NET ASSETS IN LIQUIDATION

3 Months Ended

Mar. 31, 2020

Net assets in liquidation decreased by approximately $211.9 million during the two month ended March 31, 2020 as follows:


	For the Period from February 1, 2020 to March 31, 2020
Changes in net assets in liquidation
Change in liquidation value of real estate properties	$	(68,200)
Change in estimated cash flow during liquidation	2,995
Change in capital expenditures	(7,449)
Other changes, net	(408)
Net decrease in liquidation value	(73,062)
Liquidating distribution to stockholders	(138,877)
Changes in net assets in liquidation	$	(211,939)

Pursuant to the Plan of Liquidation, on March 5, 2020, the Company’s board of directors authorized the Initial Liquidating Distribution in the amount of $0.75 per share of common stock to the Company’s stockholders of record as of the close of business on March 5, 2020, for an aggregate cash distribution of approximately $138.9 million, which was the primary reason for the decline in net assets in liquidation. The Initial Liquidating Distribution was paid on March 10, 2020 and was funded with proceeds from the sale of the Campus Drive Buildings.

The estimated net realizable value of real estate decreased by $68.2 million during the two months ended March 31, 2020, which was primarily driven by the Company’s investment in an office building located in Los Angeles, California (the “Union Bank Plaza”) and an office property located in Denver, Colorado (“Granite Tower”), as follows:

•Union Bank Plaza –The estimated sales price of the Union Bank Plaza decreased by approximately $28.5 million primarily due to changes in leasing projections to account for a longer lease-up period and lower projected rental rates caused by COVID-19. As of March 31, 2020, the Union Bank Plaza was 82% leased and due to the amount of vacancy, its valuation or projected sales price is more sensitive to the disruption caused by COVID-19 as compared to a fully stabilized property. Additionally, the valuation or projected sales price was adjusted to increase the terminal capitalization rates and discount rate to account for the increased risk and uncertainty in the current environment.

•Granite Tower – The estimated sales price of Granite Tower decreased by $24.5 million. While Granite Tower was 96% leased as of March 31, 2020, the property does have nearly 85,000 square feet of occupied space representing approximately 14% of the building square footage that will be vacated during the remainder of 2020. As a result, the anticipated sales price was reduced to account for a longer lease-up period and lower projected rental rates caused by COVID-19. Granite Tower is further impacted by the deteriorating oil and gas industry as its anchor tenant that occupies approximately 61% of the building square footage as of March 31, 2020 is engaged in the exploration and production of oil and gas. The valuation or projected sales price was adjusted to increase the terminal capitalization rates and discount rate to account for the increased risk and uncertainty in the current environment caused by COVID-19 and the deteriorating oil and gas industry.

•Other Properties – The estimated sales prices for the Company’s other real estate properties were adjusted to increase the terminal capitalization rates and discount rates to account for the increased risk and uncertainty caused by COVID-19 resulting in a reduction in the aggregate estimated sales prices of $15.2 million.

The net assets in liquidation as of March 31, 2020 would result in the payment of additional estimated liquidating distributions of approximately $2.66 per share of common stock to the Company’s stockholders of record as of March 31, 2020. This estimate of additional liquidating distributions includes projections of costs and expenses to be incurred during the estimated period required to complete the Plan of Liquidation. There is inherent uncertainty with these estimates and projections, and they could change materially based on the timing of the sales of the Company’s remaining real estate properties, the performance of the Company’s remaining assets and any changes in the underlying assumptions of the projected cash flows from such properties. See Note 2, “Plan of Liquidation.”