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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 (213) 892-5200
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 MacKenzie Fund
10, L.P., MP Value Fund 4, L.P., Pat Patterson Western Securities, Inc. Profit
Sharing Plan, Cal Kan, Inc. and Accelerated High Yield Institutional Investors,
L.P., the general partner of each of which is MacKenzie Patterson, Inc.,
(together the "Bidders"), to purchase for cash up to 5,680 Units at $375 per
Unit as disclosed in the Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") dated February 7, 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 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
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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 year ended December 31, 1996 was $85,138, representing 3.6%
of total Partnership operating revenues, while costs for the same period for
salaries, professional fees and services amounted to $353,544, representing
15.1% 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, 1996 but the Manager or the Operating General Partner's affiliate
have deferred management fees for that year of $114,386. Based upon current
estimates of value of the Partnership's Properties, it is unlikely that the
deferred management fees for 1996 or for any prior year 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:
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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
if the Properties were sold today (but not in a forced sale) each Unit would be
worth approximately $570. The Operating General Partner believes an offer
significantly below the $570 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 $570 estimate was not determined by
any independent third party valuation expert.
The Offer is also more than 21% lower than the liquidation value of
the underlying assets of the Partnership as of February 1, 1997 as estimated by
the Bidders to be $478 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 $375 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.
In determining the estimated liquidation value of $570 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' net operating income ("NOI") of $1,254,943 for 1996 by
a capitalization rate. The NOI was determined by taking the Partnership's
actual results of operations for the year ended December 31, 1996, which amount
was adjusted to account for (i) the portion of NOI for this period 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, and (ii)
certain Partnership expenses which a buyer of Warner Oaks would not take into
account. The Operating General Partner divided the NOI by a 7.5%
capitalization rate (the "Cap Rate") and reduced this result by (i) $502,500 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) $4,222,320 of mortgage debt encumbering Warner Oaks as of
December 31, 1996. The resulting estimated net sales value of Warner Oaks is
approximately $12,025,180.
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. 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
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yields of public apartment REITs of 4.6% to 7.7% allows these REITs to buy
properties at Cap Rates lower than 7.5% 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 5.3%.
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) $301,958 of notes receivable related to
previous sales of condominium spaces at San Luis Bay, and (iii) $497,629 of
other net current assets (before accrued management and condominium conversion
fees) as of December 31, 1996. The resulting net estimated liquidation value
of the Partnership's assets as of December 31, 1996 is approximately
$12,944,767 or $570 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. The Operating General Partner, however, has determined to list
Warner Oaks for sale with a nationally recognized real estate broker and has
entered into discussions for this purpose. The Operating General Partner
anticipates that a sale of Warner Oaks could occur as early as this year.
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 the return to limited
partners after a sale of Warner Oaks 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 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.
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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 upon
receipt of a satisfactory offer and anticipates that such sale could occur as
early as this year. 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
improved steadily in 1996 and that this has improved
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values in the earthquake affected area surrounding Warner Oaks. The Operating
General Partner, therefore, presently intends to sell Warner Oaks upon receipt
of a satisfactory offer. 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, the Operating General
Partner has determined to list Warner Oaks with a nationally recognized real
estate broker and has entered into discussions for this purpose. 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 February 21, 1997.
(b) None.
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(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.
February 21, 1997
- -----------------
(Date)
DE ANZA PROPERTIES-XII, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
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 February 21, 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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EXHIBIT 99.1
LOGO 9171 Wilshire Boulevard
PROPERTIES - XII, LTD. Beverly Hills, California 90210
National: (800) 321-9638
February 21, 1997 California: (800) 421-2991
Dear Limited Partner:
De Anza Properties - XII, Ltd., a California limited partnership (the
"Partnership") has reviewed the unsolicited tender offer made by MacKenzie
Patterson, Inc. and its affiliates (collectively, the "Bidders") to purchase
units of limited partnership interest of the Partnership ("Units") for $375 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. Limited Partners who sell any Unit to
the Bidders will not receive any distributions 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.
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 has
significantly improved. As a result, the Operating General Partner has
determined to list Warner Oaks for sale with a nationally recognized real estate
broker and has entered into discussions for this purpose. The Operating General
Partner anticipates that Warner Oaks could be sold as early as this year.
The Operating General Partner has estimated that a limited partnership Unit
has a current liquidating value of $570 as compared to the Bidders' estimate of
$478 and the Bidders' offer of only $375. 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 9%
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 1996 amounted to $85,138, which represents only
3.6% 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 $570 per Unit value is realized no management fees
would be payable to the Operating General Partner or its affiliates. In
addition, the costs borne by the Partnership for salaries and professional fees
and services paid for the year ended December 31, 1996 increased to $353,544 and
the approximate $5,000 increase in these administrative costs for the year ended
December 31, 1996, compared with the year
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ended December 31, 1995, was due to expenses related to the need to respond to
the previous tender offers of affiliates of the Bidders.
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 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.,
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
