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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. Morrison & Foerster LLP
Suite 627 555 West Fifth Street
Beverly Hills, California 90210 Los Angeles, CA 90013-1024
(310) 550-1111 (213) 892-5200
(Name, address, and telephone number of 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 Moraga Gold, LLC,
Moraga Fund I, L.P., Accelerated High Yield Income Fund I, L.P., Accelerated
High Yield Institutional Investors, L.P., Cal Kan, Inc. and Steven Gold
(together the "Bidders"), to purchase for cash up to 4,543 Units at $320 per
Unit as disclosed in the Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") dated November 27, 1996 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 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,
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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
year ended December 31, 1995 was $104,365, representing 4.5% of total
Partnership operating revenues, while administrative costs for the same period
for salaries, professional fees and services amounted to $391,093, representing
16.7% of total Partnership operating revenues. 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 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. In the Operating General Partner's view, the
Properties of the
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Partnership are valuable assets despite the decline in California real estate
generally. The Operating General Partner believes that if the Properties were
sold today (but not in a forced sale) each Unit would be worth approximately
$564. The Operating General Partner believes an offer significantly below the
$564 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 $564 estimate was not determined by any independent third party
valuation expert.
The Offer is also more than 23% lower than the liquidation value of the
underlying assets of the Partnership as of September 30, 1996 as estimated by
the Bidders to be $419 per Unit. 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 $320 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. In addition, Bidders' Offer will be reduced by the amount of any
distribution declared or paid with respect to Units between November 27, 1996
and December 31, 1996 or such other date as to which the offer may be extended.
The Partnership currently estimates that it will make a year end distribution
of approximately $14.70 per Unit which will reduce the Offer to only $305.30
per Unit.
In determining the estimated liquidation value of $564 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 nine months ending September
30, 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 a 7.5% capitalization rate (the "Cap Rate") and reduced this
result by (i) $496,000 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) $4,233,885 of mortgage debt encumbering
Warner Oaks as of September 30, 1996. The resulting estimated net sales value
of Warner Oaks is approximately $11,820,115.
The Operating General Partner believes that the Cap Rate used 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. This
rate has declined from the 8% Cap Rate that the General Partner used in
estimating sales values in May of this year
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because of the Operating General Partner's belief that there has been a general
improvement in the market. 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 a 7.5% Cap Rate and maintain their yield to investors. Irvine
Apartment 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) $342,057 of notes receivable related to previous
sales of condominium spaces at San Luis Bay, and (iii) $542,000 of other net
current assets (before accrued management and condominium conversion fees) as
of September 30, 1996. The resulting net estimated liquidation value of the
Partnership's assets as of September 30, 1996 is approximately $12,824,172 or
$564 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 Bidders intend to
influence a sale of the Partnership's Properties. 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 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 Bidders appear 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 Bidders.
o 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.
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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.
(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.
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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 has
improved steadily in 1996 and that this 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. In discussions with Bidders on June 10,1996, representatives
of the Operating General Partner discussed the possibility of selling as well
as the possibility of refinancing Warner Oaks. At that time, the Operating
General Partner was uncertain as to the timing of any sale, but estimated that
a sale would occur in a 3-5 year time period. Since the June 10, 1996 meeting,
the Operating General Partner has determined that it would not be in the best
interests of the Partnership to pursue a refinancing and, because of
improvement in general market conditions, it now estimates that the Partnership
will market Warner Oaks in one to two years. There will be no assurance,
however, that changes in the market or the condition or the occupancy of
Warner Oaks would not result in a revision in the estimated timing for a
planned sale or that a marketing effort, if conducted as planned, will result
in a sale of Warner Oaks.
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 11, 1996.
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(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.
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 11, 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 December 11, 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. 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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EXHIBIT 99.1
9171 Wilshire Boulevard
Beverly Hills, California 90210
National: (800) 321-9638
California: (800) 421-2991
[LOGO]
PROPERTIES - XII, LTD.
December 11, 1996
Dear Limited Partner:
De Anza Properties - XII, Ltd. (the "Partnership") has reviewed the
unsolicited tender offer made by Moraga Gold, LLC and its affiliates
(collectively, the "Bidders") to purchase units of limited partnership interest
of the Partnership ("Units") for $320 per Unit. The Operating General Partner
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 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 Bidders does not reflect the value of the
Partnership's underlying assets -- the most important of which is the
Partnership's sole remaining real property, the Warner Oaks apartment project.
The Operating General Partner believes that the market for this property is
improving and now anticipates marketing the property for sale in one to two
years. Earlier this year, the Operating General Partner believed that uncertain
market conditions would not permit such a prediction.
The Operating General Partner has estimated that a limited partnership Unit
has a current liquidating value of $564 as compared to the Bidders' estimate of
$419 and the Bidders' offer of only $320. In addition, the Bidders' offer will
be reduced by the expected $14.70 year end distribution. According to the
Bidders' materials, the Bidders' liquidating value estimate was based primarily
on its assumption that the Partnership's property could be sold at a price based
on a 10% capitalization rate. The Operating General Partner's estimate is based
on a 7.5% capitalization rate, which it believes more closely approximates the
rate prevailing for similar properties in the vicinity of the Partnership's
property.
The Bidders have encouraged a sale of the Property to avoid administrative
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 $564 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 Bidders imply that the Operating General
Partner is motivated to hold the Property to get fees, there is no basis for
that assertion. In addition, the costs borne by the Partnership for salaries and
professional fees and services paid for the nine months ended September 30, 1996
increased to $272, 289 (not $418,197 as indicated in Bidders' Offer to Purchase)
and the approximate $13,000 increase in these administrative costs for the nine
months ended
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September 30, 1996, compared with the nine months ended September 30, 1995, was
largely due to expenses related to the need to respond to the previous tender
offers of Moraga Gold, LLC.
Before deciding to reject the Bidders' offer, limited partners should
consider the risks of a continued investment in the Partnership:
- The offer from the Bidders 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 will be greater than the price being offered now by the
Bidders.
- 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 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 Bidders' 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: /s/ HERBERT M. GELFAND
Herbert M. Gelfand
Chairman of the Board
