KBS REIT III Sells 12 Properties for $1.2 Billion to Singapore REIT

July 23, 2019

KBS REIT III Sells 12 Properties for $1.2 Billion to Singapore REIT

July 19, 2019

On July 18, 2019, KBS Real Estate Investment Trust III, Inc., through 12 wholly owned subsidiaries, sold the “Singapore Portfolio” to various subsidiaries of Prime US REIT, the “SREIT”, which was listed on the Singapore Stock Exchange on July 19, 2019. The sale price of the Singapore Portfolio was $1.2 billion, before third-party closing costs and credits of approximately $16.1 million and excluding any disposition fees payable to KBS Capital Advisors LLC, the Company’s external advisor. A “Set-Off Amount” of $271.0 million of the purchase price will consist of units in SREIT’s offering.

The Singapore Portfolio consisted of the following properties: Tower I at Emeryville, Emeryville, California; 222 Main, Salt Lake City, Utah; Village Center Station, Greenwood Village, Colorado; Village Center Station II, Greenwood Village, Colorado; 101 South Hanley, St. Louis, Missouri; Tower on Lake Carolyn, Irving, Texas; Promenade I & II at Eilan, San Antonio, Texas; CrossPoint at Valley Forge, Wayne, Pennsylvania; One Washingtonian Center, Gaithersburg, Maryland; Reston Square, Reston, Virginia; and 171 17th Street, Atlanta, Georgia.

According to Blue Vault, KBS REIT III had a portfolio of 29 properties and one joint venture as of March 31, 2019, consisting of 11.2 million square feet. The REIT’s real estate assets had a book value of $3.01 billion at that date. The most recent net asset value per share was $12.02 as of September 30, 2018, and the REIT’s Q1 2019 distribution rate was 6.52% based upon its original offering price of $10.00 per share and 5.41% based upon the most recent net asset value per share of $12.02.

As part of the Singapore Transaction, on June 27, 2019, KBS REIT Properties III LLC, the Company’s indirect wholly owned subsidiary (“REIT Properties III”), entered into a Subscription Agreement (the “Subscription Agreement”) with the SREIT’s manager, KBS US Prime Property Management Pte. Ltd. (the “Manager”), to subscribe for $201.0 million of the units to be issued by the SREIT. Certain of the Company’s indirect wholly owned subsidiaries, certain of the SREIT’s direct and indirect wholly owned subsidiaries, the Manager and DBS Trustee Limited, as trustee of the SREIT, also entered a Set-Off Agreement on June 27, 2019 (the “Set-Off Agreement”). Pursuant to the Set-Off Agreement, the Company agreed that the SREIT may deduct from the aggregate purchase price due from the SREIT under the Purchase Agreement the subscription amount to be paid by REIT Properties III for the units under the Subscription Agreement. Also pursuant to the Set-Off Agreement, the Manager discharges REIT Properties III from payment of the subscription amount upon receipt by the Company of the aggregate purchase price under the Purchase Agreement less the subscription amount under the Subscription Agreement.

In connection with the Singapore Transaction, the Company repaid $613.1 million of outstanding debt secured by the properties in the Singapore Portfolio. Pursuant to the Set-Off Agreement Amendment, $271.0 million of the consideration payable by the SREIT under the Purchase Agreement was set-off against REIT Properties III’s payment obligations for its subscriptions for units in the SREIT. On July 19, 2019, REIT Properties III acquired 307,953,999 units in the SREIT at the Offering Price representing a 33.3% ownership interest in the SREIT. Currently, the SREIT does not own any properties other than the Singapore Portfolio.

Under a lock-up agreement, 100% of the SREIT units received by REIT Properties III in the transaction must not be sold for six months and 50% of the units may not be sold for 12 months following the listing of SREIT on the Singapore Stock Exchange.

The Company expects to utilize a substantial portion of the net proceeds to provide enhanced liquidity to the Company’s stockholders (whether through the share redemption program or one or more self-tender offers) and to utilize a portion of the net proceeds to pay a special distribution to stockholders.  

Source: SEC, Blue Vault

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Gil Armour, CFP
February 3, 2016

I have been using Blue Vault Partners for the past five years.  I have found them to be a valuable, unbiased resource when it comes to evaluating and comparing non-traded REITs.  The reports help me analyze which sponsors are doing a responsible job of managing their offerings.  This allows me to limit my REIT recommendations to only the most competitive products, and then track those REITs throughout their life cycle.