Item 3. LEGAL PROCEEDINGS

In November 2016, we were included as a defendant in a class action lawsuit, in the circuit court for Montgomery County, Maryland, related to predatory towing by a third party company we had retained to provide towing services at several of our properties in Montgomery County, Maryland. We, individually and collectively with other members of the more than 500 property owner defendant class, have undertaken numerous legal actions to challenge property owner liability in this case, including challenging the certification of the class as a matter of law; however, all of these legal actions have been unsuccessful. Given the costs and risks of continuing litigation on this matter, we elected to participate in a settlement for which our share is approximately $0.4 million. We expect that this settlement amount will be reimbursed by insurance. The

settlement did not cover liability for certain tows that were included in the lawsuit that the defendant class believes cannot be pursued because of the statute of limitations. Accordingly, we do not believe we should have any additional liability for these remaining tows; however, if we are unsuccessful in dismissing these tows from the litigation, our liability would be approximately $0.2 million, assuming payment on the same terms as the settlement.