FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
-----------------------
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 juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
400 E. South Street, #500
Orlando, Florida 32801
- ------------------------- -----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
----------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
------- ----------
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-6
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 7-10
Part II
Other Information 11
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
ASSETS 1997 1996
----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $1,501,604
and $1,305,886 and allowance for
loss on land of $18,203 in 1997 $23,398,718 $23,612,639
Net investment in direct financing
leases, less allowance on impairment
of $22,999 in 1997 8,477,163 8,543,916
Investment in joint ventures 1,524,822 976,531
Cash and cash equivalents 871,975 1,103,568
Restricted cash - 550,770
Receivables, less allowance for
doubtful accounts of $149,457
and $150,734 274,777 100,955
Prepaid expenses 14,336 9,143
Organization costs, less accumu-
lated amortization of $8,422
and $7,422 1,578 2,578
Accrued rental income, less allow-
ance for doubtful accounts
of $75,716 and $72,734 1,234,395 1,044,970
----------- -----------
$35,797,764 $35,945,070
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 6,686 $ 6,340
Accrued and escrowed real estate
taxes payable 14,092 14,092
Distributions payable 850,002 850,002
Due to related parties 3,152 2,594
Rents paid in advance 87,759 54,105
----------- -----------
Total liabilities 961,691 927,133
Commitment (Note 5)
Partners' capital 34,836,073 35,017,937
----------- -----------
$35,797,764 $35,945,070
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C>
Revenues:
Rental income from
operating leases $ 597,361 $ 632,153 $1,209,976 $1,213,169
Earned income from direct
financing leases 238,505 221,745 477,650 442,106
Contingent rental income 58,019 71,044 105,786 114,578
Interest and other income 7,369 9,142 21,285 22,368
---------- ---------- ---------- ----------
901,254 934,084 1,814,697 1,792,221
---------- ---------- ---------- ----------
Expenses:
General operating and
administrative 38,796 43,843 81,023 84,264
Professional services 4,874 4,939 12,013 10,756
Bad debt expense - 35,445 - 35,445
Management fees to
related parties 8,621 8,841 17,256 17,380
Real estate taxes - 8,556 - 8,556
State and other taxes 5,261 5,085 18,301 16,793
Depreciation and
amortization 98,906 98,358 197,265 196,717
---------- ---------- ---------- ----------
156,458 205,067 325,858 369,911
---------- ---------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures and Provision
for Loss on Land and
Net Investment in Direct Financing Lease 744,796 729,017 1,488,839 1,422,310
Equity in Earnings of
Joint Ventures 39,489 26,138 70,503 52,525
Provision for Loss on
Land and Net Investment in Direct
Financing Lease (41,202) - (41,202) -
---------- --------- ---------- ---------
Net Income $ 743,083 $ 755,155 $1,518,140 $1,474,835
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 7,715 $ 7,552 $ 15,466 $ 14,748
Limited partners 735,368 747,603 1,502,674 1,460,087
---------- ---------- ---------- ----------
$ 743,083 $ 755,155 $1,518,140 $1,474,835
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.18 $ 0.19 $ 0.38 $ 0.37
========== ========== ========== ==========
Weighted Average Number
of Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000 4,000,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
1997 1996
---------------- ------------
General partners:
Beginning balance $ 106,517 $ 75,027
Net income 15,466 31,490
----------- -----------
121,983 106,517
----------- -----------
Limited partners:
Beginning balance 34,911,420 35,111,103
Net income 1,502,674 3,200,325
Distributions ($0.43 and $0.85
per limited partner unit,
respectively) (1,700,004) (3,400,008)
----------- -----------
34,714,090 34,911,420
----------- -----------
Total partners' capital $34,836,073 $35,017,937
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1997 1996
----------- ----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,659,408 $ 1,647,653
----------- -----------
Cash Flows from Investing
Activities:
Investment in joint ventures (550,000) -
Decrease in restricted cash 550,000 -
Loan to tenant (190,997) -
----------- ----------
Net cash used in
investing activities (190,997) -
----------- ----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (1,700,004) (1,700,004)
----------- -----------
Net cash used in
financing activities (1,700,004) (1,700,004)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (231,593) (52,351)
Cash and Cash Equivalents at Beginning
of Period 1,103,568 1,135,995
----------- -----------
Cash and Cash Equivalents at End of
Period $ 871,975 $ 1,083,644
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of period $ 850,002 $ 850,002
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1997 and 1996
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and six months ended June 30, 1997, may not be indicative
of the results that may be expected for the year ending December 31,
1997. Amounts as of December 31, 1996, included in the financial
statements, have been derived from audited financial statements as of
that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XIII, Ltd. (the "Partnership") for the year ended December
31, 1996.
2. Land and Buildings on Operating Leases:
During the six months ended June 30, 1997, the Partnership established
an allowance for loss on land in the amount of $18,203 for its property
in Orlando, Florida. The allowance represents the difference between
the (i) property's carrying value for the land at June 30, 1997, and
(ii) the general partners' estimate of the net realizable value of the
land based on the anticipated sales price agreed upon by the general
partners relating to this property.
3. Net Investment in Direct Financing Leases:
During the six months ended June 30, 1997, the Partnership established
an allowance on impairment in the amount of $22,999 for its property in
Orlando, Florida. The allowance represents the difference between the
(i) carrying value of the net investment in the direct financing lease
at June 30, 1997, and (ii) the general partners' estimate of the net
realizable value of the net investment in the direct financing lease
based on the anticipated sales price agreed upon by the general
partners relating to this amount.
4. Investment in Joint Ventures:
In January 1997, the Partnership acquired an approximate 63 percent
interest in a Burger King property in Akron, Ohio, as tenants-in-common
with an affiliate of the general partners. The Partnership accounts for
its investment in this property using the equity method since the
Partnership shares control with an affiliate, and amounts relating to
its investment are included in investment in joint ventures.
5
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1997 and 1996
4. Investment in Joint Ventures - Continued:
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures at:
June 30, December 31,
1997 1996
Land and buildings on -------- ------------
operating leases, less
accumulated depreciation $2,331,432 $1,482,503
Net investment in direct
financing leases 366,129 367,661
Cash 24,673 21,173
Receivables 771 6,412
Prepaid expenses 270 255
Accrued rental income 78,811 51,745
Liabilities 26,334 28,121
Partners' capital 2,775,752 1,901,628
Revenues 171,755 216,960
Net income 135,995 145,851
The Partnership recognized income totalling $70,503 and $52,525 for the
six months ended June 30, 1997 and 1996, respectively, from these joint
ventures, $39,489 and $26,138 of which was earned during the quarters
ended June 30, 1997 and 1996, respectively.
5. Commitment:
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 sale of the property had not occurred as of June 30, 1997.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XIII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on September 25, 1992, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurants, as well as properties upon which restaurants were to
be constructed (the "Properties"), which are leased primarily to operators of
national and regional fast-food and family-style restaurant chains. The leases
are triple-net leases, with the lessees generally responsible for all repairs
and maintenance, property taxes, insurance and utilities. As of June 30, 1997,
the Partnership owned 47 Properties, including two Properties owned by joint
ventures in which the Partnership is a co-venturer and two Properties owned with
affiliates as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the six months ended
June 30, 1997 and 1996, was cash from operations (which includes cash received
from tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). Cash from operations was $1,659,408 and
$1,647,653 for the six months ended June 30, 1997 and 1996, respectively. The
increase in cash from operations for the six months ended June 30, 1997, as
compared to the six months ended June 30, 1996, 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.
In January 1997, the Partnership reinvested the net sales proceeds it
received from the sale, in November 1996, 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. In connection therewith, the Partnership
and the affiliate entered into an agreement whereby each co-venturer will share
in the profits and losses of the Property in proportion to its applicable
percentage interest. As of June 30, 1997, the Partnership owned an approximate
63 percent interest in this Property.
In February 1997, the Partnership entered into a sales contract with a
third party to sell the Denny's Property in Orlando, Florida. In connection
therewith, the Partnership had agreed to advancement amounts which will be
reimbursed upon the sale of the Property. The sale of the Property had not
occurred as of July 31, 1997. The Partnership intends to reinvest the net sales
proceeds in a replacement Property or use the funds for other Partnership
purposes.
Currently, cash reserves and rental income from the Partnership's
Properties are invested in money market accounts or other short-term, highly
liquid investments pending the Partnership's use of such funds to pay
Partnership expenses or to make distributions to partners. At June 30, 1997, the
Partnership had $871,975 invested in such short-term investments, as compared to
$1,103,568 at December 31, 1996. The decrease in cash and cash equivalents
during the six months ended June 30, 1997, is primarily the result of the
Partnership advancing approximately $191,000 for the anticipated sale of the
Denny's Property in Orlando, Florida, as discussed above. The funds remaining at
June 30, 1997, after the payment of distributions and other liabilities, will be
used to meet the Partnership's working capital and other needs.
7
<PAGE>
Liquidity and Capital Resources - Continued
Total liabilities of the Partnership, including distributions payable,
increased to $961,691 at June 30, 1997, from $927,133 at December 31, 1996,
primarily as a result of an increase in rents paid in advance during the six
months ended June 30, 1997. Liabilities at June 30, 1997, to the extent they
exceed cash and cash equivalents at June 30, 1997, will be paid from future cash
from operations.
Based on current and future anticipated cash from operations, the
Partnership declared distributions to the limited partners of $1,700,004 for
each of the six months ended June 30, 1997 and 1996 ($850,002 for each of the
quarters ended June 30, 1997 and 1996). This represents distributions of $0.43
per unit for each applicable six months ($0.21 per unit for each applicable
quarter). No distributions were made to the general partners for the quarters
and six months ended June 30, 1997 and 1996. No amounts distributed or to be
distributed to the limited partners for the six months ended June 30, 1997 and
1996, are required to be or have been treated by the Partnership as a return of
capital for purposes of calculating the limited partners' return on their
adjusted capital contribution. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who meet specified
financial standards minimizes the Partnership's operating expenses. The general
partners believe that the leases will continue to generate cash flow in excess
of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
During the six months ended June 30, 1996, the Partnership owned and
leased 44 wholly owned Properties (including one Property in Richmond, Virginia,
which was sold in November 1996) and during the six months ended June 30, 1997,
the Partnership owned and leased 43 wholly owned Properties to operators of
fast-food and family-style restaurant chains. In connection therewith, during
the six months ended June 30, 1997 and 1996, the Partnership earned $1,687,626
and $1,655,275, respectively, in rental income from operating leases and earned
income from direct financing leases for these Properties, $835,866 and $853,898
of which was earned
8
<PAGE>
Results of Operations - Continued
during the quarters ended June 30, 1997 and 1996, respectively. The decrease in
rental and earned income during the quarter ended June 30, 1997, was partially
offset by, and the increase in rental and earned income during the six months
ended June 30, 1997, is primarily attributable to the fact that the Partnership
did not establish an allowance for doubtful accounts for past due rental amounts
relating to the Property in Orlando, Florida, during the quarter and six months
ended June 30, 1997. The Partnership established an allowance for doubtful
accounts of approximately $25,900 and $54,300 during the quarter and six months
ended June 30, 1996, respectively for past due rental amounts relating to the
Denny's Property in Orlando, Florida in accordance with its collection policy.
The Partnership also established an allowance for doubtful accounts of
approximately $5,600 and $61,600 during the quarter and six months ended June
30, 1996, respectively, 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). In addition, the decrease during the quarter
ended June 30, 1997, as compared to the quarter ended June 30, 1996, was
partially attributable to and the increase during the six months ended June 30,
1997, as compared to the six months ended June 30, 1996, is partially offset by
a decrease of approximately $34,000 and $50,000, during the quarter and six
months ended June 30, 1997, respectively, as a result of the fact that in
February 1997, the Partnership discontinued billing the former tenant of the
Property in Orlando, Florida, in connection with the sales contract entered into
by the Partnership and an unrelated third party, in February 1997, as discussed
above in "Liquidity and Capital Resources." 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.
The decrease in rental and earned income for the quarter ended June 30,
1997, as compared to the quarter ended June 30, 1996, is primarily attributable
to and the increase in rental and earned income during the six months ended June
30, 1997, as compared to the six months ended June 30, 1996, is partially offset
by a decrease of approximately $12,900 and $25,900, respectively, due to the
fact that the Partnership sold its Property in Richmond, Virginia, in November
1996. The Partnership reinvested the net sales proceeds as discussed above in
"Liquidity and Capital Resources".
During the six months ended June 30, 1997 and 1996, the Partnership
also earned $105,786 and $114,578, respectively, in contingent rental income,
$58,019 and $71,044 of which was earned during the quarters ended June 30, 1997
and 1996, respectively. The decrease in contingent rental income during the
quarter and six months ended June 30, 1997, is primarily attributable to
decreases in gross sales relating to certain restaurant Properties required to
pay contingent rent.
For the six months ended June 30, 1997 and 1996, the Partnership owned
and leased two Properties indirectly through joint venture arrangements and one
Property with an affiliate as tenants-in-common. In addition, in January 1997,
the Partnership entered into an agreement with an affiliate of the general
partners to hold a Property located in Akron, Ohio, as a tenants-in-common, as
discussed above in "Liquidity and Capital Resources." In connection therewith,
during the six months ended June 30, 1997 and 1996, the Partnership earned
$70,503 and 52,525, respectively, attributable to net income earned by these
joint ventures, $39,489 and 26,138 of which was earned during the quarters ended
June 30, 1997 and 1996, respectively. The increase in net income earned by joint
ventures during the quarter and six months ended June 30, 1997, is primarily due
to the fact that in January 1997, the Partnership reinvested the net sales
proceeds it received from the sale, in November 1996, 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.
9
<PAGE>
Results of Operations - Continued
Operating expenses, including depreciation and amortization expense,
were $325,858 and $369,911 for the six months ended June 30, 1997 and 1996,
respectively, of which $156,458 and $205,067 were incurred for the quarters
ended June 30, 1997 and 1996, respectively. The decrease in operating expenses
during the quarter and six months ended June 30, 1997, is primarily attributable
to the fact that during the quarter and six months ended June 30, 1996, the
Partnership recorded bad debt expense for rental and other amounts recorded as
income in prior years, relating to the Denny's Property in Orlando, Florida.
Operating expenses also decreased during the quarter and six months ended June
30, 1997, due to the Partnership recording real estate tax expense relating to
this Property during the Quarter and six months ended June 30, 1996. No such bad
debt expense or real estate tax expense were recorded by the Partnership during
the quarter and six months ended June 30, 1997, due to the fact that the
Partnership anticipates the collection of such amounts upon finalization of the
sales contract discussed above in "Liquidity and Capital Resources".
In addition, during the quarter and six months ended June 30, 1997, the
Partnership recorded an allowance for loss on land and net investment in the
direct financing lease of $41,202, for financial reporting purposes, relating to
the Denny's Property in Orlando, Florida. The loss represents the difference
between the Property's land carrying value and the carrying value of the net
investment in the direct financing lease, as compared to and the estimated net
realizable value, based on the anticipated sales price of this Property from an
unrelated third party.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the
quarter ended June 30, 1997.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this day of August, 1997.
CNL INCOME FUND XIII, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
--------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
--------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet of CNL Income Fund XIII, Ltd. at June 30, 1997, and its
statement of income for the six months then ended and is qualified in its
entirety by reference to the Form 10Q of CNL Income Fund XIII, Ltd. for the
six months ended June 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 871,975
<SECURITIES> 0
<RECEIVABLES> 424,234
<ALLOWANCES> 149,457
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,900,322
<DEPRECIATION> 1,501,604
<TOTAL-ASSETS> 35,797,764
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,836,073
<TOTAL-LIABILITY-AND-EQUITY> 35,797,764
<SALES> 0
<TOTAL-REVENUES> 1,814,697
<CGS> 0
<TOTAL-COSTS> 325,858
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,518,140
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,518,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,518,140
<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>
