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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.
a California limited partnership De Anza Corporation
(Name of Subject Company) (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 (213) 892-5200
person 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 DeAnza 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 BIDDERS.
This Statement relates to the offer (the "Offer") by Accelerated High
Yield Institutional Investors, L.P., the general partner of which is MacKenzie
Patterson, Inc., Citadel Secondary Market Fund 1, Ltd., the general partner of
which is Citadel Financial Group, Inc., and Cal Kan, Inc., a Kansas corporation
owned by C.E. Patterson, President of MacKenzie Patterson, Inc. (together the
"Bidders"), to purchase for cash up to 5,680 Units at $550 per Unit as disclosed
in the Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated
December 2, 1997 filed by the Bidders with the Securities and Exchange
Commission. According to the Schedule 14D-1, the principal place of business of
the Bidders is located at 1640 School Street, Suite 100, Moraga, California
94556.
ITEM 3. IDENTITY AND 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 one space 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
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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. 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 nine months ended September 30, 1997 was $76,804. 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. Accordingly, management fees have been deferred for the nine months
ended September 30, 1997 and prior years. Based upon current estimates of value
of the Partnership's Properties, it is unlikely that any deferred management
fees will be paid. The Management Agreement is an exhibit hereto 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 Bidders 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. The Partnership has entered into a contingent agreement with
Bay Apartment Communities, Inc., an unaffiliated entity (the "Purchaser") for
the sale of its principal asset, the Warner Oaks property, for an aggregate
purchase price of $20 million. Under
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the terms of the purchase agreement, the Purchaser had a right to conduct a
thorough investigation of the project and to determine whether or not to proceed
with the purchase of the property. The Partnership received notice on December
8, 1997 that the Purchaser has completed its investigation of the project,
approved all matters subject to its inspection, and has determined to proceed
with the purchase as contemplated. The scheduled closing date is in January,
1998, subject to satisfaction of certain customary closing conditions. Although
there can be no guarantee that the sale will be completed, based on the
Purchaser's December 8 letter, the Operating General Partner believes that it is
highly likely that the sale will be completed as contemplated in the purchase
agreement. The Operating General Partner believes that if Warner Oaks were sold
as contemplated (at the contract price of $20 million) each Unit would be worth
approximately $714 upon liquidation. The Operating General Partner believes an
offer significantly below the $714 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 $714 estimate was not determined by
any independent third party valuation expert, but reflects the existing contract
purchase price.
As set forth in the Bidders' materials mailed to each of the limited
partners, the Bidders are 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 $550 per Unit, the Bidders were motivated to establish the
lowest price which might be acceptable to limited partners consistent with the
Bidders' objectives. Limited partners who sell any Unit to the Bidders will not
receive any distribution to be made by the Partnership with respect to that Unit
once the Unit is sold, including all quarterly distributions and any
distributions to be made when the Partnership's Properties are sold. The
Partnership anticipates making a regular quarterly distribution December 31,
1997. It is anticipated that the distribution will be $8.25 per Unit, as it has
been for each of the prior three quarters of 1997. In accordance with the
Bidders' Offer, the quarterly distribution will reduce the Bidders' $550 per
Unit offer by $8.25 per Unit, resulting in a net offer of $541.75 per Unit.
In determining the estimated liquidation value of $714 per Unit the
Operating General Partner first calculated the estimated current net sales value
of Warner Oaks, the Partnership's principal remaining property. This calculation
was made by reducing the $20 million current purchase price by (i) $543,560 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) $4,183,333 of mortgage debt encumbering Warner Oaks as of
September 30, 1997. The resulting estimated net sales value of Warner Oaks is
approximately $15,273,107.
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) $400,000 in reserves from the prior sale of The Mark and San
Luis Bay, (ii) $60,000 as an estimated condominium value of the remaining space
at San Luis Bay,
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(iii) $246,098 of notes receivable related to previous sales of condominium
spaces at San Luis Bay, and (iv) $252,116 of other net current assets (before
accrued management and condominium conversion fees) as of September 30, 1997
less estimated 1998 operating costs. The resulting net estimated liquidation
value of the Partnership's assets as of September 30, 1997 is approximately
$16,231,321 or $714 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.
The Operating General Partner plans to distribute all of the net sales
proceeds after closing and to hold reserves from other cash on hand to cover
certain Partnership obligations. The reserves are not expected to be substantial
and are intended to be fully distributed in 1998. If this distribution occurs
there would be no additional tax returns for the limited partners with respect
to the Partnership beyond the 1998 tax year. The Operating General Partner's
current plan is to wind-up the affairs of the Partnership and to make a final
distribution of any remaining assets of the Partnership in the second or third
quarter of 1998.
The sale of the project at $20 million would result in a gain, which
would be taxable. Based upon the new federal laws regarding capital gains taxes,
it is estimated that the federal tax would be $110 per Unit. This does not take
into account any state or local taxes, and does not take into account any
individual circumstances which might affect taxation of a partner. The general
partners are not expected to receive any portion of the sales proceeds. However,
the general partners will realize a taxable gain.
2. The Operating General Partner believes the Bidders intend to
influence Partnership Decisions. If, as a result of consummation of the Offer,
the Bidders are in a position to significantly influence all Partnership
decisions, the Bidders intend to vote the Units acquired in the Offer in
accordance with their 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.
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:
- 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 in the future.
- There is no assurance that a sale of Warner Oaks will be consummated
at the current contract price or that a future sale will result in distributions
greater than the Bidder's Offer.
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- The Offer provides an opportunity to limited partners to liquidate
their investment 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
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 Bidders 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.
The General Partner has from time to time had discussions with Mr.
Patterson which have included, among other things, discussions regarding the
refinancing and/or sale of Warner Oaks. The contract for the sale of Warner
Oaks, described in Item 4
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above was entered into prior to the Bidders' Offer and was not entered into in
response to the Offer.
(b) 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.
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 December 12, 1997.
(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.*
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* 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.
December 12, 1997
(Date)
DE ANZA PROPERTIES-XII, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
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 December 12, 1997.
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. Incorporated herein by
reference to Exhibit No. 99.2 to Schedule 14D-9 Solicitation/Recommendation
Statement Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934
previously filed by De Anza Properties XII, Ltd. with the Securities and
Exchange Commission on May 2, 1996.
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