1178132--3/5/2010--NNN_2002_VALUE_FUND

related topics

{investment, property, distribution}

{loan, real, estate}

{tax, income, asset}

{interest, director, officer}

{stock, price, share}

{debt, indebtedness, cash}

{regulation, change, law}

{loss, insurance, financial}

The downturn in the credit markets may increase the cost of borrowing, and may make it difficult for prospective buyers of the Congress Center property to obtain financing, which would have a material adverse effect on our liquidation. Our ability to dispose of our interest in the Congress Center property and our ability to pay distributions to our unit holders are subject to general economic and regulatory factors we cannot control or predict. We may delay and/or reduce our liquidating distributions to our unit holders. Our plan of liquidation allows for the sale of our interest in the Congress Center property to affiliates. If any of the parties to a future sale agreement default thereunder, or if a sale does not otherwise close, our liquidating distributions to our unit holders may be delayed or reduced. Decreases in property values may reduce the amount that we receive upon the sale of our interest in the Congress Center property. If we are unable to maintain the occupancy rates of currently leased space and lease currently available space, if tenants default under their leases or other obligations to us during the liquidation process or if our cash flow during the liquidation is otherwise less than we expect, our liquidating distributions to our unit holders may be delayed and/or reduced. If our liquidation costs or unpaid liabilities are greater than we expect, our liquidating distributions to our unit holders may be delayed and/or reduced. If we are not able to sell the Congress Center property in a timely manner, we may experience severe liquidity problems, may not be able to meet our obligations to our creditors and ultimately may become subject to bankruptcy proceedings. We may be unable to secure funds for future capital improvements, which could adversely impact our ability to attract or retain tenants, and subsequently pay liquidating distributions to our unit holders. The Congress Center property is subject to property taxes that may increase in the future, which could adversely affect our ability to sell our interest in the Congress Center property and to subsequently pay liquidating distributions to our unit holders. Our obligation to register our securities with the SEC subjects us to the Exchange Act, Sarbanes-Oxley Act compliance and related reporting requirements and we may become subject to liability for any failure to comply. If we are unable to retain our Manager and sufficient officers and employees of our Manager to complete our plan of liquidation in a reasonably expeditious manner, our liquidating distributions to our unit holders might be delayed or reduced. Our unit holders may not receive any profits resulting from the sale of our interest in the Congress Center property, or receive such profits in a timely manner, because we may provide financing to the purchaser of such property. Our entity value may be adversely affected by adoption of our plan of liquidation. There can be no assurance that our plan of liquidation will result in greater returns to our unit holders on their investment within a reasonable period of time, than our unit holders would receive through other alternatives reasonably available to us. Our Manager may amend our plan of liquidation without unit holder approval. Our Manager has the authority to sell the Congress Center property under terms less favorable than those assumed for the purpose of estimating our net liquidation value range. Our plan of liquidation may lead to unit holder litigation which could result in substantial costs and distract our Manager. Our Manager s executives and our Manager have conflicts of interest that differ from our unit holders as a result of the liquidation. Our plan of liquidation has caused our accounting basis to change, which could require us to write-down our assets. We may be unable to sell our interest in a limited liability company at our expected value. Unit holders could be liable to the extent of liquidating distributions received if contingent reserves are insufficient to satisfy our liabilities. We may have underestimated the amount of prepayment fees or defeasance charges on our mortgages. Other Risks of Our Business Distributions paid by us have included, and will continue to include, a return of capital. We depend upon our tenants to pay rent, and their inability to pay rent may substantially reduce our revenues and cash available for distribution to our unit holders. Our use of borrowings on the Congress Center property could result in its foreclosure and unexpected debt service expenses upon refinancing, both of which could have an adverse impact on our operations and cash flow. Additionally, restrictive covenants in our loan documents may restrict our operating activities. Due to the risks involved in the ownership of real estate, there is no guarantee of any return on our unit holders investments and our unit holders may lose some or all of their investments. If the Congress Center property is unable to generate sufficient funds to pay its expenses, liabilities or distributions, we may need to borrow funds to pay such expenses, liabilities or distributions, which may cause our liquidating distributions to our unit holders to be reduced and/or delayed. The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay liquidating distributions. The Congress Center property faces significant competition. The sale of our interest in the Congress Center property could cause our unit holders to recognize income in excess of cash distributions to our unit holders. Lack of diversification and illiquidity of real estate may make it difficult for us to sell or recover our investment in the Congress Center property. Lack of geographic diversity may expose us to regional economic downturns that could adversely impact our operations or our ability to recover our investment in the Congress Center property. Due to our ownership of only a single property interest in the Congress Center property, we are dependent upon those tenants that generate significant rental income at Congress Center, which may have a negative impact on our financial condition if these tenants are unable to meet their rental obligations to us, or if we are unable to retain our current tenants. Losses for which we either could not or did not obtain insurance will adversely affect our earnings and we may be unable to comply with insurance requirements contained in mortgage or other agreements due to high insurance costs. There is currently no public market for our units. Therefore, it will likely be difficult for our unit holders to sell their units and, if our unit holders are able to sell their units in a fully liquid manner, our unit holders may elect to do so at a substantial discount from the price our unit holders paid for these matters. The Congress Center property was purchased at a time when the commercial real estate market was experiencing substantial influxes of capital investment and competition for properties; therefore the Congress Center property may not maintain its current value or may further decrease in value. We have terminated our regular monthly distributions; future distributions are at the discretion of our Manager. Our past performance is not a predictor of our future results. The conflicts of interest of our Manager s executives and employees with us mean we will not be managed by our Manager solely in the best interest of our unit holders. The absence of arm s length bargaining may mean that our agreements are not as favorable to our unit holders as these agreements otherwise would have been. Increases in our insurance rates could adversely affect our cash flow and our ability to make liquidating distributions to our unit holders. We do not expect to register as an investment company under the Investment Company Act and, therefore, we will not be subject to the requirements imposed on an investment company by such Act.

Full 10-K form ▸

1178132--3/5/2010--NNN_2002_VALUE_FUND_LLC