UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission File Number 0-10430
DE ANZA PROPERTIES - XII, LTD.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3601367
(State or other jurisdiction of (IRS Employer Iden-
incorporation or organization) tification Number)
9171 WILSHIRE BOULEVARD, SUITE 627
BEVERLY HILLS, CALIFORNIA 90210
(Address of principal executive offices, including zip code)
(310) 550-1111
(Registrant's telephone number, including area code)
NO CHANGE
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
Pursuant to the Securities Exchange Act of 1934 Release 15502 and Rule
240.0-3(b) (17 CFR 240.0-3(b)), the pages of this document have been numbered
sequentially. The total number of pages contained herein is 19.
1
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets 3
Statements of Operations 5
Statements of Changes in Partners'
Capital (Deficit) 7
Statements of Cash Flows 8
Notes to Financial Statements 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 15
PART II. OTHER INFORMATION 18
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Balance Sheets
(Unaudited)
June 30, December 31,
1995 1994
------------ ------------
ASSETS
CASH - including restricted cash of $188,097 and
$230,097 at June 30, 1995 and December 31, $ 716,756 $ 912,914
1994, respectively - Note 1
ACCOUNTS RECEIVABLE 5,303 254,057
PREPAID EXPENSES 11,401 45,605
------------ ------------
733,460 1,212,576
------------ ------------
NOTES RECEIVABLE - Note 5 486,657 488,026
------------ ------------
PROPERTY AND EQUIPMENT - Notes 2, 5 and 6
Land 1,184,605 1,184,605
Land improvements 3,176,027 2,901,226
Buildings and improvements 9,933,168 9,933,168
Furniture and equipment 433,393 426,637
------------ ------------
14,727,193 14,445,636
Less accumulated depreciation 6,192,358 5,900,220
------------ ------------
8,534,835 8,545,416
------------ ------------
OTHER ASSETS
Loan costs - less accumulated amortization
of $10,274 and $7,030 at June 30, 1995
and December 31, 1994, respectively 87,060 90,304
Other 5,341 5,341
------------ ------------
92,401 95,645
------------ ------------
$9,847,353 $10,341,663
------------ ------------
------------ ------------
See accompanying notes to financial statements.
3
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Balance Sheets (Continued)
(Unaudited)
June 30, December 31,
1995 1994
----------- ------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
(including $11,506 and $27,938 due to
related parties at June 30, 1995
and December 31, 1994, respectively) $ 178,653 $ 439,431
DEPOSITS AND ADVANCE RENTALS 62,666 70,066
DEFERRED GAIN ON SALE - Note 6 188,097 230,097
MANAGEMENT AND CONDOMINIUM CONVERSION
FEES PAYABLE TO AFFILIATE - Note 3 738,969 682,583
SECURED NOTES PAYABLE - Note 2 4,266,226 4,278,706
------------ ------------
5,434,611 5,700,883
------------ ------------
PARTNERS' CAPITAL (DEFICIT)
General partners (1,652,858) (1,654,328)
Limited partners, 22,719 units issued
and outstanding 6,065,600 6,295,108
------------ ------------
4,412,742 4,640,780
------------ ------------
$9,847,353 $10,341,663
------------ ------------
------------ ------------
See accompanying notes to financial statements.
4
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Statements of Operations
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1995 1994
----------- -----------
INCOME
Rent $1,110,001 $1,340,333
Interest 30,614 35,749
Utilities income - 26,427
Other 9,092 160,709
Gain on sale of property and equipment
- Note 6 42,000 68,711
----------- -----------
1,191,707 1,631,929
----------- -----------
EXPENSES
Depreciation and amortization 295,382 405,006
Interest 153,700 242,989
Maintenance, repairs and supplies 121,756 139,823
Salaries (including $10,436 and $15,134
paid to related parties in 1995 and
1994, respectively) - Note 3 97,110 217,328
Utilities expense 89,995 161,000
Professional fees and services
(including $38,277 and $39,245 paid
to related parties in 1995 and 1994,
respectively) - Note 3 84,703 115,053
Real estate taxes 57,748 113,003
Management fees accrued to related
parties - Note 3 56,386 68,136
Other 35,995 158,903
Insurance 34,113 27,245
Payroll taxes and employee benefits 17,857 46,021
Uninsured loss from earthquake damage
- Note 7 - 575,000
----------- -----------
1,044,745 2,269,507
----------- -----------
NET INCOME (LOSS) $ 146,962 $(637,578)
----------- -----------
----------- -----------
NET INCOME (LOSS)
GENERAL PARTNERS $1,470 $(95,637)
----------- -----------
----------- -----------
LIMITED PARTNERS $145,492 $(541,941)
----------- -----------
----------- -----------
INCOME (LOSS) PER 1% GENERAL
PARTNER INTEREST - Note 4 $14.70 $(956.37)
----------- -----------
----------- -----------
INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT - Note 4 $6.40 $(23.85)
----------- -----------
----------- -----------
See accompanying notes to financial statements.
5
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Statements of Operations
(Unaudited)
Three Months Three Months
Ended Ended
June 30, June 30,
1995 1994
------------ --------------
INCOME
Rent $550,518 $ 644,847
Interest 16,124 18,497
Utilities income - 14,206
Other 3,401 150,097
Gain on sale of property and equipment
- Note 6 42,000 (305)
---------- ----------
612,043 827,342
---------- ----------
EXPENSES
Depreciation and amortization 147,691 201,925
Interest 79,090 111,803
Maintenance, repairs and supplies 65,580 82,011
Salaries (including $6,127 and $7,855
paid to related parties in 1995 and
1994, respectively) - Note 3 56,424 106,196
Utilities expense 41,516 82,875
Professional fees and services
(including $16,810 and $17,057 paid
to related parties in 1995 and 1994,
respectively) - Note 3 48,462 60,318
Real estate taxes 16,389 56,558
Management fees accrued to related
parties - Note 3 27,707 32,834
Other 22,363 82,871
Insurance 16,867 13,338
Payroll taxes and employee benefits 9,137 20,881
Uninsured loss from earthquake damage
- Note 7 - 418,504
----------- ----------
531,226 1,270,114
----------- ----------
NET INCOME (LOSS) $ 80,817 $(442,772)
----------- ----------
----------- ----------
NET INCOME (LOSS)
GENERAL PARTNERS $ 808 $(66,416)
----------- ----------
----------- ----------
LIMITED PARTNERS $80,009 $(376,356)
----------- ----------
----------- ----------
INCOME (LOSS) PER 1% GENERAL
PARTNER INTEREST - Note 4 $8.08 $(664.16)
----------- ----------
----------- ----------
INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT - Note 4 $3.52 $(16.57)
----------- ----------
----------- ----------
See accompanying notes to financial statements.
6
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Statements of Changes in Partners' Capital (Deficit)
(Unaudited)
For the Six Months Ended June 30, 1995 and
For the Year Ended December 31, 1994
GENERAL LIMITED
TOTAL PARTNERS PARTNERS
----------- ------------ ------------
BALANCE - January 1, 1994 $ 6,618,974 $(1,580,649) $ 8,199,623
DISTRIBUTIONS TO PARTNERS (1,487,000) - (1,487,000)
NET LOSS - for the year
ended December 31, 1994
(491,194) (73,679) (417,515)
----------- ------------ ------------
BALANCE - December 31,
1994 4,640,780 (1,654,328) 6,295,108
DISTRIBUTIONS TO PARTNERS (375,000) - (375,000)
NET INCOME - for the six
months ended June 30,
1995 146,962 1,470 145,492
----------- ------------ ------------
BALANCE - June 30, 1995 $ 4,412,742 $(1,652,858) $6,065,600
----------- ------------ ------------
----------- ------------ ------------
See accompanying notes to financial statements.
7
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Statements of Cash Flows
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1995 1994
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Gross rents received from real estate
operations $1,360,469 $1,533,322
Cash paid to suppliers and employees
(including $50,852 and $55,670
paid to related parties in 1995
and 1994, respectively) (763,543) (1,066,495)
Interest paid (152,433) (204,966)
Interest income received 30,592 36,655
----------- -----------
Net cash provided by
operating activities 475,085 298,516
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (281,557) (134,389)
Payments received on notes receivable 1,369 55,188
Sales and closing costs (3,575) (72,139)
Proceeds from sale of property and
equipment - 81,108
----------- -----------
Net cash used in
investing activities (283,763) (70,232)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (375,000) -
Principal payments on secured
notes payable (12,480) (63,456)
----------- -----------
Net cash used in
financing activities (387,480) (63,456)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (196,158) 164,828
CASH AND CASH EQUIVALENTS:
BALANCE AT BEGINNING OF PERIOD 912,914 1,044,715
----------- ----------
BALANCE AT END OF PERIOD $ 716,756 $1,209,543
---------- ----------
----------- ----------
See accompanying notes to financial statements.
8
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Statements of Cash Flows (Continued)
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1995 1994
---------- ----------
RECONCILIATION OF NET INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net income (loss) $ 146,962 $(637,578)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization 295,382 405,006
Gain on sale of property
and equipment (42,000) (68,711)
Changes in operating assets and liabilities
(Increase) decrease in accounts receivables 248,754 (108,556)
Decrease in prepaid expenses 34,204 25,726
Decrease in mobile homes held
for resale - 48,921
Decrease in other assets - 1
Increase (decrease) in accounts payable
and accrued expenses (257,203) 583,788
Decrease in deposits and
advance rentals (7,400) (18,660)
Increase in management and
condominium conversion fees
payable to affiliate 56,386 68,579
---------- ---------
Net cash provided by
operating activities $ 475,085 $ 298,516
---------- ---------
SUPPLEMENTAL DISCLOSURE
-----------------------
During the six months ended June 30, 1994, the lender deferred two months of
note payments on the Warner Oaks note. The accrued and unpaid interest of
$40,236 has been added to the principal balance (see Notes 2 and 7).
During the six months ended June 30, 1995, the MHC cash reserve of $42,000 was
released from restricted cash and the Partnership recognized a gain on that
portion of the 1994 sale proceeds.
See accompanying notes to financial statements.
9
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
June 30, 1995 and December 31, 1994 and
For the Six and Three Months Ended June 30, 1995 and 1994
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) have been included.
Operating results during the six and three months ended June 30, 1995
are not necessarily indicative of the results that may be expected for
the year ending December 31, 1995. For further information, refer to
the financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-K for the year ended
December 31, 1994.
CASH AND CASH EQUIVALENTS
The Partnership invests its cash not needed for working capital in
highly liquid short-term investments primarily consisting of money
market funds and certificates of deposit with original maturities
ranging generally from one to three months. The Partnership considers
all such items to be cash equivalents.
NOTE 2 - SECURED NOTES PAYABLE
Secured notes payable at June 30, 1995 and December 31, 1994 consisted
of:
June 30, December 31,
1995 1994
---------- ------------
Note collateralized by a first
trust deed, payable in monthly
installments of $26,476, including
interest until December 15, 1994.
Thereafter, the monthly payment
changes annually on each
December 15th. Interest accrued
at 6.25% until February 15, 1994
and thereafter floats at 2.5% over
the FHLB's 11th District Cost of
Funds index, not to exceed 12.9%,
adjusted monthly. Unpaid principal
and interest are due
November 15, 2008. The interest
rate in effect at June 30, 1995
and December 31, 1994 was 7.564%
and 6.69%, respectively.
$4,266,226 $4,278,706
---------- ----------
---------- ----------
10
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Notes to Financial Statements (Continued)
(Unaudited)
June 30, 1995 and December 31, 1994 and
For the Six and Three Months Ended June 30, 1995 and 1994
NOTE 2 - SECURED NOTES PAYABLE (continued)
Due to the Northridge earthquake on January 17, 1994, the lender for
the Warner Oaks note agreed to a deferment of two months of note
payments. The accrued and unpaid interest of $40,236 has been added
to the principal balance (see Note 7).
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES
Pursuant to a management agreement dated October 1, 1985, as amended,
De Anza Assets, Inc., a former affiliate of the operating general
partner, was accrued a management fee through August 18, 1994 in the
amount of 5% of the annual gross receipts from the operations of the
Partnership's properties. The payment of this fee is subordinated to
the prior distribution to the limited partners of 7% of their adjusted
capital contributions each year and is noncumulative except in the case
of a sale, refinancing or other disposition of the Partnership's
properties. In that case, the difference between the management fee
actually paid and the management fee that would have been paid if it
were not subordinated is payable out of proceeds of the sale,
refinancing or other disposition after payment of the limited partners'
priority return and capital contribution and the general partners'
incentive interest. However, management fees payable subsequent to a
consummated refinancing are not subordinated to the limited partners'
priority return to the extent the subordination would have been caused
by increased debt service charges. At June 30, 1995 and
December 31, 1994, cumulative accrued fees of $661,160 and $604,774,
respectively, have been subordinated and are included in management and
condominium conversion fees payable to affiliate as reflected in the
balance sheets. Management fees of $68,136 were accrued during the six
months ended June 30, 1994 to De Anza Assets Inc. Shortly before its
sale to Manufactured Home Communities (MHC), De Anza Assets, Inc.
assigned its rights to receive these fees to the Gelfand Family Trust.
On August 18, 1994, subsequent to the sale of the Mark and the property
management business of De Anza Group, Inc. (DAG), as discussed in
Note 6, the property management of Warner Oaks and the two remaining
spaces at San Luis Bay was assumed by Terra Vista Management, Inc.
(Terra Vista) by assignment of the management agreement from De Anza
Assets, Inc. Terra Vista is wholly owned by Michael D. Gelfand,
president of the operating general partner (OGP) and the son of
Herbert M. Gelfand. Herbert M. Gelfand, together with Beverly Gelfand
is the sole shareholder of the OGP and an individual general partner.
Management fees of $56,386 were accrued to Terra Vista during the six
months ended June 30, 1995 and are subordinated as described above. Of
the $56,386, $27,707 is attributable to the three months ended June 30,
1995 (as compared to $32,834 accrued for the three months ended
June 30, 1994).
11
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Notes to Financial Statements (Continued)
(Unaudited)
June 30, 1995 and December 31, 1994 and
For the Six and Three Months Ended June 30, 1995 and 1994
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES (continued)
Pursuant to the Partnership Agreement, a condominium conversion fee
equal to 1% of the sales price of the San Luis Bay homesites sold is
due to an affiliate of the OGP (see Note 5). Payment of this fee has
been deferred according to the Partnership Agreement's requirement
regarding subordination to payment of the limited partners' priority
return, the general partners' incentive interest and deferred
management fees. At June 30, 1995 and December 31, 1994, cumulative
accrued conversion fees of $77,809 have been subordinated and included
in management and condominium conversion fees payable to affiliate.
Shortly before the sale to MHC, De Anza Assets, Inc. assigned its
rights to receipt of these fees to the Gelfand Family Trust.
In addition, Terra Vista or an affiliate of the OGP was paid $50,852
and DAG or a wholly owned subsidiary was paid $54,379 for the six
months ended June 30, 1995 and 1994, respectively, for performing
bookkeeping, regional management, computer, legal and public relations
services necessary for the operation of the Partnership and its
properties. Of the $50,852, $23,943 is attributable to the three
months ended June 30, 1995 (compared to $22,866 paid during the three
months ended June 30, 1994).
NOTE 4 - INCOME (LOSS) PER 1% GENERAL PARTNER INTEREST AND LIMITED
PARTNERSHIP UNIT
Income (loss) per limited partnership unit is computed based on the
limited partners' share of net income (loss) as shown on the Statements
of Operations and Changes in Partners' Capital (Deficit) and the number
of limited partnership units outstanding (22,719 units during the six
and three months ended June 30, 1995 and 1994). The general partners'
share of net income (loss) has not been included in this computation.
Income (loss) per 1% general partner interest is computed based on the
general partners' share of net income (loss) as shown on the Statements
of Operations and Changes in Partners' Capital (Deficit).
NOTE 5 - SALE OF SAN LUIS BAY MOBILE ESTATES
On May 2, 1989, the Partnership entered into an agreement to sell San
Luis Bay Mobile Estates (the 162-space mobile home community in Avila
Beach, California) to the residents for an aggregate sales price of
$8,850,000, and, pursuant to that agreement, subdivided the property
into condominium units in 1991. The Partnership provided purchase
money financing for up to 80% of the individual homesite price, payable
in monthly payments, including interest at 10%, based on a loan
amortization schedule of 30 years, with a balloon payment of unpaid
principal and interest due at the end of seven years. Those residents
who purchased their homesites for cash received a 10% discount off
their purchase price.
12
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Notes to Financial Statements (Continued)
(Unaudited)
June 30, 1995 and December 31, 1994 and
For the Six and Three Months Ended June 30, 1995 and 1994
NOTE 5 - SALE OF SAN LUIS BAY MOBILE ESTATES (continued)
The Partnership sold 158 homesites prior to 1994. In 1994, two
homesites were sold for $104,990 in cash. The remaining two homesites
are leased to tenants.
The Partnership released reserves from the San Luis Bay sale and
distributed $70,540 and $300,000 to the limited partners on
September 16, 1994, and on December 30, 1994, respectively. These
distributions represent a return of original capital.
NOTE 6 - SALE OF THE MARK
On August 18, 1994 the Partnership sold The Mark to MHC as part of an
overall transaction which included the sale of the related management
business of DAG and other mobile home communities affiliated with DAG.
The sales price for The Mark was $5,404,419. Additional proceeds of
$130,094, which were included in the sales price for calculating the
gain on sale of property and equipment, were received from MHC to fund
a General Reserve. Excess proceeds of $1,116,460 were distributed to
the partners as a return of original capital on September 16, 1994,
after repayment of debt of $3,977,437, sales and closing costs of
$210,519, and establishment of various reserves totaling $230,097.
The $230,097 was used to establish the following cash reserves:
MHC Reserve $ 42,000
General Reserve 130,094
Independent Committee Reserve 58,003
During the six months ended June 30, 1995, the MHC Reserve was released
and is no longer required to be maintained. The General Reserve and
Independent Committee Reserve were established to fund contingent
liabilities that may arise out of the MHC transaction and continue to
be held.
Pursuant to the guidelines of Financial Accounting Standards No. 66,
"Accounting for Sales of Real Estate," the Partnership has deferred the
recognition of gain on that portion of the sales proceeds, represented
by General Reserve and Independent Committee Reserve, totaling
$188,097. As mentioned above, the MHC Reserve has been released and
accordingly, gain on sale has been recognized and is included in net
income for the six months ended June 30, 1995.
13
DE ANZA PROPERTIES - XII, LTD.
(A Limited Partnership)
Notes to Financial Statements (Continued
(Unaudited)
June 30, 1995 and December 31, 1994 and
For the Six and Three Months Ended June 30, 1995 and 1994
NOTE 6 - SALE OF THE MARK (continued)
The Partnership has been charged with certain costs for the
transaction, some of which were based upon an allocation of costs from
the overall transaction with MHC. Such transaction costs were
capitalized to the properties and deducted in the determination of net
gain on the sale of the Partnership's property and equipment.
Transaction and closing costs charged to the Partnership totaled
$210,519.
NOTE 7 - LOSS ON EARTHQUAKE DAMAGE
On January 17, 1994, the Warner Oaks Apartment complex suffered
property damage from an earthquake. The Partnership estimates
total costs of approximately $1,989,000 and has received insurance
proceeds of $1,414,000. As of June 30, 1995, approximately 96% of
the repairs have been completed. A portion of the costs has been
capitalized and the balance of $156,496, representing noncapitalized
costs, net of insurance proceeds, was expensed in 1995. Additional
insurance proceeds of approximately $308,000 received for loss of
income were included in rental income in 1994.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY
The Partnership's quick ratios were 2.0:1 and 1.7:1, including unrestricted cash
balances of $528,659 and $682,817 at June 30, 1995 and December 31, 1994,
respectively. The increase in the quick ratio is due mainly to the receipt of
insurance proceeds receivable and corresponding paydown of accounts payable and
accrued expenses, relating to the earthquake repairs at Warner Oaks. The
Partnership's cash balance is its immediate source of liquidity.
On a long-term basis, the Partnership's liquidity is sustained primarily from
cash flows from operations, which during the six months ended June 30, 1995 were
approximately $475,000. Cash flow from operations has improved substantially
following the sale of The Mark. See Note 6 to the Financial Statements. The
Partnership has reinstated regular operating distributions to its limited
partners though payment of the management fees continues to be deferred in
accordance with the Partnership Agreement.
Subsequent to the sale of The Mark, the Partnership continues to operate Warner
Oaks, the remaining property, which is managed by Terra Vista. The Partnership
also owns two spaces at San Luis Bay Mobile Estates and various notes receivable
related to that sale (see Note 5 to the Financial Statements).
As a result of the sale of The Mark, the Partnership's liquidity has improved.
The Mark's income fell short of its expenses, thus with the property sold, the
Partnership's income has improved which has improved liquidity. However, should
it become necessary to improve liquidity further, the Partnership can reduce
partner distributions, which totaled $375,000 during the six months ended
June 30, 1995, arrange a short-term line of credit or refinance Warner Oaks.
In November 1993, the Partnership refinanced Warner Oaks with a variable
interest rate loan. The interest rate for the initial three months was 6.25%,
thereafter the loan bears interest at 2.5% over the Eleventh District Cost of
Funds with caps on the maximum annual payment change of 7.5% of the current
payment, and an interest rate cap of 12.9% over the life of the loan. This loan
is subject to negative amortization. Future liquidity will be affected,
unfavorably or favorably, to the extent the payment rate fluctuates. At
June 30, 1995, the interest rate in effect was 7.56%.
Warner Oaks incurred moderate damage from the January 17, 1994 earthquake, which
epicenter was approximately ten miles from the property. The cost to repair the
property was approximately $1.99 million. The property was covered by
insurance, including business interruption insurance, with a deductible of 5%
of the building value on a per-building basis. The unreimbursed loss is
estimated to be approximately $575,000 and is reflected in the Financial
Statements. The Partnership funded the unreimbursed loss out of reserves.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY (CONTINUED)
The Partnership has sold 160 of 162 spaces at San Luis Bay as of June 30, 1995
(see Note 5). Liquidity is expected to improve as the notes receivable from the
buyers of San Luis Bay spaces mature, as discussed in Note 5. As of June 30,
1995, the amount of the notes receivable outstanding was approximately $486,000.
Liquidity also improves when the notes receivable are prepaid and when
additional spaces are sold.
Other than as described elsewhere, there are no known trends, demands,
commitments, events or uncertainties which are reasonably likely to materially
affect the Partnership's liquidity.
CAPITAL RESOURCES
The Partnership anticipates spending approximately $492,000 in 1995 for physical
improvements at its properties, $210,000 of which will be spent during the
remainder of 1995. Funds for these improvements will be provided by cash
generated from operations. If necessary, the Partnership can use funds from
reserves from the sale proceeds of San Luis Bay, and from cash reserved for
capital improvement projects.
Other than as described above, there are no known material trends, favorable or
unfavorable, in the Partnership's capital resources. The Partnership does not
contemplate any other material changes in the mix of its capital resources,
other than as described above.
RESULTS OF OPERATIONS
Since The Mark was sold on August 18, 1994, a comparison of operations for 1995
and 1994 would not be meaningful. However, excluding the regular operations of
The Mark, a comparison can be made.
Rental income, excluding The Mark, increased 17.0% and 24.8% during the six and
three months ended June 30, 1995, over the same periods in 1994, primarily
resulting from higher occupancy at Warner Oaks. The occupancy during the six
and three months ended June 30, 1994 was inordinately low following the
earthquake in January 1994.
Expenses, excluding The Mark's, decreased 31.0% and 37.5% during the six and
three months ended June 30, 1995 over the same periods in 1994. The decrease
is mostly due to the 1994 provision to write off the noncapitalized,
unreimbursed cost relating to the earthquake damage at Warner Oaks.
Additionally, real estate taxes decreased due to a refund and reduced assessment
of Warner Oaks real estate taxes due to earthquake damage. Partly offsetting
these decreases was an increase in interest expense due to rising interest rates
on the Warner Oaks variable rate loan, as discussed more fully in Note 2 and
Liquidity. Maintenance, repairs and supplies increased because some ongoing
maintenance was unnecessary in 1994 while earthquake repairs were underway.
Insurance premiums increased at Warner Oaks because of the earthquake.
Professional fees and services were higher due to legal fees incurred subsequent
to the sale in defense of a matter related to The Mark which is now settled.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS (CONTINUED)
The damages resulting from the January 17, 1994 earthquake have almost
completely been repaired and occupancy has been increased substantially.
Management anticipates stable occupancy at the recently established higher
levels at Warner Oaks for the foreseeable future.
Other than as described above, there are no known trends or uncertainties which
have had or can be reasonably expected to have a material effect on continuing
operations.
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PART II. OTHER INFORMATION
ITEM NUMBER
1. LEGAL PROCEEDINGS
No new material legal proceedings were commenced during the three
months ended June 30, 1995 and there are none pending.
2. CHANGES IN SECURITIES
None.
3. DEFAULTS UPON SENIOR SECURITIES
None.
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
5. OTHER INFORMATION
None.
6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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PART II. OTHER INFORMATION (Continued)
SIGNATURES
Pursuant to the requirements 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.
DE ANZA PROPERTIES - XII, LTD.
(Registrant)
By DE ANZA CORPORATION
A California Corporation
Operating General Partner
Date: August 11, 1995 By /s/ Michael D. Gelfand
----------------------
Michael D. Gelfand
President and
Chief Financial Officer
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