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, 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 OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
400 East South Street, Suite 500
Orlando, Florida 32801
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
Registrant's telephone number, including area code: (407) 422-1574
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:
Units of limited partnership interest ($10 per Unit)
(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. [x]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE
REGISTRANT: The registrant registered an offering of units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
ITEM 1. BUSINESS
CNL Income Fund XIII, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on September 25, 1992. The general partners of the Partnership are
Robert A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on March 31, 1993, the
Partnership offered for sale up to $40,000,000 of limited partnership interests
(the "Units") (4,000,000 Units at $10 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
March 17, 1993. The offering terminated on August 26, 1993, at which date the
maximum offering proceeds of $40,000,000 had been received from investors who
were admitted to the Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, 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 "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totalled
$35,324,831, and were used to acquire 47 Properties, including nine Properties
consisting of only land, two Properties owned by joint ventures in which the
Partnership is a co-venturer, and one Property acquired as tenants-in-common
with an affiliate of the General Partners, to pay acquisition fees to an
affiliate of the General Partners totalling $2,200,000, to pay miscellaneous
acquisition expenses and to establish a working capital reserve for Partnership
purposes. During the year ended December 31, 1995, the tenant of the Property in
Houston, Texas, exercised its option in accordance with the lease agreement to
substitute another property for the Houston, Texas Property. In connection
therewith, the Partnership sold the Houston, Texas Property to the tenant and
used the net sales proceeds, along with approximately $39,800 of cash reserves,
to acquire a Checkers Property in Lakeland, Florida, from the tenant. In
addition, during the year ended December 31, 1996, the Partnership sold its
Property in Richmond, Virginia, consisting of land only. As a result of the
above transactions, as of December 31, 1996, the Partnership owned 46
Properties, including eight Properties consisting of land only, interests in 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. The lessee of the
eight Properties consisting of land only, owns the buildings currently on the
land and has the right, if not under default under the lease, to remove the
buildings from the land at the end of the lease terms. During January 1997, the
Partnership reinvested the net sales proceeds from the sale of the Property in
Richmond, Virginia, in a Burger King Property located in Akron, Ohio, with an
affiliate of the General Partners as tenants-in-common. The Partnership leases
the Properties on a triple-net basis with the lessee responsible for all repairs
and maintenance, property taxes, insurance and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. In general, the General Partners plan to seek the sale of some of
the Properties commencing seven to 12 years after their acquisition. The
Partnership has 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 lessees.
LEASES
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
joint ventures in which the Partnership is a co-venturer provide for initial
terms ranging from 3 to 20 years (the average being 19 years), and expire
between 2000 and 2016. All leases are on a triple-net basis, with the lessee
responsible for all repairs and maintenance, property taxes, insurance and
utilities. The leases of the Properties provide for minimum base annual rental
payments (payable in monthly installments) ranging from approximately $27,400 to
$186,200. All of the leases provide for percentage rent, based on sales in
excess of a specified amount. In addition, the majority of the leases provide
that, commencing in specified lease years (generally the sixth lease year), the
annual base rent required under the terms of the lease will increase.
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Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Certain lessees also have been granted options to purchase
Properties at the Property's then fair market value after a specified portion of
the lease term has elapsed. Under the terms of certain leases, the option
purchase price may equal the Partnership's original cost to purchase the
Property (including acquisition costs), plus a specified percentage from the
date of the lease or a specified percentage of the Partnership's purchase price,
if that amount is greater than the Property's fair market value at the time the
purchase option is exercised.
The leases also generally provide that, in the event the Partnership
wishes to sell the Property subject to that lease, the Partnership first must
offer the lessee the right to purchase the Property on the same terms and
conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.
During 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 agreed that the renovation costs of this
Property would be the responsibility of the tenant. Rental payments under the
lease for the renovated Property commenced once renovations were completed on
December 15, 1996.
In January 1997, the Partnership reinvested the net sales proceeds from
the sale of the Property in Richmond, Virginia, in a Burger King Property
located in Akron, Ohio, with an affiliate of the General Partners, as
tenants-in-common, as described below in "Joint Venture Arrangements." The lease
terms for this Property are substantially the same as the Partnership's other
leases, as described above in the first three paragraphs of this section.
MAJOR TENANTS
During 1996, five lessees (or group of affiliated lessees) of the
Partnership, (i) Flagstar Enterprises, Inc. and Quincy's Restaurants, Inc.
(which are affiliated entities under common control of Flagstar Corporation)
(hereinafter referred to as Flagstar Corporation), (ii) Long John Silver's,
Inc., (iii) Golden Corral Corporation, (iv) Foodmaker, Inc. and (v) Checkers
Drive-In Restaurants, Inc., each contributed more than ten percent of the
Partnership's total rental income (including the Partnership's share of rental
income from two Properties owned by joint ventures and one Property owned with
an affiliate as tenants-in-common). As of December 31, 1996, Flagstar
Corporation was the lessee under leases relating to 12 restaurants, Long John
Silver's, Inc. was the lessee under leases relating to eight restaurants, Golden
Corral Corporation was the lessee under leases relating to three restaurants,
Foodmaker, Inc. was the lessee under leases relating to five restaurants and
Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to
eight restaurants. It is anticipated that based on the minimum rental payments
required by the leases, these five lessees or groups of affiliated lessees each
will continue to contribute more than ten percent of the Partnership's total
rental income in 1997 and subsequent years. In addition, six Restaurant Chains,
Long John Silver's, Hardee's, Golden Corral Family Steakhouse Restaurants
("Golden Corral"), Jack in the Box, Checkers Drive-In Restaurants and Burger
King, each accounted for more than ten percent of the Partnership's total rental
income during 1996 (including the Partnership's share of rental income from two
Properties owned by joint ventures and one Property owned with an affiliate as
tenants-in-common). In subsequent years, it is anticipated that these six
Restaurant Chains each will continue to account for more than ten percent of the
Partnership's total rental income to which the Partnership is entitled under the
terms of the leases. Any failure of these lessees or Restaurant Chains could
materially affect the Partnership's income. No single tenant or group of
affiliated tenants lease Properties with an aggregate carrying value, excluding
acquisition fees and certain acquisition expenses, in excess of 20 percent of
the total assets of the Partnership.
JOINT VENTURE ARRANGEMENT
The Partnership has entered into two separate joint venture
arrangements, Attalla Joint Venture and Salem Joint Venture, with affiliates of
the General Partners to purchase and hold two Properties. The joint venture
arrangements provide for the Partnership and its joint venture partners to share
in all costs and benefits associated with the joint ventures in accordance with
their respective percentage interests in the joint ventures. The Partnership and
its joint venture partners are also jointly and severally liable for all debts,
obligations and other liabilities of the joint ventures.
Attalla Joint Venture and Salem Joint Venture have initial terms of 30
years and, after the expiration of the initial term, each joint venture
continues in existence from year to year unless terminated at the option of
either of the joint venturers or by an event of dissolution. Events of
dissolution include the bankruptcy, insolvency or termination of any joint
venturer,
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sale of the property owned by the joint venture and mutual agreement of the
Partnership and its joint venture partners to dissolve the joint venture.
The Partnership shares management control equally with an affiliate of
the General Partners for Attalla Joint Venture and Salem Joint Venture. The
joint venture agreements restrict each venturer's ability to sell, transfer or
assign its joint venture interest without first offering it for sale to its
joint venture partner, either upon such terms and conditions as to which the
venturers may agree or, in the event the venturers cannot agree, on the same
terms and conditions as any offer from a third party to purchase such joint
venture interest.
Net cash flow from operations of Attalla Joint Venture and Salem Joint
Venture is distributed 50 percent and 27.8%, respectively, to the Partnership
and the balance is distributed to each other joint venture partner in accordance
with its percentage interest in the joint venture. Any liquidation proceeds,
after paying joint venture debts and liabilities and funding reserves for
contingent liabilities, will be distributed first to the joint venture partners
with positive capital account balances in proportion to such balances until such
balances equal zero, and thereafter in proportion to each joint venture
partner's percentage interest in the joint venture.
In addition to the above joint venture agreements, in September 1994,
the Partnership entered into an agreement to hold a Kenny Rogers Roasters
Property as tenants-in-common with an affiliate of the General Partners. The
agreement provides for the Partnership and the affiliate to share in the profits
and losses of the Property in proportion to each co-venturer's percentage
interest. The Partnership owns a 66.13% interest in this Property.
In addition, in January 1997, the Partnership entered into an agreement
to hold a Burger King Property as tenants-in-common with an affiliate of the
General Partners. The agreement provides for the Partnership and the affiliate
to share in the profits and losses of the Property in proportion to each
co-venturer's percentage interest. The Partnership owns an approximate 63
percent interest in this Property.
CERTAIN MANAGEMENT SERVICES
CNL Investment Company, an affiliate of the General Partners, provided
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership through December 31,
1994. Under this agreement, CNL Investment Company was responsible for
collecting rental payments, inspecting the Properties and the tenants' books and
records, assisting the Partnership in responding to tenant inquiries and notices
and providing information to the Partnership about the status of the leases and
the Properties. CNL Investment Company also assisted the General Partners in
negotiating the leases. For these services, the Partnership had agreed to pay
CNL Investment Company an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer and the Property held as tenants-in-common with an affiliate, but
not in excess of competitive fees for comparable services.
Effective January 1, 1995, certain officers and employees of CNL
Investment Company became officers and employees of CNL Income Fund Advisors,
Inc., an affiliate of the General Partners and CNL Investment Company assigned
its rights in, and its obligations under, the management agreement with the
Partnership to CNL Income Fund Advisors, Inc. In addition, effective October 1,
1995, CNL Income Fund Advisors, Inc. assigned its rights in, and its obligations
under, the management agreement with the Partnership to CNL Fund Advisors, Inc.
All of the terms and conditions of the management agreement, including the
payment of fees, as described above, remain unchanged.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
COMPETITION
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
At the time the Partnership elects to dispose of its Properties, other
than as a result of the exercise of tenant options to purchase Properties, the
Partnership will be in competition with other persons and entities to locate
purchasers for its Properties.
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EMPLOYEES
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who may
also perform certain services for the Partnership.
ITEM 2. PROPERTIES
As of December 31, 1996, the Partnership owned, either directly or
through joint venture arrangements, 46 Properties, located in 17 states.
Reference is made to the Schedule of Real Estate and Accumulated Depreciation
filed with this report for a listing of the Properties and their respective
costs, including acquisition fees and certain acquisition expenses.
DESCRIPTION OF PROPERTIES
LAND. The Partnership's Property sites range from approximately 19,900
to 145,400 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
BUILDINGS. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. However, the
buildings located on the eight Checkers Properties are owned by the tenant while
the land parcels are owned by the Partnership. The buildings generally are
rectangular and are constructed from various combinations of stucco, steel,
wood, brick and tile. The sizes of the building owned by the Partnership range
from approximately 1,900 to 11,500 square feet. All buildings on Properties
acquired by the Partnership are freestanding and surrounded by paved parking
areas. Buildings are suitable for conversion to various uses, although
modifications may be required prior to use for other than restaurant operations.
Generally, a lessee is required, under the terms of its lease
agreement, to make such capital expenditures as may be reasonably necessary to
refurbish buildings, premises, signs and equipment so as to comply with the
lessee's obligations, if applicable, under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.
LEASES WITH MAJOR TENANTS. The terms of the leases with the
Partnership's major tenants as of December 31, 1996 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Flagstar Corporation leases 11 Hardee's restaurants and one Quincy's
restaurant. The initial term of each lease is 20 years (expiring in 2013) and
the average minimum base annual rent is approximately $62,100 (ranging from
approximately $48,800 to $99,200).
Long John Silver's, Inc. leases eight Long John Silver's restaurants.
The initial term for seven of the leases is 20 years (expiring in 2013) and the
initial term of the eighth lease, which the Partnership assumed from an
unrelated, third party in connection with the acquisition of the related
Property, is six years (expiring in 2000). The average minimum base annual rent
is approximately $80,900 (ranging from approximately $34,800 to $115,800).
Golden Corral Corporation leases three Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2008 and 2009) and the
average minimum base annual rent is approximately $177,900 (ranging from
approximately $168,600 to $186,200).
Foodmaker, Inc. leases five Jack in the Box restaurants. The initial
term of each lease is 18 years (expiring between 2010 and 2011) and the average
minimum base annual rent is approximately $81,000 (ranging from approximately
$59,100 to $91,800).
In addition, Checkers Drive-In Restaurants, Inc. leases eight Checkers
Drive-In Restaurants ("Checkers"). The initial term of each lease is 20 years
(expiring between 2014 and 2015) and the average minimum base annual rent is
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approximately $38,300 (ranging from approximately $27,400 to $48,800). The
leases for the eight Checkers Properties consist of only land. The tenant owns
the buildings currently on the land and has the right, if not in default under
the lease, to remove the buildings from the land at the end of the lease term.
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, 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
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of February 28, 1997, there were 3,049 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. Limited Partners
who wish to sell their Units may offer the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wish to have their distributions used to acquire additional Units (to the
extent Units are available for purchase), may do so pursuant to such Plan. The
General Partners have the right to prohibit transfers of Units. Since inception,
the price paid for any Unit transferred pursuant to the Plan has been $9.50 per
Unit. The price to be paid for any Unit transferred other than pursuant to the
Plan is subject to negotiation by the purchaser and the selling Limited Partner.
The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1996 and 1995 other than
pursuant to the Plan, net of commissions (which ranged from zero to 11.44%).
<TABLE>
<CAPTION>
1996 (1) 1995 (1)
--------------------------- -------------------------
High Low Average High Low Average
---- --- ------- ---- --- -------
<S> <C>
First Quarter $10.00 $7.66 $9.17 $ 9.00 $ 8.27 $ 8.69
Second Quarter (2) (2) (2) (2) (2) (2)
Third Quarter 10.00 8.79 9.36 9.20 8.90 9.05
Fourth Quarter 9.50 7.16 8.47 10.00 9.50 9.60
</TABLE>
(1) A total of 14,969 and 14,142 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1996 and 1995,
respectively.
(2) No transfer of Units took place during the quarter other than pursuant
to the Plan.
The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For the years ended December 31, 1996 and 1995, the Partnership
declared cash distributions of $3,400,008 and $3,375,011, respectively, to the
Limited Partners. No amounts distributed to partners for the years ended
December 31, 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 contributions. No distributions have
been made to the General Partners
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to date. As indicated in the chart below, these distributions were declared at
the close of each of the Partnership's calendar quarters. These amounts include
monthly distributions made in arrears for the Limited Partners electing to
receive such distributions on this basis.
Quarter Ended 1996 1995
------------- ---------- ----------
March 31 $850,002 $825,005
June 30 850,002 850,002
September 30 850,002 850,002
December 31 850,002 850,002
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 (1)
-------------- -------------- -------------- -------------- ----------
<S> <C>
Year Ended December 31:
Revenues (2) $ 3,795,754 $ 3,956,874 $ 3,679,212 $ 1,149,437 $ -
Net income (3) 3,231,815 3,319,174 3,117,632 941,877 -
Cash distributions declared 3,400,008 3,375,011 3,025,009 1,128,364 -
Net income per Unit (3)(4) 0.80 0.82 0.77 0.32 -
Cash distributions declared
per Unit (4)0.85 0.84 0.76 0.38 -
At December 31:
Total assets $35,945,070 $36,054,757 $36,145,882 $37,288,736 $1,000
Partners' capital 35,017,937 35,186,130 35,241,967 35,152,675 1,000
</TABLE>
(1) Selected financial data for 1992 represents the period September 25,
1992 (date of inception) to December 31, 1992.
(2) Revenues include equity in earnings of joint ventures.
(3) Net income for the year ended December 31, 1996, includes $82,855 from
gain on sale of land and net income for the year ended December 31,
1995, includes $29,560 from loss on sale of land.
(4) Based on the weighted average number of Limited Partner Units
outstanding during each of the years ended December 31, 1996, 1995 and
1994, and during the period April 15, 1993 through December 31, 1993.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Partnership was organized on September 25, 1992, to acquire for
cash, either directly or through joint venture arrangements, both newly
constructed and existing restaurant Properties, as well as land upon which
restaurant Properties were to be constructed, which are leased primarily to
operators of selected national and regional fast-food and family-style
Restaurant Chains. The leases are triple-net leases, with the lessee generally
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of December 31, 1996, the Partnership owned 46 Properties, either
directly or through joint venture arrangements.
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LIQUIDITY AND CAPITAL RESOURCES
Net proceeds to the Partnership from its offering of Units, after
deduction of organizational and offering expenses, totalled $35,324,831. As of
December 31, 1993, $28,705,644 had been used to invest, either directly or
through joint venture arrangements, in 35 Properties, four of which were under
construction at December 31, 1993, to pay acquisition fees to an affiliate of
the General Partners totalling $2,200,000 and to pay certain acquisition
expenses. During 1994, construction was completed on the four Properties and the
Partnership acquired, for cash, eleven additional Properties, either directly or
as tenants-in-common with an affiliate of the General Partners, for an aggregate
amount of approximately $6,259,000. In March 1995, the Partnership completed its
acquisition of Properties by entering into a joint venture arrangement, Salem
Joint Venture, with an affiliate of the Partnership which has the same General
Partners, to renovate and hold one restaurant Property located in Salem, Ohio.
Upon completion of the Partnership's acquisitions in March 1995, the remaining
net offering proceeds of approximately $193,000 were reserved for Partnership
purposes.
In January 1995, the Partnership received notice from the tenant of its
Property in Houston, Texas, of its intent to exercise its option in accordance
with its lease agreement, to substitute another property for the Houston, Texas
Property. In April 1995, the Partnership sold its Property in Houston, Texas, to
the tenant for its original purchase price, excluding acquisition fees and
miscellaneous acquisition expenses. As a result of this transaction, the
Partnership recognized a loss for financial reporting purposes of approximately
$29,560 primarily due to acquisition fees and miscellaneous acquisition expenses
the Partnership had allocated to the Houston, Texas, Property and due to the
accrued rental income relating to future scheduled rent increases that the
Partnership had recorded and reversed at the time of sale. The Partnership used
the net sales proceeds, along with approximately $39,800 of cash reserves, to
acquire a Checkers Property in Lakeland, Florida, from the tenant. The
Partnership believes the replacement Property will outperform the original
Property, in terms of the rent that will be payable to the Partnership, due to
the tenant's strong market penetration in Florida.
In November 1996, the Partnership sold its Property in Richmond,
Virginia, to the tenant and received sales proceeds of $550,000, resulting in a
gain of $82,855 for financial reporting purposes. This Property was originally
acquired by the Partnership in March 1994, and had a cost of approximately
$415,400, excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the property for approximately $134,600 in
excess of its original purchase price. As of December 31, 1996, the sales
proceeds of $550,000, plus accrued interest of $770, were being held in an
interest-bearing escrow account pending the release of funds by the escrow agent
to acquire an additional Property. The sale of this Property was structured to
qualify as a like-kind exchange transaction in accordance with Section 1031 of
the Internal Revenue Code. As a result, no gain was recognized for federal
income tax purposes. Therefore, the Partnership was not required to distribute
any of the net sales proceeds from the sale of this Property to Limited Partners
for the purpose of paying federal and state income taxes. In January 1997, the
Partnership reinvested the net sales proceeds in a Burger King Property located
in Akron, Ohio, with an affiliate of the General Partners as tenants-in-common.
Until Properties were acquired by the Partnership, all Partnership
proceeds were held in short-term, highly liquid investments which the General
Partners believed to have appropriate safety of principal. This investment
strategy provided high liquidity in order to facilitate the Partnership's use of
these funds to acquire Properties at such time as Properties suitable for
acquisition were located.
Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, distributions from joint
ventures and interest received, less cash paid for expenses). Cash from
operations was $3,367,581, $3,379,378 and $3,149,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. The decrease in cash from
operations during 1996, as compared to 1995, and the increase during 1995, as
compared to 1994, is primarily a result of changes in income and expenses as
discussed in "Results of Operations" below and changes in the Partnership's
working capital during each of the respective years.
None of the Properties owned by the Partnership or the joint ventures
in which the Partnership owns an interest is or may be encumbered. Subject to
certain restrictions on borrowing, however, the Partnership may borrow funds but
will not encumber any of the Properties in connection with any such borrowing.
The Partnership will not borrow for the purpose of returning capital to the
Limited Partners. The Partnership will not borrow under arrangements that would
make the Limited Partners liable to creditors of the Partnership. The General
Partners further have represented that they will use their reasonable efforts to
structure any borrowing so that it will not constitute "acquisition
indebtedness" for federal income tax purposes and also will limit the
Partnership's outstanding indebtedness to three percent of the aggregate
adjusted tax basis of its Properties. Affiliates of the General Partners from
time to time incur certain operating expenses on behalf of the Partnership for
which the Partnership reimburses the affiliates without interest.
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Currently, cash reserves and rental income from the Partnership
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 December 31, 1996,
the Partnership had $1,103,568 invested in such short-term investments as
compared to $1,135,995 at December 31, 1995. The funds remaining at December 31,
1996, after payment of distributions and other liabilities, will be used to meet
the Partnership's working capital and other needs.
During 1994, affiliates of the General Partners incurred on behalf of
the Partnership $3,150 for certain offering expenses and $9,368 for certain
acquisition expenses. In addition, during 1996, 1995 and 1994, affiliates of the
General Partners incurred on behalf of the Partnership $97,819, $94,875 and
$100,903, respectively, for certain operating expenses. As of December 31, 1996
and 1995, the Partnership owed $2,594 and $7,367, respectively, to related
parties for such amounts, accounting and administrative services and management
fees. As of February 28, 1997, the Partnership had reimbursed the affiliates all
such amounts. Other liabilities, including distributions payable, increased to
$924,539 at December 31, 1996, from $861,260 at December 31, 1995. The General
Partners believe that the Partnership has sufficient cash on hand to meet its
current working capital needs.
In February 1997, the Partnership entered into a sales contract with an
unrelated third party to sell the Denny's Property in Orlando, Florida. The
Partnership intends to reinvest the net sales proceeds in a replacement
Property.
Based on cash from operations, the Partnership declared distributions
to the Limited Partners of $3,400,008, $3,375,011 and $3,025,009 for the years
ended December 31, 1996, 1995 and 1994, respectively. This represents
distributions of $0.85, $0.84 and $0.76 per Unit for the years ended December
31, 1996, 1995 and 1994, respectively. No amounts distributed or to be
distributed to the Limited Partners for the years ended December 31, 1996, 1995
and 1994, 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 contributions. The Partnership intends to continue to make
distributions of cash available for distribution to the Limited Partners on a
quarterly basis.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance 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.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally 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.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all leases of the Partnership's Properties are
on a triple-net basis, it is not anticipated that a permanent reserve for
maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purposes, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs. The General
Partners have the right to cause the Partnership to maintain additional reserves
if, in their discretion, they determine such reserves are required to meet the
Partnership's working capital needs.
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 1994, the Partnership owned and leased 44 wholly owned
Properties, during 1995, the Partnership owned and leased 45 wholly owned
Properties (including one Property in Houston, Texas, which was sold in April
1995) and during 1996, the Partnership owned and leased 44 wholly owned
Properties (including one Property in Richmond, Virginia, which was sold in
November 1996). In addition, during 1994, the Partnership was a co-venturer in
one joint venture that owned and leased one Property, and during 1995 and 1996,
the Partnership was a co-venturer in two separate joint ventures that each owned
and leased one Property. During 1996, 1995 and 1994, the Partnership also owned
and leased one Property with an affiliate as tenants-in-common. As of December
31, 1996, the Partnership owned, either directly, as tenants-in-common with an
affiliate or through joint venture arrangements, 46 Properties which are subject
to long-term, triple-net leases. The leases of the Properties provide for
minimum base annual rental amounts (payable in monthly installments)
8
<PAGE>
ranging from approximately $27,400 to $186,200. All of the leases provide for
percentage rent based on sales in excess of a specified amount. In addition, the
majority of the leases provide that, commencing in specified lease years
(generally the sixth lease year), the annual base rent required under the terms
of the lease will increase. For further description of the Partnership's leases
and Properties, see Item 1. Business - Leases and Item 2. Properties,
respectively.
During the years ended December 31, 1996, 1995 and 1994, the
Partnership earned $3,376,286, $3,509,773 and $3,280,425, respectively, in
rental income from operating leases and earned income from direct financing
leases from Properties wholly owned by the Partnership. The decrease in rental
and earned income during 1996, as compared to 1995, is primarily attributable to
the fact that the Partnership established an allowance for doubtful accounts of
approximately $85,400 and $38,000 during 1996 and 1995, respectively, 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
$72,700 during 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) relating to this Property. The tenant of this
Property is continuing to operate the restaurant on this Property; however, the
Partnership has reserved certain past due amounts in accordance with its
collection policy. The Partnership intends to continue pursuing collection of
past due amounts relating to this Property and will recognize any such amounts
as income if collected. In February 1997, the Partnership entered into a sales
contract to sell the Denny's Property in Orlando, Florida, as discussed above in
"Liquidity and Capital Resources."
The increase in rental and earned income during 1995, as compared to
1994, is partially attributable to the acquisition of additional Properties
during 1994 and the fact that several Properties which were under construction
became operational during 1994; therefore, 1995 included a full year of rental
and earned income for these Properties, as compared to a partial year in 1994.
For the years ended December 31, 1996, 1995 and 1994, the Partnership
also earned $299,495, $293,749 and $275,532, respectively, in contingent rental
income. The increase in contingent rental income during 1996 and 1995, each as
compared to the previous year, is primarily the result of increases in gross
sales relating to certain restaurant Properties.
In addition, for the years ended December 31, 1996, 1995 and 1994, the
Partnership earned $60,654, $98,520 and $43,386, respectively, attributable to
net income earned by joint ventures in which the Partnership is a co-venturer.
The decrease in net income earned by joint ventures during 1996, as compared to
1995, is primarily a result of the former tenant defaulting under the terms of
the lease agreement of the Kenny Rogers' Roasters Property owned with an
affiliate as tenants-in-common. The Partnership entered into a new lease for
this Property with a new tenant to operate the Property as an Arby's restaurant.
Rent commenced in December 1996, upon completion of renovations. In January
1997, the Partnership reinvested the net sales proceeds from the sale of the
Property in Richmond, Virginia, in a Burger King Property in Akron, Ohio, with
an affiliate of the General Partners as tenants-in-common. In connection
therewith, the Partnership and the affiliate will share the profits and losses
of the Property in proportion to each co-venturer's interest. As such, the
Partnership has an approximate 63 percent interest in this Property. Therefore,
the General Partners expect net income earned by joint ventures to increase in
1997 and subsequent years.
The increase in net income earned by joint ventures during 1995, as
compared to 1994, is primarily attributable to the fact that the Partnership
invested in a Property as tenants-in-common in September 1994, and a joint
venture, Salem Joint Venture, in March 1995, as described above in "Liquidity
and Capital Resources."
During the year ended December 31, 1996, five of the Partnership's
lessees (or group of affiliated lessees), (i) Flagstar Enterprises, Inc. and
Quincy's Restaurants, Inc. (which are affiliated entities under common control
of Flagstar Corporation) (hereinafter referred to as Flagstar Corporation), (ii)
Long John Silver's, Inc., (iii) Golden Corral Corporation, (iv) Foodmaker, Inc.
and (v) Checkers Drive-In Restaurants, Inc., each contributed more than ten
percent of the Partnership's total rental income (including the Partnership's
share of rental income from two Properties owned by joint ventures and one
Property owned with an affiliate as tenants-in-common). As of December 31, 1996,
Flagstar Corporation was the lessee under leases relating to 12 restaurants,
Long John Silver's, Inc. was the lessee under leases relating to eight
restaurants, Golden Corral Corporation was the lessee under leases relating to
three restaurants, Foodmaker, Inc. was the lessee under leases relating to five
restaurants and Checkers Drive-In Restaurants, Inc. was the lessee under leases
relating to eight restaurants. It is anticipated that based on the minimum
rental payments required by the leases, these five lessees or groups of
affiliated lessees each will continue to contribute more than ten percent of the
Partnership's total rental income during 1997 and subsequent years. In addition,
six Restaurant Chains, Long John Silver's, Hardee's, Golden Corral, Jack in the
Box, Checkers and Burger King, each accounted for more than ten percent of the
Partnership's total rental income in 1996
9
<PAGE>
(including the Partnership's share of rental income from two Properties owned by
joint ventures and one Property owned with an affiliate as tenants-in-common).
In subsequent years, it is anticipated that these six Restaurant Chains, each
will continue to account for more than ten percent of the total rental income to
which the Partnership is entitled under the terms of its leases. Any failure of
these lessees or Restaurant Chains could materially affect the Partnership's
income.
Operating expenses, including depreciation and amortization expense,
were $646,794, $608,140 and $561,580 for the years ended December 31, 1996, 1995
and 1994, respectively. The increase in operating expenses during 1996 and 1995,
each as compared to the prior year, is partially the result of an increase in
accounting and administrative expenses associated with operating the Partnership
and its Properties and an increase in insurance expense as a result of the
General Partners' obtaining contingent liability and property coverage for the
Partnership, as discussed above in "Liquidity and Capital Resources." Operating
expenses also increased during 1996, as compared to 1995, as a result of the
Partnership accruing prior and current year real estate taxes relating to the
Denny's Property in Orlando, Florida, as a result of the current financial
difficulties of the tenant. Payment of these taxes remains the responsibility of
the tenant of this Property; however, the General Partners believe that 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 1995, as compared to 1994, as
a result of the Partnership's incurring additional taxes relating to the filing
of various state tax returns during 1995, and due to the fact that depreciation
expense increased as a result of the acquisition of additional Properties during
1994, and the fact that the Properties acquired during 1994 were operational for
a full year in 1995.
As a result of the sale of the Property in Richmond, Virginia, as
discussed above in "Liquidity and Capital Resources," the Partnership recognized
a gain of $82,855 for financial reporting purposes for the year ended December
31, 1996. In addition, as a result of the 1995 sale of the Property in Houston,
Texas, as described above in "Liquidity and Capital Resources," the Partnership
recognized a loss for financial reporting purposes of $29,560 for the year ended
December 31, 1995. The loss was primarily due to acquisition fees and
miscellaneous acquisition expenses the Partnership had allocated to this
Property and due to accrued rental income relating to future scheduled rent
increases that the Partnership had recorded and reversed at the time of sale. No
Properties were sold during 1994.
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.
The Partnership's leases as of December 31, 1996, are triple-net leases
and contain provisions that the General Partners believe mitigate the adverse
effect of inflation. Such provisions include clauses requiring the payment of
percentage rent based on certain restaurant sales above a specified level and/or
automatic increases in based rent at specified times during the term of the
lease. Management expects that increases in restaurant sales volumes due to
inflation and real sales growth should result in an increase in rental income
over time. Continued inflation also may cause capital appreciation of the
Partnership's Properties. Inflation and changing prices, however, also may have
an adverse impact on the sales of the restaurants and on potential capital
appreciation of the Properties.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
10
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 13
Financial Statements:
Balance Sheets 14
Statements of Income 15
Statements of Partners' Capital 16
Statements of Cash Flows 17
Notes to Financial Statements 20
11
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XIII, Ltd.
We have audited the financial statements and the financial statement schedules
of CNL Income Fund XIII, Ltd. (a Florida limited partnership) listed in Item
14(a) of this Form 10-K. These financial statements and financial statement
schedules are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund XIII, Ltd. as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
Orlando, Florida
January 16, 1997
12
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
ASSETS 1996 1995
------ ----------- ----------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $23,612,639 $24,448,677
Net investment in direct
financing leases 8,543,916 8,624,130
Investment in joint ventures 976,531 1,009,577
Cash and cash equivalents 1,103,568 1,135,995
Restricted cash 550,770 -
Receivables, less allowance for
doubtful accounts of $150,734
and $49,747 100,955 73,691
Prepaid expenses 9,143 4,138
Organization costs, less
accumulated amortization of
$7,422 and $5,422 2,578 4,578
Accrued rental income, less allowance
for doubtful accounts of $72,734
in 1996 1,044,970 753,971
----------- -----------
$35,945,070 $36,054,757
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 6,340 $ 3,569
Accrued and escrowed real estate
taxes payable 14,092 4,726
Distributions payable 850,002 850,002
Due to related parties 2,594 7,367
Rents paid in advance 54,105 2,963
----------- -----------
Total liabilities 927,133 868,627
Partners' capital 35,017,937 35,186,130
----------- -----------
$35,945,070 $36,054,757
=========== ===========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION> Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
<S> <C>
Revenues:
Rental income from
operating leases $2,477,156 $2,566,579 $2,338,278
Earned income from direct
financing leases 899,130 943,194 942,147
Contingent rental income 299,495 293,749 275,532
Interest and other income 59,319 54,832 79,869
---------- ---------- ----------
3,735,100 3,858,354 3,635,826
---------- ---------- ----------
Expenses:
General operating and
administrative 156,466 130,501 106,450
Professional services 33,746 27,703 38,724
Management fees to related
parties 35,675 36,031 33,247
Real estate taxes 10,680 - -
State and other taxes 16,793 20,470 4,890
Depreciation and amortization 393,434 393,435 378,269
---------- ---------- ----------
646,794 608,140 561,580
---------- ---------- ----------
Income Before Equity in
Earnings of Joint Ventures and
Gain (Loss) on Sale of Land 3,088,306 3,250,214 3,074,246
Equity in Earnings of Joint
Ventures 60,654 98,520 43,386
Gain (Loss) on Sale of Land 82,855 (29,560) -
---------- ---------- ---------
Net Income $3,231,815 $3,319,174 $3,117,632
========== ========== ==========
Allocation of Net Income:
General partners $ 31,490 $ 33,432 $ 31,176
Limited partners 3,200,325 3,285,742 3,086,456
---------- ---------- ----------
$3,231,815 $3,319,174 $3,117,632
========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.80 $ 0.82 $ 0.77
========== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
General Partners Limited Partners
------------------- ------------------------------------------------------
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
------- -------- ----------- ------------ ----------- ----------- -----------
<S> <C>
Balance, December 31, 1993 $1,000 $ 9,419 $40,000,000 $ (1,128,364) $ 932,458 $(4,661,838) $35,152,675
Distribution to limited
partners ($0.76 per limited
partner unit) - - - (3,025,009) - - (3,025,009)
Syndication costs - - - - - (3,331) (3,331)
Net income - 31,176 - - 3,086,456 - 3,117,632
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1994 1,000 40,595 40,000,000 (4,153,373) 4,018,914 (4,665,169) 35,241,967
Distribution to limited
partners ($0.84 per limited
partner unit) - - - (3,375,011) - - (3,375,011)
Net income - 33,432 - - 3,285,742 - 3,319,174
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 1,000 74,027 40,000,000 (7,528,384) 7,304,656 (4,665,169) 35,186,130
Distribution to limited
partners ($0.85 per limited
partner unit) - - - (3,400,008) - - (3,400,008)
Net income - 31,490 - - 3,200,325 - 3,231,815
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 $1,000 $105,517 $40,000,000 $(10,928,392) $10,504,981 $(4,665,169) $35,017,937
====== ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION> Year Ended December 31,
1996 1995 1994
----------- ----------- -----------
<S> <C>
Increase (Decrease) in Cash
and Cash Equivalents:
Cash Flows From Operating
Activities:
Cash received from tenants $ 3,476,985 $ 3,453,186 $ 3,216,271
Distributions from
joint ventures 93,700 88,793 48,129
Cash paid for expenses (251,454) (214,011) (192,779)
Interest received 48,350 51,410 77,379
----------- ----------- -----------
Net cash provided by
operating activities 3,367,581 3,379,378 3,149,000
----------- ----------- -----------
Cash Flows From Investing
Activities:
Additions to land and
buildings on operating
leases - (336,116) (5,764,308)
Proceeds from sale of land 550,000 286,411 -
Investment in direct
financing leases - - (1,365,075)
Investment in joint ventures - (140,052) (545,139)
Increase in restricted cash (550,000) - -
Other - 954 9,226
----------- ----------- -----------
Net cash used in
investing activities - (188,803) (7,665,296)
----------- ----------- -----------
Cash Flows From Financing
Activities:
Reimbursement of acqui-
sition and syndication
costs paid by related
parties on behalf of the
Partnership - (3,074) (25,036)
Distributions to
limited partners (3,400,008) (3,350,014) (2,800,004)
Payment of syndication costs - - (181)
----------- ----------- -----------
Net cash used in
financing activities (3,400,008) (3,353,088) (2,825,221)
----------- ----------- -----------
Net Decrease in Cash and Cash
Equivalents (32,427) (162,513) (7,341,517)
Cash and Cash Equivalents at
Beginning of Year 1,135,995 1,298,508 8,640,025
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 1,103,568 $ 1,135,995 $ 1,298,508
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION> Year Ended December 31,
1996 1995 1994
----------- ----------- ------------
<S> <C>
Reconciliation of Net Income
to Net Cash Provided by
Operating Activities:
Net income $ 3,231,815 $ 3,319,174 $ 3,117,632
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 391,434 391,435 376,269
Amortization 2,000 2,000 2,000
Equity in earnings of
joint ventures, net
of distributions 33,046 (9,727) 4,743
Loss (gain) on sale of
land (82,855) 29,560 -
Increase in receivables (28,034) (3,833) (34,184)
Decrease in net investment
in direct financing
leases 80,214 71,410 61,342
Increase in prepaid
expenses (5,005) (4,138) -
Increase in accrued
rental income (313,540) (371,167) (339,466)
Increase (decrease) in
accounts payable and
accrued expenses 12,137 922 (1,979)
Increase (decrease) in
due to related parties,
excluding reimbursement
of acquisition and
syndication costs paid
on behalf of the
Partnership (4,773) 6,213 (3,554)
Increase (decrease) in
rents paid in advance 51,142 (52,471) (33,803)
----------- ----------- -----------
Total adjustments 135,766 60,204 31,368
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 3,367,581 $ 3,379,378 $ 3,149,000
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION> Year Ended December 31,
1996 1995 1994
----------- ----------- -----------
<S> <C>
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Related parties paid certain
acquisition and syndication
costs on behalf of the
Partnership as follows:
Acquisition costs $ - $ - $ 9,368
Syndication costs - - 3,150
----------- ----------- -----------
$ - $ - $ 12,518
=========== =========== ===========
Distributions declared and
unpaid at December 31 $ 850,002 $ 850,002 $ 825,005
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENT
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund XIII, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have
responsibility for managing the day-to-day operations of the
Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
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. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:
DIRECT FINANCING METHOD - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 4). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodic rate of return on the Partnership's net
investment in the leases.
OPERATING METHOD - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals 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 commencing on the
date the property is placed in service.
19
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an 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. Although the general partners have made their best
estimate of these factors based on current conditions, it is reasonably
possible that changes could occur in the near term which could
adversely affect the general partners' estimate of net cash flows
expected to be generated from its properties and the need for asset
impairment write-downs. If an impairment is indicated, a loss will be
recorded for the amount by which the carrying value of the asset
exceeds its fair market value.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables
and accrued rental income, and to decrease rental or other income for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - The Partnership accounts for its
interest in Attalla Joint Venture, Salem Joint Venture and a property
in Arvada, Colorado, held as tenants-in-common with an affiliate, using
the equity method since the Partnership shares control with affiliates
which have the same general partners.
20
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased 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 Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial institutions with high credit
standing; therefore, the Partnership believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Organization Costs - Organization costs are amortized over five years
using the straight-line method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have 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 financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
21
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1996 presentation.
These reclassifications had no effect on partners' capital or net
income.
New Accounting Standard - Effective January 1, 1996, the Partnership
adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of LongLived 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.
2. Leases:
The Partnership leases its land or land and buildings to operators of
national and regional fast-food and family-style restaurants. The
leases are accounted for under the provisions of Statement of Financial
Accounting Standards No. 13, "Accounting for Leases." Twenty-seven of
the leases are classified as operating leases and 16 of the leases have
been classified as direct financing leases. For the leases classified
as direct financing leases, the building portions of the property
leases are accounted for as direct financing leases while the land
portions of 11 of these leases are operating leases. Substantially all
leases are for 15 to 20 years and provide for minimum and contingent
rentals. In addition, the tenant pays all property taxes and
assessments, fully maintains the interior and exterior of the building
and carries insurance coverage for public liability, property damage,
fire and extended coverage. The lease options generally allow tenants
to renew the leases for two to five successive five-year periods
subject to the same terms and conditions as the initial lease. Most
leases also allow the tenant to purchase the property at fair market
value after a specified portion of the lease has elapsed.
22
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
1996 1995
----------- -----------
Land $13,175,484 $13,620,088
Buildings 11,743,041 11,743,041
----------- -----------
24,918,525 25,363,129
Less accumulated
depreciation (1,305,886) (914,452)
----------- -----------
$23,612,639 $24,448,677
=========== ===========
In January 1995, the Partnership received notice from the tenant of its
property in Houston, Texas, of the tenant's intention to exercise its
option, in accordance with its lease agreement, to substitute another
property for the Houston, Texas, property. In April 1995, the
Partnership sold its property in Houston, Texas, to the tenant for its
original purchase price, excluding acquisition fees and miscellaneous
acquisition expenses, and received net sales proceeds of $286,411. As a
result of this transaction, the Partnership recognized a loss for
financial reporting purposes of $29,560 primarily due to acquisition
fees and miscellaneous acquisition expenses the Partnership had
allocated to the Houston, Texas property and due to the accrued rental
income relating to future scheduled rent increases that the Partnership
had recorded and reversed at the time of sale. The Partnership used the
net sales proceeds, along with approximately $39,800 of cash reserves,
to acquire a new property in Lakeland, Florida, from the tenant.
In November 1996, the Partnership sold its property in Richmond,
Virginia, to the tenant and received sales proceeds of $550,000,
resulting in a gain of $82,855 for financial reporting purposes. This
property was originally acquired by the Partnership in March 1994, and
had a cost of approximately $415,400, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the
property for approximately $134,600 in excess of its original purchase
price.
23
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
3. Land and Buildings on Operating Leases - Continued:
Generally, the leases provide for escalating guaranteed minimum rents
throughout the lease term. Income from these scheduled rent increases
is recognized on a straight-line basis over the terms of the leases.
For the years ended December 31, 1996, 1995 and 1994, the Partnership
recognized $313,541, $371,167 and $339,466, respectively, of such
rental income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1996:
1997 $ 2,101,288
1998 2,135,797
1999 2,282,848
2000 2,297,153
2001 2,319,948
Thereafter 27,358,572
-----------
$38,495,606
===========
Since lease renewal periods are exercisable at the option of the
tenant, the above table only presents future minimum lease payments due
during the initial lease terms. In addition, this table does not
include any amounts for future contingent rentals which may be received
on the leases based on a percentage of the tenant's gross sales.
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1996 1995
------------ -----------
Minimum lease payments
receivable $ 18,116,667 $ 19,159,476
Estimated residual
values 2,723,067 2,723,067
Less unearned income (12,295,818) (13,258,413)
------------ ------------
Net investment in
direct financing
leases $ 8,543,916 $ 8,624,130
============ ============
24
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1996:
1997 $ 1,042,809
1998 1,043,302
1999 1,048,723
2000 1,048,723
2001 1,061,462
Thereafter 12,871,648
-----------
$18,116,667
===========
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
5. Investment in Joint Ventures:
The Partnership has a 50 percent interest in the profits and losses of
Attalla Joint Venture. The remaining interest in this joint venture is
held by an affiliate of the Partnership which has the same general
partners.
On September 22, 1994, the Partnership acquired a property in Arvada,
Colorado, with an affiliate of the Partnership that has the same
general partners, as tenants-in-common. In connection therewith, the
Partnership contributed $508,992 and has a 66.13% interest in such
property. The Partnership accounts for its investment in this property
using the equity method since the Partnership shares control with an
affiliate. Amounts relating to its investment are included in
investment in joint ventures.
On March 16, 1995, the Partnership entered into a joint venture
arrangement, Salem Joint Venture, with an affiliate of the Partnership
which has the same general partners, to renovate and lease one
restaurant property. In connection therewith, the Partnership
contributed $140,000 and has a 27.8% interest in the profits and losses
of the joint venture.
27
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
5. Investment in Joint Ventures - Continued:
Attalla Joint Venture, Salem Joint Venture and the Partnership and an
affiliate as tenants-in-common, each own and lease one property to an
operator of national fast-food or family-style restaurants. The
following presents the combined, condensed financial information for
the joint ventures and the property held as tenants-in-common with an
affiliate at December 31:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C>
Land and buildings on
operating leases,
less accumulated
depreciation $1,482,503 $1,515,155
Net investment in direct
financing leases 367,661 370,407
Cash 21,173 20,364
Receivables 6,412 32,297
Prepaid expenses 255 79
Accrued rental income 51,745 53,868
Liabilities 28,121 28,717
Partners' capital 1,901,628 1,963,453
Revenues 216,960 226,073
Net income 145,851 187,459
</TABLE>
The Partnership recognized income totalling $60,654, $98,520 and
$43,386 for the years ended December 31, 1996, 1995 and 1994,
respectively, from these joint ventures and the property held as
tenants-in-common with an affiliate.
6. Restricted Cash:
As of December 31, 1996, the sales proceeds of $550,000 from the sale
of the property in Richmond, Virginia, plus accrued interest of $770,
were being held in an interest-bearing escrow account pending the
release of funds by the escrow agent to acquire an additional property.
26
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
7. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited
partners and one percent to the general partners; provided, however,
that the one percent of net cash flow to be distributed to the general
partners is subordinated to receipt by the limited partners of an
aggregate, ten percent, cumulative, noncompounded annual return on
their invested capital contributions (the "Limited Partners' 10%
Return").
Generally, net sales proceeds from the sale of properties, to the
extent distributed, will be distributed first to the limited partners
in an amount sufficient to provide them with their Limited Partners'
10% Return, plus the return of their adjusted capital contributions.
The general partners will then receive, to the extent previously
subordinated and unpaid, a one percent interest in all prior
distributions of net cash flow and a return of their capital
contributions. Any remaining sales proceeds will be distributed 95
percent to the limited partners and five percent to the general
partners. Any gain from the sale of a property is, in general,
allocated in the same manner as net sales proceeds will be
distributable. Any loss from the sale of a property is, in general,
allocated first, on a pro rata basis, to partners with positive
balances in their capital accounts; and thereafter, 95 percent to the
limited partners and five percent to the general partners.
During the years ended December 31, 1996, 1995 and 1994, the
Partnership declared distributions to the limited partners of
$3,400,008, $3,375,011 and $3,025,009, respectively. No distributions
have been made to the general partners to date.
27
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C>
Net income for financial
reporting purposes $3,231,815 $3,319,174 $3,117,632
Depreciation for tax
reporting purposes in
excess of depreciation
for financial reporting
purposes (103,634) (103,634) (103,729)
Direct financing leases
recorded as operating
leases for tax
reporting purposes 80,214 71,410 61,342
Equity in earnings of joint
ventures for tax reporting
purposes in excess of (less
than) equity in earnings of
joint ventures for financial
reporting purposes 6,819 (17,195) (3,289)
Loss (gain) on sale of
property deferred for
tax reporting purposes (82,855) 29,560 -
Allowance for doubtful
accounts 102,198 45,182 4,565
Accrued rental income (313,540) (371,167) (339,466)
Rents paid in advance 51,142 (52,471) (33,803)
---------- ---------- ----------
Net income for federal
income tax purposes $2,972,159 $2,920,859 $2,703,252
========== ========== ==========
</TABLE>
28
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. Related Party Transactions:
One of the individual partners, James M. Seneff, Jr., is one of the
principal shareholders of CNL Group, Inc., the parent company of CNL
Securities Corp., CNL Investment Company and CNL Fund Advisors, Inc.
The other individual general partner, Robert A. Bourne, is the
president of CNL Securities Corp., CNL Investment Company and CNL Fund
Advisors, Inc. CNL Income Fund Advisors, Inc. was a wholly owned
subsidiary of CNL Group, Inc. until its merger, effective January 1,
1996, with CNL Fund Advisors, Inc. During the years ended December 31,
1996, 1995 and 1994, CNL Investment Company, CNL Income Fund Advisors,
Inc. and CNL Fund Advisors, Inc. (hereinafter referred to collectively
as the "Affiliates") each performed certain services for the
Partnership, as described below.
During the years ended December 31, 1996, 1995 and 1994, certain
Affiliates acted as manager of the Partnership's properties pursuant to
a management agreement with the Partnership. In connection therewith,
the Partnership agreed to pay the Affiliates a management fee of one
percent of the sum of gross revenues from properties wholly owned by
the Partnership and the Partnership's allocable share of gross revenues
from joint ventures and the property held as tenants-in-common with an
affiliate. The management fee, which will not exceed fees which are
competitive for similar services in the same geographic area, may or
may not be taken, in whole or in part as to any year, in the sole
discretion of the Affiliates. All or any portion of the management fee
not taken as to any fiscal year shall be deferred without interest and
may be taken in such other fiscal year as the Affiliates shall
determine. The Partnership incurred management fees of $35,675, $36,031
and $33,247 for the years ended December 31, 1996, 1995 and 1994,
respectively.
Certain Affiliates are also entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if the
Affiliates provide a substantial amount of services in connection with
the sale. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee
29
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. Related Party Transactions - Continued:
is subordinated to receipt by the limited partners of their aggregate
10% Preferred Return, plus their adjusted capital contributions. No
deferred, subordinated real estate disposition fees have been incurred
since inception.
During the years ended December 31, 1996, 1995 and 1994, Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. For the years ended December 31, 1996, 1995 and 1994,
the expenses incurred for these services were $91,272, $67,052 and
$49,799, respectively.
The due to related parties consisted of the following at December 31,
1996 and 1995, totalled $2,594 and $7,367, respectively.
10. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, each representing more than ten percent of the
Partnership's total rental and earned income (including the
Partnership's share of total rental and earned income from joint
ventures and the property held as tenants-in-common with an affiliate)
for at least one of the years ended December 31:
1996 1995 1994
-------- -------- --------
Flagstar Enterprises,
Inc. and Quincy's
Restaurants, Inc. $765,109 $785,570 $798,013
Long John Silver's,
Inc. 764,565 774,281 744,495
Golden Corral Corpora-
tion 539,568 533,668 490,915
Foodmaker, Inc. 450,393 450,724 450,993
Checkers Drive-In
Restaurants, Inc. 412,422 416,746 287,593
30
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
10. Concentration of Credit Risk - Continued:
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from joint ventures and the property held as tenants-in-common with an
affiliate) for at least one of the years ended December 31:
1996 1995 1994
-------- -------- --------
Long John Silver's $764,565 $774,281 $744,495
Hardee's 670,249 690,324 702,415
Golden Corral
Family Steakhouse
Restaurants 539,568 533,668 490,915
Jack in the Box 450,393 450,724 450,993
Burger King 431,280 419,740 395,635
Checkers
Drive-In
Restaurants 412,422 416,746 287,593
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership. However, the general partners believe that the risk
of such a default is reduced due to the essential or important nature
of these properties for the on-going operations of the lessees.
31
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
JAMES M. SENEFF, JR., age 50, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation in
1980. CNL Group, Inc. is the parent company of CNL Securities Corp., CNL
Investment Company, CNL Fund Advisors, Inc., and prior to its merger with CNL
Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors, Inc.
Mr. Seneff is Chief Executive Officer, and has been a director and registered
principal of CNL Securities Corp., which served as the managing dealer in the
Partnership's offering of Units, since its formation in 1979. Mr. Seneff also
has held the position of President and a director of CNL Management Company, a
registered investment advi sor, since its formation in 1976, has served as Chief
Executive Officer and Chairman of the Board of CNL Investment Company, and Chief
Executive Officer and Chairman of the Board of Commercial Net Lease Realty, Inc.
since 1992, has served as the Chairman of the Board and the Chief Executive
Officer of CNL Realty Advisors, Inc. since its inception in 1991, served as
Chairman of the Board and Chief Executive Officer of CNL Income Fund Advisors,
Inc. since its inception in 1994 through December 31, 1995, has served as
Chairman of the Board and Chief Executive Officer of CNL Fund Advisors, Inc.
since its inception in 1994, and has held the position of Chief Executive
Officer and a director of CNL Institutional Advisors, Inc., a registered
investment advisor, since its inception in 1990. In addition, Mr. Seneff has
served as Chairman of the Board and Chief Executive Officer of CNL American
Properties Fund, Inc. since 1994, and has served as Chairman of the Board and
Chief Executive Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors, Inc. since January 1997. Mr. Seneff previously served on
the Florida State Commission on Ethics and is a former member and past Chairman
of the State of Florida Investment Advisory Council, which recommends to the
Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of more
than $40 billion of retirement funds. Since 1971, Mr. Seneff has been active in
the acquisition, development and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
joint venturer in over 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these real estate
ventures are approximately 65 privately offered real estate limited partnerships
in which Mr. Seneff, directly or through an affiliated entity, serves or has
served as a general partner. Also included are CNL Income Fund, Ltd., CNL Income
Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income
Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income
Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income
Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIV, Ltd., CNL Income
Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd. and CNL
Income Fund XVIII, Ltd. (the "CNL Income Fund Partnerships"), public real estate
limited partnerships with investment objectives similar to those of the
Partnership, in which Mr. Seneff serves as a general partner. Mr. Seneff
received his degree in Business Administration from Florida State University in
1968.
ROBERT A. BOURNE, age 49, is President and Treasurer of CNL Group,
Inc., President, a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, CNL Fund Advisors, Inc., and
prior to its merger with CNL Fund Advisors, Inc., effective January 1, 1996, CNL
Income Fund Advisors, Inc., and President, Chief Investment Officer and a
director of CNL Institutional Advisors, Inc., a registered investment advisor.
Mr. Bourne also has served as a director since 1992, as President from July 1992
to February 1996, and since February 1996, as Vice Chairman of the Board of
Directors, Secretary and Treasurer of Commercial Net Lease Realty, Inc. In
addition, Mr.
32
<PAGE>
Bourne has served as a director since its inception in 1991, as President from
1991 to February 1996, as Secretary from February 1996 to July 1996, and since
February 1996, as Treasurer and Vice Chairman of CNL Realty Advisors, Inc. In
addition, Mr. Bourne has served as President and a director of CNL American
Properties Fund, Inc. since 1994, and has served as President and a director of
CNL American Realty Fund, Inc. since 1996 and of CNL Real Estate Advisors, Inc
since January 1997. Upon graduation from Florida State University in 1970, where
he received a B.A. in Accounting, with honors, Mr. Bourne worked as a certified
public accountant and, from September 1971 through December 1978, was employed
by Coopers & Lybrand, Certified Public Accountants, where he held the position
of tax manager beginning in 1975. From January 1979 until June 1982, Mr. Bourne
was a partner in the accounting firm of Cross & Bourne and from July 1982
through January 1987, he was a partner in the accounting firm of Bourne & Rose,
P.A., Certified Public Accountants. Mr. Bourne, who joined CNL Securities Corp.
in 1979, has participated as a general partner or joint venturer in over 100
real estate ventures involved in the financing, acquisition, construction and
rental of office buildings, apartment complexes, restaurants, hotels and other
real estate. Included in these real estate ventures are approximately 64
privately offered real estate limited partnerships in which Mr. Bourne, directly
or through an affiliated entity, serves or has served as a general partner. Also
included are the CNL Income Fund Partnerships, public real estate limited
partnerships with investment objectives similar to those of the Partnership, in
which Mr. Bourne serves as a general partner.
CNL REALTY CORPORATION is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.
CNL FUND ADVISORS, INC., provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 400 East South Street, Suite 500, Orlando,
Florida 32801. CNL Fund Advisors, Inc. is a wholly owned subsidiary of CNL
Group, Inc., a diversified real estate company, and was organized to perform
property acquisition, property management and other services.
CNL GROUP, INC., which is the parent company of CNL Fund Advisors,
Inc., is a diversified real estate corporation organized in 1980 under the laws
of the State of Florida. Other subsidiaries and affiliates of CNL Group, Inc.
include a property development and management company, two investment advisory
companies, and seven corporations organized as strategic business units. James
M. Seneff, Jr., an individual General Partner of the Partnership, is the
Chairman of the Board, Chief Executive Officer, and a director of CNL Group,
Inc. Mr. Seneff and his wife own all of the outstanding shares of CNL Group,
Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as members
of the Boards of Directors of those entities. The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.
JOHN T. WALKER, age 38, joined CNL Group, Inc. in September 1994, as
Senior Vice President, responsible for Research and Development. He currently
serves as the Chief Operating Officer and Executive Vice President of CNL Fund
Advisors, Inc. and CNL American Properties Fund, Inc. and serves as Executive
Vice President of CNL American Realty Fund, Inc. and CNL Real Estate Advisors,
Inc. From May 1992 to May 1994, he was Executive Vice President for Finance and
Administration and Chief Financial Officer of Z Music, Inc., a cable television
network which was subsequently acquired by Gaylord Entertainment, where he was
responsible for overall financial and administrative management and planning.
From January 1990 through April 1992, Mr. Walker was Chief Financial Officer of
the First Baptist Church in Orlando, Florida. From April 1984 through December
1989, he was a partner in the accounting firm of Chastang, Ferrell & Walker,
P.A., where he was the partner in charge of audit and consulting services, and
from 1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior at Price
Waterhouse. Mr. Walker is a Cum Laude graduate of Wake Forest University with a
B.S. in Accountancy and is a certified public accountant.
LYNN E. ROSE, age 48, a certified public accountant, has served as
Chief Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She
has served as Chief Operating Officer, Vice President and Secretary of CNL
Corporate Services, Inc. since November 1994. Ms. Rose also has served as Chief
Financial Officer and Secretary of CNL Institutional Advisors,
33
<PAGE>
Inc. since its inception in 1990, a director of CNL Realty Advisors, Inc. since
its inception in 1991, Secretary of CNL Realty Advisors, Inc. since its
inception in 1991 (excluding February 1996 to July 1996), Treasurer of CNL
Realty Advisors, Inc. from 1991 to February 1996, Secretary and Treasurer of
Commercial Net Lease Realty, Inc. from 1992 to February 1996, Secretary of CNL
Income Fund Advisors, Inc. since its inception in 1994 to December 1995, and a
director, Secretary and Treasurer of CNL Fund Advisors, Inc. since 1994 and has
served as a director, Secretary and Treasurer of CNL Real Estate Advisors, Inc.
since January 1997. Ms. Rose also has served as Secretary and Treasurer of CNL
American Properties Fund, Inc. since 1994, and has served as Secretary and
Treasurer of CNL American Realty Fund, Inc. since 1996. Ms. Rose also currently
serves as Secretary for approximately 50 additional corporations. Ms. Rose
oversees the management information services, administration, legal compliance,
accounting, tenant compliance, and reporting for over 250 corporations,
partnerships, and joint ventures. Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Ms. Rose holds a B.A. in Sociology from the University of
Central Florida and is a registered financial and operations principal of CNL
Securities Corp. She was licensed as a certified public accountant in 1979.
JEANNE A. WALL, age 38, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and
previously served as Executive Vice President of CNL Investment Company since
January 1991. In 1984, Ms. Wall joined CNL Securities Corp. as its Partnership
Administrator. In 1985, Ms. Wall became Vice President of CNL Securities Corp.
and, in 1987, she became a Senior Vice President of CNL Securities Corp. In
this capacity, Ms. Wall serves as national marketing and sales director and
oversees the national marketing plan for the CNL investment programs. In
addition, Ms. Wall oversees the partnership administration and investor services
for programs offered through participating brokers. Ms. Wall also has served as
Senior Vice President of CNL Institutional Advisors, Inc., a registered
investment advisor, from 1990 to 1993, as Vice President of CNL Realty Advisors,
Inc. since its inception in 1991, as Vice President of Commercial Net Lease
Realty, Inc. since 1992, as Executive Vice President of CNL Income Fund
Advisors, Inc. from its inception in 1994 to December 1995, as Executive Vice
President of CNL Fund Advisors, Inc. since 1994, and as Executive Vice President
of CNL American Properties Fund, Inc. since 1994. In addition, Ms. Wall has
served as Executive Vice President of CNL Real Estate Advisors, Inc. since
January 1997 and as Executive Vice President of CNL American Realty Fund, Inc.
since 1996. Ms. Wall holds a B.A. in Business Administration from Linfield
College and is a registered principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program Association
and on the Direct Participation Program committee for the National Association
of Securities Dealers (NASD).
STEVEN D. SHACKELFORD, age 33, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996. Mr. Shackelford joined CNL Group,
Inc. in September 1996. He also currently serves as the Chief Financial Officer
of CNL American Properties Fund, Inc. From March 1995 to July 1996, he was a
senior manager in the national office of Price Waterhouse where he was
responsible for advising foreign clients seeking to raise capital and a public
listing in the United States. From August 1992 to March 1995, he served as a
manager in the Price Waterhouse, Paris, France office serving several
multinational clients. Mr. Shackelford was an audit staff and senior from 1986
to 1992 in the Orlando, Florida office of Price Waterhouse. Mr Shackelford
received a B.A. in Accounting, with honors, and a Masters of Business
Administration from Florida State University and is a certified public
accountant.
ITEM 11. EXECUTIVE COMPENSATION
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 28, 1997, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of February 28, 1997, the beneficial
ownership interests of the General Partners in the Registrant.
34
<PAGE>
Title of Class Name of Partner Percent of Class
-------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
---
100%
====
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. There are no arrangements
which at a subsequent date may result in a change in control of the Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 1996, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
- ----------------------------- ------------------------------ --------------------------
<S> <C>
Reimbursement to affiliates Operating expenses are Operating expenses incurred
for operating expenses reimbursed at the lower of on behalf of the
cost or 90 percent of the Partnership: $97,819
prevailing rate at which
comparable services could have Accounting and administra-
been obtained in the same tive services: $91,272
geographic area. Affiliates
of the General Partners from
time to time incur certain
operating expenses on behalf
of the Partnership for which
the Partnership reimburses the
affiliates without interest.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
- ----------------------------- ------------------------------ --------------------------
<S> <C>
Annual management fee to One percent of the sum of $35,675
affiliates gross operating revenues from
Properties wholly owned by the
Partnership plus the
Partnership's allocable share
of gross revenues of joint
ventures in which the
Partnership is a co-venturer
and the Property owned with an
affiliate as tenants-in-
common. The management fee,
which will not exceed
competitive fees for
comparable services in the
same geographic area, may or
may not be taken, in whole or
in part as to any year, in the
sole discretion of affiliates
of the General Partners. All
or any portion of the
management fee not taken as to
any fiscal year shall be
deferred without interest and
may be taken in such other
fiscal year as affiliates
shall determine.
Deferred, subordinated real A deferred, subordinated real $ - 0 -
estate disposition fee payable estate disposition fee,
to affiliates payable upon sale of one or
more Properties, in an amount
equal to the lesser of (i)
one-half of a competitive real
estate commission, or (ii)
three percent of the sales
price of such Property or
Properties. Payment of such
fee shall be made only if
affiliates of the General
Partners provide a substantial
amount of services in
connection with the sale of a
Property or Properties and
shall be subordinated to
certain minimum returns to the
Limited Partners. However, if
the net sales proceeds are
reinvested in a replacement
property, no such real estate
disposition fee will be
incurred until such
replacement property is sold
and the net sales proceeds are
distributed.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
- ----------------------------- ------------------------------ --------------------------
<S> <C>
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of equal to one percent of
Partnership net cash flow Partnership distributions of
net cash flow, subordinated to
certain minimum returns to the
Limited Partners.
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of equal to five percent of
Partnership net sales proceeds Partnership distributions of
from a sale or sales such net sales proceeds,
subordinated to certain
minimum returns to the Limited
Partners.
</TABLE>
38
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Accountants
Balance Sheets at December 31, 1996 and 1995
Statements of Income for the years ended December 31, 1996,
1995 and 1994
Statements of Partners' Capital for the years ended December
31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for
the years ended December 31, 1996, 1995 and
1994
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1996
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1996
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 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XIII, Ltd. (Included as Exhibit 3.1
to Registration Statement No. 33-53672 on Form S-11
and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XIII, Ltd. (Included as Exhibit 3.1
to Registration Statement No. 33-53672 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XIII, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and
Exchange Commission on March 31, 1994, and
incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XIII,
Ltd. and CNL Investment Company (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on March 31, 1994, and
incorporated herein by reference.)
10.2 Assignment of Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with the
Securities and Exchange Commission on March 30, 1995,
and incorporated herein by reference.)
38
<PAGE>
10.3 Real Estate Sale and Lease Contract, dated May 18,
1993, between CNL Income Fund XIII, Ltd. and Golden
Corral Corporation. (Included as Exhibit 10.12 to
Registration Statement No. 33-53672 on Form S-11 and
previously incorporated by reference, but no longer
incorporated by reference.)
10.4 Real Estate Sale and Lease Contract, dated June 1,
1993, between CNL Income Fund XIII, Ltd. and Golden
Corral Corporation. (Included as Exhibit 10.13 to
Registration Statement No. 33-53672 on Form S-11 and
previously incorporated herein by reference, but no
longer incorporated by reference.)
10.5 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.5 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1996 through December 31, 1996.
39
<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 25th day of
March, 1997.
CNL INCOME FUND XIII, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
-------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, JR.
--------------------------
JAMES M. SENEFF, JR.
<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.
Signature Title Date
- ------------------ ----------------- ---------
/s/ Robert A. Bourne President, Treasurer and Director March 25, 1997
- ------------------------- (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 25, 1997
- ------------------------- (Principal Executive Officer)
James M. Seneff, Jr.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Additions
-------------------------
Balance at Charged to Charged To Balance
Beginning Costs and Other at End
Year Description of Year Expenses Accounts Deductions of Year
- ---- ----------- ---------- ---------- ---------- ---------- --------
<S> <C>
1994 Allowance for
doubtful
accounts (a) $ - $ - $ 4,56 (b) $ - $ 4,565
======= ======= ======= ======= ========
1995 Allowance for
doubtful
accounts (a) $ 4,565 $ - $45,182 (b) $ - $ 49,747
======= ======= ======= ======= ========
1996 Allowance for
doubtful
accounts (a) $49,747 $ - $173,721 (b) $ - $223,468
======= ======= ======== ======= ========
</TABLE>
(a) Deducted from receivables and accrued rental income on the
balance sheet.
(b) Reduction of rental and other income.
F-1
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------- -----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- -------- ------------ -------- --------
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Cincinnati, Ohio - $ 256,901 $ 669,537 $ - $ -
Dayton, Ohio - 211,835 771,616 - -
Lafayette, Indiana - 247,183 723,304 - -
Pineville, Louisiana - 174,843 618,815 - -
Checkers Drive-In Restaurants:
Houston, Texas - 445,389 - - -
Port Richey, Florida - 380,055 - - -
Pensacola, Florida - 280,409 - - -
Orlando, Florida - 424,323 - - -
Boca Raton, Florida - 501,416 - - -
Venice, Florida - 374,675 - - -
Woodstock, Georgia - 386,638 - - -
Lakeland, Florida - 326,175 - - -
Denny's Restaurants:
Orlando, Florida - 432,587 - - -
Peoria, Arizona - 460,107 - - -
Mesa, Arizona - 530,494 - 540,983 -
Golden Corral Family
Steakhouse Restaurants:
Dallas, Texas - 611,589 1,071,838 - -
San Antonio, Texas - 625,527 964,122 - -
Panama City, Florida - 617,016 - 1,103,437 -
Hardee's Restaurants:
Ashland, Alabama - 197,336 417,418 - -
Bloomingdale, Tennessee - 160,149 424,977 - -
Blytheville, Arkansas - 164,004 - - -
Chapin, South Carolina - 218,639 460,364 - -
Kingsport, Tennessee - 204,516 - - -
Opelika, Alabama - 240,363 412,621 - -
Spartanburg, South Carolina - 226,815 431,574 - -
Jack in the Box Restaurants:
Sacramento, California - 323,929 601,054 - -
Houston, Texas - 315,842 590,708 - -
Houston, Texas - 368,409 567,115 - -
Arlington, Texas - 404,752 592,173 - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
------------------------------ in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Cincinnati, Ohio $ 256,901 $ 669,537 $ 926,438 $ 76,431 1988 07/93 (b)
Dayton, Ohio 211,835 771,616 983,451 88,084 1988 07/93 (b)
Lafayette, Indiana 247,183 723,304 970,487 82,569 1989 07/93 (b)
Pineville, Louisiana 174,843 618,815 793,658 70,641 1990 07/93 (b)
Checkers Drive-In Restaurants:
Houston, Texas 445,389 - 445,389 (g) - 03/94 (g)
Port Richey, Florida 380,055 - 380,055 (g) - 03/94 (g)
Pensacola, Florida 280,409 - 280,409 (g) - 03/94 (g)
Orlando, Florida 424,323 - 424,323 (g) - 03/94 (g)
Boca Raton, Florida 501,416 - 501,416 (g) - 03/94 (g)
Venice, Florida 374,675 - 374,675 (g) - 03/94 (g)
Woodstock, Georgia 386,638 - 386,638 (g) - 10/94 (g)
Lakeland, Florida 326,175 - 326,175 (g) - 04/95 (g)
Denny's Restaurants:
Orlando, Florida 432,587 (f) 432,587 - 1993 10/93 (d)
Peoria, Arizona 460,107 (f) 460,107 - 1994 10/93 (d)
Mesa, Arizona 530,494 540,983 1,071,477 47,602 1994 12/93 (b)
Golden Corral Family
Steakhouse Restaurants:
Dallas, Texas 611,589 1,071,838 1,683,427 129,502 1991 05/93 (b)
San Antonio, Texas 625,527 964,122 1,589,649 115,254 1993 06/93 (b)
Panama City, Florida 617,016 1,103,437 1,720,453 102,860 1994 11/93 (b)
Hardee's Restaurants:
Ashland, Alabama 197,336 417,418 614,754 47,651 1992 07/93 (b)
Bloomingdale, Tennessee 160,149 424,977 585,126 48,513 1992 07/93 (b)
Blytheville, Arkansas 164,004 (f) 164,004 - 1991 07/93 (d)
Chapin, South Carolina 218,639 460,364 679,003 52,553 1993 07/93 (b)
Kingsport, Tennessee 204,516 (f) 204,516 - 1992 07/93 (d)
Opelika, Alabama 240,363 412,621 652,984 47,103 1992 07/93 (b)
Spartanburg, South Carolina 226,815 431,574 658,389 49,266 1993 07/93 (b)
Jack in the Box Restaurants:
Sacramento, California 323,929 601,054 924,983 70,260 1992 06/93 (b)
Houston, Texas 315,842 590,708 906,550 67,486 1993 07/93 (b)
Houston, Texas 368,409 567,115 935,524 64,895 1992 07/93 (b)
Arlington, Texas 404,752 592,173 996,925 67,600 1993 08/93 (b)
</TABLE>
F-2
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
----------------------- ----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- -------- ------------ -------- --------
<S> <C>
Long John Silver's Restaurants:
Penn Hills, Pennsylvania - 292,370 - - -
Philadelphia, Pennsylvania - 274,580 - - -
Arlington, Texas - 362,939 - - -
Johnstown, Pennsylvania - 254,412 - - -
Orlando, Florida - 299,696 139,676 - -
Tampa, Florida - 372,748 - - -
Austin, Texas - 463,937 - - -
Overland Park, Kansas - 452,691 - - -
Wendy's Old Fashioned Hamburger
Restaurant:
Salisbury, Maryland - 290,195 641,709 - -
----------- ----------- ---------- -------
$13,175,484 $10,098,621 $1,644,420 $ -
=========== =========== ========== =======
Property of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under an Operating Lease:
Hardee's Restaurant:
Attalla, Alabama - $ 196,274 $ 434,428 $ - $ -
=========== =========== ========== =======
Property in Which the Partnership
has a 66.13% Interest as Tenants-
in-Common and has Invested in
Under an Operating Lease:
Kenny Rogers Roasters Restaurant:
Arvada, Colorado - $ 260,439 $ 545,126 $ - $ -
=========== =========== ========== =======
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under Operating Lease:
Denny's Restaurant:
Salem, Ohio - $ 131,762 $ - $ - $ -
=========== =========== ========== =======
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Denny's Restaurant:
Orlando, Florida - $ - $ - $ 564,030 $ -
Peoria, Arizona - - - 613,090 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried Life
at Close of Period (c) on Which
------------------------------------------- Depreciation
in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
Long John Silver's Restaurants:
Penn Hills, Pennsylvania 292,370 (f) 292,370 - 1993 07/93 (d)
Philadelphia, Pennsylvania 274,580 (f) 274,580 - 1993 07/93 (d)
Arlington, Texas 362,939 (f) 362,939 - 1993 08/93 (d)
Johnstown, Pennsylvania 254,412 (f) 254,412 - 1993 08/93 (d)
Orlando, Florida 299,696 139,676 439,372 14,631 1983 11/93 (b)
Tampa, Florida 372,748 (f) 372,748 - 1994 12/93 (d)
Austin, Texas 463,937 (f) 463,937 - 1993 12/93 (d)
Overland Park, Kansas 452,691 (f) 452,691 - 1993 12/93 (d)
Wendy's Old Fashioned Hamburger
Restaurant:
Salisbury, Maryland 290,195 641,709 931,904 62,985 1993 01/94 (b)
---------- ----------- ----------- ----------
$13,175,484 $11,743,041 $24,918,525 $1,305,886
========== =========== =========== ==========
Property of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under an Operating Lease:
Hardee's Restaurant:
Attalla, Alabama $ 196,274 $ 434,428 $ 630,702 $ 44,156 1993 11/93 (b)
========== =========== =========== ==========
Property in Which the Partnership
has a 66.13% Interest as Tenants-
in-Common and has Invested in
Under an Operating Lease:
Kenny Rogers Roasters Restaurant:
Arvada, Colorado $ 260,439 $ 545,126 $ 805,565 $ 41,370 1994 09/94 (b)
========== =========== =========== ==========
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under Operating Lease:
Denny's Restaurant:
Salem, Ohio $ 131,762 (f) $ 131,762 - 1991 03/95 (d)
========== ===========
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Denny's Restaurant:
Orlando, Florida $ - (f) (f) (d) 1993 10/93 (d)
Peoria, Arizona - (f) (f) (d) 1994 10/93 (d)
</TABLE>
F-3
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
-------------------------- ----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ------- ------------ -------- --------
<S> <C>
Hardee's Restaurants:
Blytheville, Arkansas - - 450,014 - -
Huntingdon, Tennessee - 100,836 427,932 - -
Kingsport, Tennessee - - 484,785 - -
Parsons, Tennessee - 101,332 409,671 - -
Trenton, Tennessee - 147,232 442,640 - -
Jack in the Box Restaurant:
Cleburne, Texas - 145,890 496,797 - -
Long John Silver's Restaurants:
Penn Hills, Pennsylvania - - - 387,086 -
Philadelphia, Pennsylvania - - - 533,155 -
Arlington, Texas - - 449,369 - -
Johnstown, Pennsylvania - - - 427,552 -
Austin, Texas - - 517,109 - -
Overland Park, Kansas - - 654,133 - -
Tampa, Florida - - - 374,344 -
Quincy's Restaurant:
Mount Airy, North Carolina - 212,852 827,991 - -
----------- ----------- ---------- -------
$ 708,142 $ 5,160,441 $2,899,257 $ -
=========== =========== ========== =======
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under Direct Financing Lease:
Denny's Restaurant:
Salem, Ohio - $ - $ 371,836 $ - $ -
=========== =========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
-------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ------------
<S> <C>
Hardee's Restaurants:
Blytheville, Arkansas - (f) (f) (d) 1991 07/93 (d)
Huntingdon, Tennessee (f) (f) (f) (e) 1992 07/93 (e)
Kingsport, Tennessee - (f) (f) (d) 1992 07/93 (d)
Parsons, Tennessee (f) (f) (f) (e) 1992 07/93 (e)
Trenton, Tennessee (f) (f) (f) (e) 1992 07/93 (e)
Jack in the Box Restaurant:
Cleburne, Texas (f) (f) (f) (e) 1988 11/93 (e)
Long John Silver's Restaurants:
Penn Hills, Pennsylvania - (f) (f) (d) 1993 07/93 (d)
Philadelphia, Pennsylvania - (f) (f) (d) 1993 07/93 (d)
Arlington, Texas - (f) (f) (d) 1993 08/93 (d)
Johnstown, Pennsylvania - (f) (f) (d) 1993 08/93 (d)
Austin, Texas - (f) (f) (d) 1993 12/93 (d)
Overland Park, Kansas - (f) (f) (d) 1993 12/93 (d)
Tampa, Florida - (f) (f) (d) 1994 12/93 (d)
Quincy's Restaurant:
Mount Airy, North Carolina (f) (f) (f) (e) 1992 07/93 (e)
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under Direct Financing Lease:
Denny's Restaurant:
Salem, Ohio - (f) (f) (d) 1991 03/95 (d)
</TABLE>
F-4
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(a) Transactions in real estate and accumulated depreciation during 1996,
1995 and 1994 are summarized as follows:
Accumulated
Cost Depreciation
----------- ------------
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1993 $20,165,446 $ 146,748
Acquisitions 5,182,985 -
Depreciation expense - 376,269
----------- ----------
Balance, December 31, 1994 25,348,431 523,017
Acquisitions 324,282 -
Dispositions (309,584) -
Depreciation expense - 391,435
----------- ----------
Balance, December 31, 1995 25,363,129 914,452
Disposition (444,604) -
Depreciation expense - 391,434
----------- ----------
Balance, December 31, 1996 $24,918,525 $1,305,886
=========== ==========
Property of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1993 $ 630,317 $ 714
Acquisitions 385 -
Depreciation expense - 14,481
----------- ----------
Balance, December 31, 1994 630,702 15,195
Depreciation expense - 14,480
----------- ----------
Balance, December 31, 1995 630,702 29,675
Depreciation expense - 14,481
----------- ----------
Balance, December 31, 1996 $ 630,702 $ 44,156
=========== ==========
Property in Which the Partnership
has a 66.13% Interest as Tenants-
in-Common and has Invested in
Under an Operating Lease:
Balance, December 31, 1993 $ - $ -
Acquisitions 805,565 -
Depreciation expense - 5,028
----------- ----------
Balance, December 31, 1994 805,565 5,028
Depreciation expense - 18,171
----------- ----------
Balance, December 31, 1995 805,565 23,199
Depreciation expense - 18,171
----------- ----------
Balance, December 31, 1996 $ 805,565 $ 41,370
=========== ==========
F-5
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1996
Accumulated
Cost Depreciation
----------- ------------
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1994 $ - $ -
Acquisition 131,762 -
Depreciation expense (d) - -
----------- ---------
Balance, December 31, 1995 131,762 -
Depreciation expense (d) - -
----------- ---------
Balance, December 31, 1996 $ 131,762 $ -
=========== =========
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1996, the aggregate cost of the Properties owned
by the Partnership and joint ventures (including the Property owned
as tenants-in-common) for federal income tax purposes was $33,709,537
and $1,871,679, respectively. All of the leases are treated as
operating leases for federal income tax purposes.
(d) For financial reporting purposes, the portion of the lease relating
to the building has been recorded as a direct financing lease. The
cost of the building has been included in net investment in direct
financing leases; therefore, depreciation is not applicable.
(e) For financial reporting purposes, the lease for the land and building
has been recorded as a direct financing lease. The cost of the land
and building has been included in the net investment in direct
financing leases; therefore, depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease
relating to land and building have been recorded as a direct
financing lease. Accordingly, costs relating to these components of
this lease are not shown.
(g) The building portion of this property is owned by the tenant;
therefore, depreciation is not applicable.
F-6
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number Page
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XIII, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-53672 on Form S-11 and incorporated herein by
reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XIII, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-53672 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XIII, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on March 31,
1994, and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XIII, Ltd. and
CNL Investment Company (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 31,
1994, and incorporated herein by reference.)
10.2 Assignment of Management Agreement from CNL Investment Company
to CNL Income Fund Advisors, Inc. (Included as Exhibit 10.2 to
Form 10-K filed with the Securities and Exchange Commission on
March 30, 1995, and incorporated herein by reference.)
10.3 Real Estate Sale and Lease Contract, dated May 18, 1993,
between CNL Income Fund XIII, Ltd. and Golden Corral
Corporation. (Included as Exhibit 10.12 to Registration
Statement No. 33-53672 on Form S-11 and previously
incorporated by reference, but no longer incorporated by
reference.)
10.4 Real Estate Sale and Lease Contract, dated June 1, 1993,
between CNL Income Fund XIII, Ltd. and Golden Corral
Corporation. (Included as Exhibit 10.13 to Registration
Statement No. 33-53672 on Form S-11 and previously
incorporated herein by reference, but no longer incorporated
by reference.)
10.5 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
10.5 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
i
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet of CNL Income Fund XIII, Ltd. at December 31, 1996, and
its statement of income for the year then ended and is qualified in its
entirety by reference to the Form 10K of CNL Income Fund XIII, Ltd. for the
year ended December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,654,338
<SECURITIES> 0
<RECEIVABLES> 251,689
<ALLOWANCES> 150,734
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,918,525
<DEPRECIATION> 1,305,886
<TOTAL-ASSETS> 35,945,070
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,017,937
<TOTAL-LIABILITY-AND-EQUITY> 35,945,070
<SALES> 0
<TOTAL-REVENUES> 3,735,100
<CGS> 0
<TOTAL-COSTS> 646,794
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,231,815
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,231,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,231,815
<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>
