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| 8-K - FORM 8-K - Pacific Oak Strategic Opportunity REIT, Inc. | kbssor8k.htm |
KBS Strategic Opportunity REIT
Valuation and Portfolio Update
December 14, 2017
Exhibit 99.1
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, 2016, filed
with the Securities and Commission Exchange (the “SEC”) on March 10, 2017 (the “Annual Report”), and in KBS Strategic Opportunity
REIT’s Quarterly Report on Form 10-Q for the period ended September 30, 2017, filed with the SEC on November 14, 2017, 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 13, 2017.
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 certain of 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 Newmark Knight Frank Valuation & Advisory, LLC’s best estimates as of September 30, 2017, and/or KBS Strategic
Opportunity REIT’s and KBS Capital Advisors LLC’s (“the Advisor”) best estimates as of December 7, 2017, 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, 2016, 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: $1,548,731,000
Current Portfolio Cost Basis2: $1,602,202,000
26 Equity Assets
1 Debt Asset
December 2017 Estimated Value of Portfolio3: $1,809,810,000
SOR Equity Raised4: $ 561,749,000
Portfolio Leverage5: 62%
Percent Leased as of 9/30/176: 87%
Occupancy at Acquisition6: 75%
1 Represents acquisition price (excluding closing costs) of real estate, loans, and debt and equity securities 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 $1,739,728,000 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, 2017, adjusted for KBS Strategic Opportunity REIT’s share of consolidated and unconsolidated
joint ventures. This total is $1,804,665,000 including our partners’ shares of consolidated and unconsolidated joint ventures .
3 Value as of September 30, 2017, and is the net total of real estate, debt and equity securities, 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, 2017, KBS Strategic Opportunity REIT’s consolidated borrowings were approximately 62% of the value of consolidated properties.
6 For all consolidated and unconsolidated properties in the portfolio as of September 30, 2017, excluding the National Industrial Portfolio which is an unconsolidated
JV investment. Includes future leases that have been executed but had not yet commenced as of September 30, 2017.
Portfolio Overview
3
Estimated value per share2 calculated using information as of September 30, 2017
• 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.
– Adjusted for the impact of the self-tender offer completed in October 2017
– Adjusted for a special dividend of $3.61 to shareholders of record on December 7, 2017
• KBS Strategic Opportunity REIT followed the IPA Valuation Guidelines, which included
independent third-party appraisals for all of its consolidated properties and two of its
unconsolidated joint venture investments in real estate properties. Duff & Phelps and Newmark
Knight Frank Valuation & Advisory, LLC (“NKF”) 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 11
properties sold to a Singapore REIT3), 110 William Street and 353 Sacramento, and NKF
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 appraisals of such
investments performed by third-party valuation firms.
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 13, 2017.
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, 2017.
3 Value of these 11 properties were based on sales price less disposition costs and fees. See slide 11 for more information.
Valuation1
4
1 Based on data as of September 30, 2017, with the exception of an adjustment to the company’s net asset value to give effect to the October 2017 self-tender.
2 Based on data as of September 30, 2016
3 Includes cash and cash equivalents, restricted cash, rents and other receivables, deposits, prepaid expenses and other assets as applicable.
4 Includes accounts payable, accrued liabilities, security deposits, contingent liabilities, prepaid rent and other liabilities.
Valuation1
Estimated Value of Portfolio
5
As of December 20171 As of December 20162
Assets: $1.899 Billion $1.874 Billion
Real Estate (i) $1.606 Billion (85%) $1.646 Billion (88%)
Investments in Unconsolidated JVs (i) $169.8 Million (9%) $157.3 Million (8%)
Investments in Real Estate Debt & Equity Securities (i) $ 64.4 Million (3%)
Other Assets3 $ 58.6 Million (3%) $ 71.1 Million (4%)
Liabilities: $1.081 Billion $1.003 Billion
Mortgage and Other Debt $1.016 Billion $ 941.6 Million
Advisor Incentive Fee Potential Liability $ 28.4 Million $ 28.6 Million
Other Liabilities4 $ 36.3 Million $ 32.8 Million
Minority Interest in Consolidated JVs (i) $ 30.6 Million $ 26.2 Million
Net Equity at Estimated Value $ 787.4 Million $ 845.1 Million
Estimated Value of Portfolio (before debt) sum of (i) $1.810 Billion $1.777 Billion
Valuation1
On December 7, 2017, KBS Strategic Opportunity REIT’s Board approved an estimated value per share as follows:1
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, 2017, with the exception of an adjustment to the REIT’s net asset value to give effect to the October 2017 self-tender. The estimated value per share is $15.11
before the December 2017 special dividend, and $11.50 after the December 2017 special dividend.
2 Operating cash flow is equal to Adjusted MFFO, which is MFFO less capitalized interest, real estate taxes, and insurance.
3 Includes $15.0 million, or $0.26 per share, of disposition costs for the Singapore REIT (“SREIT”) sale on November 8, 2017.
4 Change is primarily due to the Israeli bond being valued based on its market price, which was 105.2% of par as of Sept. 30, 2017. This compares to a market price of
96.6% of par as of Sept. 30, 2016.
Change in Estimated Value Per Share
December 2016 estimated value per share $14.81
Investments
Real Estate Held as of Sept. 30, 2017 1.30
Investments in Unconsolidated JVs 0.42
Investments in Real Estate Debt and Equity Securities 0.07
Capital Expenditures on Real Estate (0.81)
Subtotal – Investments 0.98
Operating Cash Flows in Excess of Distributions Declared2 0.19
Foreign Currency Loss (0.17)
Disposition, Acquisition and Financing Costs3 (0.39)
Series A Debentures4 (0.41)
Tender Offer Price Discount 0.09
Other 0.01
Total Change (before Dec. 2017 Special Dividend) 0.30
Dec. 2017 Estimated Share Value (before Dec. 2017 Special Dividend) $15.11
Dec. 2017 Special Distribution ($3.61)
Dec. 2017 Estimated Share Value (after Dec. 2017 Special Dividend) $11.50
Special Dividend
7
The special dividend is being made primarily as a consequence of the REIT’s sale on
November 8, 2017, of 11 of its properties to a newly formed Singapore real estate
investment trust (the “SREIT”). As a result of the taxable income generated from this
sale, the REIT must make a special dividend to stockholders to continue to maintain its
status as a REIT.
• Special dividend of $3.61 per share payable to stockholders of record as of December 7, 2017
• Payment of the special dividend will be made in mid-January 2018
• Stockholders can elect 100% Stock or 100% Cash; the Default election will be 100% Cash
• Because the aggregate amount of cash to be distributed by the REIT cannot exceed 20% of the
total special dividend, the likely result of a cash election or default election is the receipt of
approximately 20% cash and 80% shares of common stock, unless a significant number of
stockholders elect to receive 100% stock.
• Stockholders will receive election forms in mid-December and must return them to the REIT’s
transfer agent by midnight CST on December 29, 2017, if they elect for a 100% stock
distribution.
• The special dividend is ineligible for reinvestment through the Dividend Reinvestment Plan.
• Elections for 100% stock for custodial held accounts require the custodian’s approval
• The special dividend payment, including both cash & stock, will generally be taxed as a capital
gain distribution. The tax due may exceed the amount of cash, if any, distributed to each
stockholder as part of the special dividend. Stockholders are advised to consult their tax
advisors regarding the tax consequences of the special dividend.
Special Dividend
8
1 Assumes the shareholder receives 20% of the special dividend in cash and 80% in stock. If a significant number of investors elect al l stock, a cash
electing investor may receive more than 20% of the special dividend in cash.
2 Equal to 0.2509 shares received in the special stock dividend multiplied times $11.50 share value after the special dividend.
Client account statements will reflect a value of $15.11 as of December 31, 2017, which is
comprised of the December 2017 NAV per share of $11.50 plus the December 2017 special
dividend of $3.61 per share. Statements will reflect a share value of $11.50 beginning with January
2018 statements after the special dividend is paid. Only the cash portion of the special dividend will
impact the value of shares held by a client. The following illustrates the approximate pre- and post-
special dividend value of an account holding 1,000 shares for which a cash election is made for the
special dividend.1
Per Share Total Shares Account Value
Before December 2017 Special Dividend:
Share Value $15.11 1,000 $15,110
After December 2017 Special Dividend:
December 2017 Special Dividend (1)
Cash Dividend ($0.72) 1,000 $720
Stock Dividend Value (2) ($2.89) 251 $0
Share Value after Special Dividend $11.50 1,251 $14,390
Total of Share Value + Special Dividend $15,110
Series A Debentures
9
The REIT’s Series A Debentures (the “bonds”) are publicly traded on the Tel-Aviv Stock Exchange. Beginning in early
2017, the bonds have been trading at a premium to their face value. The bonds were trading at approximately
105.2% of face value as of September 30, 2017 vs. 96.6% as of September 30, 2016.
Since the valuation of the bonds is based on the quoted bond price on the Tel-Aviv Stock Exchange and then
adjusted for the foreign currency exchange rate, the value of the bonds has significantly increased as of September
30, 2017 vs. September 30, 2016. Consequently, the estimated value per share declined by $0.41 per share due
solely to the change in the quoted bond price (excluding any impact related to changes in exchange rates).
The REIT does not intend to pay off the bonds early and thus we will likely never incur the cost of the premium
being priced into the bonds. The ultimate maturity date is March 2023 with required annual principal installment
payments equal to 20% of the face value of the bonds beginning in March 2019. As a result, the REIT anticipates
that the premium on the bonds reflected in the estimated value per share will be recaptured over time as the
ultimate maturity of the bonds nears and they are paid off at face value.
Sept. 2017
Fair Value
Sept. 2016
Fair Value
Sept. 2017
Face Value
Sept. 2016
Face Value
Change in
Fair Value,
Sept. 2017 vs.
Sept. 2016
Change Due to
Foreign Currency
Rates
Change Due to
Quoted Bond
Price1
Series A
Debentures $288,816,866 $250,222,434 $274,540,747 $258,975,817 $38,594,432 $15,564,930 $23,029,501
Estimated Share Value Decrease $0.17 (2) $0.41
1 Equal to change in fair value at Sept. 2017 vs. Sept. 2016, minus the change in face value that's attributed to foreign currency rates. This resulted in a decrease to the
estimated share value in Dec. 2017 vs. Dec. 2016.
2 Equal to a change in face value at Sept. 2017 vs. Sept. 2016, with such change causing a decrease to the estimated share value from Dec. 2016 to Dec. 2017 of $0.27
before hedging and $0.17 after hedging gains.
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 value shown above 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, 2017, with the exception of an adjustment to the REIT’s net asset value to give
effect to the October 2017 Self Tender and prior to an adjustment for the December 7, 2017 declaration of a special dividend of $3.61 per share
on the outstanding shares of common stock to stockholders of record as of the close of business day on December 7, 2017. The special dividend
is expected to be paid in January 2018. For more information, please refer to KBS Strategic Opportunity REIT’s 8-K filed on December 13, 2017.
Initial Offering Price: $10.001
Valuation History:
– March 25, 2014 $11.27
– December 9, 2014 $12.24
– December 8, 2015 $13.44
– December 8, 2016 $14.81
– December 7, 20172 $15.11 (before $3.61 special dividend)
10
Singapore IPO
11
• On November 8, 2017, the Company sold 11 properties to a newly
formed Singapore REIT (referred to as SREIT) for $804 million before
sales credits and costs
• SREIT was listed on the Singapore Stock Exchange
• SOR repaid $401.7 million of outstanding debt secured by the sold
properties in connection with the sale, and used approximately $52.5
million of the proceeds to acquire shares in the SREIT representing a
9.5% ownership interest
• SOR will use the majority of the net proceeds from the SREIT sale for the
special dividend, additional real estate acquisitions and stockholder
liquidity
• SREIT will be managed by a joint venture between an entity owned by
KBS Pacific Advisors and Keppel Capital Holding
• Keppel is one of the largest companies in Singapore with more than
30,000 employees and a presence in close to 30 countries
SREIT Portfolio Occupancy History
12
Sep-17 Sep-16 Change in % Change in %
Acquisition Leased Leased Occupancy Occupancy
Property Name City, State Occupancy Occupancy Occupancy vs. 9/30/16 vs. Acquisition
Iron Point Business Park Sacramento, CA 38.0% 99.5% 97.0% 2.5% 61.5%
Maitland Promenade II Orlando, FL 77.0% 99.0% 93.8% 5.2% 22.0%
Powers Ferry Landing Atlanta, GA 32.0% 94.9% 94.9% 0.0% 62.9%
Austin Portfolio's Great Hills &
Westech
Austin, TX 70.4% 93.3% 96.9% -3.6% 22.8%
Northridge Center Atlanta, GA 40.0% 92.2% 93.9% -1.7% 52.2%
Bellevue Tech Center Bellevue, WA 62.0% 90.6% 98.2% -7.7% 28.6%
Plaza Buildings Bellevue, WA 81.0% 89.3% 85.1% 4.2% 8.3%
West Loop I & II Bellaire, TX 77.0% 89.1% 89.0% 0.1% 12.1%
1800 West Loop South Houston, TX 76.0% 85.9% 87.8% -1.9% 9.9%
Westmoor Center Westminster, CO 81.0% 82.7% 82.7% 0.0% 1.7%
Total / Weighted-Avg. for ALL Properties 69.3% 89.9% 90.2% -0.3% 20.6%
110 William Street
Property Type: Class B Office
Market: New York Submarket: Downtown Manhattan
Asset Description:
Acquisition Date: May 2, 2014
Total Square Footage: 928,157 SF
Purchase Price: $261,100,000
Total JV Interest: 60%
Increase in Appraised Value
from Dec. 2016 to Dec. 2017: $45,600,000
December 2017 vs. December 2016 Appraisal Increase:
Significant factors contributing to this increase included the following:
• Recent comparable sales reflected a continued increase in investor demand for Manhattan office properties, and
contributed to a decline in both the exit cap rate assumption and the discount rate assumption used in the
appraisal report.
• Rental rates on recent leases at 110 William Street and at competing properties have resulted in an increase in the
assumed market rental rates, which increased the projected cash flows.
Portfolio Update
13
Timeline of Recent Events
1. March 2016: Raised capital for portfolio growth. Successfully issued $250
million of AA-rated Israeli bonds (10-K filed 3/28/2016)
2. Nov. 2016: Filed preliminary S-11 for NAV REIT conversion (Filed
11/28/2016)
3. 2016-2017: Purchased over $400 million of new growth assets
with bond proceeds
4. Dec. 2016: Amended share redemption program to 95% of most recent
estimated value per share (8-K filed 12/15/2016)
5. Oct. 2017: Executed first self-tender offer for approximately $66 million
(Schedule TO filed 10/20/2017)
6. Nov. 2017: 11 assets sold to new Singapore REIT, which completed
its IPO
7. Dec. 2017: Declaration of Special Dividend
14
Sept. 2017 Self-Tender Offer
• Self-tender offer was originally for up to 3,553,660 shares of the
Company’s outstanding common stock, or approximately $50 million
• Due to demand, additional funds were made available and the final
self-tender amount was approximately $66 million excluding fees and
expenses related to the tender offer
• 82.6% of the requests were fulfilled
• Purchase price of $14.07 per share
• The self-tender offer expired on October 12, 2017
• Payments were made the week of October 23, 2017
• Self-tender resulted in an overall increase in estimated value per share
to existing shareholders of $0.09, as shares were purchased from the
shareholders at a discount to the then current NAV per share of $14.81
15
Redemption Liquidity Provided
16
1 Excludes share redemption requests that were unredeemed as of the tender offer date as those shareholders were able to submit their request in
the tender offer process. Includes the full $80 million of tender offer requests received and the $66 million fulfilled.
2 Includes DRP dollars received
Recent Liquidity
September 2015 (12 mo. Ended): $9.9M $25.6M $25.6M 100%
September 2016 (12 mo. Ended): $13.5M $37.5M $37.5M 100%
October 20171 (13 mo. Ended): $12.6M $94.9M $81.0M 85%
Inception-to-Date Liquidity
Total Requested: $164.8 million1
Total Redeemed: $150.8 million
Liquidity Provided: 92%
Original Equity Invested ($): $635.6 million2
Total Redemptions ($): $150.8 million
Percent of Original Equity Redeemed ($): 23.7%
Percent of Shares Redeemed: 18.0%
Limit Based on
Prior Year DRP
Redemptions
Requested
Requests
Fulfilled
Percentage
Fulfilled
50 Congress, Boston, MA
Acquisition Date: July 11, 2013
Acquisition Price: $51,000,000
Size: 179,872 SF
Total Investment1: $55,800,000
Sale Date: May 15, 2017
Sale Price: $78,785,000
Equity Proceeds2 $47,420,000
Equity Basis3: $23,802,000
Profit / Equity Multiple: $23,618,000 2.0X
Dispositions
1 Total investment includes the initial purchase price plus capital expenditures and lease commissions from acquisition to April 30, 2017.
2 Equal to sale price less debt principal payoff at sale.
3 Equal to total investment less debt principal payoff at sale.
17
Park Highlands Lands, Las Vegas, NV
Acquisition Date: December 30, 2011 &
December 10, 2013
Total Investment:4 $89,817,000
Total Acreage Acquired: 1,670 gross
1,200 developable
Sale Date May 1, 2017
Sale Price: $17,416,000
Acres Sold:5 102 developable acres
4 Total investment includes the REIT’s share of the initial purchase price, plus the total of JV partner buyouts, plus development costs through September 30, 2017, but excluding
the interest, property taxes, and insurance capitalized in accordance with GAAP.
5 Acreage is approximate and represents only developable land.
An 18-story and a six-story office tower located
in a “live, work, play” environment in the Las
Colinas submarket of Irving, Texas.
Onsite amenities include a fitness center,
conference center, deli and tenant lounge.
125 E. John Carpenter
Acquisition date
Purchase price
September 15, 2017
$83.4 Million
Price per square foot $188.7
Location Irving, TX
Property type Office
Buildings
Floors
Size
2
18 / 6
442,039 SF
Years built 1982 / 1983
% Leased at acquisition 84%
% In-place rents are
below market rates
14.3%
Recent Acquisition
18
Current amenities include a fitness center,
business center, on-site café and a courtyard
featuring landscaped gardens, granite waterfall
features and shaded seating areas
Located in Atlanta’s Central Perimeter submarket,
home to numerous corporate headquarters, affluent
residential communities and an amenity base
featuring some of Atlanta’s most popular dining and
retail destinations
Crown Pointe
Acquisition Date
Purchase price
February 14, 2017
$83.4 Million
Price per square foot $166.8
Location Dunwoody, GA
Property type Office
Buildings
Floors
Size
2
10 / 17
499,968 SF
Years built 1985 / 1989
% Leased at acquisition 72%
% In-place rents are
below market rates;
rolling 2017/2018
22%/16%
Recent Acquisition
16
Estimated Value Changes
Since Inception
20
1 Amount is comprised of the December 2017 NAV per share of $11.50 plus the December 2017 special dividend of $3.61 per share.
Estimated Value Changes
Since Inception
21
1 Amount is comprised of the December 2017 NAV per share of $11.50 plus the December 2017 special dividend of $3.61 per share.
Estimated Value Changes
Since Inception
22
1 The Total Return of Early Investor assumes all distributions received per share since inception and no share redemptions or dividend reinvestments for a
hypothetical investor who invested at escrow break on April 19, 2010.
2 Amount is comprised of the December 2017 NAV per share of $11.50 plus the December 2017 special dividend of $3.61 per share
3 Includes the cumulative distribution amount of $2.43 paid previously and the special dividend of $3.61 to be paid in a combination of cash and stock.
23
Portfolio Occupancy
1 Reflects weighted-average lease percentage as of the acquisition date for all real estate owned as of September 30, 2017.
2 Includes future leases that had been executed, but not yet commenced as of September 30, 2017.
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
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7
Occupancy at Acquisition1 vs Actual Leased %2
Delta Actual Leased % Leased % at Acquisition
24
Portfolio Occupancy1
1 Excludes the properties sold to the S-REIT on November 8, 2017, and includes future leases that had been executed but not yet commenced as of September
30, 2016, and September 30, 2017, as applicable.
Sep-17 Sep-16 Change in % Change in %
Acquisition Leased Leased Occupancy Occupancy
Property Name City, State Occupancy Occupancy Occupancy vs. 9/30/16 vs. Acquisition
Consolidated Properties, Excluding S-REIT, Held as of Sept. 30, 2017 and 2016
The Burbank Collection Burbank, CA 57.0% 89.5% 88.5% 1.1% 32.5%
Westpark Portfolio San Francisco, CA 82.0% 88.1% 83.4% 4.7% 6.1%
Richardson Office Portfolio (JV) Richardson, TX 49.0% 84.0% 88.3% -4.3% 35.0%
The Central Buildling Seattle, WA 82.0% 83.7% 94.2% -10.6% 1.7%
Park Centre Austin, TX 80.0% 57.0% 68.0% -11.0% -23.0%
424 Bedford (JV) Brooklyn, NY 97.0% 90.9% 97.0% -6.1% -6.1%
1180 Raymond Newark, NJ 72.0% 95.6% 89.0% 6.6% 23.6%
Weighted-Average/Total 71.5% 84.6% 85.3% -0.7% 13.1%
Consolidated Properties Acquired from Oct. 1, 2016 to Sept. 30, 2017
Crown Pointe Atlanta, GA 72.0% 67.7% N/A N/A -4.3%
125 E John Carpenter Dallas, TX 84.0% 84.4% N/A N/A 0.4%
Weighted-Average/Total 77.6% 75.5% N/A N/A -2.1%
Unconsolidated Properties
110 William St. (JV) New York, NY 96.9% 96.8% 93.0% 3.8% -0.1%
353 Sacramento Rednomd, WA 85.0% 75.9% 89.2% -13.4% -9.1%
Weighted-Average/Total 94.1% 91.9% 92.1% -0.2% -2.2%
Weighted-Average/Total for Portfolio 79.3% 84.6% 87.8% -3.2% 5.3%
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 7, 2017 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, 2017,
with the exception of an adjustment to the REIT’s net asset value to give effect to the October 2017
self-tender. The estimated value per share is $11.50 per share after adjusting for the December 2017
special dividend of $3.61 per share, for a total value of $15.11 per share.
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Distribution History1
1 Based on all distributions paid as of December 7, 2017.
2 Annualized rate based on the $10.00 per share initial public offering price and is not based on the current or historical estimated values per share.
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Record Date Payment Date Amount/Share Reason
12/23/2011 12/28/2011 $0.30000000 Estimated increase in portfolio value
2/14/2012 2/17/2012 $0.02309337 Gain on the sale of 1 Roseville building
4/16/2012 4/30/2012 $0.02500000
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 $0.38000000 100% of forecasted taxable income for 2013
3/31/2014 4/15/2014 $0.04931507 Based on Board’s determination of available cash flow; 2.00% Annualized2
6/16/2014 6/23/2014 $0.05609600 Based on Board’s determination of available cash flow; 2.25% Annualized2
9/15/2014 9/24/2014 $0.06931500 Based on Board’s determination of available cash flow; 2.75% Annualized2
12/15/2014 12/29/2014 $0.08821900 Based on Board’s determination of available cash flow; 3.50% Annualized2
2015 Total $0.37500000 Based on Board’s determination of available cash flow; 3.75% Annualized2
2016 Total $0.37500000 Based on Board’s determination of available cash flow; 3.75% Annualized2
2017 Q1, Q2 and Q3 Total $0.28047945 Based on Board’s determination of available cash flow; 3.75% Annualized2
Total $2.4349595
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 7, 2017 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, 2017, with the exception of an adjustment to the REIT’s net asset
value to give effect to the October 2017 self-tender. The estimated value per share of $15.11 consists of the December 2017 NAV of $11.50 per share plus the December 2017 special
dividend of $3.61 per share.
3 Estimated value per share plus the special dividend would be $18.87 and $17.55 for a first and last investor, respectively, who fully participated in the Dividend Reinvestment Plan and
did not redeem shares during the life of the investment.
Estimated Value
Per Share as of
December 7, 2017(2)
Cumulative Cash
Distributions Per Share
Received as of
September 30, 2017
Sum of Estimated Value Per Share and
Cumulative Cash Distributions Per Share
Received, as of September 30, 2017(3)
First Investor (Invested at Escrow Break on April 19, 2010):
$15.11(2) $2.43 $17.54
Last Investor (Invested at Close of Public Offering on Nov. 14, 2012):
$15.11(2) $1.73 $16.84
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$0.44 $0.62 $0.98
$1.36 $1.73
$11.27
$12.24
$13.44
$14.81
$15.11 (1)
$10.00
$11.71
$12.86
$14.42
$16.17
$16.84
Offering
price
Mar-2014 Dec-14 Dec-15 Dec-16 Dec-17
Breakdown of Late Cash Investor Value
Estimated Value Per Share
Cumulative Distributions
$1.14 $1.32 $1.68
$2.06 $2.43
$11.27
$12.24
$13.44
$14.81
$15.11 (1)
$10.00
$12.41
$13.56
$15.12
$16.87
$17.54
Offering
Price
Mar-14 Dec-14 Dec-15 Dec-16 Dec-17
Breakdown of Early Cash Investor Value
Estimated Value Per Share
Cumulative Distributions
Stockholder Performance
Hypothetical Performance of Early and Late Investors
$10.00 Share Price
“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.
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Offering Closed
Nov. 14, 2012
Escrow Break
April 19, 2010
1 Amount is comprised of the December 2017 NAV per share of $11.50 plus the December 2017 special dividend of $3.61 per share
Conversion to Daily NAV REIT
Proxy Campaign/Annual Meeting of Stockholders
Potential Enhanced Liquidity
Additional Acquisitions
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2018 Goals & Objectives
Shareholder Communication
Statements will reflect a value of $15.11 beginning with December 2017
statements, which is comprised of the December 2017 NAV per share of $11.50
plus the December 2017 special dividend of $3.61 per share. Once the special
dividend is made in January 2018, the statements will be updated to show the
$11.50 per share value beginning with the January statements.
Stockholder letter will be included with December 2017 statements mailed in
early January 2018.
Estimated value per share visible through DST will be updated to show new
estimated value.
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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!
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