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1290 AVENUE OF THE AMERICAS
NEW YORK, NY 10104-0050
TELEPHONE: 212.468.8000
FACSIMILE: 212.468.7900
WWW.MOFO.COM
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morrison & foerster llp
new york, san francisco,
los angeles, palo alto,
san diego, washington, d.c.
northern virginia, denver,
sacramento, walnut creek
tokyo, london, brussels,
beijing, shanghai, hong kong |
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December 6, 2010
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Writers Direct Contact
212.468.8088
Nevans@mofo.com |
David L. Orlic
Special Counsel
Office of Mergers & Acquisitions
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: |
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Presidential Realty Corporation
Schedule 13E-3
File No. 005-34516
Preliminary Proxy Statement on Schedule 14A
File No. 001-08594 |
Dear Mr. Orlic:
On behalf of our client, Presidential Realty Corporation (the Company), we are filing today with
the Securities and Exchange Commission (the Commission) Amendment No. 1 to the Schedule 13E-3
(the Schedule 13E-3) and a revised Preliminary Proxy Statement on Schedule 14A (the Proxy
Statement). Below, we provide responses to the comments raised by the staff (the Staff) in its
comment letter dated September 23, 2010. We have indicated the comments from the Staff in bold
face type and the responses in regular type.
Schedule 13E-3
General
1. |
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We note the large equity position held by directors and officers of your company. We also
note that, in connection with the Plan of Liquidation proposal, Mr. Viertel and Mr. Baruch
have agreed to acquire from the company the outstanding Ivy Consolidated Loans with a balance
of more than $3.6 million for $100,000. Please tell us what consideration was given to
whether these
directors and officers are affiliates who should be filing persons. Alternatively, please
revise the Schedule 13E-3 to include these individuals as filing persons. For additional
guidance, see Interpretative Response 201.05 of our Compliance and Disclosure
Interpretations relating to Going Private Transactions, Exchange Act Rule 13e-3 and
Schedule 13E-3. |
David L. Orlic
December 6, 2010
Page Two
Amendment No. 1 to the Schedule 13E-3 includes all directors and executive officers as filing
persons except Ms. Delgado. Each of the officers of the Company other than Ms. Delgado is also a
director of the Company and owns a significant amount of Presidential stock. As Ms. Delgado is
neither a director nor a significant owner of Presidential stock nor was she involved in the
determination to seek approval of a plan of liquidation, we do not believe that she should be
included as a filing person.
2. |
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Please note that each new filing person must individually comply with the filing,
dissemination and disclosure requirements of Schedule 13E-3. You will need to revise the
disclosure to include all of the information required by Schedule 13E-3 and its instructions
for any filing persons added in response to this comment. For example, include a statement as
to whether each person believes the Rule 13e-3 transaction to be procedurally and
substantially fair to unaffiliated security holders and an analysis of the material factors
upon which they relied in reaching such a conclusion. Refer to Item 8 to Schedule 13E-3 and
Question and Answer No. 5 of SEC Release No. 34-17719 (April 19, 1981). In this regard, the
reasons for the transaction and the alternatives considered by these affiliates may be
different than those of the current filing person, and this fact should be reflected in the
disclosure. In addition, ensure that each new filer signs the Schedule 13E-3. |
Please see Amendment No. 1 to the Schedule 13E-3. See also Special FactorsReasons for the Plan
of Liquidation, Special FactorsRecommendation of the Special Committee of the Board and
Special FactorsRecommendation of the Presidential Board in the Proxy Statement.
Item 2. Subject Company Information, page 1
3. |
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The information you have disclosed in paragraph (c), (d) and (f) of this item must be
included in your proxy statement. Revise your proxy statement accordingly. See Rule
13e-3(e)(1)(v) under the Exchange Act. |
Please see the information under Market for Presidential Common Stock and Related Stockholder
Matters in the Proxy Statement.
Item 3.
Identity and Background of Filing Persons, page 2
4. |
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The information disclosed in Item 3(b) is required to appear in your proxy statement. See
Rule 13e-3(e)(1)(v) under the Exchange Act. |
David L. Orlic
December 6, 2010
Page Three
Please see the information under Special FactorsCertain Transactions and Possible Effects of the
Approval of the Plan of Liquidation upon Directors and Officers Additional Information about
Directors, Officers and Other Affiliates in the Proxy Statement.
5. |
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Please provide the information required by Item 1003(c)(5) of Regulation M-A. |
Please see the information under Special FactorsCertain Transactions and Possible Effects of the
Approval of the Plan of Liquidation upon Directors and Officers Additional Information about
Directors, Officers and Other Affiliates in the Proxy Statement.
Item 4. Terms of the Transaction, page 2
6. |
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Please tell us how you intend to comply with Item 1004(a)(2)(ii) of Regulation M-A, or
advise. |
We believe that the Proxy Statement complies with the requirements of Item 1004(a)(2)(ii) of
Regulation M-A. Although the Company cannot determine or state a fixed amount of consideration
until its assets are sold and its liabilities are satisfied or provided for, the methodology for
determining the consideration to be received by stockholders in the liquidation is described in the
Proxy Statement. The most complete description of such consideration is set forth under Special
FactorsExpected Distributions.
7. |
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Please provide the complete statement required by Item 1004(e) of Regulation M-A in your
proxy statement. |
Please see the information under Special FactorsProvisions for Unaffiliated Stockholders;
Unavailability of Appraisal or Dissenters Rights in the Proxy Statement.
Item 13. Financial Statements, page 6
8. |
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You appear to be relying on Instruction 1 to Item 13, but you have not provided summary
financial information in your proxy statement. Please advise. |
Please see Summary Financial Information in the Proxy Statement.
Preliminary Proxy Statement on Schedule 14A
General
9. |
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Please clearly mark your preliminary proxy statement and forms of proxy as Preliminary
Copies. See Rule 14a-6(e)(1) under the Exchange Act. |
Please see the first page of the Proxy Statement.
David L. Orlic
December 6, 2010
Page Four
10. |
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Please disclose whether your board of directors reasonably believes that the proposed
liquidation is substantively and procedurally fair to unaffiliated security holders. See Item
1014(a) of Regulation M-A and Q&A No. 21 in SEC Release No. 34-17719 (April 13, 1981). |
The requested disclosure has been added to the Proxy Statement. Please see, e.g., Special
FactorsRecommendation of the Special Committee of the Board and Special FactorsRecommendation
of the Presidential Board.
11. |
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Disclose why you chose to undertake the going private transaction at this time. See Item
1013(c) of Regulation M-A. |
Please see Special FactorsBackground, particularly paragraph four thereof, as well as Special
FactorsReasons for the Liquidation.
12. |
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Provide the disclosure required by Item 1014(c) and (d) of Regulation M-A. |
Please see the revised disclosure under Summary Term SheetRequired Vote and the information
under Special FactorsProvisions for Unaffiliated Stockholders; Unavailability of Appraisal or
Dissenters Rights in the Proxy Statement.
13. |
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You must present prominently, in a Special Factors section in the front of your proxy
statement, the information required by Items 7, 8 and 9 of Schedule 13E-3. Please revise your
document accordingly. See Rule 13e-3(e)(1)(ii). |
Please see Special Factors in the Proxy Statement.
Summary, page 1
14. |
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Your summary term sheet must be in bullet point format and cross-reference a more detailed
discussion contained elsewhere in the proxy statement. Revise your summary accordingly. See
Item 1001 of Regulation M-A. |
Please see the Summary Term Sheet in the Proxy Statement.
15. |
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Under the caption Total Distributions, please disclose that the final distributions may be
an amount from $0 to $2.25 per share or higher, depending
on the proceeds from the sales of your assets and the liabilities that must be paid by the
company or liquidating trust. |
Please see the revised disclosure under Summary Term SheetExpected Distributions and Special
FactorsExpected DistributionsTiming and Amount.
David L. Orlic
December 6, 2010
Page Five
The Plan of Liquidation Proposal, page 1
16. |
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Please revise your document to include the price at which you have listed the Mapletree
Industrial Center for sale. |
Please see the revised disclosure under Special FactorsSteps Taken Consistent with the Plan of
Liquidation.
Cautionary Notice Regarding Forward-Looking Statements, page 12
17. |
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You have referred to the Private Securities Litigation Reform Act of 1995 in connection with
disclosure regarding forward-looking statements. The safe harbor established by that Act is
inapplicable to statements made in connection with a going private transaction. See Section
21E(b)(1)(E) of the Exchange Act. Revise your disclosure accordingly. |
Please see the revised Cautionary Notice Regarding Forward-Looking Statements in the Proxy
Statement.
Background, page 16
18. |
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Please disclose the asset valuation models and liquidation scenarios you refer to in this
section. |
Please see the revised disclosure under Special FactorsExpected DistributionsCalculation of
Estimated Distributions. The Companys calculation of the funds available to be distributed is
simply expected net sales proceeds less expected expenses and operating losses during the
liquidation period. The expected expenses are set forth in the Proxy Statement, are reasonably
known and not subject to significant change. The calculation of expected sales prices is based on
market conditions in the various markets for the Companys assets, which conditions, as disclosed
in the Proxy Statement, are difficult. The Company has a limited number of assets. It has
disclosed the information publicly available about its assets. However, to disclose the prices at
which the Company believes it will ultimately sell its other assets Las Piedras, Hato Rey and
the Consolidated Note would be anti-competitive and adversely affect the Companys ability to
obtain such prices. In determining the possible sales prices for the Las Piedras and Hato Rey
properties and the Consolidated
Note, in order not to set expectations too high, the Company used realistic but perhaps
conservative estimates of market prices; if those amounts are disclosed, it would be very difficult
for the Company to achieve even those prices. Further, the Company has disclosed only a minimum
expected distribution because it was not sure it could reliably determine a range of distributions
given the variables described in this paragraph. However, the Company has disclosed all the
circumstances that would affect the sales prices (e.g., the
David L. Orlic
December 6, 2010
Page Six
disclosure regarding the Consolidated
Note in the fourth bullet under Special FactorsExpected DistributionsCalculation of Estimated
Distributions) as well as its ability to make any of the distributions. As the sales prices are
determined by third party market forces and not any of the Filing Persons (and the interests of the
Filing Persons in obtaining the best prices for the assets align with those of the unaffiliated
stockholders), the Company respectfully argues that it is not required to disclose the full asset
valuation models and liquidation scenarios.
Calculation of Estimated Distributions, page 19
19. |
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Please file as an exhibit to your Schedule TO the 2009 appraisal of the Las Piedras, Puerto
Rico property. See Items 12 and 13 of Schedule TO and Item 1015 of Regulation M-A. |
None of the Company, any affiliate of the Company or any Filing Person has received an report,
opinion or appraisal that is materially related to the Rule 13e-3 transaction, as required by Item
1015 of Regulation M-A. For the purpose of completeness, the Company disclosed that in connection
with acquiring the Las Piedras property, it obtained a third party appraisal. This appraisal was
solely prepared to assist the Company in preparing its financial statements. The effects of the
appraisal have been disclosed by the Company, including in note 4 to the Companys audited
financial statements included in its Annual Report on Form 10-K for the year ended December 31,
2009. As of the approximate time that the Company expects to mail the Proxy Statement, the
appraisal will be nearly two years old. For these reasons, the Company does not believe that it is
required to file the Las Piedras 2009 appraisal as an exhibit.
20. |
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Please disclose the monetary values you have assigned to the Las Piedras, Puerto Rico
property, the Consolidated Note, and the net book value of the Hato Rey property. |
We have deleted the reference to the net book value of the Hato Rey property; please note that the
net book value at September 30, 2010 was actually a negative amount. Please see the revised
disclosure in the fifth bullet under Special FactorsExpected Distributions Calculation of
Estimated Distributions. Please also see the response to comment 18.
21. |
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Please confirm that you will file amendments to your Schedule 13E-3 as subsequent steps of
this going private transaction occur, as required by Rule 13e-3(d)(2). |
The Company confirms that it will file amendments to the Schedule 13E-3 as required by Rule
13e-3(d)(2). Please also see the revised Cautionary Notice Regarding Forward-Looking Statements
in the Proxy Statement.
David L. Orlic
December 6, 2010
Page Seven
22. |
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Please include a table to show how you arrived at a per share estimated distribution amount
of $2.25 given the disclosure in this section. |
Please see the response to comment 18.
Uncertainties Relating to Estimated Distributions, page 20
23. |
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Please explain the meaning of the defined term IATG property. |
The reference to the IATG property has been corrected to refer to the Las Piedras, Puerto Rico
property. Please note that IATG Puerto Rico, LLC is the name of the entity holding the Las Piedras
property.
Modification or Termination of Plan of Liquidation, page 21
24. |
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Please highlight here or in another appropriate location of the proxy statement your
disclosure that security holders will not have an opportunity to vote on matters relating to
the modification or termination of the plan of liquidation. Similarly highlight the disclosure
in the last sentence of the partial paragraph at the top of page 23. |
We have added a reference to the ability of the Company to amend or abandon the Plan of Liquidation
under the caption Proxy Statement (immediately following the Notice of Annual Meeting of
Stockholders). Please also see Summary Term Sheet Amending or Abandoning the Plan of
Liquidation. We have also highlighted the information referenced in your comment. Please note
that the proposal itself (as indicated under the caption Proxy Statement) also notes that it is
subject to the discretion of the Board of Directors.
Liquidating Trust, page 22
25. |
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Please quantify the savings referenced at the end of the first paragraph of this section. |
Please see the revised disclosure under Special FactorsLiquidating Trust in the Proxy
Statement.
Source of Funds and Expenses of the Proxy Solicitation, page 26
26. |
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Please disclose the accounting expenses estimated to be incurred in connection with the
liquidation, or advise as to why you believe there will not be any such expenses. See Item
1007(c) of Regulation M-A. |
David L. Orlic
December 6, 2010
Page Eight
The Company has not incurred any special accounting expenses in connection with seeking approval of
the Plan of Liquidation Proposal and currently does not anticipate special accounting expenses
relating to implementation of the Plan of Liquidation. The Company expects that it will continue
to incur customary accounting expenses for its current operations.
Security Ownership of Certain Beneficial Owners, page 43
27. |
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We note that Pdl Partnership beneficially owns 44.9% of your Class A common stock and is
owned by three of your directors. Please direct us to the Schedule 13D on file with respect
to these holdings, or advise us as to why you believe that such a filing is not necessary. |
The three principals of Pdl Partnership filed a Schedule 13D on September 6, 1985 with respect to
their ownership of shares of Class A common stock under the name of BJV General Partnership, a
different New York general partnership. In 1991, the shares of Class A common stock owned by BJV
were transferred to Pdl Partnership whose sole business purpose was and is to hold those shares.
Neither an amendment to the Schedule 13D nor a new Schedule 13D was filed at that time.
Simultaneously with the filing of the revised Proxy Statement and Amendment No. 1 to the Schedule
13e-3, Pdl Partnership is filing Amendment No. 1 to the original Schedule 13D.
Forms of Proxy
28. |
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Your proxy cards provide that they may be voted on such other matters as may properly come
before the meeting. Please provide your analysis as to whether this is consistent with Rule
14a-4(c) under the Exchange Act. |
We believe the language in the proxy card is consistent with Rule 14a-4(c) under the Exchange Act
as this meeting is an Annual Meeting of Stockholders.
* * * * *
David L. Orlic
December 6, 2010
Page Nine
We hope that the foregoing has been responsive to the Staffs comments. If you have any
questions or comments regarding the foregoing, please do not hesitate to contact me at (212)
468-8088.
Sincerely,
Nilene R. Evans
cc: Jeffrey F. Joseph