KBS Strategic Opportunity REIT Update October 6, 2015

Transcription

1 KBS Strategic Opportunity REIT Update October 6, 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 The Sponsor KBS Portfolio Managers Keith Hall Co-Founder KBS Capital Advisors CEO KBS Strategic Opportunity REIT II PAST EXPERIENCE Managing Director at Credit Suisse First Boston Director in the Real Estate Products Group at Nomura Securities Senior Vice President in the High Yield Bond Department of Drexel Burnham Lambert Peter McMillan III Co-Founder, Executive Vice President, KBS Capital Advisors PAST EXPERIENCE Executive Vice President and Chief Investment Officer of SunAmerica Investments, Inc., later acquired by AIG Assistant Vice President for Aetna Life Insurance and Annuity Company MBA in finance from the Wharton Graduate School of Business at the University of Pennsylvania

4 The Sponsor KBS: Experience by the Numbers* 23 Years of real estate investment management $20.7 Billion in 1,592 assets nationwide invested in, managed or owned 14 Investment funds totaling over 42.5 million square feet of real estate have gone full-cycle 58 Institutional clients 7 Non-Traded REITs 1,081 Real estate and real estate-related assets sold nationwide since inception 5 th Largest Office Owner Globally - National Real Estate Investor, September/October 2014 Zero property management property management outsourced to most qualified managers with no mark up of cost * Information as of June 30, 2015 for all KBS affiliated entities, including private funds. Square footage does not include debt assets.

5 U.S. Opportunity Migration The Opportunity Migration in the U.S. Basis Opportunity Focus on Distressed Debt Yield Opportunity Focus on Value-Add Equity Recovering Markets and Higher Rents Low Basis Required Low Rents Acceptable Lease-Up Value Creation Attractive Financing Higher Occupancy Current Yields Sources: BLS, Moody s/rca CPPI National All Property Index, Bloomberg

6 KBS Strategic Opportunity REIT Valuation History

7 Portfolio Overview Total Acquisitions 1 : $1,219,214,000 Total Current Portfolio 2 : $1,145,858, Equity Assets 1 Debt Asset December 2014 Estimated Value of Portfolio 3 : $1,262,913,000 SOR Equity Raised: $561,749,000 Portfolio Leverage 4 : 53% Percent Leased as of 6/30/15 5 : 84% Occupancy at Acquisition 5 : 67% 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 $1,219,400,000 including our partners shares of consolidated and unconsolidated joint ventures. 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 June 30, 2015, adjusted for KBS Strategic Opportunity REIT s share of consolidated and unconsolidated joint ventures. This total is $1,153,110,000 including our partners shares of consolidated and unconsolidated joint ventures. 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 shown on page 6. Values are provided for purpose of comparison against the $1,027,469,000 cost basis of portfolio as of September 30, As of June 30, 2015, KBS Strategic Opportunity REIT s consolidated borrowings were approximately 53% of the appraised value of consolidated properties. 5 For consolidated properties in the portfolio as of June 30, 2015.

8 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.

9 Portfolio Overview: $11.27 NAV 1 Includes real estate and loans in portfolio as of December 31, 2013, adjusted for the 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 the REIT s share of consolidated and unconsolidated joint ventures.

10 Portfolio Overview: $12.24 NAV 1 Includes real estate and loans in portfolio as of September 30, 2014, adjusted for the 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 September 30, 2014.

11 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 September 28, 2015 Sum of Estimated Value Per Share and Cumulative Cash Distributions Per Share Received, as of September 28, 2015 First Investor (Invested at Escrow Break on April 19, 2010): $12.24 $1.68 $13.91 Last Investor (Invested at Close of Public Offering on Nov. 14, 2012): $12.24 $0.98 $13.22 (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, 2014.

12 KBS Strategic Opportunity REIT Portfolio Snapshot

13 Portfolio Investments Investment Team 6,252,248 RSF* $1,399,222,722 Current Valuation** *Does not include square footage from land (1,724 acres), University Housing (521 Beds) or Apartments (66 Units). **Data as of December 31, 2014

14 Portfolio Investments Bellevue Technology Center Property Type: Market: Seattle Class A/B Office Campus & Land Submarket: Bellevue Asset Description: Acquisition Date: July 31,, 2012 Total Square Footage: 330,508 SF Number of Tenants: 17 Avg. Lease Terms: 5.86 Acquisition Occupancy: 62% Current Occupancy: 93.5% Dec Appraisal: $98,690,000 First Mortgage Lender: Bank of America Pool Investment Strategy: Acquired the property from the owner user, allowing them to shrink their leased space. Rebranded the asset to take advantage of proximity to Microsoft world headquarters. Capital improvements targeted to updating the property to higher market standards and multi-tenant space. Converted space into fitness center. Locker room, bike storage, full-service café, management office, and conference center. Added a new parking lot and modified a building entrance to improve accessibility. Increased occupancy to 93.5%

15 Portfolio Investments Bellevue Technology Center

16 Portfolio Investments Maitland Promenade II Property Type: Market: Orlando, FL Class A Office Building Submarket: Maitland Center Asset Description: Acquisition Date: December 18, 2013 Total Square Footage: 230,366 SF Number of Tenants: 11 Avg. Lease Terms: 5.09 Current Occupancy: 95.5% Dec Appraisal: $ 36,400,000 First Mortgage Lender: Bank of America Pool Investment Strategy: Purchased the underperforming asset from a weak owner near the bottom of the Florida market cycle Timing was good and leasing demand increased once a strong owner was in place and had the ability to cut deals KBS repositioned the asset through: common area renovations, adding a conference center, and actively pursuing tenants Currently pushing rents higher as leases renew

17 Portfolio Investments Richardson Texas Portfolio Property Type: Market: Dallas 5 Class B buildings & 43 Acres of Land Submarket: Richardson Asset Description: Acquisition Date: Nov. 3, 2011 Total Square Footage: 1,975,475 SF Number of Tenants: 79 Avg. Lease Terms: 3.54 Current Occupancy: 89% Dec Appraisal: $112,660,000 First Mortgage Lender: Bank of America Pool JV Interest: 90% Investment Strategy: KBS purchased the property from a lender that had foreclosed on their loan. The purchase included seller financing. KBS executed a plan to reposition the property, including the entitlement of the land, and a sale of one of the buildings. Purchased in November 2011 with a 10% JV partner, additional land was purchased in Repositioned the asset through capital improvement program that included renovations of the lobbies, elevators, restrooms, and parking lots. Leasing has picked up as a direct result. Subdivided land in preparation for future development Increased occupancy to 89%

18 Portfolio Investments 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, 2015.

19 Acquisition Update Richardson Land II JV Acquisition of remaining Master Plan Acreage Acquired on September, 2014 Price: $6.9MM Total Costs: 12.4MM Selling 27 acres: $21MM Gross, $17MM Net

20 Portfolio Investments 1180 Raymond Property Type: High Rise Apartment Conversion Market: Newark, NJ Submarket: Newark CBD Asset Description: Acquisition Date: March 14, 2012 Total Square Footage: 268,688 SF Number of Tenants: 294 Avg. Lease Terms: n/a Current Occupancy: 93% Dec Appraisal: $ 47,435,607 Investment Strategy: KBS purchased a non-performing first mortgage collateralized by 1180 Raymond, a 317-unit apartment building. Subsequently, KBS foreclosed on the note in August Property was originally constructed in 1929 as an office building. In 2005, it was converted into apartments. The developer eventually defaulted. 39 of the 317 units were offline due to water infiltration issues. KBS repaired all 39 units and brought them back online. Amenities include private bowling alley, fitness center, spa, billiards lounge, game room, and indoor basketball gym KBS invested capital to refurbish lobby, gym, lounges, common corridors, and model apartments. Today, the building is 93% occupied

21 Portfolio Investments 110 William Street Property Type: Market: New York Class B Office Submarket: Downtown Manhattan Asset Description: Acquisition Date: May 2, 2014 Total Square Footage: 928,157 SF Number of Tenants: 42 Avg. Lease Terms: 6.51 Acquisition Occupancy: 97% Current Occupancy: 95% Purchase Price: $ 263,000,000 Dec Appraisal: $ 322,200,000 First Mortgage Lender: Bank of America Pool JV Interest: 60% Investment Strategy: The strategy is to lease up the vacant space and renew the NYEDC, the building s largest tenant, in advance of the loan maturity in Continue to lease vacant space at rents significantly above proforma. 110 William sits in the heart of one of the best submarkets of Manhattan and is adjacent to 13 main subway lines. Fully renovated the lobby and exterior entrance on William Street, modernized the freight elevators, renovated certain common corridors, and white-boxed the 30 th and 31 st floors to achieve above proforma rents.

22 Portfolio Investments Park Highlands Lands Property Type: Land Market: Las Vegas, NV Submarket: North Las Vegas Acquisition Date: December 30, 2011 Sale Status: 363 BK Auction Prior Owners Cost Basis: $430,000,000 Investment: Property Type: Entitlements: Equity Acq. 1,375 Acres of Entitled Land 7200 SFR JV Interest: 50.1% 120 acres of CRE Total Cost: $21,000,000 KBS Investment: $10,500,000 Newmark Grubb & Ellis Sept Appraisal: $135,000,000 Investment Strategy The Park Highlands acquisition was a opportunistic investment in entitled and improved land Subject Parcels

23 Portfolio Sale 1635 N. Cahuenga Los Angeles, CA Investment: $7,252,000 KBS Investment Amt $5,076,000 Size: 34,711 SF 1 st Declined Offer: $10,000,000 2 nd Declined Offer: $13,500,000 Acquisition Occupancy: 39% Occupancy at Sale: 80% Sold March 2015: $16,400,000 Buyer: Industry Owner/User 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.

24 Distribution History

25 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