Net Assets in Liquidation

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Plan of Dissolution

The Plan of Dissolution provides for an orderly sale of the Company's assets, payment of the Company's liabilities and other obligations, the winding up of operations and dissolution of the Company. The Company is permitted to provide for the payment of any unascertained or contingent liabilities and may do so by purchasing insurance, establishing a reserve fund, transacting with a third party or in other ways.

The Plan of Dissolution enables the Company to sell any and all of its assets without further approval of the stockholders and provides that liquidating distributions be made to the stockholders as determined by the board of directors. The dissolution process and the amount and timing of distributions to stockholders involves risks and uncertainties. Accordingly, it is not possible to accurately predict the timing or aggregate amount which will ultimately be distributed to stockholders and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Condensed Consolidated Statement of Net Assets as of June 30, 2017. The Company sold two of its remaining three properties in July 2017 and anticipates it will sell its remaining property and pay its final liquidating distribution to its stockholders by the end of 2017.

The Company expects to continue to qualify as a REIT throughout the liquidation until such time as any remaining assets, if any, are transferred into a liquidating trust. The board of directors shall use commercially reasonable efforts to continue to cause the Company to maintain its REIT status, provided however, the board of directors may elect to terminate the Company's status as a REIT if it determines that such termination would be in the best interest of the stockholders.

Net Assets in Liquidation

Net assets in liquidation increased by approximately $6.7 million during the six months ended June 30, 2017. The primary reasons for the increase in net assets were (i) an increase in total estimated sales prices for the Company's remaining properties based on actual or estimated purchase and sale agreements with third party buyers, (ii) a decrease in estimated future development costs as four of the Company's development properties finalized construction under the amounts budgeted for construction and development per the respective development agreements and (iii) additional property net operating income primarily as a result of holding multiple properties for periods longer than estimated. These increases to net assets in liquidation were partially offset by an increase in estimated future liquidation transaction costs and estimated liability for non-controlling interests as a result of the higher estimated property sales prices.

The net assets in liquidation include projections of costs and expenses to be incurred during the period required to complete the Plan of Dissolution. There is inherent uncertainty with these projections, and they could change materially based on the timing of the sales, the performance of the underlying assets and any changes in the underlying assumptions of the projected cash flows.

Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation

The Liquidation Basis of Accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the Plan of Dissolution. The Company currently estimates that it will have costs in excess of estimated receipts during liquidation. These amounts can vary significantly due to, among other things, the timing and estimates for lease-up, the timing of property sales, direct costs incurred to complete the sales, the timing and amounts associated with discharging known and contingent liabilities and the costs associated with the winding up of operations. These costs are estimated and are anticipated to be paid out over the liquidation period.

The change in the liability for estimated costs in excess of estimated receipts during liquidation for the six months ended June 30, 2017 is as follows:


6.	Liability for Estimated Costs in Excess of Estimated Receipts During Liquidation (continued)



	December 31, 2016			Cash Payments (Receipts)			Remeasurement of Assets and Liabilities			June 30, 2017
Assets:
Estimated net inflows from investments in real estate	$	4,537,620		$	(4,488,068	)	$	1,059,286		$	1,108,838
Estimated net outflows from development costs	(3,528,450		)	135,816			3,392,634			—
	1,009,170			(4,352,252		)	4,451,920			1,108,838
Liabilities:
Liquidation transaction costs	(8,114,094		)	1,536,041			(1,094,213		)	(7,672,266		)
Corporate expenditures	(4,202,073		)	2,409,816			34,226			(1,758,031		)
	(12,316,167		)	3,945,857			(1,059,987		)	(9,430,297		)
Total liability for estimated costs in excess of estimated receipts during liquidation	$	(11,306,997	)	$	(406,395	)	$	3,391,933		$	(8,321,459	)

CNL Growth Properties, Inc. 10-Q