Attached files
| file | filename |
|---|---|
| EX-99.4 - TENTH AMENDED AND RESTATED SHARE REDEMPTION PROGRAM - Pacific Oak Strategic Opportunity REIT, Inc. | kbssor8kexhibit994.htm |
| EX-99.2 - CONSENT OF LANDAUER SERVICES, LLC - Pacific Oak Strategic Opportunity REIT, Inc. | kbssor8kexhibit992.htm |
| EX-99.1 - CONSENT OF DUFF & PHELPS, LLC - Pacific Oak Strategic Opportunity REIT, Inc. | kbssor8kexhibit991.htm |
| 8-K - FORM 8-K - Pacific Oak Strategic Opportunity REIT, Inc. | kbssor8k.htm |
KBS Strategic Opportunity REIT
Valuation and Portfolio Update
December 15, 2016
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, 2015, filed
with the Securities and Commission Exchange (the “SEC”) on March 28, 2016 (the “Annual Report”), and in KBS Strategic Opportunity
REIT’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, filed with the SEC on November 14, 2016, 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 15, 2016.
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 1995. 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 of September 30, 2016, and/or KBS Strategic Opportunity REIT’s and KBS Capital
Advisors LLC’s (“the Advisor”) best estimates as of December 8, 2016, 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 rental 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, 2015, 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
Total Acquisitions1: $1,397,658,000
Current Portfolio Cost Basis2: $1,466,957,000
20 Equity Assets
December 2016 Estimated Value of Portfolio3: $1,776,963,000
SOR Equity Raised4: $561,749,000
Portfolio Leverage5: 57%
Percent Leased as of 9/30/166: 89%
Occupancy at Acquisition6: 71%
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 $1,513,045,000 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 cost basis, which is acquisition price (net of closing credits and excluding closing costs) plus capital expenditures and acquisitions of minority interests
in joint ventures, for real estate in the portfolio as of September 30, 2016, adjusted for KBS Strategic Opportunity REIT’s share of consolidated and unconsolidated
joint ventures. This total is $1,588,787,000 including our partners’ shares of consolidated and unconsolidated joint ventures .
3 Value as of September 30, 2016, and is the net total of real estate, investments in unconsolidated JVs and minority interest as shown on page 6.
4 Represents gross offering proceeds from the sale of common stock in the primary portion of KBS Strategic Opportunity REIT’s initial public offering.
5 As of September 30, 2016, KBS Strategic Opportunity REIT’s consolidated borrowings were approximately 57% of the appraised va lue of consolidated properties.
6 For consolidated properties in the portfolio as of September 30, 2016.
Portfolio Overview
3
Estimated value per share2 calculated using information as of September 30, 2016
• Net asset value; no enterprise (portfolio) premium or discount applied
• Considered potential participation fee that would be due to the advisor in a hypothetical
liquidation if the required shareholder return thresholds are met.
KBS Strategic Opportunity REIT followed the IPA Valuation Guidelines, which included
independent third-party appraisals for all of its consolidated properties and one of its two
unconsolidated joint venture investments in real estate properties. Duff & Phelps and Landauer
Services, LLC were engaged to provide appraisals of the estimated market values of real estate
assets. Duff & Phelps provided appraisals of all investments in consolidated real estate
properties (excluding undeveloped land) and 110 William Street, and Landauer provided
appraisals of all investments in undeveloped land. The appraisals were performed in accordance
with the Code of Professional Ethics and Standards of Profession Practice set forth by the
Appraisal Institute and the Uniform Standards of Professional Appraisal Practice (USPAP).
• The valuation of the Company’s real estate properties were based on (i) on appraisals of
such investments performed by third-party valuation firms and (ii) in the case of one office
property, the appraised value of the property reduced by valuation information provided by
the Advisor related to the marketing of the property subsequent to the appraisal date.
Non-controlling interest liability due to our joint venture partners calculated by assuming a
hypothetical liquidation of the underlying real estate properties at their current appraised values
and the payoff of any related debt at its fair value, based on the profit participation thresholds
contained in the joint venture agreements.
1For more information, see KBS Strategic Opportunity REIT’s Current Report on Form 8-K filed with the SEC on December 15, 2016.
2The estimated value of the REIT’s assets less the estimated value of the REIT’s liabilities, divided by the number of shares outstanding, all as of September 30, 2016.
Valuation1
4
1Based on data as of September 30, 2016
2Based on data as of September 30, 2015
3Includes cash and cash equivalents, restricted cash, rents and other receivables, deposits and prepaid expenses as applicable.
4Includes accounts payable, accrued liabilities, security deposits, contingent liabilities and prepaid rent.
Valuation1
Estimated Value of Portfolio
5
As of December 20161 As of December 20152
Assets: $1.874 Billion $1.500 Billion
Real Estate (i) $1.646 Billion (88%) $1.295 Billion (86%)
Investments in Unconsolidated JVs (i) $157.3 Million (8%) $140.4 Million (9%)
Real Estate Loan Receivable (i) $27.9 Million (2%)
Other Assets3 $71.1 Million (4%) $37.0 Million (3%)
Liabilities: $1.003 Billion $601.2 Million
Mortgage and Other Debt $941.6 Million $554.2 Million
Advisor Incentive Fee Potential Liability $28.6 Million $19.5 Million
Other Liabilities4 $32.8 Million $27.5 Million
Minority Interest in Consolidated JVs (i) $26.2 Million $107.1 Million
Net Equity at Estimated Value $845.1 Million $792.0 Million
Estimated Value of Portfolio (before debt) sum of (i) $1.777 Billion $1.356 Billion
Valuation1
On December 8, 2016, KBS Strategic Opportunity REIT’s Board approved an estimated value per share of $14.81.1
The following is a summary of the estimated value per share changes within each asset and liability group.
6
1 Based on the estimated value of KBS Strategic Opportunity REIT’s assets less the estimated value of its liabilities, divided by the number of shares outstanding,
all as of September 30, 2016.
2 Operating cash flow reflects adjusted modified funds from operations (“adjusted MFFO”), as disclosed in Forms 10-K and 10-Q filed with the SEC, plus the
amortization of deferred financing costs.
Change in Estimated
Value Per Share
December 2015 estimated value per share $13.44
Real Estate
Real Estate 1.24
Investments in Unconsolidated JVs 0.25
Capital expenditures on Real Estate (0.63)
Subtotal – Real Estate 0.86
Operating Cash Flows in Excess of Quarterly Distributions Declared2
Acquisition and Financing Costs
Acquisition of Minority Interest in Consolidated JV’s
Advisor Participation Fee Potential Liability
Other Changes
0.16
(0.30)
0.73
(0.16)
0.08
Total Change 1.37
December 2016 estimated value per share $14.81
Valuation History
1 This represents the maximum per share offering price at which shares of KBS Strategic Opportunity REIT’s common stock were sold in the
primary portion of its initial public offering. The per share offering price was determined arbitrarily and does not represent a valuation of KBS
Strategic Opportunity REIT’s assets and/or liabilities during the offering.
2 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, 2016. For more information, please refer to KBS Strategic Opportunity
REIT’s 8-K filed on December 15, 2016.
Initial Offering Price: $10.001
Valuation History:
– March 25, 2014 $11.27
– December 9, 2014 $12.24
– December 8, 2015 $13.44
– December 8, 20162 $14.81
7
Real Estate Updates
8
Westmoor Center
The appraised value increased $13.1 million from prior year appraised value due to the following:
The asset performed well in 2016. The physical occupancy was approximately 83% as of September 30, 2016
compared to 79% as of September 30, 2015.
The REIT signed a long-term lease (128 months) with a tenant for over 100,000 rentable square feet commencing
in July 2016. The starting rental rate for this lease is $17.00 psf compared to a projection of $15.50 psf in prior year
appraisal.
Vacancy rates in the northwest Denver submarket has improved year-over-year from a vacancy rate of 12.3% in
prior year to 10.4% in the current year. Rent growth in the submarket has remained steady at approximately 5%
from prior year to current year.
Plaza Buildings
The appraised value increased $10.6 million from prior year appraised value due to the following:
The property has experienced consistent year-over-year gains as a result of continued improvements throughout
the overall market, as well as directly at the property as occupancy has increased from 76% as of September 30,
2015 to 85% as of September 30, 2016.
Both cap and discount rates throughout the overall region have declined.
As a result of market conditions, starting rental rates have increased and general vacancy has decreased.
Bellevue Tech Center
The appraised value increased $8.1 million from prior year appraised value due to the following:
• The property has experienced consistent year-over-year gains as a result of continued improvements throughout
the overall market, as well as directly at the property as occupancy has increased from 93% as of September 30,
2015 to 98% as of September 30, 2016.
• Both cap and discount rates throughout the overall region have declined.
• Strong rent growth resulting from market tightening. Starting rent at the asset is projected to be between $19-24 psf
compared $16.50-21.50 psf in the prior year.
2016 Milestones
1. Successfully Issued $250 million AA- Rated Israeli Bond
2. Purchased/committed $357 million for new growth assets with
bond proceeds
• Westpark Portfolio, Redmond, WA
• 353 Sacramento Street, San Francisco
• Battery Point Mortgage Portfolio
• Park Highlands, Las Vegas, NV (acquisition of non-controlling
interests)
3. Growing the portfolio to $1.777 billion
4. Executed agreement for first land sale in Park Highlands (estimated
closing February 2017)
5. Achieved NAV growth
6. Filed preliminary S-11 for daily NAV conversion
9
Israeli Bond Offering
Description
Bond offering backed by KBS Strategic Opportunity REIT’s assets with the goal
of increasing the size of the portfolio through additional acquisitions
March 2016 : 2023 Bonds
Amount: NIS 970 million
(Approx. $250 million)
Ratings: AA- / AA-
Duration: 7 years
(4.4 years weighted average)
Coupon: 4.25%
Financial Covenants
Minimum Equity: $475 million
Debt/EBITDA Ratio: <17
Net Debt/CAP: <70%
Minimum EBITDA: $50 million
Interest Payment Deposit: 0.5 years
10
Recent Acquisition
Westpark Portfolio
Location Redmond, WA
Westpark Business Park
No. of Buildings 14 two-story office
buildings
Size 580,104 SF
Year Built 1989-1992
% Leased at acquisition 77%
Redmond Center Court
No. of Buildings 2 industrial buildings
Size 77,492 SF
Year Built 1987
% Leased at acquisition 100%
Pacific Business & Technology Center
No. of Buildings 5 flex buildings
Size 120,876 SF
Year Built 1986-1988
% Leased at acquisition 98%
Purchase Price $125.8 Million
• 21 Suburban Office/Flex/Industrial buildings,
• 778,472 square feet over 41 acres
• 82% leased at acquisition
• Diverse tenant roster with more than 100 tenants;
no one tenant occupies more than 5% of the
rentable square feet of the Westpark portfolio
• Close proximity to the Microsoft headquarters
WESTPARK
REDMOND CBD
Going In Cap rate: 6.1%
Going In Occupancy: 82% 11
• 23-story Class A office tower located adjacent to
Embarcadero Center in San Francisco’s Financial
District
• Protected bay and city views, numerous nearby
amenities and is walkable to the Bay Area Rapid
Transit terminal (BART)
• Encompasses 273,856 square feet of office space
and 10,895 square feet of street-level retail
353 Sacramento
Purchase price $168.0 Million
Location San Francisco, CA
Property type Office
Floors/Size 23 Floors / 284,751 SF
Year built 1982
% Leased at acquisition 85%
Going-in cap rate 3.1%
Leasing Opportunity
Going-in occupancy with known vacates 80%
Avg. in-place rent psf $42
Avg. market rent psf $70
Total projected capital
expenditures
$13.5 million
Projected stabilized cap rate 7%
New Leasing
Tenant #1 (Relocation commencing Oct. 2016)
Size 9,117 sf
Starting rent $68 psf
Term 60 months
Tenant #2 (Renewal commencing Oct. 2016)
Size 11,023 sf
Starting rent $70 psf
Term 64 months
Recent Acquisition
12
13
Park Highlands Acquisition of Non-Controlling Interests
On March 18, 2016, the REIT increased its
membership interest in the Park Highlands joint
venture from 50.1% to 51.58% by acquiring an
additional 1.48% membership interest from one
of the joint venture partners, who was also the
managing member.
On March 18, 2016, the Company increased its
membership interest in the Park Highlands II joint
venture from 99.5% to 100% by acquiring the
remaining 0.5% membership interest from its
joint venture partner, who was also the managing
member.
On June 6, 2016, the Company increased its
membership interest in the Park Highlands joint
venture from 51.58% to 97.62% by acquiring an
additional 46.04% membership interest from one
of the joint venture partners.
On June 25, 2016, the Company increased its
membership interest in the Park Highlands joint
venture from 97.62% to 100% by acquiring the
remaining 2.38% membership interest from one
of the joint venture partners.
JV Member
Price Paid to
Acquire JV
Partner
Interest
JV Partner
Interest Liability
at Time of
Acquisition
Discount
(Addt'l
Owner's
Equity)
Crescent Bay 741,000$ 12,820,000$ 12,079,000$
Benchmark 34,500,000 63,939,000 29,439,000
Other 2,745,000 2,858,000 113,000
Total 37,986,000$ 79,617,000$ 41,631,000$
Recent Acquisition
14
University House First Mortgage Loan
The University House First Mortgage Loan, with an outstanding principal balance of $27.9 million, matured
on June 30, 2015 without repayment. On April 21, 2016, the Company assigned the loan to an unrelated
third party for total proceeds of $31.6 million, which reflects the outstanding principal balance of $27.9
million, interest and default interest due of $3.6 million and other costs incurred of $0.1 million.
Loan Payoff
Estimated Value Changes
Since Inception
15
16
Portfolio Occupancy
1 Reflects weighted-average lease percentage as of the acquisition date taking into account all real estate owned as of each respective date.
2 Includes future leases that had been executed, but not yet commenced as of September 30, 2016.
40.00%
45.00%
50.00%
55.00%
60.00%
65.00%
70.00%
75.00%
80.00%
85.00%
90.00%
95.00%
100.00%
3/
1
/20
1
1
5/
1
/20
1
1
7/
1
/20
1
1
9/
1
/20
1
1
1
1
/1/2
0
1
1
1/
1
/20
1
2
3/
1
/20
1
2
5/
1
/20
1
2
7/
1
/20
1
2
9/
1
/20
1
2
1
1
/1/2
0
1
2
1/
1
/20
1
3
3/
1
/20
1
3
5/
1
/20
1
3
7/
1
/20
1
3
9/
1
/20
1
3
1
1
/1/2
0
1
3
1/
1
/20
1
4
3/
1
/20
1
4
5/
1
/20
1
4
7/
1
/20
1
4
9/
1
/20
1
4
1
1
/1/2
0
1
4
1/
1
/20
1
5
3/
1
/20
1
5
5/
1
/20
1
5
7/
1
/20
1
5
9/
1
/20
1
5
1
1
/1/2
0
1
5
1/
1
/20
1
6
3/
1
/20
1
6
5/
1
/20
1
6
7/
1
/20
1
6
9/
1
/20
1
6
Occupancy at Acquisition1 vs Actual Leased %2
Delta Actual Leased % Leased % at Acquisition
17
Portfolio Occupancy1
Consolidated Properties in Portfolio
at Sept. 30, 2016 and Sept. 30 , 2015
Occupancy at
Acquisition
Leased%
as of Sept 2015
Leased %
as of Sept 2016
% Change
Since Sept
2015
% Change
Since
Acquisition
Northridge Center (Atlanta, GA) 40% 81.7% 93.9% 12.2% 53.9%
Iron Point Business Park (Folsom, CA) 38% 93.7% 97.0% 3.3% 59.0%
Richardson Portfolio (Richardson, TX) 49% 87.0% 88.3% 1.3% 39.3%
Bellevue Technology Center (Bellevue, WA) 62% 96.9% 98.2% 1.4% 36.2%
Powers Ferry Landing (Atlanta, GA) 32% 94.9% 94.9% 0.0% 62.9%
1800 West Loop South (Houston, TX) 76% 88.1% 87.8% -0.3% 11.8%
West Loop I & II (Houston, TX) 77% 78.5% 89.0% 10.5% 12.0%
Burbank Collection (Burbank, CA) 57% 75.0% 88.5% 13.5% 31.5%
Austin Suburban Portfolio (Austin, TX) 75% 83.1% 85.5% 2.4% 10.5%
Westmoor Center (Westminster, CO) 81% 81.6% 82.7% 1.2% 1.7%
Central Building (Seattle, WA) 82% 93.8% 94.2% 0.4% 12.2%
50 Congress (Boston, MA) 88% 92.7% 96.8% 4.1% 8.8%
1180 Raymond (Newark, NJ) 72% 94.0% 89.0% -5.0% 17.0%
Maitland Promenade II (Orlando, FL) 77% 95.5% 93.8% -1.7% 16.8%
Plaza Buildings (Bellevue, WA) 81% 81.0% 85.1% 4.0% 4.1%
424 Bedford (Brooklyn, NY) 97% 100.0% 97.0% -3.0% 0.0%
Weighted-Average/Total 69% 87.1% 89.4% 2.3% 20.5%
Acquisitions from Oct. 1, 2015 to Sept. 30, 2016
Westpark Portfolio (Redmond, WA) 82% N/A 83.4% N/A 1.4%
353 Sacramento (San Francisco, CA) 85% N/A 89.2% N/A 4.2%
Weighted-Average/Total 83% N/A 84.9% N/A 2.1%
Consolidated Portfolio Weighted-Average/Total 71% 87.1% 88.6% 1.5% 17.1%
1 For consolidated properties, and includes future leases that had been executed, but not yet commenced, as of September 30, 2015, and September 30, 2016,
as applicable.
Distribution History1
Record Date Payment Date Amount/Share Reason
12/23/2011 12/28/2011 $0.30 Estimated increase in portfolio value, as supported by completed broker opinions
of value (BOVs)
2/14/2012 2/17/2012 $0.02309337 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 $0.35190663 Estimated increase in portfolio value, as supported by a second round of
completed BOVs
3/22/2013 4/4/2013 $0.06153498 Gain from the unsolicited sale of one building in the Richardson Portfolio
11/13/2013 12/5/2013 $0.38 100% 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 $0.04931507 Based on Board’s determination of available cash flow; 2.0% Annualized
6/16/2014 6/23/2014 $0.056096 Based on Board’s determination of available cash flow; 2.25% Annualized
9/15/2014 9/24/2014 $0.069315 Based on Board’s determination of available cash flow; 2.75% Annualized
12/15/2014 12/29/2014 $0.088219 Based on Board’s determination of available cash flow; 3.5% Annualized
3/20/2015 3/26/2015 $0.09246575 Based on Board’s determination of available cash flow; 3.75% Annualized
6/18/2015 6/25/2015 $0.09349315 Based on Board’s determination of available cash flow; 3.75% Annualized
9/21/2015 9/28/2015 $0.09452055 Based on Board’s determination of available cash flow; 3.75% Annualized
12/15/2015 12/22/2015 $0.09452055 Based on Board’s determination of available cash flow; 3.75% Annualized
3/22/2016 3/29/2016 $0.09323770 Based on Board’s determination of available cash flow; 3.75% Annualized
6/17/2016 6/22/2016 $0.09323770 Based on Board’s determination of available cash flow; 3.75% Annualized
9/16/2016 9/22/2016 $0.09426230 Based on Board’s determination of available cash flow; 3.75% Annualized
12/8/2016 12/15/2016 $0.09426230 Based on Board’s determination of available cash flow; 3.75% Annualized
Total $2.15448005
1 Based on all distributions declared, but not necessarily paid as of December 8, 2016.
18
Stockholder Performance
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 per share;
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 8, 2016 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, 2016.
All of KBS Strategic Opportunity REIT's assets and liabilities were valued as of September 30, 2016.
19
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 below1
(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 per share;
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 8, 2016 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, 2016. All of KBS Strategic Opportunity REIT's assets and liabilities
were valued as of September 30, 2016.
Estimated Value
Per Share as of
December 8, 2016 (2)
Cumulative Cash
Distributions Per Share
Received as of
December 8, 2016
Sum of Estimated Value Per Share and
Cumulative Cash Distributions Per Share
Received, as of December 8, 2016
First Investor (Invested at Escrow Break on April 19, 2010):
$14.81 $2.06 $16.87
Last Investor (Invested at Close of Public Offering on Nov. 14, 2012):
$14.81 $1.36 $16.17
20
$0.44
$0.62 $0.98 $1.36
$11.27
$12.24
$13.44
$14.81
$10.00
$11.71
$12.86
$14.42
$16.17
Offering price Mar-2014 Dec-14 Dec-15
Breakdown of Late Cash Investor Value
Cumulative Distributions
Estimated Value Per Share
$1.14 $1.32 $1.68
$2.06
$11.27
$12.24
$13.44
$14.81
$10.00
$12.41
$13.56
$15.12
$16.87
Offering Price Mar-14 Dec-14 Dec-15
Breakdown of Early Cash Investor Value
Cumulative Distributions
Estimated Value Per Share
Stockholder Performance
Hypothetical Performance of Early and Late Investors
$10.00 Share Price, All Distributions Received in Cash
“Valuation Information” for an early cash investor assumes all distributions received in cash and no share redemptions and reflect the cash payment amounts
(all distributions paid since inception) per share for a hypothetical investor who invested on or before escrow break and consequently has received all
distributions paid by the REIT. “Cumulative distributions” for an early cash investor and a late cash investor assumes all distributions received in cash and no
share redemptions, and reflect the cash payment amounts (all distributions paid since investment) per share for a hypothetical investor who invested on
April 19, 2010, and November 14, 2012, respectively. The “offering price” of $10.00 reflects the maximum per share purchase price in the primary initial
public offering.
21
Offering Closed
Nov. 14, 2012
Offering Closed
Nov. 14, 2012
Dec-16 Dec-16
Share Redemption Program
On December 8, 2016, the REIT adopted an amended and restated share
redemption program:
• Shares will be redeemed at 95% of the REIT’s most recent estimated value per
share as of the applicable redemption date, except for redemptions made upon
a stockholder’s death, “qualifying disability” or “determination of
incompetence.”
• Upon the death, “qualifying disability” or “determination of incompetence” of
a stockholder, the redemption price will continue to be equal to the REIT’s
most recent estimated value per share.
• The amended share redemption program will be effective for the December
2016 redemption date, which is December 30, 2016. Please see the Valuation
8-K for full details.
22
2017 Goals & Objectives
1) Continue to implement a value-add strategy for remaining and new assets,
primarily through lease-up and repositioning
2) Explore value-add opportunities for existing assets, primarily in land holdings,
both direct development and added entitlements
3) Refinance upcoming maturities to capitalize on an ever competitive lending
environment
4) Distribute available cash to stockholders through growing rents, leasing and
refinancing in 2017
5) Strategically sell assets and consider special distributions
6) Explore target liquidity options, including foreign exchanges and daily NAV
conversion, while managing continued value creation
23
Shareholder Communication
Statements will reflect new estimated value per share of $14.81 beginning with
December 2016 statements.
Shareholder letter will be included with December 2016 statements mailed in
early January 2017.
Estimated value per share visible through DST will be updated to show new
estimated value.
Expected next NAV date: December 2017
24
For more information, please contact your
financial advisor or KBS Capital Markets
Group at (866) 527-4264.
KBS Capital Markets Group
Member FINRA & SIPC
800 Newport Center Drive, Suite 700
Newport Beach, CA 92660
www.kbs-cmg.com
Thank you!
25