KBS Strategic Opportunity REIT Update June 17, 2015

Transcription

1 KBS Strategic Opportunity REIT Update June 17, 2015

2 Forward-Looking Statements The information contained herein should be read in conjunction with, and is qualified by, the information in the KBS Strategic Opportunity REIT, Inc. ( KBS Strategic Opportunity REIT ) Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Commission Exchange (the SEC ) on March 9, 2015 (the Annual Report ), including the Risk Factors contained therein. For a full description of the limitations, methodologies and assumptions used to value KBS Strategic Opportunity REIT s assets and liabilities in connection with the calculation of KBS Strategic Opportunity REIT s estimated value per share, see KBS Strategic Opportunity REIT s Current Report on Form 8-K, filed with the SEC on December 11, Forward-Looking Statements Certain statements contained herein may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of KBS Strategic Opportunity REIT intends that such forward-looking statements be subject to the safe harbors created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include statements regarding the intent, belief or current expectations of KBS Strategic Opportunity REIT and members of its management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as may, will, seeks, anticipates, believes, estimates, expects, plans, intends, should or similar expressions. Further, forward-looking statements speak only as of the date they are made, and KBS Strategic Opportunity REIT undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law. Actual results may differ materially from those contemplated by such forward-looking statements. The valuation methodology for KBS Strategic Opportunity REIT s real estate investments assumes that its properties realize the projected cash flows and exit cap rates and that investors would be willing to invest in such properties at cap rates equal to the cap rates used in the valuation. Though the appraisals and valuation estimates used in calculating the estimated value per share are Duff & Phelps and Landauer Services best estimates as September 30, 2014, and/or KBS Strategic Opportunity REIT s and KBS Capital Advisors LLC s ( the Advisor ) best estimates as of December 9, 2014, KBS Strategic Opportunity REIT can give no assurance that these estimated values will be realized by KBS Strategic Opportunity REIT. These statements also depend on factors such as future economic, competitive and market conditions, KBS Strategic Opportunity REIT s ability to maintain occupancy levels and lease rates at its properties, and other risks identified in Part I, Item IA of KBS Strategic Opportunity REIT s Annual Report on form 10-K for the year ended December 31, 2014, and its subsequent quarterly reports. Actual events may cause the value and returns on KBS Strategic Opportunity REIT s investments to be less than that used for purposes of KBS Strategic Opportunity REIT s estimated value per share. 2

3 Portfolio Overview Total Acquisitions 1 : $1,093,248,000 Total Current Portfolio 2 : $1,022,392, Equity Assets 1 Debt Asset December 2014 Estimated Value of Portfolio 3 : $1,252,269,000 SOR Equity Raised (excludes DRIP): $ 561,749,000 Portfolio Leverage 4 : 45% Occupancy at Acquisition 5 : 67% Percent Leased as of 5/31/15 5 : 83% 1 Represents acquisition price (excluding closing costs) of real estate and loans acquired since inception (including investments which have been disposed), adjusted for KBS Strategic Opportunity REIT s share of consolidated and unconsolidated joint ventures. This total is $1,219,214,000 including our partners shares of consolidated and unconsolidated joint ventures and excludes capital expenditures on real estate. Subsequent to acquisition, KBS Strategic Opportunity REIT foreclosed on or otherwise received title to the properties securing five of its original debt investments, all of which were non-performing loans at the time of acquisition. 2 Represents acquisition price (excluding closing costs) of real estate and loans in portfolio as of March 31, 2015, adjusted for KBS Strategic Opportunity REIT s share of consolidated and unconsolidated joint ventures. This total is $1,145,858,000 including our partners shares of consolidated and unconsolidated joint ventures and excludes capital expenditures on real estate. 3 Values as of September 30, 2014, and are the net total of real estate, investments in unconsolidated JVs, real estate loan receivables and minority interest as presented on page 6 of the stockholder presentation filed with the 8-K on December 11, 2014, but adjusted to exclude the Cahuenga JV since the property was sold on March 11, As of March 31, 2015, KBS Strategic Opportunity REIT s consolidated borrowings were approximately 45% of the December 2014 appraised value of consolidated properties. 5 For consolidated properties, excluding apartments, in the portfolio as of May 31,

4 Portfolio Overview Acquisition History Cost Basis and Fund Raising 1 Cost basis equals acquisition price (net of closing credits and excluding closing costs) plus capital expenditures as of September 30, 2014 for investments made and still in the portfolio as of that date. Real estate acquired through consolidated and unconsolidated joint ventures reflects KBS Strategic Opportunity REIT s share. 2 Includes real estate and loans in portfolio as of September 30, 2014, including KBS Strategic Opportunity REIT s share of consolidated and unconsolidated joint ventures 3 Includes gross proceeds of primary offering, excluding proceeds from the dividend reinvestment plan. 4

5 Portfolio Overview: $11.27 NAV 1 Includes real estate and loans in portfolio as of December 31, 2013, adjusted for KBS Strategic Opportunity REIT s share of consolidated and unconsolidated joint ventures. 2 Cost basis equals acquisition price (net of closing credits and excluding closing costs) plus capital expenditures for investments made and still in portfolio as of December 31, Equals acquisition price (net of closing credits and excluding closing costs), adjusted for KBS Strategic Opportunity REIT s share of consolidated and unconsolidated joint ventures. 5

6 Portfolio Overview: $12.24 NAV December 2014 Estimated Values of Real Estate 1,2 and Loan Receivable 1 For real estate held in consolidated joint ventures, the value presented is equal to the real estate value less the minority interest value. 2 For real estate held in unconsolidated joint ventures, the value presented for National Industrial Portfolio is equal to KBS Strategic Opportunity REIT s equity value since the company owns a minority share of the joint venture s equity and the value for 110 Williams Street is equal to the real estate value times the REIT s share of the joint venture s equity since the REIT is a majority owner but lacks certain control rights which preclude the REIT from consolidating the joint venture under GAAP. 3 The estimated value per share is 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, For more information, please refer to the KBS Strategic Opportunity REIT s 8K filed on December 11, Cost basis equals acquisition price (net of closing credits and excluding closing costs) plus capital expenditures for investments made and still in portfolio as of September 30, 2014, adjusted for KBS Strategic Opportunity REIT s share of consolidated and unconsolidated joint ventures. 6

7 Portfolio Updates KBS Strategic Opportunity REIT Portfolio Update June 17,

8 Occupancy Update Occupancy at Acquisition Leased% as of Sept 2014 Leased % as of May 2015 % Change Since Sept 2014 % Change Since Acquisition Northridge Center (Atlanta, GA) 40% 72.2% 79.3% 7.1% 39.3% Iron Point Business Park (Folsom, CA) 38% 86.5% 91.0% 4.5% 53.0% Richardson Portfolio (Richardson, TX) 49% 89.9% 89.0% -0.9% 40.0% Bellevue Technology Center (Bellevue, WA) 62% 82.5% 93.5% 11.0% 31.5% Powers Ferry Landing (Atlanta, GA) 32% 84.9% 94.9% 10.0% 62.9% 1800 West Loop South (Houston, TX) 76% 78.6% 84.9% 6.3% 8.9% West Loop I & II (Houston, TX) 77% 75.9% 78.0% 2.1% 1.0% Burbank Collection (Burbank, CA) 57% 53.8% 47.7% -6.1% -9.3% Austin Suburban Portfolio (Austin, TX) 75% 76.8% 79.7% 2.9% 4.7% Westmoor Center (Westminster, CO) 81% 86.7% 79.2% -7.5% -1.8% Central Building (Seattle, WA) 82% 84.5% 90.3% 5.8% 8.3% 50 Congress (Boston, MA) 88% 94.3% 92.4% -1.9% 4.4% 1180 Raymond (Newark, NJ) 72% 81.7% 90.9% 9.2% 18.9% Maitland Promenade II (Orlando, FL) 77% 95.5% 95.5% 0.0% 18.5% Plaza Buildings (Bellevue, WA) 81% 84.1% 83.6% -0.5% 2.6% 424 Bedford (Brooklyn, NY) 97% 97.0% 95.5% -1.5% -1.5% 8

9 Leasing Update Bellevue Technology Center (Bellevue, WA) Leased Occupancy 9/30/14: 82.5% Leased Occupancy 5/31/15: 93.5% New Leases: o o Intergen North America 7,330 SF MOD Super Fast Pizza 15,772 SF Austin Suburban Portfolio (Austin, TX) Leased Occupancy 9/30/14: 76.8% Leased Occupancy 5/31/15: 79.7% New Leasing: o o o o o o Maxpointe Interactive - 14,837 SF Lockwood Andrews & Newnam - 8,088 SF ASEC Group - 3,344 SF Prudential Insurance Co. - 3,227 SF Yorktown Tech - 3,106 SF Mortgage Pros - 1,518 SF 9

10 Leasing Update 1800 West Loop South (Houston, TX) Leased Occupancy 9/30/14: 78.6% Leased Occupancy 5/31/15: 84.9% New Leasing: o o o Westney Consulting Group 6,932 SF Set Solutions 5,510 SF Bless Oilfield Solutions 4,621 SF Northridge Center I and II (Atlanta, GA) Leased Occupancy 9/30/14: 72.2% Leased Occupancy 5/31/15: 79.3% New Leasing: o o CMO Compliance 5,493 SF Nolan Transportation 7,757 SF 10

11 Property Sale Summary 1635 N. Cahuenga Los Angeles, CA Acquisition Date: August 3, 2011 REIT Ownership %: 70% Property Type: Office Size: 34,711 SF Acquisition Occupancy: 39% Occupancy at Sale: 80% Purchase Price: $7,252,000 Total Investment 1 : $8,900,000 Sold March 2015: $16,400,000 Buyer: Industry Owner/User KBS Equity Value at Sale: $7,454,000 KBS Equity Basis at Sale: $2,941,000 Profit 2 / Equity Multiple: $4,513, X Capital Improvements: Building exterior painted, elevator lobby repainted with new electronic directory and leather wall coverings. New concrete driveway, stainless steel gate and lift door. Upgraded parking and access system. 1 Total investment includes the initial purchase price plus capital expenditures and lease commissions since acquisition. 2 Profit excludes acquisition fees and costs and disposition fees and costs. 11

12 Portfolio Updates KBS Strategic Opportunity REIT Partial Asset Updates June 17,

13 Portfolio Investments Park Highlands Lands Las Vegas, NV Acquisition Date: December 30, 2011 Sale Status: 363 BK Auction Prior Owners Cost Basis: $430,000,000 Investment: Equity Acq. Property Type: 1,375 Acres of Entitled Land Entitlements: 7200 SFR 120 acres of CRE REIT Ownership %: 50.1% Total Cost: $21,000,000 KBS Investment: $10,500,000 Subject Parcels Newmark Grubb & Ellis Sept Appraisal: $135,000,000 * Development Agreement Approved 13

14 Portfolio Investments Richardson Texas Portfolio Acquisition Date: Nov. 23, 2011 REIT Ownership %: 90% Property Type: 5 Class B Offices Size: 43 Entitled Acres 728,857 SF Acquisition Occupancy: 49% Current Leased Occupancy: 89% Initial Purchase Price: $ 44,500,000 Capital Expenditures 1 : $ 13,319,000 Less: Cost of Sold Building: $ (3,319,000) Total Investment 2 : $ 54,500,000 Sept Appraised Value: $101,500,000 KBS Sept Equity Valuation: $ 40,313,000 KBS Sept Equity Basis: $ 12,173,000 Profit / Equity Multiple: $ 28,140, X 1 Includes lease costs and commissions. 2 Total investment includes the initial purchase price plus capital expenditures and lease commissions since acquisition as of March 31, Excludes Greenway II which was sold in January

15 KBS SOR I Acquisition Update Richardson Land II JV Acquisition of Remaining Master Plan Acreage Acquired in September, 2014 REIT Ownership %: 90% Purchase Price: $7.3 MM Total Investment 1 : $7.9 MM 1 Total investment includes the initial purchase price plus capital expenditures since acquisition, as of March 31,

16 Portfolio Investments Folsom, CA Office Portfolio Acquisition Date: March 14, 2011 Property Type: 5 Offices Size: 211,887 SF Acquisition Occupancy: 38% Current Leased Occupancy: 91% Total Investment 1 : $25,996,000 Sept Appraisal: $31,800,000 Sept Equity Valuation : $21,757,000 Sept Equity Basis: $15,369,000 Profit / Equity Multiple: $ 6,388, X Capital Improvements: Lobbies, Restrooms, Fitness Center, Conference Center, Executive Lounge, Landscaping *Now essentially full, shows start to finish Basis Strategy materialize. 1 Total investment includes the initial purchase price plus capital expenditures and lease commissions since acquisition as of March 31,

17 Portfolio Investments Bellevue Technology Center Bellevue, WA Acquisition Date: July 31, 2012 Property Type: 9 Class A/B Offices Size: 330,508 SF Acquisition Occupancy: 62% Current Leased Occupancy: 93% Total Investment 1 : $85,888,000 Sept Appraisal: $98,690,000 Sept Equity Valuation: $49,446,000 Sept Equity Basis: $35,328,000 Profit / Equity Multiple: $14,118, X Capital Improvements: - Buildings G&H: Lobby and common area renovation - Building D: New entrance and parking field - Building C: Update to property amenities - Building out extra parking, then on to phase 2 1 Total investment includes the initial purchase price plus capital expenditures and lease commissions since acquisition as of March 31,

18 Portfolio Investments Austin Suburban Portfolio Austin, TX Acquisition Date: March 28, 2013 Property Type: Office, Class A and B Size: 517,974 SF Acquisition Occupancy: 75% Current Leased Occupancy: 80% Total Investment 1 : $81,563,000; $140 PSF Sept Appraisal: $93,600,000 Sept Equity Valuation: $37,752,000 Sept Equity Basis: $23,585,000 Profit / Equity Multiple: $14,167, X 1 Total investment includes the initial purchase price plus capital expenditures and lease commissions since acquisition as of March 31,

19 Portfolio Investments 50 Congress Boston, MA Acquisition Date: July 11, 2013 Property Type: Office, Class A Size: 179,872 SF Acquisition Occupancy: 88% Current Leased Occupancy: 92% Total Investment 1 : $52,817,000 Sept Appraisal: $62,300,000 Sept Equity Valuation: $35,352,000 Sept Equity Basis: $25,223,000 Profit / Equity Multiple: $10,129, X Capital Improvements: - Planned renovation of lobby - Elevator modernization and sprinkler upgrade 1 Total investment includes the initial purchase price plus capital expenditures and lease commissions since acquisition as of March 31,

20 Distribution History Record Date Payment Date Amount/Share Reason 12/23/ /28/2011 $0.30 Estimated increase in portfolio value, as supported by completed broker opinions of value (BOVs) 2/14/2012 2/17/2012 $ Gain on the sale of 1 Roseville building 4/16/2012 4/30/2012 $0.025 Gain from paying off loan at a discount, disposition of Roseville land and estimated increased value in the portfolio 7/20/2012 7/31/2012 $ Estimated increase in portfolio value, as supported by a second round of completed BOVs 3/22/2013 4/4/2013 $ Gain from the unsolicited sale of one building in the Richardson Portfolio 11/13/ /5/2013 $ % of forecasted taxable income for 2013, including gains from the sales of 2 Powers Ferry buildings, the remaining 4 Roseville buildings, and the payoff of Ponte Palmero mortgage loan 3/31/2014 4/15/2014 $ Based on Board s determination of available cash flow; 2.0% Annualized 6/16/2014 6/23/2014 $ Based on Board s determination of available cash flow; 2.25% Annualized 9/15/2014 9/24/2014 $ Based on Board s determination of available cash flow; 2.75% Annualized 12/15/ /29/2014 $ Based on Board s determination of available cash flow; 3.5% Annualized 3/20/2015 3/26/2015 $ Based on Board s determination of available cash flow; 3.75% Annualized Subtotal 1 $ /18/2015 6/25/2015 $ Based on Board s determination of available cash flow; 3.75% Annualized (Declared, but not yet paid) Total $ Based on all distributions paid as of June 16,

21 Stockholder Performance Hypothetical Performance of First and Last Investors Assumes all distributions have been taken in cash and stockholder has held shares since the dates below 1 Estimated Value Per Share as of December 9, 2014 (2) Cumulative Cash Distributions Per Share Received as of June 25, 2015 Sum of Estimated Value Per Share and Cumulative Cash Distributions Per Share Received, as of June 25, 2015 First Investor (Invested at Escrow Break on April 19, 2010): $12.24 $1.59 $13.83 Last Investor (Invested at Close of Public Offering on Nov. 14, 2012): $12.24 $0.89 $13.13 (1) Does not reflect the hypothetical performance of investment by stockholders that participated in the dividend reinvestment plan. (2) KBS Strategic Opportunity REIT is providing this estimated value per share to assist broker dealers that participated in its initial public offering in meeting their customer account statement reporting obligations. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share. KBS Strategic Opportunity REIT can give no assurance that: a stockholder would be able to resell his or her shares at this estimated value; a stockholder would ultimately realize distributions per share equal to KBS Strategic Opportunity REIT's estimated value per share upon liquidation or sale of KBS Strategic Opportunity REIT; KBS Strategic Opportunity REIT's shares of common stock would trade at the estimated value per share on a national securities exchange; an independent third-party appraiser or other third-party valuation firm would agree with KBS Strategic Opportunity REIT's estimated value per share; or the methodology used to estimate KBS Strategic Opportunity REIT's value per share would be acceptable to FINRA or for compliance with ERISA reporting requirements. Further, the estimated value per share as of December 9, 2014 is based on the estimated value of KBS Strategic Opportunity REIT's assets less the estimated value of KBS Strategic Opportunity REIT's liabilities, or net asset value, divided by the number of shares outstanding as of September 30, All of KBS Strategic Opportunity REIT's assets and liabilities were valued as of September 30,

22 (in thousands) Loan Maturities (in thousands) Initial Maturities $430,982 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $1,554 $14,537 $82,117 $7,804 $18,497 $ Thereafter Fully Extended Maturities $300,000 $250,117 $250,000 $200,000 $150,000 $141,009 $132,712 $100,000 $50,000 $1,554 $5,523 $24,576 $ Thereafter 22

23 Debt Refinancing Exploring options to refinance in improved lending environment Goal to free up cash from loan proceeds with relatively unchanged interest expense due to better financing terms Additional loan availability to provide greater flexibility in use of cash for capital expenditures or distributions 23

24 Liquidity Options Portfolio Refinance Bond Offering Dutch Tender Large Partial Distribution Asset Sales Public Listing 24

25 Important Updates Amended Share Redemption Program Effective June 13, 2015: All eligible shares will be redeemed at a price equal to the most recent estimated value per share as of the applicable redemption date. Amended Dividend Reinvestment Plan Effective July 1, 2015: The price of shares purchased through the plan will be the same as the estimated value per share most recently announced in a public filing, currently $12.24 per share. 25

26 Thank you! For more information, please contact your financial advisor or KBS Capital Markets Group at (866) KBS Capital Markets Group Member FINRA & SIPC 800 Newport Center Drive, Suite 700 Newport Beach, CA