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, 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 jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street
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 affiliates 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. During the year ended
December 31, 1996, the Partnership sold its Property in Richmond, Virginia,
consisting of land only. During the year ended December 31, 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. In addition, during the
year ended December 31, 1997, the Partnership sold its Property in Orlando,
Florida, to a third party and reinvested the net sales proceeds in a Chevy's
Fresh Mex Property located in Miami, Florida, with an affiliate of the General
Partners as tenants-in-common. As a result of the above transactions, as of
December 31, 1997, the Partnership owned 47 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 three Properties owned
with affiliates 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 in default under the lease, to remove the buildings from the land
at the end of the lease terms. The Partnership leases the Properties on a
triple-net basis with the lessees 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 6 to 20 years (the average being 19 years), and expire
between 2000 and 2016. All leases are on a triple-net basis, with the lessees
responsible
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<PAGE>
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
$191,900. A majority 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, the annual base rent required under
the terms of the lease will increase.
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 1997, the Partnership reinvested the net sales proceeds from the
sales of the Properties in Richmond, Virginia and Orlando, Florida, in a
Property located in Akron, Ohio and a Property in Miami, Florida, respectively,
with affiliates of the General Partners, as tenants-in-common, as described
below in "Joint Venture Arrangements." The lease terms for these Properties are
substantially the same as the Partnership's other leases, as described above in
the first three paragraphs of this section.
Major Tenants
During 1997, four 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 and (iv) Foodmaker, 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 three Properties owned with an affiliate as tenants-in-common). As of
December 31, 1997, 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 and Foodmaker, Inc. was the lessee under leases
relating to five restaurants. It is anticipated that based on the minimum rental
payments required by the leases, these four lessees or groups of affiliated
lessees each will continue to contribute more than ten percent of the
Partnership's total rental income in 1998 and subsequent years. In addition,
five Restaurant Chains, Long John Silver's, Hardee's, Golden Corral Family
Steakhouse Restaurants ("Golden Corral"), Jack in the Box and Burger King, each
accounted for more than ten percent of the Partnership's total rental income
during 1997 (including the Partnership's share of rental income from two
Properties owned by joint ventures and three Properties owned with affiliates as
tenants-in-common). In subsequent years, it is anticipated that these five
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 Arrangements
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.
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<PAGE>
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, 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, the Partnership
entered into an agreement to hold a 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 and December 1997, the Partnership entered into
agreements to hold a Burger King Property and a Chevy's Fresh Mex Property,
respectively, as tenants-in-common with affiliates of the General Partners. The
agreements provide for the Partnership and the affiliates to share in the
profits and losses of the Properties in proportion to each co-venturer's
percentage interest. The Partnership owns a 63.03% and 47.83% interest in the
Burger King Property and the Chevy's Fresh Mex Property, respectively.
Certain Management Services
CNL Income Fund Advisors, Inc., 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
September 30, 1995. Under this agreement, CNL Income Fund Advisors, Inc. 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 Income Fund Advisors, Inc. also
assisted the General Partners in negotiating the leases. For these services, the
Partnership had agreed to pay CNL Income Fund Advisors, Inc. 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 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.
3
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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.
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, 1997, the Partnership owned, either directly or
through joint venture arrangements, 47 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 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, 1997 (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).
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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).
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, 1998, there were 3,051 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 1997 and 1996 other than
pursuant to the Plan, net of commissions (which ranged from zero to 11.44%).
<TABLE>
<CAPTION>
1997 (1) 1996 (1)
--------------------------------- ---------------------
<S> <C>
High Low Average High Low Average
First Quarter $ 9.50 $ 8.00 $ 9.11 $10.00 $ 7.66 $9.17
Second Quarter 8.41 7.30 7.97 (2) (2) (2)
Third Quarter 9.50 8.05 8.50 10.00 8.79 9.36
Fourth Quarter 9.50 8.80 9.01 9.50 7.16 8.47
</TABLE>
(1) A total of 23,177 and 14,969 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1997 and 1996,
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.
5
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For each of the years ended December 31, 1997 and 1996, the Partnership
declared cash distributions of $3,400,008, to the Limited Partners.
Distributions of $850,002 were declared at the close of each of the
Partnership's calendar quarters during 1997 and 1996 to the Limited Partners.
These amounts include monthly distributions made in arrears for the Limited
Partners electing to receive such distributions on this basis. No amounts
distributed to partners for the years ended December 31, 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 contributions. No distributions have been made to the General Partners
to date. As indicated in the chart below, these distributions were declared at
the close of each of the Partnership's calendar quarters.
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>
1997 1996 1995 1994 1993
-------------------------------------------------------------------------
<S> <C>
Year Ended December 31:
Revenues (1) $ 3,832,470 $ 3,795,754 $ 3,956,874 $ 3,679,212 $ 1,149,437
Net income (2) 3,035,627 3,231,815 3,319,174 3,117,632 941,877
Cash distributions declared 3,400,008 3,400,008 3,375,011 3,025,009 1,128,364
Net income per Unit (2)(3) 0.75 0.80 0.82 0.77 0.32
Cash distributions declared
per Unit (3) 0.85 0.85 0.84 0.76 0.38
At December 31:
Total assets $35,523,590 $35,945,070 $36,054,757 $36,145,882 $37,288,736
Partners' capital 34,653,556 35,017,937 35,186,130 35,241,967 35,152,675
</TABLE>
(1) Revenues include equity in earnings of joint ventures.
(2) Net income for the year ended December 31, 1997, includes a loss on
sale of land and direct financing lease of $48,538. Net income for the
year ended December 31, 1996, includes a gain on sale of land of
$82,855 and net income for the year ended December 31, 1995, includes a
loss on sale of land of $29,560.
(3) Based on the weighted average number of Limited Partner Units
outstanding during each of the years ended December 31, 1997, 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, 1997, the Partnership owned 47 Properties, either
directly or through joint venture arrangements.
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Liquidity and Capital Resources
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
$3,204,420, $3,367,581 and $3,379,378 for the years ended December 31, 1997,
1996 and 1995, respectively. The decrease in cash from operations during 1997
and 1996, each as compared to the previous year, is primarily a result of
changes in income and expenses as described in "Results of Operations" below and
changes in the Partnership's working capital during each of the respective
years.
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.
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. In January 1997, the Partnership reinvested
the net sales proceeds in a 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 December 31, 1997, the Partnership owned a
63.03% interest in this Property. The sale of the Property in Richmond,
Virginia, and the reinvestment of the net sales proceeds in a Property in Akron,
Ohio, were 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 October 1997, the Partnership sold its Property in Orlando, Florida,
to a third party, for $953,371 and received net sales proceeds of $932,849,
resulting in a loss of $48,538 for financial reporting purposes. In December
1997, the Partnership reinvested the net sales proceeds in a Property located in
Miami, Florida, with affiliates of the General Partners as tenants-in-common. In
connection therewith, the Partnership and its affiliates 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 December 31,
1997, the Partnership owned a 47.83% interest in this Property.
During the year ended December 31, 1997, the Partnership loaned
$196,980 to the former tenant of the Denny's Property in Orlando, Florida. The
Partnership collected $127,843 of the amounts advanced and wrote off the balance
of $69,137.
Other sources and uses of capital included the following during the
years ended December 31, 1997, 1996 and 1995.
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
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<PAGE>
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.
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, 1997,
the Partnership had $907,980 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 year ended December 31, 1997, is partially the result of the
Partnership advancing and not recovering $69,137 from the former tenant of the
Denny's Property in Orlando, Florida, as described above. In addition, the
decrease was also partially attributable to a decrease in rents paid in advance
at December 31, 1997. The funds remaining at December 31, 1997, after payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
During 1997, 1996 and 1995, affiliates of the General Partners incurred
on behalf of the Partnership $87,870, $97,819 and $94,875, respectively, for
certain operating expenses. As of December 31, 1997 and 1996, the Partnership
owed $6,791 and $2,594, respectively, to related parties for such amounts,
accounting and administrative services and management fees. As of February 28,
1998, the Partnership had reimbursed the affiliates all such amounts. Other
liabilities, including distributions payable, decreased to $863,243 at December
31, 1997, from $924,539 at December 31, 1996, partially as the result of a
decrease in rents paid in advance and a decrease in accrued and escrowed real
estate taxes payable at December 31, 1997. The General Partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.
Based primarily on current and future anticipated cash from operations,
the Partnership declared distributions to the Limited Partners of $3,400,008 for
each of the years ended December 31, 1997 and 1996 and $3,375,011 for the year
ended December 31, 1995. This represents distributions of $0.85 per Unit for
each of the years ended December 31, 1997 and 1996 and $0.84 per Unit for the
year ended December 31, 1995. No amounts distributed or to be distributed to the
Limited Partners for the years ended December 31, 1997, 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. 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.
8
<PAGE>
Results of Operations
During 1995, the Partnership owned and leased 45 wholly owned
Properties (including one Property in Houston, Texas, which was sold in April
1995), during 1996, the Partnership owned and leased 44 wholly owned Properties
(including one Property in Richmond, Virginia, which was sold in November 1996)
and during 1997, the Partnership owned and leased 43 wholly owned Properties
(including one Property in Orlando, Florida, which was sold in October 1997).
During 1997, 1996 and 1995, the Partnership was a co-venturer in two separate
joint ventures that each owned and leased one Property. In addition, during 1995
and 1996, the Partnership owned and leased one Property, and during 1997, owned
and leased three Properties, with affiliates of the General Partners as
tenants-in-common. As of December 31, 1997, the Partnership owned, either
directly, as tenants-in-common with affiliates or through joint venture
arrangements, 47 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) ranging from approximately $27,400 to
$191,900. A majority 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, 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, 1997, 1996 and 1995, the
Partnership earned $3,347,609, $3,376,286 and $3,509,773, 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 1997, as compared to 1996, was partially attributable
to a decrease of approximately $116,200 as a result of the fact that in February
1997, the Partnership discontinued charging rent to the former tenant of the
Denny's Property in Orlando, Florida, as a result of the former tenant vacating
the Property. The decrease in rental and earned income during 1997, as compared
to 1996, was partially offset by, and the decrease during 1996, as compared to
1995, was partially attributable to the fact that the Partnership established an
allowance for doubtful accounts of approximately $15,300, $85,400 and $38,000
during 1997, 1996 and 1995, respectively, for past due rental amounts relating
to the Denny's Property in Orlando, Florida, due to financial difficulties the
tenant was experiencing. The decrease during 1997, as compared to 1996, was also
offset by, and the decrease during 1996, as compared to 1995, was also
attributable to the fact that during 1996, the Partnership established an
allowance for doubtful accounts of approximately $72,700 for accrued rental
income amounts previously recorded (due to the fact that future scheduled rent
increases are recognized on a straight-line basis over the term of the lease in
accordance with generally accepted accounting principles). The Partnership sold
this Property in October 1997, and reinvested the net sales proceeds in a
Property in Miami, Florida, as tenants-in-common, with affiliates of the General
Partners, as described above in "Liquidity and Capital Resources."
In addition, the decrease in rental and earned income for the years
ended 1997 and 1996, each as compared to the previous year, is partially
attributable to a decrease of approximately $46,200 and $5,600, respectively,
due to the fact that the Partnership sold its Property in Richmond, Virginia, in
November 1996. The Partnership reinvested the net sales proceeds in a Property
located in Akron, Ohio, as tenants-in-common, with an affiliate of the General
Partners, as described above in "Liquidity and Capital Resources."
For the years ended December 31, 1997, 1996 and 1995, the Partnership
also earned $287,751, $299,495 and $293,749, respectively, in contingent rental
income. The decrease in contingent rental income during 1997, as compared to
1996, is primarily the result of the Partnership adjusting estimated contingent
rental amounts accrued at December 31, 1996, to actual amounts during the year
ended December 31, 1997. The increase in contingent rental income during 1996 as
compared to 1995, is primarily the result of increases in gross sales relating
to certain restaurant Properties during 1996.
In addition, for the years ended December 31, 1997, 1996 and 1995, the
Partnership earned $150,417, $60,654 and $98,520, respectively, attributable to
net income earned by joint ventures in which the Partnership is a co-venturer.
The increase in net income earned by joint ventures during 1997, as compared to
1996 is primarily attributable to the fact that in January 1997, the Partnership
reinvested the net sales proceeds from the sale of the Property in Richmond,
Virginia, in a Property in Akron, Ohio, with an affiliate of the General
Partners, as tenants-in-common as described above in "Liquidity and Capital
Resources." The increase was also attributable to the fact that in December
1997, the Partnership reinvested the net sales proceeds from the sale of the
Property in Orlando, Florida, in a Property in Miami, Florida, with affiliates
of the General Partners, as tenants-in-common as described above
9
<PAGE>
in "Liquidity and Capital Resources." 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 during 1996. 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 the renovations.
During at least one of the years ended December 31, 1997, 1996 and
1995, five of the Partnership's lessees (or group of affiliated lessees),
Flagstar Corporation, Long John Silver's, Inc., Golden Corral Corporation,
Foodmaker, Inc. and 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 three Properties owned with affiliates as tenants-in-common). As of December
31, 1997, 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 was the lessee under leases relating
to eight restaurants. It is anticipated that based on the minimum rental
payments required by the leases, Flagstar Corporation, Long John Silver's, Inc.,
Golden Corral Corporation and Foodmaker, Inc. each will continue to contribute
more than ten percent of the Partnership's total rental income during 1998 and
subsequent years. In addition, during at least one of the years ended December
31, 1997, 1996 and 1995, five Restaurant Chains, Long John Silver's, Hardee's,
Golden Corral, Jack in the Box and Burger King, each accounted for 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 three
Properties owned with affiliates as tenants-in-common). In subsequent years, it
is anticipated that these five 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 $748,305, $646,794 and $608,140 for the years ended December 31, 1997, 1996
and 1995, respectively. The increase in operating expenses during 1997, as
compared to 1996, is primarily the result of the fact that the Partnership
recorded bad debt expense of approximately $54,000 for rental amounts due from
the former tenant of the Denny's Property in Orlando, Florida, as a result of
the Partnership ceasing collection efforts on rental amounts not collected from
the tenant as of the time of the sale of the Property in October, 1997, as
described above in "Liquidity and Capital Resources." Operating expenses also
increased as a result of the fact that the Partnership recorded bad debt expense
of approximately $69,100 relating to the advances made to the former tenant of
the Denny's Property in Orlando, Florida, that were not recovered from the
former tenant, as described above in "Liquidity and Capital Resources." The
increase in operating expenses during 1997 is partially offset by, and the
increase during 1996 is partially attributable to, the fact that during 1996,
the Partnership recorded real estate tax expense relating to this Property of
approximately $10,700. No such real estate tax expense was recorded by the
Partnership during 1995 or 1997, due to the fact that real estate taxes amounts
were paid by the tenant and the purchaser of the Property, respectively, for
each of these years.
The increase in operating expenses during 1996, as compared to 1995, is
also 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 beginning in May
1995.
As a result of the sale of the Property in Orlando, Florida, as
described above in "Liquidity and Capital Resources," the Partnership recognized
a loss for financial reporting purposes of $48,538 for the year ended December
31, 1997. In addition, as a result of the sale of the Property in Richmond,
Virginia, as described 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 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.
10
<PAGE>
The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on their company package software.
The hardware and built-in software are believed to be year 2000 compliant.
Accordingly, the General Partners do not expect this matter to materially impact
how the Partnership conducts business nor its current or future results of
operations or financial position.
The Partnership's leases as of December 31, 1997, 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
11
<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 19
12
<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, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 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.
/s/ Coopers & Lybrand, L.L.P.
- ----------------------------------
Orlando, Florida
January 21, 1998
13
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1997 1996
------ ----------- -------
Land and buildings on operating
leases, less accumulated
depreciation $22,788,618 $23,612,639
Net investment in direct
financing leases 7,910,470 8,543,916
Investment in joint ventures 2,457,810 976,531
Cash and cash equivalents 907,980 1,103,568
Restricted cash - 550,770
Receivables, less allowance for
doubtful accounts of $150,734
in 1996 23,946 100,955
Prepaid expenses 10,368 9,143
Organization costs, less
accumulated amortization of
$9,422 and $7,422 578 2,578
Accrued rental income, less allowance
for doubtful accounts of $72,734
in 1996 1,423,820 1,044,970
----------- -----------
$35,523,590 $35,945,070
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 7,671 $ 6,340
Accrued and escrowed real estate
taxes payable - 14,092
Distributions payable 850,002 850,002
Due to related parties 6,791 2,594
Rents paid in advance 5,570 54,105
----------- -----------
Total liabilities 870,034 927,133
Partners' capital 34,653,556 35,017,937
----------- -----------
$35,523,590 $35,945,070
=========== ===========
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $2,371,062 $2,477,156 $2,566,579
Earned income from direct
financing leases 976,547 899,130 943,194
Contingent rental income 287,751 299,495 293,749
Interest and other income 46,693 59,319 54,832
---------- ---------- ----------
3,682,053 3,735,100 3,858,354
---------- ---------- ----------
Expenses:
General operating and
administrative 152,918 156,466 130,501
Bad debt expense 123,071 - -
Professional services 25,595 33,746 27,703
Management fees to related
parties 34,321 35,675 36,031
Real estate taxes - 10,680 -
State and other taxes 18,301 16,793 20,470
Depreciation and amortization 394,099 393,434 393,435
---------- ---------- ----------
748,305 646,794 608,140
---------- ---------- ----------
Income Before Equity in
Earnings of Joint Ventures,
Gain (Loss) on Sale of Land 2,933,748 3,088,306 3,250,214
Equity in Earnings of Joint
Ventures 150,417 60,654 98,520
Gain (Loss) on Sale of Land
and Building (48,538) 82,855 (29,560)
---------- ---------- ----------
Net Income $3,035,627 $3,231,815 $3,319,174
========== ========== ==========
Allocation of Net Income:
General partners $ 30,690 $ 31,490 $ 33,432
Limited partners 3,004,937 3,200,325 3,285,742
---------- ---------- ----------
$3,035,627 $3,231,815 $3,319,174
========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.75 $ 0.80 $ 0.82
========== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1997, 1996 and 1995
<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, 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
Distribution to limited
partners ($0.85 per limited
partner unit) - - - (3,400,008) - - (3,400,008)
Net income - 30,690 - - 3,004,937 - 3,035,627
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1997 $1,000 $136,207 $40,000,000 $(14,328,400) $13,509,918 $(4,665,169) $34,653,556
====== ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
----------- ----------- --------
<S> <C>
Increase (Decrease) in Cash
and Cash Equivalents:
Cash Flows From Operating
Activities:
Cash received from tenants $ 3,329,633 $ 3,476,985 $ 3,453,186
Distributions from
joint ventures 151,322 93,700 88,793
Cash paid for expenses (236,793) (251,454) (214,011)
Interest received 29,395 48,350 51,410
----------- ----------- -----------
Net cash provided by
operating activities 3,273,557 3,367,581 3,379,378
----------- ----------- -----------
Cash Flows From Investing
Activities:
Additions to land and
buildings on operating
leases - - (336,116)
Proceeds from sale of land
and building 932,849 550,000 286,411
Advances to tenant (196,980) - -
Repayment of advances 127,843 - -
Investment in joint ventures (1,482,849) - (140,052)
Decrease (increase) in
restricted cash 550,000 (550,000) -
Other - - 954
----------- ----------- -----------
Net cash used in
investing activities (69,137) - (188,803)
----------- ----------- -----------
Cash Flows From Financing
Activities:
Reimbursement of acqui-
sition costs paid by
related parties on
behalf of the
Partnership - - (3,074)
Distributions to
limited partners (3,400,008) (3,400,008) (3,350,014)
----------- ----------- -----------
Net cash used in
financing activities (3,400,008) (3,400,008) (3,353,088)
----------- ----------- -----------
Net Decrease in Cash and Cash
Equivalents (195,588) (32,427) (162,513)
Cash and Cash Equivalents at
Beginning of Year 1,103,568 1,135,995 1,298,508
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 907,980 $ 1,103,568 $ 1,135,995
=========== =========== ===========
</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,
1997 1996 1995
----------- ----------- --------
<S> <C>
Reconciliation of Net Income
to Net Cash Provided by
Operating Activities:
Net income $ 3,035,627 $ 3,231,815 $ 3,319,174
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 391,434 391,434 391,435
Amortization 2,665 2,000 2,000
Equity in earnings of
joint ventures, net
of distributions 905 33,046 (9,727)
Loss (gain) on sale of
land and building 48,538 (82,855) 29,560
Decrease (increase) in
receivables 77,779 (28,034) (3,833)
Decrease in net investment
in direct financing
leases 84,646 80,214 71,410
Increase in prepaid
expenses (1,225) (5,005) (4,138)
Increase in accrued
rental income (378,850) (313,540) (371,167)
Increase (decrease) in
accounts payable and
accrued expenses (12,761) 12,137 922
Increase (decrease) in
due to related parties 4,197 (4,773) 6,213
Increase (decrease) in
rents paid in advance (48,535) 51,142 (52,471)
------------ ----------- -----------
Total adjustments 168,793 135,766 60,204
------------ ----------- -----------
Net Cash Provided by Operating
Activities $ 3,204,420 $ 3,367,581 $ 3,379,378
============ =========== ===========
Supplemental Schedule of
Non-Cash Financing Activities:
Distributions declared and
unpaid at December 31 $ 850,002 $ 850,002 $ 850,002
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
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, 1997, 1996 and 1995
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, the assets are
adjusted to their fair 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 and Salem Joint Venture, and a
property in Arvada, Colorado, a property in Akron, Ohio, and a property
in Miami, Florida, for which each property is held as tenants-in-common
with affiliates, 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, 1997, 1996 and 1995
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, 1997, 1996 and 1995
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." Some of the
leases are classified as operating leases and some 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 the majority 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.
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
1997 1996
----------- -----------
Land $12,742,897 $13,175,484
Buildings 11,743,041 11,743,041
----------- -----------
24,485,938 24,918,525
Less accumulated
depreciation (1,697,320) (1,305,886)
----------- -----------
$22,788,618 $23,612,639
=========== ===========
22
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
3. Land and Buildings on Operating Leases - Continued:
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. In January 1997, the Partnership reinvested the net sales
proceeds in a property in Akron, Ohio, as tenants-in-common, with
affiliates of the general partners (see Note 5).
In October 1997, the Partnership sold its property in Orlando, Florida,
to a third party for $953,371 and received net sales proceeds of
$932,849, resulting in a loss of $48,538 for financial reporting
purposes. In December 1997, the Partnership reinvested the net sales
proceeds in a property located in Miami, Florida, as tenants-in-common,
with affiliates of the general partners (see Note 5).
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, 1997, 1996 and 1995, the Partnership
recognized $378,850, $313,541 and $371,167, 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, 1997:
1998 $ 2,136,766
1999 2,274,706
2000 2,265,811
2001 2,277,006
2002 2,307,013
Thereafter 24,312,111
-----------
$35,573,413
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.
23
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1997 1996
------------ --------
Minimum lease payments
receivable $ 15,747,868 $ 18,116,667
Estimated residual
values 2,582,058 2,723,067
Less unearned income (10,419,456) (12,295,818)
------------ ------------
Net investment in
direct financing
leases $ 7,910,470 $ 8,543,916
============ ============
In October 1997, the Partnership sold its property in Orlando, Florida,
for which the building portion had been classified as a direct
financing lease. In connection therewith, the gross investment (minimum
lease payment receivable and estimated residual value) and unearned
income relating to this property were removed from the accounts and the
loss from the sale relating to the land portion of the property and the
net investment in direct financing lease was reflected in income (Note
3).
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1997:
1998 $ 958,686
1999 964,106
2000 964,106
2001 976,846
2002 994,681
Thereafter 10,889,443
-----------
$15,747,868
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).
24
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
5. Investment in Joint Ventures:
The Partnership has a 50 percent and a 27.8% interest in the profits
and losses of Attalla Joint Venture and Salem Joint Venture,
respectively. The remaining interests in these joint ventures are held
by affiliates of the Partnership which have the same general partners.
The Partnership also owns a property in Arvada, Colorado, 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.
As of December 31, 1997, the Partnership owned a 66.13% interest in
this property.
In January 1997, the Partnership used the net sales proceeds from the
1996 sale of the property in Richmond, Virginia, to acquire a 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
affiliates, and amounts relating to its investment are included in
investment in joint ventures. As of December 31, 1997, the Partnership
owned a 63.03% interest in this property.
In addition, in December 1997, the Partnership acquired a property in
Miami, Florida, as tenants-in-common with affiliates of the general
partners. The Partnership accounts for its investment in this property
using the equity method since the Partnership shares control with
affiliates, and amounts relating to its investment are included in
investment in joint ventures. As of December 31, 1997, the Partnership
owned a 47.83% interest in this property.
25
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
5. Investment in Joint Ventures - Continued:
Attalla Joint Venture and Salem Joint Venture and the Partnership and
affiliates, as tenants-in-common in three separate tenancy-in-common
arrangements, 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 properties held as tenants-in-common with affiliates at
December 31:
1997 1996
---------- ----------
Land and buildings on
operating leases,
less accumulated
depreciation $4,256,861 $1,482,503
Net investment in direct
financing leases 364,479 367,661
Cash 18,729 21,173
Receivables - 6,412
Prepaid expenses 380 255
Accrued rental income 106,653 51,745
Liabilities 15,653 28,121
Partners' capital 4,731,449 1,901,628
Revenues 347,971 216,960
Net income 285,922 145,851
The Partnership recognized income totalling $150,417, $60,654 and
$98,520 for the years ended December 31, 1997, 1996 and 1995,
respectively, from these joint ventures and the properties held as
tenants-in-common with affiliates.
6. Restricted Cash:
In 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. In January 1997,
the funds were released from escrow and the Partnership acquired a
63.03% interest in a Burger King property in Akron, Ohio, as
tenants-in-common with an affiliate of the general partners (Note 5).
26
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
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 each of the years ended December 31, 1997 and 1996, the
Partnership declared distributions to the limited partners of
$3,400,008 and during the year ended December 31, 1995, the Partnership
declared distributions to the limited partners of $3,375,011. 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, 1997, 1996 and 1995
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>
1997 1996 1995
---------- ---------- -------
<S> <C>
Net income for financial
reporting purposes $3,035,627 $3,231,815 $3,319,174
Depreciation for tax
reporting purposes in
excess of depreciation
for financial reporting
purposes (100,696) (103,634) (103,634)
Direct financing leases
recorded as operating
leases for tax
reporting purposes 84,646 80,214 71,410
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 (19,727) 6,819 (17,195)
Loss (gain) on sale of
property deferred for
tax reporting purposes - (82,855) 29,560
Loss on sale of property
for financial reporting
purposes in excess of
loss for tax reporting
purposes 38,823 - -
Allowance for doubtful
accounts (150,734) 102,198 45,182
Accrued rental income (378,850) (313,540) (371,167)
Rents paid in advance (48,535) 51,142 (52,471)
----------- ---------- ----------
Net income for federal
income tax purposes $2,460,554 $2,972,159 $2,920,859
========== ========== ==========
</TABLE>
28
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
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
Fund Advisors, Inc. The other individual general partner, Robert A.
Bourne, served as president of CNL Fund Advisors, Inc. through October
1997. 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, 1997, 1996 and
1995, 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, 1997, 1996 and 1995, 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 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 $34,321, $35,675
and $36,031 for the years ended December 31, 1997, 1996 and 1995,
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, 1997, 1996 and 1995
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, 1997, 1996 and 1995, Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. For the years ended December 31, 1997, 1996 and 1995,
the expenses incurred for these services were $87,322, $91,272 and
$67,052, respectively.
The due to related parties at December 31, 1997 and 1996, totalled
$6,791 and $2,594, respectively.
During 1997, the Partnership and an affiliate of the general partners
acquired a property in Akron, Ohio, as tenants-in-common for a purchase
price of $872,625 (of which the Partnership contributed $550,000 or
63.03%) from CNL BB Corp., also an affiliate of the general partners.
CNL BB Corp. had purchased and temporarily held title to this property
in order to facilitate the acquisition of the property by the
Partnership and the affiliate, as tenants-in-common. The purchase price
paid by the Partnership and the affiliate represented the costs
incurred by CNL BB Corp. to acquire and carry the property, including
closing costs.
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 properties held as tenants-
30
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
10. Concentration of Credit Risk - Continued:
in-common with affiliates) for at least one of the years ended
December 31:
1997 1996 1995
-------- -------- -----
Long John Silver's,
Inc. $759,064 $764,565 $774,281
Flagstar Enterprises,
Inc. and Quincy's
Restaurants, Inc. 744,199 765,109 785,570
Golden Corral Corpora-
tion 536,886 539,568 533,668
Foodmaker, Inc. 450,816 450,393 450,724
Checkers Drive-In
Restaurants, Inc. 366,187 412,422 416,746
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 properties held as tenants-in-common with
affiliates) for at least one of the years ended December 31:
1997 1996 1995
-------- -------- ------
Long John Silver's $759,064 $764,565 $774,281
Hardee's 649,762 670,249 690,324
Golden Corral
Family Steakhouse
Restaurants 536,886 539,568 533,668
Burger King 484,111 431,280 419,740
Jack in the Box 450,816 450,393 450,724
Checkers
Drive-In
Restaurants 366,187 412,422 416,746
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 51, 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., CNL Real Estate 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 advisor, 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 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., 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 a director, 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 a director,
Chairman of the Board and Chief Executive Officer of CNL American Properties
Fund, Inc. since 1994, and has served as a director, 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 $60 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.
32
<PAGE>
Robert A. Bourne, age 50, 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, and prior to its merger with
CNL Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors,
Inc., and Chief Investment Officer, Vice Chairman of the Board of Directors, a
director and Treasurer of CNL Institutional Advisors, Inc., a registered
investment advisor. Mr. Bourne served as President of CNL Institutional
Advisors, Inc. from the date of its inception through June 30, 1997 and served
as President of CNL Fund Advisors, Inc. from the date of its inception through
October 1997. Mr. Bourne also has served as a director since 1992, as President
from July 1992 to February 1996, as Secretary and Treasurer from February 1996
through December 1997, and since February 1996, served as Vice Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc. In addition, Mr. 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, served as Treasurer and Vice Chairman of CNL Realty Advisors, Inc. through
December 31, 1997, at which time CNL Realty Advisors, Inc. merged with
Commercial Net Lease Realty, 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, 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., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. 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.
33
<PAGE>
Curtis B. McWilliams, age 42, joined CNL Fund Advisors, Inc. in April
1997 and currently serves as President of CNL Fund Advisors, Inc. and as
Executive Vice President of CNL American Properties Fund, Inc. In addition, Mr.
McWilliams serves as Executive Vice President of CNL Group, Inc. and as
President of CNL Financial Services, Inc. and certain other subsidiaries of CNL
Group, Inc. From September 1983 through March 1997, Mr. McWilliams was employed
by Merrill Lynch. From January 1991 to August 1996, Mr. McWilliams was a
managing director in the corporate banking group of Merrill Lynch's investment
banking division. During this time, he was a senior relationship manager with
Merrill Lynch and as such was responsible for a number of the firm's larger
clients. From February 1990 to February 1993, he also served as co-head of one
of the Industrial Banking Groups within Merrill Lynch's investment banking
division and had administrative responsibility for a group of bankers and client
relationships, including the firm's transportation group. From September 1996 to
March 1997, Mr. McWilliams served as Chairman of Merrill Lynch's Private
Advisory Services. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Masters of Business Administration with a
concentration in finance from the University of Chicago in 1983.
John T. Walker, age 39, is 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 49, 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, Inc. since its inception in
1990, served as a director and Secretary of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., 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 300 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. She was licensed as a certified public accountant in 1979.
34
<PAGE>
Jeanne A. Wall, age 39, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984, Ms. Wall joined CNL Securities Corp. In 1985, Ms. Wall became Vice
President of CNL Securities Corp., in 1987, she became Senior Vice President and
in July 1997, she became Executive 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 product development, partnership administration and
investor services for programs offered through participating brokers, and
corporate communications for CNL Group, Inc. and Affiliates. 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 through 1997, as Vice
President of Commercial Net Lease Realty, Inc. from 1992 through 1997, 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 34, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996 and as Chief Financial Officer of
CNL American Properties Fund, Inc. since January 1997. 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 audit 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, 1998, 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, 1998, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
<S> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
</TABLE>
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.
35
<PAGE>
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, 1997, 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, 1997
----------------------- --------------------- -----------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed Operating expenses incurred
operating expenses at the lower of cost or 90 percent on behalf of the Partnership:
of the prevailing rate at which $87,870
comparable services could have
been obtained in the same
geographic area. Affiliates of the
General Partners from time to
time incur certain operating Accounting and administra-
expenses on behalf of the tive services: $87,322
Partnership for which the
Partnership reimburses the
affiliates without interest.
Annual management fee to One percent of the sum of gross $34,321
affiliates 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.
==========================================================================================================================
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to estate disposition fee, payable
affiliates 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.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to one percent of
cash flow Partnership distributions of net
cash flow, subordinated to certain
minimum returns to the Limited
Partners.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or Partnership distributions of such
sales net sales proceeds, subordinated to
certain minimum returns to the
Limited Partners.
==========================================================================================================================
</TABLE>
37
<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, 1997 and 1996
Statements of Income for the years ended December 31, 1997,
1996 and 1995
Statements of Partners' Capital for the years ended December
31, 1997, 1996 and 1995
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for
the years ended December 31, 1997, 1996 and
1995
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1997
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1997
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.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1997 through December 31, 1997.
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 20th day of
March, 1998.
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.
<TABLE>
<CAPTION>
==========================================================================================================================
Signature Title Date
<S> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 20, 1998
- ------------------------------- (Principal Financial and
Robert A. Bourne Accounting Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and March 20, 1998
- ------------------------------- Director (Principal Executive
James M. Seneff, Jr. Officer)
==========================================================================================================================
</TABLE>
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996 and 1995
<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>
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
======== ======= ======== ======== ========
1997 Allowance for
doubtful
accounts (a) $223,468 $ - $ - (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, 1997
<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:
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
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 256,901 $ 669,537 $ 926,438 $ 98,749 1988 07/93 (b)
211,835 771,616 983,451 113,805 1988 07/93 (b)
247,183 723,304 970,487 106,679 1989 07/93 (b)
174,843 618,815 793,658 91,268 1990 07/93 (b)
445,389 - 445,389 (g) - 03/94 (g)
380,055 - 380,055 (g) - 03/94 (g)
280,409 - 280,409 (g) - 03/94 (g)
424,323 - 424,323 (g) - 03/94 (g)
501,416 - 501,416 (g) - 03/94 (g)
374,675 - 374,675 (g) - 03/94 (g)
386,638 - 386,638 (g) - 10/94 (g)
326,175 - 326,175 (g) - 04/95 (g)
460,107 (f) 460,107 - 1994 10/93 (d)
530,494 540,983 1,071,477 65,634 1994 12/93 (b)
611,589 1,071,838 1,683,427 165,229 1991 05/93 (b)
625,527 964,122 1,589,649 147,392 1993 06/93 (b)
617,016 1,103,437 1,720,453 139,643 1994 11/93 (b)
197,336 417,418 614,754 61,564 1992 07/93 (b)
160,149 424,977 585,126 62,679 1992 07/93 (b)
164,004 (f) 164,004 - 1991 07/93 (d)
218,639 460,364 679,003 67,898 1993 07/93 (b)
204,516 (f) 204,516 - 1992 07/93 (d)
240,363 412,621 652,984 60,857 1992 07/93 (b)
226,815 431,574 658,389 63,652 1993 07/93 (b)
323,929 601,054 924,983 90,295 1992 06/93 (b)
315,842 590,708 906,550 87,177 1993 07/93 (b)
368,409 567,115 935,524 83,798 1992 07/93 (b)
404,752 592,173 996,925 87,339 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, 1997
<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 - -
----------- ----------- ---------- -------
$12,742,897 $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:
Arby's 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 $ - $ - $ -
=========== =========== ========== =======
Property in Which the Partnership has a
63.03% Interest as Tenants-In-Common and
has Invested in Under an Operating Lease:
Burger King Restaurant:
Akron, Ohio - $ 355,595 $ 517,030 $ - $ -
=========== =========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
292,370 (f) 292,370 - 1993 07/93 (d)
274,580 (f) 274,580 - 1993 07/93 (d)
362,939 (f) 362,939 - 1993 08/93 (d)
254,412 (f) 254,412 - 1993 08/93 (d)
299,696 139,676 439,372 19,287 1983 11/93 (b)
372,748 (f) 372,748 - 1994 12/93 (d)
463,937 (f) 463,937 - 1993 12/93 (d)
452,691 (f) 452,691 - 1993 12/93 (d)
290,195 641,709 931,904 84,375 1993 01/94 (b)
----------- ----------- ----------- ----------
$12,742,897 $11,743,041 $24,485,938 $1,697,320
=========== =========== =========== ==========
$ 196,274 $ 434,428 $ 630,702 $ 58,638 1993 11/93 (b)
=========== =========== =========== ==========
$ 260,439 $ 545,126 $ 805,565 $ 59,541 1994 09/94 (b)
=========== =========== =========== ==========
$ 131,762 (f) $ 131,762 - 1991 03/95 (d)
=========== ===========
$ 355,595 $ 517,030 $ 872,625 $ 15,898 1970 01/97 (b)
=========== =========== =========== ==========
</TABLE>
F-3
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Property in Which the Partnership has
a 47.83% Interest as Tenants-In-Common
and has Invested in Under an Operating
Lease:
Chevy's Fresh Mex Restaurant:
Smithfield, North Carolina - $ 976,357 $ 974,016 $ - $ -
=========== =========== ========== =======
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Denny's Restaurant:
Peoria, Arizona - - - 613,090 -
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 $2,335,227 $ -
=========== =========== ========== =======
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>
F-4
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 976,357 $ 974,016 $ 1,950,373 $ 89 1995 12/97 (b)
=========== =========== =========== ==========
- (f) (f) (d) 1994 10/93 (d)
- (f) (f) (d) 1991 07/93 (d)
(f) (f) (f) (e) 1992 07/93 (e)
- (f) (f) (d) 1992 07/93 (d)
(f) (f) (f) (e) 1992 07/93 (e)
(f) (f) (f) (e) 1992 07/93 (e)
(f) (f) (f) (e) 1988 11/93 (e)
- (f) (f) (d) 1993 07/93 (d)
- (f) (f) (d) 1993 07/93 (d)
- (f) (f) (d) 1993 08/93 (d)
- (f) (f) (d) 1993 08/93 (d)
- (f) (f) (d) 1993 12/93 (d)
- (f) (f) (d) 1993 12/93 (d)
- (f) (f) (d) 1994 12/93 (d)
(f) (f) (f) (e) 1992 07/93 (e)
- (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, 1997
(a) Transactions in real estate and accumulated depreciation during 1997,
1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
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
Dispositions (432,587) -
Depreciation expense - 391,434
----------- ----------
Balance, December 31, 1997 $24,485,938 $1,697,320
=========== ==========
Property of Joint Venture in
Which the Partnership has a 50%
Interest and has Invested in
Under an Operating Lease:
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
Depreciation expense - 14,482
----------- ----------
Balance, December 31, 1997 $ 630,702 $ 58,638
=========== ==========
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, 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
Depreciation expense - 18,171
----------- ----------
Balance, December 31, 1997 $ 805,565 $ 59,541
=========== ==========
</TABLE>
F-5
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
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 -
Depreciation expense (d) - -
----------- ---------
Balance, December 31, 1997 $ 131,762 $ -
=========== =========
Property in Which the Partnership
has a 63.03% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Balance, December 31, 1996 $ - $ -
Acquisition 872,625 -
Depreciation expense - 15,898
----------- ----------
Balance, December 31, 1997 $ 872,625 $ 15,898
=========== ==========
Property in Which the Partnership
has a 47.83% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Balance, December 31, 1996 $ - $ -
Acquisition 1,950,373 -
Depreciation expense - 89
----------- ----------
Balance, December 31, 1997 $ 1,950,373 $ 89
=========== ==========
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 19976, 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 $32,712,921
and $4,762,863, 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.
F-6
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
(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.
(h) During the year ended December 31, 1997, the Partnership and an
affiliate as tenants-in-common, purchased land and building from CNL
BB Corp., an affiliate of the General Partners, for an aggregate cost
of $872,625.
F-7
<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.)
27 Financial Data Schedule (Filed herewith.)
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, 1997, 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, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 907,980
<SECURITIES> 0
<RECEIVABLES> 174,680
<ALLOWANCES> 150,734
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,485,938
<DEPRECIATION> 1,697,320
<TOTAL-ASSETS> 35,523,590
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,653,556
<TOTAL-LIABILITY-AND-EQUITY> 35,523,590
<SALES> 0
<TOTAL-REVENUES> 3,682,053
<CGS> 0
<TOTAL-COSTS> 625,234
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 123,071
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,035,627
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,035,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,035,627
<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>
