UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
Income Growth Partners, Ltd. X
(Name of Subject Company)
Income Growth Partners, Ltd. X
(Names of Persons Filing Statement)
Original Units of Limited Partnership Interest
(Title of Class of Securities)
000-18528
(CUSIP Number of Class of Securities)
David Maurer
11230 Sorrento Valley Road, Suite 220
San Diego, CA 92121
Telephone (858) 457-2750
(Name, address, and telephone numbers of person authorized to receive
notices and communications on behalf of the persons filing statement)
Copy To:
David A. Fisher
Fisher Thurber LLP
4225 Executive Square, Suite 1600
La Jolla, CA 92037
Telephone (858) 535-9400
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[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
TABLE OF CONTENTS
1. Subject Company Information
2. Identity and Background of Filing Person.
3. Past Contacts, Transactions, Negotiations and Agreements.
4. The Solicitation or Recommendation.
5. Persons/Assets, Retained, Employed, Compensated or Used.
6. Interests in Securities of the Subject Company
7. Purposes of the Transaction and Plans or Proposals
8. Additional Information
9. Exhibits
ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject company is Income Growth Partners, Ltd. X, a
California limited partnership (the "Partnership"). The principal executive
offices of the Partnership are located at 11230 Sorrento Valley Road, Suite 220,
San Diego, California 92121. The telephone number of the Partnership's principal
executive office is (858) 457-2750.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is original units ("Original Units") of limited partnership interests in
the Partnership. As of April 30, 2003, there are 18,826.5 Original Units and
8,100 Class A Units (not included in the Offer) issued and outstanding, held by
1,874 Unit Holders.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON.
The Partnership, the subject company, is the person filing this
Statement. Its business address and telephone number are set forth above under
item 1.
This Statement relates to the cash tender offer made by Millenium
Management, LLC ("Millenium" or the "Purchaser"), a California limited liability
company, to purchase up to 1,880 Original Units of limited partnership interests
in the Partnership at a cash purchase price of $850 per Original Unit, as more
fully described in the Tender Offer Statement in Schedule TO filed by the
Purchaser with the Securities and Exchange Commission on April 17, 2003 under
file number 005-55927 (the "Purchase Tender Offer Statement").
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Based upon the information in the Purchase Tender Offer Statement, the
Partnership understands the business address of the Purchaser to be located at
155 N. Lake Avenue, Suite 1000, Pasadena, California 91101 and the telephone
number of its principal executive office is (626) 585-5920.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
(1) Certain contracts, agreements, arrangements or understandings and actual or
potential conflicts of interest between the Partnership or its affiliates and
the Partnership, its executive officers, directors or affiliates are described
under Item 12 of the Partnership's Annual Report on Form 10-KSB for the year
ended December 31, 2002 ("Form 10-KSB"). To the knowledge of the Partnership and
its General Partner, Income Growth Management, Inc. ("General Partner"), except
as set forth in Item 12 of the Form 10-KSB, there exists no material contract,
agreement, arrangement or understanding and no actual or potential conflict of
interest between the Partnership or its affiliates and (i) the Partnership's
executive officers, directors or affiliates or (ii) the Purchasers' executive
officers, directors or affiliates.
(2) To the best of the Partnership's knowledge as of the date hereof, except as
set forth elsewhere in this Statement or the Purchase Tender Offer Statement
there exists no material contract, agreement, arrangement or understanding and
no actual or potential conflict of interest between the Partnership or its
affiliates and the Purchaser, its executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation.
Income Growth Management, Inc., the general partner of the Partnership
(the "General Partner"), has not approved the Offer. The General Partner
believes that the price per Original Unit offered in the Offer to the holders
thereof ("Limited Partners") may not fairly compensate Limited Partners for
their interest in the Partnership, and, therefore, recommends the Limited
Partners not tender Original Units pursuant to the Offer.
(b) Reasons for the Recommendation.
In determining to recommend that Limited Partners not tender their
Original Units in the Offer, the General Partner considered a number of factors,
including, without limitation, the following:
(1) Millenium states in the Purchase Tender Offer Statement that its
offer of $850 per Original Unit equals the amount of net proceeds that Millenium
estimates would be distributed per Original Unit if the Partnership sold its two
properties for $42 million, the combined value of the properties estimated in a
Limited Appraisal-Restricted Appraisal Report dated May 8, 2002, obtained by the
General Partner (the "2002 Appraisal"). Based on its review of sales data on
comparable properties in the relevant area and its consultation with advisors in
the apartment sales business, however, the General Partner believes the value of
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the Partnership's two properties has increased since the delivery of the 2002
Appraisal. Accordingly, the General Partner is presently considering listing the
properties for sale at a combined price of approximately $50 million. The net
proceeds available for distribution per Original Unit following sale of the
properties for $50 million would be approximately $1,012. This would exceed the
$850 per Original Unit being offered by Millenium by approximately 19%, or $162
per Original Unit. It cannot be guaranteed that the properties will be listed
for sale or, if they are listed, that they can be sold for a combined price of
$50 million. In considering whether to sell the Partnership properties, the
General Partner is taking into consideration its familiarity with and its view
of the Partnership's business, properties, financial condition, the nature of
the local real estate sales market, the historical and current prices for the
Units, and the mortgage debt on both properties. For additional considerations
affecting the General Partners consideration to sell the properties, see Item 7
below.
(2) By tendering Original Units pursuant to the Offer, the Limited
Partners will be giving up the opportunity to participate in any potential
future benefits from the ownership of the Original Units, including
distributions resulting from any future sale of the Partnership's properties.
(3) While the Partnership's Amended and Restated Limited Partnership
Agreement allows for a $200 transfer fee, the General Partner has imposed a $40
fee in the past two fiscal years, and a $40 per transaction fee will apply to
any transfers of Original Units pursuant to the Offer. Therefore, net proceeds
to each Limited Partner will be reduced by at least $40.
(4) The tender of Units pursuant to the Offer may constitute a taxable
event to the participating Limited Partner. See Item 8--Certain Federal Income
Tax Considerations.
The General Partner did not assign relative weights to the foregoing
factors or determine that any factor was of particular importance. Rather, the
General Partner viewed its position and recommendations as being based on the
totality of information presented to and considered by it.
The General Partner has not completed its review, evaluation and
consideration of its proposed plan to sell the properties.
To the knowledge of the General Partner, none of the Partnership's
executive officers, directors or affiliates who own Original Units intend to
sell any of such Units owned by them prior to the expiration of the Offer or
tender such Units in the Offer.
The Limited Partners should consult with their respective advisors
about the financial, tax, legal and other implications of accepting or rejecting
the Offer.
ITEM 5. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
Neither the Partnership, the General Partner nor any person acting on
their behalf has retained any person to make solicitations or recommendations to
Limited Partners on the Partnership's behalf concerning the Offer.
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ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
No transaction in Units has been effected during the past 60 days by
the Partnership or the General Partner or, to the best of the Partnership's
knowledge, by any executive officer, director, affiliate or subsidiary of the
Partnership.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
The Partnership is not currently undertaking or engaging in any
negotiations in response to the Offer that relate to (i) a tender offer for or
other acquisition of securities by or of the Partnership or any other person;
(ii) an extraordinary transaction, such as a merger, reorganization or
liquidation, involving the Partnership or its subsidiaries; or (iii) any
material change in the indebtedness, present capitalization or dividend policy
of the Partnership.
The Partnership is, however, currently investigating the possible sale
of both of the Partnership's properties and the General Partner has consulted a
prominent apartment brokerage firm, Hendricks & Partners, in connection with
listing the properties for sale. The Partnership, through its subsidiaries,
presently owns the following two properties:
(i) Mission Park. This property is a 264 unit apartment complex in San
Marcos, California. The property was purchased in 1989 for $17,000,000.
(ii) Shadowridge Meadows. This property is a 184 unit apartment complex
in Vista, California. The property was purchased in 1988 for $12,700,000.
Among other factors, the General Partner is evaluating a prepayment
prohibition on the Shadowridge Meadows property that may prohibit the sale of
the property before October 2003. Additionally, the General Partner is also
considering a prepayment penalty on the Mission Park property. In considering
whether to sell the Partnership properties, the General Partner is studying the
impact of these issues upon the proposed sale of the two properties and their
possible financial effect on the Partnership and the Limited Partners.
There can be no assurance that the Partnership's properties can be sold
at the projected sales price of $50
million.
ITEM 8. ADDITIONAL INFORMATION.
(a) Certain Federal Income Tax Considerations.
The Federal Income Tax Discussion set forth below is included herein
for general information only and does not purport to address all aspects of
taxation that may be relevant to a particular Limited Partner. For example, this
discussion does not address the effect of any applicable foreign state, local or
other tax law other than federal income tax laws. Certain Limited Partners
(including trusts, foreign persons, tax-exempt organizations or corporations)
may be subject to special rules not discussed below. This discussion is based on
the Internal Revenue Code of 1986, as amended (the "Code"), existing
regulations, court decisions and Internal Revenue Service rulings and other
pronouncements.
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Each Limited Partner should consult their own tax advisor as to the
particular tax consequences to such Limited Partner of the Offer, including the
application of alternative minimum tax and federal, foreign, state, local, and
other tax laws.
The following general discussion is based upon the assumption that the
Partnership is treated as a partnership for federal income tax purposes and is
not a "publicly traded partnership," as that term is defined in the Code.
Gain or Loss. A taxable Limited Partner will recognize a gain or loss
on the sale of such Limited Partner's Units in the amount equal to the
difference between (i) the amount realized by such Limited Partner on the sale
and (ii) such Limited Partner's adjusted tax basis in the Units sold. The amount
realized by a Limited Partner will include the Limited Partner's share of the
Partnership's liabilities, if any (as determined under Section 752 of the Code
and the regulations thereunder). If the Limited Partner reports a loss on the
sale, such loss generally will not be currently deducted by such Limited Partner
except against such Limited Partner's capital gains from other investments.
However, non-corporate taxpayers may deduct up to $3,000 of capital losses per
year in excess of the amount of their capital gains against ordinary income.
The adjusted tax basis in the Units of a Limited Partner will depend
upon each Limited Partner's individual circumstances. Each Limited Partner who
plans to tender Units pursuant to the Offer should consult with a tax advisor as
to such Limited Partner's adjusted tax bases in such Limited Partner's Units and
the resulting consequences of a sale.
ITEM 9. EXHIBITS.
Exhibit 1 Item 12 of Income Growth Partners, Ltd. X Annual Report on Form 10KSB
for the year ended December 31, 2002.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Income Growth Partners, Ltd. X, a California limited partnership
By: Its General Partner
Income Growth Management, Inc., a California corporation
/s/ David W. Maurer
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(Signature)
David W. Maurer, President
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(Name and title)
May 2, 2003
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(Date)
INSTRUCTION TO SIGNATURE: The statement must be signed by the filing person or
that person's authorized representative. If the statement is signed on behalf of
a person by an authorized representative (other than an executive officer of a
corporation or general partner of a partnership), evidence of the
representative's authority to sign on behalf of the person must be filed with
the statement. The name and any title of each person who signs the statement
must be typed or printed beneath the signature. SEE ss.240.14d-1(f) with respect
to signature requirements.
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Exhibit Index
Exhibit 1 Item 12 of Income Growth Partners, Ltd. X Annual Report on Form 10KSB
for the year ended December 31, 2002.
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Exhibit 1
Item 12 of Annual Report on Form 10KSB
of Income Growth Partners, Ltd. X
December 31, 2002
Item 12. Certain Relationships and Related Transactions
The Partnership is entitled to engage in various transactions involving its
general partners and its affiliates as described in the Partnership Agreement.
The table below reflects amounts paid to the general partner or its affiliates
during the following years:
2002 2001
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Management Fees $284,000 $245,000
Administrative Costs $192,000 $115,000
Administrative Fees $20,000 $17,000
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