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, 1998
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) 650-1000
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 4,000,000 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 ten 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, 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, 1998, 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.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the third quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger, APF will own the Properties and other assets of the
Partnership. See Item 8.
Financial Statements and Supplementary Data -- Note 11. Subsequent Event.
In the event that the Limited Partners vote against the Merger, 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. 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 2018. All leases are on a triple-net basis, with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities. The leases of the Properties provide for minimum base annual rental
payments (payable in monthly installments) ranging from approximately $27,400 to
$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 if 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.
In June 1998, Long John Silver's, Inc., filed for bankruptcy and
rejected the leases relating to three of the eight Properties that it leased and
ceased making rental payments to the Partnership under such leases. In October
1998, the Partnership entered into a new lease with a new tenant to operate one
of the rejected Properties as a Lion's Choice restaurant. The lease terms for
this Property are substantially the same as the Partnership's other leases as
described above. In November 1998, the Partnership also entered into a new lease
with a new tenant for one of the rejected Properties. The Partnership has agreed
to fund up to $600,000 to convert the Long John Silver's Property into a
Steak-N-Shake. The Partnership anticipates entering into an agreement with an
affiliate of the General Partners to fund a portion of these conversion costs.
Rent is scheduled to commence during the second quarter of 1999. The lease terms
for this Property are substantially the same as the Partnership's other leases
as described above. The General Partners are currently seeking either a new
tenant or purchaser for the remaining Property. The Partnership will not
recognize rental and earned income from the remaining vacant Property until a
new tenant for this Property is located or until the Property is sold and the
proceeds from such sale is reinvested in an additional Property. As of March 11,
1999, the Partnership has been receiving rental payments on the five leases that
have not been rejected. While Long John Silver's, Inc. has not rejected or
affirmed the remaining five leases, there can be no assurance that some or all
of the leases will not be rejected in the future. The lost revenues resulting
from the vacant Property, as described above, and the possible rejection of the
remaining five leases could have an adverse effect on the results of operations
of the Partnership if the Partnership is unable to re-lease these Properties in
a timely manner.
Major Tenants
During 1998, four lessees of the Partnership, Flagstar Enterprises,
Inc., Long John Silver's, Inc., Golden Corral Corporation and 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, 1998, Flagstar Enterprises, Inc. was the
lessee under leases relating to 11 restaurants, Long John Silver's, Inc. was the
lessee under leases relating to five restaurants, (excluding three restaurants
for which Long John Silver's, Inc. rejected the leases as a result of filing for
bankruptcy, as described above), 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, Flagstar Enterprises, Inc., Golden
Corral Corporation and Foodmaker, Inc. each will continue to contribute more
than ten percent of the Partnership's total rental income in 1999. 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 1998 (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). It is anticipated that Hardee's, Golden Corral, Jack in the
Box and Burger King each will continue to account for more than ten percent of
the Partnership's total rental income under the terms of the leases. Any failure
of these lessees or Restaurant Chains could materially affect the Partnership's
income if the Partnership is not able to re-lease the Properties in a timely
manner. 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.
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 an Arby's 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 63.09% and 47.83% interest in the
Burger King Property and the Chevy's Fresh Mex Property, respectively.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is 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 Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL 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 Properties held as tenants-in-common with an affiliate,
but not in excess of competitive fees for comparable services.
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.
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, 1998, 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 nine 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, 1998 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
<PAGE>
Flagstar Enterprises, Inc. leases 11 Hardee's restaurants. The initial
term of each lease is 20 years (expiring in 2013) and the average minimum base
annual rent is approximately $58,700 (ranging from approximately $48,800 to
$65,700).
Long John Silver's, Inc. leases five Long John Silver's restaurants.
The initial term for four of the leases is 20 years (expiring in 2013) and the
initial term of the fifth 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 $75,500 (ranging from approximately $34,800 to $103,300).
Golden Corral Corporation leases three Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2008 and 2009) and the
average minimum base annual rent is approximately $177,900 (ranging from
approximately $168,600 to $186,200).
Foodmaker, Inc. leases five Jack in the Box restaurants. The initial
term of each lease is 18 years (expiring between 2010 and 2011) and the average
minimum base annual rent is approximately $85,400 (ranging from approximately
$59,900 to $95,600).
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 March 11, 1999 there were 3,049 holders of record of the Units.
There is no public trading market for the Units, and it is not anticipated that
a public market for the Units will develop. Limited Partners who wish to sell
their Units may offer the Units for sale pursuant to the Partnership's
distribution reinvestment plan (the "Plan"), and Limited Partners who wish to
have their distributions used to acquire additional Units (to the extent Units
are available for purchase), may do so pursuant to such Plan. The General
Partners have the right to prohibit transfers of Units. From inception through
December 31, 1998, the price paid for any Unit transferred pursuant to the Plan
was $9.50 per Unit. The price paid for any Unit transferred other than pursuant
to the Plan was 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 1998 and 1997 other than
pursuant to the Plan.
<TABLE>
<CAPTION>
<S> <C>
1998 (1) 1997 (1)
---------------------------------- ----------------------------------
High Low Average High Low Average
------- ------- ---------- -------- -------- ----------
First Quarter $8.67 $8.40 $8.53 $9.50 $8.00 $9.11
Second Quarter 9.50 7.90 8.54 8.41 7.30 7.97
Third Quarter 8.95 8.81 8.85 9.50 8.05 8.50
Fourth Quarter 9.50 8.97 9.16 9.50 8.80 9.01
</TABLE>
(1) A total of 30,350 and 23,177 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1998 and 1997,
respectively.
The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For each of the years ended December 31, 1998 and 1997, 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 1998 and 1997 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, 1998 and 1997 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.
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.
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
<S> <C>
1998 1997 1996 1995 1994
------------- -------------- -------------- --------------- --------------
Year ended December 31:
Revenues (1) $3,482,210 $ 3,832,470 $ 3,795,754 $ 3,956,874 $ 3,679,212
Net income (2) 2,495,855 3,035,627 3,231,815 3,319,174 3,117,632
Cash distributions declared 3,400,008 3,400,008 3,400,008 3,375,011 3,025,009
Net income per Unit (2) 0.62 0.75 0.80 0.82 0.77
Cash distributions declared
per Unit 0.85 0.85 0.85 0.84 0.76
At December 31:
Total assets $34,687,493 $35,523,590 $35,945,070 $36,054,757 $36,145,882
Partners' capital 33,749,403 34,653,556 35,017,937 35,186,130 35,241,967
</TABLE>
(1) Revenues include equity in earnings of joint ventures and adjustments
to accrued rental income due to the tenant of certain Properties filing
for bankruptcy.
(2) Net income for the year ended December 31, 1998 includes a provision
for loss on building of $297,885. 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.
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 generally triple-net leases, with the lessee
generally responsible for all repairs and maintenance, property taxes, insurance
and utilities. As of December 31, 1998, the Partnership owned 47 Properties,
either directly or through joint venture arrangements.
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
$3,277,301, $3,273,557 and $3,367,581 for the years ended December 31, 1998,
1997, and 1996, respectively. The increase in cash from operations during 1998,
as compared to 1997, and the decrease in cash from operations during 1997 as
compared to 1996, 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.
Other sources and uses of capital included the following during the
years ended December 31, 1998, 1997, and 1996.
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 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, 1998, the Partnership
owned a 63.09% 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,
1998, 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 in
order to facilitate the sale of the Property. Upon the sale of the Property in
October 1997, the Partnership collected $127,843 of the amounts advanced and
wrote off the balance of $69,137.
None of the Properties owned by the Partnership or the joint ventures
in which the Partnership owns an interest is or may be encumbered. Subject to
certain restrictions on borrowing, however, the Partnership may borrow funds but
will not encumber any of the Properties in connection with any such borrowing.
The Partnership will not borrow for the purpose of returning capital to the
Limited Partners. The Partnership will not borrow under arrangements that would
make the Limited Partners liable to creditors of the Partnership. The General
Partners further have represented that they will use their reasonable efforts to
structure any borrowing so that it will not constitute "acquisition
indebtedness" for federal income tax purposes and also will limit the
Partnership's outstanding indebtedness to three percent of the aggregate
adjusted tax basis of its Properties. Affiliates of the General Partners from
time to time incur certain operating expenses on behalf of the Partnership for
which the Partnership reimburses the affiliates without interest.
Currently, rental income from the Partnership Properties is 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, 1998, the Partnership had $766,859
invested in such short-term investments as compared to $907,980 at December 31,
1997. The decrease in cash and cash equivalents during the year ended December
31, 1998, is primarily the result of an increase in rents due at December 31,
1998. The funds remaining at December 31, 1998, will be used towards the payment
of distributions and other liabilities.
During 1998, 1997, and 1996, affiliates of the General Partners
incurred on behalf of the Partnership $101,134, $87,870, and $97,819,
respectively, for certain operating expenses. As of December 31, 1998 and 1997,
the Partnership owed $22,529 and $6,791, respectively, to related parties for
such amounts, accounting and administrative services and management fees. As of
March 11, 1999, the Partnership had reimbursed the affiliates all such amounts.
Other liabilities, including distributions payable, increased to $915,561 at
December 31, 1998, from $863,243 at December 31, 1997, primarily as the result
of an increase in rents paid in advance and deposits at December 31, 1998. Total
liabilities for the year ended December 31, 1998, to the extent they exceed cash
and cash equivalents, will be paid from future cash from operations. The General
Partners believe that the Partnership has sufficient cash on hand to meet its
current working capital needs.
Based 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, 1998, 1997, and 1996. This represents
distributions of $0.85 per Unit for each of the years ended December 31, 1998,
1997 and 1996. No amounts distributed to the Limited Partners for the years
ended December 31, 1998, 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. The
Partnership intends to continue to make distributions of cash available for
distribution to the Limited Partners on a quarterly basis.
In November 1998, the Partnership entered into a new lease for the
Property located in Tampa, Florida, with a new tenant to operate the Property as
a Steak-N-Shake restaurant. In connection therewith, the Partnership has agreed
to fund up to $600,000 in conversion costs associated with this Property. No
amounts were funded as of the year ended December 31, 1998.
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.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. As consideration for the Merger, APF has agreed to
issue 3,886,185 APF Shares which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the price paid
by APF investors in APF's most recent public offering. In order to assist the
General Partners in evaluating the proposed merger consideration, the General
Partners retained Valuation Associates, a nationally recognized real estate
appraisal firm, to appraise the Partnership's restaurant property portfolio.
Based on Valuation Associates' appraisal, the Partnership's property portfolio
and other assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $38,283,180 as of December 31, 1998. Legg Mason Wood
Walker, Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a financial point
of view. The APF Shares are expected to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and, therefore,
would be freely tradable at the option of the former Limited Partners. At a
special meeting of the partners that is expected to be held in the third quarter
of 1999, Limited Partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior to
consummation of the transaction. The General Partners intend to recommend that
the Limited Partners of the Partnership approve the Merger. In connection with
their recommendation, the General Partners will solicit the consent of the
Limited Partners at the special meeting.
Results of Operations
During 1996, the Partnership owned and leased 44 wholly owned
Properties (including one Property in Richmond, Virginia, which was sold in
November 1996), during 1997, the Partnership owned and leased 43 wholly owned
Properties (including one Property in Orlando, Florida, which was sold in
October 1997), and during 1998, the Partnership owned and leased 42 wholly owned
Properties. During 1998, 1997, and 1996, the Partnership was a co-venturer in
two separate joint ventures that each owned and leased one Property. In
addition, during 1996, the Partnership owned and leased one Property, and during
1997 and 1998, owned and leased three Properties, with affiliates of the General
Partners as tenants-in-common. As of December 31, 1998, 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, 1998, 1997, and 1996, the
Partnership earned $2,862,491, $3,347,609, and $3,376,286, respectively, in
rental income from operating leases (net of adjustments to accrued rental
income) and earned income from direct financing leases from Properties wholly
owned by the Partnership. Rental and earned income decreased by approximately
$211,400 during 1998, as compared to 1997, primarily due to the fact that in
June 1998, Long John Silver's, Inc., filed for bankruptcy and rejected the
leases relating to three of the eight Properties it leased and ceased making
rental payments on the three rejected leases. The Partnership continued
receiving rental payments relating to the leases not rejected by the tenant. In
conjunction with the three rejected leases, during the year ended December 31,
1998, the Partnership wrote off approximately $307,400 of accrued rental income
(non-cash accounting adjustment relating to the straight-lining of future
scheduled rent increases over the lease term in accordance with generally
accepted accounting principles). During 1998, the Partnership re-leased two of
these Properties to new tenants. Rental payments commenced in December 1998 for
one lease and the other lease has a scheduled rent commencement date of March
1999. The General Partners are currently seeking either a new tenant or a
purchaser for the remaining property. The Partnership will not recognize rental
and earned income from the remaining Property until a new tenant is located or
until the Property is sold and the proceeds from such sale is reinvested in an
additional Property. While Long John Silver's, Inc. has not rejected or affirmed
the remaining five leases, there can be no assurance that some or all of the
leases will not be rejected in the future. The lost revenues resulting from the
remaining vacant Property and the possible rejection of the remaining five
leases could have an adverse effect on the results of operations of the
Partnership if the Partnership is unable to re-lease these Properties in a
timely manner.
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 former tenant of the Denny's
Property in Orlando, Florida, ceased making rental payments 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 the fact that the Partnership established an
allowance for doubtful accounts of approximately $15,300 and $85,400 during 1997
and 1996, 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
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). No such allowance was recorded during 1997. 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 during 1997, as
compared to 1996, is partially attributable to a decrease of approximately
$46,200, 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, 1998, 1997, and 1996, the Partnership
also earned $326,906, $287,751, and $299,495, respectively, in contingent rental
income. The increase in contingent rental income during 1998, as compared to
1997, is primarily the result of the gross sales of four restaurant Properties
meeting the threshold during 1998, under the terms of their leases requiring
payment of 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.
In addition, for the years ended December 31, 1998, 1997, and 1996, the
Partnership earned $243,492, $150,417, and $60,654, respectively, attributable
to net income earned by joint ventures in which the Partnership is a
co-venturer. The increase in net income earned by these joint ventures during
1998, as compared to 1997, is primarily attributable to the fact that in
December 1997, the Partnership reinvested the net sales proceeds it received
from the sale, in October 1997, of the Property in Orlando, Florida, in a
Property located in Miami, Florida, with affiliates of the general partners as
tenants-in-common, as described above in "Liquidity and Capital Resources." The
increase 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."
During the year ended December 31, 1998, four of the Partnership's
lessees, Flagstar Enterprises, Inc., Long John Silver's, Inc., Golden Corral
Corporation, and 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 affiliates as tenants-in-common). As of December 31, 1998, Flagstar
Corporation was the lessee under leases relating to 11 restaurants, Long John
Silver's, Inc. was the lessee under leases relating to five restaurants,
(excluding three restaurants for which Long John Silver's, Inc. rejected the
leases as a result of filing for bankruptcy, as described above), Golden Corral
Corporation was the lessee under leases relating to three restaurants, and
Foodmaker, Inc. was the lessee under leases relating to five restaurants. During
1998, Long John Silver's Inc. filed for bankruptcy. It is anticipated that based
on the minimum rental payments required by the leases, Flagstar Enterprises,
Inc., Golden Corral Corporation and Foodmaker, Inc. each will continue to
contribute more than ten percent of the Partnership's total rental income during
1999. In addition, during the year ended December 31, 1998, 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). It is anticipated that Hardee's, Golden Corral, Jack in the
Box and Burger King, each will continue to account for more than ten percent of
the total rental income under the terms of its leases. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner.
Operating expenses, including depreciation and amortization expense,
were $688,470, $748,305, and $646,794 for the years ended December 31, 1998,
1997, and 1996, respectively. The decrease in operating expenses during 1998, as
compared to 1997, is partially attributable to, and the increase in operating
expenses during 1997, as compared to 1996, is primarily the result of, the fact
that during 1997, 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 fact that the former tenant ceased making
rental payments. The Partnership ceased collection efforts on rental amounts not
collected from the tenant at the sale of the Property in October, 1997, as
described above in "Liquidity and Capital Resources." In addition, during 1997
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 decrease in operating expenses during 1998, as compared to 1997, is
partially offset by an increase in insurance and real estate tax expenses as a
result of Long John Silver's, Inc. filing for bankruptcy and rejecting the
leases relating to three Properties in June 1998. During 1998, the Partnership
entered into two leases, each with a new tenant for two of the three vacant
Properties, to operate the Properties as a Lions Choice restaurant and a
Steak-N-Shake restaurant, as described above. In accordance with the lease
agreement, the new tenant of the Lions Choice Property is responsible for real
estate taxes, insurance and maintenance relating to this Property; therefore,
the General Partners do not anticipate the Partnership will incur these expenses
for this Property in the future. The Partnership will continue to incur these
expenses relating to the Property that is expected to be converted into a
Steak-N-Shake Property until the conversion is completed, at which point the
tenant will be responsible for these expenses under the terms of the lease. In
addition, the Partnership will continue to incur these expenses, relating to the
one remaining vacant Property until a new tenant or purchaser is located. The
Partnership is currently seeking either a new tenant or a purchaser for this
Property. In addition, the decrease in operating expenses during 1998, is
partially offset by an increase in depreciation expense due to the fact that
during 1998, the Partnership reclassified the three vacant Properties from net
investment in direct financing leases to land and building on operating leases.
The decrease in operating expenses during 1998 is also partially offset by the
fact that the Partnership has incurred $23,291 in transaction costs related to
the General Partners retaining financial and legal advisors to assist them in
evaluating and negotiating the proposed Merger with APF, as described above in
"Liquidity and Capital Resources." If the Limited Partners reject the Merger,
the Partnership will bear the portion of the transaction costs based upon the
percentage of "For" votes and the General Partners will bear the portion of such
transaction costs based upon the percentage of "Against" votes and abstentions.
During the year ended December 31, 1998, the Partnership recorded a
provision for loss on building in the amount of $297,885 for financial purposes
relating to one of the Properties for which Long John Silver's, Inc. rejected
the lease. The allowance represents the difference between the Property's
carrying value at December 31, 1998 and the current estimate of net realizable
value at December 31, 1998 for the Property. No such allowance was established
during the years ended December 31, 1997 and 1996.
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. No Properties were sold during 1998.
The Partnership's leases as of December 31, 1998, are generally
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.
Year 2000
The Year 2000 problem is the result of information technology systems
and embedded systems (products which are made with microprocessor (computer)
chips such as HVAC systems, physical security systems and elevators) using a
two-digit format, as opposed to four digits, to indicate the year. Such
information technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.
The Partnership currently does not have any information technology
systems. Affiliates of the General Partners provide all services requiring the
use of information technology systems pursuant to a management agreement with
the Partnership. The maintenance of embedded systems, if any, at the
Partnership's Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's leases. The General Partners
and affiliates have established a team dedicated to reviewing the internal
information technology systems used in the operation of the Partnership, and the
information technology and embedded systems and the Year 2000 compliance plans
of the Partnership's tenants, significant suppliers, financial institutions and
transfer agent.
The information technology infrastructure of the affiliates of the
General Partners consists of a network of personal computers and servers that
were obtained from major suppliers. The affiliates utilize various
administrative and financial software applications on that infrastructure to
perform the business functions of the Partnership. The inability of the General
Partners and affiliates to identify and timely correct material Year 2000
deficiencies in the software and/or infrastructure could result in an
interruption in, or failure of, certain of the Partnership's business activities
or operations. Accordingly, the General Partners and affiliates have requested
and are evaluating documentation from the suppliers of the software and
infrastructure of the affiliates regarding the Year 2000 compliance of their
products that are used in the business activities or operations of the
Partnership. The General Partners and affiliates have not yet received
sufficient certifications to be assured that the suppliers have fully considered
and mitigated any potential material impact of the Year 2000 deficiencies. The
costs expected to be incurred by the General Partners and affiliates to become
Year 2000 compliant will be incurred by the General Partners and affiliates;
therefore, these costs will have no impact on the Partnership's financial
position or results of operations.
The Partnership has material third party relationships with its
tenants, financial institutions and transfer agent. The Partnership depends on
its tenants for rents and cash flows, its financial institutions for
availability of cash and its transfer agent to maintain and track investor
information. If any of these third parties are unable to meet their obligations
to the Partnership because of the Year 2000 deficiencies, such a failure may
have a material impact on the Partnership. Accordingly, the General Partners
have requested and are evaluating documentation from the Partnership's tenants,
financial institutions, and transfer agent relating to their Year 2000
compliance plans. The General Partners have not yet received sufficient
certifications to be assured that the tenants, financial institutions, and
transfer agent have fully considered and mitigated any potential material impact
of the Year 2000 deficiencies. Therefore, the General Partners do not, at this
time, know of the potential costs to the Partnership of any adverse impact or
effect of any Year 2000 deficiencies by these third parties.
The General Partners currently expect that all year 2000 compliance
testing and any necessary remedial measures on the information technology
systems used in the business activities and operations of the Partnership will
be completed prior to June 30, 1999. Based on the progress the General Partners
and affiliates have made in identifying and addressing the Partnership's Year
2000 issues and the plan and timeline to complete the compliance program, the
General Partners do not foresee significant risks associated with the
Partnership's Year 2000 compliance at this time. Because the General Partners
and affiliates are still evaluating the status of the information technology
systems used in business activities and operations of the Partnership and the
systems of the third parties with which the Partnership conducts its business,
the General Partners have not yet developed a comprehensive contingency plan and
are unable to identify "the most reasonably likely worst case scenario" at this
time. If the General Partners identify significant risks related to the
Partnership's Year 2000 compliance or if the Partnership's Year 2000 compliance
program's progress deviates substantially from the anticipated timeline, the
General Partners will develop appropriate contingency plans.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
----
Report of Independent Accountants 14
Financial Statements:
Balance Sheets 15
Statements of Income 16
Statements of Partners' Capital 17
Statements of Cash Flows 18
Notes to Financial Statements 20
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XIII, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XIII, Ltd. (a Florida limited partnership) at December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules listed in the index appearing under item 14(a)(2)
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related financial statements. 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 of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Orlando, Florida
February 1, 1999, except for Note 11 for which the date is March 11, 1999
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
1998 1997
----------------- ----------------
<S> <C>
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on building $22,945,358 $22,788,618
Net investment in direct financing leases 6,951,890 7,910,470
Investment in joint ventures 2,451,336 2,457,810
Cash and cash equivalents 766,859 907,980
Receivables, less allowance for doubtful
accounts of $532 in 1998 121,119 23,946
Prepaid expenses 8,453 10,368
Lease costs 17,875 --
Organization costs, less accumulated
amortization of $10,000 and $9,422 -- 578
Accrued rental income 1,424,603 1,423,820
----------------- ----------------
$34,687,493 $35,523,590
================= ================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 4,068 $ 7,671
Accrued and escrowed real estate taxes
payable 6,923 --
Distributions payable 850,002 850,002
Due to related parties 22,529 6,791
Rents paid in advance and deposits 54,568 5,570
----------------- ----------------
Total liabilities 938,090 870,034
Commitment (Note 10)
Partners' capital 33,749,403 34,653,556
----------------- ----------------
$34,687,493 $35,523,590
================= ================
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
1998 1997 1996
-------------- -------------- --------------
Revenues:
Rental income from
operating leases $ 2,404,934 $ 2,371,062 $ 2,477,156
Adjustments to accrued rental
income (307,405 ) -- --
Earned income from direct
financing leases 764,962 976,547 899,130
Contingent rental income 326,906 287,751 299,495
Interest and other income 49,321 46,693 59,319
-------------- -------------- --------------
3,238,718 3,682,053 3,735,100
-------------- -------------- --------------
Expenses:
General operating and
administrative 150,239 152,918 156,466
Bad debt expense -- 123,071 --
Professional services 26,869 25,595 33,746
Management fees to related party 35,257 34,321 35,675
Real estate taxes 13,989 -- 10,680
State and other taxes 16,172 18,301 16,793
Depreciation and amortization 422,653 394,099 393,434
Transaction costs 23,291 -- --
-------------- -------------- --------------
688,470 748,305 646,794
-------------- -------------- --------------
Income Before Equity in Earnings of
Joint Ventures, Gain (Loss) on
Sale of Land, Buildings and Investment
in Direct Financing Lease, and Provision 2,550,248 2,933,748 3,088,306
for Loss on Building
Equity in Earnings of Joint Ventures 243,492 150,417 60,654
Gain (Loss) on Sale of Land, Buildings and
Investment in Direct Financing Lease -- (48,538 ) 82,855
Provision for Loss on Building (297,885 ) -- --
-------------- -------------- --------------
Net Income $ 2,495,855 $ 3,035,627 $ 3,231,815
============== ============== ==============
Allocation of Net Income:
General partners $ 26,667 $ 30,690 $ 31,490
Limited partners 2,469,188 3,004,937 3,200,325
-------------- -------------- --------------
$ 2,495,855 $ 3,035,627 $ 3,231,815
============== ============== ==============
Net Income Per Limited Partner Unit $ 0.62 $ 0.75 $ 0.80
============== ============== ==============
Weighted Average Number of
Limited Partner Units Outstanding 4,000,000 4,000,000 4,000,000
============== ============== ==============
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1998, 1997, and 1996
General Partners Limited Partners
--------------------------- -------------------------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs Total
-------------- ------------ -------------- ------------- ----------- ----------- -------------
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
Distribution to limited
partners ($0.85 per
limited partner unit) -- -- -- (3,400,008) -- -- (3,400,008 )
Net income -- 26,667 -- -- 2,469,188 -- 2,495,855
--------- ----------- -------------- ------------ ---------- ------------ -----------
Balance, December 31, 1998 $ 1,000 $ 162,874 $ 40,000,000 $(17,728,408) $15,979,106 $(4,665,169) $33,749,403
========= =========== ============== ============= =========== ============ =============
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1998 1997 1996
---------------- ---------------- ----------------
Increase (Decrease) in Cash and Cash
Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $3,235,985 $3,329,633 $3,476,985
Distributions from joint ventures 250,270 151,322 93,700
Cash paid for expenses (245,273 ) (236,793 ) (251,454 )
Interest received 36,319 29,395 48,350
---------------- ---------------- ----------------
Net cash provided by operating
activities 3,277,301 3,273,557 3,367,581
---------------- ---------------- ----------------
Cash Flows from Investing Activities:
Proceeds from sale of land and building -- 932,849 550,000
Advances to tenant -- (196,980 ) --
Repayment of advances -- 127,843 --
Investment in joint ventures (539 ) (1,482,849 ) --
Payment of lease costs (17,875 ) -- --
Decrease (increase) in restricted cash -- 550,000 (550,000 )
---------------- ---------------- ----------------
Net cash used in investing activities (18,414 ) (69,137 ) --
---------------- ---------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,400,008 ) (3,400,008 ) (3,400,008 )
---------------- ---------------- ----------------
Net cash used in financing activities (3,400,008 ) (3,400,008 ) (3,400,008 )
---------------- ---------------- ----------------
Net Decrease in Cash and Cash Equivalents (141,121 ) (195,588 ) (32,427 )
Cash and Cash Equivalents at Beginning of Year 907,980 1,103,568 1,135,995
---------------- ---------------- ----------------
Cash and Cash Equivalents at End of Year $ 766,859 $ 907,980 $1,103,568
================ ================ ================
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
1998 1997 1996
--------------- --------------- ----------------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 2,495,855 $ 3,035,627 $ 3,231,815
--------------- --------------- ----------------
Adjustments to reconcile netincome to
net cash provided by operating
activities:
Bad debt expense -- 123,071 --
Depreciation 421,840 391,434 391,434
Amortization 637 2,665 2,000
Equity in earnings of joint ventures,
net of distributions 6,954 905 33,046
Loss (gain) on sale of land and
building -- 48,538 (82,855 )
Provision for loss on building 297,885 -- --
Decrease (increase) in receivables (97,173 ) 23,845 (28,034 )
Decrease in net investment in direct
financing leases 82,115 84,646 80,214
Increase (decrease) in prepaid
expenses 1,915 (1,225 ) (5,005 )
Increase in accrued rental income (783 ) (378,850 ) (313,540 )
Increase (decrease) in accounts
payable and accrued expenses 3,320 (12,761 ) 12,137
Increase (decrease) in due to related
parties 15,738 4,197 (4,773 )
Increase (decrease) in rents paid in
advance and deposits 48,998 (48,535 ) 51,142
--------------- --------------- ----------------
Total adjustments 781,446 237,930 135,766
--------------- --------------- ----------------
Net Cash Provided by Operating Activities $ 3,277,301 $ 3,273,557 $ 3,367,581
=============== =============== ================
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Distributions declared and unpaid at
December 31 $ 850,002 $ 850,002 $ 850,002
=============== =============== ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997, and 1996
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.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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. Whenever a tenant defaults
under the terms of its lease, or events or changes in
circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership
either reserves or writes-off the cumulative accrued rental
income balance.
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. If an impairment is indicated, the assets are
adjusted to their fair value. 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.
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.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 were amortized over five years
using the straight-line method.
Lease Costs - Lease incentive costs and brokerage and legal fees
associated with negotiating new leases are amortized over the term of
the new lease 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.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1998 presentation.
These reclassifications had no effect on partners' capital or net
income.
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:
1998 1997
------------- --------------
Land $12,742,897 $ 12,742,897
Buildings 12,607,970 11,743,041
------------- --------------
25,350,867 24,485,938
Less accumulated depreciation (2,107,624 ) (1,697,320 )
------------- --------------
23,243,243 22,788,618
Less allowance for loss on building (297,885 ) --
------------- --------------
$22,945,358 $ 22,788,618
============= ==============
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
3. Land and Buildings on Operating Leases - Continued:
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).
At December 31, 1998, the Partnership established an allowance for loss
on building of $297,885, relating to one property in Philadelphia,
Pennsylvania. The tenant of this property filed for bankruptcy and
ceased payment of rents under the terms of its lease agreement. The
allowance represents the difference between the carrying value of the
property at December 31, 1998, and the current estimate of net
realizable value for this property.
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, 1998, 1997, and 1996, the Partnership
recognized $783 (net of $307,405 in write-offs), $378,850, and
$313,540, 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, 1998:
1999 $ 2,188,225
2000 2,179,331
2001 2,190,526
2002 2,220,532
2003 2,257,154
Thereafter 20,981,325
-----------------
$32,017,093
=================
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.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1998 1997
--------------- --------------
Minimum lease payments
receivable $13,789,643 $15,747,868
Estimated residual values 2,344,575 2,582,058
Less unearned income (9,182,328 ) (10,419,456)
--------------- --------------
Net investment in direct financing
leases $6,951,890 $7,910,470
=============== ==============
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).
In June 1998, three of the Partnership's leases with Long John
Silver's, Inc., were rejected in connection with the tenant filing for
bankruptcy. As a result, the Partnership reclassified these assets from
net investment in direct financing leases to land and buildings on
operating leases. In accordance with Statement of Financial Accounting
Standards #13, "Accounting for Leases," the Partnership recorded the
reclassified assets at the lower of original cost, present fair value,
or present carrying value. No loss on termination of direct financing
leases was recorded for financial reporting purposes.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1998:
1999 $ 857,997
2000 857,997
2001 870,737
2002 888,571
2003 889,113
Thereafter 9,425,228
-----------------
$13,789,643
=================
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
5. Investment in Joint Ventures:
The Partnership has a 50 percent 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, 1998, 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, 1998, the Partnership
owned a 63.09% interest in this property.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
5. Investment in Joint Ventures - Continued:
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, 1998, the Partnership
owned a 47.83% interest in this property.
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:
1998 1997
----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation $4,174,420 $4,256,861
Net investment in direct financing
leases 360,790 364,479
Cash 19,083 18,729
Receivables 546 --
Prepaid expenses 454 380
Accrued rental income 182,217 106,653
Liabilities 16,028 15,653
Partners' capital 4,721,482 4,731,449
Revenues 569,719 347,971
Net income 476,700 285,922
The Partnership recognized income totalling $243,492, $150,417, and
$60,654 for the years ended December 31, 1998, 1997, and 1996,
respectively, from these joint ventures and the properties held as
tenants-in-common with affiliates.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
6. 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, not in
liquidation of the Partnership, 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, not in
liquidation of the Partnership, 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.
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: i) first to pay and discharge all
of the Partnership's liabilities to creditors, ii) second, to establish
reserves that may be deemed necessary for any anticipated or unforeseen
liabilities or obligations of the Partnership, iii) third, to pay all
of the Partnership's liabilities, if any, to the general and limited
partners, iv) fourth, after allocations of net income, gains and/or
losses, to distribute to the partners with positive capital accounts
balances, in proportion to such balances, up to amounts sufficient to
reduce such positive balances to zero, and v) thereafter, any funds
remaining shall then be distributed 95 percent to the limited partners
and five percent to the general partners.
During each of the years ended December 31, 1998, 1997, and 1996, the
Partnership declared distributions to the limited partners of
$3,400,008. No distributions have been made to the general partners to
date.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
7. 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>
1998 1997 1996
-------------- ------------ ------------
<S> <C>
Net income for financial reporting purposes $2,495,855 $3,035,627 $3,231,815
Depreciation for tax reporting purposes in
excess of depreciation for financial
reporting purposes (59,127 ) (100,696 ) (103,634 )
Direct financing leases recorded as
operating leases for tax reporting
purposes 82,115 84,646 80,214
Capitalization of transaction costs for tax 23,291 -- --
reporting purposes
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 (27,118 ) (19,727 ) 6,819
Gain on sale of property for financial
reporting purposes, deferred for tax -- -- (82,855 )
reporting purposes
Loss on sale of property for financial
reporting purposes in excess of loss for
tax reporting purposes -- 38,823 --
Allowance for loss on building 297,885 -- --
Allowance for doubtful accounts 532 (150,734 ) 102,198
Accrued rental income (783 ) (378,850 ) (313,540 )
Rents paid in advance 38,165 (48,535 ) 51,142
-------------- ------------ ------------
Net income for federal income tax
purposes $2,850,815 $2,460,554 $2,972,159
============== ============ ============
</TABLE>
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
8. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the majority stockholder
of CNL Fund Advisors, Inc. The other individual general partner, Robert
A. Bourne, serves as treasurer, director and vice chairman of the board
of CNL Fund Advisors. During the years ended December 31, 1998, 1997,
and 1996, CNL Fund Advisors, Inc. (hereinafter referred to as the
"Affiliate") performed certain services for the Partnership, as
described below.
During the years ended December 31, 1998, 1997, and 1996, the Affiliate
acted as manager of the Partnership's properties pursuant to a
management agreement with the Partnership. In connection therewith, the
Partnership agreed to pay the Affiliate 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 Affiliate. All or any portion of the management fee
not taken as to any fiscal year shall be deferred without interest and
may be taken in such other fiscal year as the Affiliates shall
determine. The Partnership incurred management fees of $35,257,
$34,321, and $35,675 for the years ended December 31, 1998, 1997, and
1996, respectively.
The Affiliate is 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 Affiliate provides 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 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.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
8. Related Party Transactions - Continued:
During the years ended December 31, 1998, 1997, and 1996, the Affiliate
provided accounting and administrative services to the Partnership on a
day-to-day basis. For the years ended December 31, 1998, 1997, and
1996, the expenses incurred for these services were $98,719, $87,322,
and $91,272, 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.
The due to related parties at December 31, 1998 and 1997, totalled
$22,529, and $6,791, respectively.
9. 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- in-common with affiliates)
for each of the years ended December 31:
1998 1997 1996
----------- ---------- ------------
Flagstar Enterprises, Inc. $649,525 $744,199 $765,109
Long John Silver's, Inc. 571,066 759,064 764,565
Golden Corral Corporation 542,900 536,886 539,568
Foodmaker, Inc. 458,690 450,816 450,393
Checkers Drive-In
Restaurants, Inc. N/A N/A 412,422
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
9. Concentration of Credit Risk - Continued:
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from joint ventures and the properties held as tenants-in-common with
affiliates) for each of the years ended December 31:
1998 1997 1996
--------- ----------- -----------
Hardee's $ 649,525 $ 649,762 $ 670,249
Long John Silver's 571,066 759,064 764,565
Golden Corral Family
Steakhouse Restaurants 542,900 536,886 539,568
Burger King 497,670 484,111 431,280
Jack in the Box 458,690 450,816 450,393
Checkers Drive-In Restaurants N/A N/A 412,422
The information denoted by N/A indicates that for each period
presented, the tenant and the chains did not represent more than ten
percent of the Partnership's total rental and earned income.
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 if the Partnership is not able to re-lease the
properties in a timely manner.
In June 1998, Long John Silver's, Inc. filed for bankruptcy and
rejected the leases relating to three of the eight Properties it leased
and ceased making rental payments to the Partnership. During 1998, the
Partnership entered into a new lease for two of the three properties
with new tenants. The general partners are currently seeking either a
new tenant or a purchaser for the remaining property. The Partnership
will not recognize rental and earned income from this property until a
new tenant is located or until the property is sold and the proceeds
from such sale is reinvested in an additional property. While Long John
Silver's, Inc. has not rejected or affirmed the remaining five leases,
there can be no assurance that some or all of the leases will not be
rejected in the future. The lost revenues resulting from the vacant
property, and the possible rejection of the remaining five leases could
have an adverse effect on the results of operations of the Partnership
if the Partnership is unable to re-lease these properties in a timely
manner.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
10. Commitment:
In November 1998, the Partnership entered into a new lease for the
property in Tampa, Florida, with a new tenant to operate the property
as a Steak-N-Shake restaurant. In connection therewith, the Partnership
agreed to pay up to $600,000 in renovation costs, none of which were
incurred as of the year ended December 31, 1998.
11. Subsequent Event:
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to
which the Partnership would be merged with and into a subsidiary of APF
(the "Merger"). As consideration for the Merger, APF has agreed to
issue 3,886,185 shares of its common stock, par value $0.01 per shares
(the "APF Shares") which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the
price paid by APF investors in APF's most recent public offering. In
order to assist the general partners in evaluating the proposed merger
consideration, the general partners retained Valuation Associates, a
nationally recognized real estate appraisal firm, to appraise the
Partnership's restaurant property portfolio. Based on Valuation
Associates' appraisal, the Partnership's property portfolio and other
assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $38,283,180 as of December 31, 1998. Legg Mason
Wood Walker, Incorporated has rendered a fairness opinion that the APF
Share consideration, payable by APF, is fair to the Partnership from a
financial point of view. The APF Shares are expected to be listed for
trading on the New York Stock Exchange concurrently with the
consummation of the Merger, and, therefore, would be freely tradable at
the option of the former limited partners. At a special meeting of the
partners that is expected to be held in the third quarter of 1999,
limited partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior
to consummation of the transaction. The general partners intend to
recommend that the limited partners of the Partnership approve the
Merger. In connection with their recommendation, the general partners
will solicit the consent of the limited partners at the special
meeting. If the limited partners reject the Merger, the Partnership
will bear the portion of the transaction costs based upon the
percentage of "For" votes and the general partners will bear the
portion of such transaction costs based upon the percentage of
"Against" votes and abstentions.
<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 52, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, a director and Chief Executive Officer since its formation
in 1980. Mr. Seneff has been Chairman of the Board of Directors, director, and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979. Mr.
Seneff also has held the position of Chairman of the Board of Directors, Chief
Executive Officer, President and director of CNL Management Company, a
registered investment advisor, since its formation in 1976, has served as Chief
Executive Officer, Chairman of the Board and a director of CNL Investment
Company, has served as Chief Executive Officer, a director and Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc., a publicly-traded REIT,
listed on the NYSE, since 1992, served as Chief Executive Officer, a director
and Chairman of the Board of Directors of CNL Realty Advisors, Inc. from its
inception in May 1992 through December 1997, at which time such company merged
with Commercial Net Lease Realty, Inc., and has held the position of Chief
Executive Officer, Chairman of the Board and a director of CNL Institutional
Advisors, Inc., a registered investment advisor, since its inception in December
1990. Mr. Seneff has served as Chairman of the Board of Directors of CNL
American Properties Fund, Inc. since December 1994 and as a director and Chief
Executive Officer since May 1994. Mr. Seneff has served as Chairman of the
Board, Chief Executive Officer and a director of CNL Fund Advisors, Inc. since
March 1994. Mr. Seneff has served as Chairman of the Board, Chief Executive
Officer and a director of CNL Hospitality Properties, Inc. since June 1996 and
of CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also served
as Chairman of the Board, Chief Executive Officer and a director of CNL Health
Care Properties, Inc. since December 1997 and CNL Health Care Advisors, Inc.
since July 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 advises 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 then $60 billion of retirement funds.
Mr. Seneff has served as a member of the board of directors of First Union
National Bank of Florida since May 1998 and has served as a member of the
Orlando Advisory Board of First Union National Bank of Florida since March 1994.
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 restaurants, office buildings, apartment complexes, hotels, and other real
estate. Included in these real estate ventures are approximately 65 privately
offered real estate limited partnerships in which Mr. Seneff, directly or
through an affiliated entity, serves or has served as a general partner. Also
included are CNL Income Fund, Ltd., CNL Income Fund II, Ltd., CNL Income Fund
III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund V, Ltd., CNL Income Fund
VI, Ltd., CNL Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund
IX, Ltd., CNL Income Fund X, Ltd., CNL Income Fund XI, Ltd., CNL Income Fund
XII, Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund
XVI, Ltd., CNL Income Fund XVII, Ltd. and CNL Income Fund XVIII, Ltd. (the "CNL
Income Fund Partnerships"), public real estate limited partnerships with
investment objectives similar to those of the Partnership, in which Mr. Seneff
serves as a general partner. Mr. Seneff received his degree in Business
Administration from Florida State University in 1968.
Robert A. Bourne, age 51, is President and Treasurer of CNL Group,
Inc., President, Treasurer, a director, and a registered principal of CNL
Securities Corp., President, Treasurer, and a director of CNL Investment
Company, and Chief Investment Officer, a director and Treasurer of CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne served
as President of CNL Institutional Advisor, Inc. from the date of its inception
through July 1997. Mr. Bourne served as President of Commercial Net Lease
Realty, Inc. from July 1992 through February 1996, served as Secretary and
Treasurer from February 1996 through December 1997, and has served as a director
since July 1992 and as Vice Chairman of the Board of Directors since February
1996. In addition, Mr. Bourne served as President of CNL Realty Advisors, Inc.
from May 1992 through February 1996, served as Treasurer from February 1996
through December 1997, served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from February 1996 through December 1997, at
which time such company merged with Commercial Net Lease Realty, Inc. Mr. Bourne
has served as a Vice Chairman of the Board of Directors and Treasurer of CNL
American Properties Fund, Inc. since February 1999, has served as a director
since May 1994 and previously served as President from May 1994 through February
1999. Mr. Bourne has served as a director of CNL Fund Advisors, Inc. since March
1994, has served as Treasurer and Vice Chairman of the Board of Directors since
September 1997, and previously served as President from March 1994 through
September 1997. Mr. Bourne has served as President and a director of CNL
Hospitality Properties, Inc. since June 1996 and of CNL Hospitality Advisors,
Inc. since January 1997. Mr. Bourne has served as President and director of CNL
Health Care Properties, Inc. since December 1997 and CNL Health Care Advisors,
Inc. since July 1997. 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
restaurants, office buildings, apartment complexes, 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. Mr. Bourne formerly was a
certified public accountant with Coopers & Lybrand and a partner in the firm of
Bourne & Rose, P.A. Mr. Bourne received a B.A. in Accounting, with honors, from
Florida State University in 1970.
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 majority 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.
Curtis B. McWilliams, age 43, joined CNL Group, Inc. in April 1997 and
currently serves as an Executive Vice President. In addition, Mr. McWilliams has
served as President of CNL Fund Advisors, Inc. and as President of the
Restaurant and Financial Services Groups within CNL Group, Inc. since April
1997. Mr. McWilliams has served as President of CNL American Properties Fund,
Inc. since February 1999 and previously served as Executive Vice President from
February 1998 through February 1999. From September 1983 through March 1997, Mr.
McWilliams was employed by Merrill Lynch & Co., most recently as Chairman of
Merrill Lynch's Private Advisory Services until March 1997. 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 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since January 1996, as Chief Operating Officer
since March 1995, and previously served as Senior Vice President since December
1994. In addition, Mr. Walker has served as Executive Vice President of CNL Fund
Advisors, Inc. since January 1996, Chief Operating Officer since April 1995, and
previously served as Senior Vice President from November 1994 through January
1996. In addition, Mr. Walker previously served as Executive Vice President of
CNL Hospitality Properties, Inc. and CNL Hospitality Advisors, Inc. From May
1992 to May 1994, Mr. Walker, a certified public accountant, was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network (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 50, a certified public accountant, has served as
Secretary of CNL American Properties Fund, Inc. since December 1994 and served
as Treasurer from December 1994 through February 1999. Ms. Rose has served as a
director and Secretary of CNL Fund Advisors, Inc. since March 1994, and as
Treasurer from the date of its inception through June 30, 1997. Ms. Rose has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer of
CNL Group, Inc. since December 1993, 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, as Treasurer of CNL Realty Advisors, Inc. from 1991 to February 1996, and
as Secretary and a director of CNL Realty Advisors, Inc. since its inception in
1991 until December 31, 1997, at which time CNL Realty Advisors, Inc. merged
with Commercial Net Lease Realty, Inc. In addition, Ms. Rose served as Secretary
and Treasurer of Commercial Net Lease Realty, Inc. from 1992 to February 1996.
Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality Properties,
Inc. and CNL Health Care Properties, Inc. and as Secretary, Treasurer and a
director of CNL Hospitality Advisors, Inc. and CNL Health Care Advisors, Inc.
Ms. Rose also currently serves as Secretary for approximately 50 additional
corporations. Ms. Rose oversees the legal compliance, accounting, tenant
compliance, and reporting for over 250 corporations, partnerships and joint
ventures. Prior to joining CNL, Ms. Rose was a partner with Robert A. Bourne in
the accounting firm of Bourne & Rose, P.A., Certified Public Accountants. Ms.
Rose holds a B.A. in Sociology from the University of Central Florida.
Jeanne A. Wall, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since December 1994. Ms. Wall has served as
Executive Vice President of CNL Fund Advisors, Inc. since November 1994, and
previously served as Vice President from March 1994 through November 1994. Ms.
Wall 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. Ms. Wall joined CNL Securities
Corp. in 1984. 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 its 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 until December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., and served as Vice President
of Commercial Net Lease Realty, Inc. from 1992 through December 31, 1997. In
addition, Ms. Wall serves as Executive Vice President of CNL Hospitality
Properties, Inc., CNL Hospitality Advisors, Inc., CNL Health Care Properties,
Inc. and CNL Health Care Advisors, Inc. 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 35, a certified public accountant, has
served as Chief Financial Officer of CNL American Properties Fund, Inc. since
January 1997 and as Chief Financial Officer of CNL Fund Advisors, Inc. since
September 1996. From March 1995 to July 1996, Mr. Shackelford 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.
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 March 11, 1999, 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 March 11, 1999, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
====
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. On March 11, 1999, the
Registrant entered into an Agreement and Plan of Merger with CNL American
Properties Fund, Inc. ("APF") pursuant to which the Registrant would be merged
with and into a subsidiary of APF (the "Merger"). For further discussion, see
Item 8. Financial Statement and Supplementary Data -- Note 11.
Subsequent Event.
<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, 1998, 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, 1998
----------------------- --------------------- -----------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed Operating expenses incurred on
operating expenses at the lower of cost or 90 percent behalf of the Partnership:
of the prevailing rate at which $101,134
comparable services could have been
obtained in the same geographic Accounting and administra-
area. Affiliates of the General tive services: $98,719
Partners from time to time incur
certain operating expenses on
behalf of the Partnership for which
the Partnership reimburses the
affiliates without interest.
Annual management fee to affiliates One percent of the sum of gross $35,257
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.
<PAGE>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
----------------------- --------------------- -----------------------
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to affiliates estate disposition fee, payable
upon sale of one or more
Properties, in an amount equal to
the lesser of (i) one-half of a
competitive real estate
commission, or (ii) three percent
of the sales price of such
Property or Properties. Payment of
such fee shall be made only if
affiliates of the General Partners
provide a substantial amount of
services in connection with the
sale of a Property or Properties
and shall be subordinated to
certain minimum returns to the
Limited Partners. However, if the
net sales proceeds are reinvested
in a replacement Property, no such
real estate disposition fee will
be incurred until such replacement
Property is sold and the net sales
proceeds are distributed.
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of Partnership net equal to one percent of Partnership
cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or sales not Partnership distributions of such
in liquidation of the Partnership net sales proceeds, subordinated to
certain minimum returns to the
Limited Partners.
<PAGE>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
----------------------- --------------------- -----------------------
General Partners' share of Partnership Distributions of net sales proceeds $ - 0 -
net sales proceeds from a sale or sales from a sale or sales of
in liquidation of the Partnership substantially all of the
Partnership's assets will be
distributed in the following order
or priority: (i) first, to pay all
debts and liabilities of the
Partnership and to establish
reserves; (ii) second, to Partners
with positive capital account
balances, determined after the
allocation of net income, net
loss, gain and loss, in proportion
to such balances, up to amounts
sufficient to reduce such balances
to zero; and (iii) thereafter, 95%
to the Limited Partners and 5% to
the General Partners.
</TABLE>
As discussed above in Item 8. Financial Statements and Supplementary
Data -- Note 11. Subsequent Event, the Registrant has entered into an Agreement
and Plan of Merger, dated March 11, 1999, with APF pursuant to which the
Registrant would be merged with and into a subsidiary of APF in exchange for the
issuance of APF Shares. The APF Shares are expected to be listed for trading on
the New York Stock Exchange concurrently with the consummation of the Merger. If
the Merger is approved by Limited Partners holding units greater than 50% of the
outstanding units of the Registrant, the General Partners of the Registrant
would receive certain benefits. For instance, following the Merger, James M.
Seneff, Jr. and Robert A. Bourne, the individual General Partners, will continue
to serve as directors of APF, with Mr. Seneff serving as Chairman and Mr. Bourne
serving as Vice Chairman. As APF directors, they may also be entitled to receive
stock options under any stock option plan adopted by APF.
<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, 1998 and 1997
Statements of Income for the years ended December 31, 1998,
1997, and 1996
Statements of Partners' Capital for the years ended December
31, 1998, 1997, and 1996
Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1998, 1997, and 1996
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1998
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1998
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.)
<PAGE>
10.3 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, 1998 through December 31, 1998.
<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 29th day of
March, 1999.
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 29, 1999
- ---------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 29, 1999
- ---------------------------
James M. Seneff, Jr. (Principal Executive Officer)
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1998, 1997, and 1996
Additions Deductions
------------------------------- ------------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
-------- ---------------- -------------- -------------- --------------- ------------- ------------- -----------
1996 Allowance for
doubtful
accounts (a) $ 49,747 $ -- $ 173,721 (b) $ -- (c) $ -- $223,468
============== ============== =============== ============= ============= ===========
1997 Allowance for
doubtful
accounts (a) $ 223,468 $ -- $ -- (b) $ 223,468 (c) $ -- $ --
============== ============== =============== ============= ============= ===========
1998 Allowance for
doubtful
accounts (a) $ -- $ -- $ 532 (b) $ -- (c) $ -- $ 532
============== ============== =============== ============= ============= ===========
(a) Deducted from receivables and accrued rental income on the balance
sheet.
(b) Reduction of rental, earned and other income.
(c) Amounts written off as uncollectible.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<S> <C>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
-------------------------- ---------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
------------ ------------ ------------ ----------- --------
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 - -
Lions Choice Restaurant:
Overland Park, Kansas - 452,691 - - -
Long John Silver's Restaurants:
Penn Hills, Pennsylvania - 292,370 - - -
Philadelphia, Pennsylvania (j) - 274,580 - 504,838 -
Arlington, Texas - 362,939 - - -
Johnstown, Pennsylvania - 254,412 - - -
Orlando, Florida - 299,696 139,676 - -
Austin, Texas - 463,937 - - -
Steak & Shake Restaurant:
Tampa, Florida - 372,748 - 360,090 -
Wendy's Old Fashioned Hamburger
Restaurant:
Salisbury, Maryland - 290,195 641,710 - -
------------ ------------ ----------- --------
$12,742,897 $10,098,622 $2,509,348 -
============ ============ =========== ========
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 an Operating Lease:
Denny's Restaurant:
Salem, Ohio - $131,762 - - -
============ ============ =========== ========
Property in Which the Partnership has
a 63.09% Interest as Tenants-In-Common
and has Invested in Under an Operating
Lease:
Burger King Restaurant:
Akron, Ohio (h) - $355,595 $517,030 - -
============ ============ =========== ========
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 - -
Lion's Choice Restaurant:
Overland Park, Kansas - - 611,694 - -
Long John Silver's Restaurants:
Penn Hills, Pennsylvania - - - 387,086 -
Arlington, Texas - - 449,369 - -
Johnstown, Pennsylvania - - - 427,552 -
Austin, Texas - - 517,109 - -
Quincy's Restaurant:
Mount Airy, North Carolina - 212,852 827,991 - -
------------ ------------ ----------- --------
$708,142 $5,118,002 $1,427,728 -
============ ============ =========== ========
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 - -
============ ============ =========== ========
Gross Amount at Which Life on Which
Carried at Close of Period (c) Depreciation in
----------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
------------ ------------ ---------- ------------ --------- -------- -------------
$256,901 $669,537 $926,438 $121,067 1988 07/93 (b)
211,835 771,616 983,451 139,525 1988 07/93 (b)
247,183 723,304 970,487 130,789 1989 07/93 (b)
174,843 618,815 793,658 111,895 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 83,667 1994 12/93 (b)
611,589 1,071,838 1,683,427 200,957 1991 05/93 (b)
625,527 964,122 1,589,649 179,529 1993 06/93 (b)
617,016 1,103,437 1,720,453 176,424 1994 11/93 (b)
197,336 417,418 614,754 75,478 1992 07/93 (b)
160,149 424,977 585,126 76,845 1992 07/93 (b)
164,004 (f) 164,004 - 1991 07/93 (d)
218,639 460,364 679,003 83,244 1993 07/93 (b)
204,516 (f) 204,516 - 1992 07/93 (d)
240,363 412,621 652,984 74,611 1992 07/93 (b)
226,815 431,574 658,389 78,038 1993 07/93 (b)
323,929 601,054 924,983 110,330 1992 06/93 (b)
315,842 590,708 906,550 106,867 1993 07/93 (b)
368,409 567,115 935,524 102,702 1992 07/93 (b)
404,752 592,173 996,925 107,078 1993 08/93 (b)
452,691 (f) 452,691 - 1993 12/93 (d)
292,370 (f) 292,370 - 1993 07/93 (d)
274,580 504,838 779,418 11,064 1993 07/93 (i)
362,939 (f) 362,939 - 1993 08/93 (d)
254,412 (f) 254,412 - 1993 08/93 (d)
299,696 139,676 439,372 23,943 1983 11/93 (b)
463,937 (f) 463,937 - 1993 12/93 (d)
372,748 360,090 732,838 7,805 1994 12/93 (d)
290,195 641,710 931,905 105,766 1993 01/94 (b)
- ---------- ------------ ------------- -----------
$12,742,897 $12,607,970 $25,350,867 $2,107,624
=========== ============ ============= ===========
$196,274 $434,428 $630,702 $73,118 1993 11/93 (b)
========== ============ ============= ===========
$260,439 $545,126 $805,565 $77,712 1994 09/94 (b)
========== ============ ============= ===========
$131,762 (f) $131,762 - 1991 03/95 (d)
========== ============ ============= ===========
$355,595 $517,030 $872,625 $33,221 1970 01/97 (b)
========== ============ ============= ===========
$976,357 $974,016 $1,950,373 $32,556 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 12/93 (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) (f) (e) 1992 07/93 (e)
- (f) (f) (d) 1991 03/95 (d)
</TABLE>
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(a) Transactions in real estate and accumulated depreciation during 1998,
1997, and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
----------------- -----------------
<S> <C>
Properties the Partnership has Invested
in Under Operating Leases:
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
Reclassified from net investment in
direct financing lease 864,929 (11,536 )
Depreciation expense -- 421,840
----------------- -----------------
Balance, December 31, 1998 (j) $ 25,350,867 $ 2,107,624
================= =================
Properties of Joint Venture in Which the
Partnership has a 50% Interest and has
Invested in Under Operating Leases:
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
Depreciation expense 14,480
--
----------------- -----------------
Balance, December 31, 1998 $ 630,702 $ 73,118
================= ====================
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
Accumulated
Cost Depreciation
---------------- ---------------
Properties in Which the Partnership has
a 66.13% Interest as Tenants-in-Common
and has Invested in Under Operating Leases:
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
Depreciation expense -- 18,171
--------------- --------------
Balance, December 31, 1998 $ 805,565 $ 77,712
=============== ==============
Property of Joint Venture in Which the
Partnership has a 27.8% Interest and has
Invested in Under Direct Financing
Leases:
Balance, December 31, 1995 $ 131,762 $ --
Depreciation expense (d) -- --
--------------- --------------
Balance, December 31, 1996 131,762 --
Depreciation expense (d) -- --
--------------- --------------
Balance, December 31, 1997 131,762 --
Depreciation expense (d) -- --
--------------- --------------
Balance, December 31, 1998 $ 131,762 $ --
=============== ==============
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
Accumulated
Cost Depreciation
---------------- ---------------
Properties in Which the Partnership has
a 63.09% 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
Depreciation expense -- 17,323
--------------- --------------
Balance, December 31, 1998 $ 872,625 $ 33,221
=============== ==============
Properties in Which the Partnership has
a 47.83% Interest as Tenants-in-Common
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
Depreciation expense -- 32,467
--------------- --------------
Balance, December 31, 1998 $ 1,950,373 $ 32,556
=============== ==============
</TABLE>
(b) Depreciation expense is computed for buildings and
improvements based upon estimated lives of 30 years.
(c) As of December 31, 1998, 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 $4,767,863, 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.
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
(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.
(i) Effective June 1998, the lease for this property was
terminated, resulting in the reclassification of the building
portion of the lease as an operating lease. The building was
recorded at net book value as of June 11, 1998 and will be
depreciated over its remaining estimated life of approximately
26 years.
(j) For financial reporting purposes, the undepreciated cost of
the Property in Philadelphia, Pennsylvania, was written down
to net realizable value due to an impairment in value. The
Partnership recognized the impairment by recording an
allowance for loss on building in the amount of $297,885 at
December 31, 1998. The impairment at December 31, 1998
represents the difference between the Property's carrying
value and the General Partners' estimate of the net realizable
value of the Property based on an anticipated sales price of
this Property to an interested and unrelated third party. The
cost of the Property presented on this schedule is the gross
amount at which the Property was carried at December 31, 1998,
excluding the allowance for loss on building.
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
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 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.)
<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, 1998, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10-K of CNL Income Fund XIII, Ltd. for the year ended December 31,
1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<CASH> 766,859
<SECURITIES> 0
<RECEIVABLES> 121,651
<ALLOWANCES> 532
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 25,052,982
<DEPRECIATION> 2,107,624
<TOTAL-ASSETS> 34,687,493
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 33,749,403
<TOTAL-LIABILITY-AND-EQUITY> 34,687,493
<SALES> 0
<TOTAL-REVENUES> 3,238,718
<CGS> 0
<TOTAL-COSTS> 688,470
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,495,855
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,495,855
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,495,855
<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>
