-----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, IUC0BV6khVSecg1xFvo/RrGNEEFD83c2j2T+/1u5+6Ek49lI4nSUrx3rpXSwjY1q LzjlXWhTx6D9/IGx4y1iGA== 0000950150-95-000684.txt : 19951119 0000950150-95-000684.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950150-95-000684 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 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: 1934 Act SEC FILE NUMBER: 000-10430 FILM NUMBER: 95589965 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 1 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, 1995 [ ] 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 incorporation or organization) Identification 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 28. An Exhibit Index is located on page 18 herein. 2 TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Balance Sheets 3 Statements of Operations 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 18
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Balance Sheets (Unaudited)
September 30, December 31, 1995 1994 ------------ ------------ ASSETS CASH - including restricted cash of $188,097 and $230,097 at September 30, 1995 and December 31, 1994, respectively - Note 1 $ 725,589 $ 912,914 ACCOUNTS RECEIVABLE 9,320 254,057 PREPAID EXPENSES 59,284 45,605 ----------- ----------- 794,193 1,212,576 ----------- ----------- NOTES RECEIVABLE - Note 5 481,086 488,026 ----------- ----------- PROPERTY AND EQUIPMENT - Notes 2, 5 and 6 Land 1,184,605 1,184,605 Land improvements 3,212,279 2,901,226 Buildings and improvements 9,933,168 9,933,168 Furniture and equipment 435,807 426,637 ----------- ----------- 14,765,859 14,445,636 Less accumulated depreciation 6,338,426 5,900,220 ----------- ----------- 8,427,433 8,545,416 ----------- ----------- OTHER ASSETS Loan costs - less accumulated amortization of $11,897 and $7,030 at September 30, 1995 and December 31, 1994, respectively 85,437 90,304 Other 5,341 5,341 ----------- ----------- 90,778 95,645 ----------- ----------- $ 9,793,490 $10,341,663 =========== ===========
See accompanying notes to financial statements. 3 4 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Balance Sheets (Continued) (Unaudited)
September 30, December 31, 1995 1994 ------------ ------------ LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ACCOUNTS PAYABLE AND ACCRUED EXPENSES (including $15,066 and $27,938 due to related parties at September 30, 1995 and December 31, 1994, respectively) $ 232,919 $ 439,431 DEPOSITS AND ADVANCE RENTALS 57,841 70,066 DEFERRED GAIN ON SALE - Note 6 188,097 230,097 MANAGEMENT AND CONDOMINIUM CONVERSION FEES PAYABLE TO AFFILIATE - Note 3 767,358 682,583 SECURED NOTES PAYABLE - Note 2 4,265,117 4,278,706 ----------- ----------- 5,511,332 5,700,883 ----------- ----------- PARTNERS' CAPITAL (DEFICIT) General partners (1,652,414) (1,654,328) Limited partners, 22,719 units issued and outstanding 5,934,572 6,295,108 ----------- ----------- 4,282,158 4,640,780 ----------- ----------- $ 9,793,490 $10,341,663 =========== ===========
See accompanying notes to financial statements. 4 5 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Statements of Operations (Unaudited)
Nine Months Nine Months Ended Ended September 30, September 30, 1995 1994 ------------ ------------ INCOME Rent $1,671,845 $2,218,871 Interest 47,423 57,205 Utilities - 45,833 Other 24,730 34,740 Gain on sale of property and equipment - Notes 5 and 6 42,000 163,055 Less deferred gain on sale of property and equipment - Note 6 - (230,097) ---------- ---------- 1,785,998 2,289,607 ---------- ---------- EXPENSES Depreciation and amortization 443,073 630,872 Interest 236,497 342,778 Maintenance, repairs and supplies 190,323 219,293 Salaries (including $15,820 and $24,326 paid to related parties in 1995 and 1994, respectively) - Note 3 149,398 334,963 Utilities 137,390 232,561 Professional fees and services (including $54,698 and $68,340 paid to related parties in 1995 and 1994, respectively) - Note 3 109,870 225,837 Real estate taxes 96,622 157,306 Management fees accrued to related parties - Note 3 84,775 90,342 Other 68,916 189,851 Insurance 51,066 42,408 Payroll taxes and employee benefits 26,690 64,576 Uninsured loss from earthquake damage - Note 7 - 156,496 ---------- ---------- 1,594,620 2,687,283 ---------- ---------- NET INCOME (LOSS) 191,378 $ (397,676) ========== ========== NET INCOME (LOSS) GENERAL PARTNERS $1,914 $ (59,651) ====== ========== LIMITED PARTNERS $189,464 $ (338,025) ======== ========== INCOME (LOSS) PER 1% GENERAL PARTNER INTEREST - Note 4 $19.14 $ (596.51) ====== ========== INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT - Note 4 $8.34 $(14.88) ===== =======
See accompanying notes to financial statements. 5 6 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Statements of Operations (Unaudited)
Three Months Three Months Ended Ended September 30, September 30, 1995 1994 ------------ ------------ INCOME Rent $561,844 $ 743,538 Interest 16,809 21,456 Utilities - 19,406 Other 15,638 9,031 Gain on sale of property and equipment - Notes 5 and 6 - 94,344 Less deferred gain on sale of property and equipment - Note 6 - (230,097) -------- --------- 594,291 657,678 -------- --------- EXPENSES Depreciation and amortization 147,691 225,866 Interest 82,797 99,789 Maintenance, repairs and supplies 68,567 79,470 Salaries (including $5,384 and $9,192 paid to related parties in 1995 and 1994, respectively) - Note 3 52,288 117,635 Utilities 47,395 71,561 Professional fees and services (including $16,421 and $29,095 paid to related parties in 1995 and 1994, respectively) - Note 3 25,167 110,784 Real estate taxes 38,874 44,303 Management fees accrued to related parties - Note 3 28,389 22,206 Other 32,921 30,948 Insurance 16,953 15,163 Payroll taxes and employee benefits 8,833 18,555 Uninsured loss from earthquake damage - Note 7 - - -------- ---------- 549,875 836,280 -------- --------- NET INCOME (LOSS) $ 44,416 $(178,602) ======== ========= NET INCOME (LOSS) GENERAL PARTNERS $ 444 $(26,790) ====== ======== LIMITED PARTNERS $43,972 $(151,812) ======= ========= INCOME (LOSS) PER 1% GENERAL PARTNER INTEREST - Note 4 $4.44 $(267.90) ====== ======== INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT - Note 4 $1.94 $(6.68) ===== ======
See accompanying notes to financial statements. 6 7 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Statements of Changes in Partners' Capital (Deficit) (Unaudited) For the Nine Months Ended September 30, 1995 and For the Year Ended December 31, 1994
General Limited Total Partners Partners ---------- ------------ ------------ BALANCE - January 1, 1994 $ 6,618,974 $(1,580,649) $ 8,199,623 DISTRIBUTIONS TO PARTNERS (1,487,000) - (1,487,000) NET LOSS - for the year ended December 31, 1994 - Note 4 (491,194) (73,679) (417,515) ----------- ----------- ----------- BALANCE - December 31, 1994 4,640,780 (1,654,328) 6,295,108 DISTRIBUTIONS TO PARTNERS (550,000) - (550,000) NET INCOME - for the nine months ended September 30, 1995 - Note 4 191,378 1,914 189,464 ----------- ----------- ----------- BALANCE - September 30, 1995 $ 4,282,158 $(1,652,414) $ 5,934,572 =========== =========== ===========
See accompanying notes to financial statements. 7 8 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Statements of Cash Flows (Unaudited)
Nine Months Nine Months Ended Ended September 30, September 30, 1995 1994 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Gross rents received from real estate operations $1,930,645 $2,333,265 Cash paid to suppliers and employees (including $75,665 and $92,666 paid to related parties in 1995 and 1994, respectively) (1,048,306) (1,482,551) Interest paid (235,082) (322,975) Interest income received 45,865 59,846 --------- ---------- Net cash provided by operating activities 693,122 587,585 --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (320,223) (201,109) Payments received on notes receivable 6,940 99,735 Sales and closing costs (3,575) (184,468) Proceeds from sale of property and equipment - 5,665,451 --------- ---------- Net cash provided by (used in) investing activities (316,858) 5,379,609 --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Distributions to partners (550,000) (1,187,000) Principal payments on secured notes payable (13,589) (4,069,227) --------- ---------- Net cash used in financing activities (563,589) (5,256,227) --------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (187,325) 710,967 CASH AND CASH EQUIVALENTS: BALANCE AT BEGINNING OF PERIOD 912,914 1,044,715 --------- ---------- BALANCE AT END OF PERIOD $ 725,589 $1,755,682 ========= ==========
See accompanying notes to financial statements. 8 9 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Statements of Cash Flows (Continued) (Unaudited)
Nine Months Nine Months Ended Ended September 30, September 30, 1995 1994 ------------ ------------ RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income (loss) $ 191,378 $(397,676) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization 443,073 630,872 Gain on sale of property and equipment (42,000) 67,042 Changes in operating assets and liabilities (Increase)/decrease in accounts receivable 244,737 (177,960) Increase in prepaid expenses (13,679) (27,251) Decrease in mobile homes held for resale - 80,271 Increase (decrease) in accounts payable and accrued expenses (202,937) 330,673 Decrease in deposits and advance rentals (12,225) (8,721) Increase in management and condominium conversion fees payable to affiliate 84,775 90,335 --------- ---------- Net cash provided by operating activities $ 693,122 $ 587,585 ========= ==========
SUPPLEMENTAL DISCLOSURE During the nine months ended September 30, 1994, the lender deferred two months of note payments on the Warner Oaks note. The accrued and unpaid interest of $40,236 was added to the principal balance (see Notes 2 and 7). During the nine months ended September 30, 1995, the MHC cash reserve of $42,000 was released from restricted cash and the Partnership recognized a gain on that portion of the 1994 sale proceeds. See accompanying notes to financial statements. 9 10 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Unaudited) September 30, 1995 and December 31, 1994 and For the Nine and Three Months Ended September 30, 1995 and 1994 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, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. 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, 1994. Cash and Cash Equivalents The Partnership invests its cash not needed for working capital in highly liquid short-term investments primarily consisting 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. NOTE 2 - SECURED NOTES PAYABLE Secured notes payable at September 30, 1995 and December 31, 1994 consisted of:
September 30, December 31, 1995 1994 ------------ ------------ Note collateralized by a first trust deed, payable in monthly installments of $26,476, including interest until December 15, 1994. Thereafter, the monthly payment changes annually on each December 15th. Interest accrued at 6.25% until February 15, 1994 and thereafter floats at 2.5% over the FHLB's 11th District Cost of Funds index, not to exceed 12.9%, adjusted monthly. Unpaid principal and interest are due November 15, 2008. The interest rate in effect at September 30, 1995 and December 31, 1994 was 7.644% and 6.69%, respectively. $4,265,117 $4,278,706 ========== ==========
10 11 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1995 and December 31, 1994 and For the Nine and Three Months Ended September 30, 1995 and 1994 NOTE 2 - SECURED NOTES PAYABLE (Continued) Due to the Northridge earthquake on January 17, 1994, the lender for the Warner Oaks note agreed to a deferment of two months of note payments. The accrued and unpaid interest of $40,236 was added to the principal balance (see Note 7). NOTE 3 - TRANSACTIONS WITH RELATED PARTIES Pursuant to a management agreement dated October 1, 1985, as amended, De Anza Assets, Inc., a former affiliate of the operating general partner (OGP), has accrued 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 prior 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, 1995 and December 31, 1994, cumulative accrued fees of $689,549 and $604,774, respectively, have been subordinated and are included in management and condominium conversion fees payable to affiliate as reflected in the balance sheets. 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 6, the property management of Warner Oaks and the two remaining spaces at San Luis Bay was assumed by Terra Vista Management, Inc. (Terra Vista) by assignment of the management agreement from De Anza Assets, Inc. and was subsequently replaced with an agreement directly between the Partnership and 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 $83,342 and $8,206 were accrued during the nine and three months ended September 30, 1994, respectively, to De Anza Assets, Inc. Management fees of $84,775 and $28,389 were accrued to Terra Vista during the nine and three months ended September 30, 1995, respectively, and $7,000 was accrued for the period August 18, 1994 through September 30, 1994. All are subordinated as described above. As of the sale to MHC, De Anza Assets, Inc. had acrued deferred management fees in the amount of $565,022. The right to receive those deferred management fees has been assigned to the Gelfand Family Trust. The Gelfand 11 12 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1995 and December 31, 1994 and For the Nine and Three Months Ended September 30, 1995 and 1994 NOTE 3 - TRANSACTIONS WITH RELATED PARTIES (Continued) Family Trust has agreed with Terra Vista that in the event any amounts are payable for deferred management fees, one-half (50%) of such amounts shall be paid to Terra Vista until Terra Vista has been paid in full for any and all deferred management fees due Terra Vista. All other amounts paid by the Partnership for deferred management fees shall be paid to the Gelfand Family Trust. The Partnership has been instructed accordingly and has consented to such instruction. 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 affiliate of the OGP (see Note 5). Payment of this fee has been deferred according to the Partnership Agreement's requirement regarding subordination to payment of the limited partners' priority return, the general partners' incentive interest and deferred management fees. At September 30, 1995 and December 31, 1994, cumulative accrued conversion fees of $77,809 have been subordinated and included in management and condominium conversion fees payable to affiliate. 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, the OGP or an affiliate of the OGP was paid $75,665 and $24,813 during the nine and three months ended September 30, 1995, respectively, for performing bookkeeping, regional management, computer, legal and public relations services necessary for the operation of the Partnership and its properties. DAG or a wholly owned subsidiary was paid $86,851 and $34,154 during the nine and three months ended September 30, 1994, respectively, and Terra Vista or an affiliate of the OGP was paid $5,318 for the period August 18, 1994 through September 30, 1994, for performing these services. NOTE 4 - INCOME (LOSS) PER 1% GENERAL PARTNER INTEREST AND LIMITED PARTNERSHIP UNIT Income (loss) per limited partnership unit is computed based on the limited partners' share of net income (loss) as shown on the Statements of Operations and Changes in Partners' Capital (Deficit) and the number of limited partnership units outstanding (22,719 units). The general partners' share of net income (loss) has not been included in this computation. Income (loss) per 1% general partner interest is computed based on the general partners' share of net income (loss) as shown on the Statements of Operations and Changes in Partners' Capital (Deficit). NOTE 5 - SALE OF SAN LUIS BAY MOBILE ESTATES 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 12 13 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1995 and December 31, 1994 and For the Nine and Three Months Ended September 30, 1995 and 1994 NOTE 5 - SALE OF SAN LUIS BAY MOBILE ESTATES (Continued) 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. Those residents who purchased their homesites for cash received a 10% discount off their purchase price. The Partnership sold 158 homesites prior to 1994. In 1994, two homesites were sold for $104,990 in cash. The remaining two homesites are leased to tenants. The Partnership released reserves from the San Luis Bay sale and distributed $70,540 and $300,000 to the limited partners on September 16, 1994, and on December 30, 1994, respectively. These distributions represent a return of original capital. NOTE 6 - SALE OF THE MARK On August 18, 1994 the Partnership sold The Mark to MHC Operating Limited Partnership, an affiliate of Manufactured Home Communities, Inc. (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. The sales price for The Mark was $5,404,419. Additional proceeds of $130,094, which were included in the sales price for calculating the gain on sale of property and equipment, were received from MHC to fund a General Reserve. Excess proceeds of $1,116,460 were distributed to the partners as a return of original capital on September 16, 1994, after repayment of debt of $3,977,437, sales and closing costs of $210,519, and establishment of 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 and released in May 1995. The General Reserve and Independent Committee Reserve were established to fund contingent liabilities that may arise out of the MHC transaction. Pursuant to the guidelines of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate," the Partnership continues to defer the recognition of gain on that portion of the sales proceeds, represented by the 13 14 DE ANZA PROPERTIES - XII, LTD. (A Limited Partnership) Notes to Financial Statements (Continued) (Unaudited) September 30, 1995 and December 31, 1994 and For the Nine and Three Months Ended September 30, 1995 and 1994 NOTE 6 - SALE OF THE MARK (Continued) General Reserve and Independent Committee Reserve, totaling $188,097. As mentioned above, the MHC Reserve has been released and accordingly, gain on sale has been recognized and is included in net income for the nine months ended September 30, 1995. The Partnership has been charged with certain costs for the transaction, some of which were based upon an allocation of costs from the overall transaction with MHC. Such transaction costs were capitalized to the property and deducted in the determination of net gain on the sale of the Partnership's property. Transaction and closing costs charged to the Partnership totaled $210,519. NOTE 7 - LOSS ON EARTHQUAKE DAMAGE On January 17, 1994, the Warner Oaks Apartment complex suffered property damage from an earthquake. The Partnership estimates total costs of approximately $1,989,000 and has received insurance proceeds of $1,414,000. As of September 30, 1995, approximately 96% of the repairs have been completed. A portion of the costs has been capitalized and the balance of $156,496, representing noncapitalized costs, net of insurance proceeds, was expensed in 1994. Additional insurance proceeds of approximately $308,000 received for loss of income were included in rental income in 1994. 14 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity The Partnership's quick ratios were 1.8:1 and 1.7:1, including unrestricted cash balances of $537,492 and $682,817 at September 30, 1995 and December 31, 1994, respectively. The increase in the quick ratio is due mainly to the receipt of insurance proceeds receivable and corresponding paydown of accounts payable and accrued expenses relating to the earthquake repairs at Warner Oaks. 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, 1995 were approximately $693,000. Cash flow from operations has improved substantially following the sale of The Mark. See Note 6 to the Financial Statements. The Partnership has reinstated regular operating distributions to its partners though payment of the management fees continues to be deferred in accordance with the Partnership Agreement. Subsequent to the sale of The Mark, the Partnership continues to operate Warner Oaks, the remaining property, which is managed by Terra Vista. The Partnership also owns two spaces at San Luis Bay Mobile Estates and various notes receivables related to that sale (see Note 5 to the Financial Statements). As a result of the sale of The Mark, the Partnership's liquidity has improved. The Mark's income fell short of its expenses, thus with the property sold, the Partnership's income has improved which has improved liquidity. However, should it become necessary to improve liquidity further, the Partnership can reduce partner distributions, which totaled $550,000 during the nine months ended June 30, 1995, arrange a short-term line of credit or refinance Warner Oaks. 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 will bear 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, 1995, the interest rate in effect was 7.644%. Warner Oaks incurred moderate damage from the January 17, 1994 earthquake, which epicenter was approximately ten miles from the property. The cost to repair the property was approximately $1.99 million. The property was covered by insurance, including business interruption insurance, with a deductible of 5% of the building value on a per-building basis. The unreimbursed loss is estimated to be approximately $575,000 and is reflected in the Financial Statements. The Partnership funded the unreimbursed loss out of reserves. The Partnership has sold 160 of 162 spaces at San Luis Bay as of September 30, 1995 (see Note 5). Liquidity is expected to improve as the notes receivable from the buyers of San Luis Bay spaces mature, as discussed in Note 5. As of September 30, 1995, the amount of the notes receivable outstanding was approximately $481,000. Liquidity also improves when the notes receivable are prepaid and when additional spaces are sold. 15 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Liquidity (Continued) 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. Capital Resources The Partnership anticipates spending approximately $492,000 in 1995 for physical improvements at its properties, approximately $172,000 of which will be spent during the remainder of 1995. Funds for these improvements will be provided by cash generated from operations. If necessary, the Partnership can use funds from reserves from the sale proceeds of San Luis Bay, and from cash reserved for capital improvement projects. As a result of the sale of The Mark discussed in Note 6 and the distribution subsequent to the sale of The Mark, the Partnership's capital resources were reduced. 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 Since The Mark was sold on August 18, 1994, a comparison of operations for 1995 and 1994 would not be meaningful. However, excluding the operations of The Mark, a comparison can be made. Rental income, excluding The Mark, decreased 2.6% and 26.8% during the nine and three months ended September 30, 1995, over the same periods in 1994, primarily resulting from the recognition of insured lost rental income relating to the 1994 earthquake which recognition occurred in the third quarter of 1994. Interest income decreased in 1995 due to reduced cash balances with the payment of unreimbursed earthquake repairs in 1994. Additionally, gains on the sale of two spaces at San Luis Bay in 1994 were not repeated in 1995. Expenses, excluding The Mark, decreased 1.3% and increased 6.0% during the nine and three months ended September 30, 1995 over the same periods in 1994. The decrease is mostly due to the 1994 provision to write off the noncapitalized, unreimbursed cost relating to the earthquake damage at Warner Oaks. Additionally, salaries and payroll and related expenses decreased due to higher costs at Warner Oaks in 1994 attributable to earthquake damage repairs. Real estate taxes decreased due to a refund and reassessment of Warner Oaks due to earthquake damage. Offsetting these decreases was an increase in interest expense due to rising interest rates on the 16 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Results of Operations (Continued) Warner Oaks variable rate loan, as discussed more fully in Note 2 and Liquidity. Maintenance, repairs and supplies increased because some ongoing maintenance was unnecessary in 1994 while earthquake repairs were underway. Insurance premiums at Warner Oaks increased because of the earthquake. Management fees increased in 1995 because vacancies were high in 1994 due to the earthquake and the Partnership did not accrue management fees on the insurance reimbursement for lost rent. Other expenses increased due to preparing a new Warner Oaks brochure to further marketing efforts and emphasize the upgrades and repairs done since the 1994 earthquake. The damage resulting from the January 17, 1994 earthquake has almost completely been repaired and occupancy has increased substantially. Management anticipates stable occupancy at the recently established higher levels at Warner Oaks for the foreseeable future. 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. 17 18 PART II. OTHER INFORMATION ITEM NUMBER ----------- 1. LEGAL PROCEEDINGS No new material legal proceedings were commenced during the three months ended September 30, 1995 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 None. 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit Index
Exhibit Number Page -------------- ---- 10.1 Warner Oaks/Terra Vista Management Agreement dated August 18, 1994............20
(b) Reports on Form 8-K None. 18 19 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 13, 1995 By /s/ Michael D. Gelfand --------------------------- Michael D. Gelfand President and Chief Financial Officer 19 EX-10.1 2 MANAGEMENT AGREEMENT 1 WARNER OAKS/TERRA VISTA MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT (the "Agreement") is made as of the 18th day of August, 1994, by and between Terra Vista Management, Inc., a California corporation, (the "Manager"), and De Anza Properties - XII, Ltd., a California limited partnership, (the "Owner"), in Los Angeles, California, with reference to the following facts: A. Owner has acquired certain improved real property located in Woodland Hills, California, which is commonly known as Warner Oaks Apartments (hereinafter referred to as the "Property"). B. De Anza Assets, Inc., a California corporation, is the existing manager of the Property pursuant to a Management Agreement dated October 1, 1985, which was amended as of June 14, 1990, to reflect an amendment to Owner's partnership agreement. De Anza Assets, Inc. is wholly owned by De Anza Group, Inc., which is being sold. Accordingly, De Anza Assets has withdrawn as manager, which withdrawal has been accepted by Owner, and De Anza Assets has been replaced by Terra Vista Management, Inc. The parties desire to enter into this Management Agreement to reflect their obligations with respect to the ownership and operation of the Property. C. Owner desires that Manager maintain and operate the Property on its behalf, and Manager desires to undertake said functions. -1- 2 NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements set forth herein, the parties agree as follows: 1. Engagement. Owner hereby engages Manager as general manager of the Property to the extent and subject to the conditions set forth herein, and Manager hereby accepts such engagement. 2. Term and Termination. This Agreement shall continue from year to year; provided, however, that Owner or Manager may, without penalty or obligation to the other party to this Agreement, by providing sixty (60) days' written notice to the other, terminate this Agreement with or without cause at any time. This Agreement may be immediately canceled in the event of the violation of any of the provisions hereof, or by Owner in the event a petition in bankruptcy is filed by or against Manager which is not dismissed within ninety (90) days following the date of such filing. 3. General Duties of Manager. Manager shall be directly responsible for the day-to-day management of the Property, subject to such general guidelines and instructions as the Owner may issue from time to time. Notwithstanding anything to the contrary contained herein, all final decisions respecting the management of the Property shall be made by Owner. Manager shall at all times do and perform all things reasonably necessary to effectuate the purposes and intentions embodied in this Agreement so that the Property is operated at all times in a manner consistent with prudent business practice and in -2- 3 accordance with any and all leases, subleases and contracts to which the Property is subject, and any and all other laws, statutes, ordinances and regulations of any governmental authority having jurisdiction over Owner, the Property or Manager. 4. Collection of Rent and Payment of Expenses. Manager shall collect on behalf of Owner all rents and all other charges of every kind or type whatsoever from all tenants or other occupants of the Property for services provided in connection with, or for the use of, the Property or any portion thereof, and shall deposit the same in depositories specifically approved by Owner. Out of the foregoing rents and other charges collected on behalf of Owner, Manager shall pay all expenses related to the operation and maintenance of the Property and each of its facilities as and when the same become due, all in accordance with specific instructions provided by Owner. There shall be included in the operating expenses of the Property borne by Owner the direct out-of-pocket expenses incurred by Manager or any of its affiliates (including payments to salaried employees and payments for services and supplies) in performing the bookkeeping, management, computer and public relations services for Owner necessary for operation of Owner and the Property which services, but for their performance by Manager or its affiliates, would be required to be performed for Owner by another person; provided, however, that such expenses to be borne by Owner shall not exceed the amount Owner would be required to pay nonaffiliated persons for comparable services which could reasonably be made available to Owner. -3- 4 Manager may, with Owner's prior approval, and, when so requested by Owner, shall, at Owner's expense, institute legal actions or proceedings to collect charges, rent or other income or compensation due to Owner with respect to the Property, or to oust persons unlawfully in possession of any portion of the same. All such actions or proceedings and any related counterclaim, crossclaims or other proceedings shall be at Owner's expense and may be brought in the name of Owner or Manager. 5. Employees. Manager shall have the exclusive right to discharge, supervise and fix the pay of such personnel as are necessary for the efficient maintenance and operation of the Property. However, such personnel shall be employed and paid by and shall be bonded to the satisfaction of Owner. 6. Repair and Maintenance of Property. Manager, at Owner's expense, shall make or attend to the making of ordinary and emergency repairs, maintenance, decorations and alterations at the Property. 7. Taxes and Insurance. Owner shall pay all taxes, personal and real, and assessments that are attributable to the Property. Manager shall obtain and keep in force, at Owner's expense, such fire, comprehensive, liability and other insurance policies as are generally carried with respect to similar facilities in amounts sufficient to protect and maintain the Property and Owner's interest therein in a form, manner and amount, and with companies satisfactory to Owner. Owner and Manager shall be named as insured parties in all liability insurance policies relating to the Property. -4- 5 8. Accounting. Manager shall keep a detailed and complete set of books and records of all the income and disbursements of the Property in accordance with good accounting practice; and Manager shall, on a monthly basis, render to Owner each of the following: (a) A report on all vacancies; (b) A schedule showing all income received and disbursements made during the preceding month, together with the balance on hand, if any, at the end of said month; and (c) A schedule describing the monthly and annual budget for the Property, together with the amount expended in each category in the preceding month and for the year to date. 9. Books and Records. Manager shall keep adequate books and records in connection with all matters arising under the terms of this Agreement. During regular business hours, Manager shall allow Owner or any of its duly authorized representatives access to Manager's records and correspondence pertaining to any transaction arising out of this Agreement. At the close of each fiscal year of Owner, Manager shall allow the books and records which are the subject of this paragraph to be examined and audited by a certified public accountant selected by Owner. In the event of the termination of this Agreement, Manager shall turn over to Owner all records and correspondence as may be reasonably necessary to assist Owner to carry to completion any lease or other transaction and all contracts, records and documents directly pertaining to the Property. -5- 6 10. Compensation. Owner shall pay to Manager as compensation for its services under this Agreement a sum equivalent to 5% of the aggregate gross receipts from the operation of the Property excluding all receipts from utilities or from taxes of any kind or type (provided that this compensation is no less favorable to Owner than that which it would have to pay for comparable services which could reasonably be made available to it by non-affiliated parties) and, if thereafter that compensation is less than the compensation which would then have to be paid by Owner to non-affiliated parties performing comparable services, the Operating General Partner of Owner shall have the option under this Agreement (exercisable by three days written notice thereof to Manager) to raise the compensation to be paid to Manager hereunder to a level not in excess of that which would be payable by Owner for such comparable services. No increase in Manager's compensation under this provision shall exceed one percent of the annual gross receipts of the Property in any year. The foregoing compensation shall be payable at the beginning of each monthly accounting period and shall be calculated on the basis of the budgeted gross receipts (as determined by Owner) from the operation of the Property during that period. The total amount of compensation earned by Manager hereunder shall, as soon as possible after the end of each calendar year during the term of this Agreement, be calculated on the basis of the actual gross receipts from the operation of the Property during that year, and any additional compensation that is due to Manager (because the actual gross receipts exceeded the -6- 7 budgeted gross receipts) shall be paid to it by Owner at that time. Conversely, if Manager collected more compensation than it was entitled to receive during any such year (because the actual gross receipts were less than the budgeted gross receipts), Manager shall return the excess compensation to Owner (without interest thereon). Compensation received by Manager hereunder in any given calendar year shall be returned by Manager to Owner to the extent the limited partners of Owner have not received the Priority Return described in Section 10.1(a), as adjusted by the requirements of Section 12.3.1(a), of the Second Amended and Restated Certificate and Agreement of Limited Partnership of Owner (the "Certificate and Agreement") at the end of such year, provided, however, that, except to the extent of any reduction of the fee payable to Manager in accordance with the immediately preceding clause of this sentence, Manager shall not be obligated to provide its own funds to pay any return to Owner's limited partners described in Section 10.1(a) or 12.3.1(a) of the Certificate and Agreement, and in no event will the amount payable to Manager hereunder be reduced below zero. 11. Indemnification. Owner shall indemnify, defend and hold Manager harmless from any damages, costs, expenses or obligations incurred by Manager as a result of any actions or omissions of Manager within the scope of its authority as provided in this Agreement, or as a result of any other actions or obligations as Owner may specifically authorize Manager to perform, provided performance of such acts by Manager does not constitute fraud, bad faith or negligence. -7- 8 12. Miscellaneous. To the extent possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. However, if any provision hereof shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, and shall in no way affect the validity of the remainder of such provision, or of any of the remaining provisions of this Agreement. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of California. This Agreement and the rights of Owner and Manager hereunder shall not be assignable by either of them. Manager may, however, subcontract the performance of its duties under this Agreement to one or more subsidiaries or affiliates of Manager or to one or more affiliated companies or unaffiliated companies suitable to Owner, but it shall remain responsible for such performance. The right of Manager to receive compensation may be assigned, pledged or hypothecated at any time without Owner's consent. This Agreement, and a notice regarding payment of deferred management fees, contain the entire agreement of Owner and Manager with respect to the subject matter hereof and may not be changed except by an instrument executed by both of them. (signatures on following page) -8- 9 IN WITNESS WHEREOF, the parties hereto have executed this Management Agreement as of the date first above written. OWNER: DE ANZA PROPERTIES - X a California limited partnership By De Anza Corporation, Operating General Partner By: /s/Herbert M. Gelfand ---------------------------- Herbert M. Gelfand Chairman of the Board MANAGER: TERRA VISTA MANAGEMENT, INC. a California corporation By: /s/ Michael D. Gelfand ---------------------------- Michael D. Gelfand President -9- EX-27 3 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1 725,589 0 490,406 0 0 794,193 14,765,859 6,338,426 9,793,490 294,360 4,265,117 0 0 0 4,282,158 9,793,490 1,671,845 1,785,998 0 915,050 443,073 0 236,497 191,378 0 191,378 0 0 0 191,378 8.34 8.34 Amount is per Limited Partner Unit
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