March 21, 2005
Mara L. Ransom
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 March 7, 2005 by MacKenzie
Patterson Fuller, Inc. and its affiliates, the Purchasers SEC File No. 5-54251
Dear Ms. Ransom:
Thank you for your letter dated March 15, 2005 regarding our recent Schedule
TO-T. I will respond to the questions you asked in your letter in the order in
which you posed them.
1. No subsequent offering period will be provided.
2. The reservations of right to delay payment to which you refer are
prefaced by the phrase "upon the occurrence or failure to occur of any
of the conditions specified in Section 13." Thus, we only reserve this
right if the conditions in Section 13 are satisfied. Otherwise, you are
correct that we must make payment promptly following the expiration of
the offer.
3. Financial statements of the purchasers would not add material
disclosure to the available information. As disclosed, the offer will
be funded through the existing capital of the purchasers. As stated
in the offer materials, the purchasers have aggregate capital which
is more than adequate to fund the offer. The specific facts and
circumstances of this offer should be understood. Absent a tender
offer filed under Section 14(d)(1) of the Securities Exchange Act, the
purchasers would have little or no access to the security holders
and the holders would have little or no access to potential purchasers.
Because of the lack of liquidity of the securities, the uncertainty as
to the underlying value of the securities and the issuer's assets, and
the extraordinary per unit costs of using a tender offer as the means
for purchasing the securities, the offer prices are substantially
discounted from the estimates of liquidation value of the issuers. It
is therefore anticipated that only those securities holders who have
an immediate need for liquidity will seek to sell their securities.
Based on the extensive past experience of both the purchasers and
others who have tendered for illiquid securities in similar
circumstances, the purchasers do not reasonably expect to receive more
than 10% to 25% of the total number of securities sought and will
likely receive substantially less than that. Of course, the purchasers
could have tendered for 100% and would not have expected any different
response, but such a tender would have been unrealistic.
Accordingly, while the purchasers are prepared and able to fund the
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entire offer, as a practical matter, the actual funds necessary to
complete the offer are reasonably expected to be substantially less
than the cash reserves held by the purchasers. This offer is for
immediate cash payment and no securities of the bidder are to be used.
No evaluation of securities or credit risk is therefore relevant to
this offer. The bidder neither seeks control, nor would it, if
successful in purchasing all securities sought, gain control of any
issuer, so no evaluation of the bidders' financial condition is
relevant in that respect. No market exists for the securities and no
competing bidder is seeking to purchase the securities, so no real
alternative opportunities are available to be evaluated over the period
of the offer. Given the circumstances and terms of this offer, to
require inclusion of financial statements for this offer would
involve unnecessary and unreasonable time, effort, and expense, without
providing any more material information to prospective sellers than the
information presented in the Offer. Any additional document
preparation, financial statement preparation, and subsequent mailing
costs would add substantial additional cost to the offer without any
material impact on disclosure. Based on the foregoing, we believe the
financial statements presented together with disclosure of the other
sources of funds provide all financial information material to a
security holder's evaluation of the offer.
4. As we responded to this same comment relating to our tender offer last
year, 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 200,000 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 do not have, nor could we perform, an analysis as to why there is
not a reasonable likelihood that the tender offer will result in the
Partnership having fewer than 300 partners. We simply do not have the
ability to know whether or not our offer will have this effect. For
example, it is possible that the 30 or so largest unitholders could
tender their units and our offer would be fully subscribed, which would
result in the number of unitholders being reduced by only approximately
30. However, it is also possible that the smallest 660 or so
unitholders could tender their units resulting in the partnership
having very close to the minimum 300 unitholders. However, even the
number of outstanding unitholders is not something we can know with
enough certainty, because the most recent number was disclosed as of
December 31, 2003, well over a year ago. The number could now be lower
or higher. Further, as mentioned above, our experience tells us that it
is very unlikely that we will receive anything close to 200,000 units,
so we cannot even arrive at a reasonable calculation of how many units
might be tendered (assuming the maximum is not realistic).
6. The non-tendering unitholders will not be impacted by the lack of
liquidity any more than they already are. There is NO liquidity at this
point, and our offer will not change that. There is not a realistic
possibility that the Partnership will terminate for tax purposes
because the Partnership Agreement prevents transfer of more than 50% of
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the units in any 12-month period, as we discuss in the Offer. (see our
discussion of both issues on page 17, Section 7 of the Offer).
7. All we mean by "access" is that unitholders tendering their units will
be depositing them with an affiliate of the Purchasers, so under SEC
rules in the Investment Advisers Act context, at least, the Purchasers
would generally be considered to have "access" to them. The Purchasers
will not accept the Units tendered until the expiration of the Offer
and all conditions to the Offer have been satisfied or waived.
8. Reviewing the definition, it would appear that you are commenting that
we should not define business day with respect to Pacific Time but
should use Eastern Time. Given that our Offer expires at midnight
Pacific Time, it made sense to define "business day" with respect to
Pacific Time. If we extend the Offer, we have to keep it open for
another ten business days. If we defined "business day" with respect to
Eastern Time, we'd be extending the Offer from midnight Pacific Time to
midnight Eastern Time 10 business days later, which would be less than
10 full business days. Furthermore, the definition is modified with
respect to announcements of extensions of the Offer such that the press
release is issued by 9 a.m. Eastern Time. Moreover, it does not appear
that withdrawal rights are dependent upon this definition.
9. If we did not assume that the Partnership was taxed as a partnership,
we'd have to give a completely different explanation of all of the tax
consequences. This would certainly confuse investors. That the
partnership could be treated as a publicly traded partnership, and thus
taxed as a corporation, is certainly a risk, however unlikely. Not to
mention that it would be misleading, and to discuss in detail both
possible treatments would negate the discussion of "material"
consequences--one treatment certainly would have to, by definition, be
immaterial.
10. The Westmont apartments are owned by Columbia Westmont Associates,
L.P., formerly Columbia Associates (the "Columbia Partnership"), and
the Fieldpointe Apartments are owned by Carrollton X Associates Limited
Partnership (the "Carrollton Partnership"). The Partnership's annual
and quarterly reports have referred to such partnerships regularly.
11. We do not believe the use of the word "indirectly" in these conditions
is so broad as to make the Offer illusory or unclear. If a court order
"...restrains or prohibits the making of the Offer" whether directly or
indirectly, the Offer may not be consummated. For example, a court
order might prohibit one of the principals of the Purchasers from
participating in a tender offer, which would be an indirect prohibition
against that Purchaser.
12. You have requested that we acknowledge, and we hereby 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.
March 21, 2005
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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