Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Pre Plan of Liquidation

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, although management believes that the disclosures presented herein are adequate to make the accompanying unaudited consolidated interim financial statements not misleading. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated annual financial statements and the notes thereto included in Winthrop’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC. In the opinion of management, all adjustments considered necessary for fair statements have been included, and all such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the operating results for the full year.

The accompanying unaudited consolidated interim financial statements represent the consolidated results of Winthrop, its wholly-owned taxable REIT subsidiary, WRT-TRS Management Corp., the Operating Partnership and all majority-owned subsidiaries and affiliates over which the Trust has financial and operating control and variable interest entities (“VIE“s) in which the Trust has determined it is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation. Prior to the adoption of the plan of liquidation, the Trust accounted for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Trust’s share of the earnings of these joint ventures and companies was included in consolidated net income.

The consolidated financial statements for the periods ended July 31, 2014, December 31, 2013, and September 30, 2013 were prepared on the going concern basis of accounting, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Post Plan of Liquidation

Liquidation Basis of Accounting

As a result of the approval of the plan of liquidation by the shareholders, the Trust has adopted the liquidation basis of accounting as of August 1, 2014 and for the periods subsequent to August 1, 2014 in accordance with GAAP. Accordingly, on August 1, 2014 assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash that the Trust will collect on disposal of assets as it carries out its plan of liquidation. The liquidation value of the Trust’s operating properties and loan assets are presented on an undiscounted basis. Estimated costs to dispose of assets have been presented separately from the related assets. Liabilities are carried at their contractual amounts due or estimated settlement amounts.

The Trust accrues costs and income that it expects to incur and earn through the end of liquidation to the extent it has 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 inherent uncertainty in estimating future events. These differences may be material. See Note 4 for further discussion. Actual costs incurred but unpaid as of September 30, 2014 are included in accounts payable, accrued liabilities and other liabilities on the Consolidated Statement of Net Assets.

In liquidation, the presentation for joint ventures historically consolidated under going concern accounting will be determined based on the Trust’s planned exit strategy. Those ventures where the Trust intends to sell the property will be presented on a gross basis with a payable to the non-controlling interest holder. Those ventures where the Trust intends to sell its interest in the venture, rather than the property, will be presented on a net basis and included in equity investments on the Consolidated Statement of Net Assets. Amounts due to non-controlling interests in connection with the disposition of consolidated joint ventures have been accrued and are recorded as liability for non-controlling interests.

Net assets in liquidation represents the estimated liquidation value available to holders of Common Shares upon liquidation. Due to the uncertainty in the timing of the anticipated sale dates and the estimated cash flows, actual operating results and sale proceeds may differ materially from the amounts estimated.

Reclassifications

Discontinued operations for all periods presented in the Consolidated Statements of Operations include the operations of the Trust’s residential property in Meriden, Connecticut which was disposed of in February 2014, the Trust’s retail properties in Denton, Texas and Seabrook, Texas which were disposed of in 2013 and the Trust’s office properties in Lisle, Illinois, Deer Valley, Arizona and Andover, Massachusetts which were disposed of in 2013 and its office properties in Englewood, Colorado, Chicago, Illinois (River City) and Amherst, New York which were sold in 2014. Also included in discontinued operations for the periods presented are the operations of the Trust’s retail property located in Louisville, Kentucky which is under contract to be sold and is classified as held for sale at July 31, 2014.

Earnings Per Share

Prior to the adoption of the plan of liquidation, the Trust determined basic earnings per share on the weighted average number of Common Shares outstanding during the period and reflected the impact of participating securities. The Trust computes diluted earnings per share based on the weighted average number of Common Shares outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments.

The Trust has calculated earnings per share in accordance with relevant accounting guidance for participating securities and the two class method. The reconciliation of earnings attributable to Common Shares outstanding for the basic and diluted earnings per share calculation is as follows (in thousands, except per share data):


	One Month Ended July 31, 2014			Three Months Ended September 30, 2013			Seven Months Ended July 31, 2014			Nine Months Ended September 30, 2013
Basic
Income (loss) from continuing operations	$	2,400		$	12,128		$	(2,572	)	$	22,776
Loss attributable to non-controlling interest		395			954			3,764			2,427
Preferred dividend of Series D Preferred Shares		(929	)		(2,787	)		(6,502	)		(8,360	)
Amount allocated to Restricted Shares		(11	)		(106	)		(192	)		(235	)

Income (loss) from continuing operations applicable to Common Shares		1,855			10,189			(5,502	)		16,608
Income (loss) from discontinued operations		84			(1,395	)		11,235			8,653
(Income) loss attributable to non-controlling interests from discontinued operations		—			41			54			(8	)

Net income applicable to Common Shares for earnings per share purposes	$	1,939		$	8,835		$	5,787		$	25,253


Basic weighted-average Common Shares		35,825			33,076			35,821			33,047


Income (loss) from continuing operations	$	0.05		$	0.31		$	(0.15	)	$	0.50
Income (loss) from discontinued operations		—			(0.04	)		0.31			0.26

Net income per Common Share - Basic	$	0.05		$	0.27		$	0.16		$	0.76


Diluted
Income (loss) from continuing operations	$	2,400		$	12,128		$	(2,572	)	$	22,776
Loss attributable to non-controlling interest		395			954			3,764			2,427
Preferred dividend of Series D Preferred Shares		(929	)		(2,787	)		(6,502	)		(8,360	)
Amount allocated to Restricted Shares		(11	)		(106	)		(192	)		(235	)

Income (loss) from continuing operations applicable to Common Shares		1,855			10,189			(5,502	)		16,608
Income (loss) from discontinued operations		84			(1,395	)		11,235			8,653
(Income) loss attributable to non-controlling interests from discontinued operations		—			41			54			(8	)

Net income applicable to Common Shares for earnings per share purposes	$	1,939		$	8,835		$	5,787		$	25,253


Basic weighted-average Common Shares		35,825			33,076			35,821			33,047
Stock options (1)		—			2			—			2
Restricted shares (2)		150			70			—			40

Diluted weighted-average Common Shares		35,975			33,148			35,821			33,089


Income (loss) from continuing operations	$	0.05		$	0.31		$	(0.15	)	$	0.50
Income (loss) from discontinued operations		—			(0.04	)		0.31			0.26

Net income per Common Share - Diluted	$	0.05		$	0.27		$	0.16		$	0.76

(1)	The Trust’s stock options were exercised in 2013. The resulting shares were included in the basic weighted-average shares outstanding for the one month and seven months ended July 31, 2014. The Trust’s outstanding stock options were dilutive for the three and nine months ended September 30, 2013.

(2)

The Trust’s Restricted Shares were anti-dilutive for the seven months ended July 31, 2014 and are not included in the weighted-average shares outstanding for the calculation of diluted earnings per Common Share. The Trust’s Restricted Shares were dilutive for the one month ended July 31, 2014 and the three and nine months ended September 30, 2013. The amendments to the Restricted Shares discussed in Note 19 had no impact on the calculation of earnings per share for the periods presented.

No dividend was paid on Common Shares for the quarter ended September 30, 2014. On September 15, 2014 the Trust made the full liquidating distribution on its Series D Cumulative Redeemable Preferred Shares (the “Series D Preferred Shares”) of $25.4815 per Series D Preferred Share, which amount consisted of the $25.00 liquidation preference plus accrued and unpaid dividends to, but excluding, the date of payment.

Recently Issued Accounting Standards

On April 10, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08: Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity to update the criteria for reporting discontinued operations. The amendments require that a disposal of a component of an entity be reported as discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the entity’s operations. The new disclosure requirements are effective prospectively for annual reporting periods beginning on or after December 15, 2014 and do not impact the current financial statements. The new disclosures are required for both interim and annual reporting. The Trust did not elect early adoption of the amendments. The amendments will not have a material impact on the consolidated financial statements as a result of the adoption of the liquidation basis of accounting.

In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted. ASU 2014-09 will not have a material impact on the Trust’s financial position or results of operations as a result of the adoption of the liquidation basis of accounting.

- Definition

Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements.

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