-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C42UaA4Yj4oyLNZUJNAIVBU/vorO7ivOh8U+HeoGq9UckOIxOZtJU0FnnXq8G+Dz iixkssXDT9Rl2HnQudgkxw== 0000893562-02-000001.txt : 20020415 0000893562-02-000001.hdr.sgml : 20020415 ACCESSION NUMBER: 0000893562-02-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNL INCOME FUND XIII LTD CENTRAL INDEX KEY: 0000893562 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 593143094 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23968 FILM NUMBER: 02592711 BUSINESS ADDRESS: STREET 1: 400 EAST SOUTH ST STE 500 CITY: ORLANDO STATE: FL ZIP: 32801 BUSINESS PHONE: 4074221574 MAIL ADDRESS: STREET 1: 400 E SOUTH STREET STE 500 CITY: ORLANDO STATE: FL ZIP: 32810 10-K 1 if13.txt CNL INCOME FUND XIII, LTD. 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, 2001 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) 450 South Orange Avenue Orlando, Florida 32801 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (407) 540-2000 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 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, totaled $35,324,831. The net offering proceeds 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 totaling $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, and reinvested the proceeds in a Burger King Property located in Akron, Ohio, with an affiliate of the General Partners as tenants-in-common, in 1997. 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. During the year ended December 31, 1999, the Partnership sold its Jack in the Box Property in Houston, Texas. During the year ended December 31, 2001, the Partnership sold its Property in Mount Airy, North Carolina, to the tenant and reinvested the net sales proceeds in a Golden Corral Property located in Blue Springs, Missouri, with an affiliate of the General Partners as tenants-in-common. As of December 31, 2001, the Partnership owned 46 Properties. The 46 Properties include eight Properties consisting of land only, interests in two Properties owned by joint ventures in which the Partnership is a co-venturer and four Properties owned with affiliates as tenants-in-common. Under the leases of the eight Properties consisting of land only, the tenant owns the buildings currently on the land and has the right, if not in default under the lease, to remove the buildings from the land at the end of the lease terms. The Partnership generally leases the Properties on a triple-net basis with the lessees responsible for all repairs and maintenance, property taxes, insurance and utilities. The Partnership will hold its Properties until the General Partners determine that the sale or other disposition of the Properties is advantageous in view of the Partnership's investment objectives. In deciding whether to sell Properties, the General Partners will consider factors such as potential capital appreciation, net cash flow and federal income tax considerations. Certain lessees also have been granted options to purchase Properties, generally at the Property's then fair market value after a specified portion of the lease term has elapsed. 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. 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. Under the Agreement and Plan of Merger, APF was to issue shares of its common stock as consideration for the Merger. On March 1, 2000, the General Partners and APF announced that they had mutually agreed to terminate the Agreement and Plan of Merger. The agreement to terminate the Agreement and Plan of Merger was based, in large part, on the General Partners' concern that, in light of market conditions relating to publicly traded real estate investment trusts, the value of the transaction had diminished. As a result of such diminishment, the General Partners' ability to unequivocally recommend voting for the transaction, in the exercise of their fiduciary duties, had become questionable. The General Partners are continuing to evaluate strategic alternatives for the Partnership, including alternatives to provide liquidity to the Limited Partners. 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 and Properties owned as tenants-in-common with affiliates of the General Partners provide for initial terms ranging from 10 to 20 years (the average being 18 years), and expire between 2003 and 2018. All leases are generally 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 $30,600 to $229,800. A majority of the leases provide for percentage rent, based on sales in excess of a specified amount. In addition, the majority of the leases provide that, commencing in specified lease years, the annual base rent required under the terms of the lease will increase. Generally, the leases of the Properties provide for two to five five-year renewal options subject to the same terms and conditions as the initial lease. Lessees of 36 of the Partnership's 46 Properties 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. Fair market value will be determined through an appraisal by an independent appraisal firm. 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 addition, during 2001, the Partnership reinvested the majority of the net sales proceeds it received from the sale of the Property in Mount Airy, North Carolina in a Golden Corral located in Blue Springs, Missouri, as tenants-in-common with CNL Income Fund XV, Ltd., an affiliate of the General Partners and a Florida Limited Partnership, as described below in "Joint Venture and Tenancy in Common Arrangements." The lease terms for this Property are substantially the same as the Partnership's other leases, as described above. Major Tenants During 2001, three lessees of the Partnership, Flagstar Enterprises, Inc., Long John Silver's, Inc., and Golden Corral Corporation, each contributed more than ten percent of the Partnership's total rental and earned income (including the Partnership's share of rental and earned income from Properties owned by joint ventures and Properties owned with an affiliate of the General Partners as tenants-in-common). As of December 31, 2001, 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, and Golden Corral Corporation was the lessee under leases relating to four restaurants. It is anticipated that, based on the minimum rental payments required by the leases, these three lessees will each continue to contribute more than ten percent of the Partnership's total rental and earned income in 2002. In addition, four Restaurant Chains, Long John Silver's, Hardee's, Golden Corral Family Steakhouse Restaurants ("Golden Corral"), and Burger King, each accounted for more than ten percent of the Partnership's total rental and earned income during 2001 (including the Partnership's share of rental and earned income from Properties owned by joint ventures and Properties owned with affiliates of the General Partners as tenants-in-common). It is anticipated that these four Restaurant chains each will continue to account for more than ten percent of the Partnership's total rental and earned income under the terms of the leases in 2002. 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 in excess of 20 percent of the total assets of the Partnership. Joint Venture and Tenancy in Common Arrangements The Partnership has entered into two separate joint venture arrangements: Attalla Joint Venture and Salem Joint Venture, with CNL Income Fund XIV, Ltd., a limited partnership organized pursuant to the laws of the state of Florida and an affiliate of the General Partners, for each joint venture to purchase and hold one Property. The joint venture arrangements provide for the Partnership and its joint venture partner 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 has a 50% interest in Attalla Joint Venture and a 27.8% interest in Salem Joint Venture. The Partnership and its joint venture partner 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 agreements to hold an Arby's Property, as tenants-in-common, with CNL Income Fund II, Ltd.; a Burger King Property, as tenants-in-common, with CNL Income Fund XVII, Ltd.; and a Chevy's Fresh Mex Property, as tenants-in-common, with CNL Income Fund III, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund X, Ltd. In addition, in April 2001, the Partnership entered into an agreement to hold a Golden Corral Property, as tenants-in-common, with CNL Income Fund XV, Ltd. Each of the CNL Income Funds is an affiliate of the General Partners and is a limited partnership organized pursuant to the laws of the state of Florida. The agreements provide for the Partnership and the affiliates to share in the profits and losses of the Properties in proportion to each co-tenant's percentage interest. The Partnership owns a 66.13%, 63.09%, 47.83% and 41% interest in these Properties, respectively. The tenancy in common agreements restrict each party's ability to sell, transfer, or assign its interest in the tenancy in common's Property without first offering it for sale to the remaining parties. The use of joint venture and tenancy in common arrangements allows the Partnership to fully invest its available funds at times at which it would not have sufficient funds to purchase an additional property, or at times when a suitable opportunity to purchase an additional property is not available. The use of joint venture and tenancy in common arrangements also provides the Partnership with increased diversification of its portfolio among a greater number of properties. In addition, tenancy in common arrangements may allow the Partnership to defer the gain for federal income tax purposes upon the sale of a Property if the proceeds are reinvested in an additional Property. Certain Management Service CNL APF Partners, LP, 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 APF Partners, LP (the "Advisor") 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. The Advisor also assists the General Partners in negotiating the leases. For these services, the Partnership has agreed to pay the Advisor 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. During 2000, CNL Fund Advisors, Inc. assigned its rights in, and its obligations under, the management agreement with the Partnership to CNL APF Partners, LP. All of the terms and conditions of the management agreement, including the payment of fees, as described above, remain unchanged. The management agreement continues until the Partnership no longer owns an interest in any Properties unless terminated at an earlier date upon 60 days' prior notice by either party. Competition The fast-food and family-style restaurant business is characterized by intense competition. The restaurants on the Partnership's Properties compete with independently owned restaurants, restaurants which are part of local or regional chains, and restaurants in other well-known national chains, including those offering different types of food and service. Employees The Partnership has no employees. The officers of CNL Realty Corporation and the officers and employees of APF, the parent company of the Advisor, 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 Financial 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, 2001, the Partnership owned 46 Properties. Of the 46 Properties, 40 are owned by the Partnership in fee simple, two are owned through joint venture arrangements and four are owned through tenancy in common arrangements. See Item 1. Business - Joint Venture and Tenancy in Common Arrangements. The Partnership is not permitted to encumber its Properties under the terms of its partnership agreement. Reference is made to the Schedule of Real Estate and Accumulated Depreciation 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. The following table lists the Properties owned by the Partnership as of December 31, 2001 by state. More detailed information regarding the location of the Properties is contained in the Schedule of Real Estate and Accumulated Depreciation. State Number of Properties ----- -------------------- Alabama 3 Arizona 2 Arkansas 1 California 1 Colorado 1 Florida 10 Georgia 1 Indiana 1 Kansas 1 Louisiana 1 Maryland 1 Missouri 1 Ohio 4 Pennsylvania 3 South Carolina 2 Tennessee 5 Texas 8 ------ TOTAL PROPERTIES 46 ====== Buildings. Each of the Properties owned by the Partnership includes a building that is one of a Restaurant Chain's approved designs. However, the buildings located on the eight Checkers Properties are owned by the tenant while the land parcels are owned by the Partnership. The buildings generally are rectangular and are constructed from various combinations of stucco, steel, wood, brick and tile. The sizes of the building owned by the Partnership range from approximately 1,900 to 11,500 square feet. All buildings on Properties are freestanding and surrounded by paved parking areas. Buildings are suitable for conversion to various uses, although modifications may be required prior to use for other than restaurant operations. As of December 31, 2001, the Partnership had no plans for renovation of the Properties. Depreciation expense is computed for buildings and improvements using the straight-line method using a depreciable life of 40 years for federal income tax purposes. As of December 31, 2001, the aggregate cost of the Properties owned by the Partnership and joint ventures (including the Properties owned through tenancy in common arrangements) for federal income tax purposes was $31,553,018 and $6,919,826, respectively. The following table lists the Properties owned by the Partnership as of December 31, 2001 by Restaurant Chain. Restaurant Chain Number of Properties ---------------- -------------------- Arby's 2 Burger King 5 Checkers 8 Chevy's Fresh Mex 1 Denny's 3 Golden Corral 4 Hardee's 11 Jack in the Box 4 Lion's Choice 1 Long John Silver's 5 Steak-N-Shake 1 Wendy's 1 ----- TOTAL PROPERTIES 46 ===== The General Partners consider the Properties to be well-maintained and sufficient for the Partnership's operations. 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. Leases. The Partnership leases the Properties to operators of selected national and regional fast-food restaurant chains. The leases are generally on a long-term "triple net" basis, meaning that the tenant is responsible for repairs, maintenance, property taxes, utilities and insurance. 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. The terms of the leases of the Properties owned by the Partnership are described in Item 1. Business - Leases. At December 31, 2001, 2000, 1999, and 1997 the Properties were fully occupied. At December 31, 1998, the Properties were 98% occupied. The following is a schedule of the average rent per Property for the years ended December 31:
2001 2000 1999 1998 1997 -------------- ------------- -------------- ------------- ------------- Rental Revenues (1)(2) $ 3,768,826 $3,753,973 $3,727,854 $3,482,136 $3,822,053 Properties (2) 46 46 46 47 47 Average Rent Per Property $ 81,931 $ 81,608 $ 81,040 $ 74,088 $ 81,320
(1) Rental income includes the Partnership's share of rental income from the Properties owned through joint venture arrangements and the Properties owned through tenancy in common arrangements. Rental revenues have been adjusted, as applicable, for any amounts for which the Partnership has established a provision for doubtful accounts. (2) Excludes Properties that were vacant at December 31, and did not generate rental revenues during the year ended December 31. The following is a schedule of lease expirations for leases in place as of December 31, 2001 for the next ten years and thereafter. Percentage of Number Annual Rental Gross Annual Expiration Year of Leases Revenues Rental Income - -------------------- ----------------- ------------------- ----------------- 2002 -- $ -- -- 2003 2 69,066 1.91% 2004 -- -- -- 2005 -- -- -- 2006 -- -- -- 2007 1 37,763 1.04% 2008 2 347,428 9.58% 2009 2 247,790 6.84% 2010 2 130,126 3.59% 2011 3 264,139 7.29% Thereafter 34 2,528,746 69.75% --------- ---------------- ----------------- Total 46 3,625,058 100.00% ========= ================ ================= Leases with Major Tenants. The terms of the leases with the Partnership's major tenants as of December 31, 2001 (see Item 1. Business - Major Tenants), are substantially the same as those described in Item 1. Business - Leases. 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 $65,800 (ranging from approximately $54,700 to $73,600). 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 five years (expiring in 2005). The General Partners will seek to re-lease this Property, or to sell the Property upon the expiration of the lease. The average minimum base annual rent is approximately $81,600 (ranging from approximately $34,800 to $118,100). Golden Corral Corporation leases four Golden Corral restaurants. The initial term of each lease is 15 years (expiring between 2008 and 2015) and the average minimum base annual rent is approximately $190,900 (ranging from approximately $168,600 to $229,800). 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 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 (a) As of March 15, 2002, 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. During 2001, Limited Partners who wished to sell their Units may have offered the Units for sale pursuant to the Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners who wished to have their distributions used to acquire additional Units (to the extent Units were available for purchase), may have done so pursuant to such Plan. The General Partners have the right to prohibit transfers of Units. From inception through December 31, 2001, the price paid for any Unit transferred pursuant to the Plan ranged from $8.67 to $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 2000 and 1999 other than pursuant to the Plan.
2001(1) 2000(1) --------------------------------------- ----------------------------------- High Low Average High Low Average ---------- ---------- ---------- -------- --------- ---------- First Quarter $ 7.08 $ 6.04 $ 6.65 $ 8.30 $8.30 $ 8.30 Second Quarter 7.01 6.57 6.76 7.06 7.06 7.06 Third Quarter 7.01 7.01 7.01 7.76 7.31 7.56 Fourth Quarter 7.45 6.39 6.97 7.00 5.75 6.80
(1) A total of 18,355 and 12,800 Units were transferred other than pursuant to the Plan for the years ended December 31, 2001 and 2000, 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, 2001 and 2000, 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 2001 and 2000 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 the Limited Partners for the years ended December 31, 2001 and 2000 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. (b) Not applicable. Item 6. Selected Financial Data
2001 2000 1999 1998 1997 -------------- --------------- --------------- -------------- -------------- Year ended December 31: Revenues (1) $3,737,845 $ 3,818,095 $3,719,734 $3,789,615 $3,832,470 Net income (2) 2,835,821 3,089,297 2,681,165 2,495,855 3,035,627 Cash distributions declared 3,400,008 3,400,008 3,400,008 3,400,008 3,400,008 Net income per Unit (2) 0.71 0.77 0.66 0.62 0.75 Cash distributions declared per Unit 0.85 0.85 0.85 0.85 0.85 At December 31: Total assets $33,149,433 $33,848,645 $34,337,261 $34,687,493 $35,523,590 Partners' capital 32,155,662 32,719,849 33,030,560 33,749,403 34,653,556
(1) Revenues include equity in earnings of joint ventures. (2) Net income for the years ended December 31, 2001, 2000 and 1998 include provisions for write-down of assets of $56,506, $51,618 and $605,290, respectively. Net income for the year ended December 31, 1999, includes a loss on removal of building of $352,285 and a gain on sale of assets of $176,159. Net income for the year ended December 31, 1997, includes a loss on sale of assets of $48,538. 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 and to be 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, 2001, the Partnership owned 46 Properties, either directly or through joint venture or tenancy in common arrangements. 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 $3,302,832, $3,360,034 and $3,312,989, for the years ended December 31, 2001, 2000, and 1999, respectively. The decrease in cash from operations during 2001, as compared to 2000, and the increase during 2000, as compared to 1999, was primarily a result of changes in income and expenses as described in "Results of Operations" below and changes in the Partnership's working capital. Other sources and uses of capital included the following during the years ended December 31, 2001, 2000, and 1999: 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 with the new lease agreement, the Partnership agreed to renovate the Property; therefore, during the year ended 1999, the old building located on the Property was removed. During 1999, a new building was constructed and was operational. In connection with the new lease, the Partnership funded approximately $537,400 in construction costs for the new building. The Partnership used a portion of the net sales proceeds from the 1999 sale of the Property in Houston, Texas, to pay such costs, as described below. In May 1999, the Partnership entered into a new lease for the Property in Philadelphia, Pennsylvania with the new tenant to operate the Property as an Arby's restaurant. In connection therewith, the Partnership funded a total of approximately $325,900 in renovation costs, of which approximately $87,600 was incurred during the year ended December 31, 2000. The Partnership used a portion of the net sales proceeds from the sale of the Property in Houston, Texas, to pay such costs, as described below. In July 1999, the Partnership sold its Property in Houston, Texas to a third party for $1,073,887 and received net sales proceeds of $1,059,498, resulting in a gain of $176,159. The Partnership used the majority of the net sales proceeds to pay for the construction and renovation costs described above and to pay Partnership liabilities. The Partnership distributed amounts sufficient to enable the Limited Partners to pay federal and state income taxes, if any (at a level reasonably assumed by the General Partners), resulting from the sale. In April 2001, the Partnership sold its Property in Mount Airy, North Carolina and received net sales proceeds of approximately $947,000. Due to the fact that during 2001 the Partnership had recorded a provision for write-down of assets for this Property, no additional gain or loss was recognized upon sale. In April 2001, the Partnership reinvested approximately $882,300 of these sales proceeds in a Property in Blue Springs, Missouri, as tenants-in-common, with CNL Income Fund XV, Ltd. ("CNL XV"), a Florida limited partnership and an affiliate of the General Partners. The Partnership and CNL XV, as tenants-in-common, acquired this Property from CNL BB Corp., an affiliate of the General Partners. The affiliate had purchased and temporarily held title to the Property in order to facilitate the acquisition of the Property by the Partnership and CNL XV, as tenants-in-common. The purchase price paid by the Partnership and CNL XV, as tenants-in-common, represented the costs incurred by the affiliate to acquire the Property, including closing costs. As of December 31, 2001, the Partnership owned a 41 percent interest in the profits and losses of the Property. None of the Properties owned by the Partnership, or the joint ventures or tenancy-in-common arrangements 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 such as demand deposit accounts at commercial banks, money market accounts and certificates of deposit with less than a 90-day maturity date, pending the Partnership's use of such funds to pay Partnership expenses or to make distributions to partners. At December 31, 2001, the Partnership had $785,750 invested in such short-term investments as compared to $818,231 at December 31, 2000. As of December 31, 2001, the average interest rate earned on the rental income deposited in demand deposit accounts at commercial banks was approximately 3.0% annually. The funds remaining at December 31, 2001, will be used towards the payment of distributions and other liabilities. Short-Term Liquidity The Partnership's short-term liquidity requirements consist primarily of the operating expenses of the Partnership. The Partnership's investment strategy of acquiring Properties for cash and generally 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. The Partnership generally distributes cash from operations remaining after the payment of the operating expenses of the Partnership, to the extent that the General Partners determine that such funds are available for distribution. 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, 2001, 2000, and 1999. This represents distributions of $0.85 per Unit for each of the years ended December 31, 2001, 2000, and 1999. No distributions were made to the General partners during the years ended December 31, 2001, 2000 and 1999. No amounts distributed to the Limited Partners for the years ended December 31, 2001, 2000, and 1999, 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. During 2000, the general partners waived their right to receive future distributions from the Partnership, including both distributions of operating cash flow and distributions of liquidation proceeds, to the extent that the cumulative amount of such distributions would exceed the balance in the general partners' capital account as of December 31, 1999. Accordingly, the general partners were not allocated any net income and did not receive any distributions during the year ended December 31, 2001 and 2000. As of December 31, 2001 and 2000, the Partnership owed $15,534 and $132,671, respectively, to related parties for such amounts as accounting and administrative services and management fees. As of March 15, 2002, the Partnership had reimbursed the affiliates all of such amounts. Other liabilities, including distributions payable, increased to $978,237 at December 31, 2001, from $996,125 at December 31, 2000. The decrease in other liabilities is primarily attributable to the Partnership paying transaction costs that were accrued at December 31, 2000 relating to the proposed merger with APF, as described in "Termination of Merger." Total liabilities at December 31, 2001, to the extent they exceed cash and cash equivalents, will be paid from anticipated future cash from operations. Long-Term Liquidity The Partnership has no long-term debt or other long-term liquidity requirements. Critical Accounting Policies The Partnership's leases are accounted for under the provisions of Statement of Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and have been accounted for using either the direct financing or the operating method. FAS 13 requires management to estimate the economic life of the leased property, the residual value of the leased property and the present value of minimum lease payments to be received from the tenant. In addition, management assumes that all payments to be received under its leases are collectible. Changes in management's estimates or assumption regarding collectibility of lease payments could result in a change in accounting for the lease at the inception of the lease. The Partnership accounts for its unconsolidated joint ventures using the equity method of accounting. Under generally accepted accounting principles, the equity method of accounting is appropriate for entities that are partially owned by the Partnership, but for which operations of the investee are shared with other partners. The Partnership's joint venture agreements require the consent of all partners on all key decisions affecting the operations of the underlying Property. Management reviews its Properties and investments in unconsolidated entities periodically (no less than once per year) for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through operations. Management determines whether 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. Results of Operations During 1999, the Partnership owned and leased 42 wholly owned Properties (including one Property in Houston, Texas, which was sold in July 1999), and during 2000 and 2001, the Partnership owned and leased 41 wholly owned Properties (including one Property in Mount Airy, North Carolina, which was sold in April 2001.) During 2001, 2000, and 1999, the Partnership was a co-venturer in two separate joint ventures that each owned and leased one Property. During 2001, 2000, and 1999, the Partnership acquired and leased three Properties with affiliates of the General Partners as tenants-in-common. During 2001, the Partnership acquired and leased one additional Property with an affiliate of the General Partners, as tenants-in-common. As of December 31, 2001, the Partnership owned, either directly, as tenants-in-common with affiliates or through joint venture arrangements, 46 Properties which are generally 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 $30,600 to $229,800. 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, 2001, 2000, and 1999, the Partnership earned $3,157,455, $3,238,178, and $3,162,395, respectively, in rental income from operating leases and earned income from direct financing leases from its wholly owned Properties. The decrease in rental and earned income during the year ended December 31, 2001, as compared to the year ended December 31, 2000, was primarily due to the fact that the Partnership sold its Property in Mount Airy, North Carolina in April 2001, as described in "Capital Resources." Rental and earned income are expected to remain at reduced amounts while equity in earnings of joint ventures is expected to increase due to the fact that the Partnership reinvested the majority of net sales proceeds relating to the sale of the Property in Mount Airy, North Carolina, in a Property in Blue Springs, Missouri with an affiliate of the General Partners, as tenants-in-common, as described in "Capital Resources." The increase in rental and earned income during 2000 and 1999, each as compared to the previous year, was partially offset by a reduction in rental and earned income as a result of the sale of the Property in Houston, Texas, as described above in "Capital Resources." The increase in rental income during 2000, as compared to 1999, was partially attributable to an increase in rental income as a result of the Partnership re-leasing several Properties affected by the bankruptcy of Long John Silvers, Inc. that occurred during 1998. In August 1999, Long John Silver's, Inc. assumed and affirmed its five remaining leases, and the Partnership has continued receiving rental payments relating to these five leases. For the years ended December 31, 2001, 2000, and 1999, the Partnership also earned $245,820, $277,246, and $273,136, respectively, in contingent rental income. The decrease in contingent rental income during the year ended December 31, 2001, as compared to the year ended December 31, 2000, was partially attributable to a decrease in gross sales for certain restaurant Properties whose leases require the payment of contingent rental income. In addition, for the years ended December 31, 2001, 2000 and 1999, the Partnership earned $309,381, $244,344 and $242,158, respectively, attributable to net income earned by unconsolidated joint ventures in which the Partnership is a co-venturer. The increase in net income earned by unconsolidated joint ventures during 2001, as compared to 2000, was primarily attributable to the fact that in April 2001, the Partnership used the majority of the net sales proceeds received from the sale of its Property in Mount Airy, North Carolina, to acquire an interest in a Property in Blue Springs, Missouri, as tenants-in-common with CNL XV, as described above in "Capital Resources." The increase in net income earned by joint ventures, during the year ended December 31, 2001, is also partially due to an increase in contingent rental income attributable to an increase in gross sales of the restaurant Property in Miami, Florida, the lease of which requires the payment of contingent rental income. The Partnership owns approximately a 47.83% interest in this Property, as tenants-in-common, with CNL Income Fund III, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund X, Ltd., each a Florida limited partnership and affiliate of the General Partners. During the year ended December 31, 2001, three of the Partnership's lessees, Flagstar Enterprises, Inc., Long John Silver's, Inc., and Golden Corral Corporation, each contributed more than ten percent of the Partnership's total rental and earned income (including the Partnership's share of rental and earned income from Properties owned by joint ventures and Properties owned with affiliates of the General Partners as tenants-in-common). As of December 31, 2001, 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, and Golden Corral Corporation was the lessee under leases relating to four restaurants. It is anticipated that based on the minimum rental payments required by the leases, each of the lessees will continue to contribute more than ten percent of the Partnership's total rental and earned income during 2002. In addition, during the year ended December 31, 2001, four Restaurant Chains, Long John Silver's, Hardee's, Golden Corral, and Burger King, each accounted for more than 10% of the Partnership's total rental and earned income (including the Partnership's share of rental and earned income from Properties owned by joint ventures and Properties owned with affiliates of the General Partners as tenants-in-common). It is anticipated that these four Restaurant chains each will continue to account for more than 10% of the total rental and earned income under the terms of its leases in 2002. 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. During the years ended December 31, 2001, 2000 and 1999, the Partnership also earned $25,189, $58,327 and $42,045, respectively, in interest and other income. Interest and other income were higher during 2000, as compared to 2001 and 1999, due to interest earned on the net sales proceeds received from the 1999 sale of a Property, as described above, pending reinvestment in construction and renovation costs relating to two Properties, as described above in "Capital Resources." Operating expenses, including depreciation and amortization expense, and provisions for write-down of assets were $902,024, $728,798, and $862,443 for the years ended December 31, 2001, 2000, and 1999, respectively. The increase in operating expenses during the year ended December 31, 2001, as compared to the year ended December 31, 2000, was partially attributable to an increase in the costs incurred for administrative expenses for servicing the Partnership and its Properties, as permitted by the Partnership agreement. The increase in operating expenses during the year ended December 31, 2001, as compared to the year ended December 31, 2000, was partially due to the Partnership incurring additional state taxes due to changes in tax requirements in several states in which the Partnership conducts business. In addition, the increase in operating expenses during the year ended December 31, 2001, as compared to the year ended December 31, 2000, was partially due to the fact that the Partnership incurred expenses such as legal fees relating to several Properties with a tenant who experienced financial difficulties and assigned the leases to a new tenant, for which the Partnership approved the assignment. The Partnership incurred additional legal fees due to lease amendments relating to these assignments. The general partners do not anticipate that the Partnership will continue to incur legal fees relating to these Properties. In addition, the increase in operating expenses during 2001, as compared to 2000, was partially attributable to an increase in depreciation expense due to the fact that the tenant of the Property in Peoria, Arizona, assigned its lease to Denny's, Inc. In connection with the assignment, the Partnership reclassified this asset from net investment in direct financing leases to land and buildings on operating leases. In accordance with Statement of Financial Accounting Standards No. 13, "Accounting for Leases," the Partnership recorded the reclassified asset at the lower of original cost, present fair value, or present carrying amount. No loss on the reclassification of the direct financing lease was incurred. In March 2001, the Partnership recorded a provision for write-down of assets of $56,506 for the Property in Mount Airy, North Carolina. The provision represented the difference between the carrying value of the Property and the net sales proceeds received in April 2001 from the sale of this Property. During 2000, the Partnership recorded a provision for write-down of assets of approximately $51,600 in previously accrued rental income relating to two Denny's Properties due to financial difficulties the tenant experienced. The accrued rental income was the accumulated amount of non-cash accounting adjustments previously recorded in order to recognize future scheduled rent increases as income evenly over the term of the lease. The provision represents the difference between the carrying value of the Property, including the accumulated accrued rental income at December 31, 2001 and the General Partners' current estimate of net realizable value for this Property. The decrease in operating expenses during 2000, as compared to 1999, was partially due to the amount of transaction costs the Partnership incurred related to the General Partners retaining financial and legal advisors to assist them in evaluating and negotiating the proposed and terminated merger with APF, as described below in "Termination of Merger." No such expenses were incurred in 2001. The decrease in operating expenses during 2000, as compared to 1999, was also partially attributable to the fact that during 2000, the Partnership received reimbursement from Long John Silver's, Inc. for amounts previously incurred by the Partnership as expenses. In addition, the decrease during 2000, as compared to 1999, was partially attributable to, a decrease in depreciation expense due to the 1999 sale of the Property in Houston, Texas, as described above. During 1999, the Partnership entered into a new lease for its Property in Tampa, Florida, with a Steak-n-Shake operator. In connection with the new lease, the Partnership agreed to renovate the Property; therefore, the old building located on the Property was removed. As a result, the Partnership removed the remaining undepreciated cost of the building from its accounts resulting in a loss of $352,285 during the year ended December 31, 1999. In addition, during 1999, as a result of the sale of the Property in Houston, Texas, described above in "Capital Resources," the Partnership recognized a gain of $176,159. No properties were sold during 2000. The restaurant industry, as a whole, has been one of the many industries affected by the general slowdown in the economy. The General Partners remain confident in the overall performance of the fast-food and family style restaurants, the concepts that comprise the Partnership's portfolio. Industry data shows that these restaurant concepts continue to outperform and remain more stable than higher-end restaurants, which have been more adversely affected by the slowing economy. The Partnership's leases as of December 31, 2001, 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. Inflation, overall, has had a minimal effect on results of operations of the Partnership. Continued inflation 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. In December 1999, the Securities and Exchange Commission released SAB 101, which provides the staff's view in applying generally accepted accounting principles to selected revenue recognition issues. SAB 101 requires the Partnership to defer recognition of certain percentage rental income until certain defined thresholds are met. The Partnership adopted SAB 101 beginning January 1, 2000. Implementation of SAB 101 did not have a material impact on the Partnership's results of operations. In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 "Business Combinations" (FAS 141) and Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" (FAS 142). The Partnership has reviewed both statements and has determined that both FAS 141 and FAS 142 do not apply to the Partnership as of December 31, 2001. In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS 144). This statement requires that a long-lived asset be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The assessment is based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds its fair value. If an impairment is recognized, the adjusted carrying amount of a long-lived asset is its new cost basis. The adoption of FAS 144 did not have any effect on the partnership's recording of impairment losses as this Statement retained the fundamental provisions of FAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". Termination of Merger 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. Under the Agreement and Plan of Merger, APF was to issue shares of its common stock as consideration for the Merger. On March 1, 2000, the General Partners and APF announced that they had mutually agreed to terminate the Agreement and Plan of Merger. The agreement to terminate the Agreement and Plan of Merger was based, in large part, on the General Partners' concern that, in light of market conditions relating to publicly traded real estate investment trusts, the value of the transaction had diminished. As a result of such diminishment, the General Partners' ability to unequivocally recommend voting for the transaction, in the exercise of their fiduciary duties, had become questionable. Item 7a. Quantitative and Qualitative Disclosures About market Risk Not applicable. Item 8. Financial Statements and Supplementary Data CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) CONTENTS -------- Page ---- Report of Independent Certified Public Accountants 16 Financial Statements: Balance Sheets 17 Statements of Income 18 Statements of Partners' Capital 19 Statements of Cash Flows 20-21 Notes to Financial Statements 22-37 Report of Independent Certified Public Accountants To the Partners CNL Income Fund XIII, Ltd. In our opinion, the accompanying balance sheets and the related statements of income, of partners' capital and of cash flows present fairly, in all material respects, the financial position of CNL Income Fund XIII, Ltd. (a Florida limited partnership) at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule 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 schedule 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 auditing standards generally accepted in the United States of America, 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 our opinion. /s/ PricewaterhouseCoopers LLP Orlando, Florida February 8, 2002 CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) BALANCE SHEETS
December 31, 2001 2000 ----------------------- ---------------------- ASSETS Land and buildings on operating leases, net $ 21,299,059 $ 21,157,116 Net investment in direct financing leases 5,784,718 7,449,706 Investment in joint ventures 3,318,655 2,434,759 Cash and cash equivalents 785,750 818,231 Receivables, less allowance for doubtful accounts of $5,674 in 2000 46,553 243,086 Accrued rental income 1,866,515 1,682,363 Other assets 48,183 63,384 ----------------------- ---------------------- $ 33,149,433 $ 33,848,645 ======================= ====================== LIABILITIES AND PARTNERS' CAPITAL Accounts payable and accrued expenses $ 5,945 $ 38,373 Escrowed real estate taxes payable 5,372 -- Distributions payable 850,002 850,002 Due to related parties 15,534 132,671 Rents paid in advance and deposits 91,470 80,653 Deferred rental income 25,448 27,097 ----------------------- ---------------------- Total liabilities 993,771 1,128,796 Partners' capital 32,155,662 32,719,849 ----------------------- ---------------------- $ 33,149,433 $ 33,848,645 ======================= ======================
See accompanying notes to financial statements. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) STATEMENTS OF INCOME
Year Ended December 31, 2001 2000 1999 ---------------- ---------------- -------------- Revenues Rental income from operating leases $ 2,469,628 $ 2,401,921 $ 2,367,931 Earned income from direct financing leases 687,827 836,257 794,464 Contingent rental income 245,820 277,246 273,136 Interest and other income 25,189 58,327 42,045 ---------------- ---------------- -------------- 3,428,464 3,573,751 3,477,576 ---------------- ---------------- -------------- Expenses: General operating and administrative 277,453 165,389 152,089 Professional services 61,865 33,202 51,773 Management fees to related parties 36,671 36,142 36,152 Real estate taxes -- -- 7,877 State and other taxes 57,457 21,731 23,362 Depreciation and amortization 412,072 385,470 399,174 Provision for write-down of assets 56,506 51,618 -- Transaction costs -- 35,246 192,016 ---------------- ---------------- -------------- 902,024 728,798 862,443 ---------------- ---------------- -------------- Income Before Gain on Sale of Assets, Loss on Removal of Building and Equity in Earnings of Joint Ventures 2,526,440 2,844,953 2,615,133 Gain on Sale of Assets -- -- 176,159 Loss on Removal of Building -- -- (352,285) Equity in Earnings of Joint Ventures 309,381 244,344 242,158 ---------------- ---------------- -------------- Net Income $ 2,835,821 $ 3,089,297 $ 2,681,165 ================ ================ ============== Allocation of Net Income: General partners $ -- $ -- $ 28,060 Limited partners 2,835,821 3,089,297 2,653,105 ---------------- ---------------- -------------- $ 2,835,821 $ 3,089,297 $ 2,681,165 ================ ================ ============== Net Income Per Limited Partner Unit $ 0.71 $ 0.77 $ 0.66 ================ ================ ============== Weighted Average Number of Limited Partner Units Outstanding 4,000,000 4,000,000 4,000,000 ================ ================ ==============
See accompanying notes to financial statements. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) STATEMENTS OF PARTNERS' CAPITAL Years Ended December 31, 2001, 2000 and 1999
General Partners Limited Partners ---------------------------- --------------------------------------------- ------------- ------------ Accumulated Accumulated Syndication Contributions Earnings Contributions Distributions Earnings Costs Total -------------- ------------ --------------- --------------- -------------- ------------ ------------ Balance, December 31, 1998 $ 1,000 $ 162,874 $ 40,000,000 $ (17,728,408) $ 15,979,106 $ (4,665,169) $ 33,749,403 Distributions to limited partners ($0.85 per limited partner unit) -- -- -- (3,400,008) -- -- (3,400,008) Net income -- 28,060 -- -- 2,653,105 -- 2,681,165 -------------- ------------ --------------- --------------- --------------- ----------- ------------ Balance, December 31, 1999 1,000 190,934 40,000,000 (21,128,416) 18,632,211 (4,665,169) 33,030,560 Distributions to limited partners ($0.85 per limited partner unit) -- -- -- (3,400,008) -- -- (3,400,008) Net income -- -- -- -- 3,089,297 -- 3,089,297 -------------- ------------ --------------- --------------- --------------- ----------- ------------ Balance, December 31, 2000 1,000 190,934 40,000,000 (24,528,424) 21,721,508 (4,665,169) 32,719,849 Distributions to limited partners ($0.85 per limited partner unit) -- -- -- (3,400,008) -- -- (3,400,008) Net income -- -- -- -- 2,835,821 -- 2,835,821 -------------- ------------ --------------- --------------- ---------------- ---------- ------------ Balance, December 31, 2001 $ 1,000 $ 190,934 $ 40,000,000 $ (27,928,432) $ 24,557,329 $ (4,665,169) $ 32,155,662 ============== ============ =============== =============== =============== =========== ============
See accompanying notes to financial statements. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) STATEMENTS OF CASH FLOWS
Year Ended December 31, 2001 2000 1999 ------------------ ------------------ -------------------- Increase ( Decrease) in Cash and Cash Equivalents: Cash Flows from Operating Activities: Cash received from tenants $ 3,545,145 $ 3,404,302 $ 3,342,666 Distributions from joint ventures 307,790 254,957 247,710 Cash paid for expenses (568,238) (329,070) (314,517) Interest received 18,135 29,845 37,130 ------------------ ------------------ -------------------- Net cash provided by operating activities 3,302,832 3,360,034 3,312,989 ------------------ ------------------ -------------------- Cash Flows from Investing Activities: Proceeds from sale of assets 947,000 -- 1,059,498 Additions to land and buildings -- (87,597) (238,257) Investment in direct financing leases -- -- (537,404) Investment in joint ventures (882,305) -- -- Payment of lease costs -- -- (17,875) ------------------ ------------------ -------------------- Net cash provided by (used in) investing activities 64,695 (87,597) 265,962 ------------------ ------------------ -------------------- 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 Increase (Decrease) in Cash and Cash Equivalents (32,481) (127,571) 178,943 Cash and Cash Equivalents at Beginning of Year 818,231 945,802 766,859 ------------------ ------------------ -------------------- Cash and Cash Equivalents at End of Year $ 785,750 $ 818,231 $ 945,802 ================== ================== ====================
See accompanying notes to financial statements. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) STATEMENT OF CASH FLOWS - CONTINUED
Year Ended December 31, 2001 2000 1999 ----------------- ----------------- ----------------- Reconciliation of Net Income to Net Cash Provided by Operating Activities Net income $ 2,835,821 $ 3,089,297 $ 2,681,165 ----------------- ----------------- ----------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 410,264 383,489 397,150 Amortization 1,808 1,981 2,024 Equity in earnings of joint ventures, net of distributions (1,591 ) 10,613 5,552 Loss on removal of building in connection with renovation -- -- 352,285 Gain on sale of assets -- -- (176,159 ) Provision for write-down of assets 56,506 51,618 -- Decrease (increase) in receivables 196,533 (107,654 ) (10,493 ) Decrease in net investment in direct financing leases 109,275 107,487 90,732 Increase in accrued rental income (184,152 ) (178,371 ) (195,625 ) Decrease (increase) in other assets 13,393 (15,264 ) (7,510 ) Increase (decrease) in accounts payable, accrued expenses, and escrowed real estate taxes payable (27,056 ) (108,030 ) 135,412 Increase (decrease) in due to related parties (117,137 ) 63,437 46,705 Increase (decrease) in rents paid in advance and deposits 9,168 61,431 (8,249 ) ----------------- ----------------- ----------------- Total adjustments 467,011 270,737 631,824 ----------------- ----------------- ----------------- Net Cash Provided by Operating Activities $ 3,302,832 $ 3,360,034 $ 3,312,989 ================= ================= ================= Supplemental Schedule of Non-Cash Financing Activities: Distributions declared and unpaid at December 31 $ 850,002 $ 850,002 $ 850,002 ================= ================= =================
See accompanying notes to financial statements. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000 and 1999 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 generally on a triple-net basis, whereby the tenant is 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) (see Note 4). Unearned income is deferred and amortized to income over the lease terms so as to produce a constant periodical 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. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 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. In contrast, deferred rental income represents the aggregate amount of scheduled rental payments to date (including rental payments due during construction and prior to the property being placed in service) in excess of income recognized on a straight-line basis over the lease term commencing on the date the property is placed in service. 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 reverses 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' best 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, 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. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 1. Significant Accounting Policies - Continued: ------------------------------------------- Investment in Joint Ventures - The Partnership accounts for its interests in Attalla Joint Venture and Salem Joint Venture, and a property in Arvada, Colorado, a property in Akron, Ohio, a property in Miami, Florida, and a property in Blue Springs, Missouri, for which each property is held as tenants-in-common with affiliates, using the equity method since each joint venture agreement requires the consent of all partners on all key decisions affecting the operations of the underlying property. 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. Lease Costs - Other assets include lease incentive costs and brokerage and legal fees associated with negotiating new leases, which 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. See "Income Taxes" footnote for a reconciliation of net income for financial reporting purposes to net income for federal income tax purposes. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 1. Significant Accounting Policies - Continued: ------------------------------------------- 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. Reclassification - Certain items in the prior years' financial statements have been reclassified to conform to 2001 presentation. These reclassifications had no effect on total partners' capital or net income. Staff Accounting Bulletin No. 101 ("SAB 101") - In December 1999, the Securities and Exchange Commission released SAB 101, which provides the staff's view in applying generally accepted accounting principles to selected revenue recognition issues. SAB 101 requires the Partnership to defer recognition of certain percentage rental income until certain defined thresholds are met. The Partnership adopted SAB 101 beginning January 1, 2000. Implementation of SAB 101 did not have a material impact on the Partnership's results of operations. Statement of Financial Accounting Standards No. 141 ("FAS 141") and Statement of Financial Accounting Standards No. 142 ("FAS 142") - In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 "Business Combinations" and Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets". The Partnership has reviewed both statements and has determined that both FAS 141 and FAS 142 do not apply to the Partnership as of December 31, 2001. Statement of Financial Accounting Standards No. 144 ("FAS 144") - In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement requires that a long-lived asset be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The assessment is based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds its fair value. If an impairment is CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 1. Significant Accounting Policies - Continued: ------------------------------------------- recognized, the adjusted carrying amount of a long-lived asset is its new cost basis. The adoption of FAS 144 did not have any effect on the partnership's recording of impairment losses as this Statement retained the fundamental provisions of FAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". 1. 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:
2001 2000 -------------------- -------------------- Land $ 12,374,488 $ 12,374,488 Buildings 12,084,577 11,532,370 -------------------- -------------------- 24,459,065 23,906,858 Less accumulated depreciation (3,160,006) (2,749,742) -------------------- -------------------- $ 21,299,059 $ 21,157,116 ==================== ====================
CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 3. Land and Buildings on Operating Leases - Continued: -------------------------------------------------- In May 1999, the Partnership entered into a new lease for the property in Philadelphia, Pennsylvania, with a new tenant to operate the property as an Arby's restaurant. In connection therewith, the Partnership funded a total of approximately $325,900 in renovation costs, of which approximately $87,600 and $238,300 were incurred during 2000 and 1999, respectively. The portion of the lease relating to the building portion of the property is classified as a direct financing lease (see Note 4). During 2000, the Partnership recorded a provision for write-down of assets of $51,618 in previously accrued rental income relating to the properties in Peoria and Mesa, Arizona due to financial difficulties the tenant experienced. The accrued rental income was the accumulated amount of non-cash accounting adjustments previously recorded in order to recognize future scheduled rent increases as income evenly over the term of the lease. The provision represented the difference between the carrying value of the property, including the accumulated accrued rental income, and the general partners' estimated net realizable value for the property. The following is a schedule of the future minimum lease payments to be received on noncancellable operating leases at December 31, 2001: 2002 $ 2,293,808 2003 2,350,309 2004 2,448,907 2005 2,464,839 2006 2,490,369 Thereafter 14,910,987 ------------------ $ 26,959,219 ================== 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. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 4. Net Investment in Direct Financing Leases: ----------------------------------------- The following lists the components of the net investment in direct financing leases at December 31:
2001 2000 --------------------- ---------------------- Minimum lease payments receivable $ 10,242,278 $ 13,545,749 Estimated residual values 1,982,699 2,555,822 Less unearned income (6,440,259) (8,651,865) --------------------- ---------------------- Net investment in direct financing leases $ 5,784,718 $ 7,449,706 ===================== ======================
During 2001 the Partnership recorded a provision for write-down of assets of $56,506 for the property in Mount Airy, North Carolina. The provision represented the difference between the carrying value of the property at and the net sales proceeds received in April 2001 from the sale of this property, for which the land and building had been classified as a direct financing lease. The gross investment (minimum lease payments receivable and the estimated residual value) and the unearned income relating to the land and building were removed from the accounts. During 2001, one of the Partnership's leases was amended. As a result, the Partnership reclassified the amended lease from a direct financing lease to land and building on operating leases. In accordance with the Statement of Financial Accounting Standards No. 13., "Accounting for Leases," the Partnership recorded the reclassified lease at the lower of original cost, present fair value, or present carrying amount No loss on the reclassification of the direct financing lease was recorded. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 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, 2001: 2002 $ 774,241 2003 774,783 2004 780,746 2005 780,746 2006 789,457 Thereafter 6,342,305 ---------------- $10,242,278 ================ 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% 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 properties in Arvada, Colorado; Akron, Ohio; and Miami, Florida; each as tenants-in-common with affiliates of the general partners. As of December 31, 2001, the Partnership owned a 66.13%, 63.09% and 47.83% interest, respectively, in the properties. Attalla Joint Venture, 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. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 5. Investment in Joint Ventures - Continued: ---------------------------------------- In April 2001, the Partnership used the majority of the net sales proceeds from the sale of its property in Mount Airy, North Carolina to acquire an interest in a Golden Corral property in Blue Springs, Missouri, as tenants-in-common, with CNL Income Fund XV, Ltd., a Florida limited partnership, and an affiliate of the general partners. The Partnership and CNL Income Fund XV, Ltd., a tenants-in-common, acquired this interest from CNL BB Corp., an affiliate of the general partners (see Note 8). The Partnership accounts for its investment using the equity method since the agreement requires the consent of all partners on all key decisions affecting the operations of the underlying property. As of December 31, 2001, the Partnership owned a 41% interest in this property. 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:
2001 2000 -------------------- --------------------- Land and buildings on operating leases, net $ 6,045,197 $ 4,009,712 Net investment in direct financing lease 344,884 351,555 Cash 41,693 50,579 Receivables 67,370 -- Accrued rental income 377,299 318,016 Other assets 1,028 474 Liabilities 20,621 29,459 Partners' capital 6,856,850 4,700,877 Revenues 760,782 568,987 Net income 630,846 476,978
The Partnership recognized income totaling $309,381, $244,344, and $242,158, for the years ended December 31, 2001, 2000, and 1999 respectively, from these joint ventures and the properties held as tenants-in-common with affiliates. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 6. Allocations and Distributions - Continued: ----------------------------------------- From inception through December 31, 1999, generally all net income and net losses of the Partnership, excluding gains and losses from the sale of properties, were allocated 99 percent to the limited partners and one percent to the general partners. From inception through December 31, 1999, distributions of net cash flow were 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 was 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"). From inception through December 31, 1999, generally, net sales proceeds from the sales of properties not in liquidation of the Partnership to the extent distributed, were 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 then received, 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 were distributed 95 percent to the limited partners and five percent to the general partners. Any gain from a sale of a property not in liquidation of the Partnership was, in general, allocated in the same manner as net sales proceeds are distributable. Any loss from the sale of a property was, 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 sale of properties, in liquidation of the Partnership 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 the partners with positive capital account 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. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 6. Allocations and Distributions - Continued ----------------------------------------- Effective January 1, 2000, the general partners waived their right to receive future distributions from the Partnership, including both distributions of operating cash flow and distributions of liquidation proceeds, to the extent that the cumulative amount of such distributions would exceed the balance in the general partners' capital account as of December 31, 1999. Accordingly, for years commencing January 1, 2000 and after, the Partnership's net income will be allocated entirely among the limited partners. However, if losses are allocated to the general partners in a year, an amount of income equal to the sum of such losses may be allocated to the general partner in succeeding years. Accordingly, the general partners were not allocated any net income and did not receive any distributions during the year ended December 31, 2001 and 2000. During each of the years ended December 31, 2001, 2000, and 1999, the Partnership declared distributions to the limited partners of $3,400,008. No distributions have been made to the general partners to date. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 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:
2001 2000 1999 ---------------- ---------------- ---------------- Net income for financial reporting purposes $ 2,835,821 $ 3,089,297 $ 2,681,165 Depreciation for tax reporting purposes in excess of depreciation for financial reporting purposes (54,090) (95,523) (76,982) Direct financing leases recorded as operating leases for tax reporting purposes 109,275 107,487 90,732 Capitalization (deduction) of transaction costs for tax reporting purposes -- (215,307) 192,016 Equity in earning of joint ventures for tax reporting purposes less than equity in earnings of joint ventures for financial reporting purposes (19,015) (14,242) (25,801) Gain on sale of property for financial reporting purposes deferred for tax reporting purposes -- -- 36,702 Loss on sale of property for financial reporting purposes in excess of loss for tax reporting -- -- 352,285 purposes Gain on sale of property for financial reporting less than gain for tax reporting purposes 66,579 -- -- Provision for write-down of assets 56,506 51,618 -- Allowance for doubtful accounts (5,674) 5,674 (532) Accrued rental income (184,152) (178,371) (195,625) Rents paid in advance 9,168 61,431 (8,249) ---------------- ---------------- ---------------- Net income for federal income tax purposes $ 2,814,418 $ 2,812,064 $ 3,045,711 ================ ================ ================
CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 8. Related Party Transactions: -------------------------- One of the individual general partners, James M. Seneff, Jr., is one of the principal shareholders of CNL Holdings, Inc. The other individual general partner, Robert A. Bourne, serves as President and Treasurer of CNL Group, Inc., a wholly owned subsidiary of CNL Holdings, Inc. CNL APF Partners, LP (the "Advisor") is a wholly owned subsidiary of CNL American Properties Fund, Inc. ("APF"). CNL Fund Advisors, Inc., a majority owned subsidiary of CNL Financial Group, Inc. until it merged with and into APF effective September 1, 1999, served as the Partnership's advisor until it assigned its rights and obligations under a management agreement with the Partnership to the Advisor effective July 1, 2000. The individual general partners are stockholders and directors of APF. The Advisor provides certain services relating to management of the Partnership and its properties pursuant to a management agreement with the Partnership. In connection therewith, the Partnership agreed to pay the Advisor 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. 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 Advisor. 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 Advisor shall determine. The Partnership incurred management fees of $36,671, $36,142, and $36,152, for the years ended December 31, 2001, 2000, and 1999, respectively. The Advisor 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 Advisor 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 the receipt by the limited partners of their aggregate Limited Partners' 10% Return plus their invested capital contributions. No deferred, subordinated real estate disposition fees have been incurred since inception. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 8. Related Party Transactions - Continued: --------------------------------------- In April 2001, the Partnership and CNL Income Fund XV, Ltd. ("CNL XV"), as tenants-in-common, acquired an interest in a Golden Corral property from CNL BB Corp., an affiliate of the general partners, for a purchase price of approximately $2,152,000. CNL XV is a Florida limited partnership and 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 CNL XV, as tenants-in-common. The purchase price paid by the Partnership and CNL XV, as tenants-in-common, represents the costs incurred by CNL BB Corp. to acquire and carry the property, including closing costs. During the years ended December 31, 2001, 2000, and 1999, the Partnership's advisor and its affiliates provided accounting and administrative services to the Partnership on a day-to-day basis, including services during 2000 and 1999 relating to the proposed and terminated merger. For the years ended December 31, 2001, 2000, and 1999, the expenses incurred for these services were $211,205, $99,772, and $121,160, respectively. The amount due to related parties at December 31, 2001 and 2000 totaled $15,534, and $132,671, 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 of the general partners) for each of the years ended December 31:
2001 2000 1999 --------------- --------------- ---------------- Flagstar Enterprises, Inc. $ 640,524 $ 644,467 $ 647,065 Golden Corral Corp. 616,239 548,540 530,686 Long John Silver's, Inc. 414,556 415,012 423,498 Jack in the Box Inc. (formerly Foodmaker, Inc.) N/A N/A 413,069
CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 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 of the general partners) for each of the years ended December 31:
2001 2000 1999 --------------- --------------- ---------------- Hardee's $ 640,524 $ 644,467 $ 647,065 Golden Corral Family Steakhouse Restaurants 616,239 548,540 530,686 Burger King 412,489 454,645 465,469 Long John Silver's 414,556 415,012 423,498 Jack in the Box N/A N/A 413,069
The information denoted by N/A indicates that for each period presented, the tenant and the chain 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 of America, and the Partnership's lessees operate a variety of restaurant concepts, default by any lessee or restaurant chain contributing more than ten percent of the Partnership's revenues 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. CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2001, 2000, and 1999 10. Selected Quarterly Financial Data: --------------------------------- The following table presents selected unaudited quarterly financial data for each full quarter during the years ended December 31, 2001 and 2000:
2001 Quarter First Second Third Fourth Year ------------------------ -------------- ------------- ------------- --------------- -------------- Revenue (1) $909,091 $956,078 $920,597 $952,079 $3,737,845 Net income 533,006 768,469 757,644 776,702 2,835,821 Net income per Limited partner Unit 0.13 0.19 0.19 0.20 0.71 2000 Quarter First Second Third Fourth Year ------------------------ -------------- ------------- ------------- --------------- -------------- Revenue (1) $926,862 $912,896 $944,979 $1,033,358 $3,818,095 Net income 685,941 728,592 774,105 900,659 3,089,297 Net income per limited partner unit 0.17 0.18 0.19 0.23 0.77
(1) Revenues include equity in earnings of joint ventures. (2) Revenues have been adjusted to reclassify any reversals of accrued rental income to provisions for write-down of assets. This reclassification had no effect on total net income. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 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 Financial Group, Inc. and their affiliates, all of which are affiliates of the General Partners. James M. Seneff, Jr., age 55. 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 co-venturer in over 100 real estate ventures. These ventures have involved the financing, acquisition, construction, and leasing of restaurants, office buildings, apartment complexes, hotels, and other real estate. Mr. Seneff has served as Director and Chairman of the Board of CNL American Properties Fund, Inc. ("APF"), a public, unlisted real estate investment trust, since 1994. Mr. Seneff served as Chief Executive Officer of APF from 1994 through August 1999, and has served as Co-Chief Executive Officer of APF since December 2000. Mr. Seneff served as Chairman of the Board and Chief Executive Officer of CNL Fund Advisors, Inc., formerly the Partnership's advisor, until it merged with a wholly-owned subsidiary of APF in September 1999, and in June 2000, was re-elected to those positions of CNL Fund Advisors, Inc. Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial Group, Inc., a diversified real estate company, and has served as a Director, Chairman of the Board and Chief Executive Officer of CNL Financial Group, Inc. since its formation in 1980. CNL Financial Group, Inc. is the parent company, either directly or indirectly through subsidiaries, of CNL Real Estate Services, Inc., CNL Capital Markets, Inc., CNL Investment Company and CNL Securities Corp. Mr. Seneff also serves as a Director, Chairman of the Board and Chief Executive Officer of CNL Hospitality Properties, Inc., a public, unlisted real estate investment trust, as well as, CNL Hospitality Corp., its advisor. In addition, he serves as a Director, Chairman of the Board and Chief Executive Officer of CNL Retirement Properties, Inc., a public, unlisted real estate investment trust and its advisor, CNL Retirement Corp. Since 1992, Mr. Seneff has also served as a Director, Chairman of the Board and Chief Executive Officer of Commercial Net Lease Realty, Inc., a public real estate investment trust that is listed on the New York Stock Exchange. Mr. Seneff has also served as a Director, Chairman of the Board and Chief Executive Officer of CNL Securities Corp. since 1979; CNL Investment Company since 1990; and CNL Institutional Advisors, Inc., a registered investment advisor for pension plans, since 1990. Mr. Seneff formerly served as a Director of First Union National Bank of Florida, N.A., and currently serves as the Chairman of the Board of CNL Bank. Mr. Seneff previously served on the Florida State Commission on Ethics and is a former member and past Chairman of the State of Florida Investment Advisory Council, which recommends to the Florida Board of Administration investments for various Florida employee retirement funds. The Florida Board of Administration, Florida's principal investment advisory and money management agency, oversees the investment of more than $60 billion of retirement funds. Mr. Seneff received his degree in Business Administration from Florida State University in 1968. Robert A. Bourne, age 54. Mr. Bourne has participated as a general partner or co-venturer in over 100 real estate ventures involved in the financing, acquisition, construction, and leasing of restaurants, office buildings, apartment complexes, hotels, and other real estate. Mr. Bourne is Director of the Board of Directors of APF. Mr. Bourne served as President of APF from 1994 through February 1999. He also served as Treasurer from February 1999 through August 1999 and from May 1994 through December 1994. He also served in various executive positions with CNL Fund Advisors, Inc. prior to its merger with a wholly-owned subsidiary of APF including, President from 1994 through September 1997, and Director from 1994 through August 1999. Mr. Bourne serves as President and Treasurer of CNL Financial Group, Inc.; Director, Vice Chairman of the Board, President and Treasurer of CNL Hospitality Properties, Inc., a public, unlisted real estate investment trust; as well as, Director, Vice Chairman of the Board, President and Treasurer of CNL Hospitality Corp., its advisor. In addition, Mr. Bourne serves as Director, Vice Chairman of the Board, President and Treasurer of CNL Retirement Properties, Inc., a public, unlisted real estate investment trust; as well as, a Director, Vice Chairman of the Board, President and Treasurer of its advisor, CNL Retirement Corp. Mr. Bourne also serves as a Director of CNL Bank. He has served as a Director since 1992, Vice Chairman of the Board since February 1996, Secretary and Treasurer from February 1996 through 1997, and President from July 1992 through February 1996, of Commercial Net Lease Realty, Inc., a public real estate investment trust listed on the New York Stock Exchange. Mr. Bourne also serves as Director, President and Treasurer for various affiliates of CNL Financial Group, Inc. including, CNL Investment Company, CNL Securities Corp. and CNL Institutional Advisors, Inc., a registered investment advisor for pension plans. Mr. Bourne began his career as a certified public accountant employed by Coopers & Lybrand, Certified Public Accountants, from 1971 through 1978, where he attained the position of Tax Manager in 1975. Mr. Bourne graduated from Florida State University in 1970 where he received a B.A. in Accounting, with honors. Curtis B. McWilliams, age 46. Mr. McWilliams has served as Co-Chief Executive Officer of APF since December 2000 and previously served as Chief Executive Officer from September 1999 through December 2000. Prior to the acquisition of CNL Fund Advisors, Inc., Mr. McWilliams served as President of APF from February 1999 until September 1999. From February 1998 to February 1999, he served as Executive Vice President of APF. Mr. McWilliams joined CNL Financial Group, Inc. in April 1997 and served as an Executive Vice President from October 1997 until September 1999. In addition, Mr. McWilliams served as President of CNL Fund Advisors, Inc. and CNL Financial Services, Inc. from April 1997 until the acquisition of such entities by wholly-owned subsidiaries of APF in September 1999. From September 1983 through March 1997, Mr. McWilliams was employed by Merrill Lynch & Co. The majority of his career at Merrill Lynch & Co. was in the Investment Banking division where he served as a Managing Director. Mr. McWilliams received a B.S.E. in Chemical Engineering from Princeton University in 1977 and a Master of Business Administration degree with a concentration in finance from the University of Chicago in 1983. Steven D. Shackelford, age 38. Mr. Shackelford was promoted to Executive Vice President of APF in June 2000. He served as Senior Vice President from September 1999 until his promotion in June 2000. Mr. Shackelford has served as Chief Financial Officer since January 1997 and has served as Secretary and Treasurer of APF since September 1999. He also served as Chief Financial Officer of CNL Fund Advisors, Inc. from September 1996 to September 1999. From March 1995 to July 1996, Mr. Shackelford was a senior manager in the national office of Price Waterhouse LLP 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 was a manager in the Paris, France office of Price Waterhouse, serving several multi-national clients. Mr. Shackelford was an audit staff and senior from 1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr. Shackelford received a Bachelor of Arts degree in Accounting, with honors, and a Master of Business Administration degree from Florida State University and is a certified public accountant. Item 11. Executive Compensation Other than as described in Item 13, the Partnership has not paid and does not intend to pay any executive compensation to the General Partners or any of their affiliates. There are no compensatory plans or arrangements regarding termination of employment or change of control. Item 12. Security Ownership of Certain Beneficial Owners and Management As of March 15, 2002, 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 15, 2002, 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. 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, 2001, exclusive of any distributions to which the General Partners or their affiliates may be entitled by reason of their purchase and ownership of Units.
Amount Incurred Type of Compensation For the Year and Recipient Method of Computation Ended December 31, 2001 - --------------------------------- -------------------------------------- ------------------------------ Reimbursement to affiliates for Operating expenses are reimbursed at Accounting and operating expenses the lower of cost or 90% of the administrative services: prevailing rate at which comparable $211,205 services could have been obtained in the same geographic area. Affiliates of the General Partners from time to time incur certain operating expenses on behalf of the Partnership for which the Partnership reimburses the affiliates without interest. Annual management fee to One percent of the sum of gross $36,671 affiliates 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 the affiliates shall determine. Amount Incurred Type of Compensation For the Year and Recipient Method of Computation Ended December 31, 2001 - --------------------------------- -------------------------------------- ------------------------------ Deferred, subordinated real A deferred, subordinated real estate $-0- estate disposition fee payable disposition fee, payable upon sale to affiliates 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 equal $-0- subordinated share of to one percent of Partnership Partnership net cash flow distributions of net cash flow, subordinated to certain minimum returns to the Limited Partners. General Partners' deferred, A deferred, subordinated share equal $-0- subordinated share of to five percent of Partnership Partnership net sales proceeds distributions of such net sales from a sale or sales not in proceeds, subordinated to certain liquidation of the Partnership minimum returns to the Limited Partners. Amount Incurred Type of Compensation For the Year And Recipient Method of Computation Ended December 31, 2001 - --------------------------------- -------------------------------------- ------------------------------ General Partners' share of Distributions of net sales proceeds $-0- Partnership net sales proceeds from a sale or sales of from a sale or sales in substantially all of the liquidation of the Partnership 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.
In addition, in April 2001, the Partnership and CNL Income Fund XV, Ltd. ("CNL XV"), as tenants-in-common, acquired an interest in a Golden Corral property from CNL BB Corp., an affiliate of the general partners, for a purchase price of approximately $2,152,000. CNL XV is a Florida limited partnership and 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 CNL XV, as tenants-in-common. The purchase price paid by the Partnership and CNL XV, as tenants-in-common, represents the costs incurred by CNL BB Corp. to acquire and carry the property, including closing costs. 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 Certified Public Accountants Balance Sheets at December 31, 2001 and 2000 Statements of Income for the years ended December 31, 2001, 2000, and 1999 Statements of Partners' Capital for the years ended December 31, 2001, 2000, and 1999 Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999 Notes to Financial Statements 2. Financial Statement Schedule Schedule III - Real Estate and Accumulated Depreciation at December 31, 2001 Notes to Schedule III - Real Estate and Accumulated Depreciation at December 31, 2001 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 3.2 to Registration Statement No. 33-53672-01 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 3.2 to Registration Statement No. 33-53672-01 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, 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 10.3 to Form 10-K filed with the Securities and Exchange Commission on April 1, 1996, and incorporated herein by reference. 10.4 Assignment of Management Agreement from CNL Fund Advisors, Inc. to CNL APF Partners, LP. (Included as Exhibit 10.4 to Form 10-Q filed with the Securities and Exchange Commission on August 14, 2001, and incorporated herein by reference.) (b) The Registrant filed no reports on Form 8-K during the period October 1, 2001 through December 31, 2001. 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 26th day of March, 2002. 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. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Robert A. Bourne President, Treasurer and Director March 26, 2002 ------------------------------------ (Principal Financial and Accounting Robert A. Bourne Officer) /s/ James M. Seneff, Jr. Chief Executive Officer and Director March 26, 2002 ------------------------------------ (Principal Executive Officer) James M. Seneff, Jr.
CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 2001
Costs Capitalized Subsequent To Initial Cost Acquisition ------------------------ --------------------- Encum- Buildings andImprove- Carrying brances Land Improvements ments Costs ---------- ------------ ----------------------- ------- Properties the Partnership has Invested in Under Operating Leases: Arby's Restaurant: Philadelphia, Pennsylvan-a (j) $274,580 - - - 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 (i) - 460,107 - 552,207 - 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 Carol-na 226,815 431,574 - - Jack in the Box Restaurants: Sacramento, California - 323,929 601,054 - - Houston, Texas - 315,842 590,708 - - Arlington, Texas - 404,752 592,173 - - Lions Choice Restaurant: Overland Park, Kansas - 452,691 - - - Long John Silver's Restaurants: Penn Hills, Pennsylvania-(k) 292,370 356,444 - - Arlington, Texas - 362,939 - - - Johnstown, Pennsylvania - 254,412 - - - Orlando, Florida - 299,696 139,676 - - Austin, Texas - 463,937 - - - Steak -n- Shake Restaurant: Tampa, Florida - 372,748 - - - Wendy's Old Fashioned Hamburger Restaurant: Salisbury, Maryland - 290,195 641,709 - - ------------ ----------- ---------- ------- $12,374,488 $9,887,950 $2,196,627 - ============ =========== ========== ======= 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: Miami, Florida - $976,357 $974,016 - - ============ =========== ========== ======= Property in Which the Partnership has a 41.00% Interest as Tenants-in- Common and has Invested in Under an Operating Lease: Golden Corral Restaurant: Blue Springs, Missouri (-) $786,973 $1,364,990 - - ============ =========== ========== ======= Properties the Partnership has Invested in Under Direct Financing Leases Arby's Restaurant Philadelphia, Pennsylvan-a - $515,075 - - 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: Arlington, Texas - - 449,369 - - Johnstown, Pennsylvania - - - 427,552 - Austin, Texas - - 517,109 - - Steak-n-Shake Restaurant: Tampa, Florida - - - 537,404 - ------------ ----------- ---------- ------- $495,290 $4,805,086 $964,956 - ============ =========== ========== ======= 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 - - ============ =========== ========== ======= Net Cost Basis 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 structionAcquired Computed - ------------- ------------------------- -------------------------------------------- $274,580 (f) $274,580 - 1993 07/93 (d) 256,901 669,537 926,438 188,021 1988 07/93 (b) 211,835 771,616 983,451 216,687 1988 07/93 (b) 247,183 723,304 970,487 203,120 1989 07/93 (b) 174,843 618,815 793,658 173,777 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) 460,107 552,207 1,012,314 22,832 1994 10/93 (i) 530,494 540,983 1,071,477 137,765 1994 12/93 (b) 611,589 1,071,838 1,683,427 308,141 1991 05/93 (b) 625,527 964,122 1,589,649 275,941 1993 06/93 (b) 617,016 1,103,437 1,720,453 286,767 1994 11/93 (b) 197,336 417,418 614,754 117,220 1992 07/93 (b) 160,149 424,977 585,126 119,343 1992 07/93 (b) 164,004 (f) 164,004 - 1991 07/93 (d) 218,639 460,364 679,003 129,280 1993 07/93 (b) 204,516 (f) 204,516 - 1992 07/93 (d) 240,363 412,621 652,984 115,873 1992 07/93 (b) 226,815 431,574 658,389 121,196 1993 07/93 (b) 323,929 601,054 924,983 170,436 1992 06/93 (b) 315,842 590,708 906,550 165,938 1993 07/93 (b) 404,752 592,173 996,925 166,295 1993 08/93 (b) 452,691 (f) 452,691 - 1993 12/93 (d) 292,370 356,444 648,814 33,528 1993 07/93 (k) 362,939 (f) 362,939 - 1993 08/93 (d) 254,412 (f) 254,412 - 1993 08/93 (d) 299,696 139,676 439,372 37,910 1983 11/93 (b) 463,937 (f) 463,937 - 1993 12/93 (d) 372,748 (f) 372,748 - 1994 12/93 (d) 290,195 641,709 931,904 169,936 1993 01/94 (b) - ------------- ------------ ----------- ----------- $12,374,488 $12,084,577 $24,459,065 $3,160,006 ============= ============ =========== =========== $196,274 $434,428 $630,702 $116,561 1993 11/93 (b) ============= ============ =========== =========== $260,439 $545,126 $805,565 $132,222 1994 09/94 (b) ============= ============ =========== =========== $131,762 (f) $131,762 - 1991 03/95 (d) ============= ============ =========== =========== $355,595 $517,030 $872,625 $84,926 1970 01/97 (b) ============= ============ =========== =========== $976,357 $974,016 $1,950,373 $129,962 1995 12/97 (b) ============= ============ =========== =========== $786,973 $1,364,990 $2,151,963 $34,122 2000 04/01 (b) ============= ============ =========== =========== - (f) (f) (d) 1993 07/93 (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 08/93 (d) - (f) (f) (d) 1993 08/93 (d) - (f) (f) (d) 1993 12/93 (d) - (f) (f) (d) 1994 12/93 (d) - (f) (f) (d) 1991 03/95 (d)
CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 2001 (a) Transactions in real estate and accumulated depreciation during 2001, 2000, and 1999 are summarized as follows:
Accumulated Cost Depreciation ------------------ ------------------- Properties the Partnership has invested in Under Operating Leases: Balance, December 31, 1998 $ 25,350,867 $ 2,107,624 Disposition (935,524 ) (112,983 ) Reclassified from net investment in direct financing lease 356,444 -- Reclassified to net investment in direct financing lease (360,090 ) (7,805 ) Depreciation expense -- 397,150 ------------------ ------------------- Balance, December 31, 1999 24,411,697 2,383,986 Reclassified to net investment in direct financing lease (504,839 ) (17,733 ) Depreciation expense -- 383,489 ------------------ ------------------- Balance, December 31, 2000 23,906,858 2,749,742 Reclassified from net investment in direct financing lease 552,207 -- Depreciation expense -- 410,264 ------------------ ------------------- Balance, December 31, 2001 $ 24,459,065 $ 3,160,006 ================== =================== Property of Joint Venture in Which the Partnership has a 50% Interest and has Invested in Under an Operating Lease: Balance, December 31, 1998 $ 630,702 $ 73,118 Depreciation expense -- 14,481 ------------------ ------------------- Balance, December 31, 1999 630,702 87,599 Depreciation expense -- 14,481 ------------------ ------------------- Balance, December 31, 2000 630,702 102,080 Depreciation expense -- 14,481 ------------------ ------------------- Balance, December 31, 2001 $ 630,702 $ 116,561 ================== ===================
CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED December 31, 2001
Cost Accumulated Depreciation ---------------- ----------------- Property in Which the Partnership has a 66.13% Interest as Tenants-in-Common and has Invested in Under an Operating Lease: Balance, December 31, 1998 $ 805,565 $ 77,712 Depreciation expense -- 18,170 ---------------- ----------------- Balance, December 31, 1999 805,565 95,882 Depreciation expense -- 18,170 ---------------- ----------------- Balance, December 31, 2000 805,565 114,052 Depreciation expense -- 18,170 ---------------- ----------------- Balance, December 31, 2001 $ 805,565 $ 132,222 ================ ================= Property of Joint Venture in Which the Partnership has a 27.8% Interest and has Invested in Under a Direct Financing Lease: Balance, December 31, 1998 $ 131,762 $ -- Depreciation expense (d) -- -- ---------------- ----------------- Balance, December 31, 1999 131,762 -- Depreciation expense (d) -- -- ---------------- ----------------- Balance, December 31, 2000 131,762 -- Depreciation expense (d) -- -- ---------------- ----------------- Balance, December 31, 2001 $ 131,762 $ -- ================ =================
CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED December 31, 2001
Accumulated Cost Depreciation ---------------- ------------------ Property in Which the Partnership has a 63.09% Interest as Tenants-In-Common and has Invested in Under an Operating Lease: Balance, December 31, 1998 (h) $ 872,625 $ 33,221 Depreciation expense -- 17,235 ---------------- ------------------ Balance, December 31, 1999 (h) 872,625 50,456 Depreciation expense -- 17,235 ---------------- ------------------ Balance, December 31, 2000 (h) 872,625 67,691 Depreciation expense -- 17,235 ---------------- ------------------ Balance, December 31, 2001 (h) $ 872,625 $ 84,926 ================ ================== Property in Which the Partnership has a 47.83% Interest as Tenants-In-Common has invested in Under an Operating Lease: Balance, December 31, 1998 $ 1,950,373 $ 32,556 Depreciation expense -- 32,466 ---------------- ------------------ Balance, December 31, 1999 1,950,373 65,022 Depreciation expense -- 32,470 ---------------- ------------------ Balance, December 31, 2000 1,950,373 97,492 Depreciation expense -- 32,470 ---------------- ------------------ Balance, December 31, 2001 $ 1,950,373 $ 129,962 ================ ==================
CNL INCOME FUND XIII, LTD. (A Florida Limited Partnership) NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED December 31, 2001
Accumulated Cost Depreciation ---------------- ------------------ Property in Which the Partnership has a 41% Interest as Tenants-in-Common and has Invested in Under an Operating Lease: Balance, December 31, 2000 $ -- $ -- Acquisition 2,151,963 -- Depreciation expense -- 34,122 ---------------- ------------------ Balance, December 31, 2001 $ 2,151,963 $ 34,122 ================ ==================
(b) Depreciation expense is computed for buildings and improvements based upon estimated lives of 30 years. (c) As of December 31, 2001, the aggregate cost of the Properties owned by the Partnership and joint ventures (including the Properties owned as tenants-in-common) for federal income tax purposes was $31,553,018 and $6,919,826, respectively. All of the leases are treated as operating leases for federal income tax purposes. (d) The portion of the lease relating to the building has been recorded as a direct financing lease. The cost of the building has been included in net investment in direct financing leases; therefore, depreciation is not applicable. (e) 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) 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 February 2001, the lease for this Property was amended resulting in the reclassification of the building portion of the lease as an operating lease. The building was recorded at net book value and depreciated over its remaining estimated life of approximately 22 years. (j) Effective May 1999, the Partnership entered into a new lease and converted the building to a new concept, resulting in the reclassification of the building portion of the lease as a direct financing lease. (k) Effective October 1999, the lease for this Property was amended resulting in the reclassification of the building portion of the lease as an operating lease. The building was recorded at net book value and depreciated over its remaining estimated life of approximately 24 years. (l) During the year ended December 31, 2001, 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 $2,151,963. -----END PRIVACY-ENHANCED MESSAGE-----