February 9, 2004
CONFIDENTIAL TREATMENT REQUESTED
Via EDGAR (correspondence) and FEDEX
Abby Adams, Special Counsel
Office of Mergers and Acquisitions
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Capital Realty Investors II Limited Partnership
Schedule TO-T Filed January 23, 2004 by Equity Resource Fund XXII
LP, Equity Resource Investments LLC and Eggert Dagbjartsson
SEC File No. 5056505
Dear Ms. Adams:
On behalf of Equity Resources Fund XXII Limited Partnership, Equity
Resource Investments LLC and Eggert Dagbjartsson (together, the "Bidders"),
transmitted via EDGAR for filing with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1934, as amended, is this
response letter to the Tender Offer Statement on Schedule TO ("Schedule TO")
filed by the Bidders with respect to the offer to purchase for cash units of
limited partnership interests in the above-referenced partnership.
General
1. As you are offering $175 per unit less any distributions, revise the
cover page to clarify that this offer is not for "$175 net per unit."
In response to the staff's comment, the Bidders have revised the cover
page to clarify that the offer price is $175 per unit less any
distributions.
Summary Term Sheet
2. We note your disclosure on page 9. Revise the summary term sheet to
disclose that the general partner filed a preliminary proxy statement on
Schedule 14A on January 12, 2004 seeking approval of the limited
partners of the liquidation of the partnership and disclose the price
range of units.
In response to the staff's comment, the Bidders have revised the
summary term sheet to disclose that the general partner filed a preliminary
proxy statement on Schedule 14A on January 12, 2004 seeking approval of the
limited partners to a liquidation of the partnership and to disclose the price
range of units.
3. Also disclose whether the purchasers are aware of any distributions that
would reduce the purchase price for unit holders subject to this offer.
Confirm that if any such distributions are made, you will amend the
tender offer to disclose the distribution and that you will extend the
offer so that 10 business days remain in the offer prior to expiration.
In response to the staff's comment, the Bidders have revised the summary
term sheet to disclose that it is not aware of any distributions that would
reduce the purchase price for unit holders subject to this offer. It further
discloses that if any such distributions are made, the purchasers will amend the
tender offer to disclose the distribution and to extend the offer so that 10
business days remain in the offer prior to expiration.
4. Revise to clarify whether any transfer fees will be deducted from the
consideration in the offer, and if so, the amount of such fees and
whether they are calculated on a per unit or per transfer basis. If the
later applies, provide an example of how the fee is calculated
In response to the staff's comment, the Bidders have revised he summary
term sheet to disclose that no transfer fees will be deducted from the
consideration paid for tendered units.
Do You Have the Financial Resources
5. We note that you have not provided the offeror's financial information
as required by Item 10 of Schedule TO. As the offer is not for all
outstanding securities and the offerors are not reporting companies, the
financial condition of the offerors may be material to security holders.
Please provide us with your analysis as to why the financial statements
are not material. For example, advise us how the Offeror chose 5000
units as the total amount sought and discuss whether an acquisition of
5000 units will trigger any change of control provisions or otherwise
constitute a control transaction that would render financial information
material. See Regulation of Takeovers and Security Holder
Communications, Exchange Act Release No. 42055 (January 24, 2000). We
note that you have already discussed the Purchaser's ability to finance
the offer from cash on hand.
In response to the Staff's comment, although the Purchaser's financial
information is not immaterial under Item 10 of Schedule TO as discussed in
Release No. 42055 (January 24, 2000), Regulation of Takeovers and Security
Holder Communications, the Purchaser feels that its financial information, other
than its current cash position, is immaterial to investors based on the
following factors:
The Purchaser disclosed in Section 13 of the Offer that it had over
$1,000,000 in cash on hand as of January 20, 2004. That cash is held by Fund
XXII, the entity acquiring units under the Offer. The Fund XXII's current cash
position is in excess of the Offer's transaction value of $875,000. The Fund
XXII's investment structure is such that its cash position is the only material
factor impacting the Purchaser's ability to pay for tendered units. Fund XXII
acquires limited partnership interests as long-term investments. Limited
partnership interests are illiquid investments and Fund XXII does not trade or
resell interests once they are acquired. Fund XXII has no debt, no operating
expenses and no employees. It does not prepare audited or unaudited financial
statements. Fund XXII is managed by Equity Resource Investments LLC (ERI), who
will pay all expenses (other than payment for units tendered and transfer fees)
associated with conducting the Offer. ERI does not prepare audited or unaudited
financial statements and will not be paying for units acquired under the Offer.
Because of Fund XXII's current cash position, the Offer is not subject
to any financing conditions. Additionally, the Purchaser is seeking to purchase
a non-controlling 10% interest in the Partnership. The 10% limitation is based
on the Purchaser's investment objective of acquiring a diversified portfolio of
real estate investments. The Purchaser is not engaged in property management and
does not hold general partner positions in any public real estate limited
partnerships. As a minority limited partner in the Partnership, the Purchaser's
financial performance will not impact future operations of the Partnership. For
these reasons, the Purchaser feels that its financial information, other than
its current cash position, is immaterial to investors in the Partnership.
Can the Offer be Extended or Amended and Under What Circumstance?
6. You cannot have a subsequent offering period in an offer for less than
all the outstanding securities of the subject class. Revise the document
accordingly. See Rule 14d-11(b). We note your disclosure in this regard
on page 7, at the end of section 5.
In response to the staff's comment, the Bidders have revised the summary term
sheet to remove reference to a subsequent offering period.
Introduction, page 1
No Selling Commissions, page 1
7. In the summary term sheet, you advise unit holders to "consult with
their advisors concerning brokerage fees, commissions or similar
expenses associated with the tender of their units." Revise this section
to clarify that unit holders may be required to pay commissions or
similar payments if they tender into the offer.
In response to the staff's comment, the Bidders have revised the
introduction to disclose that unit holders may be required to pay commissions or
similar payments if they tender their units under the offer.
Risk Factors, page 3
8. In this section you discuss several reasons why the offer price may not
properly value the units and several sources that were not used. Revise
the offer to clarify how the purchasers determined the offer price.
Please refer to Section III.B.1 of Exchange Act Release No. 43069 (July
31, 2000).
In response to the staff's comment, the Bidders have revised the
introduction to disclose how the purchasers determined the offer price as
outlined in Section III.B.1 of Exchange Act Release No. 43069 (July 31, 2000).
Proration: Acceptance for Payment and Payment for Units, page 5
9. Clarify the "appropriate adjustments to avoid tenders of fractional
units."
In response to the staff's comment, the Bidders have revised Section 2
to clarify the "appropriate adjustments to avoid tenders of fractional units."
10. Confirm that you will amend the Schedule TO to file the press release as
an exhibit.
In response to the staff's comment, the Bidders will amend the Schedule
TO to file the press release as an exhibit.
Withdrawal Rights, Page 7
11. Revise to provide the date after which tendering unit holders may
withdraw any units, as provided by Section 14(d)(5).
In response to the staff's comment, the Bidders have revised Section 4
to provide the date after which tendering unit holders may withdraw any units.
12. It appears that you anticipate an extended period of time between
expiration of the offer and acceptance of the tendered units. As you
know, Rule 14c-1(c) requires you to promptly pay for or return tendered
securities upon termination of the offer, and
not upon acceptance. Revise to clarify your intent to promptly pay for
or return tendered units upon termination of the offer.
In response to the staff's comment, the Bidders have revised Section 4
to remove language allowing for an extended period of time between the
expiration of the offer and the acceptance of tendered units.
Certain Tax Consequences, page 7
13. You are required to disclose the material federal tax consequences of
the transaction. Revise the heading and first sentence of this section
to eliminate the term "certain." Clarify the basis for and significance
of the assumption that the partnership "is not a `publicly traded
partnership'."
In response to the staff's comment, the Bidders have revised Section 6
to eliminate the term certain from the heading and the first sentence and to
clarify the basis for and significance of the assumption that the partnership is
not a publicly traded partnership.
Purpose and Effects of the Offer, page 9
14. It is unclear how you determined the per unit liquidation proceeds
disclosed on page 11 from the general partner's alternative proposed
transaction. The preliminary proxy statement filed with respect to that
proposed transaction appears to provide a different valuation. Please
revise or advise us why these amounts are not equal to those disclosed
in the liquidation materials. We are aware that the liquidation
materials take into account the tax effects of the transaction and are
calculated for ten units rather than one unit.
In response to the staff's comment, the Bidders have revised Section 7
to correct the high valuation presented by the general partner to $433 per unit.
15. We note that you are not assuming responsibility for the accuracy or
completeness of any information contained in this section. While you may
include appropriate language about the reliability of the information,
you may not disclaim responsibility for its accuracy. Please revise.
In response to the staff's comment, the Bidders have revised Section 10
to remove language saying that the bidders are not responsible for the accuracy
or completeness of the information contained in Section 10.
16. We note that you have provided some information regarding the properties
owned by Capital Realty. Revise to provide additional information, if
known, regarding the occupancy rate and average rental per square foot
similar to that required by
Items 14 and Items 15 of Form S-11. See Section III.B.1 of Exchange Act
Release No. 43069 (July 31, 2000).
In response to the staff's comment, the Bidders have revised Section 10
to provide additional information regarding the occupancy rate and average
rental per square footage of the properties owned by the subject company.
Certain Conditions of the Offer, page 18
17. Revise this section to disclose all offer conditions and eliminate the
term "certain" from the heading. We note from the agreement of sale that
you have also conditioned the offer on whether the purchaser "has
received and accepted this agreement, properly completed and duly
executed and has received assurances from the partnership that the
seller's address will be changed to the purchaser's address pursuant to
the terms and conditions of the offer."
In response to the staff's comment, the Bidders have revised Section 15
to remove the term certain from the heading and to include the fact that the
offer is conditioned on the bidders receiving and accepting this agreement,
properly completed and duly executed and receiving assurances from the
partnership that the seller's address will be changed to the purchaser's address
pursuant to the terms and conditions of the offer.
18. As currently drafted, the above conditions, as well as the condition
disclosed on page 18, appear to be at least partially within the
offerors' control and do not clearly state how the conditions may be
satisfied. Please revise your disclosure to state more specifically how
the purchaser will confirm these facts so that security holders may
objectively verify the conditions. In doing so, please ensure that
satisfaction of the conditions is not within the control of the
offerors.
In response to the staff's comment, the Bidders have revised Section 15
to specify how security holders can objectively verify the conditions and to
ensure that satisfaction of the conditions is not within the control of the
offerors.
19. It does not appear that the condition disclosed in this section can be
satisfied prior to the expiration of the offer. Please advise. As you
know, the bidder cannot terminate the offer, eliminate withdrawal rights
and retain the right to accept shares for payment until all conditions
are satisfied or waived. Please revise this section accordingly.
In response to the staff's comment, the Bidders have revised Section 15
to state that the bidders waive all conditions not satified upon the termination
of the offer.
Please call the undersigned at (617) 876-4800 if you have any questions
or require any additional information.
Sincerely,
Bill Andrews
CC: Eggert Dagbjartsson