FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-----------------------------------
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
0-23968
----------------------
CNL Income Fund XIII, Ltd.
- ------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3143094
- ---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street, #500
Orlando, Florida 32801
- ---------------------------- -------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
-------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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
------- -------
CONTENTS
--------
Part I Page
----
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-9
Part II
Other Information 10
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
ASSETS 1996 1995
------------- ------------
Land and buildings on operating
leases, less accumulated
depreciation of $1,208,027
and $914,452 $24,155,102 $24,448,677
Net investment in direct financing
leases 8,564,853 8,624,130
Investment in joint ventures 1,020,440 1,009,577
Cash and cash equivalents 1,126,104 1,135,995
Receivables, less allowance for
doubtful accounts of $149,457
and $49,747 31,599 73,691
Prepaid expenses 13,333 4,138
Organization costs, less accumu-
lated amortization of $6,922
and $5,422 3,078 4,578
Accrued rental income, less allow-
ance for doubtful accounts
of $61,598 in 1996 977,169 753,971
----------- -----------
$35,891,678 $36,054,757
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 5,523 $ 3,569
Accrued and escrowed real estate
taxes payable 14,092 4,726
Distributions payable 850,002 850,002
Due to related parties 7,674 7,367
Rents paid in advance 64,127 2,963
----------- -----------
Total liabilities 941,418 868,627
Partners' capital 34,950,260 35,186,130
----------- -----------
$35,891,678 $36,054,757
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenues:
Rental income from
operating leases $ 641,863 $ 639,485 $1,855,032 $1,927,077
Earned income from direct
financing leases 242,868 228,497 684,974 715,232
Contingent rental income 68,321 66,326 182,899 187,056
Interest and other income 21,263 13,891 43,631 41,201
---------- ---------- ---------- ----------
974,315 948,199 2,766,536 2,870,566
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 40,487 32,095 124,751 90,255
Professional services 10,123 6,488 20,879 20,089
Bad debt expense - - 35,445 -
Management fees to
related parties 8,628 8,875 26,008 26,763
Real estate taxes 2,124 - 10,680 -
State and other taxes - 775 16,793 20,217
Depreciation and amorti-
zation 98,358 98,358 295,075 295,075
---------- ---------- ---------- ----------
159,720 146,591 529,631 452,399
---------- ---------- ---------- ----------
Income Before Equity in
Earnings of Joint Ventures
and Loss on Sale of Land 814,595 801,608 2,236,905 2,418,167
Equity in Earnings of
Joint Ventures 24,706 26,432 77,231 71,356
Loss on Sale of Land - - - (29,560)
---------- ---------- ---------- ----------
Net Income $ 839,301 $ 828,040 $2,314,136 $2,459,963
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 8,393 $ 8,280 $ 23,141 $ 24,600
Limited partners 830,908 819,760 2,290,995 2,435,363
---------- ---------- ---------- ----------
$ 839,301 $ 828,040 $2,314,136 $2,459,963
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.21 $ 0.20 $ 0.57 $ 0.61
========== ========== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000 4,000,000
========== ========== ========== ==========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
1996 1995
----------------- ------------
General partners:
Beginning balance $ 75,027 $ 41,595
Net income 23,141 33,432
----------- -----------
98,168 75,027
----------- -----------
Limited partners:
Beginning balance 35,111,103 35,200,372
Net income 2,290,995 3,285,742
Distributions ($0.64 and $0.84
per limited partner unit,
respectively) (2,550,006) (3,375,011)
----------- -----------
34,852,092 35,111,103
----------- -----------
Total partners' capital $34,950,260 $35,186,130
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1996 1995
----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by
Operating Activities $ 2,540,115 $ 2,544,675
----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land - 286,411
Additions to land and
buildings on operating
leases - (336,116)
Investment in joint ventures - (140,052)
Other - 948
----------- -----------
Net cash used in
investing activities - (188,809)
----------- -----------
Cash Flows from Financing
Activities:
Reimbursement of acquisition
costs paid by related
parties on behalf of the
Partnership - (3,074)
Distributions to limited
partners (2,550,006) (2,500,012)
---------- ----------
Net cash used in
financing activities (2,550,006) (2,503,086)
---------- ----------
Net Decrease in Cash and Cash
Equivalents (9,891) (147,220)
Cash and Cash Equivalents at
Beginning of Period 1,135,995 1,298,508
---------- ----------
Cash and Cash Equivalents at
End of Period $ 1,126,104 $ 1,151,288
=========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Land, building and other costs
incurred and unpaid at end of
period $ - $ 2,500
=========== ===========
Distributions declared and unpaid
at end of period $ 850,002 $ 850,002
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1996 and 1995
1. Basis of Presentation:
---------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and nine months ended September 30, 1996, may not be
indicative of the results that may be expected for the year ending
December 31, 1996. Amounts as of December 31, 1995, included in the
financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XIII, Ltd. (the "Partnership") for the year ended December
31, 1995.
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement requires that an entity review long-lived assets and certain
identifiable intangibles, to be held and used, for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Adoption of this standard had no
material effect on the Partnership's financial position or results of
operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CNL Income Fund XIII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on September 25, 1992, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurants, as well as properties upon which restaurants were to
be constructed (the "Properties"), which are leased primarily to operators of
national and regional fast-food and family-style restaurant chains. The
leases are triple-net leases, with the lessees generally responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of
September 30, 1996, the Partnership owned 47 Properties, including two
Properties owned by joint ventures in which the Partnership is a co-venturer
and one Property owned with an affiliate as tenants-in-common.
Liquidity and Capital Resources
- -------------------------------
The Partnership's primary source of capital for the nine months ended
September 30, 1996 and 1995, was cash from operations (which includes cash
received from tenants, distributions from joint ventures, and interest and
other income received, less cash paid for expenses). Cash from operations was
$2,540,115 and $2,544,675 for the nine months ended September 30, 1996 and
1995, respectively. The decrease in cash from operations for the nine months
ended September 30, 1996, as compared to the nine months ended September 30,
1995, is primarily a result of changes in income and expenses as discussed in
"Results of Operations" below, and as a result of changes in the Partnership's
working capital.
During the nine months ended September 30, 1996, the tenant of the Kenny
Rogers' Roasters Property owned with an affiliate as tenants-in-common,
defaulted under the terms of the lease. The Partnership collected all past
due rents due from the former tenant during October 1996. In September 1996,
the Partnership entered into a new lease for this Property with a new tenant
to operate the Property as an Arby's restaurant. The Partnership and the new
tenant have agreed that the renovation costs of this Property will be the
responsibility of the tenant. Rental payments under the lease for the
renovated Property are expected to commence once renovations are completed.
The renovations are expected to be completed by December 1996.
Currently, cash reserves and rental income from the Partnership's
Properties are invested in money market accounts or other short-term, highly
liquid investments pending the Partnership's use of such funds to pay
Partnership expenses or to make distributions to partners. At September 30,
1996, the Partnership had $1,126,104 invested in such short-term investments
as compared to $1,135,995 at December 31, 1995. The funds remaining at
September 30, 1996, after the payment of distributions and other liabilities,
will be used to meet the Partnership's working capital and other needs.
Total liabilities of the Partnership, including distributions payable,
increased to $941,418 at September 30, 1996, from $868,627 at December 31,
1995, primarily as a result of an increase in rents paid in advance during the
nine months ended September 30, 1996. The general partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.
Based primarily on cash from operations, the Partnership declared
distributions to the limited partners of $2,550,006 and $2,525,009 for the
nine months ended September 30, 1996 and 1995, respectively, $850,002 for each
of the quarters ended September 30, 1996 and 1995. This represents
distributions of $0.64 and $0.63 per unit for the nine months ended September
30, 1996 and 1995, respectively ($0.21 per unit for each of the
quarters ended September 30, 1996 and 1995). No distributions were made to
the general partners for the quarters and nine months ended September 30, 1996
and 1995. No amounts distributed or to be distributed to the limited partners
for the nine months ended September 30, 1996 and 1995, are required to be or
have been treated by the Partnership as a return of capital for purposes of
calculating the limited partners' return on their adjusted capital
contribution. The Partnership intends to continue to make distributions of
cash available for distribution to the limited partners on a quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who meet specified
financial standards minimizes the Partnership's operating expenses. The
general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection
with the operations of the Partnership.
Results of Operations
- ---------------------
During the nine months ended September 30, 1995, the Partnership owned
and leased 45 wholly owned Properties (including one Property in Houston,
Texas, which was sold in April 1995), and during the nine months ended
September 30, 1996, the Partnership owned and leased 44 wholly owned
Properties to operators of fast-food and family-style restaurant chains. In
connection therewith, during the nine months ended September 30, 1996 and
1995, the Partnership earned $2,540,006 and $2,642,309, respectively, in
rental income from operating leases and earned income from direct financing
leases for these Properties, $884,731 and $867,982 of which was earned during
the quarters ended September 30, 1996 and 1995, respectively. The decrease in
rental and earned income during the nine months ended September 30, 1996 is
partially attributable to the fact that the Partnership increased its
allowance for doubtful accounts by approximately $54,300 during the nine
months ended September 30, 1996, for past due rental amounts relating to the
Denny's Property in Orlando, Florida, as to which the tenant has defaulted
under the terms of the lease. In addition, the Partnership established an
allowance for doubtful accounts of approximately $61,600 during the nine
months ended September 30, 1996, for accrued rental income amounts previously
recorded (due to the fact that future scheduled rent increases are recognized
on a straight-line basis over the term of the lease in accordance with
generally accepted accounting principles). The Partnership entered into an
agreement with the tenant whereby the tenant will commence payments of past
due rents in 2003, or upon payment in full of a loan between the tenant and a
bank. At that time, past due rents will be converted to a five year note
receivable and will bear interest at a rate per annum, of 175 basis points
over the then current prime rate. In conjunction therewith, the Partnership
also agreed to reduce annual base rents beginning August 1996 through August
2001. Past due rent amounts relating to this Property will be recognized as
income if collected.
During the nine months ended September 30, 1996 and 1995, the
Partnership also earned $182,899 and $187,056, respectively, in contingent
rental income, $68,321 and $66,326 of which was earned during the quarters
ended September 30, 1996 and 1995, respectively.
For the nine months ended September 30, 1996 and 1995, the Partnership
owned and leased two Properties indirectly through joint venture arrangements
and one Property with an affiliate as tenants-in-common. In connection
therewith, during the nine months ended September 30, 1996 and 1995, the
Partnership earned $77,231 and $71,356, respectively, attributable to net
income earned by these joint ventures, $24,706 and $26,432 of which was earned
during the quarters ended September 30, 1996 and 1995, respectively. The
increase in net income earned by joint ventures during the nine months ended
September 30, 1996, is primarily due to the fact that in March 1995, the
Partnership invested in Salem Joint Venture, which became operational in May
1995. Net income earned by joint ventures is expected to decrease during the
remainder of 1996 as the result of the default by the former tenant of the
Property owned with an affiliate as tenants-in-common, and the fact that
rental payments under the lease for the renovated Property are expected to
commence after renovations are completed, as discussed above in "Liquidity and
Capital Resources", but is not expected to have an adverse effect on
operations.
Operating expenses, including depreciation and amortization expense,
were $529,631 and $452,399 for the nine months ended September 30, 1996 and
1995, respectively, of which $159,720 and $146,591 were incurred for the
quarters ended September 30, 1996 and 1995, respectively. The increase in
operating expenses during the nine months ended September 30, 1996, is
primarily the result of the Partnership establishing an allowance for doubtful
accounts for rental and other amounts, which had been recorded as income in
prior years, relating to the Denny's Property in Orlando, Florida, as a result
of the current financial difficulties of the tenant as discussed above.
Operating expenses also increased during the quarter and nine months ended
September 30, 1996, as a result of the Partnership accruing prior and current
year real estate taxes relating to this Property. Payment of these taxes
remains the responsibility of the tenant of this Property; however, the
general partners believe the tenant's ability to pay these expenses is
doubtful. The Partnership intends to pursue collection from the tenant of
any such amounts paid by the Partnership and will recognize such amounts as
income if collected.
Operating expenses also increased during the quarter and nine months ended
September 30, 1996, as a result of an increase in accounting and
administrative expenses associated with operating the Partnership and its
Properties. In addition, operating expenses increased during the nine months
ended September 30, 1996, as a result of an increase in insurance expense as a
result of the general partners' obtaining contingent liability and property
coverage for the Partnership,effective May 1995. This insurance policy is
intended to reduce the Partnership's exposure in the unlikely event a tenant's
insurance policy lapses or is insufficient to cover a claim relating to the
Property.
As a result of the sale of the Property in Houston, Texas, in April
1995, the Partnership recognized a loss for financial reporting purposes of
$29,560 during the nine months ended September 30, 1995. The loss was
primarily due to acquisition fees and miscellaneous acquisition expenses the
Partnership had allocated to the Property and due to accrued rental income
relating to future scheduled rent increases that the Partnership had recorded
and reversed at the time of the sale. No Properties were sold during the
nine months ended September 30, 1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
-----------------
Item 2. Changes in Securities. Inapplicable.
---------------------
Item 3. Defaults upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information. Inapplicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 4th day of November, 1996.
CNL INCOME FUND XIII, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XIII, Ltd. at September 30, 1996, and its statement of
income for the nine months then ended and is qualified in its entirety by
reference to the Form 10-Q of CNL Income Fund XIII, Ltd. for the nine months
ended September 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,126,104
<SECURITIES> 0
<RECEIVABLES> 181,056
<ALLOWANCES> 149,457
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 25,363,129
<DEPRECIATION> 1,208,027
<TOTAL-ASSETS> 35,891,678
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,950,260
<TOTAL-LIABILITY-AND-EQUITY> 35,891,678
<SALES> 0
<TOTAL-REVENUES> 2,766,536
<CGS> 0
<TOTAL-COSTS> 494,186
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 35,445
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,314,136
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,314,136
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,314,136
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XIII, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
