Actual results may differ materially from those included in the forward-looking statements. We intend those forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of , and are including this statement for purposes of complying with those safe-harbor provisions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.
Factors which could have an adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the United States Securities and Exchange Commission, or the SEC.
Brand Inlow, Edward A. Fleet Wallace and Gary T. In , as a result of: Accordingly, we are currently engaged in the liquidation of our assets. The rights of beneficiaries in their beneficial interests are not represented by any form of certificate or other instrument. In accordance with the plan of liquidation, we continue to actively manage our remaining assets to seek to achieve higher occupancy rates, control operating expenses and maximize income from ancillary operations and services.
We continually evaluate our properties and adjust our net real estate liquidation value accordingly. It is our policy that when we execute a purchase and sale agreement or become aware of market conditions or other circumstances that indicate that the present value of our properties materially differs from our expected net sales price, we will adjust our liquidation value accordingly.
Under the plan of liquidation, we will not acquire any new properties, and are focused on liquidating our remaining assets. Our Advisor In connection with the adoption of the plan of liquidation, our Advisor agreed to continue to provide its services to us on a month-to-month basis pursuant to the terms of an expired advisory agreement, or the Advisory Agreement, between G REIT and our Advisor.
Under the terms of the Advisory Agreement, our Advisor has responsibility for our day-to-day operations, administers our accounting and bookkeeping functions, serves as a consultant in connection with policy decisions to be made by our Trustees, manages our properties and renders other services deemed appropriate by our Trustees. Our Advisor is a Virginia limited liability company that was formed in April to advise syndicated limited partnerships, limited liability companies and other entities regarding the acquisition, management and disposition of real estate assets.
Our Advisor advises us, as well as certain other entities, which have ownership interests in certain of our remaining assets, with respect to the management and potential disposition of our remaining assets.
Current Investment Objectives and Policies In accordance with the plan of liquidation, our primary objective is to obtain the highest possible sales value for our remaining assets, while attempting to increase or maintain the current value and income from these investments. Due to the adoption of the plan of liquidation, we will not acquire any new properties, and we are focused on liquidating our remaining assets.
However, we cannot assure our beneficiaries that we will achieve these objectives or that the capital of our beneficiaries will not decrease. In accordance with the plan of liquidation, we currently consider various factors when evaluating potential property dispositions.
Until we successfully sell our remaining assets, our primary operating strategy is to enhance the performance and value of the properties through strategies designed to address the needs of current and prospective tenants. One of the consolidated properties is located in Texas and the other is located in California. Our gross leases typically require that we pay all or a majority of the operating expenses, including real estate taxes, special assessments, utilities, insurance and building repairs related to the property.
In addition, most of our government tenant leases may permit tenants to terminate under certain circumstances, including, for example, in the event of their failure to obtain financial appropriations or in the event of the termination or non-renewal of a material contract. We continue to focus on improving rental income and cash flow by aggressively marketing rentable space and extending and renewing existing leases for all our properties.
However, we can provide no assurance that we will be able to accomplish this within the stated timeframe. Tax Status We are treated as a grantor trust for income tax purposes and accordingly, are not subject to federal or state income tax on any income earned or gain recognized by us. We will recognize taxable gain or loss when our remaining assets are disposed of for an amount greater or less than the fair market value of such asset at the time of disposition.
Our beneficiaries will be treated as the owner of a pro rata portion of each remaining asset, including cash, received by and held by us and will be required to report on his or her federal and state income tax return his or her pro rata share of taxable income, including gains and losses recognized by us. Accordingly, there is no provision for federal or state income taxes in the accompanying consolidated financial statements.
Beneficiaries are urged to consult with their tax advisors as to their own filing requirements and the appropriate tax reporting of this information on their returns. Meetings of Beneficiaries; Removal of Trustees Generally, there are no meetings of the beneficiaries. However, our Trustees may at any time call a meeting of the beneficiaries to be held at such time and at such place as our Trustees shall determine. Any or all Trustees may be removed at any time, with cause, by beneficiaries holding aggregate units of at least a majority of the total units held by all beneficiaries.
Our Trustees may be removed at any time, without cause, by beneficiaries having aggregate units of at least two-thirds of the total units held by all beneficiaries. Because the estimate of additional cash distributions is based on various assumptions and projections, there can be no assurance that the actual amount of distributions will not differ materially from our estimate.
However, we can give no assurance that we will realize this amount from our liquidation, and the actual amount realized could differ materially from our estimate. Competition As we complete the plan of liquidation, we will be in competition with other sellers of similar properties, or interests in properties, to locate suitable purchasers, which may result in our receiving lower net proceeds than our estimated liquidation proceeds.
Additionally, until we sell our remaining assets, we will compete with a considerable number of other real estate companies seeking to lease office space, some of which have greater marketing and financial resources than we do. Principal factors of competition in our business are the quality of properties including the design and condition of improvements , leasing terms including rent and other charges and allowances for tenant improvements , attractiveness and convenience of location, the quality and breadth of tenant services provided, and the reputation as an owner and operator of quality office properties in the relevant market.
Our ability to compete also depends on, among other factors, trends in the national, regional and local economies, financial condition and operating results of current and prospective tenants, availability and cost of capital, including capital raised by incurring debt, construction and renovation costs, taxes, governmental regulations, legislation and population trends.
Other entities managed by our Advisor and its affiliates also own property interests in some of the same regions in which we own property interests. Our properties may face competition in these geographic regions from such other properties owned, operated or managed by our Advisor or its affiliates.
Our Advisor and its affiliates have interests that may vary from those we may have in such geographic markets. Government Regulations Many laws and governmental regulations are applicable to our properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.
Costs of Compliance with the Americans with Disabilities Act. Under the Americans with Disabilities Act of , or ADA, all public accommodations must meet federal requirements for access and use by disabled persons.
Although we believe that we are in substantial compliance with present requirements of the ADA, our properties have not been audited, nor have investigations of our properties been conducted to determine compliance. We may incur additional costs in connection with the ADA.
Additional federal, state and local laws also may require modifications to our properties or restrict our ability to renovate the properties. We cannot predict the cost of compliance with the ADA or other legislation. If we incur substantial costs to comply with the ADA or any other legislation, our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations and pay distributions could be adversely affected.
Environmental laws and regulations hold us liable for the costs of removal or remediation of certain hazardous or toxic substances which may be on our properties.
These laws could impose liability without regard to whether we are responsible for the presence or release of the hazardous materials. Government investigations and remediation actions may have substantial costs and the presence of hazardous substances on the properties could result in personal injury or similar claims by private plaintiffs.
Various laws also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances for the cost of removal or remediation of hazardous substances at the disposal or treatment facility. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. As the owner and operator of the properties, we may be deemed to have arranged for the disposal or treatment of hazardous or toxic substances.
Some of our tenants may handle hazardous substances and wastes on our properties as part of their routine operations. Environmental laws and regulations subject these tenants, and potentially us, to liability resulting from such activities. We require our tenants, in their leases, to comply with these environmental laws and regulations and to indemnify us for any related liabilities.
We are unaware of any material noncompliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with our properties. Other Federal, State and Local Regulations. Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these various requirements, we may incur governmental fines or private damage awards.
While we believe that the properties are currently in material compliance with all of these regulatory requirements, we do not know whether existing requirements will change or whether future requirements will require us to make significant unanticipated expenditures that will adversely affect our ability to make distributions to our beneficiaries. We believe, based in part on engineering reports which we generally obtain at the time we acquired our properties, that our properties comply in all material respects with current regulations.
However, if we were required to make significant expenditures under applicable regulations, our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations and to pay distributions could be adversely affected.
Employees We have no employees. Substantially all of our work is performed by employees of our Advisor and its affiliates. Financial Information about Industry Segments We internally evaluate all of our properties as one industry segment, and, accordingly, we do not report segment information.
Risks Associated with Our Liquidation If we are unable to find buyers for properties at our expected sales prices, our liquidating distributions to our beneficiaries may be delayed or reduced. As of the date of this report, none of our properties are subject to a binding sales agreement providing for its disposition. In calculating the estimated range of liquidating distributions to our beneficiaries, we assumed that we would be able to find buyers for our properties at an amount based on our best estimate of market value for each property.
However, we may have overestimated the sales price that we will ultimately be able to obtain for these assets. Additionally, the net liquidation proceeds from Congress Center, located in Chicago, Illinois, or the Congress Center property, may also be affected by: Ongoing turmoil in the financial markets has had an adverse impact on the credit markets and, as a result, the availability of credit has become more expensive and difficult to obtain.
Most lenders are imposing more stringent restrictions on the terms of credit and there may be a general reduction in the amount of credit available in the markets in which we conduct business.
Our ability to dispose of our properties and our ability to pay distributions to our beneficiaries are subject to general economic and regulatory factors we cannot control or predict. Our liquidation is subject to, among other things, ongoing uncertain national economic conditions, other uncertainties or changes in regional or local economic conditions or changes in tax, real estate, environmental or zoning laws. The following factors may affect income from our properties, which would have a materially adverse effect on our ability to dispose of them, and subsequently our ability to pay distributions to our beneficiaries: We presently intend to sell our jointly held property interests.
However, we may not be able to find purchasers for such interests due to market conditions or we may be unable to receive our expected value for our jointly held property interests because we hold only a minority interest in the underlying property. As a result, we may be forced to attempt to sell our jointly held properties at a time or at a value which is unfavorable to us which would decrease our sales proceeds.
Because of the nature of joint ownership of such properties, we may need to agree with our co-owners on the terms of a sale of our jointly held properties before such sale can be affected. There can be no assurance that we will agree with our co-owners on satisfactory sales terms.
If the parties are unable to agree, the matter could ultimately result in litigation and a judicial partition, among other relief, could be sought. A failure to reach agreement with these parties regarding the sales terms of our jointly held property interests may delay or reduce our liquidating distributions therefrom. Each co-owner is required to approve all sales, refinancings, leases and lease amendments. These acquisitions were financed, in part, by loans under which we may have been or are jointly and severally liable for the entire loan amount along with the other co-owner s.
The terms of these co-ownership arrangements may be more favorable to the co-owner s than to our beneficiaries. In addition, investing in properties through co-ownership arrangements subjects those investments to risks not present in a wholly owned property, including, among others, the following: