WILMER CUTLER PICKERING HALE AND DORR LLP
100 Light Street
Baltimore, MD 21202
410-986-2820
410-986-2828
June 10, 2005
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549-0303
Attention: Michele M. Anderson, Esq.
Division of Corporation Finance
Re: Meridian Healthcare Growth and Income Fund Limited Partnership(the "Fund")
Preliminary Consent Solicitation Statement on Schedule 14A
File No. 0-17596
Dear Ladies and Gentlemen:
Attached hereto for electronic filing on behalf of the Fund pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14A-101 thereunder, is Amendment No. 3 to the Fund's Preliminary Consent
Solicitation Statement on Schedule 14A (the "Amendment").
This letter responds to comments of the staff of the Commission
transmitted by letter dated June 7, 2005 relating to the Fund's Revised
Preliminary Consent Solicitation Statement on Schedule 14A filed May 26, 2005.
For the staff's convenience, its comments are restated below, followed by the
Fund's responses.
The Sale, page 13
Comment 1. Please revise the discussion on page 18 to explain what Mr.
Cortese calculated or concluded with respect to the valuation of the facilities
"as a multiple of the Fund's 2003 net operating income" and "as a price per
patient bed."
Response. The discussion on page 18 has been revised to explain that
Mr. Cortese primarily considered valuation as a multiple of the Fund's 2003 net
operating income and, secondarily, as a price per patient bed. Mr. Cortese
estimated that a sale of the Facilities for $45,000,000 would represent a
multiple in the range of approximately 6.8 times the Fund's 2003 operating cash
flow of approximately $6,600,000 and a price of approximately $40,760 per
patient bed, based upon the Facilities' 1104 patient beds. This valuation
compared favorably to recent sales prices of other skilled nursing facilities in
the region, which, in Mr. Cortese's opinion, had generally reflected multiples
to operating cash flow of approximately 6.5 and prices
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per patient bed in Maryland and North Carolina in the range of approximately
$40,000 or less. Accordingly, Mr. Cortese estimated that the Facilities, as a
portfolio, had a value in the range of $45,000,000.
Comment 2. Revise to indicate whether or not the information contained
in the 2004 operating budget and provided to the Purchaser was consistent with
the Fund's actual 2004 results of operations. If not, then disclose any material
differences between the projected and actual results for 2004. In addition,
please revise to provide a summary of the preliminary budget for 2005 that the
Fund gave to the Purchaser, not including the projected results for the care
centers on an individual basis.
Response. The discussion on pages 18 and 19 has been revised to
indicate that the information contained in the 2004 operating budget provided to
Purchaser was materially consistent with the Fund's actual 2004 results of
operations. Disclosure has been added indicating that the difference between
projected and actual total revenues was primarily a result of prior years
Medicare and Medicaid cost report settlements, which, consistent with past
practice are not budgeted, but are recognized as revenue when cost report
settlements are finalized. Disclosure has been added indicating that the
difference between projected and actual total expenses was primarily the result
of the inclusion of certain Fund general and administrative expenses in the
Fund's audited financial statements that are not projected or budgeted at the
operating level. Disclosure has been added setting forth a summary of the
preliminary budget for 2005 that the Fund gave to the Purchaser.
Comment 3. Please provide more detail about why the Manager, which is
an affiliate of the Development General Partner, was willing to waive its right
of first offer to purchase the Facilities in connection with the sale to the
Purchaser. Also indicate why the General Partners "could not be certain" that
the Manager would waive this right with respect to other interested buyers or do
so with out substantial additional cost to the Fund. Given the affiliation
between the Manager and the Development General Partner, do the General Partners
have any influence on the Manager's determination to waive its right?
Response. Disclosure has been added to page 11 indicating that the
General Partners believe Purchaser's willingness to negotiate with Manager
regarding management of the Facilities was a factor that influenced Manager's
decision to waive its right of first offer in respect of the Sale. The
discussion on pages 21 and 22 has been revised to explain that the General
Partners understood that Manager had an interest in continuing to operate the
Facilities, whether through ownership of the Facilities, management agreements,
or otherwise, and, therefore, could not be certain that Manager would not
exercise its right of first offer to purchase the Facilities with respect to the
Nexion offer, or any other offer. The last bullet point on page 34 has also been
revised in response to comment 6 to acknowledge that a potential conflict of
interest exists as a result of Manager's desire to continue managing the
Facilities. While the Manager and the Development General Partner are owned by a
common parent corporation, the Development General Partner does not control the
Manager and, therefore, cannot cause the Manager to waive its right of first
offer.
Page 3 of 4
The Liquidation, page 26
Comment 4. We note that you revised the consent solicitation statement
to indicate that the general partners will resolicit in the event that
distributions to investors will be less than $15 per unit. Advise us how you
selected the $15 amount and why you believe that $5 to $6 (i.e., the anticipated
$20 to $21 distribution per unit minus the $15 floor) is a reasonable range for
unit holders to consider in making their investment decision. Furthermore,
revise the section relating to the General Partners' recommendation to indicate
how the $15 per unit distribution compares to prices paid in the secondary
market.
Response. The solicitation statement has been revised to indicate that
the General Partners have committed to resolicit in the event that distributions
to investors will be less than $18 per Unit. A bullet point has been added on
page 35 explaining that $18 per Unit represents an amount which is equal to (1)
approximately 90% of the expected per Unit consideration as a result of the
Transaction, and (2) approximately 90% of the highest outstanding offer to
purchase Units of which the General Partners are presently aware. The General
Partners believe that a range equal to or in excess of approximately 90% of the
expected per Unit consideration is a reasonable range for Unitholders to
consider in making their investment decision.
General Partners' Recommendation, page 33
Comment 5. Clarify the basis on which the General Partners deemed the
sale of the Mariner Health Care nursing facilities to be comparable to the
current transaction.
Response. The discussion on page 22 has been revised to clarify that
the General Partners took note of the December 2004 sale by Mariner Healthcare
of its portfolio of nine Maryland skilled nursing facilities, which the General
Partners considered to be comparable to a sale of the Facilities because it
involved a recent sale of a portfolio of skilled nursing facilities located in
the state of Maryland, where four of the Fund's seven Facilities are located.
The purchase price for the Mariner Healthcare sale was approximately $107
million, which the General Partners estimated represents a multiple of
approximately 6.6 times 2004 operating cash flow, which the General Partners
considered to be evidence of the reasonableness of the Purchase Price. Because
the Mariner Healthcare sale of its Maryland facilities occurred in December
2004, it was considered by the General Partners in approving the transaction,
but was not considered by the Fund during the negotiation of the letter of
intent with Formation Capital.
Comment 6. We reissue prior comment 8. Revise the last bullet on page
34 to acknowledge that a potential conflict of interest exists as a result of
the management fees payable to the Manager.
Response. The last bullet point on page 34 has been revised to
acknowledge that a potential conflict of interest exists as a result of
Manager's desire to continue operating the Facilities.
Per the staff's request and pursuant to the Commission's recently
published press release 2004-89, "SEC Staff to Publicly Release Comment Letters
and Responses," the Fund notes that
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the adequacy and accuracy of the disclosure in the filing is the
responsibility of the Fund. The Fund acknowledges that staff comments or changes
to disclosure in response to staff comments in the filing do not foreclose the
Commission from taking any action with respect to the filing and may not be
asserted as a defense in any proceeding initiated by the Commission or any
person under the federal securities laws of the United States.
If you have any questions or comments, please do not hesitate to
contact me at (410) 986-2820, or Sean Mulcahy of our office at (202) 663-6462.
Very truly yours,
/s/
John B. Watkins