Buy Improve Sell. See next page for additional important risk factors.

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1 Buy Improve Sell This is neither an offer to sell nor a solicitation of an offer to buy shares of KBS Strategic Opportunity REIT II; offering is only made by prospectus ( This information must be preceded or accompanied by a prospectus in order to understand fully all of the implications and risks of the offering. Neither the Attorney General of the State of New York nor any other state regulators have passed on or endorsed the merits of this offering. Any representation to the contrary is unlawful. Investing in KBS Strategic Opportunity REIT II includes significant risks. These risks include, but are not limited to: the possibility of losing your entire investment; no guarantees regarding future performance; upon sale or distribution of assets you may receive less than your initial investment; fluctuation of the value of the assets owned by KBS Strategic Opportunity REIT II; lack of a public market for shares of KBS Strategic Opportunity REIT II; limited liquidity; limited transferability; reliance on KBS Capital Advisors LLC, the REIT s advisor, to select, manage and dispose of assets; payment of significant fees; and various economic factors that may include changes in interest rates, laws, operating expenses, insurance costs and tenant turnover. Shares of KBS Strategic Opportunity REIT II are not suitable for all investors. See next page for additional important risk factors E.indd 1 7/6/15 1:31 PM

2 Additional Risk Factors: KBS Strategic Opportunity REIT II s organizational documents do not restrict it from paying distributions from any source and do not restrict the amount of distributions it may pay from any source, including offering proceeds or borrowings. Distributions paid from sources other than current or accumulated earnings and profits may constitute a return of capital. A return of capital would reduce the amount KBS Strategic Opportunity REIT II would have for investment, which could reduce an investor s return on investment and subsequent investors will experience dilution. There are no guarantees that KBS Strategic Opportunity REIT II will pay distributions. KBS Strategic Opportunity REIT II will pay substantial fees to and expenses of KBS Capital Advisors, its affiliates and participating brokerdealers, which payments will increase the risk that stockholders will not earn a profit on their investment. KBS Capital Advisors and its affiliates, and KBS Strategic Opportunity REIT II s executive officers, its affiliated directors and other key professionals face conflicts of interest, including significant conflicts created by the advisor s compensation arrangements with the REIT and other KBS-sponsored programs and KBS-advised investors. KBS Strategic Opportunity REIT II s advisor and its affiliates receive fees in connection with transactions involving the purchase or origination and management of the REIT s investments. These fees are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to the REIT. This may influence the advisor to recommend riskier transactions to the REIT. KBS Strategic Opportunity REIT II expects to use debt in connection with its investments, which increases the risk of loss associated with these investments and could hinder its ability to pay distributions to its stockholders or could decrease the value of its stockholders investments if income on, or the value of, the property securing the debt declines. KBS Strategic Opportunity REIT II may make adjustments to its target portfolio, based on real estate market conditions and investment opportunities. The REIT may change its targeted investments and investment guidelines at any time without the consent of its stockholders. KBS Strategic Opportunity REIT II expects to make foreign investments and will be susceptible to changes in currency exchange rates, adverse political or economic developments; lack of uniform accounting standards and changes in foreign laws which may adversely affect the investment portfolio of the REIT, thereby affecting the value of the investor s investment in the REIT. Disruptions in the financial markets and uncertain economic conditions could adversely affect the REITs ability to implement its business strategy and generate returns to investors. KBS Strategic Opportunity REIT II s charter does not require it to liquidate its assets and dissolve by a specified date, nor does the charter require it to list its shares for trading by a specified date. No public market currently exists for its shares, and it has no plans to list its shares on a national securities exchange. If a stockholder is able to sell his or her shares, that stockholder would likely have to sell them at a substantial discount from their public offering price. If KBS Strategic Opportunity REIT II does not raise significant proceeds in its public offering, it may not be able to acquire as diverse portfolio of real estate investments and the value of its stockholders investment may vary more widely with the performance of specific assets. Disruptions in the financial markets and uncertain economic conditions could adversely affect KBS Strategic Opportunity REIT II s ability to implement its business strategy and generate returns for its stockholders. KBS Strategic Opportunity REIT II s share price is set arbitrarily and the price is unrelated to the book or net value of assets owned by the REIT or to its expected operating income. No public market currently exists for shares of the REIT, and the REIT has no plans to list its shares on an exchange. In addition, the shares are subject to restrictions on transferability and re-sale and investors will be required to bear the financial risk of this investment for an indefinite period of time. If investors are able to sell shares, they will likely have to sell them at a substantial loss. There is no guarantee that KBS Strategic Opportunity REIT II will be able to provide liquidity by a certain date, or at all, or that any liquidity event would be successful. Investors may be required to hold their shares indefinitely. KBS Strategic Opportunity REIT II intends to elect to be taxed as a REIT beginning with the taxable year ending December 31, Should KBS Strategic Opportunity REIT II not qualify as a REIT, it will be subject to adverse tax consequences. Please refer to the prospectus for more detailed information regarding these consequences. An investment in KBS Strategic Opportunity REIT II s shares is complex. Investors should read and consider the prospectus, as amended and supplemented, carefully before investing. 1

3 KBS Strategic Opportunity REIT II expects to invest in and manage a diverse portfolio of value-add and opportunistic real estate and real estate-related investments in both the United States and Europe.1 1 KBS Strategic Opportunity REIT II may change its targeted investments and investment guidelines at anytime, without stockholder consent. KBS Strategic Opportunity REIT II 7004-E.indd 3 2 7/6/15 1:31 PM

4 Capturing the Opportunity Migration in Commercial Real Estate KBS Strategic Opportunity REIT II is a non-traded real estate investment trust (REIT) focused on acquiring an investment portfolio with a total return profile that is composed of investments that provide capital appreciation potential and current cash flow. These investments may consist of opportunistic or value-added real estate, distressed debt or other real estate-related investments in the United States and Europe. The strategy of acquiring value-add and opportunistic properties involves a higher risk of loss than would a strategy of investing in stabilized properties. The primary investment objectives 1 of the REIT are to: 1. Preserve and return investors capital contributions; 2. Realize capital appreciation/growth in the value of the investments; 3. Provide cash distributions through increased cash flow from operations or targeted asset sales. 2 The Strategy: Buy, Improve, Sell 3 KBS Strategic Opportunity REIT II employs a Buy/Improve/Sell strategy to identify value opportunities and drive total return by repositioning properties through improvements and additional lease-up after acquiring them. Favorable interest rates create an opportunity to acquire properties with marginally higher cost bases and higher occupancies than distressed assets, but with the potential to increase yields through a combination of additional lease-up, increases in rental rates and building improvements. Opportunity Migration in the United States In the U.S., the REIT intends to acquire properties primarily in metro areas experiencing job growth that outpaces the national average. The REIT s target properties are increasingly found outside of the gateway cities, as commercial real estate recovers more broadly and the value opportunity migrates to other primary and secondary markets in the U.S. Value-Add Real Estate = Distribution Opportunity 4 Recovering Markets, Higher Occupancy Favorable Interest Rates Higher Current Distributions 4 Value Creation Meanwhile, discounted debt and distressed equity investment opportunities continue to exist driven in large part by the deleveraging taking place around the world. The unprecedented amount of consumer, commercial and real estate-related debt issued by banks from 2003 to 2007, combined with the sharp economic contraction that followed, has left banks and other financial institutions with the challenge of managing distressed loan portfolios while appeasing regulators requiring increased capital reserves and liquidity on their balance sheets. 1 There is no assurance that KBS Strategic Opportunity REIT II will meet the stated objectives. 2 There is no assurance that KBS Strategic Opportunity REIT II will be able to make cash distributions. 3 KBS Strategic Opportunity REIT II may change its targeted investments and investment guidelines at anytime, without stockholder consent. 4 KBS Strategic Opportunity REIT II may pay distributions from any source, including, without limitation, from offering proceeds or borrowings (which may constitute a return of capital). 3

5 With the amount of debt maturing over the next five years, banks and other lenders may be looking to monetize non-performing assets. Commercial Real Estate Loan Maturities $350 $300 $250 Maturities ($B) $200 $150 $100 $50 $ Other Life Cos CMBS Banks Source: Trepp, LLC, 2013 Opportunity Migration in Europe While Europe experienced a similar decline in 2008, European real estate values have not yet followed the U.S. path to recovery. As a result, KBS Strategic Opportunity REIT II has partnered with STAM Europe, a Paris-based real estate investment management company with expertise in distressed asset management and distressed debt investing, to identify opportunities for the REIT in target markets such as France, Germany, Italy and Spain. Pan-European Property Values by Sector (Declining Property Values Create Opportunities to Acquire Distressed Assets) Q4 07 = Q407 Q207 Q408 Q208 Q409 Q209 Q410 Q210 Q411 Q211 Q412 Q212 Q413 Q213 Q414 All Property Industrial Retail Offices Source: CBRE KBS Strategic Opportunity REIT II 4

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7 Adding Value: Buy, Improve, Sell One of the REIT s strategies is to capitalize on the economic and regulatory pressures, which have forced banks and other lenders to liquidate assets. Shareholder value can potentially be generated during three phases: Buy If the seller needs liquidity, the REIT may be able to purchase the assets at a discount to current market value, essentially increasing value on the buy-side of the transaction. Improve If acquiring the real estate at a discount to market-value and replacement cost, the REIT may have greater flexibility in rental rates, due to the lower cost basis, when competing with other landlords for tenants in the marketplace. When buying assets with vacancy and in need of repositioning, the REIT also has the ability to make improvements and raise rental rates to market as space is leased. Sell Due to the low interest rate environment, many institutional investors may be looking for incomeproducing hard assets once the real estate is stabilized. Distressed Real Estate = Basis Opportunity Low Basis, Low Occupancy Low Rents, Low Cash Flow Lease Up and Rental Rate Increases Value Creation Hamburg Berlin Germany Frankfurt Paris Munich France Milan Madrid Spain Barcelona Italy KBS Strategic Opportunity REIT II 6

8 About KBS and STAM Europe* KBS Capital Advisors acts as KBS Strategic Opportunity REIT II s advisor, providing advice relating to investment decision-making and the asset business plans, including disposition timing. KBS Strategic Opportunity REIT II does not have institutional investors and has terms and conditions that differ from institutional offerings, including but not limited to, leverage and higher fees and expenses. KBS Experience 1 22 years of real estate investment management $20.3 billion in 1,590 (142.7 million square feet 2 ) 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 3 1,074 real estate and real estate-related assets sold nationwide since inception Ranked 5th Largest Office Owner Globally - National Real Estate Investor, September/October offices nationwide 1 Information as of March 31, 2015, for all KBS entities and not specific to any public or private KBS offering. 2 Includes square footage of equity assets and the collateral securing debt assets serviced, managed or own by all KBS-affiliated companies. 3 It is not expected that any institutional investors will participate in the KBS Strategic Opportunity REIT II offering. However, if institutional investors do participate in the offering, they would likely invest in amounts entitling them to volume discounts such that their returns, if any, would likely be greater than those who purchase shares in this offering. KBS Management Keith Hall CEO, KBS Strategic Opportunity REIT II; Co-Founder, Executive Vice President, KBS Capital Advisors Former Managing Director at Credit Suisse First Boston; managed distribution strategy and business development for the CRE Principal Transaction Group; primary business unit responsibilities were mezzanine lending and commercial real estate development. Former Director in the Real Estate Products Group at Nomura Securities; responsible for fixedincome commercial mortgage-backed securities business. Former Senior Vice President in the High Yield Bond Department of Drexel Burnham Lambert; responsible for distribution of the group s high-yield real estate securities. Peter McMillan III President, Chairman of the Board, KBS Strategic Opportunity REIT II; Co-Founder, Executive Vice President, KBS Capital Advisors Former Executive Vice President and Chief Investment Officer of SunAmerica Investments, Inc., later acquired by AIG; responsible for over $75 billion in assets, including residential and commercial mortgage-backed securities, commercial mortgage loans and real estate investments. Former Assistant Vice President for Aetna Life Insurance and Annuity Company with responsibility for the company s $6 billion fixed-income portfolios. MBA in finance from the Wharton Graduate School of Business at the University of Pennsylvania. 7

9 STAM Europe acts as the sub-advisor to the REIT through a strategic relationship with KBS Capital Advisors. STAM Europe will primarily be responsible for identifying suitable investments in the European markets, coordinating due diligence and acquisition of assets, and assisting with dispositions. STAM Europe Experience 1 18 years of pan-european real estate investing 6 European countries with offices 33 institutional investors 30 family office investors 2.3 billion cumulative investment into now liquidated investments 44 liquidated investments since inception 28 investment professionals comprising specialized local teams 1 Information as of December 31, 2014 STAM Europe Management Antoine de Broglie Chairman, Founder Founder, shareholder and chairman of the Management Board of STAM Europe. Launched Transinvest in 1992 as one of the first specialized real estate investment banking firms in France. Former Chairman of the French Urban Land Institute (ULI) Council. Edward Bates Managing Director Joined STAM Europe at the beginning of Prior experience includes: - Former senior principal and co-head of real estate at Doughty Hanson & Co., where he was involved in fundraising, acquisitions, asset management and dispositions across Europe; - Former investment director at Orion Capital Managers; - 20 years of real estate investment experience in Europe and the United States; - Member of the Urban Land Institute. *Investors in KBS Strategic Opportunity REIT II are not acquiring an interest in KBS or KBS Capital Advisors. KBS Strategic Opportunity REIT II is a separate legal entity from KBS and KBS Capital Advisors. KBS Strategic Opportunity REIT II 8

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11 Offering at a Glance Investment Objectives 1 The REIT is focused on acquiring a portfolio with a total return (growth and income) profile designed to: Realize capital appreciation/growth in the value of the investments; Provide distributions through increased cash flow from operations or targeted asset sales; Preserve and return investors capital contributions. Targeted Investments 2 Opportunistic Real Estate presenting significant repositioning or appreciation potential through property lease up Value-Add Real Estate presenting non-stabilized cash flow with additional lease-up or other opportunities Distressed Debt, including sub-performing and non-performing loans, sold by distressed U.S. and European financial institutions Lender providing or buying first mortgage loans, mezzanine loans, preferred equity loans, bridge loans or other real-estate related loans Subscription Details Maximum offering: $1.0 billion 3 Minimum investment: $4, Price per share: $ Available for IRA investing: Yes Discounted price for reinvested distributions: $ Closing date: Approximately 90 days after the REIT has raised $650 million in its primary public offering. Suitability standards: A net worth of at least $250,000, or gross annual income of at least $70,000 and a net worth of at least $70, There is no assurance that KBS Strategic Opportunity REIT II will meet the stated objectives or that it will be able to make distributions. 2 KBS Strategic Opportunity REIT II may change its targeted investments and investment guidelines at any time, without stockholder consent. 3 KBS Strategic Opportunity REIT II is offering up to 100,000,000 shares in its primary offering at an initial purchase price of $10.00 per share and up to 80,000,000 shares pursuant to the dividend reinvestment plan at a purchase price initially equal to $9.50 per share. 4 If you own the minimum investment applicable to this offering in shares of KBS Real Estate Investment Trust I, KBS Real Estate Investment Trust II, KBS Real Estate Investment Trust III, KBS Strategic Opportunity REIT or KBS Legacy Partners Apartment REIT, you may invest less than the minimum amount set forth above, but in no event less than $ Volume discounts are available to investors who purchase more than $1,000,000 of shares through the same participating broker-dealer. 6 KBS Strategic Opportunity REIT II has not established a minimum distribution level and its charter does not require that it make distribution to its stockholders. Distributions are declared by its board of directors. There are no guarantees that KBS Strategic Opportunity REIT II will pay a distribution. 7 An investment in the shares of KBS Strategic Opportunity REIT II is suitable only for persons who have adequate financial means, including minimum net worth and/or annual gross income levels. The minimum suitability standards are more stringent for investors in certain states as outlined in the prospectus, as amended and supplemented. Please see the prospectus for more information. For Ohio investors, the aggregate investment in KBS Strategic Opportunity REIT II, the REIT s affiliates and other non-traded real estate investment trusts must not exceed 10% of the Ohio investor s liquid net worth. KBS Strategic Opportunity REIT II 10

12 KBS Strategic Opportunity REIT II KBS Capital Markets Group LLC 800 Newport Center Drive, Suite 700 Newport Beach, CA (866) KBS-4CMG ( ) Copyright 2015, KBS Capital Markets Group LLC Securities distributed by KBS Capital Markets Group LLC Member FINRA & SIPC E