Several class actions have been filed against hotel company CNL Hospitality Properties, Inc. (unlisted, NYSE:CHO), and certain of its officers and directors by: (1) all persons who were entitled to vote on the proxy statement filed with the SEC by the company dated May 7, 2004; and (2) all persons who purchased or otherwise acquired CNL securities between August 16, 2001, and August 16, 2004. The actions claim that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.

CNL was chartered in Maryland in June 1996, primarily to acquire lease-properties across the United States. The company's plan was to lease the properties for five to 20 years, and offer renewal options for up to an additional 20 years on a "triple-net" basis, meaning that the tenants would be responsible for repairs, maintenance, property taxes, utilities and insurance. The tenants would be independent third parties who would operate the properties as national and regional limited-service, extended-stay, and full-service hotel chains. In 2001, CNL began operating its properties using independent third-party managers as permitted by the federal REIT Modernization Act of 1999.

In a Form S-3 filed with the SEC on April 30, 2004, CNL announced that it was going to engage in a firm commitment underwritten offering of additional common shares and preferred shares, and would list those common shares and preferred shares together with the existing outstanding common shares, on the New York Stock Exchange. In connection with the possible Listing and Underwritten Offering, CNL sought shareholder approval via a Proxy filed with the SEC on May 7, 2004, to become a self-advised REIT through the merger of CNL Hospitality Corporation into a wholly owned subsidiary of CNL.

The actions allege that CNL failed to disclose and misrepresented the following material adverse facts which were known to the defendants but recklessly disregarded by them, that: (1) the company's reported earnings and cash were materially inflated and in violation of Generally Accepted Accounting Principles; (2) as a result, the company's offering price of $10 per share was materially inflated and unsupportable by company financial results; (3) since 2001, cash from CNL's operations had represented a decreasing percentage of the funds used to pay dividends to its shareholders; and (4) as result, the company's Underwritten Offering was overpriced and unsupportable by CNL's projections.

On July 30, 2004, GreenStreet Advisors, Inc., issued a report that stated: "It is no wonder that…entities [like CNL] seek out retail investors, as most institutional investors would more thoroughly scrutinize the value of the shares." Shortly after the GreenStreet report was issued, CNL cancelled the Underwritten Offering on August 3, 2004. This decision also postponed the merger for which it had received shareholder approval on July 30, 2004. The listing was also delayed/canceled.

If you purchased securities issued by CNL during the applicable period, you may request appointment by the court as a lead plaintiff if you do so by October 15, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the court must determine that your claim is typical of the claims of other class members, and that you will adequately represent the class. Under certain circumstances, one or more class members may together serve as lead plaintiffs. Your ability to share in any recovery is not affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve you in this action, or you may choose to do nothing, and remain in the class as a silent member.