-----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, FC2fv+jUokxcM1Rn1WyM2RsZJsLMkz1UKj98hQU+fJ8CFjKzS+GX39SGy6KvPQ+h ElA3w8P7aGKp/padoTdGng== 0000944209-97-001511.txt : 19971114 0000944209-97-001511.hdr.sgml : 19971114 ACCESSION NUMBER: 0000944209-97-001511 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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-Q SEC ACT: SEC FILE NUMBER: 000-10430 FILM NUMBER: 97713482 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-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q --------- [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1997 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ____________ Commission File Number 0-10430 DE ANZA PROPERTIES - XII, LTD. (Exact name of registrant as specified in its charter) CALIFORNIA 95-3601367 (State or other jurisdiction of (IRS Employer Iden- incorporation or organization) tification Number) 9171 WILSHIRE BOULEVARD, SUITE 627 BEVERLY HILLS, CALIFORNIA 90210 (Address of principal executive offices, including zip code) (310) 550-1111 (The registrant's telephone number, including area code) NO CHANGE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Pursuant to the Securities Exchange Act of 1934 Release 15502 and Rule 240.0-3(b) (17 CFR 240.0-3(b)), the pages of this document have been numbered sequentially. The total number of pages contained herein is 18. 1 TABLE OF CONTENTS ----------------- PART I. FINANCIAL INFORMATION - ------ --------------------- ITEM 1. FINANCIAL STATEMENTS Balance Sheets 3 Statements of Income 5 Statements of Changes in Partners' Capital (Deficit) 7 Statements of Cash Flows 8 Notes to Financial Statements 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15 PART II. OTHER INFORMATION 17 - ------- -----------------
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Balance Sheets (Unaudited)
September 30, December 31, 1997 1996 ------------ ----------- ASSETS CASH AND CASH EQUIVALENTS - including restricted deposits of $159,096 at December 31, 1996 - Note 1 $ 848,466 $ 631,598 ACCOUNTS RECEIVABLE 4,586 7,923 PREPAID EXPENSES 52,679 39,545 ----------- ----------- 905,731 679,066 ----------- ----------- NOTES RECEIVABLE - Note 5 246,098 301,958 ----------- ----------- PROPERTY AND EQUIPMENT - Notes 2 and 5 Land 1,179,884 1,184,605 Land improvements 3,535,702 3,437,005 Buildings and improvements 9,914,218 9,933,168 Furniture and equipment 482,159 469,216 ----------- ----------- 15,111,963 15,023,994 Less accumulated depreciation 7,270,584 7,180,893 ----------- ----------- 7,841,379 7,843,101 ----------- ----------- OTHER ASSETS Loan costs - less accumulated amortization of $24,875 and $20,008 at September 30, 1997 and December 31, 1996, respectively - Note 2 72,459 77,326 Other 25,359 4,420 ----------- ----------- 97,818 81,746 ----------- ----------- $ 9,091,026 $ 8,905,871 =========== ===========
See accompanying notes to financial statements. 3 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Balance Sheets (Continued) (Unaudited)
September 30, December 31, 1997 1996 ------------- ------------ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ACCOUNTS PAYABLE AND ACCRUED EXPENSES - including $9,716 and $6,399 due to related party at September 30, 1997 and December 31, 1996, respectively $ 143,159 $ 92,710 DEPOSITS AND ADVANCE RENTALS 43,560 49,182 DEFERRED GAIN ON SALE - Note 5 - 159,096 MANAGEMENT AND CONDOMINIUM CONVERSION FEES PAYABLE TO AFFILIATE OR RELATED PARTY - Note 3 796,331 796,331 SECURED NOTE PAYABLE - Note 2 4,183,333 4,222,320 ----------- ---------- 5,166,383 5,319,639 ----------- ---------- PARTNERS' CAPITAL (DEFICIT) General partners (1,639,555) (1,648,564) Limited partners, 22,719 units issued and outstanding 5,564,198 5,234,796 ----------- ---------- 3,924,643 3,586,232 ----------- ---------- $ 9,091,026 $8,905,871 =========== ==========
See acccompanying notes to financial statements. 4 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Statements of Income (Unaudited)
Nine Months Nine Months Ended Ended September 30, September 30, 1997 1996 ------------- ------------- INCOME Rent $1,697,962 $1,685,231 Other 101,198 36,412 Interest and dividends 38,159 44,506 Gain on sale of property and equipment 236,094 29,001 ---------- ---------- 2,073,413 1,795,150 ---------- ---------- EXPENSES Interest 230,975 237,442 Maintenance, repairs and supplies 183,728 187,954 Salaries - including $11,736 and $13,759 paid to related party in 1997 and 1996, respectively - Note 3 149,211 146,917 Utilities 135,789 134,275 Professional fees and services - including $43,980 and $47,766 paid to related party in 1997 and 1996, respectively - Note 3 119,559 125,372 Real estate taxes 116,638 114,940 Depreciation and amortization 106,989 460,160 Other 54,745 69,356 Insurance 44,599 48,363 Payroll taxes and employee benefits 30,269 30,986 ---------- ---------- 1,172,502 1,555,765 ---------- ---------- NET INCOME $ 900,911 $ 239,385 ========== ========== NET INCOME GENERAL PARTNERS $ 9,009 $ 2,394 ========== ========== LIMITED PARTNERS $ 891,902 $ 236,991 ========== ========== INCOME PER 1% GENERAL PARTNER INTEREST - Note 4 $ 90.09 $ 23.94 ========== ========== INCOME PER LIMITED PARTNERSHIP UNIT - Note 4 $ 39.26 $ 10.43 ========== ==========
See accompanying notes to financial statements. 5 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Statements of Income (Unaudited)
Three Months Three Months Ended Ended September 30, September 30, 1997 1996 ------------- ------------- INCOME Rent $563,403 $580,574 Other 9,303 8,735 Interest and dividends 12,919 15,132 Gain on sale of property and equipment 159,096 29,001 -------- -------- 744,721 633,442 -------- -------- EXPENSES Interest 77,484 78,223 Maintenance, repairs and supplies 56,482 56,672 Salaries - including $4,124 and $4,253 paid to related party in 1997 and 1996, respectively - Note 3 52,426 49,410 Utilities 47,282 43,797 Professional fees and services - including $14,923 and $16,406 paid to related party in 1997 and 1996, respectively - Note 3 20,943 33,080 Real estate taxes 38,832 39,055 Depreciation and amortization 1,672 153,387 Other 10,401 25,009 Insurance 14,761 15,818 Payroll taxes and employee benefits 8,920 10,192 -------- -------- 329,203 504,643 -------- -------- NET INCOME $415,518 $128,799 ======== ======== NET INCOME GENERAL PARTNERS $ 4,155 $ 1,288 ======== ======== LIMITED PARTNERS $411,363 $127,511 ======== ======== INCOME PER 1% GENERAL PARTNER INTEREST - Note 4 $ 41.55 $ 12.88 ======== ======== INCOME PER LIMITED PARTNERSHIP UNIT - Note 4 $ 18.11 $ 5.61 ======== ========
See accompanying notes to financial statements. 6 (A Limited Partnership) Statements of Changes in Partners' Capital (Deficit) (Unaudited) For the Nine Months Ended September 30, 1997 and For the Year Ended December 31, 1996
General Limited Total Partners Partners ----------- ------------ ----------- BALANCE - January 1, 1996 $4,070,413 $(1,652,362) $5,722,775 DISTRIBUTIONS TO PARTNERS (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 (562,500) - (562,500) NET INCOME - for the nine months ended September 30, 1997 900,911 9,009 891,902 ---------- ----------- ---------- BALANCE - September 30, 1997 $3,924,643 $(1,639,555) $5,564,198 ========== =========== ==========
See accompanying notes to financial statements. 7 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Statements of Cash Flows (Unaudited)
Nine Months Nine Months Ended Ended September 30, September 30, 1997 1996 -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Gross rents received from real estate operations $1,694,912 $1,679,250 Cash paid to suppliers and employees - including $76,804 and $65,194 paid to related party in 1997 and 1996, respectively (796,394) (807,505) Interest paid (231,402) (238,503) Interest and other income received 139,720 81,671 ---------- ----------- Net cash provided by operating activities 806,836 714,913 ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (114,580) (210,493) Payments received on notes receivable 55,860 134,928 Sale of property and equipment 100,000 - Sales and closing costs (29,761) - --------- ----------- Net cash provided by (used in) investing activities 11,519 (75,565) --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Distributions to partners (562,500) (525,000) Principal payments on secured notes payable (38,987) (28,058) --------- ----------- Net cash used in financing activities (601,487) (553,058) --------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 216,868 86,290 CASH AND CASH EQUIVALENTS: BALANCE AT BEGINNING OF PERIOD 631,598 671,430 ---------- ----------- BALANCE AT END OF PERIOD $ 848,466 $ 757,720 ========== ===========
See accompanying notes to financial statements. 8 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Statements of Cash Flows (Continued) (Unaudited)
Nine Months Nine Months Ended Ended September 30, September 30, 1997 1996 -------------- ------------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income $ 900,911 $ 239,385 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 106,989 460,160 Gain on sale of property and equipment (236,094) (29,001) Changes in operating assets and liabilities Decrease in accounts receivable 3,337 247 Increase in prepaid expenses (13,134) (11,260) Decrease in other assets - 716 Increase in accounts payable and accrued expenses 50,449 59,011 Decrease in deposits and advance rentals (5,622) (4,345) -------- --------- Net cash provided by operating activities $806,836 $714,913 ======== ==========
See accompanying notes to financial statements. 9 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Unaudited) September 30, 1997 and December 31, 1996 and For the Nine and Three Months Ended September 30, 1997 and 1996 NOTE 1 - BASIS OF PRESENTATION The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) have been included. Operating results during the nine and three months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the year ended December 31, 1996. Cash and Cash Equivalents ------------------------- The Partnership invests its cash not needed for working capital in highly liquid short-term investments consisting primarily of money market funds and certificates of deposit, with original maturities ranging generally from one to three months. The Partnership considers all such items to be cash equivalents. Depreciation ------------ Pursuant to generally accepted accounting principles the Partnership ceased to depreciate Warner Oaks Apartments ("Warner Oaks") from the time it determined to sell the property (see Note 5). NOTE 2 - SECURED NOTE PAYABLE Secured note payable at September 30, 1997 and December 31, 1996 consisted of:
September 30, December 31, 1997 1996 ------------ ------------ Note collateralized by a first trust deed, payable in monthly installments of $29,997, including interest until December 15, 1997. Thereafter, the monthly payment changes annually on each December 15th. Interest accrues at 2.5% over the FHLB's 11th District Cost of Funds Index, not to exceed 12.9%, adjusted monthly. Unpaid principal and accrued interest are due November 15, 2008. The interest rate in effect at September 30, 1997 and December 31, 1996 was 7.39% and 7.34%, respectively. $4,183,333 $4,222,320 ========== ==========
10 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1997 and December 31, 1996 and For the Nine and Three Months Ended September 30, 1997 and 1996 NOTE 3 - 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 (OGP), 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 September 30, 1997 and December 31, 1996, cumulative accrued fees of $565,022 to De Anza Assets, Inc. have been subordinated and are included in management and condominium conversion fees payable to affiliate or related party, as reflected in the balance sheets. Shortly before its sale to an affiliate of Manufactured Home Communities, Inc. (MHC), as discussed in Note 5, De Anza Assets, Inc. assigned its rights to receipt of these fees to the Gelfand Family Trust. On August 18, 1994, subsequent to the sale of the Mark and the property management business of De Anza Group, Inc. (DAG), as discussed in Note 5, the property management of Warner Oaks and the two remaining spaces at San Luis Bay was assumed by Terra Vista Management, Inc. (Terra Vista). Terra Vista is wholly owned by Michael D. Gelfand, president of the OGP and the son of Herbert M. Gelfand. Herbert M. Gelfand, together with Beverly Gelfand, is the sole shareholder of the OGP and an individual general partner. Management fees of $86,074 and $85,614 were deferred, but not accrued for the nine months ended September 30, 1997 and 1996, respectively. Of the $86,074, $28,578 is attributable to the three months ended September 30, 1997 (compared to $29,453 deferred, but not accrued for the three months ended September 30, 1996). The Partnership has determined, that based on the anticipated net proceeds from the disposition or refinancing of the property and their allocation under the terms of the Partnership Agreement, that it is not probable any deferred management fees would be paid. However, in the event there were sufficient proceeds, the deferred management fees would be paid at that time. At September 30, 1997 and December 31, 1996, cumulative accrued fees to Terra Vista of $153,500, have been subordinated and are included in management and condominium conversion fees payable to affiliate or related party. The Gelfand Family Trust has agreed to share equally any payment which is made to the Gelfand Family Trust for deferred management fees with Terra Vista until Terra Vista has been paid all outstanding deferred management fees due Terra Vista. Pursuant to the partnership agreement, a condominium conversion fee equal to 1% of the sales price of the San Luis Bay homesites sold is due to an 11 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1997 and December 31, 1996 and For the Nine and Three Months Ended September 30, 1997 and 1996 NOTE 3 - TRANSACTIONS WITH RELATED PARTIES (Continued) affiliate of the OGP (see Note 5). Payment of this fee has been deferred pursuant to the partnership agreement's 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 have been included in management and condominium conversion fees payable to an affiliate or related party at September 30, 1997 and December 31, 1996. Shortly before the sale to MHC, De Anza Assets, Inc. assigned its rights to receive these fees to the Gelfand Family Trust. In addition, Terra Vista was paid $76,804 and $65,194 during the nine months ended September 30, 1997 and 1996, respectively, for performing bookkeeping, legal, regional management, computer, disposition and investor relations services necessary for the operation of the Partnership and its properties. Of the $76,804, $37,814 is attributable to the three months ended September 30, 1997 (compared to $21,679 paid for the three months ended September 30, 1996). NOTE 4 - INCOME PER 1% GENERAL PARTNER INTEREST AND LIMITED PARTNERSHIP UNIT Income per limited partnership unit is computed based on the limited partners' share of net income as shown on the Statements of Income and Changes in Partners' Capital (Deficit) and the number of limited partnership units outstanding (22,719 units). The general partners' share of net income has not been included in this computation. Income per 1% general partner interest is computed based on the general partners' share of net income as shown on the Statements of Operations and Changes in Partners' Capital (Deficit). NOTE 5 - 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 payments, including interest at 10%, based on a loan amortization schedule of 30 years, with a balloon payment of unpaid principal and interest due at the end of seven years. At September 30, 1997 and December 31, 1996, respectively, the outstanding amounts due under such notes totaled $246,098 and $301,958. Those residents who purchased their homesites for cash received a 10% discount off their purchase price. 12 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1997 and December 31, 1996 and For the Nine and Three Months Ended September 30, 1997 and 1996 NOTE 5 - SALE OF PROPERTY AND EQUIPMENT (Continued) San Luis Bay (continued) ------------------------ The Partnership sold 160 homesites prior to 1995. On May 1, 1997, the Partnership sold one of the two remaining spaces at San Luis Bay for $100,000. Net proceeds, after commission and sale and closing costs of $7,112, was $92,888. The sole remaining homesite is leased to a resident. The Mark -------- On August 18, 1994 the Partnership sold The Mark to an affiliate of MHC, a real estate investment trust, as part of an overall transaction for the sale of the related management business of DAG and other mobile home communities affiliated with DAG. In connection with the sale, the Partnership established various reserves totaling $230,097. 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 MHC. It was released in 1995, at which time the gain on sale was recognized. The General Reserve and Independent Committee Reserve were established to fund contingent liabilities that may arise out of the MHC transaction. In August 1996, $29,001 of the Independent Committee Reserve was released and the gain on sale recognized and included in net income. In August 1997, the remaining balance of the Independent Committee Reserve, $29,002, and the General Reserve of $130,094, were released and the gain on sale recognized and included in net income. 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. As these reserves are released or expended, gain on sale is recognized. At December 31, 1996, $159,096 of sale proceeds have been deferred and are included in deferred gain on sale, as reflected in the balance sheets while at September 30, 1997, all reserves were released with no deferred gain on sale reflected in the balance sheets. 13 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1997 and December 31, 1996 and For the Nine and Three Months Ended September 30, 1997 and 1996 NOTE 6 - SUBSEQUENT EVENT - POTENTIAL SALE OF WARNER OAKS APARTMENTS In March 1997, the Partnership listed Warner Oaks Apartments, located in Los Angeles, its remaining property, for sale. In October 1997, the Partnership entered into a contingent contract to sell the property to Bay Apartment Communities, Inc., an unaffiliated entity, for $20 million dollars, all cash. The currently scheduled closing date is in January 1998, however there can be no assurance that a sale will be consummated, or if consummated that it will occur at that time or for that amount. Upon such a sale it is anticipated that the Partnership would be dissolved and terminated. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity - --------- The Partnership's quick ratios were 3.6:1 and 2.4:1, including unrestricted cash balances of $848,466 and $472,502 at September 30, 1997 and December 31, 1996, respectively. The increase in cash is mainly due to notes receivable prepayments, the sale of a space at San Luis Bay and the release of restricted cash reserves. 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 the nine months ended September 30, 1997 were approximately $807,000. Should it become necessary to improve liquidity, the Partnership can reduce partner distributions, which totaled $562,500 during the nine months ended September 30, 1997, arrange a short-term line of credit or refinance Warner Oaks. Subsequent to the sale of The Mark, the Partnership continues to operate Warner Oaks, the remaining property. In October 1997, the Partnership entered into a contingent contract to sell Warner Oaks and anticipates that a closing would occur in January 1998; however, there can be no assurances that a sale will occur. The Partnership also owns one space at San Luis Bay Mobile Estates and various notes receivables related to the 1991 San Luis Bay sale (see Note 5 to the Financial Statements). Upon sale of Warner Oaks, the Partnership expects to pursue the sale of its remaining space at San Luis Bay and collection of its notes receivable in order to liquidate and dissolve the Partnership in 1998. In November 1993, the Partnership refinanced Warner Oaks with a variable interest rate loan. The interest rate for the initial three months was 6.25%, thereafter the loan bears interest at 250 basis points over the Eleventh District Cost of Funds with caps on the maximum annual payment change of 7.5% of the current payment, and an interest rate cap of 12.9% over the life of the loan. This loan is subject to negative amortization. Future liquidity will be affected, unfavorably or favorably, to the extent the payment rate fluctuates. At September 30, 1997, the interest rate in effect was 7.39%. The Partnership has sold 161 of 162 spaces at San Luis Bay as of September 30, 1997 (see Note 5 to the Financial Statements). Liquidity is expected to improve as the notes receivable from the buyers of San Luis Bay spaces mature, as discussed in Note 5 to the Financial Statements. As of September 30, 1997, the amount of the notes receivable outstanding was approximately $246,000. Liquidity also improves when the notes receivable are prepaid and if the remaining space is sold. 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. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Capital Resources - ----------------- The Partnership anticipates spending approximately $139,000 in 1997 for physical improvements at Warner Oaks, approximately $24,000 of which will be spent during the remainder of 1997. The Partnership is continuously reviewing the necessity for such expenditures in light of the expected sale of Warner Oaks. Funds for these improvements will be provided by cash generated from operations. As described above the Partnership may sell Warner Oaks in January 1998. No assurances can be made that such a sale will occur. However, if it does the Partnership would endeavor to dispose of its remaining space at San Luis Bay and collect its notes receivable in order to liquidate as soon as practical. Other than as described above, there are no known material trends, favorable or unfavorable, in the Partnership's capital resources. The Partnership does not contemplate any other material changes in the mix of its capital resources, other than as described above. Results of Operations - --------------------- Rental income increased 0.8% and decreased 3.0% during the nine and three months ended September 30, 1997, respectively, over the same periods in 1996, primarily due to fluctuating occupancy. Other income increased in 1997 due to receipt of a legal settlement of litigation regarding a matter at The Mark that occurred prior to the sale of that property in 1994. Gain on sale income increased in 1997 due to sale of a space at San Luis Bay and recognition of deferred income attributable to the 1994 sale of The Mark property. Expenses decreased 24.6% and 34.8% during the nine and three months ended September 30, 1997, respectively, over the same periods in 1996. The decrease is almost entirely due to lower depreciation and amortization expense in 1997 because, according to generally accepted accounting principles, from the time the Partnership determined to sell Warner Oaks it ceased to depreciate the carrying value of the assets. Additionally, interest expense decreased in 1997 due to declining principal balances. Other expense decreased in 1997 due to responses to 1996 offers for the Partnership's Units not being repeated in 1997. Other than as described above, there are no known trends or uncertainties which have had or can be reasonably expected to have a material effect on continuing operations. 16 PART II. OTHER INFORMATION ITEM NUMBER - ----------- 1. LEGAL PROCEEDINGS No new material legal proceedings were commenced during the three months ended September 30, 1997 and there are none pending. 2. CHANGES IN SECURITIES None. 3. DEFAULTS UPON SENIOR SECURITIES None. 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 5. OTHER INFORMATION The Partnership has entered into a contingent contract to sell its last remaining property, Warner Oaks Apartments, for $20 million, all cash, to Bay Apartment Communities, Inc., an unaffiliated entity. The sale is scheduled to occur in January 1998. There is no assurance that the property will be sold. If sold, the Partnership will be dissolved and liquidated, including disposing of the remaining space at San Luis Bay and collection of the notes receivable. It is expected that the sale of Warner Oaks will result in a taxable gain. 6. EXHIBITS AND REPORTS ON FORM 8-K None. 17 PART II. OTHER INFORMATION (Continued) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DE ANZA PROPERTIES - XII, LTD. (Registrant) By DE ANZA CORPORATION A California Corporation Operating General Partner Date: November 12, 1997 By /s/ Michael D. Gelfand ---------------------- Michael D. Gelfand President and Chief Financial Officer 18 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 848,466 0 4,586 0 0 905,731 15,111,963 7,270,584 9,091,026 238,719 4,131,333 0 0 0 3,924,643 9,091,026 1,697,962 2,073,413 0 834,538 106,989 0 230,975 900,911 0 900,911 0 0 0 900,911 39.26 39.26 ESP is per limited partnership unit
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