July 8, 2005
VIA EDGAR & HAND DELIVERY
Abby Adams, Esq.
Office of Mergers and Acquisitions
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0303
Re: NATIONAL PROPERTY INVESTORS III, CENTURY PROPERTIES FUND XIX
AND DAVIDSON INCOME REAL ESTATE, L.P.
AMENDED SCHEDULE TO-T/13E-3S
FILED JUNE 7, 2005 BY AIMCO PROPERTIES LP, ET AL.
Dear Ms. Adams:
On behalf of AIMCO Properties, L.P. ("AIMCO OP"), we are responding to
comments 1 through 6 of the Staff's comment letter, dated June 16, 2005,
regarding the Tender Offer Statements and Rule 13e-3 Transaction Statements on
Schedule TO (the "Schedule TOs") referred to above. AIMCO OP previously
responded to comment 7 in its response letter dated June 21, 2005, and filed
amendments to the Schedule TOs for Century Properties Fund XV and Fox Strategic
Housing Income Partners. AIMCO OP previously filed an amendment to the Schedule
TO for Davidson Income Real Estate, L.P. ("DIRE") on July 7, 2005, and
concurrently with the filing of this letter has filed an amendment to the
Schedule TO for each of Century Properties Fund XIX ("CPF XIX") and National
Property Investors III ("NPI III") that includes as an exhibit a Supplement to
the Amended and Restated Offer to Purchase, reflecting additional disclosure in
response to the Staff's comments set forth below. We have set forth below each
of the Staff's comments and AIMCO OP's response to each comment.
Century Properties Fund XIX
Davidson Income Real Estate, L.P.
National Property Investors III
1. We note the additional disclosure regarding the appraisals performed by
CBRE in 2003. On page 39 of the CPF XIX offer that you list as a
positive factor the fact that your "estimate of the gross property
value for Misty Woods Apartments is approximately $23,093 higher than
the sales price for the property in the purchase and sale contract
dated May 19, 2005" (emphasis added). We note from page 13 of that
offer that you subtract a prepayment penalty from the gross property
value in calculating your determination of the value of a partnership
unit. It is unclear whether it is appropriate to compare the gross
property value
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July 8, 2005
Page 2
to the sales price, because it is unclear whether the prepayment
penalty would be charged if the property were sold. Please disclose
whether the partnership would be required to pay a prepayment penalty
on the mortgage of that property if it were sold in accord with the
current sale contract. Also, with a view toward disclosure, tell us
whether the prepayment penalty applies in all cases. In addition,
please disclose whether any of the other itemized additions or
subtractions from the net property value, as outlined on page 14, would
differ if this property were sold under the current contract. Disclose
the estimated transaction costs associated with the sale, to whom they
are paid and how they are allocated among the properties to be sold. It
is unclear whether your estimated value or the actual contract price
would provide a higher valuation of the partnership.
RESPONSE: Disclosure has been included in the Supplement for CPF XIX in
response to all of the points raised in this comment. The Supplement
clarifies that the contract sale price and the gross property value are
directly comparable, and that a prepayment penalty is ordinarily
payable in connection with any sale of the property. However, as
indicated in the Supplement, under the terms of the mortgage for Misty
Woods Apartments, a prepayment penalty would not be payable during the
six-month period immediately prior to the maturity date, which is
January 1, 2006.
2. Provide similar information for the tender offer for units of National
Property Investors III. We note the discussion on page 27 regarding the
general partner's views of the value of the partnership as determined
by you versus the actual sale price. This disclosure is unclear for two
reasons. First, you state that the "net equity value distributable to
limited partners would have resulted in a lower offer price," however,
it is unclear how you have calculated the "net equity value
distributable." For example, do you mean that, once the sales proceeds
were distributed to unit holders, the partnership would be worth less?
Do you mean that the net proceeds from the sale, after transaction
costs, would be less than the starting point of your valuation, and
therefore the limited partnership units would be valued less before any
distribution resulting from the sale?
Second, without additional information, it is unclear how the general
partner reached this conclusion. Please revise the document to provide
the basis for this statement. Disclose the expected transaction costs
associated with this sale. We note that the property is being sold in a
bundle with other properties. We also note the disclosure of additional
information in a Form 8-K filed May 25, 2005. With a view toward
disclosure, tell us how the transaction costs charged to this property
are determined, who makes the determination, and to whom you will pay
the transaction costs. For example, will the transaction costs be owed
to your affiliates? We note that, absent a prepayment penalty and with
all other expenses and additions (as indicated on page 13) remaining
the same, the value per unit based on the disclosed sale price of
Pinetree Apartments would be $208.49 per unit, which is approximately
17% higher than the current offer price.
RESPONSE: The Supplement for NPI III includes the requested disclosure.
In particular, the Supplement clarifies that the net equity value per
unit is the amount that would be distributed to limited partners in a
hypothetical liquidation and winding up of the partnership in which the
properties are sold at the values indicated, except that no deduction
is made for the transaction costs typically associated with a sale of
the properties. If an amount were deducted for estimated
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July 8, 2005
Page 3
transaction costs, the original calculation of net equity value per
unit would have resulted in a lower number and, as a result, the offer
price would have been lower. Accordingly, the general partner may
conclude that the current offer price is fair, even though it is lower
than the net equity value per unit that results when the contract sale
price for Pinetree Apartments is used rather than AIMCO OP's
determination of gross property value, because, among other things, the
general partner believes that transaction costs would result in a
distribution to limited partners that is lower than the offer price.
3. You provide liquidation value as a means for comparison for unit
holders. Tell us what consideration you have given to calculating
liquidation value (see pages 20-21 of the NPI III offer) using the sale
price of the property under contract for each partnership rather than,
or in addition to, the value determined by the appraiser in 2003.
RESPONSE: The Supplements for CPF XIX and NPI III indicate what the
liquidation value would be if the sales price of the property under
contract is used, instead of its appraised value.
4. On page 40 you state that the general partner has determined that offer
price is fair despite the higher appraised values, in part, because
"the general partner believes that appraisals obtained by lenders in
connection with refinancings, such as those prepared by CBRE, tend to
overstate actual property values somewhat." Expand this disclosure to
clarify the general partner's conclusion and the basis for its
conclusion.
RESPONSE: The Supplements for CPF XIX and DIRE include the requested
disclosure. In addition, we are supplementally providing you with
copies of articles that describe the conflicts that appraisers face in
these situations and the pressure to overstate property values.
5. We note from the partnership's Form 8-Ks dated May 19, 2005 and June 3,
2005 that it refinanced mortgages on the Greenspoint and Sandspoint
properties owned by CPF XIX. The risk factor on page 11, the disclosure
on page 43, and the disclosure on pages 61-62 do not appear to agree.
Please revise or advise. Also tell us whether you or, to your
knowledge, the lenders obtained appraisals for either of these
properties in connection with the refinancing, and whether you know the
value of any appraisal or have obtained or been offered a copy of any
appraisal. Finally, please tell us whether the general partner received
fees or other compensation in connection with the refinancings. We note
the fees paid in connection with prior refinancings, which are
disclosed on page 42 of this offer.
RESPONSE: The Supplement for CPF XIX includes the requested disclosure,
as well as information describing the appraisals obtained in connection
with these refinancings. AIMCO OP supplementally advises the Staff that
AIMCO OP received a copy of each appraisal subsequent to the filing of
the amendments to the Schedule TOs on June 7, 2005. These appraisals
have been filed as exhibits in an amendment to the Schedule TO for CPF
XIX. The general partner did not receive any fees or other compensation
in connection with the refinancings.
Securities and Exchange Commission
July 8, 2005
Page 4
6. In addition, we note that the new mortgage on the Greenspoint property
has a principal amount of $11 million, replacing the prior mortgage,
which had an outstanding principal balance of $7,981,000. In the Form
8-K for Sandspoint, you report that a mortgage for $11 million replaces
a mortgage with a principal amount outstanding of $8,859,000. Please
revise your disclosure to reflect these changes. For example, it
appears you should revise the disclosure to reflect the partnership's
plans for the excess cash, if any, received in these refinancings. Also
tell us whether the excess cash could be distributed to limited
partners pursuant to the partnership agreement. In addition, we note
that you subtract mortgage debt in calculating the net equity value per
unit and the liquidation value per unit of the partnership, but the
mortgage debt figure has not changed since you first filed this offer
in February 2005. Please tell us whether the refinancings or any other
factors materially change your assessment of the value of the
partnership since the offer was filed.
RESPONSE: The Supplement for CPF XIX includes the requested disclosure.
AIMCO OP supplementally advises the Staff that a portion of the
remaining loan proceeds could be distributed to limited partners
pursuant to the partnership agreement. However, the partnership
agreement also permits the general partner to use the proceeds for
other purposes. In this case, the general partner has determined that
it is in the best interests of the limited partners for the partnership
to retain the cash for use in funding the proposed redevelopment of
Sunrunner Apartments. As indicated in the Supplement, AIMCO OP has
recalculated the net equity value per unit and the net liquidation
value per unit to reflect events that have occurred since the offer was
first filed on February 16, 2005. Neither the refinancings nor any
other facts have caused AIMCO OP or the general partner to materially
change its assessment of the value of the partnership.
We would appreciate your prompt attention to this letter. Please do not
hesitate to contact the undersigned at (213) 687-5527 or Jonathan Friedman at
(213) 687-5396 if you have any questions or comments regarding this letter or
the revised Schedule TOs.
Very truly yours,
/s/ Jonathan Ko
Jonathan Ko
cc: Daniel L. Jablonsky, Esq. - Securities and Exchange Commission,
Division of Enforcement
Martha Long - Apartment Investment and Management Company
Miles Cortez, Esq. - Apartment Investment and Management Company
Joseph Coco, Esq. - Skadden, Arps, Slate, Meagher & Flom LLP
Jonathan Friedman, Esq. - Skadden, Arps, Slate, Meagher & Flom LLP