KBS Real Estate Investment Trust II (KBRS) Financial Report Summaries

Risks

• We may not be able to pay liquidating distributions to our stockholders at the times and in the amounts we currently expect.
• If our liquidation costs or unpaid liabilities are greater than we expect, our liquidating distributions may be delayed or reduced.
• Our April 4, 2023 estimated liquidation value per share may not reflect the value that stockholders will receive for their investment upon our liquidation pursuant to the Plan of Liquidation.
• Pursuing the Plan of Liquidation may cause us to fail to qualify as a REIT, which would dramatically lower the amount of our liquidating distributions.
• The sale of properties may cause us to incur penalty losses.
• In certain circumstances, the board of directors may terminate, amend, modify or delay the Plan of Liquidation even though it is approved by our stockholders.
• Our stockholders could, in some circumstances, be held liable for amounts they received from us in connection with our dissolution.
• We will continue to incur the expenses of complying with public company reporting requirements.
• Approval of the Plan of Liquidation may lead to stockholder litigation, which could result in substantial costs and distract our management.
• Our affiliated director and officers and our advisor and its affiliates may have conflicts of interest that may influence their actions during the implementation of the Plan of Liquidation and these conflicts may cause them to manage our liquidation in a manner not solely in the best interest of our stockholders.
• Our officers, our affiliated director, our advisor and the real estate professionals assembled by our advisor will face competing demands on their time which may adversely affect their management of our liquidation.
• Because no public trading market for our shares currently exists and because we have terminated our share redemption program, our stockholders’ primary source of liquidity is the completion of our Plan of Liquidation.
• Elevated market volatility due to adverse economic and geopolitical conditions (such as the war in Ukraine), health crises (such as the continuing impact of the COVID-19 pandemic) or dislocations in the credit markets, could have a material adverse effect on our ability to complete our Plan of Liquidation and pay liquidating distributions.
• Because we depend upon our advisor and its affiliates to conduct our operations, any adverse changes in the financial health of our advisor or its affiliates or our relationship with them could hinder our performance and reduce the return on our stockholders’ investment.
• As a result of our disposition activity in connection with our liquidation, our general and administrative expenses as a percentage of our cash flow from operations has increased and we will continue to incur general and administrative expenses until we have liquidated and dissolved.
• The loss of or the inability to retain or obtain key professionals at our advisor could delay or hinder implementation of the Plan of Liquidation, which could reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
• Our stockholders may be adversely affected by the Indemnification Amendment.
• We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.
• Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
• Our advisor and its affiliates, including all of our executive officers, our affiliated director and other key professionals, face conflicts of interest caused by their compensation arrangements with us and with other KBS-sponsored programs and KBS-advised investors, which could result in actions that are not in the best interests of our stockholders.
• Our sponsor, our officers, our advisor and the real estate, management and accounting professionals assembled by our advisor face competing demands on their time and this may cause our operations to suffer and delay the implementation of the Plan of Liquidation.
• All of our executive officers, our affiliated director and the key professionals assembled by our advisor face conflicts of interest related to their positions and/or interests in our advisor and its affiliates, which could hinder our ability to implement our business strategy and the Plan of Liquidation.
• Our board of directors’ loyalties to KBS REIT III and KBS Growth & Income REIT could influence its judgment, resulting in actions that may not be in our stockholders’ best interest or that result in a disproportionate benefit to another KBS-sponsored program at our expense.
• Our stockholders will have limited control over changes in our policies and operations and the implementation of the Plan of Liquidation, which increases the uncertainty and risks our stockholders face.
• Payment of fees to KBS Capital Advisors and its affiliates reduces the amount of liquidating distributions our stockholders will receive and their overall return on investment.
• Costs imposed pursuant to laws and governmental regulations may reduce the amount of liquidating distributions our stockholders receive.
• The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury or other damage claims could reduce the amount of liquidating distributions our stockholders receive.
• Failure to qualify as a REIT would reduce our net earnings available for distribution.
• Failure to qualify as a REIT would subject us to U.S. federal income tax, which would reduce the cash available for distribution to our stockholders.
• Even if we qualify as a REIT for U.S. federal income tax purposes, we may be subject to federal, state, local or other tax liabilities that reduce our cash flow and our ability to pay distributions to our stockholders.
• REIT distribution requirements could adversely affect our ability to execute our business plan.
• If our operating partnership fails to maintain its status as a partnership for U.S. federal income tax purposes, its income would be subject to taxation and our REIT status could be terminated.
• Potential characterization of distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.
• The tax on prohibited transactions will limit our ability to engage in transactions that would be treated as sales for U.S. federal income tax purposes.
• The ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to U.S. federal income tax and reduce the amount of liquidating distributions our stockholders receive and their overall return on investment.
• Generally, ordinary dividends payable by REITs do not qualify for the reduced tax rates.
• Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.
• The taxation of distributions to our stockholders can be complex.
• Non-U.S. stockholders will be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax on distributions received from us and upon the disposition of our shares.
• We may be subject to adverse legislative or regulatory tax changes.
• If the fiduciary of an employee benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or an owner of a retirement arrangement subject to Section 4975 of the Internal Revenue Code (such as an individual retirement account (“IRA”)) fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, the fiduciary could be subject to penalties and other sanctions.
• If our assets are deemed to be plan assets, we and our advisor may be exposed to liabilities under Title I of ERISA and the Internal Revenue Code.