April 19, 2005
Celeste Murphy
Office of Mergers and Acquisitions
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: U.S. Realty Partners Limited, Schedule TO-T filed March 22, 2005 by
MacKenzie Patterson Fuller, Inc. and its affiliates, the Purchasers
SEC File No. 005-55083
Dear Ms. Murphy:
Thank you for your letter dated March 29, 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. 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. Further, the general
partner owns nearly 67% of the Units, so the Purchasers are unlikely to
receive anything close to 25% of the Units. Accordingly, while the
purchasers are prepared and able to fund the 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
April 19, 2005
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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. Furthermore, by providing the total assets of
the Purchasers and their available capital, the Purchasers have
disclosed the most important information that any financial statements
would otherwise provide. The only liabilities on the financial
statements are accounts payable and occasionally some small margin
accounts, so the vast majority of the information from the financial
statements is included in the disclosure of the Purchasers' assets. We
have, therefore, provided the "statement of net worth" about which you
inquired in your comment. All of the Purchasers are advised by MPF
Advisers, Inc. and are pre-funded with no discretion as to whether to
accept or deny securities recommended and purchased pursuant to this
Offer.
2. The penultimate sentence of the first paragraph of Schedule 1 on page
22 of the Schedule TO-T states: "The Purchasers have jointly made the
offer and are jointly and severally liable for satisfying its terms.
Other than the foregoing, the Purchasers' relationship consists of an
informal agreement to share the costs associated with making the offer
and to allocate any resulting purchases of Units among them in such
manner and proportions as they may determine in the future." We believe
this is sufficient disclosure because the arrangement among the
Purchasers is not definitive because it needs to be flexible based upon
the results of the tender offer. Furthermore, we do not believe that
disclosure of such details would be material to a prospective seller
because the terms of the Offer are not affected by the allocation
between the Purchasers. There is no discretion under this Offer to deny
any securities, so if validly tendered, the Units will be purchased.
3. The Offer will be revised to disclose that Item 13 is inapplicable.
4. We have addressed the issue in our revised materials. However, it is
not likely to be material given that the general partner owns close to
67% of the Units. With respect to the current "solicitation" we would
have significant ability to "object" if the offer were fully
subscribed, but such influence would be limited to situations where the
General Partners seek approval from the minority.
5. There is no conflict--Mr. Gold can both purchase the apartments and
participate in this offer. We will revise to so indicate.
6. Please see our response to comment 2. It is HIGHLY unlikely that any
proration will occur (the General Partners will not be tendering their
Units, so we would have to have more than a 75% response rate, which is
unprecedented); thus, the concern that tendering Unit holders may want
to know who will own the securities purchased is not material. Further,
the tendering Unit holders do know who the Purchasers are, although
they do not know how much each of the Purchasers would own. This is not
know-able until after the Offer expires, of course, so we cannot
disclose it.
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7. The funds managed by MacKenzie Patterson Fuller ("MPF") are funded
through initial subscriptions, and the total assets and available
capital numbers disclosed in the Offer reflect capital already
contributed. Schedule 1 of the Offer discloses information about the
Purchasers and MPF. A brief background is set forth under "WHO IS
OFFERING TO BUY MY SECURITIES?" We do not believe that disclosing when
a Purchaser was formed is material to whether a Unit holder would
tender pursuant to the Offer.
8. We will delete the latter part of that sentence in future offers, and
you are correct that we must make payment promptly following the
expiration of the offer and confirmation of transfer (i.e., that
conditions must be satisfied or waived before expiration).
9. Please see our response to comment 1. We simply do not believe that the
financial condition of the Purchasers is material to a Unit holder's
decision, so long as the holder knows there is sufficient capital,
which has been disclosed.
10. We have revised the schedule to disclose that "The Purchasers currently
have sufficient funded capital to fund all of their commitments under
this offer and all other tender offers they are presently making." We
do not believe that the actual dollar amount for which the Purchasers
may be liable under the other offers is material to a Unit holder in
this Offer, so long as there is no possibility that the Purchasers in
this Offer would be unable to purchase tendered Units. Furthermore,
anyone interested in finding out about the other Offers can find that
information on your EDGAR database or in your offices, as disclosed in
the Schedule TO.
11. Brokers do not charge brokerage fees or commissions when they do not
"broker" the sale. Hence, we do not say that Unit holders will not have
any costs, but only that they will not have to pay brokerage fees or
commissions. If you know this to not be the case, please give us an
example of a broker properly charging a fee for tendering in a tender
offer. We do not believe any brokers can or do charge in such
circumstances.
12. We have revised the Schedule to clarify and to disclose that we will
pay promptly upon expiration of the Offer and confirmation by the
general partner. Waiting for confirmation by the general partner is the
only reason we can delay payment.
13. Mr. Pressman made this comment on a different tender offer previously,
and I still don't understand it. I believe these two statements are
consistent. The tendering Unit holder will retain distributions paid
prior to the Expiration Date, so the Offer Price will be reduced by the
amount of any such distributions. The Purchasers have the right to
receive distributions paid after the Expiration Date for Units tendered
and accepted.
14. 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. Nonetheless, we have revised the Schedule to include the
following:
Certain partnerships are classified as "publicly traded
partnerships" and, subject to certain exceptions, are taxed as
corporations for federal income tax purposes. A partnership is
a publicly traded partnership if the partnership interests
April 19, 2005
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are traded on an established securities market or readily tradable on a
secondary market (or the substantial equivalent of a secondary market).
The Units are not traded on an established securities market. In the
unlikely event that the Partnership becomes a "publicly traded
partnership" and is not excepted from federal income tax, there would
be several adverse tax consequences to the Unit holders. For instance,
the Partnership would be regarded as having transferred all of its
assets (subject to all of its liabilities) to a newly-formed
corporation in exchange for stock which would be deemed distributed to
the Unit holders in liquidation of their interests in the Partnership.
In addition, if the Partnership is deemed to be a "publicly traded
partnership," then special rules under Code Section 469 govern the
treatment of losses and income of the Partnership.
15. We have revised to discuss this issue throughout the Schedule.
16. We have addressed this issue in the revised Schedule.
17. There is not actually a consent solicitation in that the General
Partners have said that if a sufficient number of Unit holders object,
they will not sell the Twin Lakes apartments. Nonetheless, the
"contemplated benefits" do not include either the passage or failure of
the sale, such that neither event would give rise to a condition to the
offer. The Schedule has been revised to so indicate.
18. We do not believe the conditions are so broad as to make the Offer
illusory or unclear. Nonetheless, we hereby confirm our understanding
of your position that we must immediately advise Unit holders as to how
we intend to proceed if we believe an event implicates a condition.
19. You have requested that we acknowledge, and we hereby do 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.
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