<PAGE>
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 March 31, 1997
[_] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
------------ ----------------
Commission File Number 0-8942
DE ANZA PROPERTIES - X
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3005938
(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
(The 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 15.
1
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
- ------- ---------------------
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Balance Sheets 3
Statements of Income 5
Statements of Changes in Partners'
Capital (Deficit) 6
Statements of Cash Flows 7
Notes to Financial Statements 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 12
PART II. OTHER INFORMATION 14
- ------- -----------------
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DE ANZA PROPERTIES - X
(A Limited Partnership)
Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS - including restricted
deposits of $700,558 at March 31, 1997 and
December 31, 1996 - Note 1 $1,223,898 $ 1,401,497
ACCOUNTS RECEIVABLE 52,586 11,122
PREPAID EXPENSES - 70,995
---------- -----------
1,276,484 1,483,614
---------- -----------
PROPERTY AND EQUIPMENT - Notes 1, 2, 5 snd 6
Land - 2,989,265
Land improvements - 4,793,220
Buildings and improvements - 11,448,171
Furniture and equipment - 647,412
---------- -----------
- 19,878,068
Less accumulated depreciation - 10,208,135
---------- -----------
- 9,669,933
---------- -----------
OTHER ASSETS
Loan costs - less accumulated amortization of
$56,564 at December 31, 1996 - Note 2 - 51,251
Prepaid sale costs - Notes 1 and 6 - 69,994
Other 20,000 20,000
---------- -----------
20,000 141,245
---------- -----------
$1,296,484 $11,294,792
========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
DE ANZA PROPERTIES - X
(A Limited Partnership)
Balance Sheets (Continued)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
<S> <C> <C>
ACCOUNTS PAYABLE AND ACCRUED EXPENSES -
including $26,907 and $19,020 due to related
party at March 31, 1997 and December 31,
1996, respectively $ 274,090 $ 158,809
DEPOSITS AND ADVANCE RENTALS - 139,900
DEFERRED GAIN ON SALE - Note 5 700,558 700,558
SECURED NOTE PAYABLE - Notes 2 and 6 - 4,658,315
---------- -----------
974,648 5,657,582
---------- -----------
PARTNERS' CAPITAL (DEFICIT)
General partners 76,216 (3,453,230)
Cash general partners, 228.5 units issued
and outstanding 2,454 78,420
Limited partners, 22.640.5 units
issued and outstanding 243,166 9,012,020
---------- -----------
321,836 5,637,210
---------- -----------
$1,296,484 $11,294,792
========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
DE ANZA PROPERTIES - X
(A Limited Partnership)
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
------------ ------------
<S> <C> <C>
INCOME
Rent - Note 6 $ 509,933 $896,293
Interest and dividends 45,655 14,864
Other 19,362 29,414
Gain on sale of property and
equipment - Notes 5 and 6 19,168,276 -
----------- ------------
19,743,226 940,571
----------- ------------
EXPENSES
Interest 102,067 118,623
Salaries - including $4,256 and $4,611
paid to related party in 1997 and
1996, respectively - Note 3 98,434 68,142
Maintenance, repairs and supplies 59,890 104,039
Depreciation and amortization - Note 1 51,251 141,906
Other 44,643 84,650
Professional fees and services -
including $14,222 and $27,645 paid
to related party in 1997 and 1996,
respectively - Note 3 43,867 90,809
Utilities 36,769 52,687
Real estate taxes 27,705 52,510
Management fees paid to related party
- Note 3 26,410 46,045
Payroll taxes and employee benefits 18,751 15,173
Insurance 15,569 26,445
----------- --------
525,356 801,029
----------- --------
NET INCOME $19,217,870 $139,542
=========== ========
NET INCOME
GENERAL PARTNERS $ 9,339,311 $ 33,046
=========== ========
CASH GENERAL AND LIMITED PARTNERS $ 9,878,559 $106,496
=========== ========
INCOME PER 1% GENERAL
PARTNER INTEREST - Note 4 $ 93,393.11 $ 330.46
=========== ========
INCOME PER CASH GENERAL AND
LIMITED PARTNERSHIP UNIT - Note 4 $ 431.96 $ 4.66
=========== ========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
DE ANZA PROPERTIES - X
(A Limited Partnership)
Statements of Changes in Partners' Capital (Deficit)
(Unaudited)
For the Three Months Ended March 31, 1997 and
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Cash
General General Limited
Total Partners Partners Partners
------------ ----------- --------- ------------
<S> <C> <C> <C> <C>
BALANCE - January 1,
1996 $ 5,541,046 $(3,476,003) $ 77,686 $ 8,939,363
DISTRIBUTIONS TO
PARTNERS (1,250,582) (296,158) (9,536) (944,888)
NET INCOME - for the
year ended December
31, 1996 1,346,746 318,931 10,270 1,017,545
------------ ----------- --------- ------------
BALANCE - December 31,
1996 5,637,210 (3,453,230) 78,420 9,012,020
DISTRIBUTIONS TO
PARTNERS (24,533,244) (5,809,865) (187,078) (18,536,301)
NET INCOME - for the
three months ended
March 31, 1997 19,217,870 9,339,311 111,112 9,767,447
------------ ----------- --------- ------------
BALANCE - March 31,
1997 $ 321,836 $ 76,216 $ 2,454 $ 243,166
============ =========== ========= ============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
DE ANZA PROPERTIES - X
(A Limited Partnership)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Gross rents received from real estate
operations $ 378,007 $ 899,539
Cash paid to suppliers and employees -
including $64,883 and $81,585 paid
to related party in 1997 and 1996,
respectively (235,788) (463,227)
Interest paid (102,067) (118,623)
Interest and other income received 65,605 45,090
------------ ----------
Net cash provided by
operating activities 105,757 362,779
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (53,022) (34,495)
Sale of property and equipment 29,433,000 -
Sales costs (355,733) -
------------ ----------
Net cash provided by (used in)
investing activities 29,024,245 (34,495)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on secured notes
payable (4,658,315) (22,657)
Prepayment penalty (116,042) -
Partner distributions (24,533,244) (312,645)
------------ ----------
Net cash used in
financing activities (29,307,601) (335,302)
------------ ----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (177,599) (7,018)
CASH AND CASH EQUIVALENTS:
BALANCE AT BEGINNING OF PERIOD 1,401,497 1,388,279
------------ ----------
BALANCE AT END OF PERIOD $ 1,223,898 $1,381,261
============ ==========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
DE ANZA PROPERTIES - X
(A Limited Partnership)
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
------------- -------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 19,217,870 $139,542
Adjustments to reconcile net income
to net cash provided by
operating activities
Depreciation and amortization 51,251 141,906
Gain on sale of property and equipment (19,168,276) -
Changes in operating assets and
liabilities
(Increase) decrease in accounts
receivable (41,464) 1,968
Decrease in prepaid expenses 70,995 26,333
Decrease in other assets - (847)
Increase in accounts payable
and accrued expenses 115,281 51,787
(Decrease) increase in deposits
and advance rentals (139,900) 2,090
------------ --------
Net cash provided by
operating activities $ 105,757 $362,779
============ ========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
DE ANZA PROPERTIES - X
(A Limited Partnership)
Notes to Financial Statements
(Unaudited)
March 31, 1997 and December 31, 1996 and
For the Three Months Ended March 31, 1997 and 1996
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 three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1997. 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, 1996.
Cash and Cash Equivalents
-------------------------
The Partnership invests its cash not needed for working capital in
highly liquid short-term investments consisting primarily 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.
Depreciation
------------
Pursuant to generally accepted accounting principles the Partnership
ceased to depreciate Woodbridge Meadows Apartments ("Woodbridge") from
the time it determined to sell the property (see Note 6).
NOTE 2 - SECURED NOTE PAYABLE
Secured note payable at March 31, 1997 and December 31, 1996 consisted
of:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Note collateralized by first trust
deed, payable in monthly installments
of $47,093, including interest at 10%,
maturing in 2014. The note was repaid
February 19, 1997 upon sale of
Woodbridge (see Note 6). $ - $4,658,315
========= ==========
</TABLE>
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES
Pursuant to a former management agreement dated October 1, 1985, De
Anza Assets, Inc., a former affiliate of the operating general partner
(OGP), was paid a management fee in the amount of 5% of the annual
gross receipts
9
<PAGE>
DE ANZA PROPERTIES - X
(A Limited Partnership)
Notes to Financial Statements (Continued)
(Unaudited)
March 31, 1997 and December 31, 1996 and
For the Three Months Ended March 31, 1997 and 1996
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES (Continued)
from the operations of the Partnership's properties. The payment of
this fee is subordinated to the priority distributions to the cash
general and limited partners of 6% 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 from the sale,
refinancing or other disposition after payment of the limited
partners' priority return and capital contribution and the general
partners' incentive interest.
On August 18, 1994, subsequent to the sale of Colonies of Margate and
the property management business of De Anza Group, Inc. (DAG), as
discussed in Note 5, the property management of Woodbridge was assumed
by Terra Vista Management, Inc. (Terra Vista). Terra Vista is wholly
owned by Michael D. Gelfand, president of the 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.
Terra Vista was paid $26,410 and $46,045 for management fees during
the three months ended March 31, 1997 and 1996, respectively.
In addition, Terra Vista was paid $38,473 and $35,540 during the three
months ended March 31, 1997 and 1996, respectively, for performing
bookkeeping, regional management, computer, disposition and investor
relations services necessary for the operation of the Partnership and
its properties.
NOTE 4 - INCOME PER 1% GENERAL PARTNER INTEREST AND CASH GENERAL AND LIMITED
PARTNERSHIP UNIT
Income per cash general and limited partnership unit was computed
based on the cash general and limited partners' share of net income as
reflected on the Statements of Income and Changes in Partners' Capital
(Deficit) and the number of units outstanding (22,869 units). The
general partners' share of net income has not been included in this
computation. Income per 1% general partner interest was computed based
on the general partners' share of net income as reflected on the
Statements of Income and Changes in Partners' Capital (Deficit).
NOTE 5 - SALE OF COLONIES OF MARGATE
On August 18, 1994, the Partnership sold Colonies of Margate to an
affiliate of Manufactured Home Communities, Inc. (MHC), a real estate
investment trust, as part of an overall transaction for the sale of
the related property management business of DAG and other mobile home
communities affiliated with DAG.
10
<PAGE>
DE ANZA PROPERTIES - X
(A Limited Partnership)
Notes to Financial Statements (Continued)
(Unaudited)
March 31, 1997 and December 31, 1996 and
For the Three Months Ended March 31, 1997 and 1996
NOTE 5 - SALE OF COLONIES OF MARGATE (Continued)
In connection with the sale, the Partnership established various
reserves totaling $1,024,923. The $1,024,923 was used to establish the
following reserves:
<TABLE>
<S> <C>
MHC Reserve $181,000
General Reserve 557,192
Independent Committee Reserve 286,731
</TABLE>
The MHC Reserve was required by MHC. It was released in 1995, at which
time the gain on sale was recognized. The General Reserve and
Independent Committee Reserve were established to fund contingent
liabilities that may arise out of the MHC transaction. In August 1996,
$143,366 of the Independent Committee Reserve was released and the
gain on sale was recognized and included in net income. On March 4,
1997, the Partnership distributed the $143,366 to the cash general and
limited and general partners.
Pursuant to the guidelines of Financial Accounting Standards No. 66
"Accounting for Sales of Real Estate", the Partnership deferred in
1994 the recognition of gain on that portion of the sales proceeds
represented by the MHC Reserve, Independent Committee Reserve and
General Reserve, totaling $1,024,923. As these reserves are released
or expended, gain on sale will be recognized. At March 31, 1997 and
December 31, 1996, $700,558 of sale proceeds have been deferred and
are included in deferred gain on sale, as reflected in the balance
sheets.
NOTE 6 - SALE OF WOODBRIDGE MEADOWS APARTMENTS
On February 19, 1997, the Partnership sold its sole remaining
property, Woodbridge, to Heritage Square Apartments, a general
partnership, as to a 90% interest and Arroyo Grande Investment
Company, a limited liability company, as to a 10% interest, as tenants
in common, for $29,433,000, all cash. The Buyers are affiliates of
J.F. Shea Co., Inc. Net sale proceeds, after repayment of mortgage
debt of $4,757,740 (including a prepayment penalty of $116,042),
broker's commission of $261,330 and estimated transaction costs of
$164,397, totaled approximately $24,249,533. The net proceeds were
distributed to the cash general and limited and general partners on
March 4, 1997.
Following the release of the remaining Colonies of Margate sale
reserves, the Partnership will cease operations, commence liquidation
and dissolve.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
The Partnership's quick ratio increased to 1.9:1 from 1.7:1, including
unrestricted cash balances of $523,340 and $700,939 at March 31, 1997 and
December 31, 1996, respectively. The increase is due to a decrease in deposits
and advance rentals and the payoff of mortgage debt. The Partnership's cash
balance is its immediate source of liquidity.
On February 19, 1997, the Partnership sold Woodbridge, as discussed in Note 6
to the financial statements, and expects to wind up its operations in 1997 and
dissolve. Since the Partnership no longer has real estate operations its sole
liquidity source is its cash balance. Liquidity may improve to the extent that
funds are released from the General Reserve and/or the Independent Committee
Reserve. However, the Partnership expects to distribute these funds, net of
any future operating expenditures and contingencies, if any, as part of its
dissolution.
Other than as described elsewhere, there are no known trends, demands,
commitments, events or uncertainties known to the Partnership which are
reasonably likely to materially affect the Partnership's liquidity.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations
- ---------------------
The comparison of results of operations for the three months ended March 31,
1997 and 1996 is dominated by the sale of Woodbridge.
Rental and other income decreased 42.8% during the three months ended March 31,
1997 over the same period in 1996. Interest and dividend income increased
during the three months ended March 31, 1997 over the same period in 1996
because interest was earned on sale proceeds held for a short period until
their distribution.
Expenses decreased 34.4% during the three months ended March 31, 1997 over the
same period in 1996, primarily due to the sale of Woodbridge on February 19,
1997. Additionally, according to generally accepted accounting principles,
from the time the Partnership determined to sell Woodbridge it ceased to
depreciate the carrying value of the assets. This decrease in depreciation
expense is offset in part by the write off of loan costs in 1997 following the
repayment of mortgage debt with Woodbridge sale proceeds and higher salary
costs in 1997 attributable to severance salaries and bonuses paid to Woodbridge
employees.
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.
13
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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 March 31, 1997 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
Form 8-K filed March 3, 1997 relating to the Woodbridge sale on February
19, 1997.
14
<PAGE>
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 - X
(Registrant)
By DE ANZA CORPORATION
A California Corporation
Operating General Partner
Date: May 13, 1997 By /s/ Michael D. Gelfand
----------------------
Michael D. Gelfand
President and
Chief Financial Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,223,898
<SECURITIES> 0
<RECEIVABLES> 52,586
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,276,484
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,296,484
<CURRENT-LIABILITIES> 274,090
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 321,836
<TOTAL-LIABILITY-AND-EQUITY> 1,296,484
<SALES> 509,933
<TOTAL-REVENUES> 19,743,226
<CGS> 0
<TOTAL-COSTS> 372,038
<OTHER-EXPENSES> 51,251
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102,067
<INCOME-PRETAX> 19,217,870
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 19,217,870
<EXTRAORDINARY> 19,168,276
<CHANGES> 0
<NET-INCOME> 19,217,870
<EPS-PRIMARY> 431.96<F1>
<EPS-DILUTED> 431.96
<FN>
<F1>EPS is per limited partnership unit
</FN>
</TABLE>
