SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2020

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated financial statements are issued.

Second Liquidating Distribution

Pursuant to the terms of the Company’s Plan of Liquidation, on July 31, 2020, the Company’s board of directors authorized a second liquidating distribution in the amount of $0.25 per share of common stock to the Company’s stockholders of record as of the close of business on August 3, 2020 (the “Second Liquidating Distribution”). The Second Liquidating Distribution was funded from proceeds from the sale of two office buildings in Corporate Technology Centre - 100 Headquarters and 200 Holger. The Company paid the Second Liquidating Distribution on August 7, 2020.

Since the Second Liquidating Distribution is a liquidating distribution pursuant to the Plan of Liquidation, it will reduce the Company’s stockholders’ remaining investment in the Company and reduce the estimated future liquidating distributions per share to be received by the Company’s stockholders by $0.25 per share.

Updated Estimated Value Per Share

In connection with the authorization of the Second Liquidating Distribution, on July 31, 2020, the Company’s board of directors approved an updated estimated value per share of the Company’s common stock of $2.41, effective August 7, 2020 (the “August 2020 Estimated Value Per Share”), to reflect the impact of the payment of the Second Liquidating Distribution. The Company is providing the August 2020 Estimated Value Per Share to assist broker-dealers that participated in the Company’s now-terminated initial public offering in meeting their customer account statement reporting obligations under the Financial Industry Regulatory Authority Rule 2231.

The August 2020 Estimated Value Per Share is equal to the midpoint of the estimated range of liquidating distributions of $3.40 and $3.83 per share of $3.615 reduced by (i) the Company’s authorization of the Initial Liquidating Distribution of $0.75 per share of common stock to the Company’s stockholders of record as of March 5, 2020, which was paid on March 10, 2020, (ii) an estimated decrease in the net value of the Company’s remaining real estate properties and other net assets held as of June 9, 2020 of $0.21 per share due to the impact of the COVID-19 pandemic on leasing projections, projected rental rates, hold periods and the resulting ultimate estimated impact on sales prices of the real estate properties, and (iii) the Company’s authorization of the Second Liquidating Distribution of $0.25 per share of common stock. Thus, the August 2020 Estimated Value Per Share reflects the resulting reduction of the stockholders’ remaining investment in the Company.

Determination of the November 13, 2019 Estimated Value Per Share and Estimated Range in Liquidating Distributions

As disclosed in the Company’s Definitive Proxy Statement, filed with the SEC on December 9, 2019 (the “Proxy Statement”), the Company’s range of estimated net proceeds from liquidation of approximately $3.40 and $3.83 was based on the range in estimated value per share of the Company’s common stock of $3.55 to $3.99 approved by the Company’s board of directors on November 13, 2019, and reduced for (i) expected disposition costs and fees related to future dispositions of real estate, and (ii) estimated corporate and other liquidation and dissolution costs not covered from the Company’s cash flow from operations. The Company’s board of directors approved the November 13, 2019 estimated value per share, in part, to assist the Company in calculating the range of estimated net proceeds from liquidation. The November 13, 2019 estimated value per share of $3.79 was based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2019, with the exception of certain adjustments described in Item 8.01 of the Current Report on Form 8-K, filed with the SEC on November 15, 2019 (the “Valuation 8-K”).

The November 13, 2019 estimated value per share was based upon the recommendation and valuation prepared by the Company’s Advisor. The Advisor’s valuation of the Company’s seven real estate properties held as of November 13, 2019 was based on (i) appraisals of five of the Company’s real estate properties (the “Appraised Properties”) performed by CBRE, Inc. (“CBRE”), an independent third-party valuation firm, and (ii) the contractual sales price less estimated closing credits of two properties that were under contract to sell subsequent to September 30, 2019. The Advisor performed valuations with respect to the Company’s cash, other assets, mortgage debt and other liabilities. The methodologies and assumptions used to determine the estimated value of the Company’s assets and the estimated value of the Company’s liabilities are described in the Valuation 8-K. The November 13, 2019 valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines.

Limitations of the August 2020 Estimated Value Per Share

As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and this difference could be significant. The August 2020 Estimated Value Per Share is not audited and does not represent the fair value of the Company’s assets less the fair value of the Company’s liabilities according to GAAP.

The Company’s expectations about the implementation of the Plan of Liquidation and the amount of any additional liquidating distributions that the Company pays to its stockholders and when the Company will pay them are subject to risks and uncertainties and are based on certain estimates and assumptions, one or more of which may prove to be incorrect. Given the uncertainty and current business disruptions as a result of the outbreak of COVID-19, the Company’s implementation of the Plan of Liquidation may be materially and adversely impacted and this may have a material effect on the ultimate amount and timing of liquidating distributions received by stockholders. No assurance can be given that any additional liquidating distributions the Company pays to its stockholders will equal or exceed the August 2020 Estimated Value Per Share. See Note 1, “COVID-19 Pandemic,” Note 2, “Plan of Liquidation” and with respect to the limitations of the August 2020 Estimated Value Per Share, the Company’s Current Report on Form 8-K filed with the SEC on August 3, 2020.

Share Redemption Program

The Company’s share redemption program provides only for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program and, together with redemptions sought in connection with a stockholder’s death, “Special Redemptions”). In accordance with the Company’s share redemption program, these Special Redemptions are made at a price per share equal to the Company’s most recent estimated value per share as of the applicable redemption date, provided that if the Company’s board of directors has declared liquidating distributions on such share with a record date prior to the applicable redemption date for such share and the most recent estimated value per share has not been updated to reflect the reduction for such liquidating distributions, then the redemption price per share will be reduced to reflect the amount of such liquidating distributions. Thus, the redemption price per share of the Company’s common stock eligible for redemption on the August 31, 2020 redemption date will equal $2.41. The Company will report future redemption prices in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the SEC.