UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K
(Mark One)

[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                   For the fiscal year ended December 31, 2002
                                             -----------------

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from                   to
                                    ------------------   ------------------

                         Commission file number 0-24097

                        CNL HOSPITALITY PROPERTIES, INC.
             (Exact name of registrant as specified in its charter)

                 Maryland                             59-3396369
      (State or other jurisdiction of      (I.R.S. Employer Identification No.)
      incorporation or organization)

                             450 South Orange Avenue
                             Orlando, Florida 32801
          (Address of principal executive offices, including zip code)

       Registrant's telephone number, including area code: (407) 650-1000

           Securities registered pursuant to Section 12(b) of the Act:

           Title of each class:        Name of exchange on which registered:
                 None                            Not Applicable

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $0.01 par value per share
                                (Title of class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or such shorter  period that the registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days: Yes X No _____

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes X No _____

     Aggregate  market  value of the voting stock held by  nonaffiliates  of the
registrant:  No established market exists for the Registrant's  shares of common
stock,  so there is no market value for such shares.  Each share was  originally
sold  at $10  per  share.  Based  on  the  $10  offering  price  of the  shares,
$1,003,214,560  of our common  stock was held by  non-affiliates  as of June 28,
2002.

     The number of Shares of common stock  outstanding  as of February 21, 2003,
was 134,921,073.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Registrant  incorporates  by  reference  portions  of the  CNL  Hospitality
Properties,  Inc.  Definitive  Proxy  Statement  for the 2003 Annual  Meeting of
Stockholders  (Items  10,  11, 12 and 13 of Part III) to be filed no later  than
April 30, 2003.


<PAGE>





                                    CONTENTS
<TABLE>
<S><C>


                                                                                         Page

Part I

    Item 1.     Business                                                                   2
    Item 2.     Properties                                                                 5
    Item 3.     Legal Proceedings                                                          8
    Item 4.     Submission of  Matters to a Vote of Security Holders                       8

Part II
    Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters      9
    Item 6.     Selected Financial Data                                                   10
    Item 7.     Management's Discussion and Analysis of Financial Condition and
                        Results of Operations                                             13
    Item 7A.    Quantitative and Qualitative Disclosures About Market Risk                28
    Item 8.     Financial Statements and Supplementary Data                               28
    Item 9.     Changes in and Disagreements with Accountants on Accounting and
                        Financial Disclosure                                              60

Part III.
    Item 10.    Directors and Executive Officers of the Registrant                        60
    Item 11.    Executive Compensation                                                    60
    Item 12.    Security Ownership of Certain Beneficial Owners and Management            60
    Item 13.    Certain Relationships and Related Transactions                            60
    Item 14.    Controls and Procedures                                                   61

Part IV.
    Item 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K           62

Signatures                                                                               101

Certifications                                                                           103

Schedule III - Real Estate and Accumulated Depreciation                                  106

Exhibits                                                                                 111

</TABLE>

<PAGE>


                                     PART I
                     (in thousands, except per share data)

Item 1.  Business
(in thousands, except per share data)

     CNL  Hospitality  Properties,  Inc. is a  corporation  which was  organized
pursuant to the laws of the State of Maryland on June 12, 1996 and  operates for
federal income tax purposes as a real estate  investment  trust (a "REIT").  The
terms "Company" or "Registrant" include,  unless the context otherwise requires,
CNL Hospitality Properties,  Inc., CNL Hospitality Partners, LP, CNL Hospitality
GP Corp.,  CNL  Hospitality LP Corp.,  CNL  Philadelphia  Annex,  LLC, CNL Hotel
Investors,  Inc., CNL LLB SHS Management,  LP, CNL LLB F-Inn Management, LP, CNL
LLB C-Hotel  Management,  LP, CNL Bridgewater  Hotel  Partnership,  LP, CNL MI-4
Hotel,  LP and each of their wholly  owned  subsidiaries.  Various  other wholly
owned  subsidiaries have been and will be formed in the future,  for purposes of
acquiring  or  developing  hotel  Properties.  Amounts  contained  herein are in
thousands, unless otherwise noted, except for per share data.

     The Company is engaged  primarily  in the  acquisition  and  ownership  of
interests in hotel properties ("Properties") generally located across the United
States and has retained CNL Hospitality  Corp. (the "Advisor") as its advisor to
provide management,  acquisition,  advisory and certain administrative services.
The hotel  Properties  may include  limited  service,  extended  stay,  and full
service hotel Properties.  The Company generally leases its Properties to wholly
owned taxable REIT subsidiary  ("TRS")  entities and contracts with  third-party
managers to operate the Properties.  Hotel  operating  revenues and expenses for
these Properties are included in the  consolidated  results of operations of the
Company.  Other  Properties  are  leased  on a  triple-net  basis  to  unrelated
third-party  tenants who operate the  Properties or contract with hotel managers
to run their hotel  operations.  Rental income from operating leases is included
in the Company's consolidated results of operations for these Properties. All of
the Properties  acquired in 2002 are, and Properties  acquired in the future are
generally  expected to be, leased to the  Company's TRS entities.  Additionally,
several  previously entered into third-party leases were assumed by TRS entities
of the Company during 2002 and  additional  leases may be assumed by the Company
in the future. For certain  Properties,  the Company has received various credit
enhancement  guarantees  from  third-party  managers  who,  subject  to  certain
limitations,  have guaranteed performance levels for Properties they manage. See
Note 13, "Commitments and Contingencies" of the Company's consolidated financial
statements for additional information on credit enhancements.

     The Company  may also  provide  mortgage  financing  ("Mortgage  Loans") to
operators of national and regional hotel brands ("Hotel  Brands"),  however,  it
has not done so as of December 31, 2002. In addition,  the Company may invest up
to a maximum of 5 percent of total assets in equity interests in businesses that
provide  services  to  or  are  otherwise  ancillary  to  the  lodging  industry
("Ancillary  Businesses").  As of  December  31,  2002,  the Company had limited
investments in Ancillary Businesses (0.4% of total assets).

     The Company  was formed in June 1996,  at which time it received an initial
capital  contribution of $200 from the Advisor for 20 shares of common stock. On
July 9, 1997, the Company  commenced its initial public offering of up to 16,500
shares of  common  stock  ($165,000)  (the  "Initial  Offering")  pursuant  to a
registration statement on Form S-11 under the Securities Act of 1933, as amended
(the "Securities  Act").  Subsequent to the completion of the Initial  Offering,
through  December 31, 2002,  the Company has had three  follow-on,  best efforts
offerings of up to 117,500 shares of common stock,  including an offering for up
to 45,000  shares  that was being  offered as of  December  31,  2002 ("the 2002
Offering").  In addition,  upon  completion  of the 2002 Offering on February 4,
2003, the Company  commenced an offering of up to 175,000 shares of common stock
at $10 per share  ($1,750,000) (the "2003  Offering").  Of the 175,000 shares of
common  stock to be offered,  up to 25,000  will be  available  to  stockholders
purchasing  shares  through the  reinvestment  plan. The price per share and the
other terms of the 2003  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 those for the Company's 2002 Offering.  CNL Securities
Corp.,  an affiliate of the Advisor,  is the managing  dealer for the  Company's
equity  offerings.  As of December  31,  2002,  the Company had  received  gross
proceeds  totaling  $1,267,821  from the sale of 126,782  shares of common stock
through its four prior public offerings.

     As of December 31, 2002, net proceeds from its four prior public offerings,
loan proceeds and capital  contributions  from the Advisor,  after  deduction of
selling   commissions,   marketing   support   fees,   due   diligence   expense
reimbursements and organizational and offering expenses,  totaled  approximately
$1,535,263.  As of such date, the Company has used approximately $739,359 in net
offering  proceeds and  approximately  $276,928 of loan proceeds to invest in 42
hotel  Properties  and a parcel  of land on  which a hotel  Property  was  being
constructed,  approximately  $220,872 to invest in 13  Properties  through seven
partnerships,  including three Properties on which hotels were being constructed
or  renovated,  approximately  $8,467 to  redeem  914  shares  of common  stock,
approximately  $160,407  to pay down the two  construction  lines of credit  and
approximately   $93,980  to  pay   acquisition   fees  and   expenses,   leaving
approximately  $35,250 available for investment in Properties and Mortgage Loans
or other permitted investments.

<PAGE>
     During the period  January 1, 2003 through  February 21, 2003,  the Company
received additional net offering proceeds of approximately $81,442 from the 2002
and 2003 Offerings,  used approximately $16,196 to invest in four new Properties
through an  existing  partnership,  used  approximately  $39,125 to acquire  one
additional  Property,  and as of February 21, 2003,  had  approximately  $60,372
available  for  investment in  Properties,  Mortgage  Loans and other  permitted
investments.  The Company  expects to use the  uninvested  net proceeds from the
2002 Offering, plus any additional net proceeds from the sale of shares from the
2003 Offering to purchase  interests in additional  Properties  and, to a lesser
extent,  invest  in  Mortgage  Loans  or  other  permitted  investments  such as
investments in other real estate companies and partnerships.  Additionally,  the
Company intends to borrow money to acquire  interests in additional  Properties,
to invest in Mortgage Loans and to pay certain related fees. The Company intends
to encumber assets in connection with such borrowings. The Company currently has
a $96,725 line of credit (the  "Revolving  LOC") as described  below in "Item 7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations." A total of approximately  $72,646 was available under the Revolving
LOC as of December 31, 2002. The maximum  amount the Company may borrow,  absent
the Company  demonstrating  that a higher level of borrowing is  appropriate  as
approved  by a majority  of the  independent  directors,  is 300  percent of the
Company's net assets.  The Company believes that the net proceeds  received from
the 2003 Offering will enable the Company to continue to grow and take advantage
of acquisition  opportunities until such time, if any, that the Company lists it
shares on a national securities exchange or over-the-counter market ("Listing"),
although there is no assurance  that such a Listing will occur.  If Listing does
not occur by December  31, 2007,  the Company will  commence the orderly sale of
its  assets  and the  distribution  of the  proceeds.  Listing  does not  assure
liquidity.

     The Company's primary investment  objectives are to preserve,  protect, and
enhance the  Company's  assets while (i) making  quarterly  distributions;  (ii)
obtaining  fixed income  through the receipt of base rent,  and  increasing  the
Company's income (and distributions) and providing  protection against inflation
through receipt of percentage rent and/or automatic  increases in base rent, and
obtaining fixed income through the receipt of payments on Mortgage Loans;  (iii)
continuing  to  qualify as a REIT for  federal  income  tax  purposes;  and (iv)
providing  stockholders of the Company with liquidity of their investment within
five years,  either in whole or in part,  through  (a) Listing of the  Company's
shares or (b) if Listing does not occur within five years,  the  commencement of
orderly sales of the Company's  assets and  distribution of the proceeds thereof
(outside the ordinary  course of business and consistent  with its objectives of
qualifying  as a  REIT).  There  can  be  no  assurance  that  these  investment
objectives will be met.

     For the next five years or until Listing occurs,  the Company  intends,  to
the extent  consistent with the Company's  objective of qualifying as a REIT, to
invest  in  additional   Properties  or  Mortgage   Loans  or  other   permitted
investments,  any  proceeds of the sale of a Property or Mortgage  Loan or other
permitted investments that are not required to be distributed to stockholders in
order to preserve the Company's REIT status for federal income tax purposes. The
Company will not sell any assets if such sale would not be  consistent  with the
Company's  objective of  qualifying  as a REIT.  The Company  intends to provide
stockholders of the Company with liquidity of their investment,  either in whole
or in part,  through  Listing of the shares of the Company  (although  liquidity
cannot be assured  thereby)  or by  commencing  orderly  sales of the  Company's
assets as discussed above. If Listing occurs, the Company intends to use any net
sales  proceeds  not  required to be  distributed  to  stockholders  in order to
preserve  the  Company's  status as a REIT to invest in  additional  Properties,
Mortgage Loans and other permitted investments.

     In deciding  the precise  timing and terms of Property  sales,  the Advisor
will consider  factors such as national and local market  conditions,  potential
capital  appreciation,  cash flows, and federal income tax  considerations.  The
terms of certain leases and  partnership  agreements,  however,  may require the
Company  to sell a  Property  at an  earlier  time if the  tenant or  co-venture
partner exercises its option to purchase a Property after a specified portion of
either the lease or  partnership  agreement  term has  elapsed or certain  other
events have  occurred.  The Company will have no  obligation  to sell all or any
portion of a Property at any  particular  time,  except as may be required under
Property   purchase  options  granted  to  certain  tenants  or  co-partners  in
partnerships.  In connection  with sales of Properties by the Company,  purchase
money  obligations  may be taken by the Company as partial  payment of the sales
price.  The terms of payment will be affected by custom in the area in which the
Property is located and prevailing  economic  conditions.  When a purchase money
obligation is accepted in lieu of cash upon the sale of a Property,  the Company
will  continue to have a mortgage on the  Property  and the proceeds of the sale
will be realized over a period of years rather than at closing of the sale.

<PAGE>

Leases

     As of December 31, 2002,  the Company owned  interests in 55 Properties (42
directly  owned  and  13  held  indirectly  through   partnerships),   generally
consisting of land, buildings and equipment. The Company also owns one parcel of
land on which a hotel is being  developed.  Of the  Properties  in which it owns
interests,  the Company  currently  leases 43 Properties  to TRS entities,  with
management performed by third-party operators, and 12 Properties on a triple-net
basis to third-party operators. For Properties leased to TRS entities, the lease
rental income and expenses have been eliminated in  consolidation  and the hotel
operating  revenues and expenses have been included in the consolidated  results
of  operations of the Company.  Leases to unrelated  third parties are operating
leases and resulted in rental income from operating leases being included in the
results of operations of the Company.

Certain Management Services

     Pursuant to an  advisory  agreement  (the  "Advisory  Agreement")  with the
Company,  the Advisor provides management services relating to the Company,  the
Properties  and the  Mortgage  Loans.  Under  this  agreement,  the  Advisor  is
responsible  for  assisting  the  Company  in  negotiating   leases,   permanent
financing,  Mortgage Loans and the Revolving LOC; collecting rental and Mortgage
Loan payments; inspecting the Properties and the tenants' books and records; and
responding  to  tenants'  inquiries  and  notices.  The  Advisor  also  provides
information to the Company about the status of the leases,  the Properties,  the
Mortgage  Loans and the  Revolving  LOC. In  exchange  for these  services,  the
Advisor is entitled to receive  certain fees. For  supervision of the Properties
and the Mortgage Loans,  the Advisor  receives an asset management fee, which is
payable  monthly in an amount equal to  one-twelfth of 0.60 percent of the total
amount invested in the Properties, exclusive of acquisition fees and acquisition
expenses,  plus one-twelfth of 0.60 percent of the outstanding  principal amount
of any Mortgage Loans, as of the end of the preceding month. For identifying the
Properties,  structuring  the  terms  of  the  acquisition  and  leases  of  the
Properties and structuring the terms of the Mortgage Loans, the Advisor receives
an  acquisition  fee equal to 4.5 percent of gross  proceeds from the offerings,
loan proceeds from  permanent  financing and a portion of the Revolving LOC that
are used to acquire Properties.

     The Advisory  Agreement  continues until March 31, 2003, and thereafter may
be  extended  annually  upon  mutual  consent  of the  Advisor  and the Board of
Directors of the Company unless terminated at an earlier date upon 60 days prior
written notice by each party.

Competition

     The  hotel  industry  is  generally   characterized   as  being   intensely
competitive.  The hotels do, and are  expected  to, in the future,  compete with
independently  owned hotels,  hotels which are part of local or regional chains,
and  hotels  in other  well-known  national  chains,  including  those  offering
different types of accommodations.

     The Company  competes  with other  persons and entities to locate  suitable
Properties to acquire  interests in and to locate purchasers for its Properties.
The  Company  also will  compete  with other  financing  sources  such as banks,
mortgage lenders, and sale/leaseback companies for suitable Properties,  tenants
and Mortgage Loan borrowers.

Concentration of Risk

     A  significant  portion of the Company's  rental income and hotel  revenues
were earned from Properties  operating as various Marriott  International,  Inc.
("Marriott")and  Hilton Hotels Corporation  ("Hilton") brands for the year ended
December 31, 2002. Although the Company intends to acquire Properties in various
states and regions,  carefully screens its managers and tenants and has obtained
interests in non-Marriott(R) and Hilton (R) branded  Properties,  failure of the
Company's  hotels or the Marriott(R)  and Hilton (R) brands could  significantly
impact the results of  operations of the Company.  Management  believes that the
risk  of  such a  default  will  be  reduced  through  future  acquisitions  and
diversification, and through the initial and continuing due diligence procedures
performed by the Company.

<PAGE>

Available Information

     The  Company  makes  available  free of charge on or through  its  Internet
website  (http://www.cnlonline.com)  the  Company's  Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable,
amendments  to those  reports  filed or furnished  pursuant to Section  13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as
soon as  reasonable  practicable  after the  Company  electronically  files such
material with, or furnishes it to, the Securities and Exchange  Commission  (the
"Commission").

Employees

     The Company has no  employees,  other than its officers.  Information  with
respect to the Company's  officers is incorporated by reference to the Company's
Definitive  Proxy  Statement to be filed with the Commission no later than April
30,  2003.  The  Company  has  retained  the  Advisor  to  provide   management,
acquisition,  advisory and certain administrative  services and retained certain
other affiliates to provide additional administrative services.

Environmental Matters

     In the  ordinary  course of  business,  the Company may acquire  Properties
where  environmental  issues exist. In accordance  with Company policy,  when an
environmental issue exists for a Property to be acquired, and cannot be resolved
prior  to  the   acquisition   of  the   Property,   the  Company   will  obtain
indemnification from the seller or negotiate other comparable  arrangements such
as  reduction  in the  purchase  price of the  Property to be  acquired.  When a
reduction in the  purchase  price is  obtained,  the Company  will  establish an
escrow  fund in an amount  equal to or greater  than the  estimated  remediation
costs in order to fund the cost of such  remediations.  As of December 31, 2002,
the  Company  had  $1,000  set  aside  for  remediation  at  one  Property.   No
environmental  remediation  reserve funds  existed as of December 31, 2001.  The
Company has obtained  indemnification  in writing from sellers on several of its
Properties to cover potential  remediation  costs.  The Company obtains detailed
environmental studies for each Property prior to acquisition.  Additionally, the
Company  also  carries  contingent  insurance  to cover  the cost of  unexpected
issues.

Item 2.  Properties
(in thousands, except per share data)

     As of December 31, 2002,  the Company had acquired  interests,  directly or
indirectly  through its  partnerships,  in 55 Properties,  located in 21 states,
consisting of land,  buildings and  equipment,  including 13 Properties  through
interests in four partnerships with Marriott;  two partnerships with Hilton; and
one partnership  with Interstate  Hotels and Resorts.  The Company also owns one
parcel of land on which a hotel is being  developed.  Of the Properties in which
it owns  interests,  the Company  currently  leases,  43 to TRS  entities,  with
management  performed by  third-party  operators,  and 1eases 12 Properties on a
triple-net basis to third-party operators.

     The Company has committed to fund  improvements  at many of its Properties.
Three  Properties are currently in the final stages of  renovation.  Renovations
are typically funded with proceeds from the Company's stock offerings, permanent
financing, or borrowings under the Revolving LOC.

     Generally,  Properties  acquired  consist of land,  building and equipment;
although in some cases, the Company may acquire the land underlying the building
with the  building  owned by the tenant or a third  party,  or may  acquire  the
building only with the land owned by a third party.  The 55 Properties  directly
or indirectly owned by the Company as of December 31, 2002, generally conform to
the following specifications of size, cost, and type of land and buildings.

     Hotel Properties. The lot sizes generally range up to 10 acres depending on
product, market and design considerations, and are available at a broad range of
pricing. The hotel sites are generally in primary or secondary urban,  suburban,
airport, highway or resort markets which have been evaluated for past and future
anticipated lodging demand trends.

     The hotel  buildings  generally are mid-rise  construction.  The Properties
consist of limited  service,  extended  stay or full service  hotel  Properties.
Limited service hotels generally minimize non-guest room space and offer limited
food  service  such as  complimentary  continental  breakfasts  and do not  have
restaurant or lounge facilities on-site.  Extended stay hotels generally contain
guest  suites with a kitchen  area and living area  separate  from the  bedroom.
Extended  stay  hotels  vary  with  respect  to  providing  on-site   restaurant
facilities.  Full service hotels generally have conference or meeting facilities
and on-site food and beverage  facilities.  The Properties include equipment and
the Properties held conform to the Hotel Brand's approved design concepts.

     For leases to independent third parties, the tenants of the Properties have
established FF&E Reserve funds which are used for the replacement and renewal of
furniture,  fixtures,  and equipment,  and routine  capital  expenditures.  FF&E
Reserve funds and any replacement furniture, fixtures, or equipment are owned by
the Company. In addition, leases with third parties generally require the tenant
to make a  security  deposit  relating  to the  Property  which is  retained  as
security for the tenant's obligations under the lease.

<PAGE>
     As of December 31, 2002, most of the Properties  directly owned,  including
the  parcel of land  being  developed,  were  pledged  as  collateral  under the
Company's  financing  arrangements.  For more detailed  information  relating to
these  arrangements,  see  "Item 7.  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations - Borrowings".

     The  following  table  lists the number of  Properties  owned,  directly or
indirectly  through  partnerships,  by the Company as of December 31,  2002,  by
state,  including the Property  under  development.  More  detailed  information
regarding  the location of the  Properties  is contained in the Schedule of Real
Estate and Accumulated Depreciation filed as an exhibit to this report.

                  State                          Total Number of Properties
     ---------------------------------        ----------------------------------
     Arizona                                                  4
     California                                              12 *, **
     Colorado                                                 1
     Connecticut                                              2
     Florida                                                  6 *
     Georgia                                                  3
     Hawaii                                                   1 *
     Kansas                                                   1
     Maine                                                    1
     Massachusetts                                            2
     Maryland                                                 1
     Michigan                                                 1
     Nevada                                                   1
     New Jersey                                               4
     North Carolina                                           2
     Oregon                                                   1
     Pennsylvania                                             2
     Texas                                                    5
     Utah                                                     1
     Virginia                                                 4
     Washington                                               1
                                              ----------------------------------
      Total Number of Properties                             56
                                              ==================================

      *Includes one Property owned by a partnership currently under final stages
       of renovation.
     **Includes one parcel of land on which a hotel is being developed.

     Significant Leases and Assignment of Leases with Major Tenants. The Company
leases its Properties  primarily to wholly owned TRS entities and contracts with
third-party  managers to operate the Properties.  Hotel  operating  revenues and
expenses  for these  Properties  are  included  in the  consolidated  results of
operations of the Company.

     Land,  buildings  and  equipment  for other  Properties  are leased to, and
operated by, unrelated  third-party tenants on a "triple-net" basis, whereby the
tenant is  generally  responsible  for all  operating  expenses  relating to the
Property,  including property taxes, insurance,  maintenance and repairs. Rental
income from operating leases is included in the Company's  consolidated  results
of operations for these Properties.

     Of the 55  Properties  in which it owns  interests,  the Company  currently
leases 43 Properties to TRS entities with  management  performed by  third-party
operators, and 12 Properties on a triple-net basis to third-party operators.

     RST4 Tenant,  LLC leases the  Courtyard(R) by Marriott(R)  Property in Palm
Desert,  California,  the  Residence Inn by  Marriott(R)  Property in San Diego,
California,  the Residence Inn by Marriott(R) Property in Merrifield,  Virginia,
the  Residence  Inn by  Marriott(R)  Property in Palm  Desert,  California,  the
SpringHill Suites (TM) by Marriott(R) Property in Gaithersburg, Maryland and the
TownePlace Suites(R) by Marriott(R) Property in Newark,  California. The initial
term of each lease is 17 years (expiring in 2016) and the aggregate minimum base
annual rent is approximately $9,330.

<PAGE>

     City Center Annex Tenant Corporation leases the Courtyard(R) by Marriott(R)
Property in  Philadelphia,  Pennsylvania.  The  initial  term of the lease is 15
years  (expiring  in  2015)  and  the  aggregate  minimum  base  annual  rent is
approximately $6,500.

     LLB Tenant Corporation leases three Properties owned by the Company.  These
Properties  include one  Courtyard(R)  by Marriott(R),  one Fairfield  Inn(R) by
Marriott(R) and one SpringHill  Suites (TM) by Marriott(R).  The initial term of
each  lease is  approximately  15 years  (expiring  in 2016)  and the  aggregate
minimum base annual rent is approximately $10,884.

     Effective  January 1, 2002, the Company took  assignment of its leases with
WI Hotel Leasing,  LLC for seven hotel  Properties.  These  Properties are being
leased by a TRS of the Company and are managed by  affiliates  of Marriott.  The
operations of these  Properties have been reflected in the results of operations
for the  Company  for the  year  ended  December  31,  2002.  The  Company  paid
approximately $69 for this assignment.

     Effective  June 28, 2002,  the Company took  assignment  of its leases from
CCCL Leasing, LLC, an affiliate of Crestline Capital Corporation, for nine hotel
Properties.  These  Properties  are managed by an  affiliate  of  Marriott.  The
operations  of these  Properties  are reflected in the  consolidated  results of
operations  for the Company  effective  June 28, 2002. In  connection  with this
transaction,  CCCL Leasing, LLC agreed to give up its claim to security deposits
totaling  approximately  $4,000.  Additionally,  the Company assumed a liquidity
facility loan of approximately  $3,600 and paid  approximately $25 in legal fees
and  other  expenses.   This  transaction   resulted  in  net  other  income  of
approximately  $400  being  recognized  by the  Company  during  the year  ended
December 31, 2002.

     Effective June 30, 2002, the Company took  assignment of its leases from CC
GB Leasing,  LLC, an affiliate of Crestline Capital  Corporation,  for two hotel
Properties.  These  Properties are managed by an affiliate of Interstate  Hotels
and Resorts  under the Residence Inn by Marriott  brand.  The  operations of the
Properties  are  reflected in the  consolidated  results of  operations  for the
Company  effective  June 30, 2002. In connection  with this  transaction,  CC GB
Leasing,  LLC forfeited its claim to security  deposits  totaling $1,400 and the
Company assumed net assets of  approximately  $59,  resulting in other income of
approximately  $1,500  being  recognized  by the  Company  during the year ended
December 31, 2002.

Item 3.  Legal Proceedings
(in thousands, except per share data)

     Neither  the  Company,  nor  any  of its  subsidiaries,  nor  any of  their
respective Properties,  is a party to, or subject to, any material pending legal
proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders
(in thousands, except per share data)

     On November 1, 2002, at a special meeting of the  stockholders,  a majority
of the common  stockholders  approved an amendment to the Company's  Amended and
Restated  Articles of Incorporation to increase the number of authorized  equity
shares from 216,000 shares (consisting of 150,000 common shares, 3,000 preferred
shares and 63,000 excess shares) to 516,000 shares (consisting of 450,000 common
shares, 3,000 preferred shares and 63,000 excess shares).

<PAGE>

                                     PART II
        (in thousands, except per share data and number of stockholders)

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters
(in thousands, except per share data)

     As of February 21, 2003, there were 46,538 stockholders of record of common
stock.  There is no public  trading  market for the shares,  and even though the
Company  intends  to list  the  shares  on a  national  securities  exchange  or
over-the-counter  market within five years,  there is no assurance that a public
market for the shares  will  develop.  Prior to such  time,  if any,  as Listing
occurs,  any stockholder (other than the Advisor) may present all or any portion
equal to at least 25 percent of such  stockholder's  shares to the  Company  for
redemption  at any time,  in  accordance  with the  procedures  outlined  in the
Company's prospectus.  At such time, the Company may, at its sole option, redeem
such shares  presented for redemption  for cash, at a redemption  price equal to
the then  current  offering  price,  less a discount  of 8 percent.  The current
offering  price is $10 per share;  thereby the current net  redemption  price is
$9.20 per share.  Redemptions  are  limited to the extent  sufficient  funds are
available.  In addition, the Company may, at its discretion,  use up to $100 per
calendar  quarter of the proceeds of any public offering of its common stock for
redemptions. There is no assurance that there will be sufficient funds available
for redemptions and,  accordingly,  a stockholder's  shares may not be redeemed.
The Board of Directors of the Company,  in its discretion,  may amend or suspend
the redemption plan at any time they determine that such amendment or suspension
is in the best  interest of the Company.  For the years ended  December 31, 2002
and 2001, 239 and 251 shares, respectively, were redeemed at $9.20 per share and
retired from shares  outstanding  of common stock.  The price to be paid for any
share  transferred  other than  pursuant  to the  redemption  plan is subject to
negotiation  by the purchaser  and the selling  stockholder.  Amounts  contained
hereinafter are in thousands, unless otherwise noted, except for per share data.

     As of December 31, 2002,  the Company is aware of the  following  trades in
its shares,  other than purchases made in its public offering and redemptions of
shares by the Company:

       Effective Date          No. of Shares         Price Per Share
       --------------          -------------         ---------------
        April 1, 2002                4                     $  7.05
        July 1, 2002                 3                       10.00
       October 1, 2002               2                        9.20
       October 1, 2002              556                       9.00

     The  Company  is not  aware of any  other  trades  as of this  date.  As of
December 31, 2002,  the offering  price per share of common stock was $10. Based
on the continued  sale of shares  through  February 21, 2003, for $10 per share,
the  Company  estimates  that the  value of its  shares  is $10 per  share.  The
Company's  shares are not publicly  traded.  Investors are cautioned that common
stock not publicly  traded is generally  considered  illiquid and the  estimated
value per share may not be realized  when an investor  seeks to liquidate his or
her common stock.

     The Company expects to make  distributions to the stockholders  pursuant to
the  provisions of the Articles of  Incorporation.  For the years ended December
31, 2002 and 2001,  the Company  declared cash  distributions  of  approximately
$74,217  and  $48,409  respectively,  to the  stockholders.  For the years ended
December  31,  2002  and  2001,   approximately   51  percent  and  52  percent,
respectively, of the distributions paid to stockholders were considered ordinary
income  and  approximately  49  percent  and  48  percent,  respectively,   were
considered a return of capital to stockholders  for federal income tax purposes.
No amounts distributed to stockholders for the years ended December 31, 2002 and
2001,  were  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 following table presents total distributions and distributions per
share:

<TABLE>
<S> <C>
        2002 Quarter                First            Second            Third            Fourth            Year
------------------------------   -------------   ---------------  ----------------  ---------------  ---------------

Total distributions declared          $15,432           $17,058           $19,322          $22,405          $74,217
Distributions per share                 0.194             0.194             0.194            0.194            0.776

        2001 Quarter
------------------------------

Total distributions declared           $9,772           $11,257           $13,037          $14,343          $48,409
Distributions per share                 0.191             0.191             0.194            0.194            0.770

</TABLE>

     On January 1, 2003 and February 1, 2003, the Company declared distributions
totaling approximately $8,152 and $8,490,  respectively,  or $0.064583 per share
of common stock, payable by March 31, 2003, to stockholders of record on January
1, 2003 and February 1, 2003, respectively.

<PAGE>
     The  Company  intends  to  continue  to  declare  distributions  of cash to
stockholders  on a monthly  basis  during the  offering  period,  and  quarterly
thereafter  to the extent that cash is available for  distribution.  There is no
assurance that the Company will continue to be able to pay distributions, except
to maintain REIT status in accordance with the Internal Revenue Code of 1986, as
amended.  The Company is required to distribute  annually at least 90 percent of
its real estate  investment  trust  taxable  income to maintain its objective of
qualifying as a REIT.  Distributions will be made at the discretion of the Board
of Directors,  depending  primarily on net cash from  operations and the general
financial  condition of the Company,  subject to the  obligation of the Board of
Directors to cause the Company to remain  qualified as a REIT for federal income
tax purposes.

Item 6.  Selected Financial Data
(in thousands, except per share data)

     The following  selected  financial data should be read in conjunction  with
the consolidated financial statements and related notes in Item 8 hereof.
<TABLE>
<S><C>
                                                2002               2001               2000               1999               1998
                                          -------------      -------------      -------------      -------------      -------------
Year Ended December 31:

  Revenues                                 $  156,408         $   71,463         $   36,099         $   10,678         $   1,955
  Net earnings (1)                             15,810             19,328             20,670              7,516               959
  Cash flows from operating activities         70,340             52,937             43,651             12,890             2,777
  Cash flows used in investing activities    (451,745)          (295,991)          (334,237)          (130,231)          (34,511)
  Cash flows from financing activities        386,573            237,681            238,811            206,085            36,093
  Cash distributions declared (2)              74,217             48,409             28,082             10,766             1,168
  Funds from operations (4)                    59,366             40,838             30,053             10,478             1,343
  Earnings per share:
      Basic                                      0.16               0.30               0.53               0.47              0.40
      Diluted                                    0.16               0.30               0.53               0.45              0.40
  Cash distributions declared per share          0.78               0.77               0.74               0.72              0.47
  Weighted average number of shares
    Outstanding (3):
      Basic                                    97,874             64,458             38,698             15,890             2,402
      Diluted                                  97,874             64,458             45,886             21,438             2,402

At December 31:
  Total assets                           $  1,303,860         $  901,406         $  653,962          $ 266,968         $  48,857
  Mortgages payable                           207,206            168,884            170,055                 --                --
  Other notes payable and line of credit       53,818             65,072             19,582                 --                --
  Total stockholders' equity                1,012,499            637,876            419,289            253,055            37,116

</TABLE>

(1)  To the  extent  that  operating  expenses  payable or  reimbursable  by the
     Company in any four consecutive fiscal quarters (the "Expense Year") exceed
     the  greater of 2 percent of average  invested  assets or 25 percent of net
     income (the "Expense Cap"),  the Advisor shall reimburse the Company within
     60 days  after the end of the  Expense  Year the  amount by which the total
     operating  expenses paid or incurred by the Company exceed the Expense Cap.
     During the years ended December 31, 2002, 2001 and 2000, operating expenses
     did not exceed the Expense Cap.

(2)  Cash distributions are declared by the Board of Directors and generally are
     based  on  various  factors,  including  cash  available  from  operations.
     Approximately  79%,  60%,  26%, 30% and 18% of cash  distributions  for the
     years ended December 31, 2002,  2001,  2000,  1999 and 1998,  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 amounts as a
     return of capital for purposes of calculating the  stockholders'  return on
     their invested capital.

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

<PAGE>

(4)  Management  considers  funds from  operations  ("FFO") to be an  indicative
     measure  of  operating   performance  due  to  the  significant  effect  of
     depreciation  of real  estate  assets on net  earnings.  FFO,  based on the
     revised  definition  adopted  by the  Board of  Governors  of the  National
     Association of Real Estate Investment Trusts ("NAREIT") in October 1999 and
     as used herein,  means net earnings determined in accordance with generally
     accepted  accounting  principles  ("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. (Net earnings determined in accordance with GAAP includes the
     non-cash  effect of  straight-lining  rent  increases  throughout the lease
     terms.  This  straight-lining  is a GAAP  convention  requiring real estate
     companies to report rental  revenue based on the average rent per year over
     the life of the leases.  During the years ended  December 31,  2002,  2001,
     2000, 1999, and 1998, net earnings included  approximately $76, $118, $117,
     $35 and $44,  respectively,  of these amounts.) 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.  FFO, as  presented,  may not be
     comparable  to  similarly  titled  measures  reported  by other  companies.
     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  consolidated
     financial statements and notes thereto.

     The  following  is a  reconciliation  of net  earnings to FFO for the years
     ended December 31, 2002, 2001, 2000, 1999 and 1998:

     <TABLE>
     <S><C>
                                                                      Year Ended
                                                                      December 31,

                                                  2002            2001            2000           1999            1998
                                             -------------   -------------   -------------   -------------   -------------

     Net earnings                            $    15,810     $    19,328     $    20,670     $     7,516     $      959

     Adjustments:
     Effect of unconsolidated subsidiaries        12,341           2,702           1,825           1,710             --
     Effect of minority interest                    (237)           (941)           (272)            (16)            --

     Amortization of real estate assets            1,353             535             131              49             --
     Depreciation of real estate assets           26,523          19,214           7,699           1,219            384
     Effect of assumption of liabilities           3,576              --              --              --             --
                                             -------------   -------------   -------------   -------------   -------------
     Funds From Operations                   $    59,366     $    40,838     $    30,053     $    10,478     $    1,343
                                             =============   =============   =============   =============   =============

     Weighted average shares:
            Basic                                 97,874          64,458          38,698          15,890          2,402
                                             =============   =============   =============   =============   =============
            Diluted                               97,874          64,458          45,886          21,438          2,402
                                             =============   =============   =============   =============   =============

</TABLE>
<PAGE>


Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations (in thousands, except per share data)

The following information contains forward-looking statements within the meaning
of Section 27A of the Securities Act, and Section 21E of the Exchange Act. 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,  availability  of  capital  from
borrowings under the Company's line of credit and security agreement,  continued
availability  of  proceeds  from the  Company's  offerings,  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  managers  and  tenants for its  Properties  and
borrowers for its Mortgage Loans,  and the ability of such tenants and borrowers
to make payments under their  respective  leases or Mortgage Loans.  Given these
uncertainties,  readers  are  cautioned  not to  place  undue  reliance  on such
statements.

                                  Introduction
                                  ------------

The Company

     CNL  Hospitality  Properties,  Inc. is a  corporation  which was  organized
pursuant to the laws of the State of Maryland on June 12, 1996 and  operates for
federal  income  tax  purposes  as a REIT.  CNL  Hospitality  GP  Corp.  and CNL
Hospitality  LP  Corp.  are  wholly  owned   subsidiaries   of  CNL  Hospitality
Properties,  Inc.,  each of which was  organized  in Delaware in June 1998.  CNL
Hospitality  Partners,  LP  is  a  Delaware  limited  partnership  ("Hospitality
Partners")  formed in June 1998. CNL Hospitality GP Corp. and CNL Hospitality LP
Corp.  are  the  general  and  limited  partner,  respectively,  of  Hospitality
Partners.  Properties  acquired are generally expected to be held by Hospitality
Partners and, as a result, are owned by CNL Hospitality Properties, Inc. through
Hospitality Partners. Various other wholly owned subsidiaries have been and will
be  formed  in  the  future  for  purposes  of  acquiring  or  developing  hotel
Properties.  The terms  "Company" or  "Registrant"  include,  unless the context
otherwise requires, CNL Hospitality Properties,  Inc., Hospitality Partners, CNL
Hospitality GP Corp., CNL Hospitality LP Corp., CNL Philadelphia Annex, LLC, CNL
Hotel Investors, Inc., CNL LLB SHS Management, LP, CNL LLB F-Inn Management, LP,
CNL LLB C-Hotel Management, LP, CNL Bridgewater Hotel Partnership,  LP, CNL MI-4
Hotel, LP and each of their wholly owned subsidiaries.  Amounts contained herein
are in thousands, unless otherwise noted, except for per share data.

     The  Company is engaged  primarily  in the  acquisition  and  ownership  of
interests in hotel Properties  generally  located across the United States,  and
has retained CNL  Hospitality  Corp.  (the  "Advisor") as its Advisor to provide
management, acquisition, advisory and certain administrative services. The hotel
properties  may include  limited  service,  extended stay and full service hotel
Properties.  The Company  generally  leases its  Properties  to wholly owned TRS
entities and  contracts  with  third-party  managers to operate the  Properties.
Hotel operating  revenues and expenses for these  Properties are included in the
consolidated  results of operations of the Company.  Other Properties are leased
on  a  triple-net  basis  to  unrelated  third-party  tenants  who  operate  the
Properties or contract with hotel managers to run their hotel operations. Rental
income from operating leases is included in the Company's  consolidated  results
of operations for these  Properties.  All  Properties  acquired in 2002 are, and
Properties  acquired in the future are  generally  expected to be, leased to the
Company's  TRS  entities.   Additionally,   several   previously   entered  into
third-party  leases were assumed by TRS entities of the Company  during 2002 and
additional  leases may be assumed by the  Company  in the  future.  For  certain
Properties,  the Company has received various credit enhancement guarantees from
third-party  managers  who,  subject to  certain  limitations,  have  guaranteed
performance  levels for Properties they manage.  See Note 13,  "Commitments  and
Contingencies" of the Company's consolidated financial statements for additional
information on credit enhancements.

     The Company may also provide  Mortgage  Loans to operators of Hotel Brands,
however,  it has not done so as of December 31, 2002.  In addition,  the Company
may invest up to a maximum of 5 percent of total  assets in equity  interests in
Ancillary  Businesses.  As  of  December  31,  2002,  the  Company  has  limited
investments in Ancillary Businesses (0.4% of total assets).

<PAGE>

                         Liquidity and Capital Resources
                         -------------------------------
Common Stock Offerings

     The Company  was formed in June 1996,  at which time it received an initial
capital  contribution of $200 from the Advisor for 20 shares of common stock. On
July 9, 1997, the Company  commenced its Initial Offering of up to 16,500 shares
of common stock  ($165,000)  pursuant to a  registration  statement on Form S-11
under the Securities Act.  Subsequent to the completion of the Initial Offering,
through  December 31, 2002,  the Company has had three  follow-on,  best efforts
offerings of up to 117,500 shares of common stock,  including an offering for up
to 45,000  shares that was being  offered as of December 31, 2002.  In addition,
upon completion of the 2002 Offering on February 4, 2003, the Company  commenced
its 2003  Offering  of up to  175,000  shares of  common  stock at $10 per share
($1,750,000).  Of the 175,000 shares of common stock being offered, up to 25,000
will be available to  stockholders  purchasing  shares through the  reinvestment
plan.  The price per share and the other terms of the 2003  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 those for the Company's 2002
Offering.  CNL Securities  Corp.,  an affiliate of the Advisor,  is the managing
dealer for the Company's equity offerings.  As of December 31, 2002, the Company
had received gross proceeds totaling  $1,267,821 from the sale of 126,782 shares
of common stock through its public offerings.

     As of December  31,  2002,  net proceeds to the Company from its four prior
public  offerings,  loan  proceeds and capital  contributions  from the Advisor,
after deduction of selling  commissions,  marketing  support fees, due diligence
expense  reimbursements  and  organizational  and  offering  expenses,   totaled
approximately  $1,535,263.  As of such date, the Company has used  approximately
$739,359 of net offering proceeds and approximately $276,928 of loan proceeds to
invest in 42 hotel Properties and a parcel of land on which a hotel Property was
being  constructed,  approximately  $220,872 to invest in 13 Properties  through
seven  partnerships,  including  three  Properties  on which  hotels  were being
constructed  or renovated,  approximately  $8,467 to redeem 914 shares of common
stock,  approximately  $160,407 to pay down the two construction lines of credit
and  approximately  $93,980  to  pay  acquisition  fees  and  expenses,  leaving
approximately $35,250 available for future investments.

     During the period  January 1, 2003 through  February 21, 2003,  the Company
received additional net offering proceeds of approximately $81,442 from the 2002
and 2003 Offerings,  used approximately $16,196 to invest in four new Properties
through an  existing  partnership,  used  approximately  $39,125 to acquire  one
additional  Property,  and as of February 21, 2003,  had  approximately  $60,372
available for  investment in Properties  and Mortgage  Loans or other  permitted
investments.  The Company  expects to use the  uninvested  net proceeds from the
2002 Offering, plus any additional net proceeds from the sale of shares from the
2003 Offering to purchase  interests in additional  Properties  and, to a lesser
extent,  invest  in  Mortgage  Loans  or  other  permitted  investments  such as
investments in other real estate companies and partnerships.  Additionally,  the
Company intends to borrow money to acquire  interests in additional  Properties,
to invest in Mortgage Loans and to pay certain related fees. The Company intends
to encumber assets in connection with such borrowings. The Company currently has
a $96,725 Revolving LOC as described below. A total of approximately $72,646 was
available under the Revolving LOC as of December 31, 2002.

Redemptions

     In October 1998, the Board of Directors  elected to implement the Company's
redemption  plan.  Under the  redemption  plan,  prior to such time,  if any, as
Listing  occurs,  any  stockholder who has held shares for at least one year may
present all or any portion  equal to at least 25 percent of their  shares to the
Company  for  redemption  in  accordance  with the  procedures  outlined  in the
redemption plan. Upon presentation, the Company may elect, at its discretion, to
redeem the shares, subject to certain conditions and limitations. However, at no
time during a 12 month  period may the number of shares  redeemed by the Company
exceed 5 percent of the  number of shares of the  Company's  outstanding  common
stock at the beginning of the 12 month period.  During the years ended  December
31, 2002,  2001 and 2000, 239 shares,  251 shares and 269 shares,  respectively,
were  redeemed  at $9.20 per share  (approximately  $2,391,  $2,313 and  $2,503,
respectively), and retired from shares outstanding of common stock.

Borrowings

     The Company's  objectives and strategies with respect to long-term debt are
to (i) minimize the amount of interest  incurred on  permanent  financing  while
limiting  the  risk  related  to  interest  rate  fluctuations  through  hedging
activities  and (ii) maintain the ability to refinance  existing  debt.  Because
some of the Company's  mortgage  notes bear interest at fixed rates,  changes in
market interest rates during the term of such debt will not affect the Company's
operating  results.  The majority of the Company's fixed rate debt  arrangements
allow for repayment  earlier than the stated  maturity  date.  These  prepayment
rights  may  afford  the  Company  the  opportunity  to  mitigate  the  risk  of
refinancing  at maturity at higher rates by refinancing  prior to maturity.  The
weighted  average  effective  interest rate on mortgages and other notes payable
was approximately seven percent as of December 31, 2002.

<PAGE>

     The Company's  Revolving LOC is used to fund acquisition and development of
Properties  and  investments in Mortgage  Loans.  The Company is able to receive
cash advances of up to  approximately  $96,725 until  September  2006.  Interest
payments  are due monthly with  principal  payments of $1 due at the end of each
loan year.  Advances under the line of credit bear interest at an annual rate of
225 basis points  above 30-day LIBOR (3.63  percent as of December 31, 2002) and
are  collateralized  by certain hotel  Properties.  As of December 31, 2002, the
Company had approximately  $24,079,  including accrued interest of approximately
$79, outstanding under the Revolving LOC.

     In September  2002,  the Company paid down  approximately  $50,292 that had
previously   been  borrowed  on  two   construction   loan  facilities  for  the
construction  of two  Properties.  An existing  construction  loan facility (the
"Construction  LOC") was renegotiated  resulting in an increased total borrowing
capacity of $64,000.  This  Construction  LOC expires in December 2005 and bears
interest at a floating rate with a floor of 6.75 percent.  Approximately $21,280
was outstanding on the Construction LOC as of December 31, 2002.

     On October 31, 2002,  the Company  obtained a loan in the amount of $90,700
collateralized  by eight of its  hotel  Properties.  The loan has a term of five
years and bears  interest at 6.53 percent per annum.  Payments of interest  only
are due  monthly for the first two years of the loan,  and  monthly  payments of
principal and interest are due thereafter,  calculated on a 20-year amortization
schedule through maturity. At closing the Company borrowed  approximately $9,070
which was outstanding as of December 31, 2002, with the remainder expected to be
funded in 2003.

     On November 25, 2002, the Company  obtained a loan in the amount of $31,000
collateralized by one of its hotel Properties. The loan has a term of five years
and bears interest at 5.84 percent per annum.  Payments of interest only are due
monthly for the first two years of the loan,  and monthly  payments of principal
and interest are due thereafter,  calculated on a 25-year amortization  schedule
through maturity. The full $31,082,  including accrued interest of approximately
$82, was outstanding as of December 31, 2002.


<PAGE>

As of December 31, 2002, the Company's fixed and variable rate debt instruments,
excluding debt of unconsolidated partnerships, were as follows:

<TABLE>
<S><C>

                           Principal and                          Fixed Rate                         Interest
                               Accrued            Maturity          Per Year       Variable Rate    Payments Due
    Loan Description       Interest Balance
------------------------ -------------------- ------------------ ---------------- ----------------- --------------

Three Properties in Lake
Buena Vista, FL             $  50,348           December 2007        8.335%               --            Monthly

Seven Properties owned by                                                                               Monthly
Hotel Investors                84,638            July 2009           7.67%*               --

Property in Philadelphia,
PA                             32,069           December 2007        8.29%                --            Monthly

Tax Incremental Financing
Note ("TIF Note") on
Property in Philadelphia,
PA                              8,458            June 2018          12.85%****            --            Monthly

Portfolio of Eight
Marriott Properties
located throughout the
United States                   9,070           November 2007        6.53%                --            Monthly

One Property located in
New Jersey                     31,082           December 2007        5.84%                --            Monthly

Two development
Properties, one in
California and one in                                                               LIBOR + 275
Florida                        21,280           December 2005          --              bps***           Monthly

                                                                       --           LIBOR + 225
Line of credit**               24,079          September 2006          --              bps              Monthly

</TABLE>

*   Average interest rate as the loans bear interest ranging from 7.50 percent
    to 7.75 percent.
**  Revolving LOC.
*** The Construction LOC has an interest rate floor of 6.75 percent.
****Tax Incremental Financing which is paid down with incremental real estate
    taxes resulting in an interest rate of 12.85%.

     With respect to certain of its Properties, the Company has received various
credit  enhancement  guarantees from third-party  managers who have guaranteed a
certain level of performance  for Properties they manage which are leased to TRS
entities.  When  provided,  these  guarantees are typically in effect during the
stabilization  period for the hotel  Property or  Properties  being  guaranteed.
These  guarantees  normally expire (i) when a predefined  operating  performance
threshold  is achieved  for twelve  consecutive  months,  (ii) after a specified
period  (typically three to five years) or (iii) when maximum  allowable funding
under that  guarantee  has been  received,  whichever  occurs  first.  Operating
results of several  Properties  may be  "pooled"  in order to measure  operating
performance for purposes of determining guarantee funding.  Additionally, all or
a portion of the amounts funded under these guarantees may be earned back by the
guarantor,  with a specified  return,  as an incentive fee under the  management
contract.  Such  incentive fee amounts will be paid only to the extent  Property
operating  profits exceed a  predetermined  operating  threshold.  In situations
where  the  guarantor  has the  opportunity  to earn  back  funding  from  these
guarantees,  the funds  received  under the  guarantees  are  recorded  as other
liabilities in the accompanying  consolidated balance sheets. As of December 31,
2002 and December 31, 2001, the Company did not have any outstanding liabilities
from its credit enhancement  guarantees.  Additionally,  as of December 31, 2002
and  December  31,  2001,  the Company had  approximately  $37,515 and  $50,000,
respectively,  which  remained  available  for  funding  under  these  types  of
guarantees,  should such funding be necessary.  Additional  amounts of available
funding under these types of credit  enhancements  are available  separately for
several of the  partnerships  in which the  Company  has  invested.  There is no
assurance  that market  conditions  will allow the Company to continue to obtain
credit enhancements in the future.

<PAGE>

     The  Company  has  amended  the  agreements  relating  to one of its credit
enhancements with Marriott.  Marriott is obligated to fund guarantee payments of
certain minimum returns to TRS entities of the Company,  however, the management
contracts  on the  hotels  subject  to the credit  enhancement  were  amended to
provide that the first  incentive  management  fee is payable up to a predefined
amount  rather than  paying the fee  primarily  based on the amounts  previously
funded  under  the  guarantee.  The  Company  has  recognized  other  income  of
approximately  $10,280  during the fourth  quarter of 2002 equal to the  amounts
previously funded under the credit enhancement  through December 31, 2002, which
Marriott has agreed will not be subject to repayment  provisions.  Additionally,
the  Company  will  recognize  income in the future,  rather  than  liabilities,
whenever amounts are funded by Marriott under the arrangement.  The Company will
recognize incentive management fee expense if and when such incentive management
fees are  earned  by  Marriott.  These  amendments  are not  expected  to have a
significant   effect  on  the  Company's  cash  available  for  distribution  to
stockholders.

     In connection with the lease  assumptions on nine  Properties,  the Company
assumed a liquidity facility loan in the amount of approximately $3,600. A total
of  approximately  $10,170 is  available  under the  facility.  The facility was
provided by the manager of the Properties to fund Property operating  shortfalls
for the aggregate rent due on a pooled basis for the nine portfolio  Properties.
The facility is available  until the earlier of (i)  expiration of the agreement
on December 31, 2004,  (ii) the minimum rent  coverage of the pooled  Properties
equals or exceeds a predefined  threshold for 13 consecutive  accounting periods
or (iii) total  liquidity  facility  funding equals or exceeds 10 percent of the
total purchase  price for all nine  Properties at the end of any fiscal year. As
of December 31, 2002,  approximately  $5,632 was outstanding  and  approximately
$4,538 was available for future draws under the liquidity facility loan. Amounts
advanced  under the  liquidity  facility loan are repaid only out of excess cash
flow after payment of rent.

     The following is a schedule of the  Company's  fixed and variable rate debt
maturities and principal payments,  including the Revolving LOC, for each of the
next five years, and thereafter:

<TABLE>
<S><C>
                                 Fixed Rate
                                  Mortgages
                                  Payable          Variable Rate      Total Mortgages
                                and Accrued         Other Notes       and Other Notes
                                  Interest            Payable             Payable
                             ------------------- ------------------- -------------------

        2003                    $   3,489           $     153          $   3,642
        2004                        2,676                  --              2,676
        2005                        3,456              21,208             24,664
        2006                        3,701              23,999             27,700
        2007                       53,954                  --             53,954
        Thereafter                154,020                  --            154,020
                             ------------------- ------------------- -------------------
                                $ 221,296           $  45,360          $ 266,656
                             =================== =================== ===================
</TABLE>

Market Risk

     The Company is subject to interest rate risk through  outstanding  balances
on its variable rate debt, as described in the  "Borrowings"  section above. The
Company may mitigate this risk by paying down additional outstanding balances on
its variable  rate loans from  offering  proceeds,  refinancing  with fixed rate
permanent  debt or  obtaining  cash  flow  hedges  should  interest  rates  rise
substantially. At December 31, 2002, approximately $45,360 in variable rate debt
was outstanding.

<PAGE>

     In addition,  the Company has issued fixed interest rate mortgages  payable
and notes payable to lenders under permanent financing arrangements. The Company
believes that the estimated  fair value of the amounts  outstanding on its fixed
rate mortgages payable and notes payable under permanent financing  arrangements
at December 31, 2002, approximated the outstanding principal amount.

Property Acquisitions and Completed Development Properties

     During 2002, the Company made the following additional acquisitions:
<TABLE>
<S><C>

                      Brand Affiliation                 Property Location         Purchase Date
               ------------------------------------- ------------------------ ----------------------
               SpringHill Suites(TM) by Marriott(R)      Manhattan Beach, CA      January 18, 2002
               TownePlace Suites(TM) by Marriott(R)       Manhattan Beach, CA      January 18, 2002
               SpringHill Suites(TM) by Marriott(R)     Plymouth Meeting, PA      January 18, 2002
                   Courtyard(R) by Marriott(R)            Basking Ridge, NJ         March 1, 2002
                       Marriott(R) Hotel                   Bridgewater, NJ          June 14, 2002
                   Courtyard(R) by Marriott(R)           Foothill Ranch, CA          July 3, 2002*
                   Courtyard(R) by Marriott(R)               Newark, CA           October 25, 2002
                  Residence Inn by Marriott(R)              Newark, CA          November 15, 2002
                   Doubletree(R) Crystal City               Arlington, VA        December 19, 2002
             * Land purchased for development on which a hotel Property is being constructed.
</TABLE>

     Additionally,  the Company completed  construction and opened the following
Properties during 2002:
<TABLE>
<S><C>
                      Brand Affiliation                 Property Location         Opening Date
               ------------------------------------- ------------------------ ----------------------
               Residence Inn by Marriott(R)                Orlando, FL          February 14, 2002
                 Courtyard(R) by Marriott(R)                 Weston, FL          February 14, 2002
                 Courtyard(R) by Marriott(R)                 Edison, NJ           November 4, 2002
</TABLE>

     All of the Properties  acquired or completed  during 2002 are leased to the
Company's  TRS entities  and are operated by  third-party  hotel  managers.  See
Schedule III, "Real Estate and Accumulated  Depreciation,"  for a listing of all
Properties owned by the Company.

Investments in Unconsolidated Subsidiaries

     Desert  Ridge  Partnership.  The  Company  owns 44 percent of Desert  Ridge
Resort Partners, LLC (the "Desert Ridge Partnership") at a cost of $25,000 as of
December 31, 2002.  The Desert Ridge  Partnership  owns a resort which was under
construction  during the majority of 2002 and all of 2001. The resort opened for
business on November 30, 2002.  Limited golf course  operations  are included in
consolidated operations of the Company until the resort opened in late 2002. The
final costs of  construction  will be paid in early 2003. Upon  completion,  the
estimated total cost of the resort is expected to be $304,000.

     Waikiki Partnership.  The Company owns 49 percent of WB Resort Partners, LP
(the "Waikiki  Partnership")  at a cost of $42,000 as of December 31, 2002.  The
Waikiki Partnership owns the Waikiki Beach Marriott in Honolulu,  Hawaii,  which
was  undergoing  significant  renovations  for the  majority  of  2002,  and was
substantially  complete as of December 31, 2002. The total cost of the resort is
approximately $215,000.

     Hilton  Partnership.  The Company owns 70 percent of CNL HHC  Partners,  LP
(the  "Hilton  Partnership"),  which  owns four  Properties,  one each in Miami,
Florida, Costa Mesa, California,  Auburn Hills, Michigan and Portland,  Oregon,.
The total cost of the four  Properties  acquired by the Hilton  Partnership  was
approximately $215,929.

     Interstate  Partnership.  In  September  2002,  the Company  acquired an 85
percent interest in a Hampton Inn Property  located in Houston,  Texas in return
for an equity  contribution of approximately  $4,890. This Property was acquired
by a partnership  between the Company and Interstate Hotels and Resorts that was
originally  formed in November  2001.  The total  purchase  price of the Houston
Property  was  $14,300.  In  connection  with  this  purchase,   the  Interstate
Partnership  assumed a loan of  approximately  $9,300,  which is  secured by the
Property. This partnership also owns two other Properties located in Manchester,
Connecticut.

<PAGE>


     Mobil Travel  Guide.  In January  2002,  the Company  acquired a 25 percent
interest in a partnership with Publications International, Ltd. ("PIL"), Hilton,
and Marriott that owns a 77.5 percent interest in a partnership with Exxon Mobil
Corporation and PIL ("EMTG"). EMTG owns the licensing rights to the Mobil Travel
Guide. The licensing rights entitle EMTG to assemble, edit, publish and sell the
Mobil Travel Guide and use such rights to generate additional products using the
Mobil Travel Guide brand. The Company's required total capital  contribution was
approximately  $3,600. EMTG has engaged  Dustin/Massagli LLC, a company in which
one  of  the  Company's  directors  is  president,   a  director  and  principal
stockholder,  to manage its business.  In September 2002, the Company approved a
plan to contribute an additional  $894 to the  partnership  that owns EMTG. This
contribution, which increased the Company's ownership in the partnership from 25
percent to 31.25 percent, was made in December 2002.

     Office Building. In May 2002, the Company acquired a 10 percent interest in
CNL Plaza,  Ltd., a limited  partnership that owns an office building located in
Orlando,  Florida,  in which the Advisor and its affiliates  lease office space,
for $300. The remaining interest in the limited  partnership is owned by several
affiliates of the Advisor. In connection with this acquisition,  the Company has
severally  guaranteed a 16.67  percent  share,  or  approximately  $2,600,  of a
$15,500 unsecured promissory note of the limited partnership.

     San Francisco Partnership.  In June 2002, the Company acquired a 50 percent
interest  in  CY-SF  Hotel  Parent,  LP (the  "San  Francisco  Partnership"),  a
partnership  with  an  affiliate  of  Marriott.  The San  Francisco  Partnership
purchased a Courtyard by Marriott in downtown San  Francisco  for  approximately
$82,000.  The purchase was financed with equity investments of $13,000 each from
the Company  and  Marriott as well as $56,000 in  borrowings  consisting  of two
loans from a third-party lender.

     Hilton  2  Partnership.   On  December  13,  2002,  the  Company  formed  a
partnership (the "Hilton 2 Partnership") with Hilton of which the Company owns a
75 percent interest and Hilton owns a 25 percent interest. On December 24, 2002,
the Hilton 2 Partnership  acquired a Doubletree  hotel located in Dallas,  Texas
(the  "Doubletree  Lincoln Centre  Property")  and the Sheraton El  Conquistador
Resort and Country Club located in Tucson, Arizona. The Sheraton El Conquistador
Resort and Country Club was immediately converted to a Hilton Hotel (the "Hilton
El Conquistador  Resort Property").  The Hilton 2 Partnership expects to convert
the Doubletree Lincoln Centre Property into a Hilton hotel during the first half
of 2003. The total purchase price of the Properties was approximately $121,000.

Commitments and Contingencies

     From time to time the Company may be exposed to litigation arising from the
operation  of its  business.  At this time,  management  does not  believe  that
resolution of these matters will have a material adverse effect on the Company's
financial condition or results of operations.

     As of February  21,  2003,  the Company has  commitments  to (i) acquire or
develop three hotel  Properties for an anticipated  aggregate  purchase price of
approximately  $227,100,  (ii) complete  construction  on one Property,  with an
estimated additional cost of approximately  $13,000 and (iii) fund approximately
$10,000 for property  improvements in three existing  partnerships.  The Company
also has committed to fund its pro rata share of working capital  shortfalls and
construction  commitments for its  partnerships,  if shortfalls  arise,  and has
guaranteed the debt service for several of its  subsidiaries  and  partnerships.
The  acquisition  of  additional  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 these transactions will be entered into
by the Company. In order to enter into these and other transactions, the Company
must obtain additional funds through the receipt of additional offering proceeds
and/or advances on the Revolving LOC and permanent financing.

<PAGE>


     The Company has entered into an agreement whereby if certain conditions are
met, nine  Properties  currently  leased to third-party  tenants on a triple-net
basis,  must be assumed by the Company on or before March 31, 2004. In order for
this to occur,  the  Properties  must  have  operating  results  above a certain
minimum  threshold.  If these  conditions  are met and the  assumption  of these
leases does not occur by the stated  deadline,  the Company has agreed to return
security deposits it holds on three of the Properties which total  approximately
$3,200.  Both parties have agreed that should the conversion  occur, the Company
would not be obligated to pay any  additional  consideration  for the  leasehold
position and that the manager would participate,  through incentive fees, in any
additional earnings above what was otherwise the minimum rent. Additionally, the
Company would not be obligated to return the security deposits it holds on these
three Properties.

     In addition to its  commitments  to lenders under its loan  agreements  and
obligations  to fund Property  acquisitions  and  development,  the Company is a
party to  certain  contracts  which may  result in future  obligations  to third
parties.

     The following table  represents the Company's  contractual cash obligations
and related payment periods as of December 31, 2002:

<TABLE>
<S><C>

    Contractual Cash            Less than
      Obligations                1 Year          2-3 Years         4-5 Years        Thereafter          Total
-------------------------   ---------------   ---------------   ---------------   ---------------   ---------------
Mortgages and other notes
  payable (including
  Revolving LOC and
  other liabilities)        $     3,642       $   27,340        $   81,654        $  154,020        $  266,656
Refundable tenant
  security deposits                  --               --                --            12,883            12,883
                            ---------------   ---------------   ---------------   ---------------   ---------------
     Total                  $     3,642       $   27,340        $   81,654        $  166,903        $  279,539
                            ===============   ===============   ===============   ===============   ===============


     The following table represents the Company's  future potential  commitments
and  contingencies  and guarantees,  which can be assigned a monetary value, and
the related estimated expiration periods as of December 31, 2002:

   Commitments and
  Contingencies and              Less than
      Guarantees                  1 Year          2-3 Years         4-5 Years        Thereafter          Total
-------------------------   ---------------   ---------------   ---------------   ---------------   ---------------
Guarantee of unsecured
  promissory note of
  unconsolidated
  subsidiary                $        --       $    2,583        $       --        $       --        $    2,583
Earnout provision                    --            2,472                --                --             2,472
Marriott put option                  --               --                --            11,050            11,050
Irrevocable letter of
  credit                             --               --                --               775               775
Pending investments             250,100               --                --                --           250,100
                            ---------------   ---------------   ---------------   ---------------   ---------------

    Total                   $   250,100       $    5,055        $       --        $   11,825        $  266,980
                            ===============   ===============   ===============   ===============   ===============
</TABLE>

     The Company does not anticipate being required to fund any of the potential
commitments  in the above table  except for the pending  investments,  which are
subject to the completion of due diligence  procedures  and other  factors.  The
following   paragraphs  briefly  describe  the  nature  of  some  of  the  above
commitments and contractual cash obligations.

<PAGE>

     Earnout  Provisions  on Property  Acquisitions  - The Company is  currently
subject to earnout provisions on two of its Properties, whereby if the operating
performance  of the two  Properties  exceeds  a certain  pre-defined  threshold,
additional  consideration  will be due to the prior owner. The earnout provision
will  terminate on May 31, 2004,  at which time the Company will have no further
liability. The maximum amount of consideration that the Company may be obligated
to pay is approximately $2,472.

     Guarantee of Debt on Behalf of  Unconsolidated  Subsidiaries  - The Company
has  severally  guaranteed  16.67%  of a  $15,500  note  payable  on behalf of a
subsidiary of CNL Plaza,  Ltd. The maximum  obligation to the Company is $2,583,
plus  interest.  Interest  accrues at a rate of LIBOR  plus 200 basis  point per
annum on the unpaid principal amount.  This guarantee shall continue through the
loan maturity in November 2004.

     Guarantee of Other Obligations on Behalf of  Unconsolidated  Subsidiaries -
The  Company  has  generally  guaranteed,  in  connection  with loans to certain
unconsolidated  subsidiaries,  the payment of certain obligations that may arise
out of fraud or misconduct of the subsidiary borrower. This guarantee will be in
effect until the loans have been paid in full.

     Irrevocable  Letter of Credit - The  Company has  obtained  an  irrevocable
letter of credit for the  benefit of a lender in the amount of $775.  The letter
of credit is automatically extended each fiscal year until November 10, 2007.

     Refundable  Tenant  Security  Deposits - The Company is obligated to return
security deposits to unrelated third-party tenants at the end of the lease terms
in accordance  with the lease  agreements.  The Company has recorded a liability
for such security  deposits  totaling  approximately  $12,883 as of December 31,
2002.

     Marriott Put Option - Marriott has the right on certain  partnerships  with
the Company to require the Company to buy-out a portion of Marriott's ownership.
These rights are available if certain predefined operating results are obtained.
Should such  conditions  be met, the Company may be  obligated to buy  interests
valued at  approximately  $11,050.

Subsequent Events

     On February 20, 2003, the Company  contributed the Doubletree Crystal City,
and Hilton  contributed a Hilton  located in Rye, New York (the "Hilton Rye Town
Property"),  to the Hilton 2  Partnership.  Additionally,  on the same day,  the
Hilton 2  Partnership  acquired  three Embassy  Suite  Properties.  The Hilton 2
Partnership  obtained permanent financing of approximately  $145,000,  which was
allocated among these five  Properties.  The loan bears interest at 5.95 percent
per annum and  matures  on March 1,  2010.  Payments  of  interest  only are due
monthly until maturity.

     On February 20, 2003, the Company  acquired the Hyatt Regency Coral Gables,
located in Miami, Florida, for approximately $36,000. This property is leased to
a TRS of the Company and is managed by a subsidiary of Hyatt Hotels Corporation.

     During the period  January 1, 2003 through  February 21, 2003,  the Company
received  subscription  proceeds for an  additional  8,966  shares  ($89,656) of
common stock.

     On January 1, 2003 and February 1, 2003, the Company declared distributions
totaling approximately $8,152 and $8,490,  respectively,  or $0.064583 per share
of common stock, payable by March 31, 2003, to stockholders of record on January
1, 2003 and February 1, 2003, respectively.

     On February 7, 2003, at a meeting of the Board of Directors of the Company,
John A. Griswold  tendered his  resignation  as an  independent  director of the
Company's Board,  effective  immediately,  and the Board accepted Mr. Griswold's
resignation. Mr. Griswold stated that his reason for resigning as an independent
director  was not due to any  dispute or  disagreement  with the  Company or the
Board on any matter.  The  Company's  Articles of  Incorporation  provide that a
majority  of the  Board  of  Directors  be  independent  directors.  In order to
maintain the Board's independence,  Robert A. Bourne tendered his resignation as
a member of the Board and the Board  accepted  his  resignation.  As a result of
each of Mr. Griswold and Mr. Bourne's  resignations,  the Board anticipates that
it will  nominate a new  Independent  Director and ask Mr.  Bourne to rejoin the
Board  in  connection  with  the  Board  elections  to be held at the  Company's
upcoming annual meeting of stockholders.

<PAGE>

     In addition,  Thomas J. Hutchison III has been appointed Co-Chief Executive
Officer of both the Company and the Advisor,  effective  February 14, 2003.  Mr.
Hutchison  will tender his  resignation as President of both the Company and the
Advisor,  effective March 17, 2003, and Mr. Griswold will be appointed President
of the Company, effective March 17, 2003, as well as President and a Director of
the Advisor, also effective March 17, 2003.

     The Company currently is seeking  additional  Properties or other permitted
real estate related  investment  opportunities,  such as investments  into other
real estate companies or partnerships.

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,  and to fund Mortgage  Loans or other
permitted  investments.  At December  31,  2002,  the Company had  approximately
$48,993  invested  in such  short-term  investments  as  compared  to $44,825 at
December  31,  2001. A portion of this  represented  operating  cash held at the
Company's hotels. The increase in the amount invested in short-term  investments
was primarily attributable to cash received from the sale of common stock offset
by the acquisition of Properties during 2002.

Liquidity Requirements

     The Company expects to meet its liquidity  requirements,  including payment
of offering  expenses,  Property  acquisitions and  development,  investments in
Mortgage Loans and repayment of debt with proceeds from its offerings,  advances
under its Revolving LOC, cash flows from operations and refinancing of debt.

     Management  believes  that the Company  has  obtained  reasonably  adequate
insurance  coverage.  However,  certain types of losses,  such as from terrorist
attacks, may be either uninsurable,  too difficult to obtain or too expensive to
justify  insuring  against.  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 that a tenant or
manager's  insurance  policy lapses or is insufficient to cover a claim relating
to a Property  and covers the  Company's  interest in all  Properties  (with the
exception of the Desert Ridge  Resort  Property,  in which the Company owns a 44
percent interest, and the Waikiki Beach Property in which the Company owns a 49%
interest).

Distributions

     During the years  ended  December  31,  2002,  2001 and 2000,  the  Company
generated cash from operations of $70,340,  $52,937,  and $43,651  respectively.
The Company declared and paid distributions to its stockholders of approximately
$74,217,  $48,409 and $28,082 during the years ended December 31, 2002, 2001 and
2000,  respectively.  In addition,  on January 1, 2003 and February 1, 2003, the
Company declared  distributions to stockholders of record on January 1, 2003 and
February 1, 2003, totaling  approximately  $8,152 and $8,490,  respectively,  or
$0.064583 per share,  payable by March 31, 2003.  The increase in  distributions
was due to the increased cash flows  resulting  from the  additional  Properties
acquired during the year.

     For the years ended  December 31,  2002,  2001 and 2000,  approximately  51
percent, 52 percent and 63 percent,  respectively, of the distributions received
by  stockholders  were  considered to be ordinary  income and  approximately  49
percent,  48 percent and 37 percent,  respectively,  were considered a return of
capital  for  federal  income  tax  purposes.  No  amounts  distributed  to  the
stockholders  for the years ended December 31, 2002, 2001 and 2000 were 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>

Related Party Transactions

     Certain  directors and officers of the Company hold similar  positions with
the Advisor and its affiliates,  including the managing  dealer,  CNL Securities
Corp. These affiliates are by contract entitled to receive fees and compensation
for  services  provided in  connection  with  common  stock  offerings,  and the
acquisition,  development,  management and sale of the Company's assets.

     Amounts  incurred  relating to these  transactions  with affiliates were as
follows for the years ended December 31:

<TABLE>
<S><C>
                                                                                  2002                2001
                                                                               ------------       ------------
         CNL Securities Corp.:
              Selling commissions (the majority of which was
                 reallowed to unaffiliated broker-dealer firms)                  $  37,003           $ 21,804

              Marketing support fee and due diligence expense
                 reimbursements*                                                     2,448              1,351
                                                                               ------------       ------------
                                                                                    39,451             23,155
                                                                               ------------       ------------
         Advisor and its affiliates:
              Acquisition fees                                                      29,464             21,057
              Development fees                                                       1,896              2,107
              Asset management fees                                                  6,696              3,327
                                                                               ------------       ------------
                                                                                    38,056             26,491
                                                                               ------------       ------------
                                                                                 $  77,507           $ 49,646
                                                                               ============       ============

         * The majority of these fees and reimbursements were reallowed to unaffiliated broker-dealer firms.

</TABLE>

     Of these  amounts,  approximately  $1,916 and $1,026 is  included in due to
related parties in the accompanying  consolidated  balance sheets as of December
31, 2002 and December 31, 2001, respectively.

     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 follows  for the years ended
December 31:

<TABLE>
<S><C>
                                                                     2002               2001
                                                                --------------     --------------

           Stock issuance costs                                  $  3,128          $   4,705
           General operating and administrative expenses            1,128              1,092
                                                                --------------     --------------

                                                                 $  4,256          $   5,797
                                                                ==============     ==============

</TABLE>
     The Company maintains 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 bank was approximately
$14,861 and $6,928 at December 31, 2002 and 2001, respectively.

     EMTG,  a  partnership  in which the  Company has a 31.3  percent  interest,
engaged  Dustin/Massagli  LLC, a company in which one of the Company's directors
is president, a director and a principal stockholder, to manage its business.

 <PAGE>


Critical Accounting Policies

     Management   reviews  its  Properties  and  investments  in  unconsolidated
subsidiaries  periodically (no less than once per year) for impairment  whenever
events or changes in  circumstances  indicate  that the  carrying  amount of the
assets may not be recoverable through operations.  Management determines whether
impairment in value has occurred by comparing the estimated future  undiscounted
cash flows, including the residual value of the Property, with the carrying cost
of the individual Property.

     The  Company's  leases  have  been  accounted  for  as  operating   leases.
Management  estimates  the economic  life of the leased  property,  the residual
value of the leased  property and the present value of minimum lease payments to
be received  from the tenant.

     The Company accounts for its  unconsolidated  partnerships using the equity
method of accounting. Under generally accepted accounting principles, the equity
method of accounting is appropriate for subsidiaries that are partially owned by
the Company,  but for which  operations  of the investee are  controlled  by, or
control is shared with, an unrelated third-party. If consolidation was required,
amounts reported for net income and total stockholders' equity would be the same
as what would be reported under the equity method of accounting.

     Acquisition  costs that are directly  identifiable with Properties that are
probable of being acquired are  capitalized  and included in other assets.  Upon
the purchase of a Property,  the costs that are directly  identifiable with that
Property or investment are reclassified to land, building and equipment.  In the
event a Property is not acquired or, is no longer  expected to be acquired,  any
costs are charged to expense.

     In accordance with Staff  Accounting  Bulletin No. 101, the Company records
FF&E reserve income for cash transferred by third-party  tenants into restricted
FF&E accounts during the years ended December 31, 2002, 2001 and 2000. The funds
in the FF&E Accounts are maintained in a restricted cash account that the tenant
is expected  to use for  purposes  specified  in the lease.  Cash is  restricted
because the funds may only be expended  with regard to the specific  property to
which the funds  related  during the  period of the lease.  The cash in the FF&E
accounts,  any interest earned  thereon,  and any property  purchases  therewith
remain,  during and after the term of the lease, the property of the Company. To
the extent that funds in the FF&E  Accounts  are  insufficient  to maintain  the
Properties  in  good  working  condition  and  repair,   the  Company  may  make
expenditures,  in which case annual  minimum  rent is  increased.  FF&E  reserve
income is not  generated  from hotels  leased by TRS  entities  and  operated by
third-party  managers;  however,  cash  is  restricted  by the  Company  for the
purposes stated above. As the Company's  business shifts from leasing Properties
to acting as tenant for these  Properties  and engaging  third parties to manage
operations,  the amount of FF&E reserve  income is expected to decline.  For the
years ended  December  31, 2002,  2001 and 2000,  FF&E  reserve  income  totaled
approximately  $4,236,  $5,787 and $2,509,  respectively.  FF&E reserve funds of
approximately  $17,822  and $8,493  were  classified  as  restricted  cash as of
December 31, 2002 and 2001, respectively.

     In  connection  with the  assumption  of certain  third-party  leases,  the
Company has  incurred  certain  costs.  These costs have been  expensed as lease
termination  payments.  Additionally,  the third-party tenants agreed to forfeit
their rights to certain security deposits. These amounts have been recognized as
other income during 2002.

<PAGE>

                              Results of Operations
                              ---------------------
Comparison of year ended December 31, 2002 to year ended December 31, 2001

Revenue

     During the years ended December 31, 2002 and 2001, the Company earned hotel
operating  revenues of  approximately  $101,005  and $1,151,  respectively.  The
Company  earned rental income from  operating  leases and FF&E Reserve income of
approximately  $41,577 and $66,818  for the years  ended  December  31, 2002 and
2001,  respectively.  The  increase in hotel  revenue and the decrease in rental
income  and  FF&E  Reserve  income  was  due to  the  Company  investing  in new
Properties and leasing to TRS entities,  as well as taking  assignment of leases
on 18 existing  Properties  and engaging  third-party  managers to operate these
Properties during the year ended December 31, 2002. For these Properties, rental
income from  operating  leases that was  recorded in the past has been  replaced
with  hotel  operating  revenues  and  expenses  as of the time  that the  lease
assumption occurred.  Additionally, two Properties that were acquired at the end
of 2001  and all of the new  Properties  acquired  in  2002  are  leased  to TRS
entities of the Company or of its  partnerships  and operated using  third-party
managers.  Because of the  additional  acquisitions  in 2002 and the  additional
Property  acquisitions that are expected to occur, results of operations are not
expected to be indicative of future periods.

Interest and Other Income

     During the years  ended  December  31, 2002 and 2001,  the  Company  earned
approximately  $1,529  and  $3,494,   respectively,   in  interest  income  from
investments  in money  market  accounts  and  other  short-term,  highly  liquid
investments and from other income. The decrease in interest income was primarily
attributable  to a decrease in the average dollar amount  invested in short-term
liquid  investments,  a decrease in average  interest rate earned and the period
the funds  were  invested  during  2002 as  compared  to 2001.  As net  offering
proceeds are invested in long term assets, the percentage of the Company's total
revenues  from  interest  income will vary  depending  on the amount of offering
proceeds, the timing of investments and interest rates in effect.

     The increase in other income  during 2002 was  primarily  due to Marriott's
one time  forgiveness  of the amounts  previously  funded under  certain  credit
enhancements,  which  resulted in other income of  approximately  $10,397  being
recorded  during the fourth  quarter of 2002.  Additionally,  in June 2002,  the
Company recognized other income of approximately $1,900, representing the net of
the  release  of the  Company's  obligation  to repay  approximately  $5,500  in
security deposits  resulting from the assumption of leases on 11 of its existing
Properties   offset  by  the   assumption  of  a  liquidity   facility  loan  of
approximately $3,600.

Operating Expenses

     Operating  expenses,  including  amortization  and  depreciation,  interest
expenses and hotel expenses of  consolidated  subsidiaries,  were  approximately
$124,170  and  $43,893  for  the  years  ended   December  31,  2002  and  2001,
respectively  (79% and 61%,  respectively,  of total revenues).  The increase in
operating expenses during the year ended December 31, 2002, as compared to 2001,
was the result of the Company owning interests in 55 operating Properties during
2002  compared to 39 Properties  in 2001.  Additionally,  during the years ended
December 31, 2002 and 2001, the Company incurred hotel expenses of approximately
$65,601 and $1,516, respectively.  Additionally, interest expense increased from
$14,653 for 2001 to $18,330 for 2002,  primarily  due to increased  borrowing on
the Revolving LOC and proceeds from permanent financing.  Operating expenses are
expected to increase as the Company acquires interests in additional  Properties
and invests in Mortgage Loans or other permitted investments.  However,  general
operating  and  administrative  expenses,  exclusive of interest  expense,  as a
percentage  of total  revenues is  expected  to  decrease  as the Company  makes
additional  investments.  Asset  management fees increased from $3,327 to $6,696
for the  years  ended  December  31,  2001 and  2002,  respectively,  due to the
additional fees on newly acquired Properties.

Losses from Unconsolidated Subsidiaries

     Equity in losses of  unconsolidated  subsidiaries of approximately  $16,164
and $7,093 for the years ended  December 31, 2002 and 2001,  respectively,  were
primarily  due  to  pre-opening  and  marketing  expenses  incurred  during  the
construction  of a resort owned through a partnership,  losses at a resort owned
through a partnership which was open but undergoing significant  renovations and
losses at a startup  partnership  which owns the  licensing  rights to the Mobil
Travel  Guide.  Losses are expected to  moderate,  but continue in 2003 as these
properties establish market presence and capture market share.

<PAGE>

Net Earnings

     The decrease in earnings from the prior years was in part due to the effect
of the current economic  downturn on the U.S.  economy,  particularly the travel
and lodging  industry,  and the events of September  11,  2001,  offset by other
income from the  forgiveness  of the amounts  previously  funded  under  certain
credit   enhancements  and  other  income  recognized  from  the  assumption  of
third-party  leases during 2002, as discussed above. Net income recognized under
the TRS structure for leases  assumed from third parties is less than the rental
income received from these  Properties  during the year ended December 31, 2001.
This trend may continue until economic  stabilization  occurs.  Because revenues
have been  supported  by credit  enhancements,  net income may further  decrease
after  credit  enhancements  expire if the  Company's  hotel  operations  do not
stabilize prior to that time.

Comparison of year ended December 31, 2001 to year ended December 31, 2000

Revenues

     During the years  ended  December  31, 2001 and 2000,  the  Company  earned
rental income from operating  leases,  contingent rental income and FF&E Reserve
revenue of $66,818 and $26,682,  respectively.  The  increase in rental  income,
contingent rental income and FF&E Reserve income was due to the Company directly
owning 35 Properties  during the year ended December 31, 2001, as compared to 29
Properties during the year ended December 31, 2000. In addition,  several of the
Properties  which  were  owned for only a portion  of 2000 were owned for a full
year in 2001.

Interest and Other Income

     During the years  ended  December  31, 2001 and 2000,  the  Company  earned
$3,494 and $6,637,  respectively,  in interest income from  investments in money
market  accounts  and other  short-term,  highly  liquid  investments  and other
income. The decrease in interest income was primarily attributable to a decrease
in the average dollar amount  invested during the year 2001 as compared to 2000.
As net offering proceeds are invested in long-term assets, the percentage of the
Company's  total revenues from interest income is expected to remain constant or
decrease.

Operating Expenses

     Operating  expenses  were $43,893 and $13,526 for the years ended  December
31, 2001 and 2000, respectively (61% and 37%, respectively,  of total revenues).
The increase in operating  expenses  during the year ended December 31, 2001, as
compared to 2000, was the result of the Company directly owning 35 Properties in
2001  compared to 29  Properties  during 2000.  Additionally,  interest  expense
increased  from $2,384 for the year ended  December  31, 2000 to $14,653 for the
year ended December 31, 2001, as a result of securing financing.

Losses from Unconsolidated Subsidiaries

     Equity in loss of unconsolidated  subsidiaries were $7,093 and $387 for the
years ended December 31, 2001 and 2000,  respectively.  The increase in the loss
from  unconsolidated  subsidiaries  during the year ended December 31, 2001, was
due primarily to pre-opening and marketing expenses incurred by the Desert Ridge
Partnership  during the year ended December 31, 2001 and operating losses at the
Waikiki Beach Property  which  occurred as a result of a significant  portion of
the Waikiki Beach Property being closed for renovations.  Additional pre-opening
and marketing expenses were incurred during 2002 by the Desert Ridge Partnership
in  preparation  for the opening of the Desert Ridge  Property in November 2002.
Operating  losses at the  Waikiki  Beach  Property  will likely  continue  until
expected  renovations are completed and international  tourism rebounds from the
events of September 11, 2001.

Concentration of Risk

     A  significant  portion of the Company's  rental income and hotel  revenues
were earned from  properties  operating as various  Marriott and Hilton  brands.
Additionally,  the Company relies on Marriott to provide credit enhancements for
certain of its Properties. Although the Company intends to acquire Properties in
various states and regions,  carefully  screens its managers and tenants and has
obtained interests in non-Marriott and non-Hilton branded Properties, failure of
the Company's hotels or the Marriott or Hilton brands could significantly impact
the results of operations of the Company.  Management  believes that the risk of
such a default will be reduced through future acquisitions and  diversification,
and through the initial and continuing due diligence procedures performed by the
Company.

<PAGE>

Current Economic Conditions

     Early in 2001,  the U.S.  economy  was  negatively  impacted  by a  general
slowdown in business  activity,  which  began to affect the hotel  industry.  In
addition to the general decline in business  activity,  the attacks on the World
Trade Center and the Pentagon on September 11, 2001 further  adversely  impacted
economic  activity  during  the  months  following  the  attacks,   particularly
affecting the travel, airline and lodging industries.  The economic slowdown has
continued  through  2002 and is  currently  expected by  management  to continue
throughout  2003. As a result of these  conditions,  most of our hotel operators
and managers have reported declines in the operating  performance of our hotels.
Many of our leases and operating  agreements contain features such as guarantees
which are intended to require  payment of minimum returns to the Company despite
operating  declines  at our  hotels.  However,  there is no  assurance  that the
existence of credit  enhancements  will  provide the Company with  uninterrupted
cash flows to the extent that the recovery is  prolonged.  Additionally,  if our
tenants,  hotel managers or guarantors  default in their  obligations to us, the
Company's  revenues  and cash flows may decline or remain at reduced  levels for
extended periods. Any U.S. participation in a war with Iraq or other significant
military  activity  could  have  additional  adverse  effects  on  the  economy,
including the travel and lodging industries.

     An  uninsured  loss or a loss in  excess of  insured  limits  could  have a
material  adverse  impact on the  operating  results of the Company.  Management
feels that the Company has obtained  reasonably  adequate  insurance coverage on
its  Properties.  However,  certain  types  of  losses,  such as from  terrorist
attacks, may be either uninsurable,  too difficult to obtain or too expensive to
justify insuring against.

     From time to time the Company may be exposed to litigation arising from the
operation of its business. Management does not believe that resolutions of these
matters will have a material adverse effect on the Company's financial condition
or results of operations.

     Management of the Company currently knows of no other trends that will have
a  material  adverse  effect on  liquidity,  capital  resources  or  results  of
operations.

Hotel Operating Statistics

     Management  regularly  reviews  operating  statistics  such as revenue  per
available  room  ("REVPAR"),  average  daily rate  ("ADR") and  occupancy at the
Company's  Properties in order to gauge how well they are performing as compared
with the industry and past results.  Out of the 55 total  Properties owned as of
December 31, 2002, the Company has  year-to-year  comparative  data on 26 of the
Properties.  The  Company  did not  operate or have  interests  in all of the 26
Properties  used in the table below  during the year ended  December  31,  2001;
however,  the operating  results for these  Properties were used for comparative
purposes and analysis of performance.

     The  following  table  summarizes  REVPAR,  ADR  and  occupancy  for  these
Properties for the years ended December 31, 2002 and 2001.

                                            Year Ended
                                            December 31,
                                        2002          2001           Variance
                                        ----          ----           --------
      North America (26 hotels)
                REVPAR                 $61.22        $62.54            -2.1%
                ADR                    $90.41        $98.13            -7.9%
                Occupancy               67.7%         63.7%             6.2%

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.
(in thousands, except per share data)

     See "Item 7.  Management's  Discussion and Analysis of Financial  Condition
and Results of Operations - Market Risk" for information related to quantitative
and qualitative disclosure about market risk.

<PAGE>



Item 8.   Financial Statements and Supplementary Data
(in thousands, except per share data)

     The following table presents selected  unaudited  quarterly  financial data
for each full quarter during the years ended December 31, 2002 and 2001:


<TABLE>
<S><C>

     2002 Quarter              First            Second             Third             Fourth              Year
----------------------    --------------    --------------    --------------    --------------    --------------
Revenues                  $    27,147       $   32,306        $   46,276        $    50,679       $    156,408

Net income                      3,651            4,757             2,343              5,059             15,810
Earning per share:
  Basic                          0.05             0.05              0.02               0.04               0.16
  Diluted                        0.05             0.05              0.02               0.04               0.16

     2001 Quarter              First            Second             Third             Fourth              Year
----------------------    --------------    --------------    --------------    --------------    --------------

Revenues                  $    16,713       $   18,202        $   19,029        $    17,519       $     71,463

Net income                      5,529            7,058             3,890              2,851             19,328
Earning per share:
  Basic                          0.11             0.12              0.06               0.01               0.30
  Diluted                        0.11             0.12              0.06               0.01               0.30

</TABLE>


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES


                                    CONTENTS
                                    --------


                                                                        Page

Report of Independent Certified Public Accountants                       30

Financial Statements:

     Consolidated Balance Sheets                                         31

     Consolidated Statements of Earnings                                 32

     Consolidated Statements of Stockholders' Equity                     33

     Consolidated Statements of Cash Flows                               36

     Notes to Consolidated Financial Statements                          39


<PAGE>

               Report of Independent Certified Public Accountants


To the Board of Directors and Stockholders
CNL Hospitality Properties, Inc.



In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of earnings,  of stockholders' equity and of cash flows
present  fairly,  in  all  material  respects,  the  financial  position  of CNL
Hospitality Properties, Inc. and its subsidiaries at December 31, 2002 and 2001,
and the results of their  operations  and their cash flows for each of the three
years in the period  ended  December  31,  2002 in  conformity  with  accounting
principles  generally accepted in the United States of America. In addition,  in
our opinion,  the financial  statement  schedule  listed in the index  appearing
under Item 15(a)(2) presents fairly, in all material  respects,  the information
set  forth  therein  when  read in  conjunction  with the  related  consolidated
financial  statements.  These financial  statements and the financial  statement
schedule are the responsibility of the Company's management;  our responsibility
is to  express  an  opinion  on these  financial  statements  and the  financial
statement  schedule  based on our  audits.  We  conducted  our  audits  of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States of America,  which  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.




/s/ PRICEWATERHOUSECOOPERS, LLP

Orlando, Florida

February 21, 2003

<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except per share data)
<TABLE>
<S><C>

                                                                                December 31,
                                                                           2002            2001
                                                                     ------------    ------------
                                ASSETS
    Land, buildings and equipment, less accumulated depreciation
       of $56,408 and $29,182, respectively                          $   988,646     $   699,240
    Investment in unconsolidated subsidiaries                            202,554         135,271
    Cash and cash equivalents                                             48,993          44,825
    Restricted cash                                                       18,822           8,493
    Receivables                                                           11,382             672
    Due from related parties                                               3,164           2,006
    Prepaid expenses and other assets                                     25,177           6,796
    Loan costs, less accumulated amortization of $2,131 and
       $980, respectively                                                  5,122           4,103
                                                                     ------------    ------------
                                                                     $ 1,303,860     $   901,406
                                                                     ============    ============

                    LIABILITIES AND STOCKHOLDERS' EQUITY
    Mortgages payable and accrued interest                           $   207,206     $   168,884
    Other notes payable                                                   29,739          57,572
    Line of credit                                                        24,079           7,500
    Other liabilities                                                      5,632              --
    Accounts payable and accrued expenses                                  9,256           8,269
    Distributions payable                                                    106              88
    Due to related parties                                                 2,460           1,026
    Security deposits                                                     12,883          19,455
    Rents paid in advance                                                     --             736
                                                                     ------------    ------------
            Total liabilities                                            291,361         263,530
                                                                     ------------    ------------

    Commitments and contingencies

    Stockholders' equity:
       Preferred stock, without par value.
          Authorized and unissued 3,000 shares                                --              --
       Excess shares, $.01 par
       value per share.
          Authorized and unissued 63,000 shares                               --              --
       Common stock, $.01 par value per share. Authorized
          450,000 and 150,000 shares, respectively; issued
          126,802 and 77,891 shares, respectively;
          outstanding 126,030 and 77,358 shares,
          respectively                                                     1,260             773
       Capital in excess of par value                                  1,115,745         681,152
       Accumulated distributions in excess of net earnings               (98,366)        (39,959)
       Accumulated other comprehensive loss                               (4,316)         (1,190)
       Minority interest distributions in excess of contributions
          and accumulated earnings                                        (1,824)         (2,900)
                                                                     ------------    ------------
            Total stockholders' equity                                 1,012,499         637,876
                                                                     ------------    ------------
                                                                     $ 1,303,860     $   901,406
                                                                     ============    ============

</TABLE>

                    See accompanying notes to consolidated financial statements.

<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                      (in thousands, except per share data)
<TABLE>
<S><C>

                                                                    Year Ended December 31,
                                                           2002               2001               2000
                                                       -------------       -------------       -------------

      Revenues:
          Hotel revenues                                 $  101,005          $   1,151           $     --
          Rental income from operating leases                37,341             61,031             24,173
          FF&E reserve income                                 4,236              5,787              2,509
          Dividend income                                        --                 --              2,780
          Interest and other income                          13,826              3,494              6,637
                                                       -------------       -------------       -------------
                                                            156,408             71,463             36,099
                                                       -------------       -------------       -------------

      Expenses:
          Hotel expenses                                     65,601              1,516                 --
          Interest and loan cost amortization                18,330             14,653              2,384
          General operating and administrative                5,667              4,648              1,977
          Asset management fees to related
             parties                                          6,696              3,327              1,335
          Depreciation and amortization                      27,876             19,749              7,830
                                                       -------------       -------------       -------------
                                                            124,170             43,893             13,526
                                                       -------------       -------------       -------------

      Earnings before equity in loss of
          unconsolidated subsidiaries and
          minority interest                                  32,238             27,570             22,573

      Equity in loss of unconsolidated
          subsidiaries                                      (16,164)            (7,093)              (387)

      Minority interest                                        (264)            (1,149)            (1,516)
                                                       -------------       -------------       -------------

      Net earnings                                       $   15,810          $  19,328          $  20,670
                                                       =============       =============       =============

      Earnings per share of common stock:
            Basic                                        $     0.16          $    0.30          $    0.53
                                                       =============       =============       =============
            Diluted                                      $     0.16          $    0.30          $    0.53
                                                       =============       =============       =============

      Weighted average number of shares of common stock
         outstanding:
            Basic                                            97,874             64,458             38,698
                                                       =============       =============       =============
            Diluted                                          97,874             64,458             45,886
                                                       =============       =============       =============


</TABLE>




          See accompanying notes to consolidated financial statements.

<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                  Years Ended December 31,2002, 2001 and 2000
                     (in thousands, except per share data)

<TABLE>
<S><C>

                                                                                                              Minority
                                                                                                              interest
                                                                                                             distribu-
                                                                                  Accumulated                tions in
                                                  Common Stock                     distribu-   Accumulated   excess of
                                            -----------------------   Capital in   tions in       other      contr. and
                                            Number of        Par       excess of   excess of    comprehen-     accum.
                                              shares        value      par value  net earnings  sive loss     earnings       Total
                                            ----------   ----------   ----------   ----------   ----------   ----------   ----------
     Balance at December 31, 1999              28,903    $     289    $ 256,232    $  (3,466)   $      --    $      --    $ 253,055

     Subscriptions received for
       common stock through public
       offerings and distribution
       reinvestment plan                       20,368          203      203,480           --           --           --      203,683

     Retirement of common stock                  (269)          (2)      (2,501)          --           --           --       (2,503)

     Stock issuance costs                          --           --      (24,808)          --           --           --      (24,808)

     Net earnings                                  --           --           --       20,670           --           --       20,670

     Minority interest distributions in
         excess of contributions and
         accumulated earnings                      --           --           --           --           --       (2,726)      (2,726)

     Current period adjustments to
         recognize value of cash flow
         hedges of equity investees                --           --           --           --           --           --           --

     Total comprehensive income                    --           --           --           --           --           --           --

     Distributions declared and paid
         ($.74 per share)                          --           --           --      (28,082)          --           --      (28,082)


                                            ----------   ----------   ----------   ----------   ----------   ----------   ----------
     Balance at December 31, 2000              49,002    $     490    $ 432,403    $ (10,878)   $      --    $  (2,726)   $ 419,289
                                            ==========   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      AND COMPREHENSIVE INCOME - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)
<TABLE>
<S><C>



                                                                                                 Minority
                                                                                                 interest
                                                                                                distribu-
                                                                     Accumulated                tions in
                                     Common Stock                     distribu-   Accumulated   excess of
                               -----------------------   Capital in   tions in       other      contr. and
                               Number of        Par       excess of   excess of    comprehen-     accum.                 Comprehen-
                                 shares        value      par value  net earnings  sive loss     earnings       Total    sive income
                               ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------

 Balance at December 31, 2000     49,002    $     490    $ 432,403    $ (10,878)   $      --    $  (2,726)   $ 419,289    $      --

 Subscriptions received for
   common stock through public
   offerings and distribution
   reinvestment plan              28,607          286      285,783           --           --           --      286,069           --

 Retirement of common stock         (251)          (3)      (2,310)          --           --           --       (2,313)          --

 Stock issuance costs                 --           --      (34,724)          --           --           --      (34,724)          --

 Net earnings                         --           --           --       19,328           --           --       19,328       19,328

 Minority interest distribu-
   tions in excess of contri-
   butions and accumulated
   earnings                           --           --           --           --           --         (174)        (174)          --

 Current period adjustments to
   recognize value of cash
   flow hedges of equity
   investees                          --           --           --           --       (1,190)          --       (1,190)      (1,190)
                                                                                                                          ----------

 Total comprehensive income           --           --           --           --           --           --           --     $ 18,138
                                                                                                                          ==========
 Distributions declared and
   paid ($.77 per share)              --           --           --      (48,409)          --           --      (48,409)

                               ----------   ----------   ----------   ----------   ----------   ----------   ----------
 Balance at December 31, 2001     77,358    $     773     $681,152    $ (39,959)   $  (1,190)   $  (2,900)   $ 637,876
                               ==========   ==========   ==========   ==========   ==========   ==========   ==========


</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                      AND COMPREHENSIVE INCOME - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

<TABLE>
<S><C>




                                                                                                 Minority
                                                                                                 interest
                                                                                                 distribu-
                                                                      Accumulated                tions in
                                      Common Stock                     distribu-   Accumulated   excess of
                               -----------------------   Capital in   tions in       other      contr. and
                               Number of        Par       excess of   excess of    comprehen-     accum.                 Comprehen-
                                 shares        value      par value  net earnings  sive loss     earnings       Total    sive income
                               ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------


Balance at
  December 31, 2001               77,358    $     773    $ 681,152    $ (39,959)   $  (1,190)   $  (2,900)   $  637,876   $      --

Subscriptions received for
  common stock through public
  offerings and distribution
  reinvestment plan               48,911          489      488,622            --          --           --       489,111          --

Retirement of common stock          (239)         (2)       (2,389)           --          --           --        (2,391)         --

Stock issuance costs                  --           --      (51,640)           --          --           --       (51,640)         --

Net earnings                          --           --           --       15,810          --           --         15,810      15,810

Minority interest distribu-
  tions in excess of contribu-
  tions and accumulated
  earnings                            --           --           --            --          --        1,076         1,076          --

Current period adjustments to
  recognize value of cash flow
  hedges of equity investees          --           --           --            --      (3,126)          --        (3,126)     (3,126)
                                                                                                                          ----------

Total comprehensive income            --           --           --            --          --           --            --   $  12,684
                                                                                                                          ==========
Distributions declared and paid
  ($.78  per share)                   --           --           --      (74,217)         --           --        (74,217)
                               ----------   ----------   ----------   ----------   ----------   ----------   ----------

Balance at December 31, 2002     126,030    $   1,260    $1,115,745   $ (98,366)   $  (4,316)   $  (1,824)   $1,012,499
                               ==========   ==========   ==========   ==========   ==========   ==========   ==========

</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>





                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<S><C>

                                                                      Years Ended December 31,
                                                              2002               2001               2000
                                                         -------------      -------------      -------------

Cash flows from operating activities:
   Net earnings                                           $   15,810         $   19,328         $   20,670
    Adjustments to reconcile net earnings to net
      cash provided by operating activities:
        Depreciation                                          27,876             19,749              7,830
        Amortization                                           1,151              1,181                 66
        Distributions from investment in
          unconsolidated subsidiaries, net of
          equity in earnings/losses                           30,728              9,277              1,124
        Minority interest                                        264              1,149              1,516
        Changes in operating assets and liabilities:
          Dividends receivable                                    --                 --              1,216
          Receivables                                        (10,710)              (257)              (813)
          Due from related parties                            (1,158)                --                 --
          Prepaid expenses                                      (623)               (23)                20
          Accrued rental income                                  306                 (8)              (124)
          Accounts payable and accrued expenses                6,920                374                861
          Due to related parties - operating expenses          1,434               (333)               361
          Credit enhancements                                  2,056                 --                 --
          Security deposits                                   (2,978)             4,036             10,377
          Rents paid in advance                                 (736)            (1,536)               547
                                                         -------------      -------------      -------------

            Net cash provided by operating
              activities                                      70,340             52,937             43,651
                                                         -------------      -------------      -------------

Cash flows from investing activities:
    Additions to hotel Properties                           (307,447)          (117,233)          (310,712)
    Investment in unconsolidated subsidiaries                (95,026)          (129,033)           (10,174)
    Acquisition of additional interest in Hotel
      Investors, net of Hotel Investors' cash                     --            (32,884)           (17,873)
    Deposit on Property and other Investments                (10,300)                --                 --
    Increase in certificate of deposit                            --                 --              5,000
    Increase in restricted cash                              (10,329)            (5,230)            (2,988)
    Increase (decrease) in other assets                      (29,643)           (11,611)             2,510
                                                         -------------      -------------      -------------

            Net cash used in investing activities           (452,745)          (295,991)          (334,237)
                                                         -------------      -------------      -------------

</TABLE>



          See accompanying notes to consolidated financial statements.


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                                 (in thousands)

<TABLE>
<S><C>
                                                                      Years Ended December 31,
                                                               2002               2001              2000
                                                         -------------      -------------      -------------
Cash flows from financing activities:
   Proceeds, net of repayments, from borrowings
      on line of credit                                       16,579              7,500                 --
    Payment of loan costs                                     (2,170)            (2,954)            (1,343)
    Proceeds from mortgage loans and other
      notes payable                                           40,070             37,990            102,082
    Principal payments on mortgage loans                      (1,748)            (1,171)                --
    Payments on other notes                                  (26,607)                --                 --
    Subscriptions received from stockholders                 489,111            286,069            203,683
    Distributions to stockholders                            (74,217)           (48,409)           (28,082)
    Due from related parties - offering expenses                  --             (1,411)                --
    Distributions to minority interest                          (414)            (2,896)           (10,218)
    Retirement of common stock                                (2,391)            (2,313)            (2,503)
    Payment of stock issuance costs                          (51,640)           (34,724)           (24,808)
                                                         -------------      -------------      -------------
      Net cash provided by financing activities              386,573            237,681            238,811
                                                         -------------      -------------      -------------
Net increase (decrease) in cash and cash
    equivalents                                                4,168             (5,373)           (51,775)

Cash and cash equivalents at beginning of year                44,825             50,198            101,973
                                                         -------------      -------------      -------------
Cash and cash equivalents at end of year                   $  48,993         $   44,825          $  50,198
                                                         =============      =============      =============


</TABLE>








          See accompanying notes to consolidated financial statements.


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                                 (in thousands)
<TABLE>
<S><C>

                                                                       Years Ended December 31,
                                                              2002               2001              2000
                                                         -------------      -------------      -------------

Supplemental disclosures of cash flow information:

      Cash paid during the year for interest               $  16,854          $  15,248          $   1,802
                                                         =============      =============      =============

Supplemental schedule of non-cash investing activities:

      Amounts incurred but not paid for
          construction in progress                         $     668          $   6,601          $     833
                                                         =============      =============      =============

      Allocation of acquisition fees included in
          other assets to investment in hotel
          subsidiaries and operating leases                $  21,879          $  10,657          $  16,182
          Properties and unconsolidated                  =============      =============      =============

Supplemental schedule of non-cash financing activities:

      Non-cash reduction in TIF Note                       $   1,227          $      --          $     315
                                                         =============      =============      =============

      Assumption of other liabilities with
          Crestline lease assumption                       $   3,576          $      --          $      --
                                                         =============      =============      =============

      Distributions declared not paid to minority
          interest at year end                             $     106          $      88          $   1,089
                                                         =============      =============      =============


</TABLE>









          See accompanying notes to consolidated financial statements.


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

1.   Organization:
     ------------

     CNL Hospitality Properties,  Inc., (the "Company"),  was organized pursuant
     to the laws of the State of Maryland on June 12, 1996. The terms  "Company"
     or  "Registrant"  include,  unless  the  context  otherwise  requires,  CNL
     Hospitality Properties, Inc., CNL Hospitality Partners, LP, CNL Hospitality
     GP Corp., CNL Hospitality LP Corp., CNL Philadelphia  Annex, LLC, CNL Hotel
     Investors,  Inc., CNL LLB SHS Management, LP, CNL LLB F-Inn Management, LP,
     CNL LLB C-Hotel Management, LP, CNL Bridgewater Hotel Partnership,  LP, CNL
     MI-4 Hotel, LP and each of their wholly owned subsidiaries.  Various wholly
     owned  subsidiaries are utilized to hold or develop hotel  properties.  The
     Company  operates  for  federal  income  tax  purposes  as  a  real  estate
     investment trust (a "REIT") and is engaged in the acquisition and ownership
     of hotel properties ("Properties").

     The Company  generally  leases its  Properties to wholly owned taxable REIT
     subsidiary  ("TRS")  entities and contracts  with  third-party  managers to
     operate the  Properties.  Hotel  operating  revenues and expenses for these
     Properties are included in the  consolidated  results of operations.  Other
     Properties  are  leased  on a  triple-net  basis to  unrelated  third-party
     tenants who operate the  Properties or contract with hotel  managers to run
     their hotel operations.  Rental income from operating leases is included in
     the  consolidated  results of operations for these  Properties.  All of the
     Properties  acquired in 2002 are, and Properties acquired in the future are
     generally   expected  to  be,   leased  to  the   Company's  TRS  entities.
     Additionally,  several  previously  entered  into  third-party  leases were
     assumed during 2002 and additional  leases may be assumed by the Company in
     the  future.  With  respect to certain of its  Properties,  the Company has
     received various credit  enhancement  guarantees from third-party  managers
     who,  subject to certain  limitations,  have  guaranteed a certain level of
     performance for Properties they manage.

2.   Summary of Significant Accounting Policies:
     ------------------------------------------

     Principles  of  Consolidation  - The  accompanying  consolidated  financial
     statements  include the accounts of CNL Hospitality  Properties,  Inc., and
     each  of  its  wholly  owned  and  majority  controlled  subsidiaries.  All
     significant  intercompany balances and transactions have been eliminated in
     consolidation.  Interests of  unaffiliated  third  parties are reflected as
     minority  interest for less than 100 percent owned and majority  controlled
     entities.

     Lease  Accounting - The Company leases its  Properties  primarily to wholly
     owned TRS entities and contracts with  third-party  managers to operate the
     Properties.  Hotel operating revenues and expenses for these Properties are
     included in the consolidated results of operations of the Company.

     Other  Properties  are leased to, and  operated by,  unrelated  third-party
     tenants  on  a  "triple-net"   basis,   whereby  the  tenant  is  generally
     responsible for all Property operating expenses,  including property taxes,
     insurance,  maintenance  and repairs.  Rental  income from these  operating
     leases is included in the Company's  consolidated results of operations for
     these Properties.

     Third-party  Property leases are accounted for using the operating  method.
     When  minimum  lease  payments  vary  during  the  lease  term,  income  is
     recognized on a  straight-line  basis so as to produce a constant  periodic
     rent over the lease term. Accrued rental income,  included in other assets,
     represents  the aggregate  amount of income  recognized on a  straight-line
     basis in excess of scheduled payments to date.



<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

2.   Summary of Significant Accounting Policies - Continued:
     ------------------------------------------------------

     The  Company's  leases also  require  the  establishment  of separate  bank
     accounts for the  replacement  of  furniture,  fixtures,  and equipment and
     routine  capital items ("FF&E  Accounts").  Deposits into the FF&E Accounts
     established for the Properties  leased to third-party  tenants are owned by
     the  Company  and have been  reported as  additional  rent  ("FF&E  Reserve
     Revenue")  for the years ended  December 31, 2002,  2001 and 2000.  For the
     years  ended  December  31,  2002,  2001 and 2000,  revenues  from the FF&E
     Reserve  Revenue  totaled   approximately   $4,236,   $5,787,  and  $2,509,
     respectively.  For these  Properties,  the funds in the FF&E  Accounts  are
     maintained in a restricted  cash account,  funded by the tenant,  which the
     tenant is  expected to use for  purposes  specified  in the lease.  Cash is
     restricted  because  the  funds  may only be  expended  with  regard to the
     specific  Property  to which the funds  related  during  the  period of the
     lease. The cash in the FF&E Accounts,  any interest earned thereon, and any
     property  purchases  therewith  remain,  during  and  after the term of the
     lease,  the property of the Company.  FF&E Reserve Revenue is not generated
     from  Properties  leased  by  TRS  entities  and  operated  by  third-party
     managers;  however, with respect to Properties leased by TRS entities, cash
     is restricted by the Company for the purposes  stated above.  To the extent
     that funds in the FF&E Accounts are insufficient to maintain the Properties
     in good working condition and repair, the Company may make expenditures, in
     which case annual minimum rent and minimum returns are increased.

     Hotel Properties - Hotel Properties are comprised of land,  buildings,  and
     equipment and are recorded at historical cost. The cost of improvements and
     betterments and any interest incurred during the construction or renovation
     periods for hotel construction  projects are capitalized.  Costs of repairs
     and maintenance  are expensed as incurred.  During the years ended December
     31,  2002  and  2001,   approximately  $642  and  $1,552  in  interest  was
     capitalized, respectively.

     Buildings and equipment are  depreciated on the  straight-line  method over
     their estimated useful lives of 40 and seven years, respectively.  When the
     Properties  or  equipment  are  sold,  the  related  cost  and  accumulated
     depreciation  will be removed  from the  accounts and any gain or loss from
     sale will be reflected as income.

     Impairment  of  Long-Lived  Assets - Effective  January 1, 2002 the Company
     adopted Statement of Financial Accounting Standards No. 144 "Accounting for
     the Impairment or Disposal of Long-Lived  Assets".  This statement requires
     that a long-lived  asset be tested for  recoverability  whenever  events or
     changes  in  circumstances  indicate  that its  carrying  amount may not be
     recoverable.  The carrying amount of a long-lived  asset is not recoverable
     if it exceeds the sum of the  undiscounted  cash flows  expected to result
     from the use and eventual disposition of the asset. The assessment is based
     on the  carrying  amount  of  the  asset  at  the  date  it is  tested  for
     recoverability.  An impairment  loss is recognized when the carrying amount
     of a  long-lived  asset  exceeds  its  fair  value.  If  an  impairment  is
     recognized,  the adjusted  carrying amount of a long-lived asset is its new
     cost basis. The statement also requires that the results of operations of a
     component of an entity that either has been disposed of or is classified as
     held for sale be reported as a discontinued operation.

     Investment in  Unconsolidated  Subsidiaries - Investments in unconsolidated
     subsidiaries  are accounted for under the equity method of accounting since
     the decision  making  authority and control is shared.  All major decisions
     are  subject to  approval  of both  parties  concerning  all aspects of the
     entities'  operations.  In the event of a  disagreement  among the parties,
     binding arbitration is generally used to settle disagreements.  At December
     31, 2002,  the  difference  between the  Company's  carrying  amount of its
     investments in unconsolidated subsidiaries and the underlying equity in the
     net assets of the subsidiaries was approximately $22,829 due to acquisition
     fees and expenses  which have been  allocated to the Company's  investment.
     These amounts are being amortized over the estimated lives of the buildings
     and equipment commencing when the hotel begins operations.

     Cash and  Cash  Equivalents  - The  Company  considers  all  highly  liquid
     investments  with an original  maturity of three  months or less to be cash
     equivalents.  Cash and cash  equivalents  consist  of  demand  deposits  at
     commercial  banks  and money  market  funds  (some of which  are  backed by
     government  securities).  Cash  equivalents are stated at cost plus accrued
     interest,  which  approximates  market value.  Cash accounts  maintained on
     behalf of the  Company in demand  deposits  at  commercial  banks and money
     market funds may exceed federally insured levels;  however, the Company has
     not  experienced  any  losses in such  accounts.  Management  believes  the
     Company is not  exposed  to any  significant  credit  risk on cash and cash
     equivalents.

<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

2.   Summary of Significant Accounting Policies - Continued:
     ------------------------------------------------------

     Certain  amounts of cash are restricted for  maintenance and replacement of
     furniture,   fixtures,   and  equipment  at  the  Company's  various  hotel
     Properties.  These  amounts have been  separately  classified as restricted
     cash in the accompanying  consolidated balance sheets. In addition,  $1,000
     has been restricted to be used for capital improvements on one Property.

     Loan Costs - Loan costs incurred in connection  with securing  financing of
     the Company's  various  acquisitions and developments have been capitalized
     and are being amortized over the terms of the loans using the straight-line
     method, which approximates the effective interest method.

     Earnings Per Share - Basic  earnings per share ("EPS") is calculated  based
     upon the  weighted  average  number of shares of common  stock  outstanding
     during each year, and diluted  earnings per share is calculated  based upon
     weighted  average  number of common  shares  outstanding  plus  potentially
     dilutive common shares.

     Reclassification - Certain items in the prior years' consolidated financial
     statements have been  reclassified  to conform with the 2002  presentation.
     These  reclassifications  had no  effect  on  stockholders'  equity  or net
     earnings.

     Income  Taxes - Under  the  provisions  of the  Internal  Revenue  Code and
     applicable  state  laws,  each TRS  entity of the  Company  is  subject  to
     taxation of income on the profits and losses from its tenant operations.

     The Company accounts for federal and state income taxes with respect to its
     TRS subsidiaries using the asset and liability method.  Deferred tax assets
     and liabilities are recognized for the future tax consequences attributable
     to  differences  between the  consolidated  financial  statements  carrying
     amounts of existing  assets and  liabilities  and  respective tax bases and
     operating  losses and tax-credit  carry  forwards.  Deferred tax assets and
     liabilities  are  measured  using  enacted  tax rates  expected to apply to
     taxable  income  in the  years in which  those  temporary  differences  are
     expected to be recovered or settled.  The effect on deferred tax assets and
     liabilities  of a change in tax rates is recognized in income in the period
     that includes the enactment date. Valuation allowances are established when
     necessary  to reduce  deferred  tax  assets to the  amount  expected  to be
     realized.

     Segment  Information - The Company derives all significant  revenues from a
     single line of business, hotel real estate ownership.

     Recent  Accounting  Pronouncements  - In January  2003,  FASB  issued  FASB
     Interpretation  No. 46 ("FIN  46"),  "Consolidation  of  Variable  Interest
     Entities" to expand upon and strengthen  existing  accounting guidance that
     addresses  when a  company  should  include  the  assets,  liabilities  and
     activities  of  another  entity in its  financial  statements.  To  improve
     financial  reporting by companies  involved with variable interest entities
     (more commonly referred to as special-purpose entities or off-balance sheet
     structures),  FIN 46 requires that a variable interest entity be considered
     by a company if that company is subject to a majority risk of loss from the
     variable interest entity's  activities or entitled to receive a majority of
     the entity's residual returns or both. Prior to FIN 46, a company generally
     included another entity in its consolidated financial statements only if it
     controlled the entity through voting  interests.  Consolidation of variable
     interest  entities  will  provide  more  complete   information  about  the
     resources,   obligations,  risks  and  opportunities  of  the  consolidated
     company.  The  consolidation  requirements  of FIN 46 apply  immediately to
     variable  interest  entities  created after January 31, 2003,  and to older
     entities in the first fiscal year or interim  period  beginning  after June
     15, 2003. As of December 31, 2002,  the Company is evaluating the effect of
     FIN 46. It is reasonably  possible  that some or all of the  unconsolidated
     subsidiaries in Note 4, "Investments in Unconsolidated Subsidiaries" may be
     required to be consolidated or may require additional disclosures when this
     interpretation  becomes  effective.  See  Note  4 for a  discussion  of the
     purpose,  size,  and activities of these  entities.  Under the terms of the
     entities' formation agreements, the Company is required to fund its prorata
     share  of  losses  of these  entities  in order  to  maintain  its  current
     ownership  share.  The Company has also guaranteed a portion of the debt on
     CNL Plaza, Ltd.

 <PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

2.   Summary of Significant Accounting Policies - Continued:
     ------------------------------------------------------

     In November 2002, the Financial  Accounting Standards Board ("FASB") issued
     FASB  Interpretation  No.  45,   "Guarantor's   Accounting  and  Disclosure
     Requirements for Guarantees,  Including Indirect Guarantees of Indebtedness
     of  Others"  ("FIN  45").  FIN 45  elaborates  on the  existing  disclosure
     requirements for most guarantees, including loan guarantees such as standby
     letters of credit.  It also  clarifies  that at the time a company issues a
     guarantee,  the company must  recognize an initial  liability  for the fair
     value,  or market value, of the obligations it assumes under that guarantee
     and must  disclose  that  information  in its interim and annual  financial
     statements.  The  disclosure  requirements  of FIN 45 are effective for all
     fiscal years ending after  December 15, 2002.  The Company has  implemented
     the  interpretation  for the year ended December 31, 2002, and all required
     disclosures have been included in these consolidated financial statements.

     In June 2002, the FASB issued FASB Statement No. 146, "Accounting for Costs
     Associated  with  Exit or  Disposal  Activities."  The  statement  requires
     companies to recognize costs  associated  with exit or disposal  activities
     when they are incurred  rather than at the date of a commitment  to an exit
     or disposal plan.  Examples of costs covered by the statement include lease
     termination costs and certain employee  severance costs that are associated
     with a restructuring,  discontinued operation, plant closing, or other exit
     or disposal activity.  The statement is to be applied prospectively to exit
     or disposal  activities  initiated after December 31, 2002. The adoption of
     this  statement  is not  expected  to  have  a  significant  impact  on the
     financial position or results of operations of the Company.

     In April 2002, the Financial  Accounting  Standards  Board ("FASB")  issued
     FASB Statement No. 145,  "Rescission of FASB  Statements No. 4, 44, and 64,
     Amendment  of FASB  Statement  No. 13,  and  Technical  Corrections."  This
     statement  rescinds FASB Statement No. 4, "Reporting  Gains and Losses from
     Extinguishment of Debt," and an amendment of that Statement, FASB Statement
     No.   64,   "Extinguishments   of  Debt   Made  to   Satisfy   Sinking-Fund
     Requirements."   This  statement  also  rescinds  FASB  Statement  No.  44,
     "Accounting for Intangible Assets of Motor Carriers." This statement amends
     FASB   Statement  No.  13,   "Accounting   for  Leases,"  to  eliminate  an
     inconsistency   between  the   required   accounting   for   sale-leaseback
     transactions  and the required  accounting for certain lease  modifications
     that have economic effects that are similar to sale-leaseback transactions.
     This statement also amends other existing  authoritative  pronouncements to
     make various technical  corrections,  clarify  meanings,  or describe their
     applicability  under changed  conditions.  The provisions of this statement
     related to the  rescission of FASB Statement No. 4 are applicable in fiscal
     years  beginning  after May 15,  2002.  The  provisions  of this  statement
     related to FASB Statement No. 13 are effective for  transactions  occurring
     after May 15, 2002.  All other  provisions of this  statement are effective
     for financial statements issued on or after May 15, 2002. The provisions of
     this statement, excluding those related to the rescission of FASB Statement
     No. 4, did not have a  significant  impact  on the  financial  position  or
     results of operations  of the Company.  The  provisions  of this  statement
     related to the  rescission of FASB Statement No. 4 are not expected to have
     a significant  impact on the financial position or results of operations of
     the Company.

     Use of Estimates - Management of the Company has made a number of estimates
     and assumptions relating to the reporting of assets and liabilities and the
     disclosure  of  contingent   assets  and   liabilities   to  prepare  these
     consolidated  financial  statements in conformity  with generally  accepted
     accounting principles. Actual results could differ from those estimates.

     Fair Value of Financial  Instruments - The estimated fair value of cash and
     cash  equivalents,   accounts  receivable  and  accounts  payable,  accrued
     expenses and variable  rate debt  approximates  carrying  value  because of
     short  maturities.   The  estimated  fair  value  of  long-term  borrowings
     approximates carrying value as interest rates on the borrowings approximate
     current market rates.

     Derivative  Instruments and Hedging Activities - Effective January 1, 2001,
     derivatives  are  recorded  at fair value in the  balance  sheet.  Gains or
     losses  resulting  from  changes  in the  fair  value  of  derivatives  are
     recognized  in  earnings or recorded  in other  comprehensive  income,  and
     recognized  in the  statement  of  earnings  when the hedged  item  affects
     earnings,  depending  on the purpose of the  derivatives  and whether  they
     quality for hedging accounting  treatment.  The Company does not enter into
     or hold derivatives for trading or speculative purposes. The Company

<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

2.   Summary of Significant Accounting Policies - Continued:
     ------------------------------------------------------

     has invested in two  partnerships,  accounted for under the equity  method,
     that have  entered into  interest  rate hedges on variable  rate debt.  The
     Company's  partnerships  have treated these hedges as cash flow hedges.  At
     January 1, 2001,  the fair value of the interest rate hedges was zero.  The
     Company's  portion  of the  increased  obligation  under  cash flow  hedges
     reduced the carrying amount of the Company's  investment in  unconsolidated
     subsidiaries by approximately  $4,316 and has been reflected in accumulated
     other comprehensive loss as of December 31, 2002.

     Advertising and Promotional  Costs - The costs of advertising,  promotional
     and  marketing  programs are charged to operations in the year incurred and
     are included in hotel expense in the accompanying consolidated statement of
     operations. Advertising, promotional and marketing costs totaled $6,330 for
     the year ended December 31, 2002. No significant  advertising,  promotional
     and marketing costs were incurred in any prior years.

3.   Assumption of Third-Party Leases:
     --------------------------------

     Western  International  Leases

     Effective  January 1, 2002, the Company took  assignment of its leases with
     WI Hotel  Leasing,  LLC for seven hotel  Properties.  These  Properties are
     being  leased by a TRS of the  Company  and are  managed by  affiliates  of
     Marriott  International,   Inc.  ("Marriott").   The  operations  of  these
     Properties have been reflected in the results of operations for the Company
     for the year ended  December 31, 2002. The Company paid  approximately  $69
     for this assignment.

     Crestline MI-3 Leases

     Effective  June 28, 2002,  the Company took  assignment  of its leases from
     CCCL Leasing, LLC, an affiliate of Crestline Capital Corporation,  for nine
     hotel Properties. These Properties are being leased by a TRS of the Company
     and are  managed by an  affiliate  of  Marriott.  The  operations  of these
     Properties are reflected in the consolidated  results of operations for the
     Company effective June 28, 2002. In connection with this transaction,  CCCL
     Leasing, LLC gave up its claim to security deposits totaling  approximately
     $4,000.  Additionally,  the Company  assumed a liquidity  facility  loan of
     approximately  $3,600  and paid  approximately  $25 in legal fees and other
     expenses.  These transactions resulted in net other income of approximately
     $400 being  recognized  by the Company  during the year ended  December 31,
     2002. See Note 13,  "Commitments and  Contingencies,"  for a summary of the
     terms of the loan that was assumed by the Company.

     Crestline  Atlanta  Leases

     Effective June 30, 2002, the Company took  assignment of its leases from CC
     GB Leasing,  LLC, an affiliate of Crestline  Capital  Corporation,  for two
     hotel Properties. These Properties are being leased by a TRS of the Company
     and are managed by an affiliate of Interstate  Hotels and Resorts under the
     Residence  Inn by Marriott  brand.  The  operations of the  Properties  are
     reflected  in the  consolidated  results  of  operations  for  the  Company
     effective  June 30,  2002.  In  connection  with  this  transaction,  CC GB
     Leasing,  LLC forfeited its claim to security  deposits totaling $1,400 and
     the Company  assumed net assets of  approximately  $59,  resulting in other
     income of  approximately  $1,500 being recognized by the Company during the
     year ended December 31, 2002.

4.   Investments in Unconsolidated Subsidiaries:
     ------------------------------------------

     Desert Ridge Partnership

     During 2002,  the Company  contributed  an  additional  $16,200 into Desert
     Ridge Resort Partners,  LLC (the "Desert Ridge  Partnership"),  an existing
     partnership in which the Company owns 44%. The Company's  total  investment
     in the Desert Ridge  Partnership  was $25,000 as of December 31, 2002.  The
     Desert Ridge Partnership owns a resort which was under construction  during
     the  majority of 2002 and all of 2001.  The resort  opened for  business on
     November 30, 2002. Limited golf course operations have been included in the
     consolidated  results of  operations of the Company until the resort opened
     in late 2002. The final costs of  construction  will be paid in early 2003.
     Upon  completion,  the estimated total cost of the resort is expected to be
     approximately $304,000.

<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

4.   Investments in Unconsolidated Subsidiaries - Continued:
     ------------------------------------------------------

     Waikiki Partnership

     During 2002, the Company  contributed  an additional  $8,700 into WB Resort
     Partners, LP (the "Waikiki Partnership"),  an existing partnership in which
     the  Company  owns 49%.  The  Company's  total  investment  in the  Waikiki
     Partnership  was $42,000 as of December 31, 2002.  The Waikiki  Partnership
     owns  the  Waikiki  Beach  Marriott  in  Honolulu,   Hawaii  (the  "Waikiki
     Property"),  which was undergoing significant  renovations for the majority
     of 2002, and was substantially completed as of December 31, 2002. The total
     cost of the resort is expected to be approximately $215,000.


     Mobil Travel Guide

     In  January  2002,  the  Company  acquired  a  25  percent  interest  in  a
     partnership with Publications  International,  Ltd. ("PIL"),  Hilton Hotels
     Corporation ("Hilton"), and Marriott that owns a 77.5 percent interest in a
     partnership  with Exxon Mobil  Corporation and PIL ("EMTG").  EMTG owns the
     licensing  rights to the Mobil Travel Guide.  The licensing  rights entitle
     EMTG to  assemble,  edit,  publish and sell the Mobil  Travel Guide and use
     such rights to generate  additional  products  using the Mobil Travel Guide
     brand. The Company's required total capital  contribution was approximately
     $3,600. EMTG has engaged Dustin/Massagli LLC, a company in which one of the
     Company's directors is president, a director and principal stockholder,  to
     manage  its  business.   In  December  2002,  the  Company  contributed  an
     additional $894 to the partnership that owns EMTG,  thereby  increasing the
     Company's ownership in the partnership from 25 percent to 31.25 percent.

     Office Building

     In May 2002, the Company acquired a 10 percent interest in CNL Plaza, Ltd.,
     a limited  partnership  that owns an office  building  located in  Orlando,
     Florida,  in which the Advisor and its affiliates  lease office space,  for
     $300. The remaining interest in the limited partnership is owned by several
     affiliates of the Advisor. In connection with this acquisition, the Company
     has severally guaranteed a 16.67 percent share, or approximately $2,600, of
     a $15,500 unsecured promissory note of the limited partnership.

     San Francisco Partnership

     In June 2002,  the  Company  acquired a 50 percent  interest in CY-SF Hotel
     Parent,  LP  (the  "San  Francisco  Partnership"),  a  partnership  with an
     affiliate of Marriott.  The San Francisco Partnership purchased a Courtyard
     by Marriott in downtown San Francisco for  approximately  $82,000 (the "San
     Francisco  Downtown  Property").  The  purchase  was  financed  with equity
     investments  of $13,000  each from the  Company  and  Marriott,  as well as
     $56,000 in borrowings  consisting  of two loans from a third-party  lender.
     One of the  loans  was in the  amount  of  $41,000  and  requires  interest
     payments equal to the greater of one-month LIBOR plus 3.25 percent, or 6.25
     percent.  The other loan was in the amount of $15,000 and requires interest
     payments  equal to a base rate plus 7  percent.  The base rate  equals  the
     greater of (a) the lesser of (i) one-month LIBOR or (ii) 9 percent,  or (b)
     3 percent. Both loans mature in August 2007 and require monthly payments of
     interest  only  through  July 1, 2004,  at which time  monthly  payments of
     principal  and interest are due with the remaining  principal  balances and
     any  unpaid  interest  due at  maturity.  The  lessee of the San  Francisco
     Downtown  Property  is a  wholly  owned  subsidiary  of the  San  Francisco
     Partnership and the Property is managed by a subsidiary of Marriott.

     Interstate Partnership

     In September 2002, the Company acquired an 85 percent interest in a Hampton
     Inn Property  located in Houston,  Texas (the  "Hampton Inn  Property")  in
     return for an equity  contribution of $4,890.  The Hampton Inn Property was
     acquired through an existing partnership with Interstate Hotels and Resorts
     that was originally formed in November 2001 (the "Interstate Partnership").
     The total  purchase  price of the Hampton Inn  Property  was  $14,300.  All
     characteristics of the Interstate Partnership other than the acquisition of
     the  Hampton  Inn  Property  remain  unchanged.  In  connection  with  this
     purchase,  the  Interstate  Partnership  assumed  a loan  of  approximately
     $9,300, which is secured by the Property. The loan bears interest at a rate
     of 7.78 percent per annum.  Monthly  payments of principal  and interest of
     $76 are due on the first day of each month  through  December  1, 2007,  at
     which time the entire remaining principal balance is due.

<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

4.   Investments in Unconsolidated Subsidiaries - Continued:
     -------------------------------------------------------

     Hilton 2 Partnership

     On December  13,  2002,  the Company  formed a  partnership  (the "Hilton 2
     Partnership")  with Hilton, of which the Company owns a 75 percent interest
     and Hilton owns a 25 percent  interest.  On December 24, 2002, the Hilton 2
     Partnership  acquired a  Doubletree  hotel  located  in Dallas,  Texas (the
     "Doubletree Lincoln Centre Property") and a Sheraton El Conquistador Resort
     and Country Club located in Tucson,  Arizona.  The Sheraton El Conquistador
     Resort and Country  Club was  immediately  converted to a Hilton Hotel (the
     "Hilton El Conquistador Resort Property"). The Hilton 2 Partnership expects
     to convert the  Doubletree  Lincoln  Centre  Property  into a Hilton  hotel
     during the first half of 2003.  The total  purchase price of the Properties
     was approximately  $121,000. In connection with this purchase, the Hilton 2
     Partnership  obtained  mortgage  financing in the amount of $33,800 for the
     Doubletree   Lincoln  Centre   Property  and  $44,850  for  the  Hilton  El
     Conquistador Resort Property.  These loans bear interest at a rate equal to
     5.67  percent.  Monthly  payments of interest  only are due monthly for the
     first two  years of the  loans,  with  monthly  payments  of  interest  and
     principal due thereafter until maturity in December 2007.













                          - Intentionally Left Blank -



<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                      (in thousands, except per share data)

4.  Investments in Unconsolidated Subsidiaries - Continued:
    -------------------------------------------------------

     The  Company  has   investments   in  several  other  joint   ventures  and
     partnerships with third parties who share the  decision-making  and control
     for  these  entities.  The  borrowers  on the loans  are  legally  separate
     entities,  having  separate  assets and  liabilities  from the Company and,
     therefore,  the assets and credit of the respective partnerships may not be
     available  to  satisfy  the  debts and other  obligations  of the  Company.
     Likewise,  the assets and credit of the  Company  may not be  available  to
     satisfy the debts and other  obligations  of the  borrowers on the loans of
     the partnerships.  The following  presents  unaudited  condensed  financial
     information for these investments as of and for the year ended December 31,
     2002:


<TABLE>
<S><C>

                                  Desert
                                   Ridge                                       CY-SF
                                  Resort    WB Resort   CNL HHC     CNL IHC    Hotel       CTM       CNL       CNL HHC
                                 Partners,  Partners,  Partners,   Partners,  Parent,   Partners,   Plaza,   Partners II,
                                    LLC         LP         LP         LP*       LP         LLC      Ltd.        LP         Total
                                  --------  --------  ----------  ---------  ---------  ---------  --------  ----------  ---------
Hotel Properties                  $269,925  $198,140   $ 218,268  $  35,073  $  80,374  $     --   $     --  $  122,493  $ 924,273
Other assets                        20,543    22,091       9,439      2,995      3,733    12,623     63,735       5,291    140,450
Mortgages and other notes
      payable                      230,176   157,798     100,000     15,909     57,160     2,247     64,061      78,650    706,001
Other liabilities                   41,065    15,834       7,075        814      3,725       220        398       5,673     74,804
Partners' capital                   19,227    46,599     120,632     21,345     23,222    10,156       (724)     43,461    283,918
Revenues                             7,344    46,667      61,598      6,825      8,564     1,400      6,088         694    139,180
Cost of sales                        7,016    20,407      25,809      1,800      2,899     3,941      1,946         386     64,204
Expenses                            15,680    44,657      34,990      4,114      7,011     1,604      4,086         549    112,673
Net income (loss)                  (15,352)  (18,397)        799        911     (1,346)   (4,145)        56        (241)   (37,697)
Income (loss) allocable to
     the Company                    (6,527)   (9,006)        560        713       (673)   (1,056)         6        (181)   (16,164)
Other comprehensive
     income (loss) allocable
     to the Company                 (2,572)       --        (554)        --         --        --         --          --     (3,126)
Difference between
    carrying amount of
    investment and
    Company's share of
    partners' capital                3,642      3,503      7,302      2,050      1,831        --         --       4,501     22,829
Company's ownership
    interest at end of period         44.0%      49.0%     70.0%       85.0%      50.0%     31.3%       9.9%       75.0%        --


</TABLE>

<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                      (in thousands, except per share data)

4.   Investments in Unconsolidated Subsidiaries - Continued:
     ------------------------------------------------------

     The following presents unaudited condensed financial  information for these
     joint ventures and  partnerships  as of and for the year ended December 31,
     2001:

<TABLE>
<S><C>
                       Desert
                        Ridge                                       CY-SF
                       Resort    WB Resort   CNL HHC     CNL IHC    Hotel       CTM       CNL       CNL HHC
                      Partners,  Partners,  Partners,   Partners,  Parent,   Partners,   Plaza,   Partners II,
                         LLC         LP         LP         LP*       LP**       LLC**    Ltd.**      LP**       Total
                       --------  --------  ----------  ---------  ---------  ---------  --------  ----------  ---------

Hotel Properties      $133,500    $186,885   $213,279   $ 21,049   $    --    $    --   $    --    $     --   $554,713
Other assets            82,644       9,070     10,573        571        --         --        --          --    102,858
Mortgages and other
  notes payable        181,885     137,750    100,000      6,723        --         --        --          --    426,358
Other liabilities       26,970      18,197      4,940        250        --         --        --          --     50,357
Partners' capital        7,289      40,008    118,912     14,647        --         --        --          --    180,856
Revenues                 8,154      10,167     17,564        511        --         --        --          --     36,396
Cost of sales            2,235       5,508      7,095        175        --         --        --          --     15,013
Expenses                13,830      13,989      9,219        409        --         --        --          --     37,447
Net income (loss)       (7,911)     (9,330)     1,250        (73)       --         --        --          --    (16,064)
Income (loss)
  allocable to the
  Company               (3,396)     (4,572)       875         --        --         --        --          --     (7,093)
Other comprehensive
  income (loss)
  allocable to the
  Company               (1,370)         --        180         --        --         --        --          --     (1,190)
Difference between
  carrying amount of
  investment and
  Company's share of
  partners' capital      3,197       3,623      7,651        870        --         --        --          --     15,341
Company's ownership
  interest at end of
  period                 42.33%      49.00%     70.00%      85.00%      --         --        --          --         --


    * A portion of the net income for the year ended December 31, 2002 was allocated to the other partner to restore
      the deficit created by losses during  the year ended December 31, 2001 in accordance with the partnership
      agreement.
    **These entities were not formed until 2002 and therefore are not presented for the year ended December 31, 2001.


</TABLE>

<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

4.  Investment in Unconsolidated Subsidiaries - Continued:
    -----------------------------------------------------

     The difference  between the carrying amount of the investments in the above
     partnerships  and the  Company's  share of partners'  capital  results from
     various   acquisition   costs  and  fees   which  are  not  shared  by  the
     co-venturers. These amounts are amortized over 36 years.

     The Company earned distributions from the following partnerships during the
     years ended December 31, 2002 and 2001,  which reduce the carrying value of
     the investment:


                                                    2002             2001
                                                -------------      -----------

        Desert Ridge Resort Partners, LLC        $     1,432        $     968
        WB Resort Partners, LP                         4,136              854
        CNL HHC Partners, LP                           4,753            2,390
        CNL IHC Partners, LP                             973               --
        CY-SF Hotel Parent, LP                           716               --
        CNL Plaza, Ltd.                                  164               --
                                                -------------      -----------
                Total                            $    12,174       $    4,212
                                                =============      ===========

     As  of  December  31,  2002  and   December  31,  2001,   the  Company  had
     approximately $2,695 and $1,411, respectively,  in distributions receivable
     from the above partnerships, which are included in due from related parties
     in the accompanying consolidated balance sheets.

5.   Hotel Properties:
     ----------------

     During the year ended  December  31,  2002,  the  Company  acquired  direct
     interests in eight  Properties  throughout  the United States and purchased
     one  parcel  of land on which a hotel is being  developed,  resulting  in a
     total of 55 Properties  currently  operating,  42 wholly-owned  and 13 held
     indirectly  through  partnerships.  Substantially  all  of  the  Properties
     directly owned by the Company are pledged as collateral to secure mortgages
     or other long-term financing.


<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)


5.   Hotel Properties - Continued:
     ----------------------------

     During the year ended December 31, 2002, the Company acquired the following
     Properties (See Schedule III, "Real Estate and  Accumulated  Depreciation,"
     for a listing of all Properties owned by the Company.):

<TABLE>
<S><C>

             Brand Affiliation                Property Location      Date of Acquisition     Purchase Price
   --------------------------------------- ------------------------ ----------------------- ------------------
      SpringHill Suites(TM) by Marriott(R)     Manhattan Beach, CA       January 18, 2002          $20,000
      TownPlace Suites(TM) by Marriott(R)      Manhattan Beach, CA       January 18, 2002          $15,000
      SpringHill Suites(TM) by Marriott(R)    Plymouth Meeting, PA       January 18, 2002          $27,000
          Courtyard(R) by Marriott(R)           Basking Ridge, NJ         March 1, 2002            $35,750
              Marriott(R) Hotel                  Bridgewater, NJ          June 14, 2002            $61,500
          Courtyard(R) by Marriott(R)          Foothill Ranch, CA          July 3, 2002*           $18,300
          Courtyard(R) by Marriott(R)              Newark, CA            October 25, 2002          $25,500
          Residence Inn by Marriott(R)            Newark, CA           November 15, 2002          $27,300
          Doubletree(R) Crystal City              Arlington, VA         December 19, 2002          $71,000


      * Land purchased for development on which a hotel Property is being constructed

     Additionally,  the Company completed  construction and opened the following
     Properties during 2002:


                        Brand Affiliation             Property Location          Opening Date
                  ---------------------------         -----------------       ------------------
                  Residence Inn by Marriott(R)            Orlando, FL          February 14, 2002
                   Courtyard(R) by Marriott(R)              Weston, FL          February 14, 2002
                   Courtyard(R) by Marriott(R)              Edison, NJ           November 4, 2002
</TABLE>

     These hotel Properties,  with the exception of the Doubletree Crystal City,
     are  newly  constructed  and  accordingly  the  pro  forma  impact  is  not
     significant.  All of these  Properties  are  leased  to the  Company's  TRS
     entities and are operated by  third-party  managers.  The  Properties  were
     recorded at cost and  allocated  to land,  buildings  and  equipment  using
     appraisal data. The results of operations of the Properties are included in
     the consolidated results of operations.

     Hotel  Properties  are  generally  encumbered  by debt and  consist  of the
     following at December 31:


                                                 2002                 2001
                                         --------------       --------------

        Land                                $  145,719           $  106,174
        Buildings                              816,184              521,230
        Equipment                               82,232               59,937
                                         --------------       --------------
                                             1,044,135              687,341
        Less accumulated depreciation          (56,408)             (29,182)
        Construction in progress                   919               41,081
                                         --------------       --------------
                                            $  988,646           $  699,240
                                         ==============       ==============


<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)


 5.  Hotel Properties - Continued:
     ----------------------------

     Properties  with a net book value of  approximately  $295,000 are leased to
     third-party  tenants  on  a  "triple-net"  basis,  whereby  the  tenant  is
     generally  responsible for all operating expenses relating to the Property,
     including property taxes,  insurance,  maintenance and repairs.  During the
     years ended December 31, 2002,  2001, and 2000, these  third-party  tenants
     paid approximately $4,073,  $7,350, and $4,156,  respectively,  in property
     taxes for Properties which the Company leases on a triple-net basis.

     The following is a schedule of future minimum lease payments to be received
     on the  noncancellable  operating leases with third parties at December 31,
     2002:

                  2003                  $   31,276
                  2004                      31,276
                  2005                      31,276
                  2006                      31,276
                  2007                      31,276
                  Thereafter               240,047
                                        ----------
                                        $  396,427
                                        ==========


6.   Prepaid Expenses and Other Assets:
     ---------------------------------

     Other  assets as of December 31, 2002 and 2001 were  approximately  $25,177
     and $6,796, respectively, and consist primarily of deposits and acquisition
     fees and expenses relating to Properties the Company intends to acquire.











                          - Intentionally Left Blank -

<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)


7.   Indebtedness:
     -------------

     At December 31, 2002 and 2001,  indebtedness  collateralized by Properties,
     consisted of the following as of December 31:

<TABLE>
<S><C>
                                                                              2002          2001
                                                                           ---------      ---------


          Mortgages payable,  bearing interest rates ranging from 7.50
          percent to 7.75 percent,  with total  monthly  principal and
          interest  payments of $666,  maturing  July 31, 2009             $ 84,638       $ 86,152

          Mortgages payable,  bearing interest of 8.335 percent,  with
          monthly  interest  only  payments  of  approximately   $347,
          maturing December 1, 2007                                          50,348         50,000

          Mortgage  payable,  bearing  interest of 8.29 percent,  with
          monthly  principal and interest  payments of $257,  maturing
          December 1, 2007                                                   32,069         32,732

          Mortgage  payable,  bearing  interest of 5.84 percent,  with
          monthly  interest  only payments  through  December 2004 and
          thereafter  principal and interest payments  calculated on a
          25-year  amortization  through  maturity on December 1, 2007
          31,082                                                             31,082             --

          Mortgage  payable,  bearing  interest of 6.53 percent,  with
          monthly  interest only through  December 2004 and thereafter
          principal  and  interest  payments  calculated  on a 25-year
          amortization through maturity on November 1, 2007                   9,070             --

          Construction  loan facility for up to $64,000 in borrowings,
          bearing interest of London Interbank  Offered Rate ("LIBOR")
          plus 275 percent,  with monthly  payments of interest  only,
          maturing December 1, 2005                                          21,280         42,119

          Construction  loan for up to $17,000 in borrowings,  bearing
          interest  of  LIBOR  plus 300  basis  points,  with  monthly
          payments of interest  only,  maturing  September 15, 2003              --          5,768

          Tax  Incremental Financing Note,  bearing  interest of 12.85
          percent,  with  principal  and  interest  payments  made  by
          incremental  property tax payments paid by tenant,  maturing
          June   1,    2018                                                   8,458          9,685

                                                                           ---------      ---------
                                                                           $236,945       $226,456
                                                                           =========      =========

</TABLE>

<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

7.   Indebtedness - Continued:
     ------------------------

     The Company has a revolving  line of credit (the  "Revolving  LOC") to fund
     acquisition and development of Properties and investments in Mortgage Loans
     and other permitted investments.  Under the terms of the Revolving LOC, the
     Company is entitled to receive cash advances of up to approximately $96,700
     for a five-year  period.  Interest  payments are due monthly with principal
     payments  of $1 due at the  end of  each  loan  year.  Advances  under  the
     Revolving  LOC bear  interest at an annual rate of 225 basis  points  above
     30-day LIBOR (3.63 percent as of December 31, 2002) and are  collateralized
     by certain hotel Properties.  At December 31, 2002,  approximately  $24,079
     was outstanding under the Revolving LOC.

     Debt  arrangements  allow for repayments  earlier than the stated  maturity
     date. The weighted average  effective  interest rate on mortgages and other
     notes  payable was  approximately  7 percent as of December 31,  2002.  The
     amount of debt reported in the  accompanying  consolidated  balance  sheets
     approximates the fair value of such debt as of December 31, 2002 and 2001.

     The following is a schedule of maturities  for all long-term  borrowings at
     December 31, 2002:


                2003                            $      3,562
                2004                                   2,676
                2005                                  24,664
                2006                                   3,701
                2007                                  53,954
                Thereafter                           154,020
                                                ------------
                     Total                      $    242,577
                                                ============

     In connection with the lease assumptions on nine Properties as discussed in
     Note 3, "Assignment of Third-Party Leases," the Company assumed a liquidity
     facility  loan  in  the  amount  of   approximately   $3,600.  A  total  of
     approximately  $10,170 is available  under the  facility.  The facility was
     provided  by the  manager  of the  Properties  to fund  Property  operating
     shortfalls  for the  aggregate  rent  due on a  pooled  basis  for the nine
     portfolio  Properties.  The facility is available  until the earlier of (i)
     expiration  of the  agreement on December  31, 2004,  (ii) the minimum rent
     coverage of the pooled Properties equals or exceeds a predefined  threshold
     for 13 consecutive  accounting  periods or (iii) total  liquidity  facility
     funding  equals or exceeds 10 percent of the total  purchase  price for all
     nine  Properties  at the end of any fiscal  year.  As of December 31, 2002,
     approximately $5,632 was outstanding and approximately $4,538 was available
     for future draws under the liquidity facility loan.

8.   Taxes:
     ------

     The  components  of the  deferred  taxes  recognized  in  the  accompanying
     consolidated balance sheet at December 31, 2002 are as follows:

                                                         2002
                                                    -------------

                     Deferred tax assets:
                        Net operating loss          $   1,587
                     Deferred tax liabilities:
                        Valuation allowance            (1,587)
                                                    -------------
                                                    $      --
                                                    =============

     The types of  temporary  differences  between  the tax basis of assets  and
     liabilities and their consolidated  financial  statement  reporting amounts
     are attributable  principally to net operating  losses.  The TRS tenant had
     net  operating  loss  carryforwards  for  federal  and  state  purposes  of
     approximately  $4,218 as of December 31, 2002, which is available to offset
     future operating  income.  The net operating loss  carryforward  expires in
     2021.  The Company has not recorded this potential  future benefit  because
     its TRS subsidiaries do not have sufficient historical earnings on which to
     base a potential future benefit.  There were no differences between the tax
     basis of assets and liabilities and their consolidated  financial reporting
     amounts for the year ended December 31, 2001.


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)


9.   Related Party Transactions:
     --------------------------

     Certain  directors and officers of the Company hold similar  positions with
     the  Advisor  and  its  affiliates,  including  the  managing  dealer,  CNL
     Securities Corp. These affiliates are by contract  entitled to receive fees
     and  compensation  for services  provided in  connection  with common stock
     offerings,  and the  acquisition,  development,  management and sale of the
     Company's assets.

     Amounts  incurred  relating to these  transactions  with affiliates were as
     follows for the years ended December 31:

<TABLE>
<S><C>
                                                                                  2002                2001
                                                                             --------------       ------------
         CNL Securities Corp.:
              Selling commissions (the majority of which was
                 reallowed to unaffiliated broker-dealer firms)                  $  37,003           $ 21,804

              Marketing support fee and due diligence expense
                 reimbursements*                                                     2,448              1,351
                                                                             --------------       ------------

                                                                                    39,451             23,155
                                                                             --------------       ------------
               Advisor and its affiliates:
              Acquisition fees                                                      29,464             21,057
              Development fees                                                       1,896              2,107
              Asset management fees                                                  6,696              3,327
                                                                             --------------       ------------

                                                                                    38,056             26,491
                                                                             --------------       ------------

                                                                                 $  77,507           $ 49,646
                                                                             ==============       ============

         * The majority of these fees and reimbursements were reallowed to unaffiliated broker-dealer firms.

</TABLE>

     Of these  amounts,  approximately  $1,916 and $1,026 is  included in due to
     related parties in the accompanying  condensed  consolidated balance sheets
     as of December 31, 2002 and December 31, 2001, respectively.

     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 follows
     for the years ended December 31:

<TABLE>
<S><C>
                                                                     2002               2001
                                                                --------------     --------------

           Stock issuance costs                                  $  3,128          $   4,705
           General operating and administrative expenses            1,128              1,092
                                                                --------------     --------------

                                                                 $  4,256          $   5,797
                                                                ==============     ==============

</TABLE>

<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)


9.   Related Party Transactions - Continued:
     --------------------------------------

     The Company maintains 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 bank was
     approximately  $14,861 and $6,928 at December  31,  2002 and  December  31,
     2001, respectively.

     EMTG,  a  partnership  in which the  Company has a 31.3  percent  interest,
     engaged  Dustin/Massagli  LLC,  a  company  in which  one of the  Company's
     directors is president, a director and a principal  stockholder,  to manage
     its business.

10.  Concentration of Risk:
     ---------------------

     A  significant  portion of the Company's  rental income and hotel  revenues
     were  earned  from  properties  operating  as various  Marriott  and Hilton
     brands.  Additionally,  the Company  relies on  Marriott to provide  credit
     enhancements for certain of its Properties. Although the Company intends to
     acquire  Properties in various  states and regions,  carefully  screens its
     managers  and  tenants  and has  obtained  interests  in  non-Marriott  and
     non-Hilton  branded  Properties,  failure  of the  Company's  hotels or the
     Marriott  or Hilton  brands  could  significantly  impact  the  results  of
     operations  of the  Company.  Management  believes  that the risk of such a
     default will be reduced through future  acquisitions  and  diversification,
     and through the initial and continuing due diligence  procedures  performed
     by the Company.


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
     year ended December 31, 2000,  approximately  7,188 shares were  considered
     dilutive  after  the  application  of the "if  converted  method"  and were
     included in the  denominator of the diluted EPS  calculation.  For the year
     ended December 31, 2001, approximately 1,800 shares relating to potentially
     dilutive   securities  were   anti-dilutive  and  were  excluded  from  the
     calculation. There were no potentially dilutive items in 2002.










                           -Intentionally Left Blank-


<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)


11.  Earnings Per Share - Continued:
     ------------------------------

     The  following  represents  the  calculation  of earnings per share and the
     weighted average number of shares of potentially  dilutive common stock for
     the years ended December 31, 2002, 2001 and 2000:

<TABLE>
<S><C>
                                                                  2002              2001              2000
                                                             --------------    -------------    --------------
Basic Earnings Per Share:
    Net earnings                                               $  15,810        $  19,328        $  20,670
                                                             ==============    =============    ==============

    Weighted average number of shares outstanding                 97,874           64,458           38,698
                                                             ==============    =============    ==============

    Basic earnings per share                                   $    0.16        $    0.30        $    0.53
                                                             ==============    =============    ==============

Diluted Earnings Per Share:
    Net earnings                                               $  15,810        $  19,328        $  20,670

    Additional income attributable to investment in
       unconsolidated subsidiary assuming all
       Preferred Shares were converted                                --               --            3,564
                                                             --------------    -------------    --------------

    Adjusted net earnings assuming dilution                    $  15,810        $  19,328        $  24,234
                                                             ==============    =============    ==============

    Weighted average number of shares outstanding                 97,874           64,458           38,698

    Assumed conversion of Preferred Stock                             --               --            7,188
                                                             --------------    -------------    --------------

    Adjusted weighted average number of
       shares outstanding                                         97,874           64,458           45,886
                                                             ==============    =============    ==============

    Diluted earnings per share                                 $    0.16        $    0.30        $    0.53
                                                             ==============    =============    ==============

</TABLE>

12.  Stockholders' Equity:
     --------------------

     On April 22,  2002,  the  Company  commenced  its fourth  offering of up to
     45,000  shares of common stock  ($450,000)  (the "2002  Offering").  Of the
     45,000  shares of common  stock  offered,  up to 5,000  were  available  to
     stockholders  purchasing  shares through the  reinvestment  plan. Since its
     formation  through  December 31, 2002,  the Company has received an initial
     $200   contribution   from  its  Advisor  and   subscription   proceeds  of
     approximately  $1,267,821 (126,782 shares),  including approximately $7,639
     (764 shares)  received  pursuant to the Company's  reinvestment  plan.  CNL
     Securities  Corp., an affiliate of the Advisor,  is the managing dealer for
     the  Company's  equity  offerings.  The Company has received  approximately
     $392,750 (39,275 shares) in gross offering proceeds from the 2002 Offering,
     from its inception through December 31, 2002.


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

12. Stockholders' Equity - Continued:
    --------------------------------

     On August 13, 2002, the Company filed a registration statement on Form S-11
     with the Commission in connection  with the proposed sale by the Company of
     up to an additional  175,000 shares of common stock ($1,750,000) (the "2003
     Offering").   The  2003  Offering  commenced   immediately   following  the
     completion of the 2002 Offering on February 4, 2003. Of the 175,000  shares
     of common stock to be offered,  up to 25,000 are available to  stockholders
     purchasing  shares through the  reinvestment  plan. The price per share and
     the other terms of the 2003  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  those  for  the  2002
     Offering.  CNL  Securities  Corp.,  an  affiliate  of the  Advisor,  is the
     managing dealer for the Company's equity offerings.


     Under the redemption  plan, the Company may elect,  at its  discretion,  to
     redeem shares,  subject to certain  conditions and limitations.  During the
     years ended December 31, 2002,  2001 and 2000,  239 shares,  251 shares and
     269 shares, respectively, were redeemed at approximately $2,391, $2,313 and
     $2,503, respectively,  and retired from shares outstanding of common stock.
     Shares were redeemed for $9.20 per share.

     For the years ended  December 31,  2002,  2001 and 2000,  approximately  51
     percent, 52 percent and 63 percent, respectively, of the distributions paid
     to  stockholders  were  considered  ordinary  income and  approximately  49
     percent, 48 percent and 37 percent, respectively,  were considered a return
     of capital to  stockholders  for federal  income tax  purposes.  No amounts
     distributed to the stockholders for the years ended December 31, 2002, 2001
     and 2000 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.

13.  Commitments and Contingencies:
     -----------------------------

     From time to time the Company may be exposed to litigation arising from the
     operation of its business.  At this time,  management does not believe that
     resolution  of these  matters  will have a material  adverse  effect on the
     Company's financial condition or results of operations.


     As of February  21,  2003,  the Company has  commitments  to (i) acquire or
     develop three hotel Properties for an anticipated  aggregate purchase price
     of approximately  $227,100,  (ii) construct or complete construction on one
     Property,  with an estimated cost of  approximately  $13,000 and (iii) fund
     the remaining total of approximately  $10,000 for property  improvements in
     three existing partnerships. The Company also has committed to fund its pro
     rata share of working capital  shortfalls and construction  commitments for
     its partnerships,  if shortfalls arise, and has guaranteed the debt service
     for  several of its  subsidiaries  and  partnerships.  The  acquisition  of
     additional Properties are 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 these transactions will be entered into by
     the  Company.  In order to enter  into  these and other  transactions,  the
     Company  must obtain  additional  funds  through the receipt of  additional
     offering  proceeds  and/or  advances  on the  Revolving  LOC and  permanent
     financing.

     The Company has entered into an agreement whereby if certain conditions are
     met,  nine  Properties   currently  leased  to  third-party  tenants  on  a
     triple-net  basis,  must be assumed by the  Company on or before  March 31,
     2004.  In order  for this to occur,  the  Properties  must  have  operating
     results above a certain minimum threshold.  If these conditions are met and
     the assumption of these leases does not occur by the deadline,  the Company
     has agreed to return  approximately $3,200 in security deposits it holds on
     three of the Properties. If conversion occurs, the Company is not obligated
     to pay any additional consideration for the leasehold position and that the
     manager  will  participate,  through  incentive  fees,  in  any  additional
     earnings  above what was  otherwise  the minimum  rent.  Additionally,  the
     Company would not be obligated to return the security  deposits it holds on
     these three Properties.

<PAGE>
                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                      (in thousands, except per share data)

13.  Commitments and Contingencies - Continued:
     -----------------------------------------

     With respect to certain of its Properties, the Company has received various
     credit enhancement guarantees from third-party managers who have guaranteed
     a certain level of performance  for Properties they manage which are leased
     to TRS entities.  When provided,  these  guarantees are typically in effect
     during the stabilization  period for the hotel Property or Properties being
     guaranteed.   These  guarantees  normally  expire  (i)  when  a  predefined
     operating  performance threshold is achieved for twelve consecutive months,
     (ii) after a specified period (typically three to five years) or (iii) when
     maximum allowable funding under that guarantee has been received, whichever
     occurs first.  Operating  results of several  Properties may be "pooled" in
     order  to  measure  operating   performance  for  purposes  of  determining
     guarantee  funding.  Additionally,  all or a portion of the amounts  funded
     under  these  guarantees  may  be  earned  back  by the  guarantor,  with a
     specified return, as an incentive fee under the management  contract.  Such
     incentive  fee amounts will be paid only to the extent  Property  operating
     profits exceed a predetermined operating threshold. In situations where the
     guarantor has the  opportunity to earn back funding from these  guarantees,
     the funds received  under the guarantees are recorded as other  liabilities
     in the accompanying  consolidated  balance sheets.  As of December 31, 2002
     and December 31, 2001, the Company did not have any outstanding liabilities
     from its credit enhancement  guarantees.  Additionally,  as of December 31,
     2002 and  December  31,  2001,  the Company had  approximately  $37,515 and
     $50,000,  respectively,  which  remained  available for funding under these
     types of guarantees,  should such funding be necessary.  Additional amounts
     of available funding under these types of credit enhancements are available
     separately  for  several  of the  partnerships  in which  the  Company  has
     invested.  There is no  assurance  that  market  conditions  will allow the
     Company to continue to obtain credit enhancements in the future.

     The  Company  has  amended  the  agreements  relating  to one of its credit
     enhancements  with  Marriott.  Marriott  is  obligated  to  fund  guarantee
     payments  of  certain  minimum  returns  to TRS  entities  of the  Company,
     however,  the  management  contracts  on the  hotels  subject to the credit
     enhancement were amended to provide that the first incentive management fee
     is payable up to a predefined  amount  rather than paying the fee primarily
     based on the amounts previously funded under the guarantee. The Company has
     recognized other income of approximately  $10,280 during the fourth quarter
     of 2002 equal to the amounts previously funded under the credit enhancement
     through December 31, 2002, which Marriott has agreed will not be subject to
     repayment  provisions.  Additionally,  the Company will recognize income in
     the  future,  rather  than  liabilities,  whenever  amounts  are  funded by
     Marriott  under the  arrangement.  The  Company  will  recognize  incentive
     management  fee  expense  if and when such  incentive  management  fees are
     earned by Marriott. These amendments are not expected to have a significant
     effect on the Company's cash available for distribution to stockholders.

<PAGE>
                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)

13.  Commitments and Contingencies - Continued:
     -----------------------------------------

     The  Company  is a party to certain  contracts,  which may result in future
     obligations to third parties. See description of obligations below.

     Earnout  Provisions  on Property  Acquisitions  - The Company is  currently
     subject  to earnout  provisions  on two of its  Properties,  whereby if the
     operating  performance of the two Properties exceeds a certain  pre-defined
     threshold,  additional  consideration  will be due from the  Company to the
     prior owner of such Properties.  The earnout provision period terminates on
     May 31,  2004,  at which time the  Company  will have no further  liability
     under this provision.  The maximum amount of consideration that the Company
     may be obligated to pay is approximately $2,472.

     Guarantee of Debt on Behalf of  Unconsolidated  Subsidiaries  - The Company
     has  guaranteed  16.67% of a $15,500 note payable on behalf of a subsidiary
     of  CNL  Plaza,  Ltd.  The  total  liability  of  the  Company  under  this
     arrangement  is capped at $2,583,  plus  interest on such amount.  Interest
     accrues  at a rate of LIBOR  plus 200 basis  point per annum on the  unpaid
     principal  amount.  This guarantee shall continue through the loan maturity
     in November  2004.

     Guarantee of Other Obligations on Behalf of  Unconsolidated  Subsidiaries -
     The Company has generally  guaranteed,  in connection with loans to certain
     unconsolidated  subsidiaries,  the payment of certain  obligations that may
     arise out of fraud or misconduct of the subsidiary borrower. This guarantee
     will be in effect until the loans have been paid in full.

     Irrevocable  Letter of Credit - The  Company has  obtained  an  irrevocable
     letter of credit for the  benefit  of a lender in the  amount of $775.  The
     letter of credit is automatically  extended each fiscal year until November
     10, 2007. The Company could be liable to the extent that drawings under the
     letter of credit occur.

     Refundable  Tenant  Security  Deposits - The Company is obligated to return
     security deposits to unrelated  third-party tenants at the end of the lease
     terms in accordance with the lease  agreements.  The Company has recorded a
     liability for such security deposits totaling  approximately  $12,883 as of
     December 31, 2002.

     Marriott Put Option - Marriott has the right on certain  partnerships  with
     the  Company to  require  the  Company  to buy-out a portion of  Marriott's
     ownership.  These  rights are  available  if certain  predefined  operating
     results are  obtained.  Should such  conditions  be met, the Company may be
     obligated to buy interests valued at approximately  $11,050.

<PAGE>

                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                  Years Ended December 31, 2002, 2001 and 2000
                     (in thousands, except per share data)


14.  Selected Quarterly Financial Data:
     ---------------------------------

     The following table presents selected  unaudited  quarterly  financial data
     for each full quarter during the years ended December 31, 2002 and 2001:

<TABLE>
<S><C>

2002 Quarter                       First           Second            Third             Fourth              Year
------------------------    --------------    --------------    --------------     --------------    -------------

Revenues                          $27,147         $32,306          $46,276            $50,679           $156,408
Net income                          3,651           4,757            2,343              5,059             15,810
Earnings per share:
  Basic                              0.05            0.05             0.02               0.04               0.16
  Diluted                            0.05            0.05             0.02               0.04               0.16


2001 Quarter                    First            Second             Third              Fourth              Year
------------------------    --------------    --------------    --------------     --------------    -------------


Revenues                          $16,713         $18,202          $19,029            $17,519            $71,463
Net income                          5,529           7,058            3,890              2,851             19,328
Earnings per share:
  Basic                              0.11            0.12             0.06               0.01               0.30
  Diluted                            0.11            0.12             0.06               0.01               0.30

</TABLE>


15.  Subsequent Events:
     -----------------

     On February 20, 2003, the Company  contributed the Doubletree  Crystal City
     and Hilton  contributed a Hilton  located in Rye, New York (the "Hilton Rye
     Town Property") to the Hilton 2 Partnership. Additionally, on the same day,
     the Hilton 2 Partnership acquired three Embassy Suite Properties located in
     Orlando, Florida, Arlington,  Virginia, and Santa Clara, California. At the
     time  of  acquisition/contribution,   the  Hilton  2  Partnership  obtained
     permanent financing of approximately $145,000,  which was allocated between
     these five  Properties.  The loan bears  interest at 5.95 percent per annum
     and matures on March 1, 2010.  Payments  of  interest  only are due monthly
     through maturity.

     On February 20, 2003, the Company  acquired the Hyatt Regency Coral Gables,
     located in Miami,  Florida  for  approximately  $36,000.  This  property is
     leased to a TRS of the  Company  and is  managed by a  subsidiary  of Hyatt
     Hotels Corporation.

     During the period  January 1, 2003 through  February 21, 2003,  the Company
     received  subscription proceeds for an additional 8,966 shares ($89,656) of
     common stock.

     On January 1, 2003 and February 1, 2003, the Company declared distributions
     totaling approximately $8,152, and $8,490,  respectively,  or $0.064583 per
     share of common stock, payable by March 31, 2003, to stockholders of record
     on January 1, 2003 and February 1, 2003, respectively.

     The Company currently is seeking  additional  Properties or other permitted
     real estate related  investment  opportunities,  such as  investments  into
     other real estate companies or partnerships.




<PAGE>




Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         None.









<PAGE>



                                    PART III


Item 10.  Directors and Executive Officers of the Registrant

     On February 7, 2003, at a meeting of the Board of Directors of the Company,
John A. Griswold  tendered his  resignation  as an  independent  director of the
Company's Board,  effective  immediately,  and the Board accepted Mr. Griswold's
resignation. Mr. Griswold stated that his reason for resigning as an independent
director  was not due to any  dispute or  disagreement  with the  Company or the
Board on any matter.  The  Company's  Articles of  Incorporation  provide that a
majority  of the  Board  of  Directors  be  independent  directors.  In order to
maintain the Board's independence,  Robert A. Bourne tendered his resignation as
a member of the Board and the Board  accepted  his  resignation.  As a result of
each of Mr. Griswold and Mr. Bourne's  resignations,  the Board anticipates that
it will  nominate a new  Independent  Director and ask Mr.  Bourne to rejoin the
Board  in  connection  with  the  Board  elections  to be held at the  Company's
upcoming annual meeting of stockholders.

     In addition,  Thomas J. Hutchison III has been appointed Co-Chief Executive
Officer of both the Company and the Advisor,  effective  February 14, 2003.  Mr.
Hutchison  will tender his  resignation as President of both the Company and the
Advisor,  effective March 17, 2003, and Mr. Griswold will be appointed President
of the Company, effective March 17, 2003, as well as President and a Director of
the Advisor, also effective March 17, 2003.

     On February  14,  2003,  an Annual  Statement  of  Beneficial  Ownership of
Securities  on Form 5 was not filed by Mr. Kaplan (a director of the Company) on
behalf of an LLC (of which he has been  appointed a manager)  with  respect to a
single  transaction  related  to  shares  as to  which he  disclaims  beneficial
ownership.  Such Form was required to be filed by Section  16(a) of the Exchange
Act and the rules and regulation adopted thereunder, and was subsequently filed.

     Other information required by this Item is incorporated by reference to the
Company's  Definitive  Proxy  Statement to be filed with the Commission no later
than April 30, 2003.

Item 11.  Executive Compensation

     The  information  required by this Item is incorporated by reference to the
Company's  Definitive  Proxy  Statement to be filed with the Commission no later
than April 30, 2003.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The  information  required by this Item is incorporated by reference to the
Company's  Definitive  Proxy  Statement to be filed with the Commission no later
than April 30, 2003.

Item 13.  Certain Relationships and Related Transactions

     The  information  required by this Item is incorporated by reference to the
Company's  Definitive  Proxy  Statement to be filed with the Commission no later
than April 30, 2003.

Item 14.   Controls and Procedures

     As required by Rule 15d-15 under the Exchange Act, within the 90 days prior
to the filing date of this report,  the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's  disclosure  controls
and  procedures.  This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's principal
executive  and financial  officers.  Based upon that  evaluation,  the Company's
principal   executive  and  financial  officers  concluded  that  the  Company's
disclosure controls and procedures are effective. There have been no significant
changes in the  Company's  internal  controls or in other  factors,  which could
significantly  affect  internal  controls  subsequent  to the date  the  Company
carried out its evaluation.

     Disclosure  controls and procedures are controls and other  procedures that
are  designed to ensure that  information  required to be  disclosed  in Company
reports  filed or  submitted  under the  Exchange  Act is  recorded,  processed,
summarized and reported,  within the time periods  specified in the Commission's
rules and forms. Disclosure controls and procedures include, without limitation,
controls  and  procedures  designed  to ensure that  information  required to be
disclosed in Company  reports  filed under the Exchange Act is  accumulated  and
communicated to management, including the Company's principal executive officers
and the Company's principal  financial officer, as appropriate,  to allow timely
decisions regarding required disclosure.



<PAGE>

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(Amounts contained herein are in thousands, unless otherwise noted, except for
per share data.)


(a)       The following documents are filed as part of this report.

   1.   Consolidated Financial Statements

          Report of Independent Certified Public Accountants

          Consolidated Balance Sheets at December 31, 2002 and 2001

          Consolidated  Statements of Earnings for the years ended  December 31,
          2002, 2001 and 2000

          Consolidated  Statements of  Stockholders'  Equity for the years ended
          December 31, 2002, 2001 and 2000

          Consolidated Statements of Cash Flows for the years ended December 31,
          2002, 2001 and 2000

          Notes to Consolidated Financial Statements

   2.   Financial Statement Schedules

          Schedule III - Real Estate and  Accumulated  Depreciation  at December
          31, 2002

          Notes to Schedule III - Real Estate and  Accumulated  Depreciation  at
          December 31, 2002

          All  other  Schedules  are  omitted  as the  required  information  is
          inapplicable  or is presented  in the  financial  statements  or notes
          thereto.

   3.   Exhibits

          3.1  CNL  American  Realty  Fund,  Inc.   Articles  of   Incorporation
               (Previously filed as Exhibit 3.1 to the Registrant's Registration
               Statement on Form S-11  (Registration  No.  333-9943)  (the "1996
               Form S-11") and incorporated herein by reference.)


          3.2  CNL American Realty Fund, Inc.  Amended and Restated  Articles of
               Incorporation  (Previously  filed as Exhibit 3.2 to the 1996 Form
               S-11  (Registration  No.  333-9943)  (the "1996  Form  S-11") and
               incorporated herein by reference.)


          3.3  CNL  American  Realty  Fund,  Inc.  Bylaws  (Previously  filed as
               Exhibit  3.3 to the 1996  Form  S-11 and  incorporated  herein by
               reference.)


          3.4  CNL  American  Realty  Fund,  Inc.  Articles of  Amendment to the
               Amended and Restated Articles of Incorporation dated June 3, 1998
               (Previously  filed  as  Exhibit  3.4 to the  1996  Form  S-11 and
               incorporated herein by reference.)


<PAGE>


          3.5  Articles of  Amendment  to the Amended and  Restated  Articles of
               Incorporation of CNL Hospitality  Properties,  Inc. dated May 26,
               1999  (Previously  filed  as  Exhibit  3.5  to  the  Registrant's
               Registration  Statement on Form S-11 (Registration No. 333-67787)
               (the "1998 Form S-11") and incorporated herein by reference.)

          3.6  Articles of  Amendment  to the Amended and  Restated  Articles of
               Incorporation of CNL Hospitality Properties,  Inc. dated June 27,
               2000  (Previously  filed  as  Exhibit  3.6  to  the  Registrant's
               Registration  Statement  on Form S-11 (File No.  333-89691)  (the
               "1999 Form S-11") and incorporated by reference).

          3.7  Amendment No. 1 to the Bylaws of CNL Hospitality Properties, Inc.
               (Previously  filed  as  Exhibit  3.7 to the  1999  Form  S-11 and
               incorporated herein by reference.)


          3.8  Amendment No. 2 to the Bylaws of CNL Hospitality Properties, Inc.
               (Previously  filed  as  Exhibit  3.8 to the  1999  Form  S-11 and
               incorporated herein by reference.)


          3.9  Amendment No. 3 to the Bylaws of CNL Hospitality Properties, Inc.
               (Previously filed as Exhibit 3.9 to the Registrant's Registration
               Statement on Form S-11  (Registration  No.  333-67124)(the  "2002
               Form S-11") and incorporated herein by reference.)

          3.10 Articles of  Amendment  to the Amended and  Restated  Articles of
               Incorporation of CNL Hospitality Properties,  Inc. dated November
               15, 2002 (Previously  filed as Exhibit 3.10 to the 2002 Form S-11
               and incorporated herein by reference).

          4.1  CNL  American  Realty  Fund,  Inc.   Articles  of   Incorporation
               (Previously  filed  as  Exhibit  3.1 to the  1996  Form  S-11 and
               incorporated herein by reference).

          4.2  CNL American Realty Fund, Inc.  Amended and Restated  Articles of
               Incorporation  (Previously  filed as Exhibit 3.2 to the 1996 Form
               S-11 and incorporated herein by reference.)

          4.3  CNL  American  Realty  Fund,  Inc.  Bylaws  (Previously  filed as
               Exhibit  3.3 to the 1996  Form  S-11 and  incorporated  herein by
               reference.)

          4.4  Form  of  Reinvestment  Plan  (Included  as  Exhibit  4.4  to the
               Registrant's  Registration  Statement on Form S-11  (Registration
               No. 333-98047)(the "2003 Form S-11")in the Prospectus as Appendix
               A and incorporated herein by reference).

          4.5  Articles of  Amendment  to the Amended and  Restated  Articles of
               Incorporation  of CNL American  Realty Fund,  Inc.  dated June 3,
               1998  (Previously  filed as Exhibit 3.4 to the 1996 Form S-11 and
               incorporated herein by reference.)

          4.6  Articles of  Amendment  to the Amended and  Restated  Articles of
               Incorporation of CNL Hospitality  Properties,  Inc. dated May 26,
               1999  (Previously  filed as Exhibit 3.5 to the 1998 Form S-11 and
               incorporated herein by reference.)

          4.7  Articles of  Amendment  to the Amended and  Restated  Articles of
               Incorporation of CNL Hospitality Properties,  Inc. dated June 27,
               2000  (Previously  filed as Exhibit 3.6 to the 1999 Form S-11 and
               incorporated herein by reference.)

          4.8  Amendment No. 1 to the Bylaws of CNL Hospitality Properties, Inc.
               (Previously  filed  as  Exhibit  3.7 to the  1999  Form  S-11 and
               incorporated herein by reference.)

<PAGE>


          4.9  Amendment No. 2 to the Bylaws of CNL Hospitality Properties, Inc.
               (Previously  filed  as  Exhibit  3.8 to the  1999  Form  S-11 and
               incorporated herein by reference.)


          4.10 Amendment No. 3 to the Bylaws of CNL Hospitality Properties, Inc.
               (Previously  filed  an  Exhibit  3.9 to the  2002  Form  S-11 and
               incorporated herein by reference.)

          4.11 Articles of  Amendment  to the Amended and  Restated  Articles of
               Incorporation of CNL Hospitality Properties,  Inc. dated November
               15, 2002 (Previously  filed as Exhibit 3.10 to the 2002 Form S-11
               and incorporated herein by reference).


          10.1 Form of Advisory  Agreement  between CNL Hospitality  Properties,
               Inc. and CNL Hospitality  Corp.  (Included as Exhibit 10.2 to the
               2003 Form S-11).

          10.2 Indemnification  Agreement  between CNL  Hospitality  Properties,
               Inc. and Lawrence A. Dustin dated February 24, 1999.  Each of the
               following  directors  and/or  officers has signed a substantially
               similar  agreement as follows:  James M. Seneff,  Jr.,  Robert A.
               Bourne,  G.  Richard  Hostetter,  J.  Joseph  Kruse,  Richard  C.
               Huseman,  Charles  A.  Muller,  Jeanne A. Wall and Lynn E.  Rose,
               dated July 9, 1997; C. Brian  Strickland  dated October 31, 1998;
               John A.  Griswold,  dated  January 7, 1999;  Charles E. Adams and
               Craig M. McAllaster,  dated February 10, 1999;  Matthew W. Kaplan
               dated  February 24, 1999;  and Thomas J.  Hutchison III dated May
               16, 2000 (Previously filed as Exhibit 10.2 to the Form 10-Q filed
               on May 17, 1999 and incorporated herein by reference.)

          10.3 Agreement of Limited Partnership of CNL Hospitality  Partners, LP
               (Previously  filed as  Exhibit  10.10 to the 1996  Form  S-11 and
               incorporated herein by reference.)

          10.4 Hotel  Purchase  and  Sale  Contract   between  CNL  Real  Estate
               Advisors,  Inc. and Gwinnett Residence Associates,  LLC, relating
               to the  Residence  Inn -  Gwinnett  Place  (Previously  filed  as
               Exhibit  10.11 to the 1996 Form S-11 and  incorporated  herein by
               reference.)

          10.5 Assignment  and  Assumption  Agreement  between  CNL Real  Estate
               Advisors,  Inc. and CNL Hospitality Partners, LP, relating to the
               Residence Inn - Gwinnett Place (Previously filed as Exhibit 10.12
               to the 1996 Form S-11 and incorporated herein by reference.)

          10.6 Hotel  Purchase  and  Sale  Contract   between  CNL  Real  Estate
               Advisors,  Inc. and Buckhead Residence Associates,  LLC, relating
               to the Residence Inn - Buckhead (Lenox Park) (Previously filed as
               Exhibit  10.13 to the 1996 Form S-11 and  incorporated  herein by
               reference.)

          10.7 Assignment  and  Assumption  Agreement  between  CNL Real  Estate
               Advisors,  Inc. and CNL Hospitality Partners, LP, relating to the
               Residence  Inn -  Buckhead  (Lenox  Park)  (Previously  filed  as
               Exhibit  10.14 to the 1996 Form S-11 and  incorporated  herein by
               reference.)

<PAGE>

          10.8 Lease  Agreement  between CNL  Hospitality  Partners,  LP and STC
               Leasing  Associates,  LLC, dated August 1, 1998,  relating to the
               Residence Inn - Gwinnett Place (Previously filed as Exhibit 10.15
               to the 1996 Form S-11 and incorporated herein by reference.)


          10.9 Lease  Agreement  between CNL  Hospitality  Partners,  LP and STC
               Leasing  Associates,  LLC, dated August 1, 1998,  relating to the
               Residence  Inn -  Buckhead  (Lenox  Park)  (Previously  filed  as
               Exhibit  10.16 to the 1996 Form S-11 and  incorporated  herein by
               reference.)

         10.10 Master   Revolving   Line  of  Credit  Loan  Agreement  with  CNL
               Hospitality  Properties,  Inc., CNL Hospitality  Partners, LP and
               Colonial Bank, dated July 31, 1998  (Previously  filed as Exhibit
               10.17  to  the  1996  Form  S-11  and   incorporated   herein  by
               reference.)

         10.11 Master Loan  Agreement by and between CNL Hotel  Investors,  Inc.
               and  Jefferson-Pilot  Life Insurance Company,  dated February 24,
               1999 (Previously filed as Exhibit 10.18 to the 1996 Form S-11 and
               incorporated herein by reference.)

         10.12 Securities    Purchase    Agreement   between   CNL   Hospitality
               Properties,  Inc. and Five Arrows  Realty  Securities  II L.L.C.,
               dated February 24, 1999 (Previously filed as Exhibit 10.19 to the
               1996 Form S-11 and incorporated herein by reference.)

         10.13 Subscription   and   Stockholders'   Agreement  among  CNL  Hotel
               Investors,  Inc.,  Five Arrows Realty  Securities II L.L.C.,  CNL
               Hospitality  Partners, LP and CNL Hospitality  Properties,  Inc.,
               dated February 24, 1999 (Previously filed as Exhibit 10.20 to the
               1996 Form S-11 and incorporated herein by reference.)

         10.14 Registration  Rights  Agreement  by and between  CNL  Hospitality
               Properties,  Inc. and Five Arrows  Realty  Securities  II L.L.C.,
               dated February 24, 1999 (Previously filed as Exhibit 10.21 to the
               1996 Form S-11 and incorporated herein by reference.)

         10.15 First  Amendment  to  Lease  Agreement  between  CNL  Hospitality
               Partners,  LP and STC Leasing  Associates,  LLC,  dated August 1,
               1998,  related to the  Residence  Inn - Gwinnett  Place,  (amends
               Exhibit  10.8  above) and the First  Amendment  to  Agreement  of
               Guaranty,  dated  August 1, 1998  (amends  Agreement  of Guaranty
               attached as Exhibit I to 10.8 above) (Previously filed as Exhibit
               10.8 to the Form 10-Q filed on November 10, 1999 and incorporated
               herein by reference.)

         10.16 First  Amendment  to  Lease  Agreement  between  CNL  Hospitality
               Partners,  LP and STC Leasing  Associates,  LLC,  dated August 1,
               1998,  related  to the  Residence  Inn -  Buckhead  (Lenox  Park)
               (amends  Exhibit 10.9 above) and the First Amendment to Agreement
               of Guaranty,  dated August 1, 1998 (amends  Agreement of Guaranty
               attached as Exhibit I to 10.9 above) (Previously filed as Exhibit
               10.9 to the Form 10-Q filed on November 10, 1999 and incorporated
               herein by reference.)

         10.17 Lease Agreement between  Courtyard Annex,  L.L.C. and City Center
               Annex Tenant  Corporation,  dated November 15, 1999,  relating to
               the Courtyard - Philadelphia  (Previously  filed as Exhibit 10.22
               to the 1998 Form S-11 and incorporated herein by reference.)
<PAGE>

         10.18 First Amended and Restated Limited  Liability  Company  Agreement
               of  Courtyard  Annex,   L.L.C.,   relating  to  the  Courtyard  -
               Philadelphia  (Previously filed as Exhibit 10.23 to the 1998 Form
               S-11 and incorporated herein by reference.)

         10.19 Purchase  and  Sale  Agreement  between  Marriott  International,
               Inc., CBM Annex, Inc., Courtyard Annex, Inc., as Sellers, and CNL
               Hospitality Partners, LP, as Purchaser,  dated November 15, 1999,
               relating to the  Courtyard -  Philadelphia  (Previously  filed as
               Exhibit  10.24 to the 1998 Form S-11 and  incorporated  herein by
               reference.)

         10.20 Lease Agreement  between CNL Hospitality  Partners,  LP, and RST4
               Tenant LLC,  dated  December 10, 1999,  relating to the Residence
               Inn - Mira Mesa  (Previously  filed as Exhibit  10.25 to the 1998
               Form S-11 and incorporated herein by reference.)

         10.21 Purchase  and  Sale  Agreement  between  Marriott  International,
               Inc.,  TownePlace  Management  Corporation  and  Residence Inn by
               Marriott,  Inc., as Sellers, and CNL Hospitality Partners, LP, as
               Purchaser, dated November 24, 1999, relating to the Residence Inn
               - Mira Mesa and the TownePlace Suites - Newark  (Previously filed
               as Exhibit 10.26 to the 1998 Form S-11 and incorporated herein by
               reference.)

         10.22 Lease  Agreement  between CNL  Hospitality  Partners,  LP and WYN
               Orlando Lessee,  LLC, dated May 31, 2000, relating to the Wyndham
               Denver Tech Center (Previously filed as Exhibit 10.29 to the 1998
               Form S-11 and incorporated herein by reference.)

         10.23 Lease  Agreement  between CNL  Hospitality  Partners,  LP and WYN
               Orlando Lessee,  LLC, dated May 31, 2000, relating to the Wyndham
               Billerica  (Previously  filed as  Exhibit  10.30 to the 1998 Form
               S-11 and incorporated herein by reference.)

         10.24 Purchase and Sale Agreement  between CNL  Hospitality  Corp.,  as
               Buyer, and WII Denver Tech, LLC and PAH Billerica Realty Company,
               LLC, as Sellers, and Wyndham International, Inc., relating to the
               Wyndham Denver Tech Center and the Wyndham Billerica  (Previously
               filed as  Exhibit  10.31 to the 1998 Form  S-11 and  incorporated
               herein by reference.)

         10.25 Lease  Agreement  between CNL Hospitality  Partners,  LP and RST4
               Tenant LLC, dated June 17, 2000, relating to the Courtyard - Palm
               Desert and the Residence Inn - Palm Desert  (Previously  filed as
               Exhibit  10.32  to  the  1999  Form  S-11  and   incorporated  by
               reference).

         10.26 Purchase  and Sale  Agreement  between  PDH  Associates  LLC,  as
               Seller,  and CNL Hospitality  Corp., as Buyer,  dated January 19,
               2000,  relating to the  Courtyard - Palm Desert and the Residence
               Inn - Palm Desert  (Previously filed as Exhibit 10.33 to the 1999
               Form S-11 and incorporated by reference).

         10.27 Amendment to Purchase and Sale  Agreement  between PDH Associates
               LLC and CNL Hospitality Corp.,  dated January 19, 2000,  relating
               to  Courtyard - Palm Desert and the  Residence  Inn - Palm Desert
               (amends Exhibit 10.26 above)  (Previously  filed as Exhibit 10.34
               to the 1999 Form S-11 and incorporated by reference).
<PAGE>

         10.28 Assignment  Agreement  between  CNL  Hospitality  Corp.  and  CNL
               Hospitality Partners, LP, relating to the Courtyard - Palm Desert
               and the Residence Inn - Palm Desert  (Previously filed as Exhibit
               10.35 to the 1999 Form S-11 and incorporated by reference).

         10.29 Lease  Agreement  between CNL Hospitality  Partners,  LP and RST4
               Tenant  LLC,  dated July 28,  2000,  relating  to the  SpringHill
               Suites - Gaithersburg  (Previously  filed as Exhibit 10.36 to the
               1999 Form S-11 and incorporated by reference).

         10.30 Purchase and Sale Agreement  between  SpringHill SMC Corporation,
               as Seller, and CNL Hospitality  Partners,  LP, as Purchaser,  and
               joined in by Marriott  International,  Inc., dated June 30, 2000,
               relating  to the  SpringHill  Suites -  Gaithersburg  (Previously
               filed as Exhibit 10.37 to the 1999 Form S-11 and  incorporated by
               reference).

         10.31 Lease  Agreement  between CNL Hospitality  Partners,  LP and RST4
               Tenant LLC, dated July 28, 2000,  relating to the Residence Inn -
               Merrifield  (Previously  filed as Exhibit  10.38 to the 1999 Form
               S-11 and incorporated by reference).

         10.32 Purchase  and  Sale  Agreement  between   TownePlace   Management
               Corporation and Residence Inn by Marriott,  Inc., as Sellers, and
               CNL  Hospitality  Partners,  LP, as  Purchaser,  and joined in by
               Marriott  International,  Inc., dated November 24, 1999, relating
               to the  Residence Inn - Merrifield  (Previously  filed as Exhibit
               10.39 to the 1999 Form S-11 and incorporated by reference).

         10.33 First   Amendment   to  Purchase  and  Sale   Agreement   between
               TownePlace Management  Corporation and Residence Inn by Marriott,
               as Sellers, and CNL Hospitality Partners,  LP, as Purchaser,  and
               joined in by Marriott  International,  Inc.,  dated  November 24,
               1999,  relating  to the  Residence  Inn - Mira  Mesa,  SpringHill
               Suites - Gaithersburg, Residence Inn - Merrifield, and TownePlace
               Suites - Newark (amends  Exhibits 10.21,  10.30, and 10.32 above)
               (Previously  filed as  Exhibit  10.40 to the 1999  Form  S-11 and
               incorporated by reference).

         10.34 Lease  Agreement  between CNL Hospitality  Partners,  LP and CCCL
               Leasing LLC,  dated August 18, 2000,  relating to the Courtyard -
               Alpharetta  (Previously  filed as Exhibit  10.41 to the 1999 Form
               S-11 and incorporated by reference).

         10.35 Lease  Agreement  between CNL Hospitality  Partners,  LP and CCCL
               Leasing LLC, dated August 18, 2000, relating to the Residence Inn
               - Cottonwood  (Previously filed as Exhibit 10.42 to the 1999 Form
               S-11 and incorporated by reference).

         10.36 Lease  Agreement  between CNL Hospitality  Partners,  LP and CCCL
               Leasing LLC,  dated August 18, 2000,  relating to the  TownePlace
               Suites - Mt.  Laurel  (Previously  filed as Exhibit  10.43 to the
               1999 Form S-11 and incorporated by reference).

         10.37 Lease  Agreement  between CNL Hospitality  Partners,  LP and CCCL
               Leasing LLC,  dated August 18, 2000,  relating to the  TownePlace
               Suites -  Scarborough  (Previously  filed as Exhibit 10.44 to the
               1999 Form S-11 and incorporated by reference).

         10.38 Lease  Agreement  between CNL Hospitality  Partners,  LP and CCCL
               Leasing LLC,  dated August 18, 2000,  relating to the  TownePlace
               Suites - Tewksbury (Previously filed as Exhibit 10.45 to the 1999
               Form S-11 and incorporated by reference).
<PAGE>

         10.39 Purchase and Sale  Agreement  between  Residence Inn by Marriott,
               Inc.,   Courtyard   Management   Corporation,    SpringHill   SMC
               Corporation and TownePlace  Management  Corporation,  as Sellers,
               CNL Hospitality Partners, LP, as Purchaser,  CCCL Leasing LLC, as
               Tenant,  Crestline Capital Corporation,  Marriott  International,
               Inc., and joined in by CNL Hospitality  Properties,  Inc.,  dated
               August 18,  2000,  relating to the  Residence  Inn -  Cottonwood,
               Courtyard - Alpharetta  and  Overland  Park  SpringHill  Suites -
               Raleigh,  and  TownePlace  Suites - Mt. Laurel,  Scarborough  and
               Tewksbury  (Previously  filed as  Exhibit  10.46 to the 1999 Form
               S-11 and incorporated by reference).

         10.40 First Amendment to Purchase and Sale Agreement  between Residence
               Inn  by  Marriott,   Inc.,  Courtyard   Management   Corporation,
               SpringHill SMC Corporation and TownePlace Management Corporation,
               as Sellers,  CNL  Hospitality  Partners,  LP, as Purchaser,  CCCL
               Leasing  LLC,  as  tenant,  Crestline  Capital  Corporation,  and
               Marriott International,  Inc., dated August 18, 2000, relating to
               the  Residence  Inn -  Cottonwood,  Courtyard -  Alpharetta,  and
               Overland Park SpringHill Suites - Raleigh and TownePlace Suites -
               Mt.  Laurel,  Scarborough  and  Tewksbury  (Previously  filed  as
               Exhibit  10.47  to  the  1999  Form  S-11  and   incorporated  by
               reference).

         10.41 Lease  Agreement  between CNL Hospitality  Partners,  LP and RST4
               Tenant LLC,  dated  November 4, 2000,  relating to the TownePlace
               Suites - Newark  (Previously  filed as Exhibit  10.48 to the 1999
               Form S-11 and incorporated herein by reference.)

         10.42 Lease  Agreement  between  LLB  C-Hotel,  L.L.C.  and LLB  Tenant
               Corporation,  dated October 12, 2000, relating to the Courtyard -
               Little Lake Bryan  (Previously filed as Exhibit 10.49 to the 1999
               Form S-11 and incorporated herein by reference.)

         10.43 Lease  Agreement  between  LLB  F-Inn,   L.L.C.  and  LLB  Tenant
               Corporation,  dated  October 12, 2000,  relating to the Fairfield
               Inn - Little Lake Bryan (Previously filed as Exhibit 10.50 to the
               1999 Form S-11 and incorporated herein by reference.)

         10.44 First  Amendment to Lease Agreement  between LLB C-Hotel,  L.L.C.
               and LLB Tenant Corporation,  dated November 17, 2000, relating to
               the  Courtyard - Little Lake Bryan  (amends  Exhibit 10.42 above)
               (Previously  filed as  Exhibit  10.51 to the 1999  Form  S-11 and
               incorporated herein by reference.)

         10.45 First Amendment to Lease Agreement between LLB F-Inn,  L.L.C. and
               LLB Tenant Corporation,  dated November 17, 2000, relating to the
               Fairfield  Inn - Little Lake Bryan  (amends  Exhibit 10.43 above)
               (Previously  filed as  Exhibit  10.52 to the 1999  Form  S-11 and
               incorporated herein by reference.)

         10.46 Purchase  and  Sale  Agreement  between  Marriott  International,
               Inc., as Seller, and CNL Hospitality Partners,  LP, as Purchaser,
               dated September 17, 1998, relating to the Courtyard - Little Lake
               Bryan,  the Fairfield Inn - Little Lake Bryan and the  SpringHill
               Suites - Little Lake Bryan  (Previously filed as Exhibit 10.53 to
               the 1999 Form S-11 and incorporated herein by reference.)
<PAGE>

         10.47 Second  Amendment  to Lease  Agreement  between  CNL LLB  C-Hotel
               Management,  LP  (formerly  LLB  C-Hotel,  L.L.C.) and LLB Tenant
               Corporation, dated December 15, 2000, relating to the Courtyard -
               Little  Lake  Bryan  (amends  Exhibits  10.42  and  10.44  above)
               (Previously  filed as  Exhibit  10.54 to the 1999  Form  S-11 and
               incorporated herein by reference.)

         10.48 Second  Amendment  to  Lease  Agreement  between  CNL  LLB  F-Inn
               Management,  LP  (formerly  LLB  F-Inn  L.L.C.)  and  LLB  Tenant
               Corporation,  dated December 15, 2000,  relating to the Fairfield
               Inn - Little Lake Bryan (amends  Exhibits  10.43 and 10.45 above)
               (Previously  filed as  Exhibit  10.55 to the 1999  Form  S-11 and
               incorporated herein by reference.)

         10.49 Indenture  Agreement  among Desert Ridge Resort,  LLC, as Issuer;
               Bank  One,  National  Association,   as  Trustee;  and  Financial
               Structures Limited, as Insurer, dated December 15, 2000, relating
               to the Desert Ridge Property  (Previously  filed as Exhibit 10.56
               to the 1999 Form S-11 and incorporated herein by reference.)

         10.50 Form of Lease Agreement including Memorandum of Lease (Previously
               filed as  Exhibit  10.7 to the 2003  Form  S-11 and  incorporated
               herein  by  reference).

         10.51 Form of Escrow  Agreement  between  CNL  Hospitality  Properties,
               Inc. and SouthTrust Bank (Previously filed as Exhibit 10.1 to the
               2003 Form S-11 and incorporated herein by reference).

         10.52 Form of Joint  Venture  Agreement  (Previously  filed as  Exhibit
               10.3 to the 1998 Form S-11 and incorporated herein by reference).

         10.53 Form of  Indemnification  and Put Agreement  (Previously filed as
               Exhibit  10.4 to the 1996  Form S-11 and  incorporated  herein by
               reference).

         10.54 Form  of  Unconditional   Guaranty  of  Payment  and  Performance
               (Previously  filed  as  Exhibit  10.5 to the 1996  Form  S-11 and
               incorporated herein by reference).

         10.55 Form of Purchase  Agreement  (Previously filed as Exhibit 10.6 to
               the 1996 Form S-11 and incorporated herein by reference).

         10.56 Form  of   Lease   Agreement   including   Memorandum   of  Lease
               (Previously  filed  as  Exhibit  10.7 to the 2003  Form  S-11 and
               incorporated herein by reference).

         21    Subsidiaries of the Registrant (Filed herewith.)

          99.1 Certification of the Co-Chief Executive  Officer,  Pursuant to 18
               U.S.C.  Section  1350 as Adopted  Pursuant  to Section 906 of the
               Sarbanes - Oxley Act of 2002 (filed herewith).

          99.2 Certification of the Co-Chief Executive  Officer,  Pursuant to 18
               U.S.C.  Section  1350 as Adopted  Pursuant  to Section 906 of the
               Sarbanes - Oxley Act of 2002 (filed herewith).

          99.3 Certification  of the Chief  Financial  Officer,  Pursuant  to 18
               U.S.C.  Section  1350 as Adopted  Pursuant  to Section 906 of the
               Sarbanes - Oxley Act of 2002 (filed herewith).
<PAGE>

          (b)  The Company filed the following  reports during the quarter ended
               December 31, 2002, on Form 8-K:

               On December 31, 2002,  the Company  filed a report on Form 8-K to
               disclose a press release, dated December 30, 2002, describing the
               formation of a partnership  between the Company and Hilton Hotels
               Corporation.

          (d)  Other Financial Information

               The Company is required to file  audited  consolidated  financial
               statements  of Desert  Ridge Resort  Partners,  LLC and WB Resort
               Partners, LP due to the significance of the results of operations
               for these unconsolidated subsidiaries.

               The Company is required to file audited financial  information of
               a  guarantor,  Marriott  International,   Inc.  ("Marriott"),  of
               several of its tenants as a result of Marriott guaranteeing lease
               and loan  payments  for several of the  Company's  tenants  which
               leased more than 20 percent of the Company's total assets for the
               year ended December 31, 2002.


<PAGE>



               Desert Ridge Resort Partners, LLC and Subsidiaries
               Consolidated Financial Statements
               As of and for the years ended December 31, 2002 and 2001



<PAGE>





               Report of Independent Certified Public Accountants


To the Members of
Desert Ridge Resort Partners, LLC


In our opinion, the accompanying  consolidated  statements of financial position
and the related consolidated  statements of operations,  of members' capital and
comprehensive  loss and of cash flows present fairly, in all material  respects,
the financial position of Desert Ridge Resort Partners, LLC and its subsidiaries
at December 31, 2002 and 2001 and the results of their operations and their cash
flows  for the  years  then  ended  in  conformity  with  accounting  principles
generally accepted in the United States of America.  These financial  statements
are the  responsibility of the Company's  management;  our  responsibility is to
express  an  opinion  on these  financial  statements  based on our  audits.  We
conducted our audits of these  statements in accordance with auditing  standards
generally  accepted in the United States of America,  which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.





/s/ PRICEWATERHOUSECOOPERS, LLP

Orlando, Florida

February 17, 2003




<PAGE>
               DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                           DECEMBER 31, 2002 AND 2001
<TABLE>
<S><C>
                                                                       December 31,
                                                                  2002               2001
                                                            ---------------    ---------------
                   Assets

Current assets
   Cash and cash equivalents                                  $  7,564,395       $  4,378,754
   Accounts receivable                                           2,023,040            236,573
   Due from affiliate                                            3,320,900             52,443
   Prepaid expenses and other current assets                       731,964            183,962
                                                            ---------------    ---------------

         Total current assets                                   13,640,299          4,851,732


Restricted cash                                                     51,397         69,208,932
Property, construction in progress and equipment, net of
   accumulated depreciation of $2,786,920 and $449,167         269,925,397        134,596,034
Loan costs, net of accumulated amortization of
   $2,453,184 and $1,254,312                                     5,939,243          7,027,539
Other assets                                                     1,556,115          1,556,115
                                                            ---------------    ---------------
         Total assets                                         $291,112,451       $217,240,352
                                                            ===============    ===============

                 Liabilities and Members' Capital

Current liabilities
   Accounts payable and accrued expenses                      $  8,860,837       $  1,564,543
   Due to affiliate                                              5,159,727          1,060,934
   Construction costs payable, including retainage payable
         of $7,259,224 and $4,615,373                           17,172,419         22,531,663
   Obligation under cash flow hedge                              9,724,228          3,191,238
   Current portion of obligation under capital lease                41,188             41,188
                                                            ---------------    ---------------

         Total current liabilities                              40,958,399         28,389,566


Mortgage note payable                                          179,000,000        179,000,000
Other notes payable                                             51,175,811          2,289,421
Distributions payable                                            1,604,923                 -
Obligation under capital lease                                     131,728            172,916
                                                            ---------------    ---------------

         Total liabilities                                     272,870,861        209,851,903

Commitments and contingencies

Members' capital                                                18,241,590          7,388,449
                                                            ---------------    ---------------

         Total liabilities and members' capital               $291,112,451       $217,240,352
                                                            ===============    ===============


 The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>
<PAGE>
               DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
<TABLE>
<S><C>
                                                                  Years Ended December 31,
                                                                   2002              2002
                                                            ---------------    ---------------
Revenues:
   Golf course operations                                     $  3,196,404       $  2,658,777
   Room                                                          1,411,216                 -
   Food and beverage                                             1,655,655            279,837
   Interest                                                        356,167          5,214,701
   Other income                                                    724,990                637
                                                            ---------------    ---------------
         Total revenue                                           7,344,432          8,153,952

Cost of sales and other expenses:
   Golf course operations                                        3,185,750          2,050,168
   Room                                                            776,563                 -
   Food and beverage                                             2,227,158            185,140
   Other operating departments                                     826,282                 -
   Interest expense and loan cost amortization                   3,655,114         10,117,860
   Pre-opening expenses                                          6,547,778          2,587,318
   Depreciation                                                  2,337,753            449,167
   Property operations and maintenance                           1,427,877            366,428
   General and administrative                                    1,055,077            175,741
   Sales and marketing                                             446,670             94,615
   Management fees                                                 209,649             88,120
                                                            ---------------    ---------------
         Total cost of sales and other expenses                 22,695,671         16,114,557
                                                           ----------------    ---------------
Net loss                                                      $(15,351,239)       $(7,960,605)
                                                            ===============    ===============







 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE>
               DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES
        CONSOLIDATED STATEMENTS OF MEMBERS' CAPITAL & COMPREHENSIVE LOSS
                           DECEMBER 31, 2002 AND 2001
<TABLE>
<S><C>


                                                                         Accumulated Other
                                                                          Comprehensive                      Comprehensive
                                       Class A Members  Class B Members       Loss             Total             Loss
                                        --------------   --------------   --------------   --------------   ---------------
Balance at December 31, 2000            $  10,167,424    $   5,695,933    $          -     $  15,863,357    $           -

Capital contributions                      10,488,635               -                -        10,488,635                -

Return of capital                                  -        (5,613,400)              -        (5,613,400)               -

Distributions                              (1,725,463)        (472,837)              -        (2,198,300)               -

Net loss                                   (6,286,490)      (1,674,115)              -        (7,960,605)       (7,960,605)

Current period adjustment to
recognize fair value of cash
flow hedge                                         -                -        (3,191,238)      (3,191,238)       (3,191,238)

                                        --------------   --------------   --------------   --------------   ---------------
Balance at December 31, 2001               12,644,106       (2,064,419)      (3,191,238)       7,388,449       (11,151,843)


Capital contributions                      30,642,956        5,703,991                        36,346,947

Distributions                              (3,441,402)       (168,175)                        (3,609,577)

Net loss                                  (14,911,887)       (439,352)                       (15,351,239)      (15,351,239)

Current period adjustment to recognize
fair value of cash flow hedge                      -                -        (6,532,990)      (6,532,990)       (6,532,990)

                                        --------------   --------------   --------------   --------------   ---------------
Balance at December 31, 2002            $  24,933,773    $   3,032,045    $  (9,724,228)   $  18,241,590    $  (21,884,229)
                                        ==============   ==============   ==============   ==============   ===============


 The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>

<PAGE>

               DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<S><C>
                                                             Years Ended December 31,
                                                              2002             2001
                                                         --------------   --------------

Cash flows from operating activities:
    Net loss                                             $ (15,351,239)   $  (7,960,605)
    Adjustments to reconcile net loss to cash
       used in operating activities:
          Depreciation                                       2,337,753          449,167
          Amortization of loan costs                         1,198,872        1,254,312
    Changes in Operating assets and liabilities:
          Accounts receivable                               (1,787,464)        (119,095)
          Due from affiliate                                (3,267,460)         (52,573)
          Prepaid expenses and other current assets           (548,002)         (83,465)
          Accounts payable and accrued expenses              7,296,294          214,467
          Due to affiliate                                   4,098,793        1,060,934
                                                         --------------   --------------

             Net cash used in operating activities          (6,022,453)      (5,236,858)
                                                         --------------   --------------

Cash flows from investing activities:
    Additions to property and equipment                   (143,026,360)    (101,330,789)
    Decrease in restricted cash                             69,157,535      108,180,058
                                                         --------------   --------------

             Net cash (used in) provided by investing
                activities                                 (73,868,825)       6,849,269
                                                         --------------   --------------

Cash flows from financing activities:
    Borrowings, net of repayments, from other notes
       payable                                              48,886,390       (1,795,660)
    Principal payments on capital lease obligations            (41,188)              --
    Capital contributions from members                      36,346,947       10,488,635
    Return of capital to member                                     --       (5,613,400)
    Distributions to members                                (2,004,654)      (2,198,300)
    Payment of loan costs                                     (110,576)        (462,893)
                                                         --------------   --------------

             Net cash provided by financing activities      83,076,919          418,382
                                                         --------------   --------------

Net increase in cash and cash equivalents                    3,185,641        2,030,793

Cash and cash equivalents, beginning of period               4,378,754        2,347,961
                                                         --------------   --------------
Cash and cash equivalents, end of period                 $   7,564,395    $   4,378,754
                                                         ==============   ==============



 The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>

<PAGE>
               DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<S><C>

                                                             Years Ended December 31,
                                                              2002             2001
                                                         --------------   --------------

Supplemental disclosure of cash flow information:
    Cash paid during the period for:
     Interest, net of $14,979,037 and $7,486,263 in
     capitalized interest                                $     685,653    $   8,863,548
                                                         ==============   ==============

Supplemental disclosure of non-cash transactions
     Increase in obligations related to value of cash
     flow hedge                                          $   6,532,990    $   3,191,238
                                                         ==============   ==============
     Assumed obligation under capital lease              $          -     $     214,104
                                                         ==============   ==============
     Distributions declared but not paid to Partners     $   1,604,923    $          -
                                                         ==============   ==============
     Construction costs payable included in construction
     in progress                                         $  17,172,419    $  22,531,663
                                                         ==============   ==============

     Ground rental capitalized to construction cost      $     515,246    $     783,432
                                                         ==============   ==============

















 The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>

<PAGE>
               DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

1.   Business

     Organization
     Desert  Ridge  Resort  Partners,  LLC  (the  "LLC"  or the  "Company")  was
     organized  pursuant to the laws of the State of  Delaware  on December  21,
     2000. Desert Ridge Resort,  LLC and DRR Tenant Corporation are wholly owned
     subsidiaries of the LLC. The LLC's Class A members are CNL DRR Investor, LP
     and CNL Desert Ridge Resort, Ltd. (collectively, the "Class A Members") and
     Marriott  International,  Inc.  is the  Class B  Member  ("Marriott").  The
     managing  member is CNL DRR Investor,  LP. Both classes of members share in
     major decisions and there is substantially no difference between the rights
     and obligations of Class A Members and Class B Members.

     The LLC was formed to own and operate a 950-room  luxury resort  located in
     Phoenix,  Arizona (the "Property").  The Property includes two championship
     golf  courses,  a 25,500  square foot spa and 78,000 square feet of meeting
     space.  Affiliates of the members managed the  construction  activity under
     development agreements throughout the construction period. Construction was
     completed  on November  30, 2002 (the  "Opening  Date"),  at which time the
     Property  opened to the public.  The Property's  day-to-day  activities are
     managed by an affiliate of Marriott, however, all members must agree on key
     decisions affecting the Property.

     The structure of the LLC is designed to allow its managing  member's parent
     to  continue  to  qualify  as a real  estate  investment  trust,  which  is
     generally not subject to federal  income taxes.  In keeping with this goal,
     the LLC operates its Property through a taxable REIT subsidiary ("TRS"), as
     permitted by the REIT Modernization Act of 1999.

     The LLC  relies on  capital  contributions  from the  Class A  Members  and
     Marriott and borrowings under loans to fund capital expenditures, operating
     losses and  negative  cash flows.  Cash flow  deficits  are possible in the
     future,  which may require additional funding. The Members are committed to
     fund such shortfalls if they arise.

     In accordance with the LLC agreement (the  "Agreement"),  (i) each members'
     account is credited with capital  contributions,  share of profits and (ii)
     each members'  account is charged for amounts  distributed  to each member.
     The Class A Members and Class B Members  hold an 89.8% and 10.2%  interest,
     respectively  in the Company as a result of  $51,330,009  and $5,803,991 in
     capital contributions since its formation.

     Allocations  and  Distributions
     Net operating profits are allocated  (i)first,  to the members who received
     allocations of losses for earlier fiscal years,  pro rata, in proportion to
     the cumulative amount of losses  previously  allocated to them, until those
     members  have  received  cumulative  allocation  of  profits  equal  to the
     cumulative  losses;  (ii) next, to members,  pro rata, in proportion to the
     cumulative  distributions  made to them,  until those members have received
     cumulative  allocation  of profits equal to the  cumulative  amount of such
     distributions;   and  (iii)  thereafter,  to  the  members,  pro  rata,  in
     proportion to their respective percentage interests.

     Net operating  losses are allocated (i) first,  to the members who received
     allocations of profits for earlier fiscal years, pro rata, in proportion to
     the cumulative amount of profits previously  allocated to them, until those
     members  have  received  cumulative  allocation  of  losses  equal  to  the
     cumulative  profits;  (ii)  next,  to  members  who have  positive  capital
     accounts,  pro rata,  in  proportion  to the  respective  amounts  of their
     positive capital  accounts,  until the capital accounts of those members is
     reduced  to zero;  and (iii)  thereafter,  to the  members,  pro  rata,  in
     proportion to their respective percentage interests.

     In accordance with the LLC Agreement,  the Company was required to pay each
     member a return,  computed at the rate of 11 percent per annum on the daily
     average outstanding balance of the members' unreturned capital prior to the
     Opening Date, as defined above. After the Opening Date of the Property, the
     per annum  distribution  rate to members  increased to 11.5 percent.  These
     cash distributions are made based on cash available for distribution within
     thirty  days  of the  end of  each  calendar  quarter,  as  defined  in the
     Agreement.  As of December 31, 2002, the Company had distributions  payable
     totaling  $1,604,923.  As of December 31, 2001, all  distributions had been
     paid.

<PAGE>
         DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES - CONTINUED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

2.   Summary of Significant Accounting Policies

     A summary of  significant  accounting  principles and practices used in the
     preparation of the consolidated financial statements follows:

     Basis of Financial Statement Presentation
     The LLC prepares its consolidated  financial  statements in conformity with
     accounting  principles  generally accepted in the United States of America.
     These principles  require management to make estimates and assumptions that
     affect  the  reported  amounts  of assets  and  liabilities  at the date of
     financial  statements and reported  amounts of revenues and expenses during
     the reporting period. Actual results could differ from those estimates.

     Principles of Consolidation
     The accompanying  consolidated financial statements include the accounts of
     Desert Ridge Resort Partners,  LLC and its wholly owned  subsidiaries.  All
     significant  intercompany balances and transactions have been eliminated in
     consolidation.

     Reclassification
     Certain items in the prior year's  consolidated  financial  statements have
     been   reclassified   to  conform   with  the  2002   presentation.   These
     reclassifications   had  no  effect  on  Members'  Capital  or  results  of
     operations.

     Cash and Cash Equivalents
     The LLC  considers  all  amounts  held in highly  liquid  instruments  with
     original  purchased   maturities  of  three  months  or  less  to  be  cash
     equivalents.  Cash and cash equivalents consist primarily of demand deposit
     accounts. Management believes the credit risk associated with cash and cash
     equivalents to be low due to the quality of the financial  institutions  in
     which these assets are held.

     Certain amounts of cash were restricted for construction activities and are
     classified as restricted cash in the accompanying  consolidated  statements
     of financial  position as of December 31, 2001.  These amounts were used in
     2002 and  beginning  on the  Opening  Date,  certain  amounts  of cash were
     restricted for  maintenance  and  replacement of furniture,  fixtures,  and
     equipment.  These amounts are  calculated as a certain  percentage of Gross
     Revenues  in  accordance   with  the  hotel   management   agreement.   The
     accompanying  consolidated  statement of financial  position as of December
     31, 2002 includes  $51,397,  which has been  restricted for maintenance and
     replacements.

     Inventory
     Inventory  consists primarily of food and beverage  inventory,  merchandise
     and  operating  supplies and is accounted for using the first in, first out
     method and is stated at the lower of cost or market.  Inventory is recorded
     in  prepaid   expenses  and  other  current  assets  in  the   accompanying
     consolidated statements of financial position.

     Property,  Construction in Progress and Equipment
     Property,  construction  in progress  and  equipment  is stated at cost and
     includes  building,  construction in progress,  lease and land improvements
     and furniture,  fixtures and equipment ("FF&E"). Land improvements and FF&E
     are  depreciated  on the  straight-line  method over the assets'  estimated
     useful lives of 15 and 7 years,  respectively.  Buildings  are  depreciated
     over 40 years.

     Major renewals and betterments  are  capitalized  and depreciated  over the
     related  assets'  estimated  useful  lives.  Expenditures  for  repairs and
     maintenance are expensed when incurred.  Construction in progress  includes
     amounts  paid  or  due  to  third  parties  under  construction  contracts,
     capitalized  interest,  real estate taxes and development  fees.  Interest,
     ground rents and real estate taxes incurred  relating to development of the
     resort and amenities are capitalized to construction in progress during the
     active development period.


<PAGE>
         DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES - CONTINUED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

     Deferred Loan Costs
     Deferred loan costs,  primarily  loan  origination  and related  fees,  are
     capitalized  and are being  amortized  over the term of the loan  using the
     effective interest method.

     Leases
     The Company has entered into  capital and  operating  leases for  equipment
     used at its Properties.  Equipment leased under capital leases are recorded
     as equipment under capital leases along with a liability for the offsetting
     obligation  under  capital  leases.   Equipment  under  capital  leases  is
     depreciated  over the lease term and the  obligation  is reduced as monthly
     lease payments are made.  Payments under  operating  leases are recorded as
     rent expense each month as lease payments are made.

     Income Taxes
     Under the  provisions of the Internal Code and  applicable  state laws, the
     LLC is only  subject to  taxation  of income on the profits and losses from
     the TRS tenant  operations.  The tax consequences of other LLC revenues and
     expenses,  unrelated to the operation of the  Property,  will accrue to the
     Members.  Certain  of these  other  revenues  and  expenses  may be treated
     differently  in the  LLC's  income  tax  return  than  in the  accompanying
     consolidated  financial  statements.  Therefore,  amounts  reported  in the
     consolidated  financial  statements  may not be the same as reported in the
     Members' income tax returns.

     The LLC accounts for federal and state income taxes on its TRS tenant using
     the asset and liability  method.  Deferred tax assets and  liabilities  are
     recognized  for the future tax  consequences  attributable  to  differences
     between the consolidated  financial statements carrying amounts of existing
     assets and liabilities and their  respective tax bases and operating losses
     and tax-credit  carry  forwards.  Deferred tax assets and  liabilities  are
     measured using enacted tax rates expected to apply to taxable income in the
     years in which those temporary  differences are expected to be recovered or
     settled.  The effect on deferred tax assets and  liabilities of a change in
     tax rates is recognized in income in the period that includes the enactment
     date.  Valuation  allowances  are  established  when  necessary  to  reduce
     deferred tax assets to the amount expected to be realized.

     Revenue  Recognition
     Revenues are  recognized as the services are  provided.  Cash received from
     customers for events  occurring  after December 31, 2002 have been recorded
     as deposits and is included in accounts payable and accrued expenses in the
     accompanying   consolidated  statement  of  financial  position.   Advanced
     deposits  of   approximately   $1,082,000   and  $0  are  included  in  the
     accompanying  consolidated  statements of financial position as of December
     31, 2002 and 2001, respectively.

     Advertising and Promotion Costs
     The costs of advertising, promotional and marketing programs are charged to
     operations  in the year  incurred and are  included as sales and  marketing
     expenses  in  the  accompanying   consolidated   statement  of  operations.
     Advertising,  promotional and marketing costs totaled  $446,670 and $94,615
     for the years ended December 31, 2002 and 2001, respectively.

     Derivative  Financial  Instruments
     The LLC follows FAS 133, Accounting for Derivative  Instruments and Hedging
     Activities,  as  amended.  FAS 133  established  accounting  and  reporting
     standards  for  derivative   instruments  and  for  hedging  activities  by
     requiring all  derivatives  to be measured at fair value and  recognized in
     the consolidated statement of financial position. Gains or losses resulting
     from changes in fair value of  derivatives  are  recognized  in earnings or
     recorded in other comprehensive  income, and recognized in the consolidated
     statement of operations when the hedged item affects earnings, depending on
     the  purpose of the  derivatives  and  whether  they  qualify  for  hedging
     accounting  treatment (the  ineffective  portion,  if any, of all hedges is
     recognized in current prior earnings).  The LLC does not enter into or hold
     derivatives for trading or speculative purposes.

<PAGE>
         DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES - CONTINUED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

     Impairment  of  Long-Lived  Assets
     Effective  January  1, 2002 the  Company  adopted  Statement  of  Financial
     Accounting  Standards No. 144 "Accounting for the Impairment or Disposal of
     Long-Lived  Assets".  This  statement  requires that a long-lived  asset be
     tested for  recoverability  whenever  events or  changes  in  circumstances
     indicate  that its  carrying  amount may not be  recoverable.  The carrying
     amount of a long-lived  asset is not  recoverable  if it exceeds the sum of
     the  undiscounted  cash flows expected to result from the use and eventual
     disposition of the asset. The assessment is based on the carrying amount of
     the asset at the date it is tested for  recoverability.  An impairment loss
     is recognized  when the carrying  amount of a long-lived  asset exceeds its
     fair value. If an impairment is recognized, the adjusted carrying amount of
     a long-lived  asset is its new cost basis. The statement also requires that
     the results of  operations of a component of an entity that either has been
     disposed of or is classified as held for sale be reported as a discontinued
     operation.


<TABLE>
<S><C>

3.   Property, Construction in Progress and Equipment

     Property,  construction  in progress and equipment  consist of the following at
     December 31, 2002 and 2001:

                                                               2002             2001
                                                         --------------   --------------

           Land and land improvements                    $  63,466,377    $  26,106,831
           Buildings                                       162,147,269               --
           Furniture, fixtures and equipment                46,884,567          344,709
           Equipment under capital leases                      214,104          214,104
                                                         --------------   --------------
                                                           272,712,317       26,665,644
                Less: accumulated depreciation              (2,786,920)        (449,167)
           Construction in progress                                 --      108,379,557
                                                         --------------   --------------
                                                         $ 269,925,397    $ 134,596,034
                                                         ==============   ==============
</TABLE>

     Accumulated depreciation for equipment under capital leases was $71,368 and
     $49,244  for the  year  and  period  ended  December  31,  2002  and  2001,
     respectively.

4.   Mortgage Note Payable

     In December  2000, the LLC entered into a  $179,000,000  construction  loan
     with  an   institutional   lender  to  finance   construction   costs.  The
     construction  loan is secured by a first  mortgage and lien on the Property
     and all other LLC assets.  The construction  loan has a seven-year term and
     is due on December 15, 2007.  Interest  only  payments are due quarterly on
     each of March 15, July 15,  September  15, and  December 15 with the entire
     principal  balance  due at  maturity.  The amount of debt  reported  in the
     accompanying consolidated statements of financial position approximates the
     fair value of such debt as of December 31, 2002 and 2001.

     A portion of the construction  loan bears interest at an annual rate of 185
     basis points above three-month London Interbank Offered Rate (the "LIBOR").
     The LLC has entered into a seven-year  interest  rate swap  agreement  (the
     "Swap") to  effectively  convert the variable rate portion of this mortgage
     to a fixed interest rate of 6.025% per annum. The LLC designates the Swap a
     hedge of specific debt instruments and recognizes interest differentials as
     adjustments  to  interest   expense  as  the   differentials   occur.   The
     counterparty  to this agreement is a major financial  institution.  For the
     period ended  December 31, 2002 and 2001,  the LLC recorded  $9,724,228 and
     $3,191,238,  respectively,  in other comprehensive loss related to the fair
     value of the Swap.  The blended  interest rate on the  aggregate  principal
     amount of the $179,000,000  mortgage notes,  including  interest rate, swap
     costs,  premiums for a debt service insurance  policy,  and amortization of
     loan costs is approximately 10.13% per annum.

5.   Other Notes Payable

     The LLC and Marriott  entered into a series of agreements  whereby Marriott
     International Capital Corporation has agreed to make four loans to the LLC:
     mezzanine loan A (the "Mezzanine  Loan");  mezzanine loan B (the "Liquidity
     Facility  Loan");  mezzanine loan C (the "Project Cost Facility  Loan") and
     mezzanine loan D (the "Senior Loan Guaranty Loan").

<PAGE>
         DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES - CONTINUED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

<TABLE>
<S><C>
     A description of each loan is as follows:
                                                             Maximum
           Loan             Purpose of Loan                 Capacity             Term            Interest Rate
     -------------- ------------------------------- ------------------------ ------------ --------------------------

     Mezzanine Loan  Fund contributions of                 $57,134,000       Seven years     Election of either a
                     Marriott to allow Marriott to                                           floating rate or a fixed
                     pay a portion of development                                              rate (not to exceed
                                                                                                      13.5%)*

     Liquidity       Fund priority shortfalls from   Lesser of $32,500,000   Seven years     Election of either a
      Facility Loan  the operations of the Property   and 50% of Class A                   floating rate or a fixed
                                                     Members Contributions                    rate (not to exceed
                                                      cumulative priority                         13.5%) *
                                                         shortfalls

     Project Cost      Fund renovation costs in          $30,000,000         Seven years         8% per annum
      Facility Loan     excess of project budget

     Senior Loan      Fund any deficiency in the          No Limit **        Seven years         8% per annum
      Guaranty Loan   payment of monthly debt
                      service payments under the
                      Mortgage Loan

</TABLE>

     * The managing  member had the option to elect either the floating or fixed
     interest  rate at the time of the initial  advance.  The  floating  rate is
     equal to one-month  LIBOR plus 700 basis points and the fixed rate is equal
     to US Treasury Security,  with a maturity closest to the Mezzanine Loan and
     the Liquidity Facility Loan maturity date, plus 700 basis points.  Based on
     this election, these loans bear interest at an annual rate of 8.876%.

     ** The Senior  Loan  Guaranty  Loan has no limit on the amount  that can be
     borrowed until such time as the debt service  coverage ratio achieves 1.125
     percent. Once the debt service coverage ratio reaches 1.125 percent, future
     fundings under the Senior Loan Guaranty Loan are limited to $15 million.

     At December 31, 2002 and 2001,  $5,445,863  and  $2,289,421,  respectively,
     were outstanding under the Liquidity  Facility Loan and $45,729,948 and $0,
     respectively,  were  outstanding  under the Mezzanine Loan. No amounts were
     outstanding  under  the  Project  Cost  Facility  Loan or the  Senior  Loan
     Guarantee Loan at December 31, 2002 or 2001.  Collateral for these loans is
     restricted to assets relating to construction  accounts,  as defined by the
     Security Agreement. Each of the loans are due in December 2007.

     Marriott  International  Capital  Corporation  has  agreed  to  loan  up to
     $2,321,000 to the LLC for  additional  improvements  relating to the future
     occupancy  of  Marriott  Vacation  Club  (see  Note 7).  The loan will bear
     interest at 8% per annum,  with the  principal due on December 15, 2008. As
     of December 31, 2002,  the Company had not received  this amount,  however,
     the Company expects funding to occur in early 2003.

6.   Leases

     The LLC is a lessee of various  types of equipment  used in  operating  the
     Property.  The LLC's leases are  categorized as operating or capital leases
     based upon the terms in the lease agreements.

     The LLC  leases two  parcels  of land from the State of  Arizona  under two
     separate  lease  agreements,  on which the  luxury  resort and the two golf
     courses are located.  These operating  leases are effective until July 2092
     and require escalating base rents. Rental payments are due annually.  Total
     rent expense under all operating leases, including the land leases, for the
     years  ended  December  31,  2002  and  2001,  was  $647,193  and  $62,707,
     respectively.  These amounts have been included in property  operations and
     maintenance in the accompanying  consolidated  statements of operations for
     the years ended December 31, 2002 and 2001.

<PAGE>
         DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES - CONTINUED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

     Future minimum rental payments  required under capital leases together with
     the present  value of the net  minimum  lease  payments as of December  31,
     2002:

                       2003                           $     57,600
                       2004                                 57,600
                       2005                                 80,000
                                                     ---------------
                       Total future minimum
                         lease payments                    195,200
                       Less: interest                      (22,284)
                                                     ---------------

                       Present value of net
                         minimum lease payments            172,916
                       Less: current portion               (41,188)
                                                     ---------------
                                                      $    131,728
                                                     ===============

     Future minimum lease rental payments  required under operating  leases that
     have initial or remaining  non-cancelable lease terms in excess of one year
     as of December 31, 2002:

                      2003                            $    405,424
                      2004                                 405,424
                      2005                                 405,424
                      2006                                 405,424
                      2007                                 405,424
                      Thereafter                        77,325,015
                                                     --------------
                         Total                        $ 79,352,135
                                                     ==============

7.   Transactions with Related Parties

     Hotel Management Agreement
     --------------------------

     The  Company  entered  into an  agreement  with an  affiliate  of  Marriott
     International,  Inc. (the "Manager") to manage the Property. Under terms of
     the  agreement,  the Manager  operates  the  Property in return for a fixed
     management  fee of 3 percent of gross  revenues.  The Manager also earns an
     incentive management fee ranging from 20 percent to 50 percent of operating
     cash flow. The LLC incurred  management fees of $209,649 and $88,120 during
     the years ended December 31, 2002 and 2001, respectively.

     Development Agreements
     ----------------------

     The Company  entered into  agreements for $9 million with affiliates of the
     managing  member and Marriott to manage the  construction  of the Property.
     Under these agreements,  approximately  $3.0 and $5.8 million has been paid
     during the years  ended  December  31, 2002 and 2001,  respectively.  These
     amounts have been  capitalized to the cost of property and equipment in the
     accompanying consolidated statements of financial position.

<PAGE>
         DESERT RIDGE RESORT PARTNERS, LLC AND SUBSIDIARIES - CONTINUED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

     Other
     -----

     In connection with the development of a Marriott  Vacation Club resort (the
     "MVC Resort") within close proximity to the Property, the LLC has committed
     to lease  office and lobby space to the MVC Resort for the  purposes of the
     establishment  of a gallery and the  promotion  of Marriott  Vacation  Club
     International.  The term of the lease is eight years from the Opening  Date
     of the Property and will result in annual  rental  income of  approximately
     $389,000.  During the years ended  December 31, 2002 and 2001,  the Company
     received $32,435 and $0 in connection with this lease.

     The LLC has  entered  into  various  other  agreements  with  Marriott,  or
     subsidiaries  thereof,  to  provide  services  such as  marketing  support,
     reservation  services,  and other services  customary to the operation of a
     national  brand hotel  concept.  Amounts  incurred  for the year and period
     ended  December  31, 2002 and 2001 were $51,570 and $0,  respectively,  and
     have been included in cost of sales for rooms, food and beverage, and other
     operating  departments  in  the  accompanying  consolidated  statements  of
     operations.

     As of December 31, 2002 and 2001,  amounts due to Marriott  and  affiliates
     was  $5,159,727  and  $1,060,934,  respectively  and is  included in due to
     affiliate  in  the  accompanying   consolidated   statements  of  financial
     position.

     As of December 31, 2002 and 2001,  amounts due to Marriott were  $3,320,900
     and $52,443, respectively.  These amounts are primarily due for pre-opneing
     expense reimbursements.

8.   Income Taxes

     The  components  of the  deferred  taxes  recognized  in  the  accompanying
     consolidated statements of financial position at December 31, 2002 and 2001
     are as follows:

                                                 2002                2001
                                           ---------------     ---------------
          Deferred tax asset:
             Net operating loss            $ 2,821,000           $ 163,500

          Deferred tax liability:
             Tax over book depreciation       (514,000)             (2,000)
             Valuation allowance            (2,307,000)           (161,500)
                                           ---------------     ---------------
                                           $        --         $        --
                                           ===============     ===============

     The types of  temporary  differences  between  the tax bases of assets  and
     liabilities   and  their   financial   statement   reporting   amounts  are
     attributable  principally to depreciation and net operating losses. The TRS
     tenant has net operating loss carry-forwards for federal and state purposes
     of approximately  $5,971,000 and $480,000 as of December 31, 2002 and 2001,
     respectively,  which is available to offset future taxable income.  The net
     operating loss carry-forwards  expire in 2021. The Company has not recorded
     this  potential  future benefit  because its TRS  subsidiary  does not have
     sufficient historical earnings on which to base a potential future benefit.

9.   Commitments and Contingencies

     From time to time the Company  may be exposed to  litigation  arising  from
     operations of its business in the ordinary  course of business.  Management
     does not believe  that  resolution  of these  matters  will have a material
     adverse  impact  on  the  Company's   financial  condition  or  results  of
     operations.

                                    * * * * *


<PAGE>






WB Resort Partners, L.P. and Subsidiaries
Consolidated Financial Statements
As of and for the year ended December 31, 2002
and the period from July 27, 2001 (inception)
through December 31, 2001





<PAGE>




               Report of Independent Certified Public Accountants


To the Partners of
WB Resort Partners, L.P.


In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of operations,  of partners'  capital and of cash flows
present fairly, in all material  respects,  the financial  position of WB Resort
Partners,  L.P.  and its  subsidiaries  at  December  31,  2002 and 2001 and the
results of their operations and their cash flows for the year ended December 31,
2002 and the period from July 27, 2001 (inception)  through December 31, 2001 in
conformity with accounting principles generally accepted in the United States of
America.  These financial statements are the responsibility of the Partnership's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audit.  We conducted our audits of these  statements in
accordance with auditing  standards  generally  accepted in the United States of
America,  which require that we plan and perform the audits to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.





/s/ PRICEWATERHOUSECOOPERS, LLP

Orlando, Florida

February 14, 2003




<PAGE>
                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                         AS OF DECEMBER 31,2002 AND 2001
<TABLE>
<S><C>
                                                                                 December 31,
                                                                           2002                2001
                                                                    ---------------     ---------------
                     Assets

Current assets
   Cash and cash equivalents                                        $    3,309,558      $    2,865,747
   Accounts receivable, net of allowance for doubtful accounts of        3,986,276           1,208,991
         $72,508 and $78,413
   Prepaid expenses and other current assets                               861,371           1,567,735
                                                                    ---------------     ---------------
         Total current assets                                            8,851,377           5,642,473


Restricted cash                                                         11,662,018              77,010
Property, construction and progress and equipment, less
         accumulated depreciation of $12,012,790 and $2,671,883        198,140,180         188,519,031
Loan costs, less accumulated amortization of $860,569 and $236,659       2,271,970           2,789,808
                                                                    ---------------     ---------------
         Total assets                                               $  220,231,373      $  197,028,322
                                                                    ===============     ===============

      Liabilities and Partners' Capital

Current liabilities
   Accounts payable and accrued expenses                            $    9,814,084      $    5,428,103
   Construction costs payable, including retainage payable
      of $112,758 and $1,856,537                                         1,716,283          10,222,873
   Distribution payable                                                  2,463,838           1,213,418
   Current portion of capital lease obligation                           1,081,799           1,010,766
                                                                    ---------------     ---------------
         Total current liabilities                                      15,076,004          17,875,160

Mortgage note payable                                                  130,000,000         130,000,000

Other notes payable                                                     27,798,189           7,749,752

Capital lease obligation                                                   757,851           1,875,187
                                                                    ---------------     ---------------
         Total liabilities                                             173,632,044         157,500,099

Commitments and contingencies


Partners' capital                                                       46,599,329          39,528,223
                                                                    ---------------     --------------
         Total liabilities and partners' capital                    $  220,231,373      $  197,028,322
                                                                    ===============     ===============

The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>
<PAGE>

                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE YEAR ENDED DECEMBER 31,2002 AND THE PERIOD
              FROM JULY 27, 2001 (INCEPTION) TO DECEMEBER 31, 2001

<TABLE>
<S><C>

                                                         2002                2001
                                                    ---------------     ---------------

Revenues:
   Rooms                                            $   35,776,082      $    7,323,321
   Food and beverage                                     7,427,279           1,778,843
    Other operating departments                          3,463,235           1,064,677
                                                    ---------------     ---------------

         Total revenue                                  46,666,596          10,166,841

Cost of sales and other expenses:
   Rooms                                                11,741,511           3,007,678
   Food and beverage                                     7,665,138           2,211,960
   Other operating departments                           1,000,286             288,779
   Property operations and maintenance                  14,527,007           4,379,115
   Depreciation                                          9,340,907           2,671,883
   Interest and loan cost amortization                  10,381,823           3,035,605
   General and administrative                            3,938,931           2,780,902
   Sales and marketing                                   5,070,257           1,297,073
   Management fees                                       1,398,192             304,321
                                                    ---------------     ---------------
         Total costs and expenses                       65,064,052          19,977,316
                                                    ---------------     ---------------

Net loss                                            $  (18,397,456)     $   (9,810,475)
                                                    ===============     ===============





 The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>
<PAGE>

                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                            DECEMBER 31,2002 AND 2001
<TABLE>
<S><C>

                                       General Partner     Limited Partners         Total
                                       ---------------     ---------------     ----------------

Balance, July 27, 2001 (inception)     $       51,077      $   51,025,423      $    51,076,500


Distributions                                  (1,738)         (1,736,064)          (1,737,802)


Net loss                                       (9,810)         (9,800,665)          (9,810,475)
                                       ---------------     ---------------     ----------------
Balance, December 31, 2001             $       39,529      $   39,488,694      $    39,528,223
                                       ===============     ===============     ================

Contributions                          $       33,924      $   33,889,576      $    33,923,500


Distributions                                  (8,455)         (8,446,483)          (8,454,938)


Net loss                                      (18,397)        (18,379,059)         (18,397,456)
                                       ---------------     ---------------     ----------------

Balance, December 31, 2002             $       46,601      $   46,552,728      $    46,599,329
                                       ===============     ===============     ================















 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE>
                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEAR ENDED DECEMBER 31,2002 AND THE
           PERIOD FROM JULY 27, 2001 (INCEPTION) TO DECEMBER 31, 2001
<TABLE>
<S><C>

                                                                          2002                2001
                                                                    ---------------     ---------------
Cash flows from operating activities:
    Net Loss                                                        $  (18,397,456)     $   (9,810,475)
    Adjustments to reconcile net loss to cash
      used in operating activities:
          Depreciation                                                   9,340,907           2,671,883
          Amortization of loan costs                                       623,910             236,659
          Bad debt expense                                                  80,802                  -
    Changes in operating assets and liabilities:
          Accounts receivable                                           (2,858,087)          1,842,000
          prepaid expenses and other current assets                        706,364             717,867
          Accounts payable and accrued expenses                          4,385,981           1,303,341
                                                                    ---------------     ---------------
             Net cash used in operating activities                      (6,117,579)         (3,038,725)
                                                                    ---------------     ---------------

Cash flows from investing activities:
    Additions to property and equipment                                (27,468,646)       (178,913,348)
    Increase in restricted cash                                        (11,585,008)            (77,010)
                                                                    ---------------     ---------------
             Net cash used in investing activities                     (39,053,654)       (178,990,358)
                                                                    ---------------     ---------------
Cash flows from financing activities:
    Proceeds from mortgage loan                                                 -          130,000,000
    Proceeds from other notes payable                                   20,048,437           7,749,752
    Principal payments on capital lease obligations                     (1,046,303)           (380,571)
    Capital contributions from partners                                 33,923,500          51,076,500
    Distributions to partners                                           (7,204,518)           (524,384)
    Payment of loan costs                                                 (106,072)         (3,026,467)
                                                                    ---------------     ---------------
             Net cash provided by financing activities                  45,615,044         184,894,831
                                                                    ---------------     ---------------
Net increase in cash and cash equivalents at end of period                 443,811           2,865,747
    Cash, beginning of period                                            2,865,747                  -
                                                                    ---------------     ---------------
    Cash, end of period                                             $    3,309,558      $    2,865,747
                                                                    ===============     ===============

Supplementary disclosure of cash flow information:
    Cash paid during the period for:
       Interest, net of capitalized interest of $5,431,858
        and $2,227,403                                              $    8,772,225      $    3,035,605
                                                                    ===============     ===============

Supplementary disclosure of non-cash transactions:
    Equipment acquired under capital lease obligations              $           -       $    3,266,527
                                                                    ===============     ===============
    Distributions declared but not paid to Partners                 $   2,463,838       $    1,213,419
                                                                    ===============     ===============
    Construction costs payable included in property and equipment   $   1,716,283       $   10,222,873
                                                                    ===============     ===============

 The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>
<PAGE>

                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            DECEMBER 31,2002 AND 2001
1.   Business

     Organization
     WB Resort Partners,  L.P. (the "Partnership") was organized pursuant to the
     laws of the State of  Delaware on July 27,  2001.  WBM  Resort,  L.P.,  WBR
     Parent, LLC and WBR Tenant Corporation are wholly owned subsidiaries of the
     Partnership.  The  Partnership's  general  partner is CNL WBR GP Corp. (the
     "General  Partner") and the limited  partners are CNL WBR  Investor,  L.P.,
     Marriott  International,  Inc.  ("Marriott") and Waikiki Beach Resort, Ltd.
     (collectively, the "Limited Partners").

     The Partnership was formed to own and operate a resort located in Honolulu,
     Hawaii (the "Property").  The Partnership  negotiated a fixed fee agreement
     with a contractor for $65 million to renovate the Property.  As of December
     31, 2002,  renovations  were almost  complete.  The  Property's  day-to-day
     activities are managed by an affiliate of Marriott,  however,  all partners
     must agree to key decisions affecting the Property.

     The structure of the Partnership and its  subsidiaries is designed to allow
     the parent of its  majority  owner to  continue to qualify as a real estate
     investment  trust,  which is generally not subject to federal income taxes.
     In keeping  with this  objective,  the  Partnership  operates  its Property
     through  a  taxable  REIT  subsidiary  ("TRS"),  as  permitted  by the REIT
     Modernization Act of 1999.

     The General  Partner and Limited  Partners hold a 0.1% and 99.9%  interest,
     respectively,  in the Partnership and contributed  $33,924 and $33,889,577,
     respectively,  during  2002,  and  $51,077 and  $51,025,424,  respectively,
     during 2001, in order to obtain the following percentage interests:

                          Partner                          Percentage Interest

                       General Partner                            0.1%
                     CNL WBR Investor, LP                         48.9%
                  Waikiki Beach Resort, Ltd.                      36.0%
                           Marriott                               15.0%

     The Partnership  relies on capital  contributions  from the General Partner
     and  Limited  Partners  and  borrowings  under  loans to fund  renovations,
     capital  expenditures,  operating losses and negative cash flows. Cash flow
     deficits are possible in the future,  which may require additional funding.
     The Partners are committed to fund such shortfalls if they arise.

     Allocations  and  Distributions
     Net operating profits and net operating losses are allocated to the General
     and  Limited  Partners  in  accordance  with  their  respective   ownership
     interests.

     In  addition,  the General  Partner and Limited  Partners are entitled to a
     return  of 11.5%  per  annum  (the  "11.5%  Preferred  Return").  The 11.5%
     cumulative  Preferred  Return is to be paid quarterly to each partner based
     on the capital accounts of each partner during the quarter.  As of December
     31, 2002 and 2001,  the  Partnership  had  distributions  payable  totaling
     $2,463,838 and $1,213,418, respectively.

<PAGE>
                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31,2002 AND 2001

2.   Summary of Significant Accounting Policies

     A summary of  significant  accounting  principles and practices used in the
     preparation of the financial statements follows:

     Basis of Financial  Statement  Presentation
     The  Partnership  prepares its  financial  statements  in  conformity  with
     accounting  principles  generally accepted in the United States of America.
     These principles  require management to make estimates and assumptions that
     affect  the  reported  amounts  of assets  and  liabilities  at the date of
     financial  statements and reported  amounts of revenues and expenses during
     the reporting period. Actual results could differ from those estimates.

     Principles  of  Consolidation
     The accompanying  consolidated financial statements include the accounts of
     WB Resort Partners, L.P. and its wholly owned subsidiaries. All significant
     intercompany   balances   and   transactions   have  been   eliminated   in
     consolidation.

     Reclassification
     Certain items in the prior year's  consolidated  financial  statements have
     been   reclassified   to  conform   with  the  2002   presentation.   These
     reclassifications   had  no  effect  on  Members'  Capital  or  results  of
     operations.

     Cash and Cash Equivalents
     The  Partnership  considers all amounts held in highly  liquid  instruments
     with  original  purchased  maturities  of three  months  or less to be cash
     equivalents.  Cash and cash equivalents consist primarily of demand deposit
     accounts. Management of the Partnership believes the credit risk associated
     with  cash  and  cash  equivalents  to be low  due to  the  quality  of the
     financial institutions in which these assets are held.

     Certain  amounts of cash are restricted for  maintenance and replacement of
     furniture,  fixtures,  and equipment at the Partnership's Property of which
     $694,172 is classified as restricted cash in the accompanying  consolidated
     balance  sheet.  These amounts are  calculated  as a certain  percentage of
     sales in  accordance  with the hotel  management  agreement.  The remaining
     amount of restricted  cash represents cash which is restricted for budgeted
     renovations of December 31, 2002.

     Inventory
     Inventory  consists  primarily of food and beverage inventory and operating
     supplies and is  accounted  for using the first in, first out method and is
     stated at the lower of cost or market.  Inventory  is  recorded  in prepaid
     expenses and other current assets in the accompanying  consolidated balance
     sheet.

     Property, Construction in Progress and Equipment
     Property  and  Equipment  is stated  at cost and  includes  building,  land
     improvements  and  furniture,   fixtures  and  equipment.   Building,  land
     improvements and equipment is depreciated on the straight-line  method over
     the assets' estimated useful lives of 40, 15 and 7 years, respectively.

     Expenditures  for  major  renewals  and  betterments  are  capitalized  and
     depreciated over the related assets'  estimated useful lives.  Expenditures
     for repairs and maintenance  are expensed when incurred.  Interest and real
     estate taxes  incurred  relating to  renovation of the resort and amenities
     are capitalized to  construction  in progress during the active  renovation
     period.

<PAGE>
                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31,2002 AND 2001

     Deferred Loan Costs
     Loan costs,  primarily loan  origination  and related fees, are capitalized
     and are  being  amortized  over the term of the loan  using  the  effective
     interest method.

     Revenue Recognition
     Revenues are  recognized as the services are  provided.  Cash received from
     customers  for events  occurring  after each year end have been recorded as
     deposits in the accompanying consolidated balance sheets. Advanced deposits
     of  approximately  $668,315 and  $399,864 are included in the  accompanying
     consolidated balance sheet as of December 31, 2002 and 2001, respectively.

     Advertising and Promotion Costs
     The costs of advertising, promotional and marketing programs are charged to
     operations  in the year  incurred and are  included as sales and  marketing
     expenses  in  the  accompanying   statement  of  operations.   Advertising,
     promotional and marketing  costs totaled  $5,070,257 and $1,297,073 for the
     year and period ended December 31, 2002 and 2001, respectively.

     Leases The  Partnership  has entered into capital and operating  leases for
     land and  equipment  used at the Property.  Equipment  leased under capital
     leases is recorded as equipment on the  accompanying  consolidated  balance
     sheet with a liability  for the  corresponding  obligation  under the lease
     agreement.  Equipment under capital leases are depreciated  over the useful
     life of the  equipment  and the  obligation  is reduced  as  monthly  lease
     payments are made.  Payments  under  operating  leases are recorded as rent
     expense as lease payments are made.

     Income Taxes
     Under the  provisions  of the Internal  Revenue Code and  applicable  state
     laws, the  Partnership is only subject to taxation of income on the profits
     and losses from the TRS tenant  operations.  The tax  consequences of other
     Partnership  revenues  and  expenses,  unrelated  to the  operation  of the
     Property, will accrue to the partners.  Certain of these other revenues and
     expenses may be treated differently in the Partnership's  income tax return
     than in the  accompanying  consolidated  financial  statements.  Therefore,
     amounts  reported in the consolidated  financial  statements may not be the
     same as reported in the Partners' income tax returns.

     The  Partnership  accounts  for federal and state  income  taxes on its TRS
     tenant  using the asset and  liability  method.  Deferred  tax  assets  and
     liabilities are recognized for the future tax consequences  attributable to
     differences between the consolidated  financial statements carrying amounts
     of existing  assets and  liabilities and respective tax bases and operating
     losses and tax-credit  carry forwards.  Deferred tax assets and liabilities
     are measured using enacted tax rates expected to apply to taxable income in
     the years in which those temporary differences are expected to be recovered
     or settled.  The effect on deferred tax assets and  liabilities of a change
     in tax rates is  recognized  in  income in the  period  that  includes  the
     enactment  date.  Valuation  allowances are  established  when necessary to
     reduce deferred tax assets to the amount expected to be realized.

<PAGE>

                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31,2002 AND 2001

     Impairment of Long-Lived  Assets
     Effective  January 1, 2002 the Partnership  adopted  Statement of Financial
     Accounting  Standards No. 144 "Accounting for the Impairment or Disposal of
     Long-Lived  Assets".  This  statement  requires that a long-lived  asset be
     tested for  recoverability  whenever  events or  changes  in  circumstances
     indicate  that its  carrying  amount may not be  recoverable.  The carrying
     amount of a long-lived  asset is not  recoverable  if it exceeds the sum of
     the  undiscounted  cash flows  expected to result from the use and eventual
     disposition of the asset. The assessment is based on the carrying amount of
     the asset at the date it is tested for  recoverability.  An impairment loss
     is recognized  when the carrying  amount of a long-lived  asset exceeds its
     fair value. If an impairment is recognized, the adjusted carrying amount of
     a long-lived  asset is its new cost basis. The statement also requires that
     the results of  operations of a component of an entity that either has been
     disposed of or is classified as held for sale be reported as a discontinued
     operation.

3.   Property, Construction in Progress and Equipment

     Property,  construction in progress and equipment  consist of the following
     at December 31, 2002 and 2001:
<TABLE>
<S><C>

                                                        2002                 2001
                                                 ---------------      ---------------

            Building                             $  121,436,927       $  121,436,927
            Land improvements                         2,265,081            2,265,132
            Furniture, fixtures and equipment        23,546,112           20,856,769
            Equipment under capital leases            3,234,183            2,885,955
                                                 ---------------      ---------------
                                                    150,482,303          147,444,783
                 Less: accumulated depreciation     (12,012,790)          (2,671,883)
            Construction in progress                 59,670,667           43,746,131
                                                 ---------------      ---------------
                                                 $  198,140,180       $  188,519,031
                                                 ===============      ===============
</TABLE>

     Accumulated  depreciation for equipment under capital leases was $1,492,397
     and $380,572 as of December 31, 2002 and 2001, respectively.

4.   Mortgage Note Payable

     In July 2001, the  Partnership  entered into a  $130,000,000  mortgage loan
     with an institutional  lender to finance a portion of the Property acquired
     and future  renovation  costs.  The mortgage is secured by a first mortgage
     and lien on the building and all other assets.  The loan bears  interest at
     8.53% per annum and matures on August 15, 2006.  Interest only payments are
     due monthly  through  maturity.  For the year and period ended December 31,
     2002  and  2001,  the  Partnership   incurred  $9,621,688  and  $2,798,946,
     respectively  in  interest  expense.  The  amount of debt  reported  in the
     accompanying  consolidated  balance sheets  approximates  the fair value of
     such debt as of December 31, 2002 and 2001.












                          - Intentionally Left Blank -

<PAGE>

                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31,2002 AND 2001

5.   Other Notes Payable

     On July 27, 2001, the Partnership and Marriott entered into a loan
     agreement whereby Marriott has agreed to provide three loans to the
     Partnership: a liquidity facility loan ("Mezz Loan A"); a senior loan
     guaranty ("Mezz Loan B"); and a cost overrun loan ("Mezz Loan C"). A
     description of each loan is as follows:

<TABLE>
<S><C>
                                                          Maximum
            Loan                Purpose of Loan            Capacity          Term          Interest Rate
     ------------------  ---------------------------   ---------------- -------------- ---------------------

      Mezz Loan A         Fund priority shortfalls        $20,000,000     Five years       LIBOR plus 700
                          from the operations of the                                     basis points (not
                          Property                                                        to exceed 13.5%)

      Mezz Loan B         Fund any deficiency in the       No limit       Five years       LIBOR plus 700
                          payment of monthly debt                                        basis points (not
                          service payments under the                                      to exceed 13.5%)
                          Mortgage Loan

      Mezz Loan C         Fund renovation costs in        $5,000,000      Five years       LIBOR plus 700
                          excess of project budget                                       basis points (not
                                                                                         to exceed 13.5%)
</TABLE>

     Each  of the  three  loans  are  due  July  2006.  At  December  31,  2002,
     $12,969,406,  $14,828,783  and $0 were  outstanding  under the Mezz Loan A,
     Mezz  Loan B and  Mezz  Loan C,  respectively.  As of  December  31,  2001,
     $3,258,258,  $4,491,494 and $0 were outstanding under the Mezz Loan A, Mezz
     Loan B and Mezz Loan C, respectively.  The interest rate on the Mezz Loan A
     and Mezz Loan B was 8.382  percent and 8.876  percent at December  31, 2002
     and 2001, respectively.

6.   Leases

     The Partnership is a lessee of various types of equipment used in operating
     the Property.  Leases are  categorized as operating or capital leases based
     upon the terms in the lease agreements.



<PAGE>

                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31,2002 AND 2001

     The  following  is a schedule by years of future  minimum  rental  payments
     required under capital lease obligations together with the present value of
     the net minimum lease payments as of December 31, 2002:

                 2003                                            $    1,203,292
                 2004                                                   759,944
                 2005                                                    16,832
                                                                 ---------------
                 Total future minimum lease payments                  1,980,068
                 Less: interest                                        (140,418)
                                                                 ---------------
                 Present value of net minimum
                     lease payments                                   1,839,650
                 Less: current portion                               (1,081,799)
                                                                 ---------------

                                                                 $      757,851
                                                                 ===============

     The  Partnership  leases two parcels of land under ground leases,  on which
     the Property is  currently  being  renovated.  These  operating  leases are
     effective  until 2080 and 2050,  respectively.  One of the land  leases has
     escalating  base rents from 2001 to 2008.  The base rents from 2008 through
     2080 and 2050, respectively, will never be less than the 2008 base rent and
     will  increase  every five years by the consumer  price index.  The minimum
     annual  rental  expense  has  been  straight-lined  over  the life of these
     leases.   Both  leases  contain   percentage  rent  calculations  based  on
     percentages of gross revenues, as defined. Rent expense,  including accrued
     rental  expense  and lease taxes for the year ended  December  31, 2002 was
     $4,699,049.  Rent expense,  including accrued rental expense for the period
     ended December 31, 2001 was  $2,289,952.  Percentage  rent for the year and
     period  ended   December  31,  2002  and  2001  was  $128,447  and  $4,781,
     respectively.  These amounts have been included in property  operations and
     maintenance in the accompanying consolidated statements of operations as of
     the year and period ended December 31, 2002 and 2001, respectively.

     Future minimum lease rental payments  required under operating  leases that
     have initial or remaining  noncancellable lease terms in excess of one year
     as of December 31, 2002 are as follows:

              2003                               $    3,784,000
              2004                                    4,794,000
              2005                                    4,794,000
              2006                                    4,794,000
              2007                                    4,794,000
              Thereafter                            342,042,000
                                                 ---------------
                                                 $  365,002,000
                                                 ===============

7.   Transactions with Related Parties

     Hotel Management Agreement

     The  Partnership  entered into an  agreement  with an affiliate of Marriott
     International,  Inc. (the "Manager") to manage the Property. Under terms of
     the  agreement,  the Manager  operates  the  Property in return for a fixed
     management  fee of 3 percent of gross  revenues.  The Manager also earns an
     incentive  management  fee equal up to 50 percent of  operating  profits in
     excess of certain payment thresholds.  The Partnership  incurred management
     fees of $1,398,192  and $304,321  during the year and period ended December
     31, 2002 and 2001, respectively.

<PAGE>

                     WB RESORT PARTNERS, LP AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31,2002 AND 2001

     Development Agreements

     The  Partnership  entered into  agreements  with  affiliates of the General
     Partner  and  Marriott  to manage the  renovation  of the  Property  for $5
     million.  All amounts were paid under these  agreements  as of December 31,
     2001 and no additional amounts were incurred during 2002.

     Other

     The  Partnership  has entered into various  other  agreements  with related
     parties  to  provide  services  such  as  marketing  support,   reservation
     services, and other services customary to the operation of a national brand
     hotel concept.  Amounts incurred for the year and period ended December 31,
     2002 and 2001  were  $740,874  and  $188,078,  respectively,  and have been
     included in cost of sales for room, food and beverage,  and other operating
     departments in the accompanying consolidated statement of operations.

     As of December 31, 2002 and 2001,  amounts due from Marriott and affiliates
     were $0 and $898,117.

8.   Income Taxes

     The  components  of the  deferred  taxes  recognized  in  the  accompanying
     consolidated balance sheet at December 31, 2002 and 2001 are as follows:

                                              2002                2001
                                        ---------------     ---------------

     Deferred tax assets:
        Net operating loss              $    6,583,000      $    1,376,000
        Accrued rent                           562,000             179,000
     Deferred tax liabilities:
        Tax over book depreciation          (1,921,000)                 --
        Valuation allowance                 (5,224,000)         (1,555,000)
                                        ---------------     ---------------

                                        $           --      $           --
                                        ===============     ===============

     The types of  temporary  differences  between  the tax basis of assets  and
     liabilities and their consolidated  financial  statement  reporting amounts
     are attributable principally to depreciation differences,  accrued expenses
     and  net  operating   losses.   The  TRS  tenant  had  net  operating  loss
     carryforwards  for federal and state purposes of approximately  $11,250,000
     and  $4,050,000  as of December 31, 2002 and 2001,  respectively,  which is
     available  to  offset  future  operating  income.  The net  operating  loss
     carryforward  expires  in  2021.  The  Partnership  has not  recorded  this
     potential   future  benefit  because  its  TRS  subsidiary  does  not  have
     sufficient historical earnings on which to base a potential future benefit.

9.   Commitments and Contingencies

     From time to time the Partnership may be exposed to litigation arising from
     operations of its business in the ordinary  course of business.  Management
     does not believe  that  resolution  of these  matters  will have a material
     adverse  impact on the  Partnership's  financial  condition  or  results of
     operations.

                                    * * * * *

<PAGE>



     The following  summarized  financial  information  is filed as part of this
     report as a result of Marriott  guaranteeing  lease and loan  payments  for
     several of the Company's tenants whose aggregate  carrying value represents
     more than 20  percent  of the  Company's  total  assets  for the year ended
     December 31, 2002.  The  summarized  financial  information  presented  for
     Marriott as of January 3, 2003 and December  28, 2001,  and for each of the
     years ended January 3, 2003,  December 28, 2001 and December 29, 2000,  was
     obtained from the Form 10-K filed by Marriott with the  Commission  for the
     year ended January 3, 2003.

                  Marriott International, Inc. and Subsidiaries
                             Selected Financial Data
                      (in Millions, except per share data)

       Consolidated Balance Sheets Data:
       --------------------------------
<TABLE>
<S><C>
                                                               January 3,        December 28,
                                                                 2003                2001
                                                            ---------------     ---------------

       Current Assets                                       $      1,744        $     2,747
       Noncurrent Assets                                           6,552              6,360
       Current Liabilities                                         2,207              1,970
       Noncurrent Liabilities                                      2,516              3,659
       Stockholders' Equity                                        3,573              3,478


       Consolidated Statements of Income Data:
       --------------------------------------
                                                               Fiscal Year        Fiscal Year         Fiscal Year
                                                                 Ended,             Ended,               Ended,
                                                               January 3,        December 28,         December 29,
                                                                  2003               2001                 2000
                                                            ---------------     ----------------     ---------------

    Gross revenues                                          $      8,441        $      7,786         $     7,911

    Costs and expenses (including income tax expense)              8,164               7,550               7,432
                                                            ---------------     ----------------     ---------------

    Net income                                              $        277        $        236         $       479
                                                            ===============     ================     ===============

    Basic earnings per share                                $       1.15        $       0.97         $      1.99
                                                            ===============     ================     ===============

    Diluted earnings per share                              $       1.10        $       0.92         $      1.89
                                                            ================   ================      ===============

</TABLE>

<PAGE>




                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto  duly  authorized,  on the 6th day of
March, 2003.

                                  CNL HOSPITALITY PROPERTIES, INC.

                               By:      /s/ James M. Seneff, Jr.
                                        ----------------------------------
                                        JAMES M. SENEFF, JR.
                                        Chairman of the Board and
                                        Co-Chief Executive Officer
                                        (Principal Executive Officer)


                               By:      /s/ Thomas J. Hutchison, III
                                        ----------------------------------
                                        THOMAS J. HUTCHISON, III
                                        President and Co-Chief Executive Officer
                                        (Principal Executive Officer)


                               By:      /s/ C. Brian Strickland
                                        ----------------------------------
                                        C. BRIAN STRICKLAND
                                        Executive Vice President
                                        (Principal Financial and Accounting
                                        Officer)


<PAGE>


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<S><C>

           Signature                           Title                                Date
           ---------                           -----                                ----



  /s/ James M. Seneff, Jr.             Chairman of the Board and                 March 6, 2003
  ------------------------------      Co-Chief Executive Officer
  JAMES M. SENEFF, JR.               (Principal Executive Officer)



  /s/ Robert A. Bourne                       Treasurer                           March 6, 2003
  ------------------------------
  ROBERT A. BOURNE



  /s/ Thomas J. Hutchison, III             President and Co-                     March 6, 2003
  ------------------------------        Chief Executive Officer
  THOMAS J. HUTCHISON, III            (Principal Executive Officer)



  /s/ C. Brian Strickland              Executive Vice President,                 March 6, 2003
  ------------------------------       (Principal Financial and
  C. BRIAN STRICKLAND                   Accounting Officer)



  /s/ Matthew W. Kaplan                        Director                          March 6, 2003
  ------------------------------
  MATTHEW W. KAPLAN



  /s/ Charles E. Adams                   Independent Director                    March 6, 2003
  ------------------------------
  CHARLES E. ADAMS



  /s/ Lawrence A. Dustin                 Independent Director                    March 6, 2003
  ------------------------------
  LAWRENCE A. DUSTIN



  /s/ Craig M. McAllaster                Independent Director                    March 6, 2003
  ------------------------------
  CRAIG M. MCALLASTER


</TABLE>


<PAGE>

                        CNL Hospitality Properties, Inc.

                                 CERTIFICATIONS
                                 --------------

I, James M Seneff, Jr, certify that:

1.   I have  reviewed  this  annual  report  on  Form  10-K  of CNL  Hospitality
     Properties, Inc. (the "Registrant");

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the Registrant as of, and for, the periods presented in this annual report;

4.   The  Registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  Registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the Registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The Registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  Registrant's  auditors  and the audit
     committee of the Registrant's board of directors:

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  Registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  Registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  Registrant's  internal
          controls; and

6.   The  Registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date: March 6, 2003

/s/ James M. Seneff, Jr
-----------------------
James M. Seneff, Jr.
Chairman of the Board and Co-Chief Executive Officer
(Principal Executive Officer)

<PAGE>


                        CNL Hospitality Properties, Inc.

                                 CERTIFICATIONS
                                 --------------

I, Thomas J. Hutchison, III certify that:

1.   I have  reviewed  this  annual  report  on  Form  10-K  of CNL  Hospitality
     Properties, Inc. (the "Registrant");

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the Registrant as of, and for, the periods presented in this annual report;

4.   The  Registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  Registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the Registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The Registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  Registrant's  auditors  and the audit
     committee of the Registrant's board of directors:

     c)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  Registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  Registrant's  auditors any material  weaknesses in
          internal controls; and

     d)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  Registrant's  internal
          controls; and

6.   The  Registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date: March 6, 2003

/s/ Thomas J. Hutchison, III
------------------------------------
Thomas J. Hutchison, III
President and Co-Chief Executive Officer
(Principal Executive Officer)

<PAGE>

                        CNL Hospitality Properties, Inc.

                                 CERTIFICATIONS
                                 --------------


I, C. Brian Strickland certify that:

1.   I have  reviewed  this  annual  report  on  Form  10-K  of CNL  Hospitality
     Properties, Inc. (the "Registrant");

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the Registrant as of, and for, the periods presented in this annual report;

4.   The  Registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     d)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  Registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     e)   evaluated the  effectiveness of the Registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     f)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The Registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  Registrant's  auditors  and the audit
     committee of the Registrant's board of directors:

     e)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  Registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  Registrant's  auditors any material  weaknesses in
          internal controls; and

     f)   any fraud, whether or not material,  that involves management or other
          employees who have a significant role in the
                      Registrant's internal controls; and

6.   The  Registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date: March 6, 2003

/s/ C. Brian Strickland
------------------------------
C. Brian Strickland
Executive Vice President
(Principal Financial and Accounting Officer)

<PAGE>


CNL HOSPITALITY PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (amounts in thousands)

December 31, 2002

<TABLE>
<S><C>
Properties the Company
    has Invested in Under
    Operating Leases:
                                                                                                   Costs Capitalized
                                                              Initial Costs                    Subsequent to Acquisition
                                                 ------------------------------------------   ---------------------------
                                                                                                              Carrying
                                  Encumbrances       Land        Buildings      Equipment     Improvements      Costs
                                  ------------   ------------   ------------   ------------   ------------   ------------
Residence Inn by Marriott:
    Atlanta, Georgia              $       --     $    1,907     $   13,459     $    1,270     $      178     $       --
    Duluth, Georgia                       --          1,019         10,017          1,141            137             --
    Orlando, Florida                      --          3,533             --             --         31,346             --
    Merrifield, Virginia                  --          2,621         15,499          2,011            (78)            --
    Palm Desert, California               --          2,187         14,212          1,375             37             --
    Las Vegas, Nevada                 16,997          3,784         27,651            954          3,636             --
    Plano, Texas                       5,654          1,409          9,478            494          1,373             --
    Phoenix, Arizona                  10,121          2,215         18,061            852          2,191             --
    Salt Lake City, Utah                  --          2,330         11,659          1,480             13             --
    San Diego, California                 --          2,002         12,924          1,701             29             --
    Newark, California                 1,365          3,871         23,883          1,034             --

Courtyard by Marriott:
    Alpharetta, Georgia                   --          2,460         10,916          1,392             18             --
    Edison, New Jersey                    --          2,770             --             --         13,457             --
    Oakland, California                1,025          3,239         17,471          1,125             17             --
    Orlando, Florida                  17,426          9,025         24,583          4,285             61             --
    Overland Park, Kansas                 --          1,419         13,014          2,317             22             --
    Palm Desert, California               --          1,489         11,269          1,599             78             --
    Philadelphia, Pennsylvania        40,527          7,409         55,820          5,160            412             --
    Plano, Texas                       6,394          1,687         10,088            552          1,487             --
    Scottsdale, Arizona               10,465          2,869         15,936            745          2,062             --
    Seattle, Washington               18,058          7,552         27,621          1,145          3,854             --
    Weston, Florida                   16,441          1,810             --             --         14,274             --
    Basking Ridge, New Jersey          1,788          3,946         31,987          1,892             --             --
    Newark, California                 1,275          3,787         21,273          1,878             --             --
    Foothill Ranch, California         4,839          3,446             --             --            919             --

Doubletree:
    Arlington, Virginia                   --          7,854         57,979          4,509          3,783             --

Marriott Suites:
    Dallas, Texas                     16,948          2,778         27,739          1,404          3,742             --

Marriott Hotel:
    Bridgewater, New Jersey           31,082          3,821         55,249          5,207             --             --

SpringHill Suites:
    Centreville, Virginia                 --          1,482          9,432          1,223             12             --
    Charlotte, North Carolina             --          1,603          9,307          1,588           (138)            --
    Durham, North Carolina                --          1,040          6,925          1,401             13             --
    Gaithersburg, Maryland                --          2,592         11,931          1,683            (61)            --
    Orlando, Florida                  17,863          8,750         26,381          3,717             20             --
    Richmond, Virginia                   518            845          9,368            831            (44)            --
    Manhattan Beach, California        1,000          3,889         16,288            998             --             --
    Plymouth Meeting, Pennsylvania     1,350          3,606         23,874          1,237             --             --

TownePlace Suites:
    Mount Laurel, New Jersey              --          1,224          6,395            623              2             --
    Newark, California                    --          2,305         10,828          1,353             25             --
    Scarborough, Maine                    --            919          6,109            612             20             --
    Tewksbury, Massachusetts              --          1,060          7,982            591             17             --
    Manhattan Beach, California          750          3,399         11,831            621             --             --

Wyndham:
    Billerica, Massachusetts              --          3,838         20,471          2,255             --             --
    Denver, Colorado                      --          3,883         13,436          2,094             --             --

Fairfield Inn:
    Orlando, Florida                  15,059          9,077         20,318          3,366              9             --
                                  ------------   ------------   ------------   ------------   ------------   ------------
                                  $  236,945     $  143,751     $  748,665     $   69,715     $   82,923     $       --
                                  ============   ============   ============   ============   ============   ============


</TABLE>

<PAGE>


             Gross Amount at Which Carried
                   at Close of Period
    ----------------------------------------------
<TABLE>
<S><C>
                                                                         Accumulated        Date of           Date
         Land          Buildings        Equipment          Total        Depreciation     Construction       Acquired
    ------------     ------------     ------------     ------------     ------------     ------------     ------------

    $    1,913       $   13,504       $    1,397       $   16,814       $    2,486             1997           Aug-98
         1,022           10,051            1,241           12,314            1,861             1997           Aug-98
         4,995           25,932            3,952           34,879            1,201             2002           Feb-02
         2,610           15,431            2,012           20,053            1,625             2000           Jul-00
         2,187           14,212            1,412           17,811            1,382             1999           Jun-00
         4,035           30,224            1,765           36,024            2,122             1998           Feb-99
         1,495           10,400              859           12,754              879             1998           Feb-99
         2,384           19,564            1,371           23,319            1,522             1999           Jun-99
         2,330           11,659            1,493           15,482            1,174             1999           Aug-00
         2,002           12,924            1,730           16,656            1,751             1999           Dec-99
         3,871           23,883            1,034           28,788               93             2002           Nov-02

         2,461           10,917            1,408           14,786            1,105             2000           Aug-00
         4,092           10,747            1,388           16,227               93             2002           Nov-02
         3,239           17,471            1,142           21,852              598             2001           Dec-01
         9,025           24,583            4,346           37,954            2,573             2000           Nov-00
         1,419           13,014            2,339           16,772            1,259             2000           Feb-01
         1,489           11,315            1,631           14,435            1,283             1999           Jun-00
         4,416           58,823            5,561           68,800            6,960             1999           Nov-99
         1,774           11,103              938           13,815              954             1998           Feb-99
         2,994           17,401            1,218           21,613            1,341             1999           Jun-99
         7,699           30,536            1,938           40,173            2,258             1999           Jun-99
         2,711           11,884            1,490           16,085              518             2002           Feb-02
         3,946           31,987            1,892           37,825              891             2001           Mar-02
         3,787           21,273            1,878           26,938              133             2002           Oct-02
         3,446              919               --            4,365               --               --               --

         8,232           61,006            4,887           74,125               65             1972           Dec-02

         3,064           30,228            2,372           35,664            2,525             1998           Feb-99

         3,821           55,247            5,207           64,275            1,240             2002           Jun=02

         1,482            9,432            1,235           12,149              720             2000           Mar-01
         1,458            9,307            1,595           12,360              807             2001           Mar-01
         1,040            6,925            1,414            9,379              718             2000           Feb-01
         2,581           11,879            1,685           16,145            1,298             2000           Jul-00
         8,750           26,381            3,737           38,868            2,381             2000           Dec-00
           845            9,319              836           11,000              352             2001           Dec-01
         3,889           16,288              998           21,175              504             2001           Jan-02
         3,606           23,874            1,237           28,717              709             2001           Jan-02

         1,224            6,397              623            8,244              581             1999           Aug-00
         2,305           10,828            1,378           14,511            1,008             2000           Nov-00
           823            6,197              640            7,660              571             1999           Aug-00
         1,060            7,982              608            9,650              661             1999           Aug-00
         3,399           11,831              621           15,851              352             2001           Jan-02

         3,838           20,471            2,255           26,564            2,154             1999           Jun-00
         3,883           13,436            2,094           19,413            1,641             1999           Jun-00

         9,077           20,318            3,375           32,770            2,059             2000           Nov-00
    ------------     ------------     ------------     ------------     ------------
    $  145,719       $  817,103       $   82,232       $1,045,054       $   56,408

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

</TABLE>

<PAGE>

(1)  Transactions in real estate and accumulated  depreciation during 2002, 2001
     and 2000 are summarized as follows:
                                                                  Accumulated
                                                Cost (2) (4)      Depreciation
                                               --------------    --------------

     Properties the Company has Invested
         in Under Operating Leases:
            Balance, December 31, 1999         $    113,831      $      1,603
               Acquisitions                         477,131                --
               Depreciation expense (3)                  --             7,830
                                               --------------    --------------
            Balance, December 31, 2000              590,962             9,433
               Acquisitions                         137,460               --
               Depreciation expense (3)                  --            19,749
                                               --------------    --------------
            Balance, December 31, 2001              728,422            29,182
               Acquisitions                         316,632                --
               Depreciation expense (3)                  --            27,226
                                               --------------    --------------
            Balance, December 31, 2002         $  1,045,054      $     56,408
                                               ==============    ==============


(2)  As of  December  31,  2002,  2001  and  2000,  the  aggregate  cost  of the
     Properties owned by the Company and its subsidiaries for federal income tax
     purposes was $1,045,054,  $728,422 and $590,962,  respectively.  All of the
     leases are treated as operating leases for federal income tax purposes.

(3)  Depreciation  expense is computed for buildings  and  equipment  based upon
     estimated lives of 40 and seven years, respectively.

(4)  During  the  years  ended  December  31,  2002,  2001 and 2000 the  Company
     incurred   acquisition   fees   totaling   $3,784,   $5,473  and   $16,182,
     respectively,  paid to the Advisor.  Acquisition  fees are included in land
     and buildings on operating leases at December 31, 2002, 2001 and 2000.



<PAGE>


                                  EXHIBIT INDEX

     Exhibit Number

     3.1  CNL American Realty Fund, Inc.  Articles of Incorporation  (Previously
          filed as Exhibit 3.1 to the  Registrant's  Registration  Statement  on
          Form S-11  (Registration  No.  333-9943)  (the "1996  Form  S-11") and
          incorporated herein by reference.)


     3.2  CNL  American  Realty  Fund,  Inc.  Amended and  Restated  Articles of
          Incorporation  (Previously  filed as Exhibit 3.2 to the 1996 Form S-11
          (Registration  No.  333-9943) (the "1996 Form S-11") and  incorporated
          herein by reference.)

     3.3  CNL American Realty Fund, Inc. Bylaws (Previously filed as Exhibit 3.3
          to the 1996 Form S-11 and incorporated herein by reference.)


     3.4  CNL American  Realty Fund,  Inc.  Articles of Amendment to the Amended
          and Restated Articles of Incorporation  dated June 3, 1998 (Previously
          filed as Exhibit 3.4 to the 1996 Form S-11 and incorporated  herein by
          reference.)


     3.5  Articles  of  Amendment  to  the  Amended  and  Restated  Articles  of
          Incorporation of CNL Hospitality  Properties,  Inc. dated May 26, 1999
          (Previously  filed as  Exhibit  3.5 to the  Registrant's  Registration
          Statement on Form S-11  (Registration  No.  333-67787) (the "1998 Form
          S-11") and incorporated herein by reference.)

     3.6  Articles  of  Amendment  to  the  Amended  and  Restated  Articles  of
          Incorporation of CNL Hospitality Properties,  Inc. dated June 27, 2000
          (Previously  filed as  Exhibit  3.6 to the  Registrant's  Registration
          Statement on Form S-11 (File No. 333-89691) (the "1999 Form S-11") and
          incorporated by reference).

     3.7  Amendment  No. 1 to the  Bylaws of CNL  Hospitality  Properties,  Inc.
          (Previously   filed  as  Exhibit   3.7  to  the  1999  Form  S-11  and
          incorporated herein by reference.)


     3.8  Amendment  No. 2 to the  Bylaws of CNL  Hospitality  Properties,  Inc.
          (Previously   filed  as  Exhibit   3.8  to  the  1999  Form  S-11  and
          incorporated herein by reference.)

     3.9  Amendment  No. 3 to the  Bylaws of CNL  Hospitality  Properties,  Inc.
          (Previously  filed as  Exhibit  3.9 to the  Registrant's  Registration
          Statement on Form S-11  (Registration  No.  333-67124)(the  "2002 Form
          S-11") and incorporated herein by reference.)

     3.10 Articles  of  Amendment  to  the  Amended  and  Restated  Articles  of
          Incorporation of CNL Hospitality  Properties,  Inc. dated November 15,
          2002  (Previously  filed  as  Exhibit  3.10  to  the  2002  Form  S-11
          (Registration  No.  333-67124) (the "2002 Form S-11") and incorporated
          herein by reference).

     4.1  CNL American Realty Fund, Inc.  Articles of Incorporation  (Previously
          filed as Exhibit 3.1 to the 1996 Form S-11 and incorporated  herein by
          reference).

     4.2  CNL  American  Realty  Fund,  Inc.  Amended and  Restated  Articles of
          Incorporation  (Previously  filed as Exhibit 3.2 to the 1996 Form S-11
          and incorporated herein by reference.)

     4.3  CNL American Realty Fund, Inc. Bylaws (Previously filed as Exhibit 3.3
          to the 1996 Form S-11 and incorporated herein by reference.)

     4.4  Form of Reinvestment Plan (Included as Exhibit 4.4 to the Registrant's
          Registration  Statement on Form S-11 (Registration No.  333-98047)(the
          "2003 Form  S-11")in  the  Prospectus  as Appendix A and  incorporated
          herein by reference).

     4.5  Articles  of  Amendment  to  the  Amended  and  Restated  Articles  of
          Incorporation  of CNL American  Realty Fund,  Inc.  dated June 3, 1998
          (Previously   filed  as  Exhibit   3.4  to  the  1996  Form  S-11  and
          incorporated herein by reference.)
<PAGE>

     4.6  Articles  of  Amendment  to  the  Amended  and  Restated  Articles  of
          Incorporation of CNL Hospitality  Properties,  Inc. dated May 26, 1999
          (Previously   filed  as  Exhibit   3.5  to  the  1998  Form  S-11  and
          incorporated herein by reference.)

     4.7  Articles  of  Amendment  to  the  Amended  and  Restated  Articles  of
          Incorporation of CNL Hospitality Properties,  Inc. dated June 27, 2000
          (Previously   filed  as  Exhibit   3.6  to  the  1999  Form  S-11  and
          incorporated herein by reference.)

     4.8  Amendment  No. 1 to the  Bylaws of CNL  Hospitality  Properties,  Inc.
          (Previously   filed  as  Exhibit   3.7  to  the  1999  Form  S-11  and
          incorporated herein by reference.)


     4.9  Amendment  No. 2 to the  Bylaws of CNL  Hospitality  Properties,  Inc.
          (Previously   filed  as  Exhibit   3.8  to  the  1999  Form  S-11  and
          incorporated herein by reference.)


     4.10 Amendment  No. 3 to the  Bylaws of CNL  Hospitality  Properties,  Inc.
          (Previously   filed  as  Exhibit   3.9  to  the  2002  Form  S-11  and
          incorporated herein by reference.)

     4.11 Articles  of  Amendment  to  the  Amended  and  Restated  Articles  of
          Incorporation of CNL Hospitality  Properties,  Inc. dated November 15,
          2002  (Previously  filed as  Exhibit  3.10 to the 2002  Form  S-11 and
          incorporated herein by reference).

     10.1 Form of Advisory  Agreement between CNL Hospitality  Properties,  Inc.
          and CNL Hospitality  Corp.  (Included as Exhibit 10.2 to the 2003 Form
          S-11).

     10.2 Indemnification Agreement between CNL Hospitality Properties, Inc. and
          Lawrence A. Dustin  dated  February 24,  1999.  Each of the  following
          directors and/or officers has signed a substantially similar agreement
          as  follows:  James M.  Seneff,  Jr.,  Robert A.  Bourne,  G.  Richard
          Hostetter,  J. Joseph Kruse,  Richard C.  Huseman,  Charles A. Muller,
          Jeanne  A.  Wall  and Lynn E.  Rose,  dated  July 9,  1997;  C.  Brian
          Strickland dated October 31, 1998; John A. Griswold,  dated January 7,
          1999;  Charles E. Adams and Craig M.  McAllaster,  dated  February 10,
          1999;  Matthew  W.  Kaplan  dated  February  24,  1999;  and Thomas J.
          Hutchison III dated May 16, 2000 (Previously  filed as Exhibit 10.2 to
          the  Form  10-Q  filed  on May 17,  1999 and  incorporated  herein  by
          reference.)

     10.3 Agreement  of Limited  Partnership  of CNL  Hospitality  Partners,  LP
          (Previously  filed  as  Exhibit  10.10  to  the  1996  Form  S-11  and
          incorporated herein by reference.)

     10.4 Hotel  Purchase and Sale  Contract  between CNL Real Estate  Advisors,
          Inc. and Gwinnett Residence Associates, LLC, relating to the Residence
          Inn - Gwinnett  Place  (Previously  filed as Exhibit 10.11 to the 1996
          Form S-11 and incorporated herein by reference.)

     10.5 Assignment and Assumption  Agreement between CNL Real Estate Advisors,
          Inc. and CNL Hospitality Partners, LP, relating to the Residence Inn -
          Gwinnett  Place  (Previously  filed as Exhibit  10.12 to the 1996 Form
          S-11 and incorporated herein by reference.)

     10.6 Hotel  Purchase and Sale  Contract  between CNL Real Estate  Advisors,
          Inc. and Buckhead Residence Associates, LLC, relating to the Residence
          Inn - Buckhead (Lenox Park)  (Previously filed as Exhibit 10.13 to the
          1996 Form S-11 and incorporated herein by reference.)
<PAGE>
     10.7 Assignment and Assumption  Agreement between CNL Real Estate Advisors,
          Inc. and CNL Hospitality Partners, LP, relating to the Residence Inn -
          Buckhead (Lenox Park)  (Previously  filed as Exhibit 10.14 to the 1996
          Form S-11 and incorporated herein by reference.)

     10.8 Lease Agreement between CNL Hospitality  Partners,  LP and STC Leasing
          Associates, LLC, dated August 1, 1998, relating to the Residence Inn -
          Gwinnett  Place  (Previously  filed as Exhibit  10.15 to the 1996 Form
          S-11 and incorporated herein by reference.)

     10.9 Lease Agreement between CNL Hospitality  Partners,  LP and STC Leasing
          Associates, LLC, dated August 1, 1998, relating to the Residence Inn -
          Buckhead (Lenox Park)  (Previously  filed as Exhibit 10.16 to the 1996
          Form S-11 and incorporated herein by reference.)

    10.10 Master  Revolving Line of Credit Loan  Agreement with CNL  Hospitality
          Properties,  Inc.,  CNL  Hospitality  Partners,  LP and Colonial Bank,
          dated July 31,  1998  (Previously  filed as Exhibit  10.17 to the 1996
          Form S-11 and incorporated herein by reference.)

    10.11 Master Loan  Agreement  by and between CNL Hotel  Investors,  Inc. and
          Jefferson-Pilot  Life  Insurance  Company,  dated  February  24,  1999
          (Previously  filed  as  Exhibit  10.18  to  the  1996  Form  S-11  and
          incorporated herein by reference.)

    10.12 Securities  Purchase  Agreement  between CNL  Hospitality  Properties,
          Inc. and Five Arrows Realty  Securities II L.L.C.,  dated February 24,
          1999  (Previously  filed as  Exhibit  10.19 to the 1996  Form S-11 and
          incorporated herein by reference.)

    10.13 Subscription  and  Stockholders'  Agreement among CNL Hotel Investors,
          Inc.,  Five  Arrows  Realty  Securities  II  L.L.C.,  CNL  Hospitality
          Partners, LP and CNL Hospitality Properties,  Inc., dated February 24,
          1999  (Previously  filed as  Exhibit  10.20 to the 1996  Form S-11 and
          incorporated herein by reference.)

    10.14 Registration   Rights   Agreement  by  and  between  CNL   Hospitality
          Properties,  Inc. and Five Arrows Realty  Securities II L.L.C.,  dated
          February 24, 1999 (Previously  filed as Exhibit 10.21 to the 1996 Form
          S-11 and incorporated herein by reference.)

    10.15 First Amendment to Lease Agreement  between CNL Hospitality  Partners,
          LP and STC Leasing  Associates,  LLC, dated August 1, 1998, related to
          the Residence Inn - Gwinnett  Place,  (amends  Exhibit 10.8 above) and
          the First  Amendment to  Agreement  of Guaranty,  dated August 1, 1998
          (amends  Agreement  of  Guaranty  attached as Exhibit I to 10.8 above)
          (Previously  filed as Exhibit  10.8 to the Form 10-Q filed on November
          10, 1999 and incorporated herein by reference.)

    10.16 First Amendment to Lease Agreement  between CNL Hospitality  Partners,
          LP and STC Leasing  Associates,  LLC, dated August 1, 1998, related to
          the Residence Inn - Buckhead  (Lenox Park) (amends Exhibit 10.9 above)
          and the First Amendment to Agreement of Guaranty, dated August 1, 1998
          (amends  Agreement  of  Guaranty  attached as Exhibit I to 10.9 above)
          (Previously  filed as Exhibit  10.9 to the Form 10-Q filed on November
          10, 1999 and incorporated herein by reference.)

    10.17 Lease Agreement between Courtyard Annex,  L.L.C. and City Center Annex
          Tenant Corporation, dated November 15, 1999, relating to the Courtyard
          -  Philadelphia  (Previously  filed as Exhibit  10.22 to the 1998 Form
          S-11 and incorporated herein by reference.)

    10.18 First  Amended and Restated  Limited  Liability  Company  Agreement of
          Courtyard  Annex,  L.L.C.,  relating to the  Courtyard -  Philadelphia
          (Previously  filed  as  Exhibit  10.23  to  the  1998  Form  S-11  and
          incorporated herein by reference.)

    10.19 Purchase and Sale Agreement between Marriott International,  Inc., CBM
          Annex, Inc.,  Courtyard Annex,  Inc., as Sellers,  and CNL Hospitality
          Partners,  LP, as Purchaser,  dated November 15, 1999, relating to the
          Courtyard -  Philadelphia  (Previously  filed as Exhibit  10.24 to the
          1998 Form S-11 and incorporated herein by reference.)
<PAGE>

    10.20 Lease Agreement between CNL Hospitality Partners,  LP, and RST4 Tenant
          LLC,  dated  December 10, 1999,  relating to the  Residence Inn - Mira
          Mesa  (Previously  filed as  Exhibit  10.25 to the 1998  Form S-11 and
          incorporated herein by reference.)

    10.21 Purchase and Sale  Agreement  between  Marriott  International,  Inc.,
          TownePlace Management Corporation and Residence Inn by Marriott, Inc.,
          as Sellers,  and CNL  Hospitality  Partners,  LP, as Purchaser,  dated
          November 24, 1999,  relating to the  Residence Inn - Mira Mesa and the
          TownePlace  Suites - Newark  (Previously filed as Exhibit 10.26 to the
          1998 Form S-11 and incorporated herein by reference.)

    10.22 Lease Agreement between CNL Hospitality  Partners,  LP and WYN Orlando
          Lessee,  LLC, dated May 31, 2000,  relating to the Wyndham Denver Tech
          Center  (Previously  filed as Exhibit  10.29 to the 1998 Form S-11 and
          incorporated herein by reference.)

    10.23 Lease Agreement between CNL Hospitality  Partners,  LP and WYN Orlando
          Lessee,  LLC,  dated May 31, 2000,  relating to the Wyndham  Billerica
          (Previously  filed  as  Exhibit  10.30  to  the  1998  Form  S-11  and
          incorporated herein by reference.)

    10.24 Purchase and Sale Agreement  between CNL Hospitality  Corp., as Buyer,
          and WII Denver Tech,  LLC and PAH Billerica  Realty  Company,  LLC, as
          Sellers,  and  Wyndham  International,  Inc.,  relating to the Wyndham
          Denver  Tech  Center and the Wyndham  Billerica  (Previously  filed as
          Exhibit  10.31  to the  1998  Form  S-11 and  incorporated  herein  by
          reference.)

    10.25 Lease Agreement between CNL Hospitality  Partners,  LP and RST4 Tenant
          LLC, dated June 17, 2000,  relating to the Courtyard - Palm Desert and
          the Residence Inn - Palm Desert  (Previously filed as Exhibit 10.32 to
          the 1999 Form S-11 and incorporated by reference).

    10.26 Purchase and Sale  Agreement  between PDH  Associates  LLC, as Seller,
          and CNL Hospitality Corp., as Buyer, dated January 19, 2000,  relating
          to the  Courtyard  - Palm Desert and the  Residence  Inn - Palm Desert
          (Previously  filed  as  Exhibit  10.33  to  the  1999  Form  S-11  and
          incorporated by reference).

    10.27 Amendment to Purchase and Sale  Agreement  between PDH  Associates LLC
          and CNL  Hospitality  Corp.,  dated  January  19,  2000,  relating  to
          Courtyard - Palm Desert and the  Residence  Inn - Palm Desert  (amends
          Exhibit  10.26 above)  (Previously  filed as Exhibit 10.34 to the 1999
          Form S-11 and incorporated by reference).

    10.28 Assignment   Agreement   between  CNL   Hospitality   Corp.   and  CNL
          Hospitality Partners,  LP, relating to the Courtyard - Palm Desert and
          the Residence Inn - Palm Desert  (Previously filed as Exhibit 10.35 to
          the 1999 Form S-11 and incorporated by reference).

    10.29 Lease Agreement between CNL Hospitality  Partners,  LP and RST4 Tenant
          LLC,  dated  July  28,  2000,  relating  to the  SpringHill  Suites  -
          Gaithersburg  (Previously filed as Exhibit 10.36 to the 1999 Form S-11
          and incorporated by reference).

    10.30 Purchase and Sale Agreement  between  SpringHill SMC  Corporation,  as
          Seller, and CNL Hospitality Partners, LP, as Purchaser,  and joined in
          by Marriott International,  Inc., dated June 30, 2000, relating to the
          SpringHill Suites - Gaithersburg (Previously filed as Exhibit 10.37 to
          the 1999 Form S-11 and incorporated by reference).

    10.31 Lease Agreement between CNL Hospitality  Partners,  LP and RST4 Tenant
          LLC,  dated July 28, 2000,  relating to the Residence Inn - Merrifield
          (Previously  filed  as  Exhibit  10.38  to  the  1999  Form  S-11  and
          incorporated by reference).
<PAGE>


    10.32 Purchase and Sale Agreement between TownePlace Management  Corporation
          and Residence Inn by Marriott,  Inc., as Sellers,  and CNL Hospitality
          Partners, LP, as Purchaser,  and joined in by Marriott  International,
          Inc.,  dated  November  24,  1999,  relating  to the  Residence  Inn -
          Merrifield  (Previously  filed as Exhibit  10.39 to the 1999 Form S-11
          and incorporated by reference).

    10.33 First  Amendment to Purchase  and Sale  Agreement  between  TownePlace
          Management  Corporation and Residence Inn by Marriott, as Sellers, and
          CNL Hospitality Partners, LP, as Purchaser,  and joined in by Marriott
          International,   Inc.,  dated  November  24,  1999,  relating  to  the
          Residence Inn - Mira Mesa, SpringHill Suites - Gaithersburg, Residence
          Inn - Merrifield,  and  TownePlace  Suites - Newark  (amends  Exhibits
          10.21,  10.30, and 10.32 above)  (Previously filed as Exhibit 10.40 to
          the 1999 Form S-11 and incorporated by reference).

    10.34 Lease Agreement between CNL Hospitality  Partners, LP and CCCL Leasing
          LLC,  dated  August 18, 2000,  relating to the  Courtyard - Alpharetta
          (Previously  filed  as  Exhibit  10.41  to  the  1999  Form  S-11  and
          incorporated by reference).

    10.35 Lease Agreement between CNL Hospitality  Partners, LP and CCCL Leasing
          LLC, dated August 18, 2000, relating to the Residence Inn - Cottonwood
          (Previously  filed  as  Exhibit  10.42  to  the  1999  Form  S-11  and
          incorporated by reference).

    10.36 Lease Agreement between CNL Hospitality  Partners, LP and CCCL Leasing
          LLC, dated August 18, 2000,  relating to the  TownePlace  Suites - Mt.
          Laurel  (Previously  filed as Exhibit  10.43 to the 1999 Form S-11 and
          incorporated by reference).

    10.37 Lease Agreement between CNL Hospitality  Partners, LP and CCCL Leasing
          LLC,  dated  August 18,  2000,  relating  to the  TownePlace  Suites -
          Scarborough  (Previously  filed as Exhibit 10.44 to the 1999 Form S-11
          and incorporated by reference).

    10.38 Lease Agreement between CNL Hospitality  Partners, LP and CCCL Leasing
          LLC,  dated  August 18,  2000,  relating  to the  TownePlace  Suites -
          Tewksbury (Previously filed as Exhibit 10.45 to the 1999 Form S-11 and
          incorporated by reference).

    10.39 Purchase and Sale Agreement between  Residence Inn by Marriott,  Inc.,
          Courtyard  Management  Corporation,  SpringHill  SMC  Corporation  and
          TownePlace  Management   Corporation,   as  Sellers,  CNL  Hospitality
          Partners,  LP, as  Purchaser,  CCCL Leasing LLC, as Tenant,  Crestline
          Capital Corporation,  Marriott  International,  Inc., and joined in by
          CNL Hospitality  Properties,  Inc., dated August 18, 2000, relating to
          the Residence Inn -  Cottonwood,  Courtyard - Alpharetta  and Overland
          Park SpringHill Suites - Raleigh,  and TownePlace Suites - Mt. Laurel,
          Scarborough  and Tewksbury  (Previously  filed as Exhibit 10.46 to the
          1999 Form S-11 and incorporated by reference).

    10.40 First Amendment to Purchase and Sale Agreement  between  Residence Inn
          by Marriott,  Inc., Courtyard Management  Corporation,  SpringHill SMC
          Corporation and TownePlace  Management  Corporation,  as Sellers,  CNL
          Hospitality Partners,  LP, as Purchaser,  CCCL Leasing LLC, as tenant,
          Crestline Capital Corporation, and Marriott International, Inc., dated
          August 18, 2000, relating to the Residence Inn - Cottonwood, Courtyard
          -  Alpharetta,  and  Overland  Park  SpringHill  Suites - Raleigh  and
          TownePlace Suites - Mt. Laurel,  Scarborough and Tewksbury (Previously
          filed as  Exhibit  10.47 to the 1999  Form  S-11 and  incorporated  by
          reference).

    10.41 Lease Agreement between CNL Hospitality  Partners,  LP and RST4 Tenant
          LLC,  dated  November  4, 2000,  relating to the  TownePlace  Suites -
          Newark  (Previously  filed as Exhibit  10.48 to the 1999 Form S-11 and
          incorporated herein by reference.)

    10.42 Lease   Agreement   between  LLB  C-Hotel,   L.L.C.   and  LLB  Tenant
          Corporation,  dated  October 12,  2000,  relating  to the  Courtyard -
          Little Lake Bryan  (Previously filed as Exhibit 10.49 to the 1999 Form
          S-11 and incorporated herein by reference.)
<PAGE>


    10.43 Lease Agreement between LLB F-Inn,  L.L.C. and LLB Tenant Corporation,
          dated  October 12, 2000,  relating to the  Fairfield Inn - Little Lake
          Bryan  (Previously  filed as  Exhibit  10.50 to the 1999 Form S-11 and
          incorporated herein by reference.)

    10.44 First Amendment to Lease  Agreement  between LLB C-Hotel,  L.L.C.  and
          LLB Tenant  Corporation,  dated  November  17,  2000,  relating to the
          Courtyard - Little Lake Bryan (amends Exhibit 10.42 above) (Previously
          filed as Exhibit 10.51 to the 1999 Form S-11 and  incorporated  herein
          by reference.)

    10.45 First Amendment to Lease Agreement  between LLB F-Inn,  L.L.C. and LLB
          Tenant Corporation, dated November 17, 2000, relating to the Fairfield
          Inn - Little Lake Bryan (amends Exhibit 10.43 above) (Previously filed
          as  Exhibit  10.52 to the 1999  Form S-11 and  incorporated  herein by
          reference.)

    10.46 Purchase and Sale Agreement between Marriott  International,  Inc., as
          Seller,  and  CNL  Hospitality  Partners,  LP,  as  Purchaser,   dated
          September 17, 1998, relating to the Courtyard - Little Lake Bryan, the
          Fairfield Inn - Little Lake Bryan and the  SpringHill  Suites - Little
          Lake Bryan  (Previously  filed as Exhibit  10.53 to the 1999 Form S-11
          and incorporated herein by reference.)


    10.47 Second   Amendment  to  Lease   Agreement   between  CNL  LLB  C-Hotel
          Management,   LP  (formerly  LLB  C-Hotel,   L.L.C.)  and  LLB  Tenant
          Corporation,  dated  December  15, 2000,  relating to the  Courtyard -
          Little Lake Bryan (amends Exhibits 10.42 and 10.44 above)  (Previously
          filed as Exhibit 10.54 to the 1999 Form S-11 and  incorporated  herein
          by reference.)

    10.48 Second Amendment to Lease Agreement  between CNL LLB F-Inn Management,
          LP  (formerly  LLB F-Inn  L.L.C.)  and LLB Tenant  Corporation,  dated
          December 15, 2000,  relating to the  Fairfield Inn - Little Lake Bryan
          (amends Exhibits 10.43 and 10.45 above)  (Previously  filed as Exhibit
          10.55 to the 1999 Form S-11 and incorporated herein by reference.)

    10.49 Indenture  Agreement among Desert Ridge Resort,  LLC, as Issuer;  Bank
          One,  National  Association,  as  Trustee;  and  Financial  Structures
          Limited,  as Insurer,  dated December 15, 2000, relating to the Desert
          Ridge  Property  (Previously  filed as Exhibit  10.56 to the 1999 Form
          S-11 and incorporated herein by reference.)

    10.50 Form of Lease  Agreement  including  Memorandum  of Lease  (Previously
          filed as Exhibit 10.7 to the 2003 Form S-11 and incorporated herein by
          reference).

    10.51 Form of Escrow Agreement between CNL Hospitality Properties,  Inc. and
          SouthTrust  Bank  (Previously  filed as Exhibit  10.1 to the 2003 Form
          S-11 and incorporated herein by reference).

    10.52 Form of Joint Venture  Agreement  (Previously filed as Exhibit 10.3 to
          the 1998 Form S-11 and incorporated herein by reference).

    10.53 Form  of  Indemnification  and  Put  Agreement  (Previously  filed  as
          Exhibit  10.4  to the  1996  Form  S-11  and  incorporated  herein  by
          reference).
<PAGE>

    10.54 Form of Unconditional Guaranty of Payment and Performance  (Previously
          filed as Exhibit 10.5 to the 1996 Form S-11 and incorporated herein by
          reference).

    10.55 Form of Purchase  Agreement  (Previously  filed as Exhibit 10.6 to the
          1996 Form S-11 and incorporated herein by reference).

    10.56 Form of Lease  Agreement  including  Memorandum  of Lease  (Previously
          filed as Exhibit 10.7 to the 2003 Form S-11 and incorporated herein by
          reference).

     21   Subsidiaries of the Registrant (Filed herewith.)

     99.1 Certification  of Co-Chief  Executive  Officer,  Pursuant to 18 U.S.C.
          Section 1350 as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley
          Act of 2002. (Filed herewith.)

     99.2 Certification  of Co-Chief  Executive  Officer,  Pursuant to 18 U.S.C.
          Section 1350 as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley
          Act of 2002. (Filed herewith.)

     99.3 Certification  of  Chief  Financial  Officer,  Pursuant  to 18  U.S.C.
          Section 1350 as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley
          Act of 2002. (Filed herewith.)


<PAGE>


                        CNL HOSPITALITY PROPERTIES, INC.
                                AND SUBSIDIARIES

                                   EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT

The following is a list of the subsidiaries of the registrant and the state of
incorporation for each:

           Name of Subsidiary                           State of Incorporation
           ------------------                           ----------------------
     CNL Hospitality GP Corp.                                 Delaware
     CNL Hospitality LP Corp.                                 Delaware
     CNL Hospitality Partners, LP                             Delaware
     CNL Hotel Investors, Inc.                                Maryland
     CNL Philadelphia Annex, LLC                              Delaware
     CNL Philadelphia Hospitality Management, Inc.            Delaware
     CNL LLB LP Holding, Ltd.                                 Florida
     CNL LLB SHS Management, LP                               Delaware
     CNL LLB F-Inn Management, LP                             Delaware
     CNL LLB C-Hotel Management, LP                           Delaware
     CNL LLB SHS Management Corp.                             Delaware
     CNL LLB F-Inn Management Corp.                           Delaware
     CNL C-Hotel Management Corp.                             Delaware
     CNL LLB GP Holding Corp.                                 Florida
     CNL Phoenix GP Corp.                                     Delaware
     CNL DRR Investor, LP                                     Delaware
     CNL WBR GP Corp.                                         Delaware
     CNL WBR Investor, L.P.                                   Delaware
     CNL CY-Edison, LLC                                       Delaware
     CNL Hotel CY-Edison, LP                                  Delaware
     CNL CY-Weston, LLC                                       Florida
     CNL Hotel CY-Weston, Ltd.                                Florida
     CNL RI-Orlando, LLC                                      Florida
     CNL Hotel RI-Orlando, Ltd.                               Florida
     CNL MI-4, LLC                                            Delaware
     CNL Hotel MI-4, LP                                       Delaware
     CNL Hospitality Leasing Corp.                            Delaware
     CNL HHC, LLC                                             Delaware
     CNL IHC, LLC                                             Delaware
     CNL HHC II, LLC                                          Delaware
     CNL Hospitality Services, Inc.                           Delaware
     CNL Foothill GP Corp.                                    Delaware
     CNL Foothill Hotel Partnership, LP                       Delaware
     CNL Foothill Tenant Corp.                                Delaware
     CNL Bridgewater GP Corp.                                 Delaware
     CNL Bridgewater Hotel Partnership, LP                    Delaware
     CNL Bridgewater Tenant Corp.                             Delaware
     CNL 2 Tree GP, LLC                                       Delaware
     CNL 2 Tree Hotel Partners, LP                            Delaware
     CC 2 Tree Tenant Corp.                                   Delaware
     CNL San Francisco, LLC                                   Delaware
     CNL CY-San Francisco GP Corp.                            Delaware
     CNL Hotel CY San Francisco, LP                           Delaware
     CNL Travel Services, Inc.                                Delaware
     CNL Hotel Tenant Corp.                                   Delaware
     CNL GA Tenant Corp.                                      Delaware



<PAGE>











                                  EXHIBIT 99.1
                   Certification of Co-Chief Executive Officer
                       Pursuant to 18 U.S.C. Section 1350
                             as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002























<PAGE>




                   CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER

            PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     Pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to Section 906 of
the Sarbanes-Oxley  Act of 2002, the undersigned  certifies that (1) this Annual
Report of CNL Hospitality Properties,  Inc. (the "Company") on Form 10-K for the
period  ended  December  31,  2002,  as filed with the  Securities  and Exchange
Commission  on  the  date  hereof  (this  "Report"),  fully  complies  with  the
requirements  of Section 13(a) or 15(d) of the Securities  Exchange Act of 1934,
as amended, and (2) the information contained in this Report fairly presents, in
all material respects, the financial condition of the Company as of December 31,
2002 and 2001 and its  results of  operations  for the three year  period  ended
December 31, 2002.

                                     /s/ James M. Seneff, Jr.
                                    ---------------------------------------
Date: March 6, 2003                 Name: James M. Seneff, Jr.
                                    Title: Co-Chief Executive Officer
                                          (Principal Executive Officer)


















<PAGE>















                                  EXHIBIT 99.2
                   Certification of Co-Chief Executive Officer
                       Pursuant to 18 U.S.C. Section 1350
                             as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

















<PAGE>




                   CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER

            PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     Pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to Section 906 of
the Sarbanes-Oxley  Act of 2002, the undersigned  certifies that (1) this Annual
Report of CNL Hospitality Properties,  Inc. (the "Company") on Form 10-K for the
period  ended  December  31,  2002,  as filed with the  Securities  and Exchange
Commission  on  the  date  hereof  (this  "Report"),  fully  complies  with  the
requirements  of Section 13(a) or 15(d) of the Securities  Exchange Act of 1934,
as amended, and (2) the information contained in this Report fairly presents, in
all material respects, the financial condition of the Company as of December 31,
2002 and 2001 and its  results of  operations  for the three year  period  ended
December 31, 2002.

                                     /s/ Thomas J. Hutchison, III
                                    ---------------------------------
Date: March 6, 2003                 Name: Thomas J. Hutchison, III
                                    Title: Co-Chief Executive Officer
                                          (Principal Executive Officer)























<PAGE>






















                                  EXHIBIT 99.3
                    Certification of Chief Financial Officer
                       Pursuant to 18 U.S.C. Section 1350
                             as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002









<PAGE>




                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

            PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     Pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to Section 906 of
the Sarbanes-Oxley  Act of 2002, the undersigned  certifies that (1) this Annual
Report of CNL Hospitality Properties,  Inc. (the "Company") on Form 10-K for the
period  ended  December  31,  2002,  as filed with the  Securities  and Exchange
Commission  on  the  date  hereof  (this  "Report"),  fully  complies  with  the
requirements  of Section 13(a) or 15(d) of the Securities  Exchange Act of 1934,
as amended, and (2) the information contained in this Report fairly presents, in
all material respects, the financial condition of the Company as of December 31,
2002 and 2001 and its  results of  operations  for the three year  period  ended
December 31, 2002.

                                      /s/ C. Brian Strickland
                                     ------------------------------------------
Date: March 6, 2003                  Name: C. Brian Strickland
                                     Title: Executive Vice President (Principal
                                     Financial and Accounting Officer)