UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 1)
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
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
PURPOSE OF AMENDMENT
The purpose of this amendment is (i) to amend and supplement Item 4 in
the Solicitation/Recommendation Statement on Schedule 14D-9 previously filed by
Income Growth Partners, Ltd. X (the "COMPANY" ) on September 17, 2003, and (ii)
to add an additional Exhibit to Item 9 and revise the Exhibit Index accordingly.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
Item 4 is hereby amended and supplemented as follows:
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 based its reasons for its
recommendation on the following factors:
(1) Everest states in the Purchase Tender Offer Statement that its
offer of $1,000 per Original Unit exceeds the amount of net proceeds that
Everest estimates would be distributed per Original Unit if the Partnership sold
its two properties for $50 million, the combined estimated sales price projected
in the Partnership's Schedule 14D-9 filing on May 6, 2003.
(2) The $1,000 per Original Unit price offered by the Purchasers is
approximately 52.32% of the General Partner's estimate of the net asset value of
$1,911.10 per Original Unit. This estimated net asset value was calculated based
on the General Partner's projected sale of the Shadowridge Meadows Apartments
("Shadowridge") and the Mission Park Apartments ("Mission Park") for a total
combined sales price of $62.9 million, excluding closing costs and liquidation
and related expenses.
On or about August 7, 2003, after consultation with Hendricks &
Partners, the General Partner listed the Shadowridge property for sale at
$27,400,000 and the Mission Park property for sale at $35,500,000, for a total
combined sales price of $62.9 million. The General Partner's recent listing of
the properties reflects an increase in its previously projected sales price of
$50 million for both properties, as indicated in the Partnership's Schedule
14D-9 filed on May 6, 2003 and the Amended Schedule 14D-9 filed on July 14,
2003. The estimated realizable net asset value per Original Unit upon a sale of
the Partnership properties and liquidation of the Partnership would depend on
many other factors, including the actual selling price of the property, closing
costs, payment of outstanding loans and prepayment penalties, and Partnership
liquidation expenses, and there can be no assurance these estimated net asset
values per unit will be realized, or that the properties will be sold at the
listing price.
2
As part of the General Partner's evaluation of the Tender Offer by
Everest, the General Partner consulted with Hendricks & Partners, a prominent
apartment brokerage firm with experience in the apartment sales business. The
General Partner also reviewed sales comparison reports prepared by Hendricks &
Partners detailing sales of 28 comparable apartment buildings in the San Diego
County area from March 28, 2002 through May 20, 2003. The General Partner also
reviewed a list of comparable rental properties, also prepared by Hendricks &
Partners providing a summary of local rental properties comparables for 11
apartment buildings (with properties ranging from 18 to 108 units).
The General Partner also reviewed the Apartment Update Third Quarter
2003 for the Southern California Region and the Forecast 2003, both prepared by
Hendricks & Partners. These two studies detail the residential real estate
markets on both a local and national level with demographic and other
statistical information and data regarding rent growth and vacancy rates, rental
and sales figures, as well as other information related to the residential real
estate market.
In addition, the General Partner reviewed a market study prepared for
the Mission Park apartments by Integra Realty Resources - San Diego ("Integra
Report"), a copy of which was attached as Exhibit 3 to the Partnership's
previous Amended Schedule 14D-9 filed on July 14, 2003. The purpose of the
Integra Report was to compare the rental market and "for sale" market in San
Diego County as of February 24, 2003. The Integra Report compares the rental and
sales markets in San Diego and provides supply and demand comparisons, rental
rates, pricing levels, and absorption and competition levels relating to the
Mission Park apartments. Based upon an analysis of supply and demand
comparisons, rental rates, pricing levels, absorption and competition levels,
and general economic conditions, the Integra Report concludes that the Mission
Park apartments have an indicated value of $25,400,000 based upon an overall
capitalization rate of 8.5%. The capitalization rate was derived from comparable
projects that sold in the Vista, San Marcos, and Oceanside areas; the range of
overall capitalization rates was 7.97% to 9.28%. The Integra Report concludes
that based upon the factors referenced above, the demand for housing is expected
to continue at reasonable levels in the San Marcos area as the region is poised
for further growth. Additionally, the Integra Report concludes that the North
County East market and the San Marcos submarket are experiencing strong demand
for apartment units, thereby further supporting the indicated value of
$25,400,000.
Based on its review of sales and rental data on comparable properties
in the relevant area and market studies and industry reports, as described
above, and the current strength of the local residential rental market,
increased market rent rates, lower interest rates, continued high demand for
large multi-family apartment buildings, and its continued consultations with
Hendricks & Partners, the General Partner believes the value of the
Partnership's two properties has increased since the filing of its Schedule
14D-9 on May 6, 2003 and its Amended Schedule 14D-9 on July 14, 2003. As a
result, on August 7, 2003, the General Partner entered into a listing agreement
with Hendricks & Partners and has listed the properties at a combined sales
price of $62.9 million.
3
The estimated net proceeds available for distribution per Original Unit
following sale of the properties for $62.9 million would be approximately
$1,911.10. This would exceed the $1,000 per Original Unit being offered by
Everest by approximately 52.32%, or $911.10 per Original Unit. It cannot be
guaranteed that the properties will be sold for a combined sales price of $62.9
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 Original
Units, sales commissions on the sale of the properties, and the mortgage debt
and prepayment penalties on both properties. For additional considerations
affecting the General Partners consideration to sell the properties, see item 7
below.
No assurances can be provided that the General Partner's estimates are
correct, and the actual amount of net proceeds available for distribution that
would be received from the sale of the properties and a liquidation of the
Partnership may differ substantially from the General Partner's estimates.
(3) 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.
(4) 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.
(5) The tender of Original 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.
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.
4
ITEM 9. EXHIBITS.
Item 9 of the Schedule 14D-9 is hereby amended and supplemented by the addition
of the following exhibit:
4 Letter to Limited Partners dated October 10, 2003.
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
/David W. Maurer/
--------------------------------------------------
(Signature)
David W. Maurer, President
--------------------------------------------------
(Name and title)
October 15, 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.
Exhibit Index
4 Letter to Limited Partners dated October 15, 2003.
5
Exhibit 4
Letter to Limited Partners dated October 15, 2003
October 15, 2003
Re: Income Growth Partners, Ltd. X
Dear Investor:
On September 4, 2003, Income Growth Partners, Ltd. X ("Partnership")
received a tender offer statement on Schedule TO and exhibits from Everest
Management, LLC, a California limited liability company, to purchase for cash up
to 940 original units of limited partnership interests in the Partnership
("Original Units"). On September 17, 2003, the General Partner caused to be
filed Schedule 14D-9 with the Securities and Exchange Commission. The September
17, 2003 Schedule 14D-9 stated that 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.
On September 25, 2003, the Securities Exchange Commission requested
additional information relating to the Partnership's September 17, 2003 filing.
In response to the Securities and Exchange Commissions' request, the General
Partner caused to be prepared an Amended Schedule 14D-9. A copy of the Amended
Schedule 14D-9 as filed with the Securities and Exchange Commission on October
15, 2003 is enclosed for your information.
Sincerely,
Income Growth Management, Inc.
General Partner
/s/ David W. Maurer
- --------------------------
David W. Maurer
President
Enclosure