CARLYLE REAL ESTATE LTD PARTNERSHIP XIII - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarter ended June 30, 2002 Commission file #0-12791

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII
(Exact name of registrant as specified in its charter)

Illinois 36-3207212
(State of organization) (IRS Employer Identification No.)

900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312/915-1987

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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements . . . . . . . . . . . . . . . 3

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . 11

PART II OTHER INFORMATION

Item 3. Defaults on Senior Securities. . . . . . . . . . . 16

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 16

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII
(A LIMITED PARTNERSHIP)

BALANCE SHEETS
JUNE 30, 2002 AND DECEMBER 31, 2001
(UNAUDITED)

ASSETS
------
JUNE 30, DECEMBER 31,
2002 2001
------------ -----------
Current assets:
Cash and cash equivalents . . . . . $ 3,277,907 3,409,779
Other receivables . . . . . . . . . 23,950 22,269
------------ ------------
Total current assets. . . . . 3,301,857 3,432,048

Other assets. . . . . . . . . . . . . -- 105,188
------------ ------------
$ 3,301,857 3,537,236
============ ============

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------

Current liabilities:
Accounts payable and
accrued expenses. . . . . . . . . $ 471,686 230,250
------------ ------------
Total current liabilities . . 471,686 230,250

Distributions received in excess
of recorded investment . . . . . . . -- 661,228
------------ ------------
Commitments and contingencies

Total liabilities . . . . . . 471,686 891,478
------------ ------------

Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . 1,000 1,000
Cumulative net earnings (losses). 1,206,141 1,223,379
Cumulative cash distributions . . (1,149,967) (1,149,967)
------------ ------------
57,174 74,412
------------ ------------
Limited partners:
Capital contributions,
net of offering costs . . . . . 326,224,167 326,224,167
Cumulative net earnings (losses). (262,379,232) (262,580,883)
Cumulative cash distributions . . (61,071,938) (61,071,938)
------------ ------------
2,772,997 2,571,346
------------ ------------
Total partners' capital
accounts (deficits) . . . . 2,830,171 2,645,758
------------ ------------
$ 3,301,857 3,537,236
============ ============

See accompanying notes to financial statements.

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII
(A LIMITED PARTNERSHIP)

STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII
(A LIMITED PARTNERSHIP)

STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

2002 2001
---------- ----------
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . $ 184,413 3,622,887
Items not requiring (providing)
cash or cash equivalents:
Partnership's share of the
reduction of the maximum
unfunded obligation under
and income related to the
termination of the
indemnification agreement . . . . -- (3,572,053)
Partnership's share of gains on
sale of indirect partnership
interests . . . . . . . . . . . . (820,496) (343,038)
Changes in:
Other receivables . . . . . . . . . (1,681) (557)
Other assets. . . . . . . . . . . . 1,427 --
Accounts payable and
accrued expenses. . . . . . . . . 241,436 13,736
---------- ----------
Net cash provided by
(used in) operating
activities. . . . . . . . . . (394,901) (279,025)
---------- ----------

Cash flows from investing activities:
Partnership's distributions from
unconsolidated ventures . . . . . . -- 1,435,704
Cash proceeds from Partnership's
share of gains on sale of
indirect partnership interests. . . 159,268 343,038
Return of Partnership's advance
to affiliated entity. . . . . . . . 103,761 --
---------- ----------
Net cash provided by (used in)
investing activities. . . . . 263,029 1,778,742
---------- ----------
Net increase (decrease)
in cash and cash
equivalents . . . . . . . . . (131,872) 1,499,717
Cash and cash equivalents,
beginning of year . . . . . . 3,409,779 2,162,172
---------- ----------
Cash and cash equivalents,
end of period . . . . . . . . $3,277,907 3,661,889
========== ==========

Supplemental disclosure of cash
flow information:
Non-cash activities:
Recognition of reduction of
distributions received in
excess of recorded investment
as gain . . . . . . . . . . . . . $ 661,228 --
========== ==========

See accompanying notes to financial statements.

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII
(A LIMITED PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2002 AND 2001

(UNAUDITED)

GENERAL

Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 2001,
which are included in the Partnership's 2001 Annual Report on Form 10-K
(File No. 0-12791) filed on April 1, 2002, as certain footnote disclosures
which would substantially duplicate those contained in such audited
financial statements have been omitted from this report. Capitalized terms
used but not defined in this quarterly report have the same meanings as in
the Partnership's 2001 Annual Report on Form 10-K.

The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

TRANSACTIONS WITH AFFILIATES

The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates, including the reimbursement for salaries and salary-
related expenses of its employees and certain of its officers, and for
other direct expenses relating to the administration of the Partnership and
the operation of the Partnership's investment properties. Fees,
commissions and other expenses required to be paid by the Partnership to
the General Partners and their affiliates for the six months ended June 30,
2002 and 2001 were as follows:

Unpaid at
June 30,
2002 2001 2002
------- ------ ---------
Reimbursement (at cost) for
out-of-pocket salary and
salary-related expenses. . . . . $59,374 52,102 26,167
======= ====== ======

JMB/NYC

JMB/NYC is a limited partnership among Carlyle-XIII Associates, L.P.,
and its affiliates, Carlyle-XIV Associates, L.P. and Property Partners,
L.P., as limited partners and Carlyle Managers, Inc. as the sole general
partner. The Partnership is a 25% shareholder of Carlyle Managers, Inc.
and holds, indirectly as a limited partner of Carlyle-XIII Associates,
L.P., an approximate 25% limited partnership interest in JMB/NYC. The sole
general partner of Carlyle-XIII Associates, L.P. is Carlyle Investors,
Inc., of which the Partnership is a 25% shareholder. The general partner
in each of JMB/NYC and Carlyle-XIII Associates, L.P. is an affiliate of the
Partnership.

As a result of the 1996 restructuring, JMB/NYC had an indirect limited
partnership interest which, before taking into account significant
preferences to other partners, equaled approximately 4.9% of the
reorganized and restructured ventures owning 237 Park and 1290 Avenue of
the Americas (collectively, the "Properties"). Neither O&Y nor any of its
affiliates retained any direct or indirect continuing interest in the
Properties. The new ownership structure gave control of the Properties to
an unaffiliated real estate investment trust ("REIT"), owned primarily by
holders of the first mortgage debt that encumbered the Properties prior to
the bankruptcy. JMB/NYC had, under certain limited circumstances, through
January 1, 2001 rights of consent regarding sale of the Properties or the
consummation of certain other transactions that would have significantly
reduced indebtedness of the Properties. In general, at any time on or
after January 2, 2001, an affiliate of the REIT had the right to purchase
JMB/NYC's interest in the Properties for an amount based on a formula
relating to the operations of the Properties (the "Formula Price").

The restructuring and reorganization discussed above eliminated any
potential additional obligation of the Partnership in the future to provide
additional funds under its previous joint venture agreements (other than
that related to a certain indemnification agreement provided in connection
with such restructuring).

Pursuant to an indemnification agreement, the Affiliated Partners were
jointly and severally obligated to indemnify the REIT to the extent of $25
million to ensure their compliance with the terms and conditions relating
to JMB/NYC's indirect limited partnership interests in the restructured and
reorganized joint ventures that owned the Properties. The Affiliated
Partners contributed approximately $7,800,000 (of which the Partnership's
share was approximately $1,900,000) to JMB/NYC, which was deposited into an
escrow account as collateral for such indemnification. These funds were
invested in stripped U.S. Government obligations with a maturity date of
February 15, 2001. Subsequent to that date, the remaining escrowed funds
were invested in short-term U.S. Government obligations. Due to the
Restructuring discussed below, during 1999 the maximum potential obligation
was reduced to $14,285,000 and a portion of the collateral (approximately
$4,460,000 in face amount) was released in 1999 to JMB/NYC. On March 23,
2001, JMB/NYC's indirect interest in the 1290 Partnership was sold, and as
a result, the indemnification obligation was terminated and the remaining
collateral (approximately $5,700,000 face amount of which the Partnership's
share was approximately $1,436,000) was released in March 2001 to JMB/NYC.
The Partnership's share of the reduction of the maximum unfunded obligation
under the indemnification agreement recognized as income is a result of (i)
interest earned on amounts contributed by the Partnership and held in
escrow by JMB/NYC, (ii) the Partnership's share of the agreed upon
reduction of the maximum obligation in November 1999 in connection with the
Restructuring discussed below, and (iii) the Partnership's share of the
remaining indemnification obligation that was released in March 2001 in
connection with the sale of JMB/NYC's indirect interest in the 1290
Partnership. Interest income earned reduced the Partnership's share of the
maximum unfunded obligation under the indemnification agreement, which had
been reflected as a liability.

In November 1999, JMB/NYC closed a transaction (the "Restructuring")
pursuant to which, among other things, JMB/NYC's interests in 237 Park
Avenue ("237 Park") and 1290 Avenue of the Americas ("1290 Avenue of the
Americas") were restructured. Under the Restructuring, the partnership
that owns 237 Park was converted to a limited liability company ("237 Park
LLC"). The membership interest in 237 Park LLC owned by 237/1290 Upper
Tier Associates, L.P. (the "Upper Tier Partnership"), in which JMB/NYC has
been a limited partner with a 99% interest, was contributed to a
partnership (the "237 Partnership") that acquired the other membership
interests in 237 Park LLC from the REIT and one of its affiliates. In
exchange for the interest in 237 Park LLC, the Upper Tier Partnership
received a limited partnership interest in the 237 Partnership having a
fair market value (determined in accordance with the partnership agreement
of the 237 Partnership) of approximately $500,000. (JMB/NYC's total
investment in the 237 Partnership (prior to its sale in January 2002) was

significantly less than 1% of the 237 Partnership.) The 237 Partnership
owned a portfolio of investments in addition to 237 Park. JMB/NYC had the
right, during the month of July of each calendar year commencing with 2001,
to cause a sale of the interest in the 237 Partnership for a price equal to
the greater of the fair market value of such interest (determined in
accordance with the partnership agreement of the 237 Partnership) and a
specified amount, of which JMB/NYC's share would be $500,000. JMB/NYC
elected not to exercise its right to cause a sale of its interest in the
237 Partnership during July 2001. In addition, the general partner of the
237 Partnership had the right, during the month of January of each calendar
year commencing with 2002, to purchase the interest in the 237 Partnership
for a price equal to the greater of the fair market value of such interest
(determined as described above) and a specified amount, of which JMB/NYC's
share would be $650,000. In January 2002, the general partner of the 237
Partnership exercised its right to acquire JMB/NYC's indirect interest in
the 237 Partnership and JMB/NYC received $650,000 in sale proceeds. Such
amount was paid to the limited partners of JMB/NYC as holders of a tranche
of the Purchase Note as discussed below. The Partnership received its
share of sale proceeds, approximately $159,000 in March 2002. Due to the
January 2002 sale of the Partnership's indirect interest in the 237
Partnership, which was the Partnership's last investment property
associated with JMB/NYC, the distributions received in excess of recorded
investment were reduced to zero and included as part of the gain on sale in
2002. The distributions received in excess of recorded investment were
created by the 1999 retirement of the Partnership's obligations to Carlyle
Investors, Inc. and Carlyle Managers, Inc.

JMB/NYC's indirect interest through the Upper Tier Partnership in the
partnership (the "1290 Partnership") that owned 1290 Avenue of the Americas
was also modified, although the REIT continued to own the controlling
interest in the property. In general, the REIT had the right to sell 1290
Avenue of the Americas or engage in certain other transactions during the
period January 1, 2000 through February 28, 2001, provided that JMB/NYC
received the greater of (i) an amount based on a formula relating to the
operations of the property (the "1290 Formula Price") and (ii) $4,500,000.
No such transaction occurred during that period. An affiliate of the REIT
also had the right, during the month of March of each calendar year
commencing with 2001, to purchase JMB/NYC's indirect interest in the 1290
Partnership for the greater of (x) the 1290 Formula Price and (y)
$1,400,000. On March 2, 2001, JMB/NYC was notified that an affiliate of
the REIT intended to exercise its right to purchase JMB/NYC's indirect
interest in the 1290 Partnership and on March 23, 2001, the sale was
completed and JMB/NYC received approximately $1,400,000 at closing (of
which the Partnership's share was approximately $340,000). Such amount was
paid in May of 2001 to the limited partners of JMB/NYC as holders of a
tranche of the Purchase Note as discussed below. In addition, JMB/NYC
received the remaining collateral (approximately $5,700,000, of which the
Partnership's share was approximately $1,436,000) held pursuant to the
indemnification agreement, including interest earned thereon, upon closing
of the sale of its interest in the 1290 Partnership. The Partnership
received its share of the sale proceeds and collateral amount in May 2001.

A portion of the purchase price for JMB/NYC's indirect interests in
the 1290 Avenue of the Americas and 237 Park Avenue office buildings is
represented by a certain promissory note (the "Purchase Note") bearing
interest at 12-3/4% per annum. The Purchase Note was secured by JMB/NYC's
indirect interests in the 237 Partnership (prior to its sale in January
2002) and the 1290 Partnership (prior to its sale in March 2001) and is
non-recourse to JMB/NYC. The Purchase Note requires payment of principal
and interest out of distributions made to JMB/NYC from the 1290 Partnership
and the 237 Partnership and proceeds from sales of JMB/NYC's indirect
interests in those partnerships. Unpaid interest accrues and is deferred,
compounded monthly. Unpaid principal and interest were due at maturity on
January 2, 2001. As expected, JMB/NYC did not have funds to pay the
Purchase Note at its maturity. The limited partners of JMB/NYC, as
creditors, and the holder of the Purchase Note agreed to certain steps if

the Purchase Note were not repaid within one year of its maturity as
discussed below. The outstanding principal and accrued and deferred
interest on the Purchase Note at June 30, 2002, was approximately
$180,531,000, including interest at the default rate (as defined) of 12-
3/4% per annum.

In December 1999, the Affiliated Partners advanced a total of
approximately $425,000 (of which the Partnership advanced approximately
$105,000) to the limited partners of JMB/NYC, which was used to acquire a
$5,425,000 tranche of the Purchase Note and the related security agreement
for the collateralization of such tranche. As a result of this purchase,
such limited partners, as creditors of JMB/NYC, were entitled to receive up
to $5,425,000 in proceeds otherwise payable to JMB/NYC in respect of its
indirect interests in the 1290 Partnership or the 237 Partnership, which
were owned through the Upper Tier Partnership. Such amounts received by
the limited partners are distributable to the Affiliated Partners in
proportion to their respective advances made to purchase the tranche (i.e.,
25% to the Partnership and 75% in the aggregate to the other Affiliated
Partners). In connection with their purchase of the $5,425,000 tranche of
the Purchase Note, the limited partners of JMB/NYC agreed with the holder
of the Purchase Note that in the event JMB/NYC had not repaid all amounts
due and owing under the Purchase Note within one year after its maturity on
January 2, 2001, the holder would take the appropriate steps necessary to
foreclose upon and obtain JMB/NYC's interest in the Upper Tier Partnership
in lieu of seeking any other damages. As a result of the sales of
JMB/NYC's indirect interests in the 1290 Partnership and the 237
Partnership, which were the primary assets of the Upper Tier Partnership,
and the application of JMB/NYC's share of the proceeds from such sales to
amounts due under the Purchase Note, it is unlikely that the holder will
seek to foreclose on JMB/NYC's interest in the Upper Tier Partnership. The
Partnership received $103,761 in May of 2002 as a return of its December
1999 advance to the limited partners of JMB/NYC.

1001 FOURTH AVENUE PLAZA

On or about October 13, 2000, the Corporate General Partner of the
Partnership received a demand letter and notice of planned environmental
remedial activities from counsel for National Office Partners Limited
Partnership (hereinafter, "NOP"). In the notice, NOP advised the
Partnership that NOP had discovered contamination on a site adjacent to the
office building formerly known as the 1001 Fourth Avenue Plaza office
building (the "1001 Property"). The 1001 Property had been owned by 1001
Fourth Avenue Associates ("Associates"), an Illinois general partnership,
until it transferred ownership of the property to its mortgage lender
pursuant to a deed in lieu of foreclosure in November 1993. Associates had
as its partners the Partnership with a 99.9% partnership interest and the
Corporate General Partner with a 0.1% partnership interest. Associates was
dissolved in 1993. In its notice, NOP advised that it has discovered soil
and possible groundwater contamination on its property that it believed had
emanated from underground fuel storage tanks allegedly operated by
Associates. NOP advised that its site was contaminated with petroleum
hydrocarbons in excess of Washington state cleanup levels and that
approximately 80,000 to 90,000 tons of contaminated soil have been
excavated and disposed of off-site. NOP also stated that impacted
groundwater recovered during excavation has been addressed as necessary.
NOP advised that it had incurred costs of investigation and remedial action
at the site and would seek to recover from the responsible party or
parties, among other things, the costs of investigation and remediation,
attorneys' fees, and other costs in connection with this matter.

On November 30, 2001, NOP sent the Partnership, and five other
allegedly responsible parties, a further demand letter purporting to
quantify the amount of remedial action costs incurred by NOP through the
date of the letter. In the letter, NOP stated that it had incurred
$2,050,561 in recoverable remedial action costs that allegedly covered,
among other things, costs of investigation, soil removal costs, consulting

fees and attorneys' fees incurred to the date of the letter. In the 2001
demand letter, NOP stated that it would also seek all additional future
costs as they are incurred, including any additional costs related to
future required investigation and remediation of any groundwater
contamination and any costs incurred by NOP as a result of any recontamina-
tion of the NOP property that might arise from the contamination alleged to
exist currently at the 1001 Property site. Such future costs could
materially increase the ultimate costs that NOP might seek to recover. In
addition, NOP's demands do not include costs for the investigation,
remediation or other treatment of the soil or groundwater at the 1001
Property site and the Partnership does not have preliminary estimates of
these potential costs. The Partnership engaged counsel and developed
information sufficient to respond to the issues raised by NOP's demands.

A settlement in principle of this matter was reached as a result of a
mediation in July 2002 involving NOP, the Partnership and other alleged
responsible parties. Under the terms of the proposed settlement, among
other things, the Partnership agreed to pay NOP a sum of money, NOP agreed
in concept to release its claims against the Partnership with respect to
the alleged contamination of NOP's property, and the current owner of the
1001 Property committed in concept to certain remedial actions. The
Partnership has accrued as a liability its share of the proposed
settlement.

Completion of the proposed settlement is subject to negotiation and
execution of final, binding agreements, and there is no assurance that such
agreements will be executed or that there will be no material change in the
terms of the settlement (including the Partnership's obligations
thereunder) as compared to the terms described above for the proposed
settlement. If a settlement is not completed, the Partnership intends to
vigorously defend itself in this matter, and it is unlikely that the
Partnership would be able to finish its winding up and terminate prior to
the end of 2002. Even if a settlement is completed, such settlement may
not be completed on a timely or other basis that will allow the Partnership
to finish its winding up and terminate prior to the end of 2002.

ADJUSTMENTS

In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of June 30, 2002
and for the three and six months ended June 30, 2002 and 2001.

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

At June 30, 2002, the Partnership had cash and cash equivalents of
approximately $3,278,000. These funds are available for working capital
requirements and reserves, the proposed settlement relating to the 1001
property, contingent liabilities and potential future distributions to the
General Partners and Holders of Interests. As discussed below, JMB/NYC's
indirect interest in the 237 Partnership was sold in January 2002. The
Partnership received its share of the proceeds from such sale
(approximately $159,000) in March 2002. In addition, the Partnership
received approximately $104,000 in May of 2002 as a return of its December
1999 advance to the limited partners of JMB/NYC.

On or about October 13, 2000, the Corporate General Partner of the
Partnership received a demand letter and notice of planned environmental
remedial activities from counsel for National Office Partners Limited
Partnership (hereinafter, "NOP"). In the notice, NOP advised the
Partnership that NOP had discovered contamination on a site adjacent to the
office building formerly known as the 1001 Fourth Avenue Plaza office
building (the "1001 Property"). The 1001 Property had been owned by 1001
Fourth Avenue Associates ("Associates"), an Illinois general partnership,
until it transferred ownership of the property to its mortgage lender
pursuant to a deed in lieu of foreclosure in November 1993. Associates had
as its partners the Partnership with a 99.9% partnership interest and the
Corporate General Partner with a 0.1% partnership interest. Associates was
dissolved in 1993. In its notice, NOP advised that it had discovered soil
and possible groundwater contamination on its property that it believed had
emanated from underground fuel storage tanks allegedly operated by
Associates. NOP advised that its site was contaminated with petroleum
hydrocarbons in excess of Washington state cleanup levels and that
approximately 80,000 to 90,000 tons of contaminated soil have been
excavated and disposed of off-site. NOP also stated that impacted
groundwater recovered during excavation has been addressed as necessary.
NOP advised that it had incurred costs of investigation and remedial action
at the site and would seek to recover from the responsible party or
parties, among other things, the costs of investigation and remediation,
attorneys' fees, and other costs in connection with this matter.

On November 30, 2001, NOP sent the Partnership, and five other
allegedly responsible parties, a further demand letter purporting to
quantify the amount of remedial action costs incurred by NOP through the
date of the letter. In the letter, NOP stated that it had incurred
$2,050,561 in recoverable remedial action costs that allegedly covered,
among other things, costs of investigation, soil removal costs, consulting
fees and attorneys' fees incurred to the date of the letter. In the 2001
demand letter, NOP stated that it would also seek all additional future
costs as they are incurred, including any additional costs related to
future required investigation and remediation of any groundwater
contamination and any costs incurred by NOP as a result of any
recontamination of the NOP property that might arise from the contamination
alleged to exist currently at the 1001 Property site. Such future costs
could materially increase the ultimate costs that NOP might seek to
recover. In addition, NOP's demands do not include costs for the
investigation, remediation or other treatment of the soil or groundwater at
the 1001 Property site and the Partnership does not have preliminary
estimates of these potential costs. The Partnership engaged counsel and
developed information sufficient to respond to the issues raised by NOP's
demands.

A settlement in principle of this matter was reached as a result of a
mediation in July 2002 involving NOP, the Partnership and other alleged
responsible parties. Under the terms of the proposed settlement, among
other things, the Partnership agreed to pay NOP a sum of money, NOP agreed
in concept to release its claims against the Partnership with respect to
the alleged contamination of NOP's property, and the current owner of the
1001 Property committed in concept to certain remedial actions. The
Partnership has accrued as a liability its share of the proposed
settlement.

Completion of the proposed settlement is subject to negotiation and
execution of final, binding agreements, and there is no assurance that such
agreements will be executed or that there will be no material change in the
terms of the settlement (including the Partnership's obligations
thereunder) as compared to the terms described above for the proposed
settlement. If a settlement is not completed, the Partnership intends to
vigorously defend itself in this matter, and it is unlikely that the
Partnership would be able to finish its winding up and terminate prior to
the end of 2002. Even if a settlement is completed, such settlement may
not be completed on a timely or other basis that will allow the Partnership
to finish its winding up and terminate prior to the end of 2002.

In November 1999, JMB/NYC closed a transaction (the "Restructuring")
pursuant to which, among other things, JMB/NYC's interests in 237 Park
Avenue ("237 Park") and 1290 Avenue of the Americas ("1290 Avenue of the
Americas") were restructured. Under the Restructuring, the partnership
that owns 237 Park was converted to a limited liability company ("237 Park
LLC"). The membership interest in 237 Park LLC owned by 237/1290 Upper
Tier Associates, L.P. (the "Upper Tier Partnership"), in which JMB/NYC is a
limited partner with a 99% interest, was contributed to a partnership (the
"237 Partnership") that acquired the other membership interests in 237 Park
LLC from the REIT and one of its affiliates. In exchange for the interest
in 237 Park LLC, the Upper Tier Partnership received a limited partnership
interest in the 237 Partnership having a fair market value (determined in
accordance with the partnership agreement of the 237 Partnership) of
approximately $500,000. (JMB/NYC's total investment in the 237 Partnership
prior to its sale in January 2002 was significantly less than 1% of the 237
Partnership.) The 237 Partnership owned a portfolio of investments in
addition to 237 Park. JMB/NYC had the right, during the month of July of
each calendar year commencing with 2001, to cause a sale of the interest in
the 237 Partnership for a price equal to the greater of the fair market
value of such interest (determined in accordance with the partnership
agreement of the 237 Partnership) and a specified amount, of which
JMB/NYC's share would be $500,000. JMB/NYC elected not to exercise its
right to cause a sale of its interest in the 237 Partnership during July
2001. In addition, the general partner of the 237 Partnership had the
right, during the month of January of each calendar year commencing with
2002, to purchase the interest in the 237 Partnership for a price equal to
the greater of the fair market value of such interest (determined as
described above) and a specified amount, of which JMB/NYC's share would be
$650,000. In January 2002, the general partner of the 237 Partnership
exercised its right to acquire JMB/NYC's indirect interest in the 237
Partnership, and JMB/NYC received $650,000 in sale proceeds. Such amount
was paid to the limited partners of JMB/NYC as holders of a tranche of the
Purchase Note as discussed below. The Partnership's share of such sale
proceeds, approximately $159,000, was received in March 2002. Due to the
January 2002 sale of the Partnership's indirect interest in the 237
Partnership, which was the Partnership's last investment property, the
distributions received in excess of recorded investment were reduced to
zero and included as part of the gain on sale in 2002. The distributions
received in excess of recorded investment were created by the 1999
retirement of the Partnership's obligations to Carlyle Investors, Inc. and
Carlyle Managers, Inc.

JMB/NYC's indirect interest through the Upper Tier Partnership in the
partnership (the "1290 Partnership") that owned 1290 Avenue of the Americas
was also modified, although the REIT continued to own the controlling
interest in the property. In general, the REIT had the right to sell 1290
Avenue of the Americas or engage in certain other transactions during the
period January 1, 2000 through February 28, 2001, provided that JMB/NYC
received the greater of (i) an amount based on a formula relating to the
operations of the property (the "1290 Formula Price") and (ii) $4,500,000.
No such transaction occurred during that period. An affiliate of the REIT
also had the right, during the month of March of each calendar year
commencing with 2001, to purchase JMB/NYC's indirect interest in the 1290
Partnership for the greater of (x) the 1290 Formula Price and (y)
$1,400,000. On March 2, 2001, JMB/NYC was notified that an affiliate of
the REIT intended to exercise its right to purchase JMB/NYC's indirect
interest in the 1290 Partnership and on March 23, 2001, the sale was
completed and JMB/NYC received approximately $1,400,000 at closing (of
which the Partnership's share was approximately $340,000). Such amount was
paid to the limited partners of JMB/NYC as holders of a tranche of the
Purchase Note as discussed below. In addition, JMB/NYC received the
remaining collateral (approximately $5,700,000, of which the Partnership's
share was approximately $1,436,000) held pursuant to the indemnification
agreement, including interest earned thereon, upon closing of the sale of
its interest in the 1290 Partnership. The Partnership received its share
of the sale proceeds and collateral amount in May 2001.

A portion of the purchase price for JMB/NYC's indirect interests in
the 1290 Avenue of the Americas and 237 Park Avenue office buildings is
represented by a certain promissory note (the "Purchase Note") bearing
interest at 12-3/4% per annum. The Purchase Note was secured by JMB/NYC's
indirect interests in the 237 Partnership (prior to its sale in January
2002) and the 1290 Partnership (prior to its sale in March 2001) and is
non-recourse to JMB/NYC. The Purchase Note requires payment of principal
and interest out of distributions made to JMB/NYC from the 1290 Partnership
and the 237 Partnership and proceeds from sales of JMB/NYC's indirect
interests in those partnerships. Unpaid interest accrues and is deferred,
compounded monthly. Unpaid principal and interest were due at maturity on
January 2, 2001. As expected, JMB/NYC did not have funds to pay the
Purchase Note at its maturity. The limited partners of JMB/NYC, as
creditors, and the holder of the Purchase Note agreed to certain steps if
the Purchase Note were not repaid within one year of its maturity as
discussed below. The outstanding principal and accrued and deferred
interest on the Purchase Note at June 30, 2002, was approximately
$180,531,000, including interest at the default rate (as defined) of 12-
3/4% per annum.

In December 1999, the Affiliated Partners advanced a total of
approximately $425,000 (of which the Partnership advanced approximately
$105,000) to the limited partners of JMB/NYC, which was used to acquire a
$5,425,000 tranche of the Purchase Note and the related security agreement
for the collateralization of such tranche. As a result of this purchase,
such limited partners, as creditors of JMB/NYC, were entitled to receive up
to $5,425,000 in proceeds otherwise payable to JMB/NYC in respect of its
indirect interests in the 1290 Partnership or the 237 Partnership, which
were owned through the Upper Tier Partnership. Such amounts received by
the limited partners are distributable to the Affiliated Partners in
proportion to their respective advances made to purchase the tranche (i.e.,
25% to the Partnership and 75% in the aggregate to the other Affiliated
Partners). In connection with their purchase of the $5,425,000 tranche of
the Purchase Note, the limited partners of JMB/NYC agreed with the holder
of the Purchase Note that in the event JMB/NYC had not repaid all amounts
due and owing under the Purchase Note within one year after its maturity on
January 2, 2001, the holder would take the appropriate steps necessary to
foreclose upon and obtain JMB/NYC's interest in the Upper Tier Partnership
in lieu of seeking any other damages. As a result of the sales of
JMB/NYC's indirect interests in the 1290 Partnership and the 237
Partnership, which were the primary assets of the Upper Tier Partnership,
and the application of JMB/NYC's share of the proceeds from such sales to

amounts due under the Purchase Note, it is unlikely that the holder will
seek to foreclose on JMB/NYC's interest in the Upper Tier Partnership. The
Partnership received $103,761 in May 2002 as a return of its December 1999
advance to the limited partners of JMB/NYC.

Pursuant to the indemnification agreement, the Affiliated Partners
were jointly and severally obligated to indemnify the REIT to the extent of
$25 million to ensure their compliance with the terms and conditions
relating to JMB/NYC's indirect limited partnership interests in the
restructured and reorganized joint ventures that owned the Properties. The
Affiliated Partners contributed approximately $7,800,000 (of which the
Partnership's share was approximately $1,900,000) to JMB/NYC, which was
deposited into an escrow account as collateral for such indemnification.
These funds were invested in stripped U.S. Government obligations with a
maturity date of February 15, 2001. Subsequent to that date, the remaining
escrowed funds were invested in short-term U.S. Government obligations.
Due to the Restructuring discussed above, during 1999 the maximum potential
obligation was reduced to $14,285,000 and a portion of the collateral
(approximately $4,460,000 in face amount) was released in 1999 to JMB/NYC.
As a result of the sale of JMB/NYC's indirect interest in the 1290
Partnership, the indemnification obligation was terminated and the
remaining collateral (approximately $5,700,000 face amount of which the
Partnership's share was approximately $1,436,000) was released in March
2001 to JMB/NYC. The Partnership's share of the reduction of the maximum
unfunded obligation under the indemnification agreement recognized as
income is a result of (i) interest earned on amounts contributed by the
Partnership and held in escrow by JMB/NYC, (ii) the Partnership's share of
the agreed upon reduction of the maximum obligation in November 1999 in
connection with the Restructuring discussed above, and (iii) the
Partnership's share of the remaining indemnification obligation that was
released in March 2001 in connection with the sale of JMB/NYC's indirect
interest in the 1290 Partnership. Interest income earned reduced the
Partnership's share of the maximum unfunded obligation under the
indemnification agreement, which had been reflected as a liability.

The Partnership will not make any significant distributions to the
Holders of Interests. However, in connection with the sale of JMB/NYC's
interest in the 237 Partnership in January 2002, Holders of Interests will
recognize in the current year a substantial amount of net gain for Federal
income tax purposes (corresponding at a minimum to all or most of their
remaining deficit capital account balances for tax purposes related to such
investment). Sale proceeds that will likely be distributed upon
liquidation of the Partnership will be significantly less than the gain.
For certain Holders of Interests such taxable income may be offset by their
suspended passive activity losses (if any). Each Holder's tax consequences
will depend on his own tax situation.

Given that the 237 Partnership was the Partnership's last investment
property, the Partnership is working to resolve the environmental matter at
the 1001 Property. If such environmental matter is resolved prior to
December 31, 2002, and barring any unexpected circumstances, the
Partnership will terminate at the end of 2002. If such matter is not
resolved, the Partnership may liquidate in a later year. The Partnership
expects to make a minimal liquidating distribution upon termination;
however, Holders of Interests are only expected to receive, in total over
the entire term of the Partnership, less than one-sixth of their original
investment from all cash sources.

RESULTS OF OPERATIONS

The decrease in other assets at June 30, 2002 as compared to
December 31, 2001 is due to the return of the Partnership's 1999 advance to
the limited partners of JMB/NYC related to the tranche of the Purchase
Note, as described more fully in the Notes.

The increase in accounts payable and accrued expenses at June 30, 2002
as compared to December 31, 2001 is primarily due to the accrual for the
proposed settlement relating to the 1001 Property, discussed more fully in
the Notes.

The decrease in distributions received in excess of recorded
investment at June 30, 2002 as compared to December 31, 2001 is due to the
reduction of such amount in connection with the sale of the indirect
interest in the 237 Partnership in January, 2002. The distributions
received in excess of recorded investment was created by the 1999
retirement of the Partnership's obligations to Carlyle Investors, Inc. and
Carlyle Managers, Inc. Such investment has been reduced to zero and
included in the Partnership's share of gain on sale of indirect partnership
interest due to the sale of the Partnership's last investment property in
January 2002.

The decrease in interest income for the three and six months ended
June 30, 2002 as compared to the same periods in 2001 is primarily due to
lower interest rates on invested funds in 2002.

The increase in professional services for the three and six months
ended June 30, 2002 as compared to the same periods in 2001 is primarily
due to accruals made for legal and other professional services in regards
to the environmental issues at 1001 Fourth Avenue Plaza, discussed more
fully in the Notes.

The increase in general and administrative expenses for the three and
six months ended June 30, 2002 as compared to the same periods in 2001 is
primarily due to the accrual for the proposed settlement relating to the
1001 Property.

The Partnership's share of the reduction of the maximum unfunded
obligation under and income related to termination of the indemnification
agreement recognized as income during 2001 of $3,572,177 is a result of the
sale of JMB/NYC's indirect interest in the 1290 Partnership in March of
2001 and release of the Partnership's and other Affiliated Partners'
indemnification obligation relating to the interest in the 1290
Partnership, as well as interest earned during 2001 on amounts contributed
by the Partnership and held in escrow by JMB/NYC. Such interest income
earned reduced the Partnership's proportionate share of the maximum
unfunded obligation under the indemnification agreement.

The Partnership's share of gain on sale of indirect partnership
interest for the six months ended June 30, 2002 is the aggregate of the
Partnership's share of JMB/NYC's gain from the sale of its indirect
partnership interest in the 237 Partnership in January 2002 and the
reduction of the distributions received in excess of recorded investment.
The Partnership's share of gain on sale of indirect partnership interest
for the six months ended June 30, 2001 is the Partnership's share of
JMB/NYC's gain from the sale of its indirect partnership interest in the
1290 Partnership in March 2001.

PART II. OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

A portion of the purchase price for JMB/NYC's indirect interests in
the 1290 Avenue of the Americas and 237 Park Avenue office buildings is
represented by a certain promissory note (the "Purchase Note") bearing
interest at 12-3/4% per annum. Unpaid principal and interest were due at
maturity on January 2, 2001. As expected, JMB/NYC did not have funds to
pay the Purchase Note at its maturity. The outstanding principal and
accrued and deferred interest on the Purchase Note at June 30, 2002, was
approximately $180,531,000 including interest at the default rate (as
defined) of 12-3/4% per annum. Reference is made to the subsection
entitled "JMB/NYC" in the Notes to the Financial Statements filed with this
report for a further discussion of the default under the Purchase Note.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

3-A. Amended and Restated Agreement of Limited Partnership set
forth as Exhibit A to the Prospectus is filed herewith.

3-B. Acknowledgement of rights and duties of the General
Partners of the Partnership between ABPP Associates, L.P. (a successor
Associate General Partner of the Partnership) and JMB Realty Corporation as
of December 31, 1995 is hereby incorporated herein by reference to the
Partnership's Report for September 30, 1996 on Form 10-Q (File No. 0-12791)
dated November 8, 1996.

99. Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is filed
herewith.

(b) No reports on Form 8-K were filed during the last quarter of
the period covered by this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII

BY: JMB Realty Corporation
(Corporate General Partner)

By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: August 12, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.

By: GAILEN J. HULL
Gailen J. Hull, Chief Financial Officer and
Principal Accounting Officer
Date: August 12, 2002