WOODBRIDGE LIQUIDATION TRUST The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements ofWoodbridge Liquidation Trust and the related notes thereto. The Trust, the Remaining Debtors, the Wind-Down Entity and the Wind-Down Subsidiaries, as used herein, are defined in Note 1 to the consolidated financial statements and are collectively referred to herein as the Company.
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include, without limitation, financial guidance, and projections and statements with respect to expectation of future financial condition, changes in net assets in liquidation, cash flows, plans, targets, goals, objectives and performance of the Trust. Such forward-looking statements also include statements that are preceded by, followed by, or that include the words "believes", "estimates", "plans", "expects", "intends", "is anticipated", "will continue", "project", "outlook", "evaluate", "may", "could", "would", "should" and similar expressions, and all other statements that are not historical facts. All such forward-looking statements are based on the Trust's current expectations and involve risks and uncertainties which may cause actual results to differ materially from those set forth in such statements. Such risks and uncertainties include the amount of sales proceeds, timing of sales of real estate assets, timing and amount of funds needed to complete construction of single-family homes, amount of general and administrative costs, the number and amount of successful litigations and/or settlements and the ability to recover thereon, the amount of funding required to continue litigations, the continuing impact of the COVID-19 pandemic, interest rates, adverse weather conditions in the regions in which properties to be sold are located, economic and political conditions, changes in tax and other governmental rules and regulations applicable to the Trust and its subsidiaries and other risks and uncertainties identified in Item 1A. Risk Factors of the Company's Annual Report on Form 10-K, or contained in any of the Trust's subsequent filings with theSEC . These risks and uncertainties are beyond the ability of the Trust to control, and in many cases, the Trust cannot predict the risks and uncertainties, that could cause its actual results to differ materially from those indicated by the forward-looking statements. In connection with the "safe harbor" provisions of the Securities Act of 1933 and the Exchange Act, the Trust has identified and is disclosing important factors, risks and uncertainties that could cause its actual results to differ materially from those projected in forward-looking statements made by the Trust, or on the Trust's behalf. (See "Part II. Other Information, Item 1A. Risk Factors" of this Form 10-Q.) These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of the Trust's subsequent filings with theSEC . Because of these factors, risks and uncertainties, the Trust cautions against placing undue reliance on forward-looking statements. Although the Trust believes that the assumptions underlying forward-looking statements are currently reasonable, any of the assumptions could be incorrect or incomplete, and there can be no assurance that forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date on which they are made. Except as may be required by law, the Trust does not undertake any obligations to modify, update or revise any forward-looking statement to take into account or otherwise reflect subsequent events, corrections in or revisions of underlying assumptions, or changes in circumstances arising after the date that the forward-looking statement was made.
Overview
Pursuant to the Plan, the Trust was formed onFebruary 15, 2019 to hold, either directly or indirectly through the Wind-Down Entity and the Wind-Down Subsidiaries, the assets and equity interests formerly owned by the Debtors. Each of the real properties formerly owned by the Debtors was, as ofFebruary 15, 2019 , owned by one of the Wind-Down Subsidiaries. The purpose of the Wind-Down Entity and the Wind-Down Subsidiaries is to develop (as applicable), market and sell those properties to generate cash. Assets formerly owned by the Debtors other than real estate assets and certain cash were transferred to the Trust. The purpose of the Trust is to receive remittances of cash from the Wind-Down Entity, to resolve disputed claims, to prosecute the Causes of Action, to pay allowed unimpaired claims and, subject to the payment of Trust expenses and the retention of various reserves, to make distributions of cash to All Interestholders in accordance with the Plan. 25
--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
The Trust operates pursuant to the Plan and the Trust Agreement. The Trust was
formed as a Delaware statutory trust and is administered by the Liquidation
Trustee under the supervision of its Supervisory Board. The Wind-Down Entity, a
wholly-owned subsidiary of the Trust, operates pursuant to the Plan and the
Wind-Down Entity LLC Agreement. The Wind-Down Entity was formed as a Delaware
limited liability company and is administered by its Board of Managers , one of
which is the chief executive officer. One member of the Board of Managers is
also a member of the Supervisory Board of the Trust.
The Bankruptcy Court has retained certain jurisdictions regarding the Trust, the
Liquidation Trustee, the Supervisory Board, the Wind-Down Entity, the Board of
Managers , and assets of the Trust and the Wind-Down Entity, including the
determination of all disputes arising out of or related to administration of the
Trust and the Wind-Down Entity and its subsidiaries.
As of
Class of Interest Number Outstanding Class A Liquidation Trust Interests 11,513,660 Class B Liquidation Trust Interests 676,312 For each of the classes of Liquidation Trust Interests, the number of Liquidation Trust Interests outstanding will increase to the extent that the disputed claims become allowed claims. In addition, the number of Liquidation Trust Interests outstanding will decrease to the extent that claims are settled by cancelling Liquidation Trust Interests. OnDecember 24, 2019 , the Trust's Registration Statement on Form 10 became effective under the Exchange Act. The trading symbol for the Trust's Class A Interests is WBQNL. The Trust's Class A Interests are quoted on OTC Link ATS, theSEC -registered alternative trading system, and are eligible for theDepository Trust Company's DRS services. 26
--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Since the Plan Effective Date throughMarch 31, 2021 , the Wind-Down Subsidiaries have disposed of approximately 131 properties for aggregate net sales proceeds of approximately$403.73 million . As ofMarch 31, 2021 , the Company owned fourteen real estate assets with a gross carrying value of approximately$164.81 million . Therefore, it is unlikely that the amount of net sales proceeds that the Company will receive in the future will be consistent with the amount received from the Plan Effective Date throughMarch 31, 2021 . During the three months endedMarch 31, 2021 and 2020, the Company completed the construction of zero and one single-family home, respectively. During the nine months endedMarch 31, 2021 , the Company sold one single-family home that was under construction. The buyer assumed the remaining obligations to complete the construction of the property. The Company expects to complete the liquidation of its assets during the fiscal year endingJune 30, 2023 .
Discussion of the Company's Operations
Three months ended
Consolidated Statement of Changes in Net Assets in Liquidation
For the three months ended March 31, 2021
($ in thousands)
Restricted for All
Qualifying Victims Interestholders Total
Net assets in liquidation as of December 31, 2020 $ - $ 210,476 $ 210,476 Change in assets and liabilities: Restricted for Qualifying Victims - change in carrying value of assets and liabilities, net
3,459 - 3,459
All Interestholders:
Change in carrying value of assets and liabilities, net - 1,974 1,974
Distributions (declared) reversed, net - (49,958 ) (49,958 )
Net change in assets and liabilities - (47,984 ) (47,984 )
Net assets in Liquidation, as of March 31, 2021 $ 3,459 $ 162,492 165,951
Net assets in liquidation - Restricted for Qualifying Victims increased by
approximately $3.46 million during the three months ended March 31, 2021 . The
increase was the result of receiving the Forfeited Assets from the DOJ during
the three months ended March 31, 2021 .
Net assets in liquidation - All Interestholders decreased by approximately
$47.98 million during the three months ended March 31, 2021 . This decrease was
due to: (a) an increase in the carrying value of assets and liabilities of
approximately $1.97 million and (b) net distributions of approximately $49.95
million .
The components of the change in the carrying value of assets and liabilities, net are as follows ($ in thousands):
Restricted for All
Qualifying Victims Interestholders Total
Recognition of Forfeited Assets $ 3,459 $ - $ 3,459
Remeasurement of assets and liabilities, net - 2,473 2,473
Settlement recoveries recognized, net - 1,326 1,326
Adjustment to insurance claim receivable - (1,900 ) (1,900 )
Other - 75 75
Change in carrying value of assets and liabilities, net $ 3,459 $ 1,974 $ 5,433 During the three months ended
• Declared a distribution of
totaled approximately
• Signed agreements to settle certain Causes of Action for payment to the Trust
of approximately $1.28 million .
• Recorded Forfeited Assets with an estimated net realizable value of
approximately $3.46 million .
• Paid construction costs of approximately $5.77 million relating to
single-family homes under development.
27--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
• Paid holding costs of approximately $0.77 million .
• Paid general and administrative costs of approximately $4.29 million ,
including approximately
approximately
costs and approximately
fees.
Three months ended
Consolidated Statement of Changes in Net Assets in Liquidation
For the three months ended March 31, 2020
($ in thousands)
Net assets in liquidation, as of
(77,678 )
Net change in assets and liabilities (64,773 )
Net assets in liquidation, as of March 31, 2020 $ 269,810
Net assets in liquidation decreased by approximately $64.77 million during the
three months ended March 31, 2020 . This increase was due to: (a) an increase in
the carrying value of assets and liabilities of approximately $12.91 million and
(b) net distributions of approximately $77.68 million . The components of the
approximately $12.91 million change in the carrying value of assets and
liabilities, net are as follows ($ in thousands):
Settlement recoveries recognized, net $ 1,120
Sales proceeds in excess of carrying value 16,873
Remeasurement of assets and liabilities, net (5,345 )
Other 257
Change in carrying value of assets and liabilities, net
During the three months ended
• Declared distributions of
Interest, which totaled approximately $78.43 million .
• Completed construction of one single-family home (1241 Loma Vista ).
• Sold two single-family homes, two lots and settled one secured loan for net
proceeds of approximately $74.27 million .
• Adopted a strategy to auction certain secured loans and other properties. As a
result of this change in strategy, the net carrying value of these real estate
assets was reduced by approximately $1.86 million .
• Signed agreements to settle certain Causes of Action of approximately
million.
• Paid construction costs of approximately $11.79 million relating to
single-family homes under development.
• Paid holding costs of approximately $2.11 million .
28--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
• Paid general and administrative costs of approximately $5.52 million ,
including approximately
approximately
costs and approximately
fees.
Nine months ended
Consolidated Statement of Changes in Net Assets in Liquidation
For the nine months ended March 31, 2021
($ in thousands)
Restricted for All
Qualifying Victims Interestholders Total
Net assets in liquidation as of June 30, 2020 $ - $ 264,517 $ 264,517 Change in assets and liabilities: Restricted for Qualifying Victims - change in carrying value of assets and liabilities, net
3,459 - 3,459
All Interestholders:
Change in carrying value of assets and liabilities, net - 7,529 7,529
Distributions (declared) reversed, net - (109,554 ) (109,554 )
Net change in assets and liabilities - (102,025 ) (102,025 )
Net assets in Liquidation, as of March 31, 2021 $ 3,459 $ 162,492 165,951
Net assets in liquidation - Restricted for Qualifying Victims increased by
approximately
Net assets in liquidation - All Interestholders decreased by approximately$102.02 million during the nine months endedMarch 31, 2021 . This decrease was due to: (a) an increase in the carrying value of assets and liabilities of approximately$7.53 million and (b) net distributions of approximately$109.55 million .
The components of the change in the carrying value of assets and liabilities, net are as follows ($ in thousands):
Restricted for All
Qualifying Victims Interestholders Total
Recognition of Forfeited Assets $ 3,459 $ - $ 3,459
Settlement recoveries recognized, net - 8,013 8,013
Carrying value in excess of sales proceeds - (1,540 ) (1,540 )
Remeasurement of assets and liabilities, net - 2,775 2,775
Adjustment to insurance claim receivable - (1,900 ) (1,900 )
Other 181 181
Change in carrying value of assets and liabilities, net $ 3,459 $ 7,529 $ 10,988 During the nine months ended
• Declared three distributions, two each of
Liquidation Trust Interest, which totaled approximately
29
--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
• Sold five single-family homes, two lots and eleven other properties for net
proceeds of approximately $121.16 million .
• Signed agreements to settle certain Causes of Action for payment to the Trust
of approximately $8.44 million .
• Recorded forfeited assets with an estimated net realizable value of
approximately $3.46 million .
• Paid construction costs of approximately $22.04 million relating to
single-family homes under development.
• Paid holding costs of approximately $4.13 million .
• Paid general and administrative costs of approximately
including approximately
approximately
costs and approximately
fees.
Nine months ended
Consolidated Statement of Changes in Net Assets in Liquidation
For the nine months ended March 31, 2020
($ in thousands)
Net assets in liquidation, as of June 30, 2019 $ 329,971 Change in assets and liabilities: Change in carrying value of assets and liabilities, net 17,440 Distributions (declared) reversed, net
(77,601 )
Net change in assets and liabilities (60,161 )
Net assets in liquidation, as of March 31, 2020 $ 269,810
Net assets in liquidation decreased by approximately $60.16 million during the
nine months ended March 31, 2020 . This increase was due to: (a) changes in the
carrying value of assets and liabilities, net of approximately $17.44 million
and (b) net distributions of approximately $77.60 million . The components of the
approximately $17.44 million change in the carrying value of assets and
liabilities, net are as follows ($ in thousands):
Reduction of state, local and other taxes $ 2,890
Settlement recoveries recognized, net 4,596
Sales proceeds in excess of carrying value 20,164
Remeasurement of assets and liabilities, net (10,660 )
Other 450
Change in carrying value of assets and liabilities, net
During the nine months ended
• Declared distributions of
Interest, which totaled approximately $78.43 million .
30--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
• Completed construction of three single-family homes (25210
Loma Vista and 24055Hidden Ridge ).
• Sold ten single-family homes, 18 lots, two other properties and settled three
secured loans for net proceeds of approximately $177.97 million .
• Adopted a strategy to auction certain secured loans and other properties. As a
result of this change in strategy, the net carrying value of these real estate
assets were reduced by approximately $1.86 million .
• Signed agreements to settle certain Causes of Action of approximately
million.
• Paid construction costs of approximately $37.33 million relating to
single-family homes under development.
• Paid holding costs of approximately $8.69 million .
• Paid general and administrative costs of approximately
including approximately
approximately
costs and approximately $10.87 million of post Plan Effective Date
professional fees.
• Paid professional fees incurred before the Plan Effective Date of
approximately $0.36 million .
Liquidity and Capital Resources
Liquidity
The Company's primary sources for meeting its capital requirements are its cash, availability under the LOC, proceeds from the sale of its real estate assets and recoveries from certain Causes of Action. The Company's primary uses of funds are and will continue to be for distributions, development costs, holding costs and general and administrative costs, all of which the Company expects to be able to adequately fund over the next twelve months from its primary sources of capital. Capital Resources
In addition to consolidated cash and cash equivalents at
Revolving Line of Credit
OnJune 19, 2020 , two wholly-owned subsidiaries of the Wind-Down Entity entered into a$25,000,000 revolving LOC. OnFebruary 11, 2021 , the LOC was amended. Two additional wholly owned subsidiaries of the Wind-Down Entity were joined to the LOC as co-borrowers and two properties were added as replacement collateral as allowed for in the original agreement. The maturity date of the LOC was changed toJanuary 31, 2023 with an option to extend for one additional year. The LOC required the borrowers to establish an interest reserve of$1,750,000 , which is to be used to pay the potential monthly interest payments. Outstanding borrowings bear interest at a fixed rate of 3.50% per annum. Indebtedness under the LOC is secured by a deed of trust on two properties, the personal property associated therewith and the interest reserve. The Wind-Down Entity is the guarantor of the LOC. The Company is required to keep a cash balance of$20,000,000 on deposit with the lender in order to avoid a non-compliance fee of 2% of the shortfall in the required deposit and is required to comply with various covenants. 31
--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
No amounts were outstanding under the LOC as of
Sales of Real Estate Assets
The Wind-Down Entity and the Wind-Down Subsidiaries are in the process of developing, marketing and selling their real estate assets. As ofMarch 31, 2021 , one of the single-family homes was listed for sale. All of the other single-family homes are under construction. There can be no assurance as to the amount of net proceeds that the Company will receive from the sale of real estate assets or when the net sales proceeds will be received. As ofMarch 31, 2021 , the Company owned fourteen real estate assets with a gross carrying value of approximately$164.81 million . Therefore, it is unlikely that the net proceeds for the nine months endedMarch 31, 2021 will be indicative of future net proceeds, which may be significantly lower. In addition, it may take longer to sell the properties than the Company has estimated.
Causes of Action and Fair Funds Recoveries
During the three and nine months endedMarch 31, 2021 , the Company recognized approximately$1.33 and$8.01 million , net, respectively, from the settlement of certain Causes of Action. There can be no assurance that the amounts the Company receives from settling other Causes of Action and Fair Funds recoveries in the future will be consistent with the amount recovered during the three and nine months endedMarch 31, 2021 . Forfeited Assets Forfeited Assets consist of cash and other assets (jewelry, art, wine, purses, clothing, a car and other items). During the three months endedMarch 31, 2021 , the Trust received certain of the Forfeited Assets from the DOJ. During the three and nine months endedMarch 31, 2021 , the Company recognized approximately$3.46 million and$3.46 million , respectively of Forfeited Assets, including a$1.89 million receivable for cash not yet received from the DOJ. The Trust is required to distribute the net sale proceeds from liquidating the Forfeited Assets to the Qualifying Victims. Qualifying Victims are the former holders of Class 3 and Class 5 Claims and their permitted assigns. Former holders of Class 4 Claims are not Qualifying Victims. Because of the requirement to distribute the net sale proceeds of the Forfeited Assets to the Qualifying Victims only, the Forfeited Assets atMarch 31, 2021 are presented in the consolidated statement of net assets as restricted net assets in liquidation. AtMarch 31, 2021 , 11,439,782 of the 11,513,660 Class A Interests were held by Qualifying Victims. Of the 138,788 Class A Interests relating to unresolved claims atMarch 31, 2021 , 24,760 would be held by Qualifying Victims.
Uses of Liquidity
The primary uses of the Company's liquidity are to pay (a) distributions payable, (b) development costs, (c) holding costs, and (d) general and administrative costs. As ofMarch 31, 2021 , the Company's total liabilities were approximately$68.33 million . The total liabilities recorded as ofMarch 31, 2021 may not be indicative of the costs paid in future periods, which may be significantly higher. Given current cash and cash equivalent balances, projected sales of real estate assets, availability under the LOC, Causes of Action recoveries, distributions declared and expected cash needs, the Company does not expect a deficiency in liquidity in the next twelve months. Due to the uncertain nature of future net sales proceeds, recoveries and costs to be incurred, it is not possible to be certain that the current liquidity will be adequate to cover all future financial needs of the Company. Creating contingent obligation agreements and/or seeking methods to reduce professional costs, including legal fees, and administrative costs are strategies that could be undertaken to address liquidity issues should they arise. These strategies could impact the Company's ability to maximize recoveries from the settlement of other Causes of Action. 32
--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Distributions
Distributions will be made at the sole discretion of the Liquidation Trustee in accordance with the provisions of the Plan and the Trust Agreement. As ofMay 13, 2021 , the Liquidation Trustee has declared six distributions on account of Class A Interests. The distributions are paid on account of the then-allowed claims and a deposit is made into a restricted cash account for amounts (a) payable for Class A Interests that may be issued in the future upon the allowance of unresolved claims, (b) in respect of Class A Interests on account of recently allowed claims, (c) to holders of Class A Interests who failed to cash distribution checks mailed in respect of prior distributions, (d) that were withheld due to pending avoidance actions and (e) in respect of which the Trust is waiting for further beneficiary information. The following tables summarize the distributions declared, distributions paid and the activity in the restricted cash account for the periods fromFebruary 15, 2019 (inception) throughMarch 31, 2021 and fromFebruary 15, 2019 (inception) throughMay 13, 2021 : During the Period FromFebruary 15, 2019 During the Period From February 15, 2019 (inception) through March 31, 2021 (inception) through May 13, 2021 ($ in Millions) ($ in Millions) $ per Distribution Distribution Class A Total Reserve Total Reserve Date Interest Declared Paid Account Declared Paid Account Distributions Declared First3/15/2019 $ 3.75 $ 44.70 $ 42.32 $ 2.38$ 44.70 $ 42.32 2.38 Second1/2/2020 4.50 53.43 51.19 2.24 53.43 51.19 2.24 Third3/31/2020 2.12 25.00 24.19 0.81 25.00 24.19 0.81 Fourth7/13/2020 2.56 29.97 29.24 0.73 29.97 29.24 0.73 Fifth10/19/2020 2.56 29.95 29.20 0.75 29.95 29.20 0.75 Sixth1/7/2021 4.28 50.01 48.67 1.34 50.01 48.67 1.34 Seventh (a)5/13/2021 2.58 - - - 30.00 - - Subtotal$ 22.35 $ 233.06 $ 224.81 $ 8.25$ 263.06 $ 224.81 $ 8.25 Distributions Reversed
Disallowed/cancelled (b)
(2.02 ) (2.81 )
Returned (c) 0.58 0.58
Subtotal (1.44 ) (2.23 )
Distributions Paid from Reserve Account (d) (1.91 ) (2.14 )
Distributions Payable, Net
as of 3/31/2021: $ 4.90 as of 5/13/2021: $ 3.88
(a) Approved on
(b) As a result of claims being disallowed or Class A Interests being cancelled.
(c) Distribution checks returned or not cashed. (d) Paid as claims are allowed or resolved.
--------------------------------------------------------------------------------
The Liquidation Trustee will continue to assess the adequacy of funds held and expects to make additional cash distributions on account of Class A Interests but does not currently know the timing or amount of any such distribution(s).
Contractual Obligations
As ofMarch 31, 2021 , the Company has contractual commitments related to construction contracts totaling approximately$15.20 million . The Company expects to complete the construction of these single-family homes during the fiscal year endingJune 30, 2022 . The Company has an office lease that expires inAugust 2021 . The Company expects that it will continue to lease office space until the liquidation process is completed.
Quantitative Disclosures about Market Risk
As of
33--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Critical Accounting Policies and Practices
The Company's consolidated financial statements are prepared in accordance withU.S. GAAP. The accounting policies and practices that the Company believes are the most critical are discussed below. These accounting policies and practices require management to make decisions on subjective and/or complex matters that may inherently be uncertain. Estimates are required to prepare the consolidated financial statements in conformity withU.S. GAAP. Significant estimates, judgments and assumptions are required in a number of areas, including, but not limited to, the sales price of real estate assets, selling costs, development costs, holding costs and general and administrative costs to be incurred until the completion of the liquidation of the Company. In many instances, changes in the accounting estimates are likely to occur from period to period. Actual results may differ from the estimates. The Company believes the current assumptions and other considerations used in preparing the consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in the Company's consolidated financial statements, the resulting changes could have a material adverse effect on the Company's net assets in liquidation.
Liquidation Basis of Accounting
Under the liquidation basis of accounting, all assets are recorded at their estimated net realizable value or liquidation value, which represents the estimated amount of net cash that may be received upon the disposition of the assets (on an undiscounted basis). Liabilities are measured in accordance withU.S. GAAP that otherwise applies to those liabilities. The Company has not recorded any amount for future recoveries from unsettled Causes of Action or Fair Funds recoveries in the accompanying consolidated financial statements because they cannot be reasonably estimated.
Valuation of Real Estate
The measurement of real estate assets held for sale is based on current contracts (if any), estimates and other indications of sales value, net of estimated selling costs. To determine the value of real estate assets held for sale, the Company considers the three traditional approaches to value (cost, income and sales comparison) commonly used by the real estate appraisal community. The applicability and relevancy of each valuation approach as applied may differ by asset. In most cases, the sales comparison approach was accorded the greatest weight. This approach compares a property to other properties with similar characteristics that have recently sold. To validate management's estimate, the Company also considers opinions from qualified real estate professionals and local real estate brokers and, in some cases, obtained third-party appraisals.
Accrued Liquidation Costs
The estimated costs associated with implementing and completing the Company's plan of liquidation are recorded as accrued liquidation costs. The Company has also recorded the estimated development costs to be incurred to prepare the assets for sale as well as the estimated holding costs to be incurred until the projected sale date and the estimated general and administrative costs to be incurred until the completion of the liquidation of the Company.
Changes in Carrying Value
On a quarterly basis, the Company reviews the estimated net realizable values
and liquidation costs and records any significant changes. The Company will also
evaluate an asset when it is under contract for sale and the buyer's
contingencies have been removed. During the period that this occurs, the
carrying value of the asset and the estimated closing and other costs will be
adjusted, if necessary. If the Company has a change in its plan for the
disposition of an asset, the carrying value will be adjusted to reflect this
change in the period that the change is approved. The change in value may also
include the accrued liquidation costs related to the asset.
All changes in the estimated liquidation value of the Company's assets, real
estate held for sale, or other assets and liabilities are reflected as a change
to the Company's net assets in liquidation.
34--------------------------------------------------------------------------------
Index
PART I. FINANCIAL INFORMATION (CONTINUED)
© Edgar Online, source
