-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HRdIBKx7EU4BVu4Z87FZ/rnjpy+rdrwrEfkZrhlAromL1/H/ZFYkuskG1F0qBZob PIAw6c7jTsV/aC+ZIfcSXw== 0000944209-98-000623.txt : 19980330 0000944209-98-000623.hdr.sgml : 19980330 ACCESSION NUMBER: 0000944209-98-000623 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DE ANZA PROPERTIES XII LTD CENTRAL INDEX KEY: 0000351509 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 953601367 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-10430 FILM NUMBER: 98576186 BUSINESS ADDRESS: STREET 1: 9171 WILSHIRE BLVD STE 627 CITY: BEVERLY HILLS STATE: CA ZIP: 90210 BUSINESS PHONE: 3105501111 MAIL ADDRESS: STREET 1: 9171 WILSHIRE BLVD STREET 2: SUITE 600 CITY: BEVERLY HILLS STATE: CA ZIP: 90210 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required) For the Year Ended December 31, 1997 [_] Transition Report Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 (No Fee Required) Commission File Number 0-10430 DE ANZA PROPERTIES - XII, LTD. (Exact Name of Registrant as Specified in Its Charter) California 95-3601367 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 9171 Wilshire Boulevard, Suite 627 Beverly Hills, California 90210 (Address of Principal Executive Offices) (Zip Code) (310) 550-1111 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12 (b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests (Title of Class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] State the aggregate market value of the voting stock held by non-affiliates of the Partnership. $22,719,000 (See Item 5 Herein) DOCUMENTS INCORPORATED BY REFERENCE. Portions of the Prospectus of the registrant, dated August 21, 1981 and three supplements thereto dated December 29, 1981, January 25, 1982, and May 1, 1982, respectively, filed pursuant to Rule 424(b) and Rule 424(c) under the Securities Act of 1933, as amended, and the report on Form 8-K filed with the Securities and Exchange Commission on September 6, 1983 each of which were subsequently filed on July 11, 1989 with Form 8, are incorporated by reference in Parts I, II, III and IV hereof. Page 1 of 44 pages contained herein. Exhibit Index is located on page 17 herein. PART I. ITEM 1. BUSINESS. -------- The registrant, De Anza Properties-XII, Ltd. (the "Partnership")/(1)/ is a limited partnership formed on December 2, 1980 under the California Uniform Limited Partnership Act to acquire, develop, maintain and operate income- producing residential real estate properties, including apartment complexes and mobile home parks, and to engage in general business activities related thereto. The Partnership considers its business to represent one industry segment, investment in real property, specifically mobile home parks and apartment complexes. As December 31, 1997, the Partnership owned an apartment complex, and one space in a mobile home park previously owned by the Partnership (the "Properties"). A description of the Properties is set forth in Item 2 hereof and is incorporated herein by reference. The Partnership's apartment complex is located in an upscale urban area. The project attracts primarily young professionals and business people due in part to the Property's convenient location near major office centers. The Property contains recreational facilities and services that offer its residents a quality lifestyle. The apartment project competes with approximately five other apartment properties consisting of approximately 2,500 rental units. Some of these properties are newer. Competition is a significant factor affecting the occupancy and results of operations of the Partnership's apartment project. A description of the general development of the business of the Partnership since the beginning of the year for which this report is being filed is set forth in Item 7(3), Results of Operations, and is incorporated herein by reference. Information regarding the Partnership's revenues, profitability and identifiable assets attributable to each of the Partnership's geographic areas is set forth in Item 8, Note 10 to the Financial Statements, in the Schedules of Projects' Operations attached thereto, and in the description of the Properties set forth in Item 2 hereof, which are incorporated herein by reference. The Partnership has no real estate investments which are located outside of the United States. As of December 31, 1997, the Partnership employed a total of 7 persons. ITEM 2. PROPERTIES. ---------- The Partnership purchased three Properties using the capital raised. Following is a description of each Property; for each Property which has been sold, the description is as of the time of sale. - ------------------- (1) A Registration Statement (File No. 2-71144) was filed on behalf of the Partnership by its general partners (the "General Partners"), and the securities offered and sold thereunder were units of limited partnership interests. -2- SAN LUIS BAY MOBILE ESTATES. "San Luis Bay" is an 88-acre retirement community in Avila Beach, California, midway between Los Angeles and San Francisco. The 162 homesites are built into hillsides on winding private roads, providing valley or ocean views to many residents, most of whom are young retirees from Southern California. San Luis Bay is part of a larger planned community of single-family detached homes, townhomes, condominiums, a time-share resort with an 18-hole golf course, a tennis club and acres of beautiful landscaping. The golf course and tennis courts are available for use by the residents. Large homes with cedar-shake roofs, decks and wood or wood-like siding, and planted flowering shrubs on the slopes below characterize this community. San Luis Bay also features a clubhouse used principally for parties, banquets and special events. High on a hillside overlooking the valley is an outdoor pool, an indoor whirlpool spa, and a pool house with shower, locker facilities and saunas. An area reserved for parking recreational vehicles and boats is located on the Property. Pursuant to an agreement dated May 2, 1989, to sell the community to an association representing the residents, the community was subdivided into condominium units, and the residents elected to purchase the individual homesites for an aggregate purchase price of $8,850,000, which could be paid, if an individual buyer so elected, partly in cash, with the remainder represented by purchase money financing provided by the Partnership. The residents who purchased their homesites for all cash received a 10% discount off their purchase price. During 1997, 1994, 1993, 1992 and 1991, one, two, three, three and 152 homesites (0.6%, 1.2%, 1.9%, 1.9% and 93.8% of the Property) were sold, respectively. The homesite which has not been purchased is leased under a seven-year non-transferable lease which expires in 1998. The Partnership intends to sell the homesite in 1998 to facilitate the Partnership's dissolution. See Item 8, Note 3 to the Financial Statements, which is incorporated herein by reference. WARNER OAKS APARTMENTS. "Warner Oaks" is a 227-unit, 7-acre mixed- aged apartment complex located in the Warner Center area of Woodland Hills, a Los Angeles, California suburban community. Warner Center is a planned development of owner-occupied residences, apartment properties, high-rise office buildings, first-class hotels and two major shopping malls. The community offers private tennis courts, an outdoor swimming pool and spa, and a complete fitness center with a full circuit of Nautilus equipment, a video aerobics studio and a tanning bed. Warner Oaks is a fully enclosed, gated community, most of the residents of which are professionals and white-collar workers who work in the immediate area. The Property offers twelve-month leases. Rental rates include water and sewer service; residents are billed separately for electricity and gas. The Partnership sold the Property on January 14, 1998 and distributed the net proceeds to the limited partners. See Item 8, Note 9 to the financial statements which is incorporated herein by reference. THE MARK. "The Mark" was sold on August 18, 1994. The Mark is a 58- acre mixed-aged community in Mesa, Arizona, principally serving young families with children who occupy the 411 homesites as primary residences. The community's central recreational facility contains a large clubhouse -3- and swimming pool. A separate smaller building with a fitness center and second swimming pool serves adults only. A grassy park with play equipment is located at one end of the community, and at the other end is a seven acre area containing a softball diamond, a volleyball court and a basketball court. Football, soccer and other sports can be played there as well. Also available for resident use is a car wash facility and a do-it-yourself auto repair area with two covered repair bays. The entire community is surrounded by a 6-foot masonry wall and has a computerized access gated entrance. The Mark offered one- to-four-year leases. Rental rates included sewer service; residents were billed separately for water, electricity and gas. For a description of the terms of encumbrances relating to the Properties, see the information set forth in Item 8, Note 5 to the Financial Statements, which is incorporated herein by reference. ITEM 3. LEGAL PROCEEDINGS. ----------------- None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. --------------------------------------------------- No matter was submitted during the quarter ended December 31, 1997. -4- PART II. ITEM 5. MARKET FOR THE PARTNERSHIP'S COMMON EQUITY AND RELATED STOCKHOLDER ------------------------------------------------------------------ MATTERS. ------- (a) Market Information. ------------------ There is no public market for the Units of Limited Partnership Interests and it is not anticipated that a public market for them will develop. Accordingly, accurate information as to the market value of a Unit at any given date is not available. The estimated aggregate market price shown on the cover page of this report is simply the original capital contributed by the Limited Partners and should not be relied upon as indicative of any bid or ask quotations or transactions in the Limited Partnership Interests. Units are transferable only on the books and records of the Partnership and are subject to certain limitations. (b) Holders. ------- As of December 31, 1997, the approximate number of Unit holders is 1,631. (c) Dividends. --------- The Partnership is a limited partnership and, accordingly, does not pay dividends. It does, however, make distributions from operations determined by the Operating General Partner on a quarterly basis. During 1997 and 1996, $750,000 and $700,000 ($33.01 and $30.81 per interest held), respectively, was distributed to the Limited Partners from operations. During 1996, 1994, 1992 and 1991, $135,000, $370,540, $180,000 and $3,450,000 ($5.94, $16.31, $7.92 and $151.86 per interest held), respectively, was distributed to the Limited Partners from the sale proceeds of San Luis Bay. No distributions from sale proceeds of San Luis Bay were made in 1995. In addition, during 1996, 1995 and 1994, $29,000, $42,000 and $1,116,460 ($1.28, $1.85 and $49.14 per interest held), respectively, was distributed to the Limited Partners from sale proceeds of The Mark. -5- ITEM 6. SELECTED FINANCIAL DATA. ----------------------- The following table sets forth in comparative tabular form a summary of selected financial data for each of the Partnership's last five years:
Years ended December 31, 1997 1996 1995 1994 1993 ------------------------------------------------------------------- Operating revenues: $2,452,908 $2,363,283 $2,344,863 $2,925,056 $3,028,062 Gain (loss) on sale of property and equipment: 236,093 29,001 42,000 (67,041) 153,751 Net income (loss) from continuing operations: 1,945,392 379,819 196,633 (491,194) (827,239) Net income (loss) from continuing operations per limited partnership interest/(1)/: 84.77 16.55 8.57 (18.38) (30.95) Total assets: 9,120,097 8,905,871 9,540,441 10,341,663 15,724,774 Long-term obligations: 4,170,474 4,222,320 4,261,943 4,278,706 8,319,038 Cash distributions per partnership interest: 1. Limited Partner/(2)/: 33.01 38.03 33.76 65.45 -- 2. General Partner: -- -- -- -- --
- ------------------- Assets have been disposed of during the periods presented above which materially affect the comparability reflected in the selected financial data. The above selected financial data should be read in conjunction with the financial statements and the related notes appearing elsewhere in this annual report. /(1)/ Net income (loss) from continuing operations per limited partnership interest is based on the number of such interests outstanding (22,719 units) during each year. /(2)/ Cash distributions per limited partnership interest are based on the number of such interests outstanding (22,719 units) during each year. -6- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS. --------------------- (1) Liquidity. --------- The Partnership's quick ratios were 3.9:1 and 2.4:1 including unrestricted cash balances of $876,533 and $472,502 at December 31, 1997 and 1996, respectively. The unrestricted cash balance increased as a result of notes receivable prepayments and the release of restricted reserves, both of which also increased the quick ratio. The Partnership's cash balance is its immediate source of liquidity. On a long-term basis, the Partnership's liquidity is sustained primarily from cash flows from operations, which during 1997 was approximately $1,055,000. Cash flow from operations improved substantially following the 1994 sale of The Mark, as described in Item 8, Note 3 to the financial statements. The Partnership reinstated regular operating distributions to its Limited Partners in 1995 though management fees continue to be deferred in accordance with the Partnership Agreement. As a consequence of the sale of The Mark, three reserve accounts were established as follows: 1) The MHC Reserve in the amount of $42,000 was established as a requirement of the Amended Acquisition Agreement by and between MHC and the Partnership. The funds were released in 1995 in full and distributed to the Limited Partners. 2) The General Reserve was maintained in a separate interest bearing trust account, pursuant to the terms of a trust agreement between the Partnership, as the beneficiary, and Mr. Gelfand as trustee, with an all cash fund in the amount of $130,094. Pursuant to the terms of a contribution agreement entered into among all of the partnerships and/or liquidating trusts, whose properties were acquired in the MHC transaction described above, funds in the General Reserve may have been used to discharge or satisfy the Partnership's pro rata portion of any contingent liabilities of any of the liquidating trusts or partnerships, and to discharge or satisfy any liabilities of Mr. Gelfand and his affiliates. In August 1997, all funds remaining in the General Reserve were released to the Partnership. 3) The amount of the Independent Committee Reserve for the Partnership was initially $58,003. The funds held in the Independent Committee Reserve were invested in an interest bearing account (but not in derivative securities) pursuant to the terms of the Independent Committee Trust Agreement, between the Partnership as beneficiary, and Citicorp Trust N.A. as trustee, for the benefit of the Partnership's Independent Committee. Pursuant to the terms of a contribution agreement among all of the partnerships/liquidating trusts, each partnership/liquidating trust (including the Partnership) would contribute a pro rata portion of any claim for indemnification made by the Independent Committee regardless of which specific partnership or partnerships, if less than all, a claim relates to. In August 1996, $29,001 of the reserve was released to the Partnership from the Independent Committee Reserve and the remainder was released in 1997. -7- The Partnership operated Warner Oaks through January 14, 1998 along with one space at San Luis Bay which operations are managed by Terra Vista Management, Inc. ("Terra Vista"). Terra Vista is wholly owned by Mr. Michael D. Gelfand, the president of the Operating General Partner. The Partnership sold Warner Oaks on January 14, 1998; see Item 8, Note 9 to the Financial Statements, which is incorporated herein by reference. The sale and distribution of the proceeds leaves the Partnership with only one space at San Luis Bay, notes receivable and reserves as assets. In 1998, the Partnership intends to sell the space and collect the notes receivable (all of which mature in 1998), distribute the proceeds and any remaining reserves and then terminate by year end. As of December 31, 1997, the amount of the notes receivable outstanding was approximately $217,000. Other than as described elsewhere, there are no known trends, demands, commitments, events or uncertainties which are reasonably likely to materially affect the Partnership's liquidity. (2) Capital Resources. ----------------- As described above, the Partnership sold Warner Oaks on January 14, 1998 and intends to wind-up its remaining business and terminate in 1998. However, no assurance can be given that such termination will occur. (3) Results of Operations. --------------------- Rental income increased 1.6% in 1997 due to increased occupancy although it was the same in 1996 as in 1995. Average occupancy for the last three years is as follows: Average Occupancy -----------------
1997 1996 1995 --------- --------- --------- Warner Oaks 95% 93% 93%
The recent recession in Southern California held down rents at Warner Oaks, although occupancy remained high. Other income increased in 1997 due to receipt of a litigation settlement. Interest income decreased in 1997 over 1996 and in 1996 over 1995 due to declining reserve balances. Additionally, gains on the sale of The Mark fluctuated in 1997, 1996 and 1995 as reserves from the 1994 sale were released. Expenses during 1997 decreased 63% over 1996 due to two special accounting occurrences. First, management and condominium conversion fees expensed prior to 1996 but payment of which was deferred, were reversed in 1997 when the Partnership determined payment of such fees would not occur following the pending Warner Oaks sale. Second, as allowed under then-current accounting and tax standards, Warner Oaks' 1982 purchase was depreciated on an accelerated basis which depreciation was completed in 1996 and reduced the 1997 expense. A third special accounting treatment slightly offset -8- the expense reductions above; specifically, in 1996, an adjustment was made to reduce previous earthquake losses to actual costs, which expense reduction did not recur in 1997. Excluding these special accounting occurrences, expenses decreased 2.4% in 1997 over 1996. Other expense and professional fees declined as costs incurred in responding to multiple tender offers for the Partnership's limited partner units in prior years were not repeated to the same extent in 1997. Also, interest on Warner Oaks' variable rate loan decreased with declining interest rates and insurance expense continued decreasing with a more competitive market for earthquake and other coverage. Partly offsetting these expense decreases, utilities increased with increasing occupancy at Warner Oaks and increased utility rates. Expenses during 1996 decreased 8.1% over 1995. The Partnership ceased accruing management fees in 1996 due to the unlikelihood that they will be paid (prior years' fees were accrued but not paid) according to their subordination to limited partner Priority Return distributions. Also in 1996, an adjustment was made to reduce previous earthquake losses to actual costs. Real estate taxes increased due to earthquake related reductions in 1995 not repeated in 1996. Payroll taxes and employee benefits increased because of higher workers' compensation insurance rates and adjustments of prior years' costs. Lastly, insurance premiums decreased with a more competitive market for earthquake and other coverage. As described above, Warner Oaks was sold on January 14, 1998 and the Partnership intends to wind-up its business and terminate in 1998, although no assurance can be given that such termination will occur. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ------------------------------------------- See Index to Financial Statements set forth in Item 14 of this Annual Report on Form 10-K. The material contained in such Financial Statements, Notes and Supplementary Schedules is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE. -------------------- None. -9- PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP. --------------------------------------------------- (a) General Partners ---------------- The Partnership is a limited partnership and has no executive officers or directors. De Anza Corporation has served as the Operating General Partner of the Partnership since June 14, 1990 and its directors and policy making executive officers are described below together with the names and ages of the other General Partners, each of whom has served in that capacity since the creation of the Partnership. Name of General Partners Age ------------------------ --- De Anza Corporation (Operating General Partner) N/A Herbert M. Gelfand 66 David G. Licht 73 DZA Equities - XII, Ltd. N/A Name of Directors/Key Executive Officers of De Anza Corporation, Operating General Partner Age ---------------------------------------- --- Michael D. Gelfand 43 Sheila M. Schrank 42 Ron E. Rubinstein 29 Pursuant to the Partnership's Second Amended and Restated Certificate and Agreement of Limited Partnership (the "Partnership Agreement"), the General Partners will retain their respective positions until their death, insanity, bankruptcy, disability, removal, or withdrawal. De Anza Corporation, the Operating General Partner of the Partnership, is wholly owned by Herbert M. Gelfand. De Anza Corporation was formed as a California corporation in 1984 and since October 1985, has been available to serve as a general partner of real estate partnerships previously sponsored by De Anza Group, Inc. or Mr. Gelfand. De Anza Corporation served as the operating general partner of one other real estate partnership until it dissolved in 1997, was the liquidating agent for three other partnerships dissolved in 1997 and is the non-member manager of an affiliated limited liability company formed in 1997. Herbert M. Gelfand served as the Operating General Partner of the Partnership from its inception until June 14, 1990, currently serves as a general partner of three affiliated partnerships, was a -10- general partner of three affiliated partnership dissolved in 1997 and substantially owns the managing member of an affiliated limited liability company formed in 1997. Mr. Gelfand is currently the Operating General Partner of the three affiliated partnerships, the first of which was formed in 1969. Mr. Gelfand was also the founder, and together with his wife, Beverly J. Gelfand, were the principal shareholders of De Anza Group, Inc. which was sold August 18, 1994. Mr. Gelfand served as its Chairman of the Board of Directors until its sale. From 1986 to 1990, Mr. Gelfand was also its Chief Executive Officer. Mr. Gelfand served as the Chairman of the Board of Directors of De Anza Corporation since its inception. He is a member of the Bar of the State of California and was engaged in the private practice of law from 1956 through 1977 and from 1970 until 1975, Mr. Gelfand was a partner in the predecessor to the firm of Benjamin and Susman, a Law Corporation (and thereafter was counsel to that firm until 1977), which predecessor law firm performed legal services for all but one of the affiliated partnerships. Mr. Gelfand is married to Beverly J. Gelfand, who served as a director of De Anza Group, Inc. until its sale, and is the father of Michael D. Gelfand, Director, President, Chief Financial Officer and Treasurer of De Anza Corporation. David G. Licht has been an attorney practicing in California since 1950, and is the senior member of Licht & Licht, a Professional Corporation, specializing in business law. He became a director of De Anza Group, Inc. in April 1980 and served until its sale. He has served as a Director of De Anza Corporation since its inception. He also served as the Secretary of De Anza Group, Inc. from April 1980 until February 1981. DZA Equities - XII, Ltd. ("Equities") is a California limited partnership which was formed in 1980 and whose general partner is Herbert M. Gelfand and whose limited partners are certain current and former officers and employees of De Anza Group, Inc. or De Anza Corporation or its affiliates. As a General Partner of the Partnership, Equities shares in the Partnership's cash distributions to General Partners and the allocation of profits and losses of the Partnership. Michael D. Gelfand is a director, President, Chief Financial Officer and Treasurer of De Anza Corporation and is President and sole shareholder of Terra Vista Management, Inc., a real estate management company that managed Warner Oaks until its sale on January 14, 1998 and currently manages properties owned by other affiliated partnerships. Mr. Gelfand also substantially owns the managing member of an affiliated limited liability company formed in 1997. Mr. Gelfand joined De Anza Group, Inc. in 1978 and is the son of Herbert M. Gelfand and Beverly J. Gelfand. He received a B.S. degree from Claremont Men's College in 1977. Mr. Gelfand is a previous member of the Board of Directors of the National Campground Owner's Association, is a licensed NASD General Securities Principal and is a licensed real estate broker. Sheila M. Schrank became Vice President - Controller of De Anza Corporation in October 1990. Prior to that, Ms. Schrank served as Assistant Vice President from 1983 to 1990, after having served as Assistant Controller since 1982. From 1976 to June 1982, she served in various -11- accounting and data processing functions at De Anza Accounting Corporation, a former affiliate of the Operating General Partner. Ron E. Rubinstein became Assistant Vice President and Finance Director of De Anza Corporation in June 1995 and Vice President - Finance in April 1997. Mr. Rubinstein joined De Anza Accounting Corporation, a former affiliate of the Operating General Partner, in 1988 as a financial analyst. Mr. Rubinstein received a B.A. degree from UCLA in 1989 and an M.A. degree from UCLA in 1996. (b) Independent Committee. --------------------- The Partnership created an independent committee (the "Independent Committee") to review and evaluate certain "Interested Partner" and "Fundamental" transactions. These transactions are defined in the Partnership Agreement, which is incorporated herein by reference, and are to be reviewed prior to the expenditure of significant sums in connection with the pursuit of any such transactions. The Independent Committee was created pursuant to an amendment to the Partnership Agreement which was adopted at the May 31, 1990 Special Meeting of the Limited Partners. The original members of the Independent Committee were Frederick M. Nicholas, Arthur W. Schmutz and Ira Yellin. The appointment of these individuals to the Independent Committee was approved and ratified by vote of the Limited Partners at the May 31, 1990 Special Meeting of the Limited Partners. None of the members of the Independent Committee has had any prior dealings or affiliation with the Partnership or the General Partners. In 1997, Ira Yellin resigned his position on the Independent Committee and the vacancy has not been filled. Frederick M. Nicholas, age 75, is President and the principal shareholder of The Hapsmith Company since it was formed. The Hapsmith Company specialized in commercial real estate development. Mr. Nicholas attended the University of Southern California, where he received an AB degree in 1947 and a JD degree in 1952. Mr. Nicholas was the Chairman of the Board of Trustees for the Museum of Contemporary Art, Los Angeles, California. Arthur W. Schmutz, age 74, has been a partner at Gibson, Dunn & Crutcher, a law firm, from 1960 to 1986 and an advisory partner at the same law firm from 1987 to the present. Mr. Schmutz has been practicing law in California since 1953 and his areas of specialty include securities, real estate, corporate and general commercial law. He received his AB degree from Johns Hopkins University in 1949 and an LLB degree from Harvard Law School in 1952. (c) Forms 3, 4 and 5. ---------------- Based upon various Schedule 14D-1's provided to Registrant by affiliates of MacKenzie Patterson (see Item 12, which is incorporated herein by reference), as beneficial owners of more than 10% of Registrant's securities, Mackenzie Patterson and affiliates may be required to file Forms 4 and 5 pursuant to Section 16(a) of the Securities Exchange Act of 1934. Registrant has not received copies of -12- any such Forms and does not know if such Forms were filed with the Securities and Exchange Commission. ITEM 11. EXECUTIVE COMPENSATION. ---------------------- The Partnership does not have directors, a chief executive officer or any other executive officers. None of the General Partners of the Partnership received compensation (including distributions) exceeding $100,000 each from the Partnership during the years ended December 31, 1997, 1996 and 1995. There was no compensation (including distributions) paid by the Partnership to the Operating General Partner's President. None of the four most highly compensated officers of the Operating General Partner received reimbursement from the Partnership exceeding $100,000 each during the years ended December 31, 1997, 1996 and 1995. Information contained in Item 13 of this Annual Report on Form 10-K is incorporated herein by reference. COMPENSATION OF DIRECTORS. The Partnership does not have directors. De Anza Corporation, the Operating General Partner, has directors, none of whom received compensation for the year ended December 31, 1997, from the Partnership. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. There is no compensation committee for the Partnership or the Operating General Partner. The President of the Operating General Partner participates in deliberations regarding executive officer compensation. Payments of compensation by the Partnership are governed by the Partnership Agreement and described in the Prospectus under the heading "Compensation and Fees of General Partners", page 12, which is incorporated herein by reference. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS. In the event a General Partner (other than the Operating General Partner) withdraws as a General Partner of the Partnership, such individual may either (i) upon payment of $1,000 to the Partnership, continue as a Limited Partner (but without the right to vote as a Limited Partner), and thereafter receive all profits, losses and cash distributions to which he would have been entitled as a General Partner, or (ii) sell his interest to the Partnership or the remaining General Partners at a price and on such terms agreed upon by the withdrawing General Partner and De Anza Corporation, the Partnership's Operating General Partner. In the event the withdrawing General Partner elects to sell his interest in the Partnership, he must first offer to sell such interest to the Partnership. If such offer is not accepted by a majority in interest of the Partnership's Limited Partners within 30 days after the Partnership's receipt of the -13- notice of withdrawal, then the withdrawing General Partner shall offer his interest for sale to the remaining General Partners, who shall have the right to accept such offer for a period of 30 days. In the event a General Partner is removed as a General Partner by 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, which is incorporated herein by reference. -14- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND ---------------------------------------------------- MANAGEMENT. ---------- (a) Security Ownership of Certain Beneficial Owners. -----------------------------------------------
Amount & Nature of Title of Class Name of Beneficial Owner Beneficial Ownership Percent of Class - ----------------- --------------------------- -------------------- ---------------- Limited Partnership Interests: MacKenzie Patterson 1640 School Street, #100 4,958 UNITS/(1)/ 21.8%/(1)/ Moraga, CA 94556 DIRECT (b) Security Ownership of Management. -------------------------------- Amount & Nature of Title of Class Name of Beneficial Owner Beneficial Ownership Percent of Class - -------------- ------------------------ -------------------- ---------------- General Partner Herbert M. Gelfand 37.60% 37.60% Interests: TTEE DZA Equities - XII, Ltd. 10.00% 10.00% DIRECT David G. Licht 2.00% 2.00% DIRECT De Anza Corporation .40% .40% DIRECT Economic Assignment of General Partner Interest: DME, Ltd. 39.6% 39.6% DIRECT Gelfand Family Trust 0.4% 0.4% TTEE All General Partners and _______ ________ directors/key executive officers of De Anza Corporation as a group (7): 90.00%/(2)/ 90.00%/(2)/ ===== =====
- ---------------- /(1)/ MacKenzie Patterson and its affiliates reported in Schedule 14D-1, dated January 7, 1998, that they are the beneficial owners of 4,958 Units. /(2)/ Beneficial Ownership excludes the assignment by a Beneficial Owner of any economic interests to others; however, it does include the economic interest if the Beneficial Owner is the assignee. -15-
Amount & Nature of Title of Class Name of Beneficial Owner Beneficial Ownership Percent of Class - -------------- ------------------------ -------------------- ---------------- Limited Partnership Interests: Herbert M. Gelfand 2.5 UNITS * BY SPOUSE --------- All General Partners and directors/key executive officers of De Anza Corporation as a group (7): 2.5 UNITS * ========= * Less than 1%
(c) Changes in Control. ------------------ None. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. ---------------------------------------------- For the year ended December 31, 1997, Terra Vista was not paid management fees but was reimbursed $80,037 for the cost of goods and services provided that were necessary for the operation of the Partnership and its Properties. A portion of the foregoing fees were for compensation to executives as set forth in Item 11 above. Were the management fees not subordinated to the distribution of the limited partners' Priority Return, approximately $116,215 would have been paid. See Item 8, Note 6 to the Financial Statements for discussion of Terra Vista's affiliation with the Partnership and actual transaction amounts which is incorporated herein by reference. PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON ------------------------------------------------------- FORM 8-K. -------- (a) 1. Index to Financial Statements for the years ended December 31, 1997, 1996, and 1995 that are filed as part of this report:
PAGE ---- Independent Auditor's Report................................22 Balance Sheets, December 31, 1997 and 1996..................23 Statements of Income for the years ended December 31, 1997, 1996 and 1995............................25 Statements of Changes in Partners' Capital (Deficit) for the period January 1, 1995 to December 31, 1997.........26
-16-
PAGE ---- Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995............................27 Notes to Financial Statements...............................29 Schedules of Projects' Operations for the years ended December 31, 1997, 1996 and 1995............................40 Schedule of Distributable Income, Partners' Distributions and Reserves for the years ended December 31, 1997, 1996 and 1995......................43
2. All Schedules have been omitted since they are not required, not applicable or the information is included in the Financial Statements or Notes thereto. 3. The following index sets forth the exhibits required to be filed by Item 601 of Regulation S-K: EXHIBIT NO. PAGE - ----------- ---- 3.1 Second Amended and Restated Certificate and Agreement of Limited Partnership effective as of June 14, 1990. (See Exhibit 3.1 in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1990, incorporated herein by reference.) 10.1 Management Agreement between De Anza Assets, Inc. and the Partnership respecting San Luis Bay dated June 25, 1991. (See Exhibit 10.6 in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1992, incorporated herein by reference.) 10.2 Balloon Promissory Note in the amount of $4,300,000; Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing; and Security Agreement dated November 8, 1993. (See Exhibit 10.8 in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1993, incorporated herein by reference.) 10.3 Amended Acquisition Agreement and Joint Escrow Instructions dated May 9, 1994 by and between De Anza Properties-XII, Ltd. and MHC Operating Limited Partnership respecting The Mark Mobile Home Park, as executed. (See Exhibit 10.8 in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994 incorporated herein by reference.) -17- 10.4 Consent Agreement dated August 18, 1994, between the Partnership and De Anza Assets, Inc. ("Assets ") whereby Assets withdrew as the property manager of San Luis Bay Mobile Estates and was replaced by Terra Vista Management, Inc. (See Exhibit 10.10 in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994 incorporated herein by reference.) 10.5 General Reserve Trust Agreement dated August 1, 1994 between the Partnership, the Herbert M. and Beverly J. Gelfand Family Trust and Herbert M. Gelfand as trustee. (See Exhibit 10.11 in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994 incorporated herein by reference.) 10.6 Independent Committee Trust Agreement dated August 1, 1994 between the Partnership and Citicorp Trust N.A. as trustee. (See Exhibit 10.12 in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994 incorporated herein by reference.) 10.7 General Reserve Contribution Agreement dated August 1, 1994 between the Partnership, affiliated partnerships, the Herbert M. and Beverly J. Gelfand Family Trust, and Herbert M. Gelfand as trustee. (See Exhibit 10.13 in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994 incorporated herein by reference.) 10.8 Independent Committee Reserve Contribution Agreement dated August 1, 1994 between the Partnership, affiliated partnerships, and Citicorp Trust N.A. as trustee. (See Exhibit 10.14 in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994 incorporated herein by reference.) 10.9 Warner Oaks/Terra Vista Management Agreement dated August 18, 1994. (See Exhibit 10.1 in the Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 incorporated herein by reference.) (b) Reports on Form 8-K. None filed in the fourth quarter of 1997. (c) The information set forth in Item 14(a) (3) of this Annual Report on Form 10-K is incorporated herein by reference. (d) All information required by Regulation S-X will be furnished by the Partnership to its partners in its annual report. Therefore, this Item is not applicable. -18- SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DE ANZA PROPERTIES - XII, LTD. (a California limited partnership) By DE ANZA CORPORATION (a California corporation) Operating General Partner By /s/Michael D. Gelfand --------------------- Michael D. Gelfand President and Chief Financial Officer Date: March 27, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/Herbert M. Gelfand --------------------- Herbert M. Gelfand, Chairman of the Board Of Directors of De Anza Corporation, the Operating General Partner Date: March 27, 1998 By /s/Michael D. Gelfand --------------------- Michael D. Gelfand Director of De Anza Corporation, the Operating General Partner Date: March 27, 1998 By /s/David Licht -------------- David Licht Director of De Anza Corporation, the Operating General Partner Date: March 27, 1998 -19- DE ANZA PROPERTIES-XII, LTD. (A Limited Partnership) AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES December 31, 1997 and 1996 De Anza Properties - XII, Ltd. (A Limited Partnership) December 31, 1997 and 1996 CONTENTS
Report of Independent Auditors......................................................... 1 Audited Financial Statements Balance Sheets......................................................................... 2 Statements of Income................................................................... 4 Statement of Changes in Partners' Capital (Deficit).................................... 5 Statements of Cash Flows............................................................... 6 Notes to Financial Statements.......................................................... 8 Other Financial Information Schedule I - Schedule of Projects' Operations.......................................... 19 Schedule II - Schedule of Distributable Income, Partners' Distributions and Reserves... 22
Report of Independent Auditors To the Partners De Anza Properties - XII, Ltd. Beverly Hills, California We have audited the accompanying balance sheets of De Anza Properties - XII, Ltd., a Limited Partnership (the Partnership), as of December 31, 1997 and 1996, and the related statements of income, changes in partners' capital (deficit) and cash flows for the years ended December 31, 1997, 1996 and 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the years ended December 31, 1997, 1996 and 1995, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary Schedules I and II are presented for the purpose of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ERNST & YOUNG, LLP February 5, 1998, except for Note 9 as to which the date is February 19, 1998 Los Angeles, California 1 De Anza Properties - XII, Ltd. (A Limited Partnership) Balance Sheets
DECEMBER 31, 1997 1996 ---------------------------- ASSETS CASH AND CASH EQUIVALENTS, including restricted cash of $159,096 at December 31, 1996 (Notes 1 and 3) $ 876,533 $ 631,598 ACCOUNTS RECEIVABLE 2,289 7,923 PREPAID EXPENSES 38,312 39,545 ---------------------------- 917,134 679,066 ---------------------------- NOTES RECEIVABLE (Note 3) 217,248 301,958 ---------------------------- PROPERTY AND EQUIPMENT (Notes 1, 3, 5, 8, 9, 10 and 11) Land 1,179,884 1,184,605 Land improvements 3,560,450 3,437,005 Buildings and improvements 9,914,217 9,933,168 Furniture and equipment 484,385 469,216 ---------------------------- 15,138,936 15,023,994 Less accumulated depreciation 7,270,812 7,180,893 ---------------------------- 7,868,124 7,843,101 ---------------------------- OTHER ASSETS Loan costs, less accumulated amortization of $26,497 and $20,008 at December 31, 1997 and 1996, respectively (Notes 1 and 5) 70,837 77,326 Prepaid sale costs (Note 9) 45,754 -- Other 1,000 4,420 ---------------------------- 117,591 81,746 ---------------------------- $ 9,120,097 $ 8,905,871 ============================
See accompanying report of independent auditors and notes to financial statements. 2 De Anza Properties - XII, Ltd. (A Limited Partnership) Balance Sheets (Continued)
DECEMBER 31, 1997 1996 ---------------------------- LIABILITIES AND PARTNERS' CAPITAL (DEFICIT ACCOUNTS PAYABLE AND ACCRUED EXPENSES, including $8,768 and $8,864 due to related party at December 31, 1997 and 1996, respectively (Note 6) $ 124,114 $ 92,710 DEPOSITS AND ADVANCE RENTALS 43,885 49,182 UNRECOGNIZED GAIN (Note 3) -- 159,096 MANAGEMENT AND CONDOMINIUM CONVERSION FEES PAYABLE TO AFFILIATE OR RELATED PARTY(Note 6) -- 796,331 SECURED NOTE PAYABLE (Note 5) 4,170,474 4,222,320 ---------------------------- 4,338,473 5,319,639 ---------------------------- PARTNERS' CAPITAL (DEFICIT) General partners (1,629,110) (1,648,564) Limited partners, 22,719 units issued and outstanding 6,410,734 5,234,796 ---------------------------- 4,781,624 3,586,232 ---------------------------- $ 9,120,097 $ 8,905,871 ============================
See accompanying report of independent auditors and notes to financial statements. 3 De Anza Properties - XII, Ltd. (A Limited Partnership) Statements of Income
YEAR ENDED DECEMBER 31, 1997 1996 1995 --------------------------------------------- INCOME Rent (Note 4) $ 2,293,836 $ 2,257,960 $ 2,241,482 Other 108,012 46,323 39,970 Interest and dividends 51,060 59,000 63,411 Gain on sale of property and equipment (Note 3) 236,093 29,001 42,000 --------------------------------------------- 2,689,001 2,392,284 2,386,863 --------------------------------------------- EXPENSES Interest 308,878 315,356 318,184 Maintenance, repairs and supplies 248,622 242,248 244,538 Salaries, including $15,820, $18,874 and $21,018, paid to related party in 1997, 1996 and 1995, respectively (Note 6) 210,463 207,394 210,316 Utilities 192,358 178,828 179,183 Real estate taxes 157,774 155,422 135,357 Professional fees and services, including $58,821, $60,850, and $78,061, paid to related party in 1997, 1996 and 1995, respectively (Note 6) 144,604 149,150 140,777 Depreciation and amortization (Notes 1 and 3) 108,840 646,624 647,027 Other 68,915 85,305 90,000 Insurance 59,053 63,288 75,213 Payroll taxes and employee benefits 40,433 42,109 35,887 Loss on earthquake damage (Note 8) -- (73,259) -- Management fees accrued to related parties (reversal of previously accrued management fees and condominium conversion fees) (Note 6) (796,331) -- 113,748 --------------------------------------------- 743,609 2,012,465 2,190,230 --------------------------------------------- NET INCOME $ 1,945,392 $ 379,819 $ 196,633 ============================================= NET INCOME GENERAL PARTNERS $ 19,454 $ 3,798 $ 1,966 ============================================= LIMITED PARTNERS $ 1,925,938 $ 376,021 $ 194,667 ============================================= INCOME PER 1% GENERAL PARTNER INTEREST (Note 7) $ 194.54 $ 37.98 $ 19.66 ============================================= INCOME PER LIMITED PARTNERSHIP UNIT (Note 7) $ 84.77 $ 16.55 $ 8.57 =============================================
See accompanying report of independent auditors and notes to financial statements. 4 De Anza Properties - XII, Ltd. (A Limited Partnership) Statements of Changes in Partners' Capital (Deficit) Years Ended December 31, 1997, 1996 and 1995
GENERAL LIMITED PARTNERS PARTNERS TOTAL (Note 2) (Note 2) ---------------------------------------------- BALANCE - January 1, 1995 $ 4,640,780 $(1,654,328) $6,295,108 DISTRIBUTIONS TO PARTNERS (Note 3) (767,000) -- (767,000) NET INCOME - for the year ended December 31, 1995 196,633 1,966 194,667 ---------------------------------------------- BALANCE - December 31, 1995 4,070,413 (1,652,362) 5,722,775 DISTRIBUTIONS TO PARTNERS (Note 3) (864,000) -- (864,000) NET INCOME - for the year ended December 31, 1996 379,819 3,798 376,021 ---------------------------------------------- BALANCE - December 31, 1996 3,586,232 (1,648,564) 5,234,796 DISTRIBUTIONS TO PARTNERS (Note 3) (750,000) -- (750,000) NET INCOME - for the year ended December 31, 1997 1,945,392 19,454 1,925,938 ---------------------------------------------- BALANCE - December 31, 1997 $ 4,781,624 $(1,629,110) $6,410,734 ==============================================
See accompanying report of independent auditors and notes to financial statements. 5 De Anza Properties - XII, Ltd. (A Limited Partnership) Statements of Cash Flows
YEAR ENDED DECEMBER 31, 1997 1996 1995 ---------------------------------------------- OPERATING ACTIVITIES Gross rents received from real estate operations $ 2,401,075 $ 2,297,147 $ 2,513,880 Cash paid to suppliers and employees, including $80,037, $85,138, and $104,365, paid to related party during 1997, 1996 and 1995, respectively (Note 6) (1,089,234) (1,121,414) (1,377,593) Interest paid (308,827) (316,028) (316,426) Interest and other income received 51,768 60,681 61,688 ----------------------------------------------- Net cash provided by operating activities 1,054,782 920,386 881,549 ----------------------------------------------- INVESTING ACTIVITIES Additions to property and equipment (141,554) (231,622) (346,736) Principal payments on notes receivable 84,710 175,027 11,041 Sales costs (44,044) -- (3,575) Proceeds from sale of property and equipment 92,887 -- -- ----------------------------------------------- Net cash used in investing activities (8,001) (56,595) (339,270) ----------------------------------------------- FINANCING ACTIVITIES Principal payments on secured note payable (51,846) (39,623) (16,763) Partner distributions (750,000) (864,000) (767,000) ----------------------------------------------- Net cash used in financing activities (801,846) (903,623) (783,763) ----------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 244,935 (39,832) (241,484) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 631,598 671,430 912,914 ----------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 876,533 $ 631,598 $ 671,430 ===============================================
See accompanying report of independent auditors and notes to financial statements. 6 De Anza Properties - XII, Ltd. (A Limited Partnership) Statements of Cash Flows (Continued)
YEAR ENDED DECEMBER 31, 1997 1996 1995 ----------------------------------------------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income $ 1,945,392 $ 379,819 $ 196,633 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 108,840 646,624 647,027 Gain on sale of property and equipment (236,093) (29,001) (42,000) Reversal of previously accrued management and condominium conversion fees payable (796,331) -- -- Changes in operating assets and liabilities: Decrease in accounts receivable 5,634 423 245,711 Decrease in prepaid expenses 1,233 3,570 2,490 Decrease in other assets -- 716 205 Increase (decrease) in accounts payable and accrued expenses 31,404 (77,306) (265,840) Decrease in deposits and advance rentals (5,297) (4,459) (16,425) Increase in management and condominium conversion fees payable to affiliate or related party -- -- 113,748 ------------------------------------------------ Net cash provided by operating activities $ 1,054,782 $ 920,386 $ 881,549 ================================================
See accompanying report of independent auditors and notes to financial statements. 7 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements For the Years Ended December 31, 1997, 1996 and 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS The Partnership invests its cash not needed for working capital in highly liquid short-term investments consisting primarily of money market funds and certificates of deposit, with original maturities generally ranging from one to three months. The Partnership considers all such items to be cash equivalents. Restricted cash at December 31, 1996 is comprised of the cash reserves established in connection with the sale of certain property described in Note 3. The Partnership maintains some of its cash in bank deposit accounts which, at times, may exceed the federally insured limits. No losses have been experienced to date related to such accounts. The Partnership places its cash and cash equivalents with quality financial institutions and believes it is not exposed to any significant concentrations of credit risk on cash and cash equivalents. PROPERTY AND EQUIPMENT In 1996, the Partnership adopted Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Depreciation is computed using both the straight-line and declining-balance methods, based on estimated useful lives as follows: Land improvements 10 - 15 Buildings and improvements 25 - 30 Furniture 3 - 5 Mobile homes 5
Maintenance and repairs are expensed as incurred. LOAN COSTS The costs incurred in obtaining financing are capitalized and amortized over the term of the loan. See accompanying report of independent auditors. 8 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FINANCIAL INSTRUMENTS The carrying amount reported in the balance sheet for cash and cash equivalents, accounts receivable and accounts payable at December 31, 1997, approximates fair value due to the short maturity of these instruments. The carrying value of the note payable approximates fair value at December 31, 1997, based on the current borrowing rates for similar obligations. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at December 31, 1997 and 1996 and revenues and expenses for the years ended December 31, 1997, 1996 and 1995. Actual results could differ from those estimates. INCOME TAXES Since the Partnership's income or loss is allocated to the partners and not the Partnership, there is no provision or benefit for income taxes reflected in the accompanying financial statements. The amount of income for federal tax purposes for the years ended December 31, 1997, 1996 and 1995 was $1,741,479, $231,550, and $3,588, respectively. The income for federal tax purposes was calculated as follows:
1997 1996 1995 ---------------------------------------------- Net income per financial statements $ 1,945,392 $ 379,819 $ 196,633 Tax basis depreciation in excess of financial statement depreciation (61,090) (119,268) (151,272) Deferred income (142,823) (29,001) (42,000) Other -- 227 ---------------------------------------------- Income for federal tax purposes $ 1,741,479 $ 231,550 $ 3,588 ==============================================
See accompanying report of independent auditors. 9 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INCOME TAXES (CONTINUED) Partners' capital, as reflected in the financial statements, differs from the amount reflected in the Partnership's federal tax return for the years ended December 31, 1997, 1996 and 1995. Partners' capital is reconciled as follows:
1997 1996 1995 ------------------------------------------- Partners' capital per financial statements $ 4,781,624 $ 3,586,232 $ 4,070,413 Syndication costs 3,378,563 3,378,563 3,378,563 Accumulated depreciation difference (7,224,169) (7,163,079) (7,043,811) Purchase price adjustment 2,273,774 2,273,774 2,273,774 Aggregate of differences described in the preceding reconciliation (203,913) (148,269) (193,045) Other 118,118 205,297 279,074 ------------------------------------------- Partners' capital per federal tax return $ 3,123,997 $ 2,132,518 $ 2,764,968 ===========================================
2. PARTNERSHIP AGREEMENT The Partnership was formed on December 2, 1980 to acquire, develop and operate income-producing residential real properties. The Partnership owns and operates Warner Oaks Apartments (Warner Oaks), a 227-unit apartment complex in Woodland Hills, California. The Partnership owned and operated two mobile home communities: San Luis Bay Mobile Estates, a 162-space community in Avila Beach, California, and Mark Mobile Home Park (the Mark), a 411-space community in Mesa, Arizona. Prior to 1995, management converted the San Luis Bay Mobile Estates to a common-interest subdivision of the type referred to as a condominium and sold most of the homesites by the end of 1995 (see Note 3). The Mark was sold in 1994 (see Note 3). The Partnership Agreement provides that distributable cash, as defined, will be distributed to the limited partners, up to a sum equivalent to 6% per annum of their adjusted capital contributions, as defined therein, through November 20, 1983, and 7% per annum thereafter. Cash is then distributed to the general partners, up to a sum equivalent to 2% per annum of the adjusted capital contributions of the limited partners, through November 20, 1983, and 2-1/3% per annum thereafter. Any additional cash is See accompanying report of independent auditors. 10 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 2. PARTNERSHIP AGREEMENT (CONTINUED) distributed 75% to the limited partners and 25% to the general partners. Net income is allocated in the same proportion as cash distributions; however, the general partners receive a minimum 1% allocation. If no distributions are made, net income is allocated 85% to the limited partners and 15% to the general partners. Losses are allocated 85% to the limited partners and 15% to the general partners. Profits upon dissolution are allocated to the partners first according to their negative capital account after distribution of sales proceeds, any additional profits are allocated 75% to the limited partners and 25% to the general partners. 3. SALE OF PROPERTY AND EQUIPMENT SAN LUIS BAY On May 2, 1989, the Partnership entered into an agreement to sell San Luis Bay Mobile Estates (the 162-space mobile home community in Avila Beach, California) to the residents for an aggregate sales price of $8,850,000 and, pursuant to that agreement, subdivided the property into condominium units in 1991. The Partnership provided purchase money financing for up to 80% of the individual homesite price, payable in monthly installments, including interest at 10%, based on a loan amortization schedule of 30 years, with a balloon payment of unpaid principal and interest due in 1998. Those residents who purchased their homesites for cash received a 10% discount off their purchase price. At December 31, 1997 and 1996, respectively, the outstanding amounts due totaled $217,248 and $301,958. The Partnership sold 160 homesites prior to 1995. In 1997, it sold one site for $100,000. The remaining unsold unit is leased to a tenant. The Partnership released reserves from San Luis Bay sales and distributed $135,000 to the limited partners in 1996. This distribution represents a return of original capital. THE MARK On August 18, 1994, the Partnership sold the Mark to MHC Operating Limited Partnership (MHC). From the sale proceeds, $230,097 was retained by the Partnership. See accompanying report of independent auditors. 11 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 3. SALE OF PROPERTY AND EQUIPMENT (CONTINUED) THE MARK (CONTINUED) The $230,097 was used to establish the following cash reserves: MHC Reserve $ 42,000 General Reserve 130,094 Independent Committee Reserve 58,003
The MHC Reserve was required by the Amended Acquisition Agreement. The General Reserve and Independent Committee Reserve were established to fund contingent liabilities that may arise out of the MHC transaction. During 1996 and 1995, $29,001 of the Independent Committee Reserve and the $42,000 MHC Reserve, respectively, were released and distributed to the limited partners as a return of original capital. During 1997, the balance of the reserves, $159,096, was released. Pursuant to the guidelines of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate," the Partnership deferred in 1994 the recognition of gain on that portion of the sales proceeds represented by the MHC Reserve, General Reserve and Independent Committee Reserve, totaling $230,097. During the years ended December 31, 1996 and 1995, the Partnership recognized as income $29,001 attributable to the Independent Committee Reserve released and $42,000 attributable to the MHC Reserve released, respectively. During 1997, the Partnership recognized as income $29,001 and $130,094 attributable to the Independent Committee Reserve released and the General Reserve released, respectively. WARNER OAKS In March 1997, the Partnership began actively marketing the Warner Oaks Apartment complex. In accordance with Statement of Financial Accounting Standards No. 121, the Partnership ceased depreciating the assets' carrying value at that time (see Note 9). 4. TENANT LEASES Apartment units are leased for a period of one year or on a month-to-month basis, while the remaining mobile home space at San Luis Bay is leased through June 1998. The Partnership accounts for all leases as operating leases. Rental revenue is reported ratably over the lease terms. The annual rents from noncancelable operating leases from tenants, as of December 31, 1997, are as follows: 1998 $ 303,952 ========= See accompanying report of independent auditors. 12 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 5. SECURED NOTE PAYABLE Secured note payable at December 31, 1997 and 1996 consisted of:
DECEMBER 31, 1997 1996 ------------------------- Note collateralized by a first trust deed, payable in monthly installments of $29,547, including interest until December 15, 1996 and $29,997 until December 15, 1997. Thereafter, the monthly payment changes annually on each December 15th. Interest floats at 2.5% over the Federal Home Loan Bank's 11th District Cost of Funds Index, not to exceed 12.9%, adjusted monthly. The interest rate in effect at December 31, 1997 and 1996 was 7.441% and 7.34%, respectively. The note was paid off in 1998 (see Note 9). $ 4,170,474 $ 4,222,320 =========================
6. TRANSACTIONS WITH RELATED PARTIES Pursuant to a former management agreement dated October 1, 1985, as amended, De Anza Assets, Inc., a former affiliate of the operating general partner, was paid a management fee in the amount of 5% of the annual gross receipts from the operations of the Partnership's properties. The payment of this fee is subordinated to the priority distribution to the limited partners of 7% of their adjusted capital contributions each year and is noncumulative, except in the case of a sale, refinancing or other disposition of the Partnership's properties. In that case, the difference between the management fee actually paid and the management fee that would have been paid if it were not subordinated is payable out of proceeds of the sale, refinancing or other disposition after payment of the limited partners' priority return and capital contribution and the general partners' incentive interest. However, management fees payable, subsequent to a consummated refinancing, are not subordinated to the limited partners' priority return to the extent the subordination would have been caused by increased debt service charges. At December 31, 1996, cumulative accrued fees of $565,022 were subordinated and included in management and condominium conversion fees payable to affiliate or related party. Shortly before the sale to MHC, De Anza Assets, Inc. assigned its rights to receipt of these fees to the Gelfand Family Trust. During 1997, this payable was written off when it became apparent that it would not be paid from proceeds from the pending sale of Warner Oaks Apartments under the terms of the Partnership Agreement. See accompanying report of independent auditors. 13 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 6. TRANSACTIONS WITH RELATED PARTIES (CONTINUED) On August 18, 1994, subsequent to the sale of the Mark and the property management business of DAG, as discussed in Note 3, the property management of Warner Oaks and remaining spaces at San Luis Bay was assumed by Terra Vista Management, Inc. (Terra Vista). Terra Vista is wholly owned by Michael D. Gelfand, the son of Herbert M. Gelfand. Herbert M. Gelfand is the sole shareholder of the Operating General Partner and an individual general partner. Management fees of $113,748 were accrued but not paid to Terra Vista for the year ended December 31, 1995. Management fees in the amounts of $116,215 and $114,386 were not accrued for the years ended December 31, 1997 and 1996, respectively, because the Partnership has determined that it is not probable based on the anticipated cash flows to be generated from the disposition or the refinancing of the property and under the terms of the Partnership Agreement that the fees would be paid. At December 31, 1996, cumulative accrued fees of $153,500, were subordinated and included in management and condominium conversion fees payable to affiliate or related party. The Gelfand Family Trust agreed to share equally any payment to be made to the Gelfand Family Trust for deferred management fees with Terra Vista until Terra Vista has been paid all outstanding deferred management fees. During 1997, this payable was written off when it became apparent that these fees would not be paid from proceeds from the pending sale of Warner Oaks Apartments under the terms of the Partnership Agreement. Pursuant to the Partnership Agreement, a condominium conversion fee equal to 1% of the sales price of the San Luis Bay homesites is due to DAG (see Note 3). Payment of this fee was deferred pursuant to the partnership agreement requirement regarding subordination to payment of the limited partners' priority return and capital contribution, the general partners' incentive interest and deferred management fees. Subordinated cumulative accrued fees of $77,809 were included in management and condominium conversion fees payable to affiliate at December 31, 1996. Shortly before the sale to MHC, DAG assigned its right to receipt of this fee to the Gelfand Family Trust. During 1997, this payable was written off when it became apparent that this fee would not be paid under the terms of the Partnership Agreement. As described earlier in this Note, management fees payable in the amounts of $565,022 and $153,500 due to Gelfand Family Trust and Terra Vista Management, Inc., respectively, were written off in 1997. Additionally, condominium conversion fees payable to Gelfand Family Trust in the amount of $77,809 were written off in 1997. Based on the contract sale price of Warner Oaks (see Note 9) and the terms of the Partnership Agreement, the Partnership will not have to pay these subordinated amounts. See accompanying report of independent auditors. 14 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 6. TRANSACTIONS WITH RELATED PARTIES (CONTINUED) The total, $796,331, was written off as a credit to management fee expense and is included in the determination of net income for the year ended December 31, 1997. Terra Vista was paid in the aggregate $80,037, $85,138, and $104,365 for the years ended December 31, 1997, 1996 and 1995, respectively, for performing bookkeeping, legal, regional management, disposition, computer and investor relations services necessary for the operation of the Partnership and its properties. 7. INCOME PER 1% GENERAL PARTNER INTEREST AND LIMITED PARTNERSHIP UNIT Income per 1% general partner interest was computed based on the general partners' share of net income as reflected in the statement of changes in partners' capital (deficit). Income per limited partnership unit was computed based on the limited partners' share of income as reflected in the statement of changes in partners' capital (deficit) and the number of limited partnership units outstanding (22,719 units in each year). 8. LOSS ON EARTHQUAKE DAMAGE On January 17, 1994, the Warner Oaks Apartment complex suffered property damage from an earthquake. The Partnership estimated total costs of $1,989,000 and received insurance proceeds of $1,414,000. A portion of the costs had been capitalized and the balance of $156,496, representing estimated noncapitalized costs, net of insurance proceeds, was expensed at December 31, 1994. Additional insurance proceeds of $308,000 received for loss of income were included in rental income for the year ended December 31, 1995. The excess of the estimated accrued costs over the actual costs incurred by the Partnership totaling $73,259 is recorded as a reduction to operating expenses in 1996. As of December 31, 1996, all of the repairs were completed. See accompanying report of independent auditors. 15 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 9. SUBSEQUENT EVENT On October 15, 1997, the Partnership entered into a contract to sell Warner Oaks Apartments to Bay Apartment Communities, Inc., a Maryland Corporation, unaffiliated with the Partnership, for an all-cash price of $20,000,000. The sale closed on January 14, 1998. After payment of mortgage debt of $4,170,474, broker's commission of $300,000, transfer taxes of $112,000 and estimated sales costs of approximately $88,000, the Partnership will net proceeds of $15,329,526. On February 19, 1998, the net proceeds of $15,329,526 were distributed to the limited partners as a combination of gain distributions and return of original capital. The Partnership ceased operations, will sell or collect its remaining assets, settle outstanding liabilities and terminate upon release and distribution of remaining cash reserves. See accompanying report of independent auditors. 16 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 10. SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
Initial Cost to Partnership --------------------------- Buildings, Improvements, Costs Furniture Capitalized Sale of and Subsequent to Property and Description Encumbrances Land Equipment Acquisition Equipment - --------------------------------------------------------------------------------------------------------------------------------- San Luis Bay Mobile Estates, mobile home community, Avila Beach, California - $ 722,945 $ 3,218,956 $ 272,310 $(4,187,600) Warner Oaks Apartments, apartment complex, Woodland Hills, California $4,170,474 1,168,747 9,962,170 3,981,408 - ----------------------------------------------------------------------------------- $4,170,474 $1,891,692 $13,181,126 $4,253,718 $(4,187,600) =================================================================================== Gross Amount Carried at Close of Period Ended December 31, 1997 Life on Which --------------------------------------- Depreciation in Buildings, Latest Improvements, Statement of Furniture Operations is and Accumulated Year of Date of Computed Description Land Equipment Total Depreciation Construction Acquisition (Years) - ----------------------------------------------------------------------------------------------------------------------------------- San Luis Bay Mobile Estates, mobile home community, Avila Beach, California $ 4,721 $ 21,890 $ 26,611(1) $ 12,829 1972 8/11/81 3 to 25 Warner Oaks Apartments, apartment complex, Woodland Hills, California 1,175,163 13,937,162 15,112,325(2) 7,257,983 1979 2/09/82 5 to 30 ---------------------------------------------------------- $1,179,884 $13,959,052 $15,138,936 $7,270,812 ==========================================================
(1) Aggregate cost for federal income tax purposes is $26,611 (2) Aggregate cost for federal income tax purposes is $16,106,441 See accompanying report of independent auditors. 17 De Anza Properties - XII, Ltd. (A Limited Partnership) Notes to Financial Statements (Continued) For the Years Ended December 31, 1997, 1996 and 1995 11. RECONCILIATION OF REAL ESTATE AND ACCUMULATED DEPRECIATION
BUILDINGS, IMPROVEMENTS, FURNITURE LAND AND EQUIPMENT TOTAL -------------------------------------------------- REAL ESTATE Balance at January 1, 1995 $ 1,184,605 $13,261,031 $14,445,636 Additions during 1995 -- 346,736 346,736 -------------------------------------------------- Balance at December 31, 1995 1,184,605 13,607,767 14,792,372 Additions during 1996 -- 231,622 231,622 -------------------------------------------------- Balance at December 31, 1996 1,184,605 13,839,389 15,023,994 Additions during 1997 -- 141,554 141,554 Reductions due to sale of property and equipment during 1997 (4,721) (21,891) (26,612) -------------------------------------------------- Balance at December 31, 1997 $ 1,179,884 $13,959,052 $15,138,936 ================================================== ACCUMULATED DEPRECIATION Balance at January 1, 1995 $ 5,900,220 Depreciation charged to expense during 1995 640,538 ----------- Balance at December 31, 1995 6,540,758 Depreciation charged to expense during 1996 640,135 ----------- Balance at December 31, 1996 7,180,893 Depreciation charged to expense during 1997 102,351 Reduction due to sale of property and equipment during 1997 (12,432) ----------- Balance at December 31, 1997 $ 7,270,812 ===========
See accompanying report of independent auditors. 18 SCHEDULE I Page 1 of 3 De Anza Properties - XII, Ltd. (A Limited Partnership) Schedule of Projects' Operations
Year Ended December 31, 1997 -------------------------------------------------------------------------------- Warner Oaks Apartments De Anza Properties - XII, Ltd. Total --------------------------------------------------------------------------------- Amount % of Income Amount % of Income Amount % of Income --------------------------------------------------------------------------------- INCOME Rent (Note 4) $2,285,621 98.53% $ 8,215 2.23% $ 2,293,836 85.30% Other 34,170 1.47 73,842 19.99 108,012 4.02 Interest and dividends -- -- 51,060 13.83 51,060 1.90 Gain on sale of property and equipment (Note 3) -- -- 236,093 63.95 236,093 8.78 -------------------------------------------------------------------------------- 2,319,791 100.00 369,210 100.00 2,689,001 100.00 -------------------------------------------------------------------------------- EXPENSES Interest 308,868 13.31 10 -- 308,878 11.49 Maintenance, repairs and supplies 248,622 10.72 -- -- 248,622 9.25 Salaries, including $15,820 paid to related party (Note 6) 197,824 8.53 12,639 3.42 210,463 7.83 Utilities 192,330 8.29 28 0.01 192,358 7.15 Real estate taxes 157,340 6.78 434 0.12 157,774 5.87 Professional fees and services, including $58,821 paid to related party (Note 6) 65,140 2.81 79,464 21.52 144,604 5.38 Depreciation and amortization (Notes 1 and 3) 108,193 4.66 647 0.18 108,840 4.05 Other 28,184 1.21 40,731 11.03 68,915 2.56 Insurance 58,607 2.53 446 0.12 59,053 2.20 Payroll taxes and employee benefits 40,433 1.74 -- -- 40,433 1.50 Management fees accrued to related parties (reversal of previously accrued management fees and condominium conversion fees) (Note 6) (545,454) (23.51) (250,877) (67.95) (796,331) (29.61) -------------------------------------------------------------------------------- 860,087 37.07 (116,478) (31.55) 743,609 27.67 -------------------------------------------------------------------------------- NET INCOME $1,459,704 62.93% $ 458,668 131.55% $ 1,945,392 72.33% ================================================================================
See accompanying report of independent auditors and notes to financial statements. 19 SCHEDULE I Page 2 of 3 De Anza Properties - XII, Ltd. (A Limited Partnership) Schedule of Projects' Operations
Year Ended December 31, 1996 -------------------------------------------------------------------------------- Warner Oaks Apartments De Anza Properties - XII, Ltd. Total --------------------------------------------------------------------------------- Amount % of Income Amount % of Income Amount % of Income --------------------------------------------------------------------------------- INCOME Rent (Note 4) $ 2,245,805 98.34% $ 12,155 11.19% $ 2,257,960 94.38% Other 37,839 1.66 8,484 7.81 46,323 1.94 Interest and dividends -- -- 59,000 54.31 59,000 2.47 Gain on sale of property and equipment (Note 3) -- -- 29,001 26.69 29,001 1.21 --------------------------------------------------------------------------------- 2,283,644 100.00 108,640 100.00 2,392,284 100.00 --------------------------------------------------------------------------------- EXPENSES Interest 315,340 13.81 16 0.01 315,356 13.18 Maintenance, repairs and supplies 242,248 10.61 -- -- 242,248 10.13 Salaries, including $18,874 paid to related party (Note 6) 190,194 8.33 17,200 15.83 207,394 8.67 Utilities 178,795 7.83 33 0.03 178,828 7.47 Real estate taxes 154,501 6.77 921 0.85 155,422 6.50 Professional fees and services, including $60,850 paid to related party (Note 6) 70,933 3.11 78,157 71.94 149,150 6.23 Depreciation and amortization (Note 1) 645,606 28.27 1,018 0.94 646,624 27.03 Other 32,786 1.44 52,519 48.34 85,305 3.57 Insurance 62,648 2.74 640 0.59 63,288 2.65 Payroll taxes and employee benefits 42,109 1.84 -- -- 42,109 1.76 Loss on earthquake damage (Note 8) (73,259) (3.21) -- -- (73,259) (3.06) --------------------------------------------------------------------------------- 1,861,961 81.54 150,504 138.53 2,012,465 84.13 --------------------------------------------------------------------------------- NET INCOME (LOSS) $ 421,683 18.46% $ (41,864) (38.53)% $ 379,819 15.87% =================================================================================
See accompanying report of independent auditors and notes to financial statements. 20 SCHEDULE I Page 3 of 3 De Anza Properties - XII, Ltd. (A Limited Partnership) Schedule of Projects' Operations
Year Ended December 31, 1995 -------------------------------------------------------------------------------- San Luis Bay Warner Oaks Mobile Estates Apartments De Anza Properties-XII, Ltd. --------------------------------------------------------------------------------- Amount % of Income Amount % of Income Amount % of Income --------------------------------------------------------------------------------- INCOME Rent (Note 4) $ 12,050 100.00% $2,229,432 98.50% $ -- --% Other -- -- 34,024 1.50 5,946 5.34 -------------------------------------------------------------------------------- Interest and dividends -- -- -- -- $ 63,411 56.94 Gain on sale of property and equipment (Note 3) -- -- -- -- 42,000 37.72 12,050 100.00 2,263,456 100.00 111,357 100.00 --------------------------------------------------------------------------------- EXPENSES Interest 29 0.24 318,155 14.06 -- -- Maintenance, repairs and supplies -- -- 244,538 10.80 -- -- Salaries, including $21,018 paid to related party (Note 6) -- -- 190,819 8.43 19,497 17.51 Utilities 18 0.15 179,096 7.91 69 0.06 Real estate taxes 1,274 10.57 134,083 5.92 -- -- Professional fees and services, including $78,061 paid to related party (Note 6) -- -- 74,823 3.31 65,954 59.23 Depreciation and amortization (Note 1) 1,071 8.89 645,956 28.54 -- -- Other 3,932 32.63 52,072 2.30 33,996 30.53 Insurance 493 4.09 74,720 3.30 -- -- Payroll taxes and employee benefits -- -- 35,956 1.59 (69) (0.06) Management fees accrued to related party (Note 6) 315 2.61 113,433 5.01 -- -- --------------------------------------------------------------------------------- 7,132 59.18 2,063,651 91.17 119,447 107.27 --------------------------------------------------------------------------------- NET INCOME (LOSS) $ 4,918 40.82% $ 199,805 8.83% $ (8,090) (7.27)% ================================================================================= Year Ended December 31,1995 --------------------------- Total --------------------------- Amount % of Income --------------------------- INCOME Rent (Note 4) $ 2,241,482 93.91% Other 39,970 1.67 ------------------------- Interest and dividends 63,411 2.66 Gain on sale of property and equipment (Note 3) 42,000 1.76 2,386,863 100.00 ------------------------- EXPENSES Interest 318,184 13.33 Maintenance, repairs and supplies 244,538 10.25 Salaries, including $21,018 paid to related party (Note 6) 210,316 8.81 Utilities 179,183 7.51 Real estate taxes 135,357 5.67 Professional fees and services, including $78,061 paid to related party (Note 6) 140,777 5.90 Depreciation and amortization (Note 1) 647,027 27.11 Other 90,000 3.77 Insurance 75,213 3.15 Payroll taxes and employee benefits 35,887 1.50 Management fees accrued to related party (Note 6) 113,748 4.77 ------------------------- 2,190,230 91.77 ------------------------- NET INCOME (LOSS) $ 196,633 8.23% =========================
See accompanying report of independent auditors and notes to financial statements. 21 Schedule II Page 1 of 2 De Anza Properties - XII, Ltd. (A Limited Partnership) Schedule of Distributable Income, Partners' Distributions and Reserves
YEAR ENDED DECEMBER 31, 1997 1996 1995 -------------------------------------- Net income $1,945,392 $ 379,819 $ 196,633 Add (deduct) adjustments per partnership agreement: Depreciation and amortization 108,840 646,624 647,027 Gain on sale of property and equipment (236,093) (29,001) (42,000) Debt amortization (51,846) (39,623) (16,763) Net change in accruals (922,502) (75,874) 95,624 Release of prior years' reserves 3,793,094 3,611,149 3,455,628 -------------------------------------- Cash available for distribution(1) 4,636,885 4,493,094 4,336,149 Cash distributions to limited partners, up to 7% per annum of average adjusted capital contributions of $17,396,000, $17,559,104, and $17,601,655, in 1997, 1996 and 1995, respectively (750,000) (700,000) (725,000) -------------------------------------- Reserves from operations(2) $3,886,885 $3,793,094 $3,611,149 ====================================== Proceeds from sales of properties available for distribution or reserves(3) $ 175,887 $ 175,027 $ 11,041 Release of prior years' reserves 310,398 299,371 330,330 -------------------------------------- 486,285 474,398 341,371 Distributions to limited partners from sales proceeds -- (164,000) (42,000) -------------------------------------- Reserves from sales of properties(2)(3)(4) $ 486,285 $ 310,398 $ 299,371 ====================================== Distributions to limited partners per original $1,000 investment: From operations: Amount $ 33.01 $ 30.81 $ 31.91 ====================================== Percent (of adjusted capital) 4.31% 3.99% 4.12% ====================================== From sales: Amount $ -- $ 7.22 $ 1.85 ====================================== Percent (of original investment) -- 0.72% 0.18% ======================================
See accompanying report of independent auditors and notes to financial statements. 22 Schedule II Page 2 of 2 De Anza Properties - XII, Ltd. (A Limited Partnership) Schedule of Distributable Income, Partners' Distributions and Reserves (Continued) (1) Cash available for distribution represents amounts as defined by the Partnership Agreement. (2) The operating general partner has exercised its discretion in reserving these amounts for operations, additions to property and equipment, and future distribution. (3) Proceeds from sales of properties available for distribution or reserves represent actual cash payments less cash disbursements for expenses incurred in connection with the sale. In 1995, the Partnership collected $11,041 in principal payments on the purchase money notes. Additionally, the Partnership distributed $42,000 to the limited partners from the sale proceeds of the Mark upon release of the MHC Reserve. This amount represents a return of original capital contributed and reduces the adjusted capital contributions as defined in the Partnership Agreement. In 1996, the Partnership collected $175,027 in principal payments on the purchase money notes. The Partnership distributed $135,000 of these San Luis Bay sale proceeds to the limited partners along with $29,000 from the sale proceeds of the Mark upon partial release of the Independent Committee Reserve. These distributions represent a return of original capital contributions as defined in the Partnership Agreement. In 1997, the Partnership sold one of the then remaining two spaces of San Luis Bay for $100,000 in cash. After paying sale and closing costs of $8,823, including $6,000 broker's commission, the Partnership netted proceeds of $91,177. Additionally, the Partnership collected $84,710 in principal payments on the purchase money notes. (4) Included in the reserves from sales of properties are $159,096 and $188,097 at December 31, 1996 and 1995, respectively, in specific reserves established to fund contingent liabilities that might have arisen from the MHC transaction. See accompanying report of independent auditors and notes to financial statements. 23 EX-27 2 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 876,533 0 2,289 0 0 917,134 15,138,936 7,270,812 9,120,097 220,000 4,170,474 0 0 0 4,781,624 9,120,097 2,293,836 2,689,001 0 325,891 108,840 0 308,878 1,945,392 0 1,945,392 0 0 0 1,945,392 84.77 84.77 EPS IS PER LIMITED PARTNERSHIP UNIT
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