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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. __)
<TABLE>
<S> <C>
De Anza Properties - XII, Ltd. De Anza Properties - XII, Ltd.
(Name of Subject Company) De Anza Corporation
(Name of Persons Filing Statement)
</TABLE>
Units of Limited Partnership Interest
(Title of Class of Securities)
NONE
((CUSIP) Number of Class of Securities)
<TABLE>
<S> <C>
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)
</TABLE>
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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
------------------------------
Herbert M. Gelfand
Chairman of the Board
DE ANZA CORPORATION
By: /s/Herbert M. Gelfand
-----------------------------------
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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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]
--------------------------
Herbert M. Gelfand
Chairman of the Board
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EXHIBIT 99.2
WARNER OAKS/TERRA VISTA
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is made as of the 18th day
of August, 1994, by and between Terra Vista Management, Inc., a California
corporation, (the "Manager"), and De Anza Properties - XII, Ltd., a California
limited partnership, (the "Owner"), in Los Angeles, California, with reference
to the following facts:
A. Owner has acquired certain improved real property located in
Woodland Hills, California, which is commonly known as Warner Oaks Apartments
(hereinafter referred to as the "Property").
B. De Anza Assets, Inc., a California corporation, is the
existing manager of the Property pursuant to a Management Agreement dated
October 1, 1985, which was amended as of June 14, 1990, to reflect an amendment
to Owner's partnership agreement. De Anza Assets, Inc. is wholly owned by De
Anza Group, Inc., which is being sold. Accordingly, De Anza Assets has
withdrawn as manager, which withdrawal has been accepted by Owner, and De Anza
Assets has been replaced by Terra Vista Management, Inc. The parties desire to
enter into this Management Agreement to reflect their obligations with respect
to the ownership and operation of the Property.
C. Owner desires that Manager maintain and operate the Property
on its behalf, and Manager desires to undertake said functions.
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NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein, the parties agree as follows:
1. Engagement. Owner hereby engages Manager as general manager
of the Property to the extent and subject to the conditions set forth herein,
and Manager hereby accepts such engagement.
2. Term and Termination. This Agreement shall continue from year
to year; provided, however, that Owner or Manager may, without penalty or
obligation to the other party to this Agreement, by providing sixty (60) days'
written notice to the other, terminate this Agreement with or without cause at
any time. This Agreement may be immediately canceled in the event of the
violation of any of the provisions hereof, or by Owner in the event a petition
in bankruptcy is filed by or against Manager which is not dismissed within
ninety (90) days following the date of such filing.
3. General Duties of Manager. Manager shall be directly
responsible for the day-to-day management of the Property, subject to such
general guidelines and instructions as the Owner may issue from time to time.
Notwithstanding anything to the contrary contained herein, all final decisions
respecting the management of the Property shall be made by Owner.
Manager shall at all times do and perform all things reasonably
necessary to effectuate the purposes and intentions embodied in this Agreement
so that the Property is operated at all times in a manner consistent with
prudent business practice and in
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accordance with any and all leases, subleases and contracts to which the
Property is subject, and any and all other laws, statutes, ordinances and
regulations of any governmental authority having jurisdiction over Owner, the
Property or Manager.
4. Collection of Rent and Payment of Expenses. Manager shall
collect on behalf of Owner all rents and all other charges of every kind or
type whatsoever from all tenants or other occupants of the Property for
services provided in connection with, or for the use of, the Property or any
portion thereof, and shall deposit the same in depositories specifically
approved by Owner. Out of the foregoing rents and other charges collected on
behalf of Owner, Manager shall pay all expenses related to the operation and
maintenance of the Property and each of its facilities as and when the same
become due, all in accordance with specific instructions provided by Owner.
There shall be included in the operating expenses of the Property borne by
Owner the direct out-of-pocket expenses incurred by Manager or any of its
affiliates (including payments to salaried employees and payments for services
and supplies) in performing the bookkeeping, management, computer and public
relations services for Owner necessary for operation of Owner and the Property
which services, but for their performance by Manager or its affiliates, would
be required to be performed for Owner by another person; provided, however,
that such expenses to be borne by Owner shall not exceed the amount Owner would
be required to pay nonaffiliated persons for comparable services which could
reasonably be made available to Owner.
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Manager may, with Owner's prior approval, and, when so requested by
Owner, shall, at Owner's expense, institute legal actions or proceedings
to collect charges, rent or other income or compensation due to Owner with
respect to the Property, or to oust persons unlawfully in possession of any
portion of the same. All such actions or proceedings and any related
counterclaim, crossclaims or other proceedings shall be at Owner's expense
and may be brought in the name of Owner or Manager.
5. Employees. Manager shall have the exclusive right to
discharge, supervise and fix the pay of such personnel as are necessary for the
efficient maintenance and operation of the Property. However, such personnel
shall be employed and paid by and shall be bonded to the satisfaction of Owner.
6. Repair and Maintenance of Property. Manager, at Owner's
expense, shall make or attend to the making of ordinary and emergency repairs,
maintenance, decorations and alterations at the Property.
7. Taxes and Insurance. Owner shall pay all taxes, personal and
real, and assessments that are attributable to the Property. Manager shall
obtain and keep in force, at Owner's expanse, such fire, comprehensive,
liability and other insurance policies as are generally carried with respect to
similar facilities in amounts sufficient to protect and maintain the Property
and Owner's interest therein in a form, manner and amount, and with companies
satisfactory to Owner. Owner and Manager shall be named as insured parties in
all liability insurance policies relating to the Property.
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8. Accounting. Manager shall keep a detailed and complete set of
books and records of all the income and disbursements of the Property in
accordance with good accounting practice; and Manager shall, on a monthly
basis, render to Owner each of the following:
(a) A report on all vacancies;
(b) A schedule showing all income received and
disbursements made during the preceding month, together with the balance on
hand, if any, at the end of said month; and
(c) A schedule describing the monthly and annual budget
for the Property, together with the amount expended in each category in the
preceding month and for the year to date.
9. Books and Records. Manager shall keep adequate books and
records in connection with all matters arising under the terms of this
Agreement. During regular business hours, Manager shall allow Owner or any of
its duly authorized representatives access to Manager's records and
correspondence pertaining to any transaction arising out of this Agreement. At
the close of each fiscal year of Owner, Manager shall allow the books and
records which are the subject of this paragraph to be examined and audited by a
certified public accountant selected by Owner. In the event of the termination
of this Agreement, Manager shall turn over to Owner all records and
correspondence as may be reasonably necessary to assist Owner to carry to
completion any lease or other transaction and all contracts, records and
documents directly pertaining to the Property.
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10. Compensation. Owner shall pay to Manager as compensation for
its services under this Agreement a sum equivalent to 5% of the aggregate gross
receipts from the operation of the Property excluding all receipts from
utilities or from taxes of any kind or type (provided that this compensation is
no less favorable to Owner than that which it would have to pay for comparable
services which could reasonably be made available to it by non-affiliated
parties) and, if thereafter that compensation is less than the compensation
which would then have to be paid by Owner to non-affiliated parties performing
comparable services, the Operating General Partner of Owner shall have the
option under this Agreement (exercisable by three days written notice thereof
to Manager) to raise the compensation to be paid to Manager hereunder to a
level not in excess of that which would be payable by Owner for such comparable
services. No increase in Manager's compensation under this provision shall
exceed one percent of the annual gross receipts of the Property in any year.
The foregoing compensation shall be payable at the beginning of each monthly
accounting period and shall be calculated on the basis of the budgeted gross
receipts (as determined by Owner) from the operation of the Property during
that period. The total amount of compensation earned by Manager hereunder
shall, as soon as possible after the end of each calendar year during the term
of this Agreement, be calculated on the basis of the actual gross receipts from
the operation of the Property during that year, and any additional compensation
that is due to Manager (because the actual gross receipts exceeded the
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budgeted gross receipts) shall be paid to it by Owner at that time.
Conversely, if Manager collected more compensation than it was entitled to
receive during any such year (because the actual gross receipts were less than
the budgeted gross receipts), Manager shall return the excess compensation to
Owner (without interest thereon). Compensation received by Manager hereunder
in any given calendar year shall be returned by Manager to Owner to the extent
the limited partners of Owner have not received the Priority Return described
in Section 10.1(a), as adjusted by the requirements of Section 12.3.1(a), of
the Second Amended and Restated Certificate and Agreement of Limited
Partnership of Owner (the "Certificate and Agreement") at the end of such year,
provided, however, that, except to the extent of any reduction of the fee
payable to Manager in accordance with the immediately preceding clause of this
sentence, Manager shall not be obligated to provide its own funds to pay any
return to Owner's limited partners described in Section 10.1(a) or 12.3.1(a) of
the Certificate and Agreement, and in no event will the amount payable to
Manager hereunder be reduced below zero.
11. Indemnification. Owner shall indemnify, defend and hold
Manager harmless from any damages, costs, expenses or obligations incurred by
Manager as a result of any actions or omissions of Manager within the scope of
its authority as provided in this Agreement, or as a result of any other
actions or obligations as Owner may specifically authorize Manager to perform,
provided performance of such acts by Manager does not constitute fraud, bad
faith or negligence.
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12. Miscellaneous. To the extent possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. However, if any provision hereof shall be held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, and shall in
no way affect the validity of the remainder of such provision, or of any of the
remaining provisions of this Agreement.
This Agreement shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of California.
This Agreement and the rights of Owner and Manager hereunder shall not
be assignable by either of them. Manager may, however, subcontract the
performance of its duties under this Agreement to one or more subsidiaries or
affiliates of Manager or to one or more affiliated companies or unaffiliated
companies suitable to Owner, but it shall remain responsible for such
performance. The right of Manager to receive compensation may be assigned,
pledged or hypothecated at any time without Owner's consent.
This Agreement, and a notice regarding payment of deferred management
fees, contain the entire agreement of Owner and Manager with respect to the
subject matter hereof and may not be changed except by an instrument executed
by both of them.
(signatures on following page)
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IN WITNESS WHEREOF, the parties hereto have executed this Management
Agreement as of the date first above written.
OWNER: DE ANZA PROPERTIES - X
a California limited partnership
By /s/ HERBERT M. GELFAND
-------------------------------
Herbert M. Gelfand
Chairman of the Board
MANAGER: TERRA VISTA MANAGEMENT, INC.
a California corporation
By: /s/ MICHAEL D. GELFAND
--------------------------------
Michael D. Gelfand
President
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