Significant Accounting Policies:

Basis of Presentation — As a result of the approval of the Plan of Dissolution by the stockholders in March 2017, the Company's financial position is presented using two different methods. The Company adopted the liquidation basis of accounting ("Liquidation Basis of Accounting") as of March 31, 2017 and for the periods subsequent to March 31, 2017. As a result, a new statement of financial position (Statement of Net Assets) is presented, which represents the estimated amount of proceeds that the Company collected on disposal of assets and obligations it intends to satisfy as it carries out its Plan of Dissolution.

All financial results and disclosures through March 31, 2017 prior to the Company's adoption of Liquidation Basis of Accounting, are presented based on a going concern basis ("Going Concern Basis"), which contemplates the realization of assets and liabilities in the normal course of business. As a result, the balance sheet as of December 31, 2016, and the statements of operations and statements of cash flows for the quarter ended March 31, 2017 and the comparative six months ended June 30, 2016, are presented on a Going Concern Basis consistent with the Company's Annual Report on Form 10-K for the year ended December 31, 2016, as further described below.


3.	Significant Accounting Policies (Continued):

Basis of Presentation Liquidation Basis of Accounting (Post-Plan of Dissolution) — Effective with the adoption of the Liquidation Basis of Accounting on March 31, 2017, assets were adjusted to their estimated liquidation value, on an undiscounted basis, which represented the estimated gross amount of proceeds that the Company would collect on disposal of assets in accordance with the terms of the Sale Agreement for its remaining properties. Estimated costs to dispose of assets were presented separately from the related assets. Liabilities are carried at their contractual amounts due or estimated settlement amounts.

The Company accrues costs that it expects to incur through the end of liquidation to the extent it has a reasonable basis for estimation. These amounts are classified as a liability for estimated costs during liquidation on the Condensed Consolidated Statement of Net Assets. Actual costs may differ from amounts reflected in the financial statements because of inherent uncertainty in estimating future events. These differences may be material. See Note 5, "Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation" for further discussion. Actual costs incurred but unpaid as of June 30, 2017 are included in accounts payable and other accrued expenses, income tax liabilities, and due to affiliates on the Condensed Consolidated Statement of Net Assets.

Net assets in liquidation represents the estimated liquidation value available to stockholders upon liquidation.

Consolidation and Variable Interest Entities (Pre-Plan of Dissolution) — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated financial statements prepared under the Going Concern Basis reflected all normal recurring adjustments, which, in the opinion of management were necessary for the fair statement of the Company’s results for the interim period presented. Amounts as of December 31, 2016 included in the unaudited condensed consolidated financial statements were derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

The accompanying unaudited condensed consolidated financial statements for periods prior to the adoption of the Liquidation Basis of Accounting included the Company’s accounts, the accounts of wholly owned subsidiaries or subsidiaries for which the Company had a controlling interest, the accounts of variable interest entities (“VIEs”) in which the Company was the primary beneficiary, and the accounts of other subsidiaries over which the Company had a controlling financial interest. All material intercompany accounts and transactions were eliminated in consolidation.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the disclosure of contingent liabilities. Under the Liquidation Basis of Accounting, the Company is required to estimate all costs and income that it expects to incur and earn through the end of the liquidation. Actual results could differ from those estimates.

Income Taxes — The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended and related regulations beginning with the year ended December 31, 2004. As a REIT, the Company generally is not subject to federal corporate income taxes provided it distributes at least 100% of its REIT taxable income and capital gains and meets certain other requirements for qualifying as a REIT. Subject to compliance with applicable tax law, certain properties were operated using an eligible third-party manager. In those cases, taxable income from those operations may have been subject to federal income tax.

During 2016, the Company determined that during 2014, 2015 and 2016 it did not comply with the gross income tests of the federal income tax rules applicable to REITs. The applicable federal income tax rules provide a "savings clause" for REITs that fail to satisfy the REIT gross income tests if such failure is due to reasonable cause and not due to willful neglect and the REIT complies with certain disclosure and filing requirements. A REIT that qualifies for the savings clause will retain its REIT status but may be required to pay a tax under section 857(b)(5) of the Code and related interest. As such, the Company accrued an estimated income tax liability of approximately $8.4 million related to 2015 and none related to 2014 or 2016. See Note 2, "Significant Accounting Policies" in Item 8, "Financial Statements and Supplementary Data" of the Company's Annual Report on Form 10-K for the year ended December 31, 2016 for additional information.


3.	Significant Accounting Policies (Continued):

Adopted Accounting Pronouncements — Going Concern Basis (Pre-Plan of Dissolution) — In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810): Interests Held Through Related Parties that are under Common Control,” which requires an entity to consider its indirect interests held by related parties that are under common control on a proportionate basis when evaluating whether the entity is a primary beneficiary of a VIE. The ASU was effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016. The Company adopted this ASU on January 1, 2017. The adoption of this ASU did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.