October 5, 2004
Michael Pressman
Office of Mergers and Acquisitions
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Secured Income L.P., Schedule TO-T filed September 23, 2004 by MacKenzie
Patterson Fuller, Inc. and its affiliates, the Purchasers
SEC File No. 5-54251
Dear Mr. Pressman:
Thank you for your letter dated September 30, 2004 regarding our recent Schedule
TO-T. I would like to point out that your letter referenced a Schedule TO filed
on September 1, 2004. That Schedule TO was filed by AIMCO; I assume that was
just a leftover from your comment letter to AIMCO, but it may also explain your
comment number 2 below. Please note that we will be filing an amended Schedule
TO with an attached "Supplemental Letter to Unitholders" in which we will
clarify some of these issues as well as increase our offer price to $30 per
Unit. I will respond to the questions you asked in your letter in the order in
which you posed them.
1. We will address the 50% limitation in our Supplemental Letter, although
it will not have any effect on our Offer because we will accept Units
under our Offer without regard to the 50% limitation (we will accept
tendered units for payment and pay for them upon confirmation that the
GP will recognize the change of address for distributions and
correspondence on the Units).
2. We are unable to find the reference you mention in your letter.
The word "waive" does not occur until page 12. Neither can we find
any language that suggests we may waive a condition subsequent to
expiration. In fact, Section 1 on page 12 suggests that we must waive
a condition if at all by the Expiration Date and Section 5 on page 15
explicitly states that "If the Purchasers make a material change in the
terms of the Offer or the information concerning the Offer or waive a
material condition of the Offer, the Purchasers will extend the Offer
to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act." Further, Section 13 "Conditions of the Offer" prefaces
the list of conditions with "The Purchasers shall not be required to
accept for payment or pay for any Units not theretofore accepted for
payment or paid for and may terminate or amend the Offer as to such
Units if, at any time on or after the date of the Offer and before the
Expiration Date, any of the following conditions exists:" (emphasis
added). We do not believe any revisions are required.
October 5, 2004
Page 2 of 3
3. In our Supplemental Letter, we will provide further detail regarding
our initial valuation. In our initial Offer, we did not determine
the Offer Price by reference to individual properties. Our revised
Offer Price is determined in part by the fact that the general partner
has announced an offer for one of the properties at a price that
exceeds our NOI analysis, so we have used that number in determining
our revised Offer Price. We will include this detail in the
Supplemental Letter. In terms of the "liquidity discount" we
estimated the risk in the investment in terms of liquidation value,
length of investment, and market conditions and arrived at a discounted
price at which we felt comfortable purchasing Units. Because the Units
are not traded on any market, there is a risk to making an investment
in illiquid Units such as these.
4. We stated in our Offer that "if more than 100,000 Units are so
tendered and not withdrawn, we will accept for payment and pay for
100,000 Units so tendered, pro rata according to the number of Units
so tendered, adjusted by rounding down to the nearest whole number
of Units tendered by each Unit holder to avoid purchases of fractional
Units, as appropriate." The only "circumstance[] that may require
[us] to use proration" is if more than 100,000 Units are tendered. We
are unsure what further detail could be provided. With respect to the
further adjustments relating to minimum ownership requirements, we
will disclose the following: (1) if proration is required, we will
first determine the percentage of each Unitholders' tendered Units
that we can accept to reach the maximum of 100,000 Units; then (2) we
will determine if acceptance of such a pro rata share from any
Unitholder would result in the Unitholder owning fewer than the
minimum number of Units allowed under the Partnership Agreement; then
(3) we will reject the tender of any such Unitholder's units. Our
legal analysis supporting such adjustments is fairly simple--we cannot
purchase units if such a purchase would violate the Partnership
Agreement. Our Offer is open to all holders, but proration will
require some adjustments if necessary. In essence, these adjustments
are akin to a reduction to avoid fractional units. The Purchasers
wish to purchase the entire 100,000 Units and want to comply with the
proration rules, but we cannot purchase Units if we cannot purchase the
Units. If you have a better suggestion on how we should proceed, we
will consider it.
5. We assume that you did not mean "tender of notes" but rather meant
"tender of Units." Our supplemental letter will disclose that if we
waive a particular condition for one tender, we will waive it for all
tenders.
6. We do not feel that we are required to quantify "material diminution."
Further, at this point, we cannot know exactly how much diminution
in the benefits would be required because the benefits to be received
as a result of the Offer can vary widely based upon different
circumstances. We do direct Unitholders to "see the discussion of
such benefits in the Summary Term Sheet and Introduction sections of
the Offer to Purchase." Thus, investors can review what benefits are
to be received and thus can verify if the condition has been triggered.
The reference has sufficient specificity to allow for objective
verification. The "benefits to be derived by the Purchasers" are
outlined in the offer to purchase as a matter of disclosure and
October 5, 2004
Page 2 of 3
are not subjective. Such benefits include financial, voting, and
information rights, but they are not illusory or subjective
7. We do not believe this condition is so broad as to make the Offer
illusory. The condition requires that the change be material in the
"reasonable judgment of the Purchasers." Further, the condition is
limited to the "business, properties, assets, liabilities, financial
condition, operations, results of operations or prospects" of the
Partnership, which are objective criteria.
8. We are unable to further quantify the standards in subpart (d). The
standards are already objective: the outbreak of war, the suspension of
trading by a national securities exchange, and so forth. We do not
believe that these conditions make the Offer illusory.
9. AIMCO's offer is for up to 50% of the outstanding Units, but the
condition relates to an offer for more than 50% of the Units.
Nevertheless, we will disclose that AIMCO's present offer and the other
general partner affiliate's offer are not within this condition.
10. We have provided all of the required disclosure under Instruction C.
11. The sole purpose of the attestation that the Unitholder has read the
terms of the Letter of Transmittal is to assure that the Unitholder
understand what s/he is signing. We do not think this is inappropriate.
It is an admonition, not a condition.
12. You have requested that we acknowledge that we are responsible for the
adequacy and accuracy of the disclosure in the filings and that staff
comments or changes to disclosure in response to staff comments in the
filings reviewed by the staff do not foreclose the Commission from
taking any action with respect to the filing and that we may not assert
staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
Please let me know if you have any questions or further comments.
Very Truly Yours,
/s/ CHIP PATTERSON
Chip Patterson
Vice President and General Counsel
(925) 631-9100 ext. 206 (925) 871-4046 (Fax) chip@mpfi.com