KBS Strategic Opportunity REIT Recommends Rejection of $7.23 Per Share Tender Offer
October 16, 2019 | Blue Vault
In a letter to shareholders dated October 16, 2019, Peter McMillan, President and Chairman of the Board of KBS Strategic Opportunity REIT, Inc. recommended to the REIT’s shareholders that they not sell their shares to Comrit Investments 1, Limited Partnership. The letter stated, “We believe the Offer Price is substantially below the value of the Shares and recommend against selling your Shares at that price.”
The letter stated:
“In arriving at our recommendation against selling your Shares to the Bidder, we considered the following:
• On November 12, 2018, our board of directors approved an estimated value per share (the “EVPS”) of the REIT’s common stock of $9.91 based on the estimated value of the REIT’s assets less the estimated value of the REIT’s liabilities, or net asset value, divided by the number of shares outstanding as of September 30, 2018, with the exception of an adjustment to our net asset value to give effect to the November 12, 2018 authorization of a special dividend of $2.95 per share on our outstanding shares of common stock to the stockholders of record as of the close of business on November 12, 2018 which was reflected in the calculation of the November 12, 2018 estimated value per share. The value of the REIT’s shares will fluctuate over time in response to developments related to individual assets in the REIT’s portfolio and the management of those assets and in response to the real estate and finance markets. As such, the most recent EVPS does not take into account developments in the REIT’s portfolio since November 12, 2018. Tendering stockholders whose shares are accepted for payment will lose the opportunity to participate in any potential future upside and future growth of the REIT with respect to such shares and will lose the right to receive any future distributions or dividends that we may declare and pay.
• With respect to ordinary redemption requests received pursuant to our share redemption program (the “SRP”) for the first and second quarters of 2019, we had unfulfilled requests to redeem 3,294,070 and 3,782,675 Shares, respectively, or 94.216% and 94.926%, respectively, of the Shares submitted for redemption, due to SRP funding limitations. If future redemption requests exceed the amount of funding available under our share redemption program and any additional funding made available under one or more self-tender offers, the number of unfulfilled redemption or repurchase requests will increase over time. As of the date of this letter, we had an aggregate $2.6 million available under the SRP for additional redemptions in 2019 with $2.0 million available for ordinary redemption requests subject to the $2.0 million quarterly limitation in addition to $0.6 million available for the monthly redemption of shares requested in connection with a stockholder’s death, qualifying disability or determination of incompetence, all of which is specified in the current SRP. However, we continue to monitor the number of redemption requests and funding levels for the SRP. As we did in prior instances when our board of directors authorized additional funds for the redemption of shares, we will continue to consider the liquidity available to stockholders going forward, balanced with other long-term interests of the stockholders and the REIT. We are continuing to evaluate possible strategic alternatives to provide additional liquidity to stockholders, including but not limited to negotiating or procuring the sale of certain properties in the REIT’s portfolio, the potential conversion of the REIT to an “NAV REIT” with increased capacity to repurchase shares through its SRP, and other strategies.”
Comrit Investments 1 made a tender offer in February 2019 for shares of KBS Real Estate Investment Trust II, Inc. The Partnership offered $3.81 per share for 1,574,803 shares. KBS Real Estate Investment Trust II had announced an estimated value per share as of December 3, 2018, of $4.95. In September 2019 Comrit offered shareholders of SmartStop Self Storage REIT, Inc. $7.84 per share. That REIT had estimated its value per share at $10.66 as of June 26, 2019.
Comrit Investments 1, Limited Partnership, is a Cayman Islands Exempted Limited Partnership. Comrit Investments Ltd., a limited liability private company organized under the laws of the State of Israel, is the general partner of Comrit Investments 1, LP.
Sources: SEC, Central Trade & Transfer
