CNL HOSPITALITY PROPERTIES INC, 424B3, 2000-08-09

CNL HOSPITALITY PROPERTIES INC
424B3, 2000-08-09
LESSORS OF REAL PROPERTY, NEC

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CNL HOSPITALITY PROPERTIES, INC.

Supplement No. 1, dated August 9, 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 July 28, 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 July 28, 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 June 16, 2000, the Company acquired a Courtyard(R) by Marriott(R)
and a Residence Inn(R) by Marriott(R) both located in Palm Desert, California.
The Courtyard Palm Desert Property, which opened in September 1999, has 151
guest rooms. The Residence Inn Palm Desert Property, which opened in February
1999, has 130 guest suites. The Courtyard Palm Desert and the Residence Inn Palm
Desert 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.

On July 28, 2000, the Company acquired a SpringHill Suites(TM) by
Marriott(R) located in Gaithersburg, Maryland and a Residence Inn by Marriott
located in Merrifield, Virginia. The Gaithersburg and the Merrifield Properties
both opened in June 2000. The Gaithersburg Property includes 162 guest suites
and approximately 500 square feet of meeting space and the Merrifield Property
includes 159 guest suites, approximately 500 square feet of meeting space and an
exercise room and SportCourt(R). According to Hospitality Valuation Services
(HVS) data, the Merrifield Property is located in one of the fastest growing
areas in the Washington, D.C. area.

As of July 28, 2000, the Company owned interests in 17 Properties and
had commitments to acquire an additional 13 properties. The Company's interests
in these Properties are focused on real estate only, not hotel operations. 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 July 1 and August 1, 2000, the Board of Directors declared a
distribution of $0.0625 per Share to stockholders of record on July 1 and August
1, 2000, respectively, 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. As of July 28,
2000, the Company had received aggregate subscriptions for 40,141,141 Shares
totalling $401,411,412 in gross proceeds, including 103,782 Shares ($1,037,819)
issued pursuant to the Reinvestment Plan from its Initial Offering and the 1999
Offering. As of July 28, 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 $355,400,000. The
Company has used the net offering proceeds to invest, directly or indirectly,
approximately $244,200,000 in 17 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 $23,100,000 in Acquisition Fees and certain
Acquisition Expenses, leaving approximately $81,700,000 available to invest in
Properties and Mortgage Loans. See "Business -- Pending Investments" for
information on the 13 Properties the Company has entered into commitments to
acquire.

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 July 28, 2000, the Company had acquired, directly or indirectly,
17 hotel Properties consisting of land, building and equipment and had initial
commitments to acquire 13 additional Properties. However, as of July 28, 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

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 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 Property, 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:

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 71.80% 119.42 85.80 59.70% 87.73 52.40
</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 May 31, 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").

<PAGE>

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 the 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 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 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

<PAGE>

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 Suites by Marriott 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 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 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.

<PAGE>

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 A security deposit equal to $578,954 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: 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 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.

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 July 28, 2000, the Company had initial commitments to acquire 13
additional hotel properties. These Properties are three Courtyard by Marriott
properties (one in each of Alpharetta, Georgia; Orlando, Florida and Overland
Park, Kansas), one Fairfield Inn(R) by Marriott(R) (in Orlando, Florida), four
SpringHill SuitesTM by Marriott(R) (one in each of Centreville, Virginia;
Charlotte, North Carolina, Orlando, Florida and Raleigh/Durham, North Carolina),
one Residence Inn by Marriott (in Cottonwood, Utah) and four TownePlace
Suites(R) by Marriott(R) (one in each of Tewksbury, Massachusetts; Mt. Laurel,
New Jersey; Newark, California and Scarborough, Maine). 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>

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 $13,877,000 15 years; two ten-year
Alpharetta, GA (4) renewal options
(the "Courtyard Alpharetta
Property")
Existing hotel

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

Residence Inn by Marriott $14,573,000 15 years; two ten-year
Cottonwood, UT (4) renewal options
(the "Residence Inn
Cottonwood Property")
Existing hotel

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

10% of the Company's total cost for each lease year after the
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 $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

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

TownePlace Suites by Marriott $9,050,000 15 years; two ten-year
Tewksbury, MA (4) renewal options
(the "TownePlace Suites
Tewksbury Property")
Existing hotel

TownePlace Suites by Marriott $7,711,000 15 years; two ten-year
Mt. Laurel, NJ (4) renewal options
(the "TownePlace Suites
Mt. Laurel Property")
Existing hotel

TownePlace Suites by Marriott $7,160,000 15 years; two ten-year
Scarborough, ME (4) renewal options
(the "TownePlace Suites
Scarborough Property")
Existing hotel

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

10% of the Company's total cost for each lease year after the
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 cost for each lease year after the
to purchase the property first lease year, 7% of revenues
in excess of proforma revenues for
the second lease year, and 7% of
revenues in excess of actual
revenues for the third lease year
and each lease year thereafter

</TABLE>

<PAGE>

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

(1) The leases for the Courtyard Little Lake Bryan, the Fairfield Inn
Little Lake Bryan and the 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 Alpharetta, the Courtyard Overland Park,
the Residence Inn Cottonwood, the SpringHill Suites Centreville, the
SpringHill Suites Charlotte, the SpringHill Suites Raleigh/Durham, the
TownePlace Suites Tewksbury, the TownePlace Suites Mt. Laurel and the
TownePlace Suites Scarborough Properties are expected to be with the
same unaffiliated lessee.

<PAGE>

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

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. 53 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 37 Independent Director
Lawrence A. Dustin 55 Independent Director
John A. Griswold 51 Independent Director
Craig M. McAllaster 48 Independent Director
Charles A. Muller 41 Chief Operating Officer and Executive Vice
President
C. Brian Strickland 37 Vice President of Finance and Administration
Thomas J. Hutchison III 58 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 Health Care Properties, Inc., a public,
unlisted real estate investment trust, as well as 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 Health Care Properties, Inc., a
public, unlisted real estate investment trust; as well as, a director and
President of CNL Health Care 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 a 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 Hotels & 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.

<PAGE>

C. Brian Strickland. 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 development 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 Health Care 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 Health Care 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 Health Care 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 Health Care
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 to 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.

<PAGE>

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.

<PAGE>

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. 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 and
fourth 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, and during the period June 18, 1999
through July 28, 2000, the Company incurred $18,850,408 of such fees in
connection with the 1999 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, and
during the period June 18, 1999 through July 28, 2000, the Company incurred
$1,256,694 of such fees in connection with the 1999 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, 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, and during the period June 18, 1999 through July 28, 2000,
the Company incurred $13,246,038 of such fees.

<PAGE>

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).

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:

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

Total Distributions $5,522,125 $6,410,869
declared
Distributions per Share 0.181 0.181

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

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

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

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

</TABLE>

(1) In July and August 2000, the Company declared Distributions totalling
$2,404,414 and $2,513,813, respectively (representing $0.0625 per
Share), payable in September 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

The following sentence replaces 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 July 28, 2000, the Company had 40,161,141 Shares of Common Stock
outstanding (including 20,000 Shares issued to the Advisor prior to the
commencement of the Initial Offering and 103,782 Shares issued pursuant to the
Reinvestment Plan) and no Preferred Stock or Excess Shares outstanding.

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

<PAGE>

ADDENDUM TO
APPENDIX B

FINANCIAL INFORMATION

------------------------------------------------------------
| |
| THE UPDATED PRO FORMA FINANCIAL STATEMENTS OF CNL |
| HOSPITALITY PROPERTIES, INC. CONTAINED IN THIS |
| ADDENDUM UPDATE AND REPLACE THE PRO FORMA FINANCIAL |
| STATEMENTS IN APPENDIX B TO THE ATTACHED PROSPECTUS, |
| DATED MARCH 30, 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 March 31, 2000 B-2

Pro Forma Consolidated Statement of Earnings for the quarter ended March 31, 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 quarter ended
March 31, 2000 and the year ended December 31, 1999 B-5

</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,
$338,986,655 in gross offering proceeds from the sale of 33,900,805 shares of
common stock and the sale of warrants for the period from inception through
March 31, 2000, and the application of such funds to purchase three 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 March 31, 2000, to place deposits on eight additional properties, to
redeem 27,490 shares of common stock pursuant to the Company's redemption plan,
and to pay offering expenses, acquisition fees and miscellaneous acquisition
expenses, (ii) the receipt of $62,878,320 in gross offering proceeds from the
sale of 6,287,832 additional shares for the period April 1, 2000 through July
28, 2000, (iii) 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. and (iv) the purchase of
six additional properties, as reflected in the pro forma adjustments described
in the related notes. The Unaudited Pro Forma Consolidated Balance Sheet as of
March 31, 2000, includes the transactions described in (i) above, from its
historical balance sheet, adjusted to give effect to the transactions in (iv)
above as if they had occurred on March 31, 2000.

The Unaudited Pro Forma Consolidated Statements of Earnings for the
quarter ended March 31, 2000, includes the historical operating results of the
properties described in (ii) 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 its unconsolidated subsidiary 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
MARCH 31, 2000

Pro Forma
ASSETS Historical Adjustments Pro Forma
-------------- ---------------- --------------

Land, buildings and equipment on operating leases $ 111,449,355 $115,038,200 (a) $226,487,555
Investment in unconsolidated subsidiary 37,878,065 -- 37,878,065
Cash and cash equivalents 142,143,157 (104,652,741 )(a) 37,490,416
Restricted cash 409,538 -- 409,538
Certificate of deposit 5,000,000 -- 5,000,000
Receivables 427,240 -- 427,240
Prepaid expenses 23,247 -- 23,247
Dividends receivable 1,280,395 -- 1,280,395
Loan costs 43,859 -- 43,859
Accrued rental income 78,276 -- 78,276
Other assets 10,388,879 (6,235,344 )(a) 4,153,535
---------------- --------------- -------------

$309,122,011 $4,150,115 $312,272,126
================ ================ ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

Note payable $ 10,000,000 $ -- $10,000,000
Accounts payable and accrued expenses 892,783 -- 892,783
Distribution payable 174,178 -- 174,178
Due to related parties 506,490 -- 506,490
Security deposits 5,042,054 4,150,115 9,192,169
Rents paid in advance 474,912 -- 474,912
---------------- ---------------- --------------
Total liabilities 17,090,417 4,150,115 21,240,532
---------------- ---------------- --------------

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.
60,000,000 authorized shares; issued and
outstanding 33,873,315 shares 338,733 -- 338,733
Capital in excess of par value 299,660,797 -- 299,660,797
Accumulated distributions in excess of
net earnings (5,043,063 ) -- (5,043,063 )
Minority interest distributions in excess of
contributions and accumulated earnings (2,924,873 ) -- (2,924,873 )
---------------- ---------------- --------------
Total stockholders' equity 292,031,594 -- 292,031,594
---------------- ---------------- --------------

$309,122,011 $ 4,150,115 $313,272,126
================ ================ ==============

See accompanying notes to unaudited pro
forma consolidated financial statements.

<PAGE>

CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
QUARTER ENDED MARCH 31, 2000

Pro Forma
Historical Adjustments Pro Forma
------------ -------------- --------------

Revenues:
Rental income from
operating leases $ 2,725,894 $ 1,842,375 (1) $ 4,568,269
FF&E reserve income 159,237 151,080 (2) 310,317
Dividend income 926,817 -- 926,817
Interest and other income 1,769,209 (523,264 )(4) 1,245,945
------------- ---------------- ----------------
5,581,157 1,470,191 7,051,348
------------- ---------------- ----------------

Expenses:
Interest and loan cost amortization 8,110 -- 8,110
General operating and
administrative 295,070 -- 295,070
Professional services 45,337 -- 45,337
Asset management fees to
related party 126,422 111,648 (5) 238,070
Depreciation and amortization 916,641 629,954 (6) 1,546,595
------------- ---------------- ----------------
1,391,580 741,602 2,133,182
------------- ---------------- ----------------

Earnings Before Equity in Loss
of Unconsolidated Subsidiary
After Deduction of Preferred
Stock Dividends and Minority Interest 4,189,577 728,589 4,918,166

Equity in Loss of Unconsolidated
Subsidiary After Deduction of
Preferred Stock Dividends (119,803 ) -- (119,803 )

Minority Interest (124,690 ) -- (124,690 )
------------- ---------------- ----------------

Net Earnings $ 3,945,084 $ 728,589 $ 4,673,673
============= ================ ================

Earnings Per Share of Common Stock (8):
Basic $ 0.13 $ 0.15
============= ================
Diluted $ 0.12 $ 0.18
============= ================

Weighted Average Number of Shares of
Common Stock Outstanding (8):
Basic 31,200,726 31,200,726
============= ================
Diluted 38,622,874 38,622,874
============= ================

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

Pro Forma
Historical Adjustments Pro Forma
------------ ---------------- --------------

Revenues:
Rental income from
operating leases $ 3,910,639 $ 3,963,517 (1) $ 7,874,156
FF&E reserve income 320,356 329,245 (2) 649,601
Dividend income 2,753,506 461,106 (3) 3,214,612
Interest and other income 3,693,004 (1,419,284 )(4) 2,273,720
------------- ----------------- ----------------
10,677,505 3,334,584 14,012,089
------------- ----------------- ----------------

Expenses:
Interest and loan cost amortization 248,094 -- 248,094
General operating and
administrative 626,649 -- 626,649
Professional services 69,318 -- 69,318
Asset management fees to
related party 106,788 240,189 (5) 346,977
Depreciation and amortization 1,267,868 1,331,777 (6) 2,599,645
------------- ----------------- ----------------
2,318,717 1,571,966 3,890,683
------------- ----------------- ----------------

Earnings Before Equity in Loss
of Unconsolidated Subsidiary
After Deduction of Preferred
Stock Dividends and Minority Interest 8,358,788 1,762,618 10,121,406

Equity in Loss of Unconsolidated
Subsidiary After Deduction of
Preferred Stock Dividends (778,466 ) (144,635 )(7) (923,101 )

Minority Interest (64,334 ) -- (64,334 )
------------- ----------------- ----------------

Net Earnings $ 7,515,988 $ 1,617,983 $ 9,133,971
============= ================= ================

Earnings Per Share of Common Stock (8):
Basic $ 0.47 $ 0.57
============= ================
Diluted $ 0.45 $ 0.53
============= ================

Weighted Average Number of Shares of
Common Stock Outstanding (8):
Basic 15,890,212 15,918,577
============= ================
Diluted 21,437,859 21,437,859
============= ================

</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 QUARTER ENDED MARCH 31, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999

Unaudited Pro Forma Consolidated Balance Sheet:

(a) Represents the receipt of $4,150,115 from the lessees for security
deposits net of $108,802,856 of cash and cash equivalents used to
purchase six properties for $115,038,200 (which includes closing costs
of $1,077,256 and acquisition fees and costs of $6,235,344, which had
been recorded as other assets as of March 31, 2000).

<TABLE>
<CAPTION>
<S> <C>
Acquisition
Fees and Costs
And Closing
Costs Allocated
Asset Value or To Investment
Purchase Price Total
--------------------- ---------------- ---------------

Wyndham in Billerica, MA $ 25,092,000 $ 1,638,416 $ 26,730,416
Wyndham in Denver, CO 18,353,000 1,198,384 19,551,384
Residence Inn in Palm Desert, CA 16,740,000 1,118,642 17,858,642
Courtyard in Palm Desert, CA 13,510,000 902,801 14,412,801
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
-------------------- ----------------- ---------------

$107,725,600 $ 7,312,600 $115,038,200
==================== ================= ===============
</TABLE>

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 June 28, 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 (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. Two of the Pro Forma Properties
acquired were not operational and did not become operational during the
pro forma periods presented, therefore, these properties have not been
treated as becoming operational as rental properties 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

</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 quarter ended March 31, 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 quarter ended March
31, 2000.

<PAGE>

CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE QUARTER ENDED MARCH 31, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999

Unaudited Pro Forma Consolidated Statements of Earnings - Continued:

(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 dividend income earned on the Company's
$38,364,157 investment as of December 31, 1999, in the 9.76% Class B
cumulative preferred stock of the unconsolidated subsidiary, for the
period commencing (A) the later of (i) the date the properties owned by
the unconsolidated subsidiary became operational by the previous owner
or (ii) January 1, 1999, to (B) the earlier of (i) the date the
properties owned by the unconsolidated subsidiary were acquired or (ii)
the end of the pro forma period presented. The cash from the Company's
investment, along with loan proceeds and funds from an institutional
investor were used to purchase seven hotel properties which were
operational prior to the Company's investment in the unconsolidated
subsidiary. The following presents the actual date the unconsolidated
subsidiary properties were acquired or placed in service by the
unconsolidated subsidiary as compared to the date the unconsolidated
subsidiary's properties were treated as becoming operational for
purposes of the Pro Forma Consolidated Statements of Earnings:

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

Residence Inn Las Vegas, NV February 25, 1999 January 1, 1999
Residence Inn Plano, TX February 25, 1999 January 1, 1999
Marriott Suites Dallas, TX February 25, 1999 January 1, 1999
Courtyard Plano, TX February 25, 1999 January 1, 1999
Residence Inn Phoenix, AZ June 16, 1999 May 14, 1999
Courtyard Scottsdale, AZ June 16, 1999 May 21, 1999
Courtyard Seattle, WA June 16, 1999 May 22, 1999
</TABLE>

(4) 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 and the unconsolidated subsidiary's 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 and the
unconsolidated subsidiary's 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
quarter ended March 31, 2000.

(5) Represents increase in asset management fees relating to the Pro Forma
Properties and the investment in unconsolidated subsidiary for the
period commencing (A) the later of (i) the date the Pro Forma
Properties and the unconsolidated subsidiary's properties became
operational by the previous owners or (ii) January 1, 1999, through (B)
the earlier of (i) the date the Pro Forma Properties and the

CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE QUARTER ENDED MARCH 31, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999

Unaudited Pro Forma Consolidated Statements of Earnings - Continued:

(5) unconsolidated subsidiary's properties were acquired or (ii) the end of
the pro forma period presented, as described in Notes (1) and (3)
above. Asset management fees are equal to 0.60% per year of the
Company's Real Estate Asset Value, including the investment in the
unconsolidated subsidiary, as defined in the Company's prospectus.

(6) 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.

(7) Represents adjustment to equity in loss of unconsolidated subsidiary
after deduction of preferred stock dividends for the period commencing
(A) the date the unconsolidated subsidiary's properties became
operational by the previous owner, through (B) the earlier of (i) the
date the properties were acquired by the unconsolidated subsidiary or
(ii) the end of the pro forma period presented, as described in Note
(3) above. The following represents the Company's share of pro forma
net earnings or loss after deduction of preferred stock dividends
declared for the pro forma period ending December 31, 1999:

Unconsolidated Subsidiary Pro Forma
Earnings Before Preferred Stock Dividends $ 4,769,743
8% Class A Cumulative Preferred Stock
Dividends (institutional investor) (3,431,011)
9.76% Class B Cumulative Preferred Stock
Dividends (the Company) (3,214,612)
8% Class C Cumulative Preferred Stock
Dividends (other investors) (8,000)
------------
Pro Forma Net Loss of Unconsolidated Subsidiary
After Preferred Stock Dividends $(1,883,880)
============
The Company's 49% Interest in the Pro Forma
Loss of the Unconsolidated Subsidiary $ (923,101)
============

(8) 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 quarter ended March 31, 2000.

As a result of the investment in the unconsolidated subsidiary being
treated in the Pro Forma Consolidated Statements of Earnings as
invested beginning on January 1, 1999 (the date the first property
became operational), the Company assumed additional shares of common
stock were sold and net offering proceeds were available for investment
on January 1, 1999. Due to the fact that approximately 817,000 of these
shares of common stock were actually sold subsequent to January 1,
1999, the weighted average number of shares outstanding for the pro
forma year ended December 31, 1999 was adjusted. Pro forma earnings per
share were calculated based upon the weighted average number of shares
of common stock outstanding, as adjusted, during the year ended
December 31, 1999 and the quarter ended March 31, 2000.