KBS Strategic Opportunity REIT to Sell 11 Properties for $804 Million
October 25, 2017 | James Sprow | Blue Vault
On October 24, 2017, KBS Strategic Opportunity REIT, Inc. entered into an agreement to sell 11 of its properties to various subsidiaries of Keppel-KBS US REIT, a newly formed Singapore real estate investment trust (the “SREIT”) that is expected to be listed on the Singapore Stock Exchange. The purchase price of the portfolio is $804 million. The portfolio consists of the following properties: 1800 West Loop, Westech 360 (part of the Austin Suburban Portfolio), Great Hills Plaza (part of the Austin Suburban Portfolio), Westmoor Center, Iron Point Business Park, the Plaza Buildings, Bellevue Technology Center, Northridge Center I and II, West Loop I and II, Powers Ferry Landing East, and Maitland Promenade II.
The transaction is scheduled to close on November 8, 2017. However, closing of the transaction is contingent upon, among other things, (i) the buyer obtaining the equity capital through the issuance of shares listed on the Singapore Stock Exchange necessary to fund the acquisition of the portfolio and (ii) the buyer obtaining commitments from commercial lenders to help finance the acquisition.
The $804 million purchase price for the 11 properties in the portfolio is slightly above the aggregate appraised values for the 11 properties used in the REIT’s most recent estimated value per share determined as of December 8, 2016. As of June 30, 2017, the properties in the portfolio had a cumulative carrying value of $518.7 million, and were subject to cumulative loans in the amount of $379.0 million. The Company will avoid significant third party closing costs by listing the portfolio on the Singapore Stock Exchange compared to selling the properties, whether individually or as a portfolio, in a typical sales transaction, which represents significant savings to the Company for a disposition of this size. After repayment of the loans and disposition fees, the REIT expects to have approximately $418 million in net proceeds from the transaction, including its up to 9.5% ownership interest in shares of the SREIT which it will retain upon completion of the transaction.
The 11 properties that comprise the portfolio were initially acquired as opportunistic assets but have since developed into stabilized assets. The Company believes that the transaction presents an excellent opportunity to monetize these assets at attractive pricing and to utilize a substantial portion of the net proceeds to invest in new opportunistic investments, as well as current capital projects, in accordance with its opportunistic business strategy and focus and to pay down debt. It also intends to use a smaller portion of the net proceeds to provide additional liquidity to stockholders who desire it, whether through its share redemption program or one or more self-tender offers. If the transaction is consummated, because of the size of the transaction and the properties in the portfolio being stabilized assets, cash flow would be reduced and may impact distributions to stockholders going forward.
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