KBS REIT III Board Recommends Rejection of $6.01 per Share Tender Offer
February 18, 2020
CMG Income Fund II, LLC, CMG Liquidity Fund, LLC and CMG Partners, LLC (collectively, the “Bidder”) made a tender offer to purchase shares of KBS Real Estate Investment Trust III, Inc. The Bidder informed the REIT’s board that its offer price will be $6.01 per share. The board of directors believe the Bidder’s offer price is substantially below the value of the REIT’s shares and recommend against selling shares at that price.
The board of directors believes that the Bidder’s offer is meant to take advantage of the illiquidity of the Company’s shares by buying shares at a price significantly below their fair value in order to make a significant profit. The Company believes that tendering stockholders whose shares are accepted for payment will lose the opportunity to participate in any potential future upside and future growth of the Company with respect to such shares and will lose the right to receive any future distributions that the Company may declare and pay.
In arriving at their recommendation against selling shares to the Bidder, the REIT’s board considered the following:
• On December 4, 2019, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $11.65 based on the estimated value of the Company’s assets less the estimated value of the Company’s liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2019, with the exception of adjustments to the Company’s net asset value to give effect to (i) the October 23, 2019 authorization of a special dividend of $0.80 per share on the outstanding shares of common stock of the Company to the stockholders of record as of the close of business on November 4, 2019 and (ii) the change in the estimated value of the Company’s investment in units of Prime US REIT (SGX Ticker: OXMU) as of December 3, 2019.
• The Company’s board of directors has approved management’s recommendation to explore strategic alternatives in an effort to provide enhanced liquidity to stockholders. In an effort to further enhance stockholder liquidity, the Company’s board of directors has determined to pursue conversion to a non-listed perpetual-life NAV REIT that calculates the net asset value or “NAV” per share on a regular basis that is more frequent than annually (i.e., daily, monthly or quarterly) and seeks to provide increased liquidity to current and future stockholders through an expansion of the current share redemption program and/or periodic self-tender offers. On January 9, 2020, the REIT filed a definitive proxy statement with the SEC in connection with the annual meeting of stockholders to vote on, among other proposals, two proposals related to the pursuit of conversion to an NAV REIT. The annual meeting of stockholders will be held on April 7, 2020. Anyone who is a stockholder of record at the close of business on January 8, 2020, the record date, or holds a valid proxy for the annual meeting, is entitled to vote at the annual meeting. The conversion to an NAV REIT remains subject to further approval of the conflicts committee, composed of all of the REIT’s independent directors, and the board of directors. Although the board is exploring an NAV REIT strategy, there is no assurance that it will successfully implement its strategy.
• In connection with the pursuit of an NAV REIT strategy, in December 2019, the Company’s board of directors determined to temporarily suspend Ordinary Redemptions under the share redemption program. Ordinary Redemptions are all redemptions that do not qualify for the special provisions for redemptions sought in connection with a stockholder’s death, “Qualifying Disability” or “Determination of Incompetence” (each as defined in the share redemption program). Redemptions sought in connection with a stockholder’s death, “Qualifying Disability” or “Determination of Incompetence” are “Special Redemptions.” Upon suspension, all Ordinary Redemptions requests that had been received were cancelled and no Ordinary Redemptions requests will be accepted or collected during the suspension of the share redemption program. However, any redemptions sought in connection with and meeting the requirements for a Special Redemption are still eligible and continue to be processed in accordance with the current share redemption program.
• The Singapore portfolio sale has made a significant amount of capital available to the REIT that the board intends to use to offer additional liquidity to stockholders after stockholders have had an opportunity to vote on proposals related to the conversion to an NAV REIT at the annual meeting. The REIT intends to provide this liquidity to stockholders either through tender offers and/or the share redemption program or through special distributions. Although the Singapore portfolio sale has made additional capital available to the REIT that it has and intends to continue to use to offer additional liquidity to stockholders through tender offers and/or the share redemption program or through special distributions to stockholders, the board cannot predict future redemption demand with any certainty.
Source: SEC
