June 30, 2005
Via Facsimile: (202) 772-9203
and submitted via EDGAR
Abby Adams
Office of Mergers and Acquisitions
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0303
Re: American Republic Realty Fund I Schedule TO-T filed June 2, 2005, by
Everest Properties II, LLC
Dear Ms. Adams:
This letter responds to the Staff's comments conveyed in your letter of
June 10, 2005. Numbered paragraphs below correspond to the numbered paragraphs
in your letter.
1. In response to the comment, the offer has been amended in "Future Plans
of the Purchaser" to clarify that there is no current intention to seek to
influence the management and affairs of the Partnership.
The offeror's financial statements are not material to persons considering
the Offer, for the following reasons. The distinction made in the instruction to
Item 10 between full and partial tender offers is meaningless in all-cash
offers. Whether an all-cash offer is for all of the class of securities or only
part of the class does not affect the materiality of the financial statements to
security holders receiving the offer, who in both cases must choose between
selling or continuing to hold.
For persons who would sell, the offer is for cash, so the reasonable
selling investor would only be concerned with the bidder's current source of
funding to pay for the selling investors' units. That information is disclosed
in "Source of Funds," stating "cash and cash equivalents." Beyond that
disclosure, the financial position of the bidder and its historical operating
results are irrelevant, as the instructions to Item 10 implicitly acknowledge by
deeming such financials immaterial when the offer is for all of the securities
of the class.
For persons who will continue to hold the security (either because they
choose not to tender or they get prorated), Purchaser does not believe its
financial statements are material to persons considering the Offer. Limited
partnership agreements in general, and this Partnership's specific limited
partnership agreement, require any approval by limited partners to be made by an
actual majority of the outstanding securities (as opposed to a majority of a
quorum). Therefore, the general partner has sole legal and practical control
over the partnership until a limited partner (or a `group') has more than 50% of
the limited partner interests, because only then could a limited partner (or
group) remove the general partner at will. Even ownership of a 39% position
would give the Purchaser and affiliates no greater influence or control over the
Partnership's management and affairs than the limited partner with the smallest
position. This is true because there is no board of directors to which a
director may be elected by someone with a large (but not majority) position.
Even if a 39% limited partner could be considered a "dominant security
holder," which Purchaser would dispute, the statement made in Note 195 of
Exchange Act Release No. 42055, does not present any logical connection between
the financial position or performance of a "dominant or controlling security
holder" and what that security holder might do with its influence or control.
How would knowing the financial information of such an influential security
holder assist a co-owner in predicting what that influential security holder
might do later with its influence? Financial statements of the bidder would not
really provide security holders with a meaningful ability to predict the future
actions of that influential security holder any better than they could without
the financial statements. The foregoing reasoning is supported by the fact that
Schedule 13D, which sets forth the disclosure requirements by which security
holders will be able to understand and attempt to predict what a dominant
security holder might do with its position of influence, does not require
financial statements.[FN1]
For the foregoing reasons, the financial statements of the Purchaser are
immaterial to security holders considering the offer, whether they end up
selling or holding the securities.
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[1] I recognize the irony of this observation given Everest Management's
delinquency in making its Schedule 13D filing, which is being redressed
concurrently herewith.
2. In response to the comment, the offer has been amended in "Certain
Information Concerning the Partnership - Trading History of the Units" and in
"Certain Information Concerning the Purchaser - Prior Acquisitions of Units and
Prior Contacts." Please also see the response herein to Comment 5.
3. In response to the comment, the offer has been amended in "Withdrawal
Rights."
4. In response to the comment, the offer has been amended in "Conditions of
the Offer."
5. Everest Management, LLC increased its holdings through a single, private
block purchase. Details of the transaction are being included in the offer by
the amendment being made concurrently herewith. An amended Schedule 13D is also
being filed concurrently herewith. We acknowledge the Staff's admonition
expressed in the comment and supplementally inform you that no interim
acquisitions or votes of the securities have occurred.
6. As set forth in the section identified in the comment, the Purchaser is
unable to make that determination. Only the general partner of the partnership
would have the information necessary to make such determination. The process
that bidder would apply if bidder is notified by the general partner that a tax
termination could occur is set forth in "Terms of the Offer; Expiration Date;
Proration" which refers to the possibility that "transfers of Units are limited
by the Partnership Agreement to a number of Units (the "Transfer Limit") less
than 1,500 Units, and the number of Units that are Properly Tendered exceeds the
Transfer Limit . . . ." That description addresses the technical (although
unlikely) possibility of a limit on transfers being imposed in order to avoid a
tax termination. It is not really a condition to the offer because the bidder
would accept the number of units that it could, up to such Transfer Limit (if
imposed).
7. We do not believe this comment is appropriate because, by definition,
any description of tax consequences to a group of individuals who have different
individual tax situations is a "general discussion," i.e., not specific to the
individual. In addition, the reference to "certain" tax consequences is also
appropriate - it is not possible, or even helpful, to explain exhaustively all
possible tax consequences. However, in response to the comment, we have revised
the introductory statement to describe the section as "a general discussion of
the principal federal income tax consequences."
Furthermore, we disagree that security holders are entitled to rely on the
tax consequences disclosure to determine their individual tax consequences -
they must obtain advice from their own tax attorney or accountant or analyze
their own circumstances to understand the actual tax consequences to them. A
bidder does not become a security holder's tax advisor by making an offer.
Closing paragraphs: While acknowledging the Staff's positions, and without
implying any specific issue with such position, we respectfully decline to make
the statements requested. There is no requirement that we do so. To the extent
the requested statements are accurate statements of applicable law, there is no
reason to obtain from bidders a recitation of such law. To the extent the
statements go beyond applicable law or reflect interpretations of law that may
be open to dispute, it would not be fair or appropriate to require bidders to
make statements that might prejudice their right to take a contrary position at
some later time, if the occasion arose.
We are filing an amendment concurrently with this letter and disseminating
it to the Unit Holders in the same manner as the initial materials were
disseminated. Please contact the undersigned if you have any questions regarding
our responses to the Staff's comments and to advise us if the Staff has any
further comments.
Very truly yours,
/S/ Christopher K. Davis
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Christopher K. Davis
Vice President and General Counsel
CKD:ckd