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EXHIBIT 99.1
LOGO 9171 Wilshire Boulevard
PROPERTIES - XII, LTD. Beverly Hills, California 90210
National: (800) 321-9638
May 2, 1996 California: (800) 421-2991
Dear Limited Partner:
De Anza Properties-XII, Ltd. (the "Partnership") has been studying the
unsolicited tender offer made by Moraga Gold, LLC (the "Bidder") to purchase
units of limited partnership interest of the Partnership ("Units") for $305 per
Unit. The Operating General Partner has completed its evaluation and has
determined that the offer is inadequate, and not in the best interests of the
Partnership or its limited partners. Accordingly, the Operating General Partner
recommends that the limited partners reject the offer and urges you not to
tender any of your limited partnership Units. None of the Operating General
Partner or any of its officers, directors or affiliates intend to tender any
Units.
In arriving at its determination, the Operating General Partner carefully
reviewed the offer with its advisors and management, and considered many factors
including the business, financial condition and prospects of the Partnership.
The Operating General Partner's conclusions and recommendations concerning
the offer are based, in part, on the Operating General Partner's belief that:
- The amount being offered by the Bidder does not reflect the value of the
Partnership's underlying assets. According to the Bidder's materials, the Bidder
believes a Unit has a current liquidating value of $405 based on a 10%
capitalization rate. The offer is, therefore, approximately 25% lower than the
Bidder's own estimate of the Partnership's underlying assets. Also, the
Operating General Partner's estimate is $522 per Unit. This is based on an 8%
capitalization rate, which we believe more closely approximates the rate
prevailing for similar properties in the vicinity of the Partnership's sole
substantial remaining property, Warner Oaks Apartments (the "Property"). 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.
- Despite improving conditions, both the market and the operation of the
Property are still adversely affected by the effects of the 1994 Northridge
earthquake. This suggests that a further delay in marketing the Property for
sale would be advisable. The Bidder appears to be purchasing Units with a view
toward urging an earlier rather than a later sale date.
- While a current sale would most probably realize a substantially greater
value than that offered by the Bidder, an even greater value might be realized
if the Property were marketed as condominiums rather than sold as a single
apartment project. The Operating General Partner believes that time should be
taken to evaluate this alternative.
The Bidder has implied that administrative costs for the Partnership are
high and has encouraged a sale of the Property to avoid the costs. Of the
administrative costs, reimbursements paid to affiliates of the Operating General
Partner in 1995 amounted to $104,365, which represents only 4.5% of total
Partnership operating revenues, and affiliates of the Operating General Partner
received no management fees. Deferred management fees would be payable to the
Operating General Partner only if the limited partners first receive a full
return of their capital and their full priority return. Even if the Property is
sold and a $522 per Unit value is realized no management fees would be payable
to the Operating General Partner or its affiliates. Accordingly, to the extent
that the Bidder implies that the Operating General Partner is motivated to hold
the Property to get fees, there is no basis for that assertion.
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Before deciding to reject the Bidder's offer, limited partners should
consider the risks of a continued investment in the Partnership:
- The offer from the Bidder 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.
- There is no assurance that the return to limited partners after a sale of
the Property, whether as a whole or after conversion to condominiums (if
feasible), will be greater than the price being offered now by the Bidder.
- 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 attached Schedule 14D-9, which has been filed with the Securities and
Exchange Commission, expands upon the reasons for the Operating General
Partner's determination concerning the Bidder's offer, and contains additional
information relating to the Operating General Partner's recommendation and
certain other actions taken by the Operating General Partner on behalf of the
Partnership. We urge you to read the Schedule 14D-9 carefully.
If you have any questions concerning these matters please call Investor
Relations at (310) 777-2153.
You can be assured that the Operating General Partner will continue to act
in the manner in which the Operating General Partner believes to be in the best
interest of the Partnership and its limited partners.
Very truly yours,
DE ANZA PROPERTIES-XII, LTD.
By: DE ANZA CORPORATION,
Operating General Partner
By: [SIGNATURE]
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Herbert M. Gelfand
Chairman of the Board