OPERATIONS


The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" above and our accompanying consolidated financial
statements and the notes thereto. Also see "Forward-Looking Statements" and
"Summary Risk Factors" preceding Part I and Part I, Item 1A, "Risk Factors."
Overview
We were formed on July 12, 2007 as a Maryland corporation that elected to be
taxed as a real estate investment trust ("REIT") beginning with the taxable year
ended December 31, 2008 and we intend to continue to operate in such a manner.
We conduct our business primarily through our Operating Partnership, of which we
are the sole general partner. Subject to certain restrictions and limitations,
our business is managed by our advisor, KBS Capital Advisors LLC, pursuant to an
advisory agreement. KBS Capital Advisors conducts our operations and manages our
portfolio of real estate investments. Our advisor owns 20,000 shares of our
common stock. We have no paid employees.
As of December 31, 2020, we owned four office properties and an office building
that is part of an office campus.
As of December 31, 2020, we had 184,299,500 shares of common stock issued and
outstanding.
On November 13, 2019, in connection with a review of potential strategic
alternatives available to us, a special committee composed of all of our
independent directors (the "Special Committee") and our board of directors
unanimously approved the sale of all of our assets and our dissolution pursuant
to the terms of the plan of complete liquidation and dissolution (the "Plan of
Liquidation"). The principal purpose of the Plan of Liquidation is to provide
liquidity to our stockholders by selling our assets, paying our debts and
distributing the net proceeds from liquidation to our stockholders. On March 5,
2020, our stockholders approved the Plan of Liquidation. The Plan of Liquidation
is included as an exhibit to this Annual Report on Form 10-K.
Plan of Liquidation
In accordance with the Plan of Liquidation, our objectives are to pursue an
orderly liquidation of our company by selling all of our remaining assets,
paying our debts and our known liabilities, providing for the payment of unknown
or contingent liabilities, distributing the net proceeds from liquidation to our
stockholders and winding up our operations and dissolving our company. While
pursuing our liquidation pursuant to the Plan of Liquidation, we intend to
continue to manage our portfolio of assets to maintain and, if possible, improve
the quality and income-producing ability of our properties to enhance property
stability and better position our remaining assets for sale.
We expect to distribute substantially all of the net proceeds from liquidation
to our stockholders within 24 months from March 5, 2020. Pursuant to the Plan of
Liquidation, on March 5, 2020, our board of directors authorized the Initial
Liquidating Distribution in the amount of $0.75 per share of common stock to
stockholders of record as of the close of business on March 5, 2020. On July 31,
2020, our board of directors authorized the Second Liquidating Distribution in
the amount of $0.25 per share of common stock to stockholders of record as of
the close of business on August 3, 2020, and on December 24, 2020, our board of
directors authorized the Third Liquidating Distribution in the amount of $0.40
per share of common stock to stockholders of record as of the close of business
on December 24, 2020. We expect to continue to pay liquidating distribution
payments to our stockholders through the completion of our liquidation process.
However, if we cannot sell our assets and pay our debts within 24 months from
March 5, 2020, or if the board of directors and the Special Committee determine
that it is otherwise advisable to do so, pursuant to the Plan of Liquidation, we
may transfer and assign our remaining assets to a liquidating trust. Upon such
transfer and assignment, our stockholders will receive beneficial interests in
the liquidating trust.
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Our expectations about the implementation of the Plan of Liquidation and the
amount of any additional liquidating distributions that we will pay to our
stockholders and when we 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. As a result, the actual amount of any additional
liquidating distributions we pay to stockholders may be more or less than we
estimate and the liquidating distributions may be paid later than we predict.
There are many factors that may affect the amount of liquidating distributions
we will ultimately pay to our stockholders. If we underestimate our existing
obligations and liabilities or the amount of taxes, transaction fees and
expenses relating to the liquidation and dissolution, or if unanticipated or
contingent liabilities arise, the amount of liquidating distributions ultimately
paid to our stockholders could be less than estimated. Moreover, the liquidation
value will fluctuate over time in response to developments related to individual
assets in our portfolio and the management of those assets, in response to the
real estate and finance markets, based on the actual liquidation timing and the
amount of net proceeds received from the disposition of the remaining assets and
due to other factors. Given the uncertainty and current business disruptions as
a result of the outbreak of COVID-19, our 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 our stockholders. While we have considered the impact from COVID-19
in our net assets in liquidation presented on the Consolidated Statement of Net
Assets as of December 31, 2020, the extent to which our business may be affected
by COVID-19 depends on future developments with respect to the continued spread
and treatment of the virus, the actions taken to contain the pandemic or
mitigate its impact, and the direct and indirect economic effects of the
pandemic and containment measures. Any long-term impact of this situation, even
after an economic rebound, remains unclear. See " - Market Outlook - Real Estate
and Real Estate Finance Markets - COVID-19 Pandemic and Portfolio Outlook" for a
discussion of the impact of the outbreak of COVID-19 on our business and our
liquidation. We can give no assurance regarding the timing of asset dispositions
in connection with the implementation of the Plan of Liquidation, the sale
prices we will receive for our assets, and the amount or timing of liquidating
distributions to be received by our stockholders.

Market Outlook - Real Estate and Real Estate Finance Markets
Volatility in global financial markets and changing political environments can
cause fluctuations in the performance of the U.S. commercial real estate
markets. Possible future declines in rental rates, slower or potentially
negative net absorption of leased space and expectations of future rental
concessions, including free rent to renew tenants early, to retain tenants who
are up for renewal or to attract new tenants, may result in decreases in cash
flows from our properties. Further, revenues from our properties could decrease
due to a reduction in occupancy (caused by factors including, but not limited
to, tenant defaults, tenant insolvency, early termination of tenant leases and
non-renewal of existing tenant leases), rent deferrals or abatements, tenants
being unable to pay their rent and/or lower rental rates. Reductions in revenues
from our properties would adversely impact the timing of asset sales and/or the
sales price we will receive for our properties. To the extent there are
increases in the cost of financing due to higher interest rates, this may cause
difficulty in refinancing debt obligations at terms as favorable as the terms of
existing indebtedness. Further, increases in interest rates would increase the
amount of our debt payments on our variable rate debt. Management continuously
reviews our debt financing strategies to optimize our portfolio and the cost of
our debt exposure. Market conditions can change quickly, potentially negatively
impacting the value of real estate investments. Most recently, the outbreak of
COVID-19 has had a negative impact on the real estate market as discussed below.
COVID-19 Pandemic and Portfolio Outlook
Since initially being reported in December 2019, COVID-19 has spread around the
world, including to every state in the United States. On March 11, 2020, the
World Health Organization declared COVID-19 a pandemic, and on March 13, 2020,
the United States declared a national emergency with respect to COVID-19. The
COVID-19 pandemic has severely impacted global economic activity and caused
significant volatility and negative pressure in financial markets. The global
impact of the pandemic continues to evolve and many countries, states and
localities, including states and localities in the United States, have reacted
by imposing measures to help control the spread of the virus, including
instituting quarantines, "shelter-in-place" and "stay-at-home" orders, travel
restrictions, restrictions on businesses and school closures. As a result, the
COVID-19 pandemic is negatively impacting almost every industry, including the
U.S. office real estate industry and the industries of our tenants, directly or
indirectly. As of December 31, 2020, tenants in the mining and oil and gas
extraction industry represented approximately 18% of our base rent. Tenants in
this sector have been adversely impacted by the reduced demand for oil as a
result of the slowdown in economic activity resulting from the pandemic spread
of COVID-19 and the collapse in oil prices. The fluidity of the COVID-19
pandemic continues to preclude any prediction as to the ultimate adverse impact
the pandemic may have on our business, financial condition, results of
operations, cash flows and liquidation.
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During the year ended December 31, 2020, we did not experience significant
impact to rental income collections from the COVID-19 pandemic. Rent collections
for the quarter ended December 31, 2020 were approximately 99%. Many of our
tenants have suffered reductions in revenue. As of December 31, 2020, we had
entered into lease amendments related to the effects of the COVID-19 pandemic,
granting $0.2 million of rent deferrals for the period from March 2020 through
December 31, 2020 and granting $0.2 million in rental abatements during this
period. From March 2020 through December 31, 2020, eight tenants were granted
rental deferrals or rental abatements as a result of the pandemic, of which
three tenants have begun to pay rent in accordance with their lease agreements
subsequent to the deferral or abatement period. Four of the eight tenants
continue to have rent abated through March 2021. Depending upon the duration of
the pandemic, the various measures imposed to help control the spread of the
virus and the corresponding economic slowdown, these tenants or additional
tenants may seek rent deferrals or abatements in future periods or become unable
to pay their rent. We will continue to evaluate any additional short-term rent
relief requests from tenants on an individual basis. Any future rent relief
arrangements are expected to be structured as temporary short-term deferrals of
base rent that will be paid back over time. Not all tenant requests will
ultimately result in modified agreements, nor are we forgoing our contractual
rights under our lease agreements. In most cases, it is in our best interest to
help our tenants remain in business and reopen when restrictions are lifted. If
tenants default on their rent and vacate, the ability to re-lease this space is
likely to be more difficult if the economic slowdown continues and any long term
impact of this situation, even after an economic rebound, remains unclear.
Subsequent to December 31, 2020, we have not seen a material impact on our rent
collections. However, current collections and rent relief requests to-date may
not be indicative of collections or requests in any future period. The impact of
the COVID-19 pandemic on our rental revenue for the first quarter of 2021 and
thereafter cannot be determined at present.
Although we did not experience significant disruptions in rental income, during
the year ended December 31, 2020, we reduced the estimated liquidation value of
our real estate portfolio by $90.2 million due to changes in leasing projections
across our portfolio resulting in lower projected cash flow and projected sales
prices caused by the impact of the COVID-19 pandemic. See "- Changes in Net
Assets in Liquidation" for a discussion of the change in liquidation value of
real estate properties. We may need to recognize additional decreases in the
values of our real estate properties to the extent leasing projections and
projected sales prices continue to decline at our properties.
As of December 31, 2020, we had $48.4 million of revolving debt available for
immediate future disbursement under our portfolio loan facility, subject to
certain conditions set forth in the loan agreements. Significant reductions in
rental revenue in the future may limit our ability to draw on our portfolio loan
facility due to covenants described in our loan agreements. However, we believe
that our cash on hand, proceeds from asset sales and proceeds available under
our portfolio loan facility and mortgage loan will be sufficient to meet our
liquidity needs during our liquidation.
The COVID-19 pandemic or a future pandemic, epidemic or outbreak of infectious
disease affecting states or regions in which we or our tenants operate could
have material and adverse effects on our business, financial condition, results
of operations, cash flows and our liquidation due to, among other factors:
health or other government authorities requiring the closure of offices or other
businesses or instituting quarantines of personnel as the result of, or in order
to avoid, exposure to a contagious disease; disruption in supply and delivery
chains; a general decline in business activity and demand for real estate,
especially office properties; reduced economic activity, general economic
decline or recession, which may impact our tenants' businesses, financial
condition and liquidity and may cause tenants to be unable to make rent payments
to us timely, or at all, or to otherwise seek modifications of lease
obligations; difficulty accessing debt and equity capital on attractive terms,
or at all, and a severe disruption and instability in the global financial
markets or deteriorations in credit and financing conditions, which may affect
our access to capital necessary to fund business operations or address maturing
liabilities on a timely basis and may result in fewer buyers seeking to acquire
commercial real estate; and the potential negative impact on the health of
personnel of our advisor, particularly if a significant number of our advisor's
employees are impacted, which would result in a deterioration in our ability to
ensure business continuity during a disruption.
The extent to which the COVID-19 pandemic or any other pandemic, epidemic or
disease impacts our operations and those of our tenants and our ability to
implement our Plan of Liquidation depends on future developments, which are
highly uncertain and cannot be predicted with confidence, including the scope,
severity and duration of the pandemic, the actions taken to contain the pandemic
or mitigate its impact, and the direct and indirect economic effects of the
pandemic and containment measures, among others. Nevertheless, the COVID-19
pandemic (or a future pandemic, epidemic or disease) presents material
uncertainty and risk with respect to our business, financial condition, results
of operations, cash flows and our liquidation.
Our business, like all businesses, is being impacted by the uncertainty
regarding the COVID-19 pandemic, the effectiveness of policies introduced to
neutralize the disease, and the impact of those policies on economic activity.
Given the uncertainty and current business disruptions as a result of the
outbreak of COVID-19, our 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 our
stockholders.
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Liquidity and Capital Resources
As described above under "- Overview - Plan of Liquidation," on March 5, 2020,
our stockholders approved the sale of all of our assets and our dissolution
pursuant to the terms of the Plan of Liquidation. We expect to sell all of our
assets, pay all of our known liabilities, provide for unknown liabilities and
distribute the net proceeds from liquidation to our stockholders. Our principal
demands for funds during our liquidation are and will be for: the payment of
operating expenses, capital expenditures and general and administrative
expenses, including expenses in connection with the Plan of Liquidation;
payments under debt obligations; Special Redemptions of common stock pursuant to
our share redemption program; and payments of distributions to stockholders
pursuant to the Plan of Liquidation. During our liquidation, we intend to use
our cash on hand and proceeds from the sale of real estate properties as our
primary sources of liquidity. To the extent available, we also intend to use
cash flow generated by our real estate investments and proceeds from debt
financing; however, asset sales will further reduce cash flows from these
sources during the implementation of the Plan of Liquidation.
Our share redemption program provides only for Special Redemptions. During each
calendar year, such Special Redemptions are limited to an annual dollar amount
determined by the board of directors, which may be reviewed during the year and
increased or decreased upon ten business days' notice to our stockholders. We do
not expect to make ordinary redemptions in the future. On December 24, 2020, our
board of directors approved an annual dollar limitation of $10.0 million in the
aggregate for the calendar year 2021 for Special Redemptions (subject to review
and adjustment during the year by the board of directors), and further subject
to the limitations described in the share redemption program.
Our investments in real estate generate cash flow in the form of rental revenues
and tenant reimbursements, which are reduced by operating expenditures, debt
service payments, the payment of asset management fees and corporate general and
administrative expenses. Cash flow from operations from our real estate
investments is primarily dependent upon the occupancy level of our portfolio,
the net effective rental rates on our leases, the collectibility of rent and
operating recoveries from our tenants and how well we manage our expenditures,
all of which may be adversely affected by the impact of the COVID-19 pandemic as
discussed above. As of December 31, 2020, our real estate properties were
73% occupied.
For the year ended December 31, 2020, our cash needs for capital expenditures
and the payment of debt obligations were met with cash on hand and proceeds from
asset sales. Operating cash needs during the same period were met with cash flow
generated by our real estate. We believe that our cash on hand, proceeds from
the sales of real estate properties and, to the extent available, our cash flow
from operations and proceeds available under our portfolio loan facility and
mortgage loan will be sufficient to meet our liquidity needs during our
liquidation. As discussed above, asset sales will further reduce cash flows from
operations and proceeds available from debt financing during the implementation
of the Plan of Liquidation.
On March 5, 2020, our board of directors authorized the Initial Liquidating
Distribution in the amount of $0.75 per share of common stock to our
stockholders of record as of the close of business on March 5, 2020. This
Initial Liquidating Distribution was paid on March 10, 2020 and was funded from
proceeds from the sale of the Campus Drive Buildings. On July 31, 2020, our
board of directors authorized the Second Liquidating Distribution in the amount
of $0.25 per share of common stock to our stockholders of record as of the close
of business on August 3, 2020. This Second Liquidating Distribution was paid on
August 7, 2020 and was funded from proceeds from the sale of two office
buildings in Corporate Technology Centre - 100 Headquarters and 200 Holger. On
December 24, 2020, our board of directors authorized the Third Liquidating
Distribution in the amount of $0.40 per share of common stock to our
stockholders of record as of the close of business on December 24, 2020. This
Third Liquidating Distribution was paid on December 30, 2020 and was funded from
the proceeds from the sale of two office buildings in Corporate Technology
Centre - 250 Holger and 350 Holger. We do not expect to pay regular monthly
distributions during the liquidating process. During the liquidating process, we
intend to maintain adequate cash reserves for liquidity, capital expenditures,
debt repayments, future Special Redemptions under our share redemption program
and other future capital needs.
We expect to continue to pay liquidating distribution payments to our
stockholders through the completion of our liquidation process and to pay the
final liquidating distribution after we sell all of our assets, pay all of our
known liabilities and provide for unknown liabilities. We expect to
substantially complete these activities within 24 months from March 5, 2020, the
day our stockholders approved the Plan of Liquidation. However, our expectations
about the amount of liquidating distributions that we will pay and when we will
pay them are based on many estimates and assumptions, one or more of which may
prove to be incorrect. As a result, the actual amount of liquidating
distributions we pay to our stockholders may be more or less than we estimate
and the liquidating distributions may be paid later than we predict. See "-
Overview - Plan of Liquidation" and "-Market Outlook - Real Estate and Real
Estate Finance Markets - COVID-19 Pandemic and Portfolio Outlook" for a
discussion of the impact of the outbreak of COVID-19 on our business and our
liquidation.
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Cash Flows from Operating Activities
During the month ended January 31, 2020, net cash used in operating activities
was $7.4 million.
Cash Flows from Investing Activities
Net cash provided by investing activities was $299.3 million for the month ended
January 31, 2020 and consisted of the following:
•$302.0 million of net proceeds from the sale of the Campus Drive Buildings; and
•$2.7 million used for improvements to real estate.
Cash Flows from Financing Activities
During the month ended January 31, 2020, net cash used in financing activities
was $177.0 million and consisted of the following:
•$176.7 million of principal payments on notes payable; and
•$0.3 million of cash used for redemptions of common stock.
In addition to using our capital resources to meet our debt service obligations,
for capital expenditures and for operating costs, we use our capital resources
to make certain payments to our advisor. We paid our advisor fees in connection
with the acquisition and origination of our assets and pay our advisor fees in
connection with the management and disposition of our assets and for certain
costs incurred by our advisor in providing services to us. Among the fees
payable to our advisor is an asset management fee. With respect to investments
in real estate, we pay our advisor a monthly asset management fee equal to
one-twelfth of 0.75% of the amount paid or allocated to acquire the investment,
plus the cost of any subsequent development, construction or improvements to the
property. This amount includes any portion of the investment that was debt
financed and is inclusive of acquisition fees and expenses related thereto. We
also continue to reimburse our advisor and our dealer manager for certain
stockholder services.
During the period from February 1, 2020 to December 31, 2020, cash and cash
equivalents decreased by $139.7 million primarily as a result of the payments of
the $138.9 million Initial Liquidating Distribution, the $46.2 million Second
Liquidating Distribution, the $73.7 million Third Liquidating Distribution and
$50.8 million of capital expenditure payments offset by $152.9 million of net
proceeds from the sale of four buildings in Corporate Technology Centre and
$20.6 million of net cash flows from operations.
In order to execute our investment strategy, we primarily utilized secured debt
to finance a portion of our investment portfolio. Management remains vigilant in
monitoring the risks inherent with the use of debt in our portfolio and is
taking actions to ensure that these risks, including refinance and interest rate
risks, are properly balanced with the benefit of using leverage. We limit our
total liabilities to 75% of the cost (before deducting depreciation and other
noncash reserves) of our tangible assets; however, we may exceed that limit if
the majority of the conflicts committee approves each borrowing in excess of
such limitation and we disclose such borrowings to our stockholders in our next
quarterly report with an explanation from the conflicts committee of the
justification for the excess borrowing. As of December 31, 2020, our borrowings
and other liabilities were approximately 37% of both the cost (before deducting
depreciation and other noncash reserves) and book value (before deducting
depreciation) of our tangible assets, respectively.
Pursuant to our stockholders' approval of the Plan of Liquidation, we adopted
the liquidation basis of accounting as of February 1, 2020 (as the approval of
the Plan of Liquidation by our stockholders became imminent within the first
week of February 2020 based on the results of our solicitation of proxies from
our stockholders for their approval of the Plan of Liquidation) and for the
periods subsequent to February 1, 2020 in accordance with GAAP. Accordingly, on
February 1, 2020, assets were adjusted to their estimated net realizable value,
or liquidation value, which represents the estimated amount of cash that we will
collect through the disposal of our assets as we carry out our Plan of
Liquidation. The liquidation values of our operating properties are presented on
an undiscounted basis. Estimated costs to dispose of assets and estimated
capital expenditures through the anticipated disposition date of the properties
have been presented separately from the related assets. Liabilities are carried
at their contractual amounts due or estimated settlement amounts.

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Contractual Obligations
The following is a summary of our contractual obligations as of December 31,
2020 (in thousands):

Payments Due During the Years Ending December 31, Contractual Obligations

                                Total               2021               2022             2023              2024
Outstanding debt obligations (1)                    $ 240,520          $  145,170          $ 5,175          $ 90,175          $     -
Interest payments on outstanding debt
obligations (2)                                     $   5,170          $    2,282          $ 1,685          $  1,203          $     -


_____________________
(1) Amounts include principal payments only based on maturity dates as of
December 31, 2020; subject to certain conditions, the maturity dates of certain
loans may be extended beyond what is shown above.
(2) Projected interest payments are based on the outstanding principal amounts,
maturity dates and interest rates in effect as of December 31, 2020 (consisting
of the contractual interest rate). We incurred interest expense of $1.1 million,
excluding amortization of deferred financing costs of $0.1 million during the
month ended January 31, 2020. During the 11 months ended December 31, 2020, we
incurred interest expense of $4.7 million.

Changes in Net Assets in Liquidation
Period from February 1, 2020 through December 31, 2020
Net assets in liquidation decreased by approximately $322.9 million from $704.4
million on February 1, 2020 to $381.5 million on December 31, 2020. Pursuant to
the Plan of Liquidation, on March 5, 2020, our board of directors authorized the
Initial Liquidating Distribution in the amount of $0.75 per share of common
stock to our stockholders of record as of the close of business on March 5,
2020, for an aggregate cash distribution of approximately $138.9 million. The
Initial Liquidating Distribution was paid on March 10, 2020 and was funded with
proceeds from the sale of the Campus Drive Buildings. On July 31, 2020, our
board of directors authorized the Second Liquidating Distribution in the amount
of $0.25 per share of common stock to our stockholders of record as of the close
of business on August 3, 2020, for an aggregate cash distribution of
approximately $46.2 million. The Second Liquidating Distribution was paid on
August 7, 2020 and was funded with proceeds from the sale of two office
buildings in Corporate Technology Centre - 100 Headquarters and 200 Holger. On
December 24, 2020, our board of directors authorized the Third Liquidating
Distribution in the amount of $0.40 per share of common stock to our
stockholders of record as of the close of business on December 24, 2020, for an
aggregate cash distribution of approximately $73.7 million. The Third
Liquidating Distribution was paid on December 30, 2020 and was funded with
proceeds from the sale of two office buildings in Corporate Technology Centre -
250 Holger and 350 Holger. These liquidating distributions were the largest
component of the decline in net assets in liquidation.
The estimated net realizable value of real estate decreased by $90.2 million
during the 11 months ended December 31, 2020, which was primarily driven by our
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 net proceeds from the sale of the Union Bank
Plaza decreased by approximately $57.5 million primarily due to changes in
leasing projections and related capital investments to account for a longer
lease-up period and lower projected rental rates caused by COVID-19. As of
December 31, 2020, the Union Bank Plaza was 72% 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 net proceeds from the sale of Granite Tower
decreased by approximately $24.3 million due to changes in leasing projections
and related capital investments 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 50% of the building square footage as of December 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. As of December 31, 2020, Granite Tower was 82% leased.
•Other Properties - The estimated net proceeds from the sales of our 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 net reduction in the aggregate estimated net proceeds
from sales of $8.4 million.

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Results of Operations
In light of the adoption of liquidation basis accounting as of February 1, 2020,
the results of operations for the current year period are not comparable to the
prior year period. The sale of assets under the Plan of Liquidation will have a
significant impact on our operations. Changes in liquidation values of our
assets are discussed above under "- Changes in Net Assets in Liquidation." See
"- Overview - Plan of Liquidation" and "- Market Outlook - Real Estate and Real
Estate Finance Markets - COVID-19 Pandemic and Portfolio Outlook" for a
discussion of the impact of the outbreak of COVID-19 on our business and our
liquidation. For a discussion of the year ended December 31, 2019 compared to
the year ended December 31, 2018, please refer to   Item 7 of Part II,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations    "   in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, which was filed with the SEC on March 6, 2020 and which
specific discussion is incorporated herein by reference.
Due to the adoption of the Plan of Liquidation, we are no longer reporting funds
from operations and modified funds from operations as we no longer consider
these to be key performance measures.

Critical Accounting Policies
Below is a discussion of the accounting policies that management considers
critical in that they involve significant management judgments and assumptions,
require estimates about matters that are inherently uncertain and because they
are important for understanding and evaluating our reported financial results.
These judgments affect the reported amounts of assets and liabilities and our
disclosure of contingent assets and liabilities as of the dates of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. With different estimates or assumptions, materially different amounts
could be reported in our financial statements. Additionally, other companies may
utilize different estimates that may impact the comparability of our results of
operations to those of companies in similar businesses.
Subsequent to the adoption of the liquidation basis of accounting, we are
required to estimate all costs and income we expect to incur and earn through
the end of liquidation including the estimated amount of cash we expect to
collect through the disposal of our assets and the estimated costs to dispose of
our assets.
Pursuant to our stockholders' approval of the Plan of Liquidation, we adopted
the liquidation basis of accounting as of and for the periods subsequent to
February 1, 2020 (as approval of the Plan of Liquidation became imminent within
the first week of February 2020 based on the results of our solicitation of
proxies from our stockholders for their approval of the Plan of Liquidation).
Accordingly, on February 1, 2020, assets were adjusted to their estimated net
realizable value, or liquidation value, which represents the estimated amount of
cash that we will collect through the disposal of our assets as we carry out our
Plan of Liquidation. The liquidation values of our remaining real estate
properties are presented on an undiscounted basis. Estimated costs to dispose of
assets and estimated capital expenditures through the anticipated disposition
date of the properties have been presented separately from the related assets.
Liabilities are carried at their contractual amounts due or estimated settlement
amounts.
We accrue costs and income that we expect to incur and earn through the
completion of our liquidation, including the estimated amount of cash we expect
to collect through the disposal of our assets and the estimated costs to dispose
of our assets, to the extent we have a reasonable basis for estimation. These
amounts are classified as a liability for estimated costs in excess of estimated
receipts during liquidation on the Consolidated Statement of Net Assets. Actual
costs and income may differ from amounts reflected in the financial statements
because of the inherent uncertainty in estimating future events. These
differences may be material. See Note 2, "Plan of Liquidation" and Note 4,
"Liabilities for Estimated Costs in Excess of Estimated Receipts During
Liquidation" for further discussion. Actual costs incurred but unpaid as of
December 31, 2020 are included in accounts payable and accrued liabilities, due
to affiliate and other liabilities on the Consolidated Statement of Net Assets.
Revenue Recognition - Operating Leases
Liquidation Basis of Accounting
Under the liquidation basis of accounting, we have accrued all income that we
expect to earn through the completion of our liquidation to the extent we have a
reasonable basis for estimation. Revenue from tenants is estimated based on the
contractual in-place leases and projected leases through the anticipated
disposition date of the property. These amounts are classified in liabilities
for estimated costs in excess of estimated receipts during liquidation on the
Consolidated Statement of Net Assets.
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Going Concern Basis
Real Estate
On January 1, 2019, we adopted the lease accounting standards under Topic 842
including the package of practical expedients for all leases that commenced
before the effective date of January 1, 2019. Accordingly, we (i) did not
reassess whether any expired or existing contracts are or contain leases, (ii)
did not reassess the lease classification for any expired or existing lease, and
(iii) did not reassess initial direct costs for any existing leases. We did not
elect the practical expedient related to using hindsight to reevaluate the lease
term. In addition, we adopted the practical expedient for land easements and did
not assess whether existing or expired land easements that were not previously
accounted for as leases under the lease accounting standards of Topic 840 are or
contain a lease under Topic 842.
In addition, Topic 842 provides an optional transition method to allow entities
to apply the new lease accounting standards at the adoption date and recognize a
cumulative-effect adjustment to the opening balance of retained earnings. We
adopted this transition method upon our adoption of the lease accounting
standards of Topic 842, which did not result in a cumulative effect adjustment
to the opening balance of retained earnings on January 1, 2019. Our comparative
periods presented in the financial statements were reported under the lease
accounting standards of Topic 840 until our adoption of the liquidation basis of
accounting as of and for the periods subsequent to February 1, 2020.
In accordance with Topic 842, tenant reimbursements for property taxes and
insurance were included in the single lease component of the lease contract (the
right of the lessee to use the leased space) and therefore were accounted for as
variable lease payments and were recorded as rental income on our statement of
operations beginning January 1, 2019 until our adoption of the liquidation basis
of accounting as of and for the periods subsequent to February 1, 2020. In
addition, we adopted the practical expedient available under Topic 842 to not
separate nonlease components from the associated lease component and instead to
account for those components as a single component if the nonlease components
otherwise would be accounted for under the new revenue recognition standard
(Topic 606) and if certain conditions are met, specifically related to tenant
reimbursements for common area maintenance which would otherwise be accounted
for under the revenue recognition standard. We believe the two conditions have
been met for tenant reimbursements for common area maintenance as (i) the timing
and pattern of transfer of the nonlease components and associated lease
components are the same and (ii) the lease component would be classified as an
operating lease. Accordingly, tenant reimbursements for common area maintenance
were also accounted for as variable lease payments and recorded as rental income
on our statement of operations beginning January 1, 2019 until our adoption of
the liquidation basis of accounting as of and for the periods subsequent to
February 1, 2020.
Until our adoption of the liquidation basis of accounting as of and for the
periods subsequent to February 1, 2020, we recognized minimum rent, including
rental abatements, lease incentives and contractual fixed increases attributable
to operating leases, on a straight-line basis over the term of the related
leases when collectibility was probable and recorded amounts expected to be
received in later years as deferred rent receivable. If the lease provided for
tenant improvements, we determined whether the tenant improvements, for
accounting purposes, were owned by the tenant or us. When we were the owner of
the tenant improvements, the tenant was not considered to have taken physical
possession or have control of the physical use of the leased asset until the
tenant improvements were substantially completed. When the tenant was the owner
of the tenant improvements, any tenant improvement allowance (including amounts
that can be taken in the form of cash or a credit against the tenant's rent)
that was funded was treated as a lease incentive and amortized as a reduction of
rental revenue over the lease term. Tenant improvement ownership is determined
based on various factors including, but not limited to:
•whether the lease stipulates how a tenant improvement allowance may be spent;
•whether the lessee or lessor supervises the construction and bears the risk of
cost overruns;
•whether the amount of a tenant improvement allowance is in excess of market
rates;
•whether the tenant or landlord retains legal title to the improvements at the
end of the lease term;
•whether the tenant improvements are unique to the tenant or general purpose in
nature; and
•whether the tenant improvements are expected to have any residual value at the
end of the lease.
In accordance with Topic 842, we made a determination of whether the
collectibility of the lease payments in an operating lease was probable. If we
determined the lease payments were not probable of collection, we fully reserved
for any contractual lease payments, deferred rent receivable, and variable lease
payments and recognized rental income only if cash was received. Beginning
January 1, 2019, these changes to our collectibility assessment were reflected
as an adjustment to rental income. Prior to January 1, 2019, bad debt expense
related to uncollectible accounts receivable and deferred rent receivable was
included in operating, maintenance, and management expense in the statement of
operations. Any subsequent changes to the collectibility of the allowance for
doubtful accounts as of December 31, 2018, which was recorded prior to the
adoption of Topic 842, were recorded in operating, maintenance, and management
expense in the statement of operations.
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Beginning January 1, 2019, we, as a lessor, recorded costs to negotiate or
arrange a lease that would have been incurred regardless of whether the lease
was obtained, such as legal costs incurred to negotiate an operating lease, as
an expense and classified such costs as operating, maintenance, and management
expense on our consolidated statement of operations, as these costs were no
longer capitalizable under the definition of initial direct costs under Topic
842.
Sales of Real Estate
Effective January 1, 2018, we adopted the guidance of ASC 610-20, Other Income -
Gains and Losses from the Derecognition of Nonfinancial Assets ("ASC 610-20"),
which applies to sales or transfers to noncustomers of nonfinancial assets or in
substance nonfinancial assets that do not meet the definition of a business.
Generally, our sales of real estate would be considered a sale of a nonfinancial
asset as defined by ASC 610-20.
ASC 610-20 refers to the revenue recognition principles under ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606). Under ASC 610-20, if we
determined we did not have a controlling financial interest in the entity that
held the asset and the arrangement met the criteria to be accounted for as a
contract, we derecognized the asset and recognized a gain or loss on the sale of
the real estate when control of the underlying asset transferred to the buyer.
Real Estate
Liquidation Basis of Accounting
As of February 1, 2020, our investments in real estate were adjusted to their
estimated net realizable value, or liquidation value, to reflect the change to
the liquidation basis of accounting. The liquidation value represents the
estimated amount of cash that we will collect through the disposal of our
assets, including any residual value attributable to lease intangibles, as we
carry out the Plan of Liquidation. As of December 31, 2020, we estimated the
liquidation value of our real estate investments based on internal valuation
methodologies using a combination of the direct capitalization approach, sales
comparison approach and discounted cash flow analyses and relied primarily on
discounted cash flow analyses for the estimated liquidation value for each of
the four office properties and relied on a sales comparison approach for the
office building that is part of an office campus, which was vacant. The
liquidation values of our investments in real estate are presented on an
undiscounted basis and investments in real estate are no longer depreciated.
Estimated costs to dispose of these investments are carried at their contractual
amounts due or estimated settlement amounts and are presented separately from
the related assets. Subsequent to February 1, 2020, all changes in the estimated
liquidation value of the investments in real estate are reflected as a change to
our net assets in liquidation.
Going Concern Basis
Depreciation and Amortization
Real estate costs related to the acquisition and improvement of properties are
capitalized and amortized over the expected useful life of the asset on a
straight-line basis. Repair and maintenance costs are charged to expense as
incurred and significant replacements and betterments are capitalized. Repair
and maintenance costs include all costs that do not extend the useful life of
the real estate asset. We considered the period of future benefit of an asset to
determine its appropriate useful life. Expenditures for tenant improvements are
capitalized and amortized over the shorter of the tenant's lease term or
expected useful life. We estimated useful lives of our assets by class to be
generally as follows:
Land                                         N/A
Buildings                                    25-40 years
Building improvements                        10-25 years
Tenant improvements                          Shorter of lease term or

expected useful life Tenant origination and absorption costs Remaining term of related leases, including


                                             below-market renewal periods




Impairment of Real Estate and Related Intangible Assets and Liabilities
We continually monitored events and changes in circumstances that could indicate
that the carrying amounts of our real estate and related intangible assets and
liabilities may not be recoverable or realized. When indicators of potential
impairment suggested that the carrying value of real estate and related
intangible assets and liabilities may not be recoverable, we assessed the
recoverability by estimating whether we would recover the carrying value of the
real estate and related intangible assets and liabilities through its
undiscounted future cash flows and its eventual disposition. If, based on this
analysis, we did not believe that we would be able to recover the carrying value
of the real estate and related intangible assets and liabilities, we recorded an
impairment loss to the extent that the carrying value exceeded the estimated
fair value of the real estate and related intangible assets and liabilities.
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Projecting future cash flows involves estimating expected future operating
income and expenses related to the real estate and its related intangible assets
and liabilities as well as market and other trends. Using inappropriate
assumptions to estimate cash flows or the expected hold period until the
eventual disposition could result in incorrect conclusions on recoverability and
incorrect fair values of the real estate and its related intangible assets and
liabilities and could result in the overstatement of the carrying values of our
real estate and related intangible assets and liabilities and an overstatement
of our net income.
Rents and Other Receivables
Liquidation Basis of Accounting
In accordance with the liquidation basis of accounting, as of February 1, 2020,
rents and other receivables were adjusted to their net realizable value. We
periodically evaluate the collectibility of amounts due from tenants. Any
changes in the collectibility of the receivables are reflected as a change to
our net assets in liquidation.
Going Concern Basis
We made a determination of whether the collectibility of the lease payments in
our operating leases was probable. If we determined the lease payments were not
probable of collection, we fully reserved for any outstanding rent receivables
related to contractual lease payments and variable leases payments, wrote-off
any deferred rent receivable and recognized rental income only if cash was
received. We exercised judgment in assessing collectibility and considered
payment history, current credit status, the tenant's financial condition,
security deposits, letters of credit, lease guarantees and current market
conditions that may impact the tenant's ability to make payments in accordance
with its lease agreements in making the determination.
Accrued Liquidation Costs
We accrue for certain estimated liquidation costs to the extent we have a
reasonable basis for estimation. These consist of legal fees, dissolution costs,
final audit/tax costs, insurance, and distribution processing costs.
Income Taxes
We have elected to be taxed as a REIT under the Internal Revenue Code. To
continue to qualify as a REIT, we must meet certain organizational and
operational requirements, including a requirement to distribute at least 90% of
our annual REIT taxable income to stockholders (which is computed without regard
to the dividends-paid deduction or net capital gain and which does not
necessarily equal net income as calculated in accordance with GAAP). As a REIT,
we generally will not be subject to federal income tax on income that we
distribute as dividends to our stockholders. If we fail to qualify as a REIT in
any taxable year, we will be subject to federal income tax on our taxable income
at regular corporate income tax rates and generally will not be permitted to
qualify for treatment as a REIT for federal income tax purposes for the four
taxable years following the year during which qualification is lost, unless the
Internal Revenue Service grants us relief under certain statutory provisions.
Such an event could materially and adversely affect our net income and net cash
available for distribution to stockholders. However, we believe that we are
organized and operate in such a manner as to qualify for treatment as a REIT.

Subsequent Events
We evaluate subsequent events up until the date the consolidated financial
statements are issued.
Updated Estimated Value Per Share
On March 11, 2021, our board of directors approved an estimated value per share
of our common stock of $2.07 based on our net assets in liquidation, divided by
the number of shares outstanding, all as of December 31, 2020. For a description
of the methodologies and assumptions used in the determination of the estimated
value per share, see Part II, Item 5, "Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities - Market
Information" in this Annual Report on Form 10-K.
Share Redemption Program
Our share redemption program provides only for redemptions that qualify as
Special Redemptions. In accordance with our share redemption program, these
Special Redemptions are made at a price per share equal to our most recent
estimated value per share as of the applicable redemption date, provided that if
our 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.
The redemption price per share of our common stock eligible for redemption on
the March 31, 2021 redemption date will equal $2.07. We will report future
redemption prices in a Current Report on Form 8-K or in our annual or quarterly
reports, all publicly filed with the SEC.

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