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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
(Amendment No. __)
De Anza Properties - XII, Ltd. De Anza Properties - XII, Ltd.
(Name of Subject Company) De Anza Corporation
(Name of Persons Filing Statement)
Units of Limited Partnership Interest
(Title of Class of Securities)
NONE
((CUSIP) Number of Class of Securities)
Herbert M. Gelfand with copies to:
De Anza Corporation Michael J. Connell
9171 Wilshire Blvd. Rena L. O'Malley
Suite 627 Morrison & Foerster LLP
Beverly Hills, California 90210 555 West Fifth Street
(310) 550-1111 Los Angeles, CA 90013-1024
(Name, address, and telephone number of person (213) 892-5200
authorized to receive
notice and communications on behalf of the
person(s) filing statement)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is De Anza Properties-XII, Ltd., a California limited
partnership (the "Partnership"). The title of the class of equity securities
to which this Statement relates is units of limited partnership interest
("Units") of the Partnership. The address of the principal executive offices
of the Partnership is 9171 Wilshire Boulevard, Suite 627, Beverly Hills,
California 90210.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the offer (the "Offer") by Moraga Gold, LLC,
a newly-formed California limited liability company (the "Bidder"), to purchase
for cash up to 5,680 Units at $305 per Unit as disclosed in the Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") dated April 18, 1996 filed
by the Bidder with the Securities and Exchange Commission. According to the
Schedule 14D-1, the principal place of business of the Bidder is located at
1640 School Street, Suite 100, Moraga, California 94556.
ITEM 3. IDENTITY OF BACKGROUND.
(a) This Statement is being filed by the Partnership and De Anza
Corporation, a California corporation (the "Operating General Partner"). The
address of the principal executive offices of the Operating General Partner is
9171 Wilshire Boulevard, Suite 627, Beverly Hills, California 90210. The name
and business address of the Partnership are set forth in Item 1 above.
(b)(1) The Partnership is a limited partnership and has no executive
officers or directors. Except as described below, to the best knowledge of the
Partnership, there are no material contracts, agreements, arrangements or
understandings or any actual or potential conflicts of interest between the
Partnership on the one hand and its general partners including the Operating
General Partner or the directors and executive officers of the Operating
General Partner or affiliates thereof on the other hand, with respect to the
Offer.
Terra Vista Management, Inc., a California corporation (the
"Manager"), manages and operates Warner Oaks Apartments, the Partnership's sole
substantial remaining property ("Warner Oaks"), pursuant to a Management
Agreement dated as of August 18, 1994 entered into by the Partnership with the
Manager (the "Management Agreement") and also manages two spaces in a mobile
home park at San Luis Bay (together with Warner Oaks the "Properties"). The
President and sole stockholder of the Manager is Michael D. Gelfand, who is
also President and a member of the Board of Directors of the Operating General
Partner, and the son of Herbert M. Gelfand (who is Chairman of the Board and
sole shareholder, through his family trust, of the Operating General Partner
and a general partner of the Partnership). The Management Agreement continues
from year-to-year. However, either party may, without penalty or obligation to
the other party, by providing sixty (60) days' written notice to the other,
terminate the Management Agreement with or without cause at any time.
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The Management Agreement may be immediately canceled in the event of violation
of any of the provisions of the Management Agreement, or by the Partnership in
the event a petition in bankruptcy is filed by or against the Manager which is
not dismissed within ninety (90) days following the date of such filing.
The Partnership has retained the Manager and an affiliate of the
Operating General Partner to provide accounting, data processing and investor
and other services to the Partnership. The Manager and the Operating General
Partner's affiliate are reimbursed on an allocated basis for their costs and
expenses for providing these services (directly or through unrelated third
parties) to the Partnership. The total of such reimbursements paid by the
Partnership for the year ended December 31, 1995 was $104,365, representing 4.5%
of total Partnership operating revenues. For the same period, salaries,
professional fees and services amounted to $351,093, representing 15% of total
Partnership operating revenues. Of that amount $190,819 (or 8.1% of total
Partnership operating revenues) was paid for on-site leasing and maintenance
staff at Warner Oaks. The Manager is entitled to receive compensation under the
Management Agreement for its services of a sum equivalent to five percent (5%)
of the aggregate gross receipts from the operation of Warner Oaks, excluding all
receipts from utilities or from taxes of any kind or type. However, the
Manager's compensation is subordinated to the receipt (on a noncumulative basis)
by the limited partners of the Partnership of an annual cash distribution equal
to seven percent (7%) of the adjusted aggregate capital contributions of the
limited partners. No management fees were paid to the Manager by the
Partnership for the year ended December 31, 1995 but the Manager or the
Operating General Partner's affiliate have deferred management fees for that
year of $113,748. Based upon current estimates of value of the Partnership's
Properties, it is unlikely that the deferred management fees for 1995 or for any
prior year will be paid. The Management Agreement is filed herewith as an
exhibit and is incorporated herein by reference.
(b)(2) To the best knowledge of the Partnership, there are no
material contracts, agreements, arrangements or understandings or any actual or
potential conflicts of interest between the Partnership or its general partners
or executive officers or directors of the Operating General Partner or
affiliates thereof, on the one hand, and the Bidder or its executive officers,
directors or affiliates, on the other hand.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Operating General Partner has determined that the Offer is
inadequate and not in the best interests of the limited partners and recommends
that limited partners of the Partnership reject the Offer and not tender their
Units pursuant to the Offer.
(b) The reasons for the position taken by the Operating General
Partner are as follows:
1. The Offer price does not reflect the value of the
Partnership's underlying assets. In the Operating General Partner's view, the
Properties of the Partnership are valuable assets despite the decline in
California real estate generally. The Operating General Partner believes that
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if the Properties were sold today (but not in a forced sale) each Unit would be
worth approximately $522. The Operating General Partner believes an offer
significantly below the $522 estimate is too low to be recommended by the
Operating General Partner. In reaching this conclusion, the Operating General
Partner did not take into account individual tax consequences, which may vary
significantly among limited partners. The $522 estimate was not determined by
any independent third party valuation expert.
The Offer is also approximately 25% lower than the liquidation value of
the underlying assets of the Partnership as of December 31, 1995 as estimated
by the Bidder to be $405 per Unit. As set forth in the Bidder's materials
mailed to each of the limited partners, the Bidder is making the Offer for
investment purposes and with the intention of making a profit from the
ownership of the Units. In establishing the purchase price of $305 per Unit,
the Bidder was motivated to establish the lowest price which might be
acceptable to limited partners consistent with the Bidder's objectives. In
addition, limited partners who sell any Unit to the Bidder will not receive any
distribution to be made by the Partnership with respect to that Unit once the
Unit is sold.
In determining the estimated liquidation value of $522 per Unit the
Operating General Partner first calculated the estimated current net sales
value of Warner Oaks, the Partnership's main remaining property. This was done
by dividing Warner Oaks' estimated net operating income ("NOI") of $1,240,060
for 1996 by a capitalization rate. The NOI was determined by annualizing the
Partnership's actual results of operations for the three months ending March
31, 1996, which amount was adjusted to account for (i) the portion of NOI for
this period estimated by the Operating General Partner to be attributable to
the operation of two spaces at San Luis Bay and the collection of notes
receivable related to previous sales of spaces at San Luis Bay, (ii) certain
Partnership expenses which a buyer of Warner Oaks would not take into account,
and (iii) certain seasonal and year-end items. The Operating General Partner
divided the NOI by an 8% capitalization rate (the "Cap Rate") and reduced this
result by (i) $475,000 in estimated closing costs which would be incurred upon
the sale of Warner Oaks, including broker's commission, title costs, surveys,
legal fees and transfer taxes, and (ii) $4,254,211 of mortgage debt encumbering
Warner Oaks as of March 31, 1996. The resulting estimated net sales value of
Warner Oaks is approximately $10,770,789.
The Operating General Partner believes that the Cap Rate utilized by
it is within the range of capitalization rates currently employed in the
marketplace and is the Cap Rate at which Warner Oaks would most likely sell
today. Warner Oaks is a premium, gated apartment community catering to
professionals and white-collar workers who work in the upscale, planned Warner
Center development in suburban Los Angeles. Because of these qualities, the
Operating General Partner believes Warner Oaks would appeal to real estate
investment trusts ("REITs"), among other potential buyers, and that current
dividend yields of public apartment REITs of 7% to 8% allows these REITs to use
an 8% Cap Rate and maintain their yield to investors. Irvine Apartment
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Communities is a REIT whose properties are similarly upscale and also located
in Southern California, and its recent yield was 7.1%
To determine the estimated liquidation value of the Partnership's
assets, the Operating General Partner added to the estimated net sales value of
Warner Oaks, (i) $120,000 as an estimated condominium value of the two
remaining spaces at San Luis Bay, (ii) $387,153 of notes receivable related to
previous sales of condominium spaces at San Luis Bay, and (iii) $578,088 of
other net current assets (before deferred management and condominium conversion
fees) as of March 31, 1996. The resulting net estimated liquidation value of
the Partnership's assets as of March 31, 1996 is approximately $11,921,030 or
$522 per Unit. Based on these estimates, the general partners would not
receive any distributions from sale and liquidation proceeds nor would any
deferred management or condominium conversion fees be paid.
2. The Operating General Partner believes the Bidder intends
to influence a sale of the Partnership's Properties. If, as a result of
consummation of the Offer, the Bidder is in a position to significantly
influence all Partnership decisions, the Bidder intends to vote the Units
acquired in the Offer in accordance with its own investment objectives. That
vote may be different from or in conflict with the interests of other limited
partners who do not tender their Units. The Bidder appears to be purchasing
Units with a view toward urging an earlier rather than a later sale date.
3. Risks. The Operating General Partner believes each
limited partner should consider the risks of a continuing investment in the
Partnership. In particular, limited partners should consider:
o The Offer provides limited partners with the opportunity to tender
their Units and realize their investment now at a definite price without having
to wait for the Partnership to be terminated or liquidated at an indeterminate
date in the future.
o There is no assurance that the return to limited partners after a
sale of Warner Oaks, whether as a whole or after conversion to condominiums (if
feasible), will be greater than the price being offered now by the Bidder.
o The Offer provides an opportunity to limited partners to liquidate
their investment in the currently depressed Southern California real estate
market without the usual transaction costs associated with market sales and
without the difficulty of selling Units in an illiquid and limited trading
market.
The Operating General Partner urges all limited partners to carefully
consider all the information contained herein and consult with their own
advisors, tax, financial or otherwise, in evaluating the terms of the Offer
before deciding whether to tender Units. In particular, the Operating General
Partner has not taken into account the tax consequences to individual limited
partners as a result of accepting or rejecting the Offer and those tax
consequences could vary significantly for each limited partner based on such
limited partner's unique tax situation or other circumstances. No independent
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person has been retained to evaluate or render any opinion with respect to the
fairness of the Offer price.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Neither the Partnership nor any person acting on its behalf intends to
employ, retain or compensate any other person to make solicitations or
recommendations to the limited partners of the Partnership in connection with
the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best knowledge of the Partnership, no transactions in
the Units have been effected during the past 60 days by the Partnership, by
general partners of the Partnership, including by the Operating General Partner
or any executive officer or director of the Operating General Partner, or any
affiliates or subsidiaries of such persons.
(b) To the best knowledge of the Partnership, the Operating
General Partner, the officers and directors of the Operating General Partner
and any other affiliate of the Operating General Partner do not presently
intend to tender to the Bidder any Units currently held of record or
beneficially owned by such Persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described below, the Partnership is not engaged in
any negotiation in response to the Offer which relates to or would result in:
(1) An extraordinary transaction such as a merger or reorganization, involving
the Partnership or any subsidiary of the Partnership; (2) A purchase, sale or
transfer of a material amount of assets by the Partnership or any subsidiary of
the Partnership; (3) A tender offer for or other acquisition of securities by
or of the Partnership; or (4) Any material change in the present capitalization
or dividend policy of the Partnership.
(b) Except as described below, there are no transactions, board or
partnership resolutions, agreements in principle, or signed contracts in
response to the Offer, which relate to or would result in one or more of the
matters referred to in this Item 7.
The Operating General Partner intends to sell Warner Oaks in due
course, but the effects of the 1994 Northridge earthquake and a somewhat
depressed market in the immediate area surrounding Warner Oaks suggest that a
further delay in marketing for sale the property would be desirable and as yet
no satisfactory offers have been received . Warner Oaks suffered moderate
damage from the January 17, 1994 earthquake, the epicenter of which was
approximately ten miles from the property. The Partnership completely repaired
the earthquake damage to Warner Oaks and has experienced substantially
increased occupancy rates. The Operating General Partner believes that the real
estate market in Southern California is beginning to improve and this
eventually will improve values in the earthquake affected area surrounding
Warner Oaks. The Operating General Partner, therefore, is considering the
possibility of a sale of Warner Oaks at the appropriate time. Further,
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the Operating General Partner believes that an even greater value might be
realized if Warner Oaks were marketed as condominiums rather than sold as a
single apartment project. This alternative, although being considered by the
Operating General Partner, has not yet been fully evaluated and the Operating
General Partner believes that time should be taken to evaluate this alternative
fully.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The general partners of the Partnership, including the Operating
General Partner and certain officers and directors of the Operating General
Partner and other affiliates of the Operating General Partner, beneficially own
limited partnership Units and general partner interests in the Partnership.
The total amount of Units owned by all general partners and the directors and
key executive officers of the Operating General Partner is less than 1% of the
outstanding Units.
Pursuant to the terms of the Partnership's Partnership Agreement, in
the event a general partner (including the Operating General Partner) is
removed as a general partner by a vote of a majority in interest of the limited
partners, such general partner shall automatically become a limited partner and
if the vote of a majority in interest of the limited partners so requires, sell
his interest to the limited partners who shall purchase such interest on behalf
of the Partnership. If a removed general partner is required by the limited
partners to sell his interest in the Partnership, the amount to be paid for
such interest shall be computed as of the date of the consummation of the
purchase and in accordance with Section 15 of the Partnership's Partnership
Agreement.
The affirmative vote of a majority in interest of the limited partners
of the Partnership is required under the Partnership's Partnership Agreement to
remove or replace any general partner (including the Operating General Partner)
or to dissolve the Partnership.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a) Letter to Limited Partners dated May 2, 1996
(b) None.
(c) Management Agreement dated as of August 18, 1994 by and between
Terra Vista Management, Inc., a California corporation, and De Anza
Properties-XII, Ltd., a California limited partnership.*
__________________________________________
* Not included in copies mailed to limited partners.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete, and
correct.
May 2, 1996
(Date)
DE ANZA PROPERTIES-XII, LTD.
By: DE ANZA CORPORATION
Operating General Partner
By: /s/Herbert M. Gelfand
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Herbert M. Gelfand
Chairman of the Board
DE ANZA CORPORATION
By: /s/Herbert M. Gelfand
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Herbert M. Gelfand
Chairman of the Board
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EXHIBIT INDEX
99.1 Letter to Limited Partners dated May 2, 1996.
99.2 Management Agreement dated as of August 18, 1994 by and
between Terra Vista Management, Inc., a California corporation, and De Anza
Properties-XII, Ltd., a California limited partnership.
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