, are not included in the
          1995, 1996, 1997, 1998, 1999 and 2000 totals, respectively.

Note 5:   Total  cash  distributions  as a  percentage  of  original  $1,000
          investment are calculated based on actual  distributions  declared for
          the period. (See Note 4 above)

Note 6:   During  1998,   CNL  XVII  received   approximately   $306,100  in
          reimbursements  from the developer upon final  reconciliation of total
          construction costs relating to the properties in Aiken, South Carolina
          and  Weatherford,  Texas, in accordance  with the related  development
          agreements.  During 1999, CNL XVII had reinvested these amounts,  plus
          additional funds, in a property as tenants-in-common with an affiliate
          of the general  partners and in Ocean Shores  Joint  Venture,  with an
          affiliate of CNL XVII which has the same general partners.

Note 7:   During 1999,  CNL/El Cajon Joint Venture,  CNL XVII's  consolidated
          joint  venture  in which  CNL XVII  owned  an 80%  interest,  sold its
          property  to the 20% joint  venture  partner and  dissolved  the joint
          venture.  CNL XVII did not recognize any gain or loss from the sale of
          the  property for  financial  reporting  purposes.  As a result of the
          dissolution,  CNL XVII recognized a loss on dissolution of $82,914 for
          financial  reporting  purposes.   In  January  2000,  the  Partnership
          reinvested approximately $1,630,200 of the net sales proceeds received
          from the 1999 sale of this  property in a Baker's  Square  property in
          Wilmette, Illinois.


<PAGE>


TABLE III - CNL INCOME FUND XVII, LTD. (continued)




                         6 months
      1999                 2000
------------------    ----------------



               61                  14
                0                   0

               19                   0
                0                  26
------------------    ----------------
               80                  40
==================    ================

                0                   0
                0                   7
               80                  33
------------------    ----------------
               80                  40
==================    ================

             8.00 %              8.00 %

              260                 300






               94 %               100 %

Note 8:   During the six months ended June 2000, the  Partnership  recorded a
          provision  for loss on land and building in the amount of $353,622 for
          financial reporting purposes relating to the Boston Market property in
          Long  Beach,  California.  The  tenant  of  this  property  filed  for
          bankruptcy in October 1998 and ceased payment of rents under the terms
          of its  lease  agreement.  The  allowance  represents  the  difference
          between the  carrying  value of the  property at June 30, 2000 and the
          estimated net realizable value for this property.

Note 9:   Certain data for columns representing less than 12 months have been
          annualized.


<PAGE>


                                    TABLE III
                     Operating Results of Prior Programs CNL
                             INCOME FUND XVIII, LTD.

<TABLE>
<CAPTION>
<S> <C>

                                                          1995
                                                        (Note 1)            1996               1997               1998
                                                      --------------    --------------     -------------      --------------

Gross revenue                                              $      0         $   1,373       $ 1,291,416         $ 2,956,349
Equity in earnings of joint venture                               0                 0                 0                   0
Gain on sale of properties (Note 7)                               0                 0                 0                   0
Provision for loss on land (Note 5)                               0                 0                 0            (197,466 )
Lease termination refund to tenant (Note 8)                       0                 0                 0                   0
Interest income                                                   0            30,241           161,826             141,408
Less:  Operating expenses                                         0            (3,992 )        (156,403 )          (207,974 )
       Transaction costs                                          0                 0                 0             (15,522 )
       Interest expense                                           0                 0                 0                   0
       Depreciation and amortization                              0              (712 )        (142,079 )          (374,473 )
                                                      --------------    --------------     -------------      --------------
Net income - GAAP basis                                           0            26,910         1,154,760           2,302,322
                                                      ==============    ==============     =============      ==============
Taxable income
    -  from operations                                            0            30,223         1,318,750           2,324,746
                                                      ==============    ==============     =============      ==============
    -  from gain on sale (Note 7)                                 0                 0                 0                   0
                                                      ==============    ==============     =============      ==============
Cash generated from operations (Notes
    2 and 3)                                                      0            27,146         1,361,756           2,831,738
Cash generated from sales (Note 7)                                0                 0                 0                   0
Cash generated from refinancing                                   0                 0                 0                   0
                                                      --------------    --------------     -------------      --------------
Cash generated from operations, sales and
    refinancing                                                   0            27,146         1,361,756           2,831,738
Less:  Cash distributions to investors (Note 4)
      -  from operating cash flow                                 0            (2,138 )        (855,957 )        (2,468,400 )
      -  from prior period                                        0                 0                 0                   0
                                                      --------------    --------------     -------------      --------------
Cash generated (deficiency) after cash
    distributions                                                 0            25,008           505,799             363,338
Special items (not including sales and
refinancing):
    Limited partners' capital contributions                       0         8,498,815        25,723,944             854,241
    General partners' capital contributions                   1,000                 0                 0                   0
    Contributions from minority interest                          0                 0                 0                   0
    Syndication costs                                             0          (845,657 )      (2,450,214 )          (161,142 )
    Acquisition of land and buildings                             0        (1,533,446 )     (18,581,999 )        (3,134,046 )
    Investment in direct financing leases                         0                 0        (5,962,087 )           (12,945 )
    Investment in joint venture                                   0                 0                 0            (166,025 )
    Decrease (increase) in restricted cash                        0                 0                 0                   0
    Reimbursement of organization, syndication
      and acquisition costs paid on behalf of CNL
      Income Fund XVIII, Ltd. by related parties                  0          (497,420 )        (396,548 )           (37,135 )
    Increase in other assets                                      0          (276,848 )               0                   0
    Other                                                       (20 )            (107 )         (66,893 )           (10,000 )
                                                      --------------    --------------     -------------      --------------
Cash generated (deficiency) after cash
    distributions and special items                             980         5,370,345        (1,227,998 )        (2,303,714 )
                                                      ==============    ==============     =============      ==============
TAX AND DISTRIBUTION DATA PER
    $1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
    -  from operations                                            0                 6                57                  66
                                                      ==============    ==============     =============      ==============
    -  from recapture                                             0                 0                 0                   0
                                                      ==============    ==============     =============      ==============
Capital gain (loss) (Note 7)                                      0                 0                 0                   0
                                                      ==============    ==============     =============      ==============



<PAGE>







                    6 months
     1999             2000
---------------   -------------

   $ 3,075,379     $ 1,366,920
        61,656          32,475
        46,300               0
             0               0
             0         (84,873 )
        55,336          33,111
      (256,060 )      (130,979 )
       (74,734 )       (22,874 )
             0               0
      (392,521 )      (193,400 )
---------------   -------------
     2,515,356       1,000,380
===============   =============

     2,341,350       1,066,303
===============   =============
        80,170               0
===============   =============

     2,797,040       1,270,560
       688,997               0
             0               0
---------------   -------------

     3,486,037       1,270,560

    (2,797,040 )    (1,270,560 )
        (2,958 )      (129,440 )
---------------   -------------

       686,039        (129,440 )

             0               0
             0               0
             0               0
             0               0
       (25,792 )             0
             0               0
      (526,138 )    (1,001,592 )
      (688,997 )       688,997


        (2,495 )             0
             0               0
          (117 )             0
---------------   -------------

      (557,500 )      (442,035 )
===============   =============




            66              30
===============   =============
             0               0
===============   =============
             2               0
===============   =============


<PAGE>


TABLE III - CNL INCOME FUND XVIII, LTD. (continued)




                                                    1995
                                                  (Note 1)             1996              1997               1998
                                                --------------     -------------     --------------     -------------

Cash distributions to investors
    Source (on GAAP basis)
    -  from investment income                               0                 0                 38                65
    -  from capital gain                                    0                 0                  0                 0
    -  from return of capital                               0                 0                  0                 0
    -  from investment income from prior
       period                                               0                 0                  0                 6
                                                --------------     -------------     --------------     -------------
Total distributions on GAAP basis (Note 4)                  0                 0                 38                71
                                                ==============     =============     ==============     =============
   Source (on cash basis)
    -  from sales (Note 7)                                  0                 0                  0                 0
    -  from prior period                                    0                 0                  0                 0
    -  from operations                                      0                 0                 38                71
                                                --------------     -------------     --------------     -------------
Total distributions on cash basis (Note 4)                  0                 0                 38                71
                                                ==============     =============     ==============     =============
Total cash distributions as a percentage of
    original $1,000 investment from
    inception (Note 9)                                   0.00 %            5.00 %             5.75 %            7.63 %
Total cumulative cash distributions per
    $1,000 investment (Note 6)                              0                 0                 38               109
Amount (in percentage terms) remaining
    invested in program properties at the
end
    of each year (period) presented
(original
    total acquisition cost of properties
    retained, divided by original total                   N/A               100 %              100 %             100 %
    acquisition cost of all properties in
    program) (Note 7)

</TABLE>

Note 1:   Pursuant  to a  registration  statement  on Form  S-11  under  the
          Securities  Act of 1933, as amended,  effective  August 11, 1995,  CNL
          Income Fund XVIII,  Ltd ("CNL  XVIII") and CNL Income Fund XVII,  Ltd.
          each  registered  for sale  $30,000,000  units of limited  partnership
          interest  ("Units").  The  offering  of Units of CNL Income Fund XVII,
          Ltd.  commenced  September  2,  1995.  Pursuant  to  the  registration
          statement, CNL XVIII could not commence until the offering of Units of
          CNL Income Fund XVII, Ltd. was terminated.  CNL Income Fund XVII, Ltd.
          terminated  its offering of Units on September 19, 1996, at which time
          the maximum offering  proceeds of $30,000,000 had been received.  Upon
          the  termination  of the  offering  of Units of CNL Income  Fund XVII,
          Ltd., CNL XVIII  commenced its offering of Units.  Activities  through
          October 11, 1996,  were devoted to organization of the partnership and
          operations had not begun.

Note 2:   Cash generated from operations includes cash received from tenants,
          less cash paid for expenses, plus interest received.

Note 3:   Cash  generated  from  operations  per this  table  agrees to cash
          generated from  operations per the statement of cash flows included in
          the financial statements of CNL XVIII.

Note 4:   Distributions  declared for the quarters ended December 1996, 1997,
          1998 and 1999 are reflected in the 1997,  1998, 1999 and 2000 columns,
          respectively,  due to the  payment  of such  distributions  in January
          1997, 1998, 1999 and 2000, respectively.  As a result of distributions
          being presented on a cash basis,  distributions declared and unpaid as
          of December 31, 1996,  1997, 1998 and 1999, and June 30, 2000, are not
          included in the 1996, 1997, 1998, 1999 and 2000 totals, respectively.

Note 5:   During the year ended December 31, 1998,  CNL XVIII  established an
          allowance  for  loss on  land  of  $197,466  for  financial  reporting
          purposes relating to the property in Minnetonka, Minnesota. The tenant
          of this Boston Market  property  declared  bankruptcy and rejected the
          lease  relating to this property.  The loss  represents the difference
          between the  Property's  carrying  value at December  31, 1998 and the
          estimated net realizable value.

Note 6:   Total  cash  distributions  as a  percentage  of  original  $1,000
          investment are calculated based on actual  distributions  declared for
          the period. (See Note 4 above)

Note 7:   In December 1999, CNL XVIII sold one of its properties and received
          net sales  proceeds of  $688,997,  resulting  in a gain of $46,300 for
          financial reporting  purposes.  In June 2000, the Partnership used the
          net  sales  proceeds  from  this  sale to enter  into a joint  venture
          arrangement  with CNL Income Fund VII,  Ltd., CNL Income Fund XV, Ltd.
          and CNL Income Fund XVI, Ltd., each a Florida limited  partnership and
          an affiliate of the general partners, to hold one restaurant property.

Note 8:   The lease  termination  refund to tenant of $84,873  during the six
          months  ended June 30, 2000 is due to lease  termination  negotiations
          during the six months  ended June 30, 2000 related to the 1999 sale of
          the Partnership's  Property in Atlanta,  Georgia. The Partnership does
          not anticipate  incurring any additional  costs related to the sale of
          this property.

Note 9:   Certain data for columns representing less than 12 months have been
          annualized.


<PAGE>







                      6 months
     1999               2000
----------------    -------------



             71               28
              1                0
              0                9

              8                3
----------------    -------------
             80               40
================    =============

              0                0
              0                4
             80               36
----------------    -------------
             80               40
================    =============


           8.00 %           8.00 %

            189              229






             98 %            100 %




<PAGE>


                                     TABLE V
                        SALES OR DISPOSALS OF PROPERTIES

<TABLE>
<CAPTION>
<S> <C>
                                                                              Selling Price, Net of
                                                                        Closing Costs and GAAP Adjustments
                                                          ------------------------------------------------------------

                                                                                   Purchase
                                                                                    money     Adjustments
                                                              Cash      Mortgage   mortgage   resulting
                                                          received net   balance    taken       from
                                  Date        Date of     of closing    at time    back by   application
          Property              Acquired       Sale          costs      of sale    program     of GAAP       Total
============================  ============= ===========  ============= ========== ========== =========== ============

CNL Income Fund, Ltd.:
   Burger King -
     San Dimas, CA (14)         02/05/87     06/12/92      $1,169,021      0           0          0        $1,169,021
   Wendy's -
     Fairfield, CA (14)         07/01/87     10/03/94      1,018,490       0           0          0         1,018,490
   Wendy's -
     Casa Grande, AZ            12/10/86     08/19/97        795,700       0           0          0           795,700
   Wendy's -
     North Miami, FL (9)        02/18/86     08/21/97        473,713       0           0          0           473,713
   Popeye's -
     Kissimmee, FL (14)         12/31/86     04/30/98        661,300       0           0          0           661,300
   Golden Corral -
     Kent Island, MD (21)       11/20/86     10/15/99        870,457       0           0          0           870,457

CNL Income Fund II, Ltd.:
   Golden Corral -
     Salisbury, NC              05/29/87     07/21/93        746,800       0           0          0           746,800
   Pizza Hut -
     Graham, TX                 08/24/87     07/28/94        261,628       0           0          0           261,628
   Golden Corral -
     Medina, OH (11)            11/18/87     11/30/94        825,000       0           0          0           825,000
   Denny's -
     Show Low, AZ (8)           05/22/87     01/31/97        620,800       0           0          0           620,800
   KFC -
     Eagan, MN                  06/01/87     06/02/97        623,882       0       42,000         0           665,882
   KFC -
     Jacksonville, FL           09/01/87     09/09/97        639,363       0           0          0           639,363
   Wendy's -
     Farmington Hills, MI (12)  05/18/87     10/09/97        833,031       0           0          0           833,031
   Wendy's -
     Farmington Hills, MI       05/18/87     10/09/97      1,085,259       0           0          0         1,085,259
     (13) (14)
   Denny's -
     Plant City, FL             11/23/87     10/24/97        910,061       0           0          0           910,061
   Pizza Hut -
     Mathis, TX                 12/17/87     12/04/97        297,938       0           0          0           297,938
   KFC -
     Avon Park, FL (14)         09/02/87     12/10/97        501,975       0           0          0           501,975
   Golden Corral -
     Columbia, MO               11/17/87     03/23/99        678,888       0           0          0           678,888
   Little House -
     Littleton, CO              10/07/87     11/05/99        150,000       0           0          0           150,000
   KFC -
     Jacksonville, FL (14)      09/01/87     06/15/00        601,400       0           0          0           601,400

CNL Income Fund III, Ltd.:
   Wendy's -
     Chicago, IL (14)           06/02/88     01/10/97        496,418       0           0          0           496,418
   Perkins -
     Bradenton, FL              06/30/88     03/14/97      1,310,001       0           0          0         1,310,001

                                                     Cost of Properties
                                                   Including Closing and
                                                         Soft Costs
                                        -------------------------------------
                                                        Total                     Excess
                                                     acquisition               (deficiency)
                                                    cost, capital               of property
                                                     improvements              operating cash
                                          Original   closing and               receipts over
                                          mortgage    soft costs                   cash
          Property                        financing      (1)         Total      expenditures
============================            ========== ============= ============  ==============

CNL Income Fund, Ltd.:
   Burger King -
     San Dimas, CA (14)                      0         $955,000       $955,000     $214,021
   Wendy's -
     Fairfield, CA (14)                      0          861,500        861,500      156,990
   Wendy's -
     Casa Grande, AZ                         0          667,255        667,255      128,445
   Wendy's -
     North Miami, FL (9)                     0          385,000        385,000       88,713
   Popeye's -
     Kissimmee, FL (14)                      0          475,360        475,360      185,940
   Golden Corral -
     Kent Island, MD (21)                    0          726,600        726,600      143,857

CNL Income Fund II, Ltd.:
   Golden Corral -
     Salisbury, NC                           0          642,800        642,800      104,000
   Pizza Hut -
     Graham, TX                              0          205,500        205,500       56,128
   Golden Corral -
     Medina, OH (11)                         0          743,000        743,000       82,000
   Denny's -
     Show Low, AZ (8)                        0          484,185        484,185      136,615
   KFC -
     Eagan, MN                               0          601,100        601,100       64,782
   KFC -
     Jacksonville, FL                        0          405,000        405,000      234,363
   Wendy's -
     Farmington Hills, MI (12                0          679,000        679,000      154,031
   Wendy's -
     Farmington Hills, MI                    0          887,000        887,000      198,259
     (13) (14)
   Denny's -
     Plant City, FL                          0          820,717        820,717       89,344
   Pizza Hut -
     Mathis, TX                              0          202,100        202,100       95,838
   KFC -
     Avon Park, FL (14)                      0          345,000        345,000      156,975
   Golden Corral -
     Columbia, MO                            0          511,200        511,200      167,688
   Little House -
     Littleton, CO                           0          330,456        330,456     (180,456 )
   KFC -
     Jacksonville, FL (14)                   0          441,000        441,000      160,400

CNL Income Fund III, Ltd.:
   Wendy's -
     Chicago, IL (14)                        0          591,362        591,362      (94,944 )
   Perkins -
     Bradenton, FL                           0        1,080,500      1,080,500      229,501





<PAGE>

                                                      TABLE V
                                         SALES OR DISPOSALS OF PROPERTIES


                                                                              Selling Price, Net of
                                                                        Closing Costs and GAAP Adjustments
                                                          ------------------------------------------------------------

                                                                                   Purchase
                                                                                    money     Adjustments
                                                              Cash      Mortgage   mortgage   resulting
                                                          received net   balance    taken       from
                                  Date        Date of     of closing    at time    back by   application
          Property              Acquired       Sale          costs      of sale    program     of GAAP       Total
============================  ============= ===========  ============= ========== ========== =========== ============

CNL Income Fund III, Ltd.
(Continued):
   Pizza Hut -
     Kissimmee, FL               02/23/88      04/08/97      673,159        0               0         0        673,159
   Burger King -
     Roswell, GA                 06/08/88      06/20/97      257,981        0         685,000         0        942,981
   Wendy's -
     Mason City, IA              02/29/88      10/24/97      217,040        0               0         0        217,040
   Taco Bell -
     Fernandina Beach, FL (14)   04/09/88      01/15/98      721,655        0               0         0        721,655
   Denny's -
     Daytona Beach, FL (14)      07/12/88      01/23/98     1,008,976       0               0         0      1,008,976
   Wendy's -
     Punta Gorda, FL             02/03/88      02/20/98      665,973        0               0         0        665,973
   Po Folks -
     Hagerstown, MD              06/21/88      06/10/98      788,884        0               0         0        788,884
   Denny's-
     Hazard, KY                  02/01/88      12/23/98      432,625        0               0         0        432,625
   Perkins -
     Flagstaff, AZ               09/30/88      04/30/99     1,091,193       0               0         0      1,091,193
   Denny's -
     Hagerstown, MD              08/14/88      06/09/99      700,977        0               0         0        700,977

CNL Income Fund IV, Ltd.:
   Taco Bell -
     York, PA                    03/22/89      04/27/94      712,000        0               0         0        712,000
   Burger King -
     Hastings, MI                08/12/88      12/15/95      518,650        0               0         0        518,650
   Wendy's -
     Tampa, FL                   12/30/88      09/20/96     1,049,550       0               0         0      1,049,550
   Checkers -
     Douglasville, GA            12/08/94      11/07/97      380,695        0               0         0        380,695
   Taco Bell -
     Fort Myers, FL (14)         12/22/88      03/02/98      794,690        0               0         0        794,690
   Denny's -
     Union Township, OH (14)     11/01/88      03/31/98      674,135        0               0         0        674,135
   Perkins -
     Leesburg, FL                01/11/89      07/09/98      529,288        0               0         0        529,288
   Taco Bell -
     Naples, FL                  12/22/88      09/03/98      533,127        0               0         0        533,127
   Wendy's
     Detroit, MI (14)            10/21/88      06/29/00     1,056,475       0               0         0      1,056,475

CNL Income Fund V, Ltd.:
   Perkins -
     Myrtle Beach, SC (2)        02/28/90      08/25/95            0        0        1,040,000        0      1,040,000
   Ponderosa -
     St. Cloud, FL (14) (24)     06/01/89      10/24/96       73,713        0        1,057,299        0      1,131,012
   Franklin National Bank -
     Franklin, TN                06/26/89      01/07/97      960,741        0               0         0        960,741



                                                     Cost of Properties
                                                   Including Closing and
                                                         Soft Costs
                                        -------------------------------------
                                                        Total                     Excess
                                                     acquisition               (deficiency)
                                                    cost, capital               of property
                                                     improvements              operating cash
                                          Original   closing and               receipts over
                                          mortgage    soft costs                   cash
          Property                        financing      (1)         Total      expenditures
============================            ========== ============= ============  ==============

CNL Income Fund III, Ltd.
(Continued):
   Pizza Hut -                              0          474,755      474,755       198,404
     Kissimmee, FL
   Burger King -                            0          775,226      775,226       167,755
     Roswell, GA
   Wendy's -                                0          190,252      190,252        26,788
     Mason City, IA
   Taco Bell -                              0          559,570      559,570       162,085
     Fernandina Beach, FL (14)
   Denny's -                                0          918,777      918,777        90,799
     Daytona Beach, FL (14)
   Wendy's -                                0          684,342      684,342       (18,369 )
     Punta Gorda, FL
   Po Folks -                               0        1,188,315    1,188,315      (399,431 )
     Hagerstown, MD
   Denny's-                                 0          647,622      647,622      (214,997 )
     Hazard, KY
   Perkins -                                0          993,508      993,508        97,685
     Flagstaff, AZ
   Denny's -                                0          861,454      861,454      (160,477 )
     Hagerstown, MD

CNL Income Fund IV, Ltd.:
   Taco Bell -                              0          616,501      616,501        95,499
     York, PA
   Burger King -                            0          419,936      419,936        98,714
     Hastings, MI
   Wendy's -                                0          828,350      828,350       221,200
     Tampa, FL
   Checkers -                               0          363,768      363,768        16,927
     Douglasville, GA
   Taco Bell -                              0          597,998      597,998       196,692
     Fort Myers, FL (14)
   Denny's -                                0          872,850      872,850      (198,715 )
     Union Township, OH (14)
   Perkins -                                0          737,260      737,260      (207,972 )
     Leesburg, FL
   Taco Bell -                              0          410,546      410,546       122,581
     Naples, FL
   Wendy's                                  0          614,500      614,500       441,975
     Detroit, MI (14)

CNL Income Fund V, Ltd.:
   Perkins -                                0          986,418      986,418        53,582
     Myrtle Beach, SC (2)
   Ponderosa -                              0          996,769      996,769       134,243
     St. Cloud, FL (14) (24)
   Franklin National Bank -                 0        1,138,164    1,138,164      (177,423 )
     Franklin, TN




<PAGE>


                                                      TABLE V
                                         SALES OR DISPOSALS OF PROPERTIES


                                                                              Selling Price, Net of
                                                                        Closing Costs and GAAP Adjustments
                                                          ------------------------------------------------------------

                                                                                   Purchase
                                                                                    money     Adjustments
                                                              Cash      Mortgage   mortgage   resulting
                                                          received net   balance    taken       from
                                  Date        Date of     of closing    at time    back by   application
          Property              Acquired       Sale          costs      of sale    program     of GAAP       Total
============================  ============= ===========  ============= ========== ========== =========== ============

CNL Income Fund V, Ltd.
(Continued):
   Shoney's -
     Smyrna, TN                  03/22/89     05/13/97      636,788         0               0         0           636,788
   KFC -
     Salem, NH                   05/31/89     09/22/97      1,272,137       0               0         0         1,272,137
   Perkins -
     Port St. Lucie, FL          11/14/89     09/23/97      1,216,750       0               0         0         1,216,750
   Hardee's -
     Richmond, IN                02/17/89     11/07/97      397,785         0               0         0           397,785
   Wendy's -
     Tampa, FL (14)              02/16/89     12/29/97      805,175         0               0         0           805,175
   Denny's -
     Port Orange, FL (14)        07/10/89     01/23/98      1,283,096       0               0         0         1,283,096
   Shoney's
     Tyler, TX                   03/20/89     02/17/98      844,229         0               0         0           894,229
   Wendy's -
     Ithaca, NY                  12/07/89     03/29/99      471,248         0               0         0           471,248
   Wendy's -
     Endicott, NY                12/07/89     03/29/99      642,511         0               0         0           642,511
   Burger King -
     Halls, TN (20)              01/05/90     06/03/99      433,366         0               0         0           433,366
   Hardee's -
     Belding, MI                 03/08/89     03/03/00      124,346         0               0         0           124,346

CNL Income Fund VI, Ltd.:
   Hardee's -
     Batesville, AR              11/02/89     05/24/94      791,211         0               0         0           791,211
   Hardee's -
     Heber Springs, AR           02/13/90     05/24/94      638,270         0               0         0           638,270
   Hardee's -
     Little Canada, MN           11/28/89     06/29/95      899,503         0               0         0           899,503
   Jack in the Box -
     Dallas, TX                  06/28/94     12/09/96      982,980         0               0         0           982,980
   Denny's -
     Show Low, AZ (8)            05/22/87     01/31/97      349,200         0               0         0           349,200
   KFC -
     Whitehall Township, MI      02/26/90     07/09/97      629,888         0               0         0           629,888
   Perkins -
     Naples, FL                  12/26/89     07/09/97      1,487,725       0               0         0         1,487,725
   Burger King -
     Plattsmouth, NE             01/19/90     07/18/97      699,400         0               0         0           699,400
   Shoney's -
     Venice, FL                  08/03/89     09/17/97      1,206,696       0               0         0         1,206,696
   Jack in the Box -
     Yuma, AZ (10)               07/14/94     10/31/97      510,653         0               0         0           510,653
   Denny's
     Deland, FL                  03/22/90     01/23/98      1,236,971       0               0         0         1,236,971
   Wendy's -
     Liverpool, NY               12/08/89     02/09/98      145,221         0               0         0           145,221



                                                     Cost of Properties
                                                   Including Closing and
                                                         Soft Costs
                                        -------------------------------------
                                                        Total                     Excess
                                                     acquisition               (deficiency)
                                                    cost, capital               of property
                                                     improvements              operating cash
                                          Original   closing and               receipts over
                                          mortgage    soft costs                   cash
          Property                        financing      (1)         Total      expenditures
============================            ========== ============= ============  ==============

CNL Income Fund V, Ltd.
(Continued):
   Shoney's -
     Smyrna, TN                              0           554,200      554,200        82,588
   KFC -
     Salem, NH                               0         1,079,310    1,079,310       192,827
   Perkins -
     Port St. Lucie, FL                      0         1,203,207    1,203,207        13,543
   Hardee's -
     Richmond, IN                            0           695,464      695,464      (297,679 )
   Wendy's -
     Tampa, FL (14)                          0           657,800      657,800       147,375
   Denny's -
     Port Orange, FL (14)                    0         1,021,000    1,021,000       262,096
   Shoney's
     Tyler, TX                               0           770,300      770,300        73,929
   Wendy's -
     Ithaca, NY                              0           471,297      471,297           (49 )
   Wendy's -
     Endicott, NY                            0           471,255      471,255       171,256
   Burger King -
     Halls, TN (20)                          0           329,231      329,231       104,135
   Hardee's -
     Belding, MI                             0           630,432      630,432      (506,086 )

CNL Income Fund VI, Ltd.:
   Hardee's -
     Batesville, AR                          0           605,500      605,500       185,711
   Hardee's -
     Heber Springs, AR                       0           532,893      532,893       105,377
   Hardee's -
     Little Canada, MN                       0           821,692      821,692        77,811
   Jack in the Box -
     Dallas, TX                              0           964,437      964,437        18,543
   Denny's -
     Show Low, AZ (8)                        0           272,354      272,354        76,846
   KFC -
     Whitehall Township, MI                  0           725,604      725,604       (95,716 )
   Perkins -
     Naples, FL                              0         1,083,869    1,083,869       403,856
   Burger King -
     Plattsmouth, NE                         0           561,000      561,000       138,400
   Shoney's -
     Venice, FL                              0         1,032,435    1,032,435       174,261
   Jack in the Box -
     Yuma, AZ (10)                           0           448,082      448,082        62,571
   Denny's
     Deland, FL                              0         1,000,000    1,000,000       236,971
   Wendy's -
     Liverpool, NY                           0           341,440      341,440      (196,219 )




<PAGE>


                                                      TABLE V
                                         SALES OR DISPOSALS OF PROPERTIES


                                                                                Selling Price, Net of
                                                                          Closing Costs and GAAP Adjustments
                                                           ------------------------------------------------------------

                                                                                       Purchase
                                                                                        money     Adjustments
                                                                Cash      Mortgage     mortgage   resulting
                                                            received net   balance      taken       from
                                    Date        Date of     of closing    at time      back by    application
          Property                Acquired       Sale          costs      of sale      program     of GAAP         Total
============================     =========== ===========  ============= ==========   ==========   ===========  ============

CNL Income Fund VI, Ltd.
(Continued):
   Perkin's -
     Melbourne, FL                02/03/90     02/12/98         552,910      0              0          0           552,910
   Hardee's -
     Bellevue, NE                 05/03/90     06/05/98         900,000      0              0          0           900,000
   Burger King -
     Greeneville, TN              01/05/90     06/03/99       1,059,373      0              0          0         1,059,373
   Burger King -
     Broadway, TN                 01/05/90     06/03/99       1,059,200      0              0          0         1,059,200
   Burger King -
     Sevierville, TN              01/05/90     06/03/99       1,168,298      0              0          0         1,168,298
   Burger King -
     Walker Springs, TN           01/10/90     06/03/99       1,031,274      0              0          0         1,031,274

CNL Income Fund VII, Ltd.:
   Taco Bell -
     Kearns, UT                   06/14/90     05/19/92         700,000      0              0          0           700,000
   Hardee's -
     St. Paul, MN                 08/09/90     05/24/94         869,036      0              0          0           869,036
   Perkins -
     Florence, SC (3)             08/28/90     08/25/95               0      0       1,160,000         0         1,160,000
   Church's Fried Chicken -
     Jacksonville, FL (14)        04/30/90     12/01/95               0      0        240,000          0           240,000
(25)
   Shoney's -
     Colorado Springs, CO         07/03/90     07/24/96       1,044,909      0              0          0         1,044,909
   Hardee's -
     Hartland, MI                 07/10/90     10/23/96         617,035      0              0          0           617,035
   Hardee's -
     Columbus, IN                 09/04/90     05/30/97         223,590      0              0          0           223,590
   KFC -
     Dunnellon, FL                08/02/90     10/07/97         757,800      0              0          0           757,800
   Jack in the Box -
     Yuma, AZ (10)                07/14/94     10/31/97         471,372      0              0          0           471,372
   Burger King -
     Maryville, TN                05/04/90     06/03/99       1,059,954      0              0          0         1,059,954
   Burger King -
     Halls, TN (20)               01/05/90     06/03/99         451,054      0              0          0           451,054
   Shoney's
     Pueblo, CO                   08/21/90     06/20/00       1,005,000      0              0          0         1,005,000

CNL Income Fund VIII, Ltd.:
   Denny's -
     Ocoee, FL                    03/16/91     07/31/95       1,184,865      0              0          0         1,184,865
   Church's Fried Chicken -
     Jacksonville, FL (4) (14)    09/28/90     12/01/95               0      0        240,000          0           240,000
   Church's Fried Chicken -
     Jacksonville, FL (5) (14)    09/28/90     12/01/95               0      0        220,000          0           220,000
   Ponderosa -
     Orlando, FL (6) (14)         12/17/90     10/24/96               0      0       1,353,775         0         1,353,775




                                                     Cost of Properties
                                                   Including Closing and
                                                         Soft Costs
                                        -------------------------------------
                                                        Total                     Excess
                                                     acquisition               (deficiency)
                                                    cost, capital               of property
                                                     improvements              operating cash
                                          Original   closing and               receipts over
                                          mortgage    soft costs                   cash
          Property                        financing      (1)         Total      expenditures
============================            ========== ============= ============  ==============

CNL Income Fund VI, Ltd.
(Continued):
   Perkin's -
     Melbourne, FL                           0           692,850       692,850     (139,940 )
   Hardee's -
     Bellevue, NE                            0           899,512       899,512          488
   Burger King -
     Greeneville, TN                         0           890,240       890,240      169,133
   Burger King -
     Broadway, TN                            0           890,036       890,036      169,164
   Burger King -
     Sevierville, TN                         0           890,696       890,696      277,602
   Burger King -
     Walker Springs, TN                      0           864,777       864,777      166,497

CNL Income Fund VII, Ltd.:
   Taco Bell -
     Kearns, UT                              0           560,202       560,202      139,798
   Hardee's -
     St. Paul, MN                            0           742,333       742,333      126,703
   Perkins -
     Florence, SC (3)                        0         1,084,905     1,084,905       75,095
   Church's Fried Chicken -
     Jacksonville, FL (14)                   0           233,728       233,728        6,272
     (25)
   Shoney's -
     Colorado Springs, CO                    0           893,739       893,739      151,170
   Hardee's -
     Hartland, MI                            0           841,642       841,642     (224,607 )
   Hardee's -
     Columbus, IN                            0           219,676       219,676        3,914
   KFC -
     Dunnellon, FL                           0           546,333       546,333      211,467
   Jack in the Box -
     Yuma, AZ (10)                           0           413,614       413,614       57,758
   Burger King -
     Maryville, TN                           0           890,668       890,668      169,286
   Burger King -
     Halls, TN (20)                          0           342,669       342,669      108,385
   Shoney's
     Pueblo, CO                              0           961,582       961,582       43,418

CNL Income Fund VIII, Ltd.:
   Denny's -
     Ocoee, FL                               0           949,199       949,199      235,666
   Church's Fried Chicken -
     Jacksonville, FL (4) (14)               0           238,153       238,153        1,847
   Church's Fried Chicken -
     Jacksonville, FL (5) (14)               0           215,845       215,845        4,155
   Ponderosa -
     Orlando, FL (6) (14)                    0         1,179,210     1,179,210      174,565



<PAGE>


                                                      TABLE V
                                         SALES OR DISPOSALS OF PROPERTIES


                                                                                Selling Price, Net of
                                                                          Closing Costs and GAAP Adjustments
                                                           ------------------------------------------------------------

                                                                                       Purchase
                                                                                        money     Adjustments
                                                                Cash      Mortgage     mortgage   resulting
                                                            received net   balance      taken       from
                                    Date        Date of     of closing    at time      back by    application
          Property                Acquired       Sale          costs      of sale      program     of GAAP         Total
============================     =========== ===========  ============= ==========   ==========   ===========  ============

CNL Income Fund IX, Ltd.:
   Burger King -
     Woodmere, OH (15)          05/31/91     12/12/96        918,445       0                0         0          918,445
   Burger King -
     Alpharetta, GA             09/20/91     06/30/97      1,053,571       0                0         0        1,053,571
   Shoney's -
     Corpus Christi, TX         10/28/91     02/12/99      1,350,000       0                0         0        1,350,000
   Perkins -
     Rochester, NY              12/20/91     03/03/99      1,050,000       0                0         0        1,050,000
   Perkins -
     Williamsville, NY          12/20/91     05/15/00        693,350       0                0         0          693,350

CNL Income Fund X, Ltd.:
   Shoney's -
     Denver, CO                 03/04/92      08/11/95     1,050,186       0                0         0        1,050,186
   Jack in the Box -
     Freemont, CA               03/26/92      09/23/97     1,366,550       0                0         0        1,366,550
   Jack in the Box -
     Sacramento, CA             12/19/91      01/20/98     1,234,175       0                0         0        1,234,175
   Pizza Hut -
     Billings, MT               04/16/92      10/07/98      359,990        0                0         0          359,990
   Perkins -
     Amherst, NY                02/26/92      03/03/99     1,150,000       0                0         0        1,150,000
   Shoney's -
     Fort Myers Beach, FL       09/08/95      08/26/99      931,725        0                0         0          931,725

CNL Income Fund XI, Ltd.:
   Burger King -
     Philadelphia, PA           09/29/92      11/07/96     1,044,750       0                0         0        1,044,750
   Burger King -
     Columbus, OH (19)          06/29/92      09/30/98      795,264        0                0         0          795,264
   Burger King -
     Nashua, NH                 06/29/92      10/07/98     1,630,296       0                0         0        1,630,296

CNL Income Fund XII, Ltd.:
   Golden Corral -
     Houston, TX                12/28/92      04/10/96     1,640,000       0                0         0        1,640,000
   Long John Silver's -
     Monroe, NC                 06/30/93      12/31/98      483,550        0                0         0          483,550
   Long John Silver's -
     Morganton, NC (23)         07/02/93      05/17/99      467,300        0           55,000         0          522,300
   Denny's -
     Cleveland, TN              12/23/92      03/03/00      797,227        0                0         0          797,227

CNL Income Fund XIII, Ltd.:
   Checkers -
     Houston, TX                03/31/94      04/24/95      286,411        0                0         0          286,411
   Checkers -
     Richmond, VA               03/31/94      11/21/96      550,000        0                0         0          550,000





                                                     Cost of Properties
                                                   Including Closing and
                                                         Soft Costs
                                        -------------------------------------
                                                        Total                     Excess
                                                     acquisition               (deficiency)
                                                    cost, capital               of property
                                                     improvements              operating cash
                                          Original   closing and               receipts over
                                          mortgage    soft costs                   cash
          Property                        financing      (1)         Total      expenditures
============================            ========== ============= ============  ==============

CNL Income Fund IX, Ltd.:
   Burger King -
     Woodmere, OH (15)                       0          918,445      918,445            0
   Burger King -
     Alpharetta, GA                          0          713,866      713,866      339,705
   Shoney's -
     Corpus Christi, TX                      0        1,224,020    1,224,020      125,980
   Perkins -
     Rochester, NY                           0        1,064,815    1,064,815      (14,815 )
   Perkins -
     Williamsville, NY                       0          981,482      981,482     (288,132 )

CNL Income Fund X, Ltd.:
   Shoney's -
     Denver, CO                              0          987,679      987,679       62,507
   Jack in the Box -
     Freemont, CA                            0        1,102,766    1,102,766      263,784
   Jack in the Box -
     Sacramento, CA                          0          969,423      969,423      264,752
   Pizza Hut -
     Billings, MT                            0          302,000      302,000       57,990
   Perkins -
     Amherst, NY                             0        1,141,444    1,141,444        8,556
   Shoney's -
     Fort Myers Beach, FL                    0          931,725      931,725            0

CNL Income Fund XI, Ltd.:
   Burger King -
     Philadelphia, PA                        0          818,850      818,850      225,900
   Burger King -
     Columbus, OH (19)                       0          795,264      795,264            0
   Burger King -
     Nashua, NH                              0        1,217,015    1,217,015      413,281

CNL Income Fund XII, Ltd.:
   Golden Corral -
     Houston, TX                             0        1,636,643    1,636,643        3,357
   Long John Silver's -
     Monroe, NC                              0          239,788      239,788      243,762
   Long John Silver's -
     Morganton, NC (23)                      0          304,002      304,002      218,298
   Denny's -
     Cleveland, TN                           0          622,863      622,863      174,364

CNL Income Fund XIII, Ltd.:
   Checkers -
     Houston, TX                             0          286,411      286,411            0
   Checkers -
     Richmond, VA                            0          413,288      413,288      136,712






<PAGE>



                                                      TABLE V
                                         SALES OR DISPOSALS OF PROPERTIES



                                                                                Selling Price, Net of
                                                                          Closing Costs and GAAP Adjustments
                                                           ------------------------------------------------------------

                                                                                       Purchase
                                                                                        money     Adjustments
                                                                Cash      Mortgage     mortgage   resulting
                                                            received net   balance      taken       from
                                    Date        Date of     of closing    at time      back by    application
          Property                Acquired       Sale          costs      of sale      program     of GAAP         Total
============================     =========== ===========  ============= ==========   ==========   ===========  ============

CNL Income Fund XIII, Ltd.
(Continued):
   Denny's -
     Orlando, FL                      09/01/93     10/24/97       932,849       0               0          0          932,849
   Jack in the Box -
     Houston, TX                      07/27/93     07/16/99     1,063,318       0               0          0        1,063,318

CNL Income Fund XIV, Ltd.:
   Checkers -
     Knoxville, TN                    03/31/94     03/01/95       339,031       0               0          0          339,031
   Checkers -
     Dallas, TX                       03/31/94     03/01/95       356,981       0               0          0          356,981
   TGI Friday's -
     Woodridge, NJ (7)                01/01/95     09/27/96     1,753,533       0               0          0        1,753,533
   Wendy's -
     Woodridge, NJ (7)                11/28/94     09/27/96       747,058       0               0          0          747,058
   Hardee's -
     Madison, AL                      12/14/93     01/08/98       700,950       0               0          0          700,950
   Checkers -
     Richmond, VA (#548)              03/31/94     01/29/98       512,462       0               0          0          512,462
   Checkers -
     Riviera Beach, FL                03/31/94     04/14/98       360,000       0               0          0          360,000
   Checkers -
     Richmond, VA (#486)              03/31/94     07/27/98       397,985       0               0          0          397,985
   Long John Silver's -
     Stockbridge, GA                  03/31/94     05/25/99       696,300       0               0          0          696,300
   Long John Silver's -
     Shelby, NC                       06/22/94     11/12/99       494,178       0               0          0          494,178
   Checker's -
     Kansas City, MO                  03/31/94     12/10/99       268,450       0               0          0          268,450
   Checker's -
     Houston, TX                      03/31/94     12/15/99       385,673       0               0          0          385,673

CNL Income Fund XV, Ltd.:
   Checkers -
     Knoxville, TN                    05/27/94     03/01/95       263,221       0               0          0          263,221
   Checkers -
     Leavenworth, KS                  06/22/94     03/01/95       259,600       0               0          0          259,600
   Checkers -
     Knoxville, TN                    07/08/94     03/01/95       288,885       0               0          0          288,885
   TGI Friday's -
     Woodridge, NJ (7)                01/01/95     09/27/96     1,753,533       0               0          0        1,753,533
   Wendy's -
     Woodridge, NJ (7)                11/28/94     09/27/96       747,058       0               0          0          747,058
   Long John Silver's -
     Gastonia, NC                     07/15/94     11/12/99       631,304       0               0          0          631,304
   Long John Silver's
     Lexington, NC                    10/22/94     01/12/00       562,130       0               0          0          562,130



                                                     Cost of Properties
                                                   Including Closing and
                                                         Soft Costs
                                        -------------------------------------
                                                        Total                     Excess
                                                     acquisition               (deficiency)
                                                    cost, capital               of property
                                                     improvements              operating cash
                                          Original   closing and               receipts over
                                          mortgage    soft costs                   cash
          Property                        financing      (1)         Total      expenditures
============================            ========== ============= ============  ==============

CNL Income Fund XIII, Ltd.
(Continued):
   Denny's -
     Orlando, FL                             0         934,120      934,120      (1,271 )
   Jack in the Box -
     Houston, TX                             0         861,321      861,321     201,997

CNL Income Fund XIV, Ltd.:
   Checkers -
     Knoxville, TN                           0         339,031      339,031           0
   Checkers -
     Dallas, TX                              0         356,981      356,981           0
   TGI Friday's -
     Woodridge, NJ (7)                       0       1,510,245    1,510,245     243,288
   Wendy's -
     Woodridge, NJ (7)                       0         672,746      672,746      74,312
   Hardee's -
     Madison, AL                             0         658,977      658,977      41,973
   Checkers -
     Richmond, VA (#548)                     0         382,435      382,435     130,027
   Checkers -
     Riviera Beach, FL                       0         276,409      276,409      83,591
   Checkers -
     Richmond, VA (#486)                     0         352,034      352,034      45,951
   Long John Silver's -
     Stockbridge, GA                         0         738,340      738,340     (42,040 )
   Long John Silver's -
     Shelby, NC                              0         608,611      608,611    (114,433 )
   Checker's -
     Kansas City, MO                         0         209,329      209,329      59,121
   Checker's -
     Houston, TX                             0         311,823      311,823      73,850

CNL Income Fund XV, Ltd.:
   Checkers -
     Knoxville, TN                           0         263,221      263,221           0
   Checkers -
     Leavenworth, KS                         0         259,600      259,600           0
   Checkers -
     Knoxville, TN                           0         288,885      288,885           0
   TGI Friday's -
     Woodridge, NJ (7)                       0       1,510,245    1,510,245     243,288
   Wendy's -
     Woodridge, NJ (7)                       0         672,746      672,746      74,312
   Long John Silver's -
     Gastonia, NC                            0         776,248      776,248    (144,944 )
   Long John Silver's
     Lexington, NC                           0         646,203      646,203     (84,073 )





<PAGE>

                                                      TABLE V
                                         SALES OR DISPOSALS OF PROPERTIES




                                                                                Selling Price, Net of
                                                                          Closing Costs and GAAP Adjustments
                                                           ------------------------------------------------------------

                                                                                       Purchase
                                                                                        money     Adjustments
                                                                Cash      Mortgage     mortgage   resulting
                                                            received net   balance      taken       from
                                    Date        Date of     of closing    at time      back by    application
          Property                Acquired       Sale          costs      of sale      program     of GAAP         Total
============================     =========== ===========  ============= ==========   ==========   ===========  ============

CNL Income Fund XVI, Ltd.:
   Long John Silver's -
     Appleton, WI                06/24/95     04/24/96          775,000      0               0         0           775,000
   Checker's -
     Oviedo, FL                  11/14/94     02/28/97          610,384      0               0         0           610,384
   Boston Market -
     Madison, TN (16)            05/05/95     05/08/98          774,851      0               0         0           774,851
   Boston Market -
     Chattanooga, TN (17)        05/05/95     06/16/98          713,386      0               0         0           713,386
   Boston Market -
     Lawrence, KS                05/08/98     11/23/99          667,311      0               0         0           667,311

CNL Income Fund XVII, Ltd.:
   Boston Market -
     Troy, OH (18)               07/24/96     06/16/98          857,487      0               0         0           857,487
   Golden Corral -
     El Cajon, CA (22)           04/29/97     12/02/99        1,675,385      0               0         0         1,675,385

CNL Income Fund XVIII, Ltd.:
   Black Eyed Pea -
     Atlanta, GA                 03/26/97     12/06/99          688,997      0               0         0           688,997

CNL American Properties
Fund, Inc.:
   TGI Friday's -
     Orange, CT                  10/30/95     05/08/97        1,312,799      0               0         0         1,312,799
   TGI Friday's -
     Hazlet, NJ                  07/15/96     05/08/97        1,324,109      0               0         0         1,324,109
   TGI Friday's -
     Marlboro, NJ                08/01/96     05/08/97        1,372,075      0               0         0         1,372,075
   TGI Friday's -
     Hamden, CT                  08/26/96     05/08/97        1,245,100      0               0         0         1,245,100
   Boston Market -
     Southlake, TX               07/02/97     07/21/97        1,035,153      0               0         0         1,035,135
   Boston Market -
     Franklin, TN (26)           08/18/95     04/14/98          950,361      0               0         0           950,361
   Boston Market -
     Grand Island, NE (27)       09/19/95     04/14/98          837,656      0               0         0           837,656
   Burger King -
     Indian Head Park, IL        04/03/96     05/05/98          674,320      0               0         0           674,320
   Boston Market -
     Dubuque, IA (28)            10/04/95     05/08/98          969,159      0               0         0           969,159
   Boston Market -
     Merced, CA (29)             10/06/96     05/08/98          930,834      0               0         0           930,834
   Boston Market -
     Arvada, CO (30)             07/21/97     07/28/98        1,152,262      0               0         0         1,152,262
   Boston Market -
      Ellisville, MO             09/03/96     04/28/99          822,824      0               0         0           822,824





                                                     Cost of Properties
                                                   Including Closing and
                                                         Soft Costs
                                        -------------------------------------
                                                        Total                     Excess
                                                     acquisition               (deficiency)
                                                    cost, capital               of property
                                                     improvements              operating cash
                                          Original   closing and               receipts over
                                          mortgage    soft costs                   cash
          Property                        financing      (1)         Total      expenditures
============================            ========== ============= ============  ==============

CNL Income Fund XVI, Ltd.:
   Long John Silver's -
     Appleton, WI                             0          613,838       613,838      161,162
   Checker's -
     Oviedo, FL                               0          506,311       506,311      104,073
   Boston Market -
     Madison, TN (16)                         0          774,851       774,851            0
   Boston Market -
     Chattanooga, TN (17)                     0          713,386       713,386            0
   Boston Market -
     Lawrence, KS                             0          774,851       774,851     (107,540 )

CNL Income Fund XVII, Ltd.:
   Boston Market -
     Troy, OH (18)                            0          857,487       857,487            0
   Golden Corral -
     El Cajon, CA (22)                        0        1,692,994     1,692,994      (17,609 )

CNL Income Fund XVIII, Ltd.:
   Black Eyed Pea -
     Atlanta, GA                              0          617,610       617,610       71,387

CNL American Properties
Fund, Inc.:
   TGI Friday's -
     Orange, CT                               0        1,310,980     1,310,980        1,819
   TGI Friday's -
     Hazlet, NJ                               0        1,294,237     1,294,237       29,872
   TGI Friday's -
     Marlboro, NJ                             0        1,324,288     1,324,288       47,787
   TGI Friday's -
     Hamden, CT                               0        1,203,136     1,203,136       41,964
   Boston Market -
     Southlake, TX                            0        1,035,135     1,035,135            0
   Boston Market -
     Franklin, TN (26)                        0          950,361       950,361            0
   Boston Market -
     Grand Island, NE (27)                    0          837,656       837,656            0
   Burger King -
     Indian Head Park, IL                     0          670,867       670,867        3,453
   Boston Market -
     Dubuque, IA (28)                         0          969,159       969,159            0
   Boston Market -
     Merced, CA (29)                          0          930,834       930,834            0
   Boston Market -
     Arvada, CO (30)                          0        1,152,262     1,152,262            0
   Boston Market -
      Ellisville, MO                          0        1,026,746     1,026,746     (203,922 )


   <PAGE>



                                                      TABLE V
                                         SALES OR DISPOSALS OF PROPERTIES

                                                                                Selling Price, Net of
                                                                          Closing Costs and GAAP Adjustments
                                                           ------------------------------------------------------------

                                                                                       Purchase
                                                                                        money     Adjustments
                                                                Cash      Mortgage     mortgage   resulting
                                                            received net   balance      taken       from
                                    Date        Date of     of closing    at time      back by    application
          Property                Acquired       Sale          costs      of sale      program     of GAAP         Total
============================     =========== ===========  ============= ==========   ==========   ===========  ============

CNL American Properties
Fund, Inc.
   (Continued):
   Golden Corral -
     Brooklyn, OH                08/23/96     05/18/99          974,560      0               0         0           974,560
   Boston Market -
     Edgewater, CO               08/19/97     08/11/99          634,122      0               0         0           634,122
   Black Eyed Pea -
     Houston, TX (31)            10/01/97     08/24/99          648,598      0               0         0           648,598
   Big Boy -
     Topeka, KS (32)             02/26/99     09/22/99          939,445      0               0         0           939,445
   Boston Market -
     LaQuinta, CA                12/16/96     10/13/99          833,140      0               0         0           833,140
   Sonny's -
     Jonesboro, GA               06/02/98     12/22/99        1,098,342      0               0         0         1,098,342
   Golden Corral -
     Waldorf, MD (32) (33)       04/05/99     01/03/00        2,501,175      0               0         0         2,501,175
   Jack in the Box -
     Los Angeles, CA             06/30/95     02/18/00        1,516,800      0               0         0         1,516,800
   Golden Corral
     Dublin, GA                  08/07/98     05/01/00        1,323,205      0               0         0         1,323,205
   Boston Market -
     San Antonio, TX             04/30/97     05/02/00          517,495      0               0         0           517,495
   Boston Market -
     Corvallis, OR               07/09/96     06/20/00          717,019      0               0         0           717,019
   Big Boy -
     St. Louis, MO               01/19/99     06/28/00        1,463,050      0               0         0         1,463,050
   Ground Round -
     Nanuet, NY                  12/02/97     06/30/00          964,825      0               0         0           964,825
   Big Boy -
     Jefferson City, MO          01/19/99     06/30/00          905,250      0               0         0           905,250
   Big Boy -
     Alton, IL                   01/19/99     06/30/00          905,250      0               0         0           905,250





                                                     Cost of Properties
                                                   Including Closing and
                                                         Soft Costs
                                        -------------------------------------
                                                        Total                     Excess
                                                     acquisition               (deficiency)
                                                    cost, capital               of property
                                                     improvements              operating cash
                                          Original   closing and               receipts over
                                          mortgage    soft costs                   cash
          Property                        financing      (1)         Total      expenditures
============================            ========== ============= ============  ==============

CNL American Properties
Fund, Inc.
   (Continued):
   Golden Corral -
     Brooklyn, OH                              0          997,296       997,296      (22,736 )
   Boston Market -
     Edgewater, CO                             0          904,691       904,691     (270,569 )
   Black Eyed Pea -
     Houston, TX (31)                          0          648,598       648,598            0
   Big Boy -
     Topeka, KS (32)                           0        1,062,633     1,062,633     (123,188 )
   Boston Market -
     LaQuinta, CA                              0          987,034       987,034     (153,894 )
   Sonny's -
     Jonesboro, GA                             0        1,098,342     1,098,342            0
   Golden Corral -
     Waldorf, MD (32) (33)                     0        2,430,686     2,430,686       70,489
   Jack in the Box -
     Los Angeles, CA                           0        1,119,567     1,119,567      397,233
   Golden Corral
     Dublin, GA                                0        1,272,765     1,272,765       50,440
   Boston Market -
     San Antonio, TX                           0          757,069       757,069     (239,574 )
   Boston Market -
     Corvallis, OR                             0          925,427       925,427     (208,408 )
   Big Boy -
     St. Louis, MO                             0        1,345,100     1,345,100      117,950
   Ground Round -
     Nanuet, NY                                0          927,273       927,273       37,552
   Big Boy -
     Jefferson City, MO                        0        1,113,383     1,113,383     (208,133 )
   Big Boy -
     Alton, IL                                 0        1,012,254     1,012,254     (107,004 )

</TABLE>



(1)     Amounts shown do not include pro rata share of original  offering  costs
        or acquisition fees.

(2)     Amount  shown is face value and does not  represent  discounted  current
        value.  The mortgage  note bears  interest at a rate of 10.25% per annum
        and provides for a balloon payment of $991,331 in July 2000.

(3)     Amount  shown is face value and does not  represent  discounted  current
        value.  The mortgage  note bears  interest at a rate of 10.25% per annum
        and provides for a balloon payment of $1,105,715 in July 2000.

(4)     Amount  shown is face value and does not  represent  discounted  current
        value.  The mortgage  note bears  interest at a rate of 10.00% per annum
        and provides for a balloon payment of $218,252 in December 2005.

(5)     Amount  shown is face value and does not  represent  discounted  current
        value.  The mortgage  note bears  interest at a rate of 10.00% per annum
        and provides for a balloon payment of $200,063 in December 2005.

(6)     Amount  shown is face value and does not  represent  discounted  current
        value.  The mortgage  note bears  interest at a rate of 10.75% per annum
        and provides for 12 monthly payments of interest only and thereafter, 24
        equal monthly  payments of principal and interest  until  November 1999,
        when the remaining 144 equal monthly  payments of principal and interest
        will be  reduced  due to a lump sum  payment  received  in March 1999 in
        advance from the borrower.

(7)     CNL Income Fund XIV,  Ltd. and CNL Income Fund XV, Ltd.  each owned a 50
        percent  interest in Wood-Ridge  Real Estate Joint Venture,  which owned
        two properties.  The amounts presented for CNL Income Fund XIV, Ltd. and
        CNL  Income  Fund XV,  Ltd.  represent  each  partnership's  50  percent
        interest  in the  properties  owned  by  Wood-Ridge  Real  Estate  Joint
        Venture.

(8)     CNL Income Fund II, Ltd. owns a 64 percent  interest and CNL Income Fund
        VI, Ltd. owns a 36 percent  interest in this joint venture.  The amounts
        presented  for CNL Income  Fund II,  Ltd.  and CNL Income  Fund VI, Ltd.
        represent each  partnership's  percent interest in the property owned by
        Show Low Joint Venture.

(9)     CNL Income Fund, Ltd. owned a 50 percent interest in this joint venture.
        The amounts presented represent the partnerships percent interest in the
        property owned by Seventh  Avenue Joint Venture.  A third party owns the
        remaining 50 percent interest in this joint venture.

(10)    CNL Income Fund VI, Ltd. and CNL Income Fund VII,  Ltd. own a 52 percent
        and 48 percent interest, respectively, in the property in Yuma, Arizona.
        The amounts  presented  for CNL Income Fund VI, Ltd. and CNL Income Fund
        VII,  Ltd.  represent  each  partnership's  respective  interest  in the
        property.

(11)    Cash received net of closing costs includes $198,000 received as a lease
        termination fee.

(12)    Cash received net of closing costs includes  $93,885 received as a lease
        termination fee.

(13)    Cash received net of closing costs includes $120,115 received as a lease
        termination fee.

(14)    Closing costs deducted from net sales proceeds do not include  deferred,
        subordinated real estate  disposition fees payable to CNL Fund Advisors,
        Inc. or its affiliates.


(15)    The Burger King property in Woodmere, Ohio was exchanged on December 12,
        1996 for a Burger  King  property in  Carrboro,  NC at the option of the
        tenant as permitted under the terms of the lease  agreement.  Due to the
        exchange, the Burger King property in Carrboro, NC is being leased under
        the same lease as the Burger King property in Woodmere, OH.

(16)    The Boston Market  property in Madison,  TN was exchanged on May 8, 1998
        for a Boston Market property in Lawrence, KS at the option of the tenant
        as  permitted  under  the  terms  of  the  lease  agreement.  Due to the
        exchange,  the Boston  Market  property in Lawrence,  KS is being leased
        under the same lease as the Boston Market property in Madison, TN.

(17)    The Boston Market property in Chattanooga,  TN was exchanged on June 16,
        1998 for a Boston Market property in  Indianapolis,  IN at the option of
        the tenant as permitted under the terms of the lease  agreement.  Due to
        the exchange,  the Boston Market property in  Indianapolis,  IN is being
        leased  under  the  same  lease  as  the  Boston   Market   property  in
        Chattanooga, TN.

(18)    The Boston  Market  property in Troy,  OH was exchanged on June 16, 1998
        for a Boston  Market  property  in  Inglewood,  CA at the  option of the
        tenant as permitted under the terms of the lease  agreement.  Due to the
        exchange,  the Boston Market  property in Inglewood,  CA is being leased
        under the same lease as the Boston Market property in Troy, OH.

(19)    The Burger King property in Columbus,  OH was exchanged on September 30,
        1998 for a Burger  King  property  in  Danbury,  CT at the option of the
        tenant as permitted under the terms of the lease  agreement.  Due to the
        exchange,  the Burger King property in Danbury, CT is being leased under
        the same lease as the Burger King property in Columbus, OH.

(20)    CNL Income Fund V, Ltd.  owns a 49 percent  interest and CNL Income Fund
        VII, Ltd. owns a 51 percent interest in this joint venture.  The amounts
        presented  for CNL Income  Fund V, Ltd.  and CNL Income  Fund VII,  Ltd.
        represent each  partnership's  percent interest in the property owned by
        Halls Joint Venture.

(21)    Cash received net of closing costs includes  $50,000 received as a lease
        termination fee.

(22)    CNL Income Fund XVII,  Ltd.  owned an 80 percent  interest in this joint
        venture.  The amounts  presented  represent  the  partnership's  percent
        interest in the property owned by El Cajon Joint Venture.  A third party
        owned the remaining 20 percent interest in this joint venture.

(23)    Amount  shown is face value and does not  represent  discounted  current
        value.  The mortgage  note bears  interest at a rate of 10.25% per annum
        and provides for 60 equal monthly payments of principal and interest.

(24)    Amount  shown is face value and does not  represent  discounted  current
        value.  The mortgage  note bore an interest rate of 10.75% per annum and
        provided for 12 monthly  payments of interest only and  thereafter,  168
        equal monthly  payments of principal and interest.  The borrower prepaid
        the mortgage note in full in April 1999.

(25)    Amount  shown is face value and does not  represent  discounted  current
        value.  The mortgage  note bore an interest rate of 10.00% per annum and
        was paid in full in July 1999.

(26)    The Boston  Market  property in Franklin,  TN was exchanged on April 14,
        1998 for a Boston Market  property in Glendale,  AZ at the option of the
        tenant as permitted under the terms of the lease  agreement.  Due to the
        exchange,  the Boston  Market  property in Glendale,  AZ is being leased
        under the same lease as the Boston Market property in Franklin, TN.

(27)    The Boston Market  property in Grand  Island,  NE was exchanged on April
        14, 1998 for a Boston  Market  property in Warwick,  RI at the option of
        the tenant as permitted under the terms of the lease  agreement.  Due to
        the exchange,  the Boston Market property in Warwick, RI is being leased
        under the same lease as the Boston Market property in Grand Island, NE.

(28)    The Boston Market  property in Dubuque,  IA was exchanged on May 8, 1998
        for a Boston Market property in Columbus, OH at the option of the tenant
        as  permitted  under  the  terms  of  the  lease  agreement.  Due to the
        exchange,  the Boston  Market  property in Columbus,  OH is being leased
        under the same lease as the Boston Market property in Dubuque, IA.

(29)    Cash received net of closing  costs  includes  $362,949 in  construction
        costs incurred but not paid by CNL American  Properties Fund, Inc. as of
        the closing date, which were deducted from the actual net sales proceeds
        received by CNL American Properties Fund, Inc.

(30)    Cash received net of closing  costs  includes  $522,827 in  construction
        costs incurred but not paid by CNL American  Properties Fund, Inc. as of
        the closing date, which were deducted from the actual net sales proceeds
        received by CNL American Properties Fund, Inc.

(31)    The Black Eyed Pea property in Houston,  TX was  exchanged on August 24,
        1999 for a Black Eyed Pea  property  in Dallas,  TX at the option of the
        tenant as permitted under the terms of the lease  agreement.  Due to the
        exchange,  the Black Eyed Pea  property  in Dallas,  TX is being  leased
        under the same lease as the Black Eyed Pea property in Houston, TX.

(32)    This property was being  constructed and was sold prior to completion of
        construction.

(33)    Cash received net of closing costs includes  $1,551,800 in  construction
        costs incurred but not paid by CNL American  Properties Fund, Inc. as of
        the closing date, which were deducted from the actual net sales proceeds
        received by CNL American Properties Fund, Inc.



<PAGE>


                                  ADDENDUM TO
                                   APPENDIX E

                             STATEMENT OF ESTIMATED
                            TAXABLE OPERATING RESULTS
                         BEFORE DIVIDENDS PAID DEDUCTION

            -------------------------------------------------------

              THE STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
                BEFORE DIVIDENDS PAID DEDUCTION IN THIS ADDENDUM
                UPDATES AND REPLACES APPENDIX E TO THE ATTACHED
                        PROSPECTUS, DATED MAY 23, 2000.

            -------------------------------------------------------




<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
                         BEFORE DIVIDENDS PAID DEDUCTION
                       PROPERTIES ACQUIRED FROM INCEPTION
                             THROUGH OCTOBER 9, 2000
                For the Year Ended December 31, 1999 (Unaudited)

         The following schedule presents  unaudited  estimated taxable operating
results before dividends paid deduction of each Property  acquired,  directly or
indirectly, by the Company from inception through October 9, 2000. The statement
presents  unaudited  estimated  taxable operating results for each Property that
was  operational as if the Property (i) had been acquired the earlier of (a) the
actual date  acquired  by the Company or (b) January 1, 1999,  and (ii) had been
operational  during the period  January 1, 1999 through  December 31, 1999.  The
schedule should be read in light of the accompanying footnotes.

         These estimates do not purport to present actual or expected operations
of the Company for any period in the future.  The estimates were prepared on the
basis  described in the  accompanying  notes which should be read in conjunction
herewith.

<TABLE>
<CAPTION>
<S> <C>
                                    Residence Inn by Marriott           Residence Inn by Marriott      Residence Inn by Marriott
                                    Buckhead (Lenox Park) (1)              Gwinnett Place (1)                 Mira Mesa (2)
                                 ---------------------------------     ----------------------------     --------------------------
Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction:

Rental Income  (8)                        $1,668,185                            $1,220,977                      $1,542,300

FF&E Reserve Income (9)                      166,584                               127,865                          32,000

Asset Management Fees  (10)                  (94,388 )                             (69,085)                        (93,232  )

Interest Expense  (11)                            --                                    --                              --

General and Administrative
    Expenses  (12)                          (132,144 )                             (96,719)                       (123,384  )
                                        -------------                      ---------------                  ----------------

Estimated Cash Available from
    Operations                             1,608,237                             1,183,038                       1,357,684

Depreciation and Amortization
    Expense  (13) (14)                      (569,033 )                            (425,414)                       (409,488  )
                                        -------------                      ---------------                  ----------------

Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction                        $1,039,204                             $ 757,624                       $ 948,196
                                        =============                       ===============                  ================
</TABLE>

                                                   See Footnotes

<PAGE>







<TABLE>
<CAPTION>
<S> <C>




                                    Marriott Suites by Marriott          Residence Inn by Marriott     Residence Inn by Marriott
                                         Market Center (3)                   Hughes Center (3)             Dallas Plano (3)
                                    ----------------------------         --------------------------    ------------------------
Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction:

Rental Income  (8)                           $1,807,078                           $1,813,855                     $640,305

FF&E Reserve Income (9)                          62,225                               64,075                       20,281

Asset Management Fees  (10)                    (105,172  )                          (105,566  )                   (37,265  )

Interest Expense  (11)                         (711,278  )                          (702,854  )                  (233,572  )

General and Administrative
    Expenses  (12)                             (144,567  )                          (145,108  )                   (51,225  )
                                           --------------                      ---------------              ---------------

Estimated Cash Available from
    Operations                                  908,286                              924,402                      338,524

Depreciation and Amortization
    Expense  (13) (14)                         (570,141  )                          (512,475  )                  (199,805  )
                                           --------------                      ---------------              ---------------

Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction                            $ 338,145                            $ 411,927                    $ 138,719
                                           ==============                      ===============              ===============


</TABLE>




                                                   See Footnotes


<PAGE>








<TABLE>
<CAPTION>
<S> <C>



                                        Courtyard by Marriott           Courtyard by Marriott        Residence Inn by Marriott
                                       Scottsdale Downtown (3)             Lake Union (3)               Phoenix Airport (3)
                                   --------------------------------  ----------------------------  -------------------------------
Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction:

Rental Income  (8)                          $1,074,940                        $1,962,054                     $1,170,161

FF&E Reserve Income (9)                         15,063                            56,341                         16,650

Asset Management Fees  (10)                    (62,562  )                       (114,192  )                     (68,103  )

Interest Expense  (11)                        (437,834  )                       (767,372  )                    (430,112  )

General and Administrative
    Expenses  (12)                             (85,996  )                       (156,964  )                     (93,614  )
                                         ---------------                  ----------------                 --------------

Estimated Cash Available from
    Operations                                 503,611                           979,867                        594,982

Depreciation and Amortization
    Expense  (13) (14)                        (245,727  )                       (588,284  )                    (366,949  )
                                         ---------------                  ----------------                 --------------

Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction                            $257,884                         $ 391,583                      $ 228,033
                                         ===============                  ================                 ==============



</TABLE>

                                                   See Footnotes


<PAGE>







<TABLE>
<CAPTION>
<S> <C>


                                       Courtyard by Marriott                Courtyard by Marriott                   Wyndham
                                          Legacy Park (3)                 Philadelphia Downtown (4)              Billerica (5)
                                  ---------------------------------   ----------------------------------  -------------------------
Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction:

Rental Income  (8)                           $695,691                           $ 5,785,000                       $2,509,200

FF&E Reserve Income (9)                        19,607                               161,674                           64,190

Asset Management Fees  (10)                   (40,489  )                           (309,060  )                      (150,552 )

Interest Expense  (11)                       (268,351  )                                 --                               --

General and Administrative
    Expenses  (12)                            (55,655  )                           (462,800  )                      (513,520 )
                                         --------------                       ---------------               -----------------

Estimated Cash Available from
    Operations                                350,803                             5,174,814                        1,909,318

Depreciation and Amortization
    Expense  (13) (14)                       (218,342  )                         (1,804,256  )                      (787,694 )
                                         --------------                       ---------------               -----------------

Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction                           $132,461                           $ 3,370,558                       $1,121,624
                                         ==============                       ===============               =================


</TABLE>



                                                   See Footnotes


<PAGE>







<TABLE>
<CAPTION>
<S> <C>




                                               Wyndham                Residence Inn by Marriott        Courtyard by Marriott
                                       Denver Tech Center (5)                Palm Desert                    Palm Desert
                                                                                 (6)                            (6)
                                       ------------------------      -----------------------------   --------------------------
Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction:

Rental Income  (8)                           $1,835,300                     $1,674,000                     $1,351,000

FF&E Reserve Income (9)                          41,540                        144,660                        142,470

Asset Management Fees  (10)                    (110,118  )                    (100,440  )                     (81,060  )

Interest Expense  (11)                               --                             --                             --

General and Administrative
    Expenses  (12)                             (146,824  )                    (133,920  )                    (108,080  )

                                           --------------                 --------------                 --------------

Estimated Cash Available from
    Operations                                1,619,898                      1,584,300                      1,304,330

Depreciation and Amortization
    Expense  (13) (14)                         (600,411  )                    (528,205  )                    (486,897  )
                                           --------------                 --------------                 --------------

Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction                           $1,019,487                     $1,056,095                       $817,433
                                           ==============                 ==============                 ==============





                                                             Residence Inn by            Courtyard by Marriott    TownePlace Suites
                                  SpringHill Suites        Marriott Merrifield, VA          Alpharetta, GA          Tewksbury, MA
                                Gaithersburg, MD (2)                 (2)                         (7)                    (7)
                               ------------------------   --------------------------     --------------------    ------------------

Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction:

Rental Income  (8)                   $1,521,460                    $1,830,000                 $1,387,700                $905,000

FF&E Reserve Income (9)                  40,150                        46,210                     41,520                  22,010

Asset Management Fees  (10)             (91,288  )                   (109,800  )                 (83,262  )              (54,300  )

Interest Expense  (11)                       --                            --                         --                      --

General and Administrative
    Expenses  (12)                     (121,717  )                   (146,400  )                (111,016  )              (72,400  )

                                   --------------                --------------             --------------         ---------------

Estimated Cash Available from
    Operations                        1,348,606                     1,620,010                  1,234,942                 800,310

Depreciation and Amortization
    Expense  (13) (14)                 (674,838  )                   (538,707  )                (471,691  )             (283,944  )
                                   --------------                --------------             --------------         ---------------

Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction                     $673,768                    $1,081,303                  $ 763,251                $516,366
                                   ==============                ==============             ==============         ===============



</TABLE>











<TABLE>
<CAPTION>
<S> <C>



                                Residence Inn by Marriott        TownePlace Suites           TownePlace Suites
                                    Salt Lake City, UT             Mt. Laurel, NJ             Scarborough, MN
                                           (7)                          (7)                         (7)                   Total
                               ---------------------------  -------------------------  -------------------------   --------------

Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction:

Rental Income  (8)                     $1,457,300                    $771,100                    $716,000            $35,338,606

FF&E Reserve Income (9)                    37,870                      19,350                      18,120              1,360,455

Asset Management Fees  (10)               (87,438  )                  (46,266  )                  (42,960   )         (2,056,598 )

Interest Expense  (11)                         --                          --                          --             (3,551,373 )

General and Administrative
    Expenses  (12)                       (116,584  )                  (61,688  )                  (57,280   )         (3,137,605 )

                                     --------------              --------------              --------------      ----------------

Estimated Cash Available from
    Operations                          1,291,148                     682,496                     633,880             27,953,485

Depreciation and Amortization
    Expense  (13) (14)                   (502,722  )                 (248,671  )                 (240,198   )        (11,273,892 )
                                     --------------              --------------              --------------      ----------------

Estimated Taxable Operating
    Results Before Dividends
    Paid Deduction                      $ 788,426                    $433,825                    $393,682            $16,679,593
                                     ==============              ==============              ==============      ================

                                  See Footnotes

</TABLE>

<PAGE>




FOOTNOTES:

(1)      The lessee of the Buckhead (Lenox Park) and Gwinett Place Properties is
         the same unaffiliated lessee.

(2)      The lessee of the Mira Mesa,  Gaithersburg and Merrifield Properties is
         the same unaffiliated lessee.

(3)      In  February  1999,  the  Company  formed a jointly  owned real  estate
         investment  trust, CNL Hotel  Investors,  Inc. ("CHI") with Five Arrows
         Realty  Securities II, L.L.C.  to acquire seven hotel  Properties.  The
         Company had a 49% ownership interest in CHI. However,  in October 2000,
         the Company entered into an agreement  whereby the Company's  ownership
         interest in CHI  increased to 53%. The seven hotel  Properties  are the
         Legacy Park,  Market Center,  Hughes Center,  Dallas Plano,  Scottsdale
         Downtown,  Lake Union and  Phoenix  Airport  Properties.  The lessee of
         these seven  hotel  Properties  is the same  unaffiliated  lessee.  For
         purposes  of this  table,  the  balances  presented  represent  the 53%
         interest owned by the Company.

(4)      In  November  1999,  the  Company  acquired  an  89%  interest  in  CNL
         Philadelphia Annex, LLC (formerly known as Courtyard Annex,  L.L.C.) to
         own  and  lease  one  hotel   Property.   The  hotel  Property  is  the
         Philadelphia  Downtown  Property.  For  purposes  of  this  table,  the
         balances presented represent the 89% interest owned by the Company.

(5)      The lessee of the Wyndham  Billerica and the Wyndham Denver Tech Center
         Properties is the same unaffiliated lessee.

(6)      The  lessee  of  the  Residence  Inn  and  the  Courtyard  Palm  Desert
         Properties is the same unaffiliated lessee.

(7)      The lessee of the  Alpharetta,  Tewksbury,  Cottonwood,  Mt. Laurel and
         Scarborough Properties are the same unaffiliated lessee.

(8)      Rental income does not include  percentage rents, which will become due
         if specified levels of gross receipts are achieved.

(9)      Reserve  funds  will  be  used  for  the  replacement  and  renewal  of
         furniture,  fixtures and  equipment  related to the  Properties  ("FF&E
         Reserve").  The funds in the FF&E  Reserve and all  property  purchased
         with the funds from the FF&E Reserve will be paid, granted and assigned
         to the  Company as  additional  rent.  FF&E  Reserve  income  earned is
         estimated  at three  percent of  projected  hotel  gross  receipts.  In
         connection therewith, FF&E Reserve income will be earned at 1% of gross
         revenues  for the lease years one through  four and has been  estimated
         based on projected gross revenues.

(10)     The  Properties  will be  managed  pursuant  to an  advisory  agreement
         between the Company and CNL Hospitality Corp. (the "Advisor"), pursuant
         to which the Advisor will receive  monthly asset  management fees in an
         amount equal to  one-twelfth of .60% of the Company's Real Estate Asset
         Value  as of  the  end  of the  preceding  month  as  defined  in  such
         agreement. See "Management Compensation."

(11)     Estimated  at 7.625%  per  annum  based on the  bank's  base rate as of
         February 24, 1999 and June 21, 1999,  assuming $88 million was borrowed
         to acquire the Legacy Park, Market Center, Hughes Center, Dallas Plano,
         Scottsdale  Downtown,  Lake Union and Phoenix Airport  Properties.  For
         purposes  of  this  table,  the  amounts  presented  represent  the 49%
         interest owned by the Company.

(12)     Estimated  at  8%  of  gross  rental  income,  based  on  the  previous
         experience  of  Affiliates  of the Advisor  with  another  public REIT.
         Amount does not include soliciting dealer servicing fee due to the fact
         that the Company did not incur such fee for the year ended December 31,
         1999.

(13)     The  estimated  federal  tax basis of the  depreciable  portion  of the
         Properties and the number of years the assets have been  depreciated on
         the  straight-line  method is as follows (the balances are presented at
         the  Company's  49%  interest  in  CHI  and  the  89%  interest  in CNL
         Philadelphia Annex, LLC):


<TABLE>
<CAPTION>
<S> <C>
                                                                                                     Furniture and
                                                                          Buildings                    Fixtures
                                                                          (39 years)                 (5-15 years)
                                                                        --------------             -----------------

              Buckhead (Lenox Park) Property                               $13,459,000                  $1,235,000
              Gwinett Place Property                                        10,017,000                   1,114,000
              Legacy Park Property                                           5,005,000                     470,000
              Market Center Property                                        13,762,000                   1,177,000
              Hughes Center Property                                        13,719,000                     815,000
              Dallas Plano Property                                          4,703,000                     405,000
              Scottsdale Downtown Property                                   7,766,000                     539,000
              Lake Union Property                                           13,499,000                     846,000
              Phoenix Airport Property                                       8,826,000                     633,000
              Philadelphia Downtown Property                                47,237,000                   4,367,000
              Mira Mesa Property                                            12,924,000                   1,701,000
              Wyndham Billerica Property                                    19,336,000                   2,130,000
              Wyndham Denver Tech Center Property                           12,702,000                   1,980,000
              Residence Inn Palm Desert Property                            13,385,000                   1,295,000
              Courtyard Palm Desert Property                                10,604,000                   1,505,000
              Merrifield Property                                           15,500,000                   2,011,000
              Gaithersburg Property                                         11,931,000                   1,683,000
              Alpharetta Property                                           10,913,000                   1,392,000
              Tewksbury Property                                             7,983,000                     591,000
              Cottonwood Property                                           11,655,000                   1,479,000
              Mt. Laurel Property                                            6,389,000                     623,000
              Scarborough Property                                           6,111,000                     612,000


</TABLE>


(14)     A loan  origination  fee of $758,000  from the  issuance of  promissory
         notes, to facilitate the acquisition of the seven CHI hotel Properties,
         is being amortized under the effective interest method over the term of
         the loans. For purposes of this table, the amounts presented  represent
         the 49% interest owned by the Company.




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