Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 08, 2019 | |
Cover page. | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2019 | |
Document Transition Report | false | |
Entity File Number | 000-53649 | |
Entity Registrant Name | KBS REAL ESTATE INVESTMENT TRUST II, INC. | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 26-0658752 | |
Entity Address, Address Line One | 800 Newport Center Drive, Suite 700 | |
Entity Address, City or Town | Newport Beach, | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 92660 | |
City Area Code | 949 | |
Local Phone Number | 417-6500 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 185,461,792 | |
Entity Central Index Key | 0001411059 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Real estate: | ||
Land | $ 118,955 | $ 118,955 |
Buildings and improvements | 580,169 | 550,802 |
Tenant origination and absorption costs | 28,025 | 30,846 |
Total real estate held for investment, cost | 727,149 | 700,603 |
Less accumulated depreciation and amortization | (133,429) | (116,714) |
Total real estate held for investment, net | 593,720 | 583,889 |
Real estate held for sale, net | 257,163 | 370,318 |
Total real estate, net | 850,883 | 954,207 |
Cash and cash equivalents | 48,133 | 57,730 |
Restricted cash | 15,681 | 17,957 |
Rents and other receivables, net | 79,824 | 67,232 |
Above-market leases, net | 169 | 224 |
Assets related to real estate held for sale | 38,571 | 46,817 |
Prepaid expenses and other assets | 23,363 | 12,850 |
Total assets | 1,056,624 | 1,157,017 |
Notes payable: | ||
Notes payable, net | 300,900 | 266,296 |
Notes payable related to real estate held for sale, net | 115,693 | 148,912 |
Total notes payable, net | 416,593 | 415,208 |
Accounts payable and accrued liabilities | 69,408 | 48,903 |
Due to affiliate | 102 | 55 |
Distributions payable | 3,481 | 3,874 |
Below-market leases, net | 190 | 308 |
Liabilities related to real estate held for sale | 0 | 6 |
Other liabilities | 14,504 | 17,189 |
Total liabilities | 504,278 | 485,543 |
Commitments and contingencies (Note 9) | ||
Redeemable common stock | 5,655 | 10,000 |
Stockholders’ equity: | ||
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Common stock, $.01 par value; 1,000,000,000 shares authorized, 185,551,436 and 186,464,794 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively | 1,856 | 1,865 |
Additional paid-in capital | 1,667,906 | 1,667,897 |
Cumulative distributions in excess of net income | (1,123,071) | (1,008,288) |
Total stockholders’ equity | 546,691 | 661,474 |
Total liabilities and stockholders’ equity | $ 1,056,624 | $ 1,157,017 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued (in shares) | 185,551,436 | 186,464,794 |
Common stock, shares outstanding (in shares) | 185,551,436 | 186,464,794 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues: | ||||
Rental income | $ 24,943 | $ 30,411 | $ 78,619 | $ 95,578 |
Interest income from real estate loans receivable | 0 | 0 | 0 | 434 |
Other operating income | 1,480 | 2,271 | 5,359 | 6,968 |
Total revenues | 26,423 | 32,682 | 83,978 | 102,980 |
Expenses: | ||||
Real estate taxes and insurance | 4,294 | 4,387 | 13,959 | 13,634 |
General and administrative expenses | 1,342 | 1,416 | 4,204 | 4,452 |
Depreciation and amortization | 11,050 | 12,077 | 33,053 | 38,427 |
Interest expense | 4,418 | 4,175 | 13,262 | 13,494 |
Impairment charges on real estate | 14,300 | 0 | 14,300 | 0 |
Total expenses | 45,864 | 33,516 | 112,352 | 103,578 |
Other income: | ||||
Other interest income | 114 | 380 | 477 | 867 |
Loss from extinguishment of debt | (165) | 0 | (471) | (212) |
Gain on sale of real estate, net | 0 | 0 | 30,754 | 24,884 |
Total other (loss) income | (51) | 380 | 30,760 | 25,539 |
Net (loss) income | $ (19,492) | $ (454) | $ 2,386 | $ 24,941 |
Net (loss) income per common share, basic and diluted (in dollars per share) | $ (0.10) | $ 0 | $ 0.01 | $ 0.13 |
Weighted-average number of common shares outstanding, basic and diluted (in shares) | 185,770,646 | 186,968,315 | 186,064,468 | 187,293,455 |
Operating, maintenance, and management | ||||
Expenses: | ||||
Expenses | $ 7,991 | $ 8,773 | $ 25,867 | $ 25,379 |
Asset management fees to affiliate | ||||
Expenses: | ||||
Expenses | $ 2,469 | $ 2,688 | $ 7,707 | $ 8,192 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Cumulative Distributions and Net Income (Loss) |
Balance (in shares) at Dec. 31, 2017 | 187,666,302 | |||
Balance at Dec. 31, 2017 | $ 684,582 | $ 1,877 | $ 1,673,767 | $ (991,062) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net (loss) income | 24,941 | 24,941 | ||
Redemptions of common stock (in shares) | (920,643) | |||
Redemptions of common stock | (4,502) | $ (9) | (4,493) | |
Transfers from redeemable common stock | 4,502 | 4,502 | ||
Distributions declared | (34,252) | (34,252) | ||
Balance (in shares) at Sep. 30, 2018 | 186,745,659 | |||
Balance at Sep. 30, 2018 | 675,271 | $ 1,868 | 1,673,776 | (1,000,373) |
Balance (in shares) at Jun. 30, 2018 | 187,162,274 | |||
Balance at Jun. 30, 2018 | 687,248 | $ 1,872 | 1,673,772 | (988,396) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net (loss) income | (454) | (454) | ||
Redemptions of common stock (in shares) | (416,615) | |||
Redemptions of common stock | (2,037) | $ (4) | (2,033) | |
Transfers from redeemable common stock | 2,037 | 2,037 | ||
Distributions declared | (11,523) | (11,523) | ||
Balance (in shares) at Sep. 30, 2018 | 186,745,659 | |||
Balance at Sep. 30, 2018 | $ 675,271 | $ 1,868 | 1,673,776 | (1,000,373) |
Balance (in shares) at Dec. 31, 2018 | 186,464,794 | 186,464,794 | ||
Balance at Dec. 31, 2018 | $ 661,474 | $ 1,865 | 1,667,897 | (1,008,288) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net (loss) income | 2,386 | 2,386 | ||
Redemptions of common stock (in shares) | (913,358) | |||
Redemptions of common stock | (4,345) | $ (9) | (4,336) | |
Transfers from redeemable common stock | 4,345 | 4,345 | ||
Distributions declared | $ (117,169) | (117,169) | ||
Balance (in shares) at Sep. 30, 2019 | 185,551,436 | 185,551,436 | ||
Balance at Sep. 30, 2019 | $ 546,691 | $ 1,856 | 1,667,906 | (1,123,071) |
Balance (in shares) at Jun. 30, 2019 | 185,871,023 | |||
Balance at Jun. 30, 2019 | 576,633 | $ 1,859 | 1,667,903 | (1,093,129) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net (loss) income | (19,492) | (19,492) | ||
Redemptions of common stock (in shares) | (319,587) | |||
Redemptions of common stock | (1,438) | $ (3) | (1,435) | |
Transfers from redeemable common stock | 1,438 | 1,438 | ||
Distributions declared | $ (10,450) | (10,450) | ||
Balance (in shares) at Sep. 30, 2019 | 185,551,436 | 185,551,436 | ||
Balance at Sep. 30, 2019 | $ 546,691 | $ 1,856 | $ 1,667,906 | $ (1,123,071) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash Flows from Operating Activities: | ||
Net income | $ 2,386 | $ 24,941 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 33,053 | 38,427 |
Impairment charges on real estate | 14,300 | 0 |
Noncash interest income on real estate-related investments | 0 | 3 |
Deferred rent | 2,761 | 3,096 |
Bad debt expense | 0 | 213 |
Amortization of above- and below-market leases, net | (65) | 948 |
Amortization of deferred financing costs | 1,169 | 940 |
Loss from extinguishment of debt | 471 | 212 |
Gain on sale of real estate, net | (30,754) | (24,884) |
Changes in operating assets and liabilities: | ||
Rents and other receivables | (14,841) | (2,391) |
Prepaid expenses and other assets | (13,469) | (2,601) |
Accounts payable and accrued liabilities | 18,574 | 3,180 |
Due to affiliate | 47 | 29 |
Other liabilities | (2,685) | 8,478 |
Net cash provided by operating activities | 10,947 | 50,591 |
Cash Flows from Investing Activities: | ||
Proceeds from sale of real estate | 130,285 | 94,015 |
Improvements to real estate | (30,943) | (24,205) |
Principal repayments on real estate loans receivable | 0 | 13,920 |
Net cash provided by investing activities | 99,342 | 83,730 |
Cash Flows from Financing Activities: | ||
Proceeds from notes payable | 134,350 | 375,000 |
Principal payments on notes payable | (133,681) | (460,446) |
Payments of deferred financing costs | (924) | (2,810) |
Payments to redeem common stock | (4,345) | (4,502) |
Distributions paid to common stockholders | (117,562) | (34,874) |
Net cash used in financing activities | (122,162) | (127,632) |
Net (decrease) increase in cash and cash equivalents and restricted cash | (11,873) | 6,689 |
Cash and cash equivalents and restricted cash, beginning of period | 75,687 | 86,643 |
Cash and cash equivalents and restricted cash, end of period | 63,814 | 93,332 |
Supplemental Disclosure of Cash Flow Information: | ||
Interest paid | 12,131 | 12,663 |
Supplemental Disclosure of Noncash Transactions: | ||
Accrued improvements to real estate | 6,748 | 7,517 |
Distributions payable | $ 3,481 | $ 3,754 |
ORGANIZATION
ORGANIZATION | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | ORGANIZATION KBS Real Estate Investment Trust II, Inc. (the “Company”) was formed on July 12, 2007 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2008. The Company conducts its business primarily through KBS Limited Partnership II, a Delaware limited partnership formed on August 23, 2007 (the “Operating Partnership”), and its subsidiaries. The Company is the sole general partner of and directly owns a 0.1% partnership interest in the Operating Partnership. The Company’s wholly-owned subsidiary, KBS REIT Holdings II LLC, a Delaware limited liability company formed on August 23, 2007 (“KBS REIT Holdings II”), owns the remaining 99.9% partnership interest in the Operating Partnership and is its sole limited partner. The Company invested in a diverse portfolio of real estate and real estate-related investments. As of September 30, 2019, the Company owned six office properties (of which two were held for sale) and an office campus consisting of five office buildings. Subject to certain restrictions and limitations, the business of the Company is managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with the Advisor on June 6, 2019 (the “Advisory Agreement”). The Advisory Agreement is effective through May 21, 2020 and may be renewed for an unlimited number of one Upon commencing its initial public offering (the “Offering”), the Company retained KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Advisor, to serve as the dealer manager of the Offering. The Company ceased offering shares of common stock in its primary offering on December 31, 2010 and terminated its primary offering on March 22, 2011. The Company terminated its dividend reinvestment plan effective May 29, 2014. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2018, except for the Company’s adoption of the lease accounting standards issued by the Financial Accounting Standards Board (“FASB”) effective on January 1, 2019. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”). Principles of Consolidation and Basis of Presentation The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The consolidated financial statements include the accounts of the Company, KBS REIT Holdings II, the Operating Partnership, and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements and condensed notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and condensed notes. Actual results could materially differ from those estimates. Per Share Data Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the nine months ended September 30, 2019 and 2018. Distributions declared per common share were $0.056 and $0.630 in the aggregate for the three and nine months ended September 30, 2019, respectively, and consisted of the following: • For each month commencing January 2019 through June 2019, the Company’s board of directors declared distributions per common share in the amount of $0.02062500 per share of common stock to stockholders of record based on a monthly record date. • On June 12, 2019, the Company’s board of directors declared a special distribution in the amount of $0.45 per share of common stock to stockholders of record as of the close of business on June 17, 2019. • For each month commencing July 2019 through September 2019, the Company’s board of directors declared distributions per common share in the amount of $0.01875000 per share of common stock to stockholders of record based on a monthly record date. Distributions declared per common share were $0.062 and $0.183 in the aggregate for the three and nine months ended September 30, 2018, respectively. Distributions declared per common share assumes each share was issued and outstanding each day that was a record date for distributions and were based on a monthly record date for each month during the periods commencing January 2018 through September 2018. Segments The Company invested in core real estate properties and real estate-related investments with the goal of acquiring a portfolio of income-producing investments. The Company’s real estate properties exhibit similar long-term financial performance and have similar economic characteristics to each other. As of September 30, 2019, the Company aggregated its investments in real estate properties into one reportable business segment. Reclassifications Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. Upon adoption of the lease accounting standards of Topic 842 on January 1, 2019 (described below), the Company accounted for tenant reimbursements for property taxes, insurance and common area maintenance as variable lease payments and recorded these amounts as rental income on the statement of operations. For the three and nine months ended September 30, 2018, the Company reclassified $2.0 million and $7.6 million, respectively, of tenant reimbursement revenue for property taxes, insurance, and common area maintenance to rental income for comparability purposes. In addition, during the nine months ended September 30, 2019, the Company sold two office properties and classified two office properties as held for sale. As a result, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets for all periods presented. Revenue Recognition - Operating Leases Real Estate On January 1, 2019, the Company adopted the lease accounting standards under Topic 842 including the package of practical expedients for all leases that commenced before the effective date of January 1, 2019. Accordingly, the Company (i) did not reassess whether any expired or existing contracts are or contain leases, (ii) did not reassess the lease classification for any expired or existing lease, and (iii) did not reassess initial direct costs for any existing leases. The Company did not elect the practical expedient related to using hindsight to reevaluate the lease term. In addition, the Company adopted the practical expedient for land easements and did not assess whether existing or expired land easements that were not previously accounted for as leases under the lease accounting standards of Topic 840 are or contain a lease under Topic 842. In addition, Topic 842 provides an optional transition method to allow entities to apply the new lease accounting standards at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company adopted this transition method upon its adoption of the lease accounting standards of Topic 842, which did not result in a cumulative effect adjustment to the opening balance of retained earnings on January 1, 2019. The Company’s comparative periods presented in the financial statements will continue to be reported under the lease accounting standards of Topic 840. In accordance with Topic 842, tenant reimbursements for property taxes and insurance are included in the single lease component of the lease contract (the right of the lessee to use the leased space) and therefore are accounted for as variable lease payments and are recorded as rental income on the Company’s statement of operations beginning January 1, 2019. In addition, the Company adopted the practical expedient available under Topic 842 to not separate nonlease components from the associated lease component and instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met, specifically related to tenant reimbursements for common area maintenance which would otherwise be accounted for under the revenue recognition standard. The Company believes the two conditions have been met for tenant reimbursements for common area maintenance as (i) the timing and pattern of transfer of the nonlease components and associated lease components are the same and (ii) the lease component would be classified as an operating lease. Accordingly, tenant reimbursements for common area maintenance are also accounted for as variable lease payments and recorded as rental income on the Company’s statement of operations beginning January 1, 2019. The Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectibility is probable and records amounts expected to be received in later years as deferred rent receivable. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive and amortized as a reduction of rental revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to: • whether the lease stipulates how a tenant improvement allowance may be spent; • whether the lessee or lessor supervises the construction and bears the risk of cost overruns; • whether the amount of a tenant improvement allowance is in excess of market rates; • whether the tenant or landlord retains legal title to the improvements at the end of the lease term; • whether the tenant improvements are unique to the tenant or general purpose in nature; and • whether the tenant improvements are expected to have any residual value at the end of the lease. In accordance with Topic 842, the Company makes a determination of whether the collectibility of the lease payments in an operating lease is probable. If the Company determines the lease payments are not probable of collection, the Company would fully reserve for any contractual lease payments, deferred rent receivable, and variable lease payments and would recognize rental income only if cash is received. Beginning January 1, 2019, these changes to the Company’s collectibility assessment are reflected as an adjustment to rental income. Prior to January 1, 2019, bad debt expense related to uncollectible accounts receivable and deferred rent receivable was included in operating, maintenance, and management expense in the statement of operations. Any subsequent changes to the collectibility of the allowance for doubtful accounts as of December 31, 2018, which was recorded prior to the adoption of Topic 842, are recorded in operating, maintenance, and management expense in the statement of operations. Beginning January 1, 2019, the Company, as a lessor, records costs to negotiate or arrange a lease that would have been incurred regardless of whether the lease was obtained, such as legal costs incurred to negotiate an operating lease, as an expense and classifies such costs as operating, maintenance, and management expense on the Company’s consolidated statement of operations, as these costs are no longer capitalizable under the definition of initial direct costs under Topic 842. Square Footage, Occupancy and Other Measures Square footage, occupancy, number of tenants and other similar measures, including annualized base rent and annualized base rent per square foot, used to describe real estate investments included in these condensed notes to the consolidated financial statements are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board. Recently Issued Accounting Standards Update In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. ASU No. 2016-13 also amends the impairment model for available-for-sale securities. An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required. ASU No. 2016-13 also requires new disclosures. For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available-for-sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still evaluating the impact of adopting ASU No. 2016-13 on its financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement |
REAL ESTATE HELD FOR INVESTMENT
REAL ESTATE HELD FOR INVESTMENT | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
REAL ESTATE HELD FOR INVESTMENT | REAL ESTATE HELD FOR INVESTMENT As of September 30, 2019, the Company’s portfolio of real estate held for investment was composed of four office properties and an office campus consisting of five office buildings, encompassing in the aggregate approximately 2.7 million rentable square feet. As of September 30, 2019, the Company’s real estate portfolio was 74% occupied. The following table summarizes the Company’s real estate portfolio as of September 30, 2019 (in thousands): Property Date Acquired City State Property Type Total Real Estate Accumulated Depreciation and Amortization Total Real Estate, Net Willow Oaks Corporate Center 08/26/2009 Fairfax VA Office $ 118,547 $ (24,520) $ 94,027 Union Bank Plaza 09/15/2010 Los Angeles CA Office 195,544 (34,710) 160,834 Granite Tower 12/16/2010 Denver CO Office 144,368 (31,588) 112,780 Fountainhead Plaza 09/13/2011 Tempe AZ Office 119,384 (27,357) 92,027 Corporate Technology Centre 03/28/2013 San Jose CA Office 149,306 (15,254) 134,052 $ 727,149 $ (133,429) $ 593,720 As of September 30, 2019, the following properties represented more than 10% of the Company’s total assets: Property Location Rentable Total Real Estate, Net Percentage of Annualized Base Rent (in thousands) (1) Average Annualized Base Rent per Sq. Ft. Occupancy Union Bank Plaza Los Angeles, CA 701,888 $ 160,834 15.2 % $ 23,798 $ 42.29 80 % Corporate Technology Centre San Jose, CA 415,492 134,052 12.7 % 5,774 33.39 42 % Granite Tower Denver, CO 591,070 112,780 10.7 % 18,884 34.86 92 % _____________________ (1) Annualized base rent represents annualized contractual base rental income as of September 30, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. Annualized base rent excludes leases that have been executed but have not commenced as of September 30, 2019. Operating Leases The Company’s real estate properties held for investment are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2019, the leases had remaining terms, excluding options to extend, of up to 15.7 years with a weighted-average remaining term of 6.6 years. Some of the leases have provisions to extend the term of the leases, options for early termination for all or part of the leased premises after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $3.4 million and $2.5 million as of September 30, 2019 and December 31, 2018, respectively. During the nine months ended September 30, 2019 and 2018, the Company recognized deferred rent from tenants, net of lease incentive amortization, which reduced rental income by $2.8 million and $3.1 million, respectively. As of September 30, 2019 and December 31, 2018, the cumulative deferred rent balance was $78.8 million and $61.7 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $54.8 million and $38.6 million of unamortized lease incentives as of September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019 and December 31, 2018, lease incentive payable was $52.1 million and $35.2 million, respectively, and is included in accounts payable and accrued liabilities on the accompanying balance sheets. As of September 30, 2019, the future minimum rental income from the Company’s properties held for investment under non-cancelable operating leases was as follows (in thousands): October 1, 2019 through December 31, 2019 $ 14,264 2020 59,820 2021 55,459 2022 59,634 2023 54,929 Thereafter 388,947 $ 633,053 As of September 30, 2019, the Company had approximately 80 tenants over a diverse range of industries and geographic areas in its portfolio of real estate held for investment. The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows: Industry Number of Tenants Annualized Base Rent (1) (in thousands) Percentage of Annualized Base Rent Finance 12 $ 19,363 28.1 % Mining, Oil & Gas Extraction 3 13,154 19.1 % Educational Services 1 11,728 17.0 % $ 44,245 64.2 % _____________________ (1) Annualized base rent represents annualized contractual base rental income as of September 30, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. No other tenant industries accounted for more than 10% of annualized base rent. The Company had not identified any material tenant credit issues as of September 30, 2019. During the nine months ended September 30, 2019, the Company recorded an adjustment to rental income of $0.9 million for lease payments that were deemed not probable of collection and a net recovery of bad debt of $0.1 million, which was included in operating, maintenance, and management expense in the accompanying consolidated statements of operations. During the nine months ended September 30, 2018, the Company recorded bad debt expense of $0.2 million, which was included in operating, maintenance, and management expense in the accompanying consolidated statements of operations. As of September 30, 2019, the Company had a concentration of credit risk related to the following tenant leases that represented more than 10% of the Company’s annualized base rent: Annualized Base Rent Statistics Tenant Property Tenant Industry Square Feet % of Portfolio Annualized Base Rent (in thousands) (1) % of Portfolio Annualized Base Rent Annualized Base Rent per Sq. Ft. Lease Expiration Union Bank Union Bank Plaza Finance 295,563 14.6% $ 15,730 22.8% $ 53.22 05/31/2020 03/31/2021/ 05/31/2021/ 05/31/2022 05/31/2035 (2)(3) The University of Phoenix Fountainhead Plaza Educational Services 445,957 22.0% 11,728 17.0% 26.30 08/31/2023 (4) Anadarko Petroleum Corporation Granite Tower Mining, Oil & Gas Extraction 360,584 17.8% 12,256 17.8% 33.99 04/30/2021 / 04/30/2033 (5) _____________________ (1) Annualized base rent represents annualized contractual base rental income as of September 30, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. (2) Represents the expiration dates of the lease as of September 30, 2019 and does not take into account any tenant renewal options. Pursuant to a lease amendment that the Company entered into with Union Bank on December 31, 2017, Union Bank surrendered 15,829 rentable square feet of its total rentable square footage on March 31, 2018 and 31,320 rentable square feet of its total rentable square footage on June 30, 2018. In addition, Union Bank also surrendered 321 parking area passes on March 31, 2018. During the year ended December 31, 2018, the Company received $11.4 million of lease termination fees from Union Bank, of which $8.5 million was deferred as of December 31, 2018. During the nine months ended September 30, 2018, $1.4 million was recognized as rental income and $0.8 million was recognized as other operating income in the accompanying consolidated statement of operations. During the nine months ended September 30, 2019, $1.4 million was recognized as rental income and $0.7 million was recognized as other operating income in the accompanying consolidated statements of operations, and $6.4 million was deferred as of September 30, 2019 and included in other liabilities on the accompanying consolidated balance sheets. (3) On August 2, 2019, the Company entered into amended and restated lease agreements with Union Bank relating to Union Bank’s office, retail, and storage spaces, which amended the terms of the leases as follows: (i) remeasured the existing rentable square footage from 295,563 rentable square feet to 307,729 rentable square feet effective June 1, 2020, (ii) of the 307,729 rentable square feet, a total of 131,135 rentable square feet of office space and 11,985 rentable square feet of retail space will be surrendered at various dates between May 31, 2020 and May 31, 2022 and the remaining 164,609 rentable square feet will expire on May 31, 2035, and (iii) the addition of 3,152 rentable square feet of retail space for a 15-year lease term expiring on May 31, 2035. Each of Union Bank’s amended and restated office and retail lease agreements has two five (4) The University of Phoenix has two options to extend the term of this lease for five years per option term. (5) Per the lease agreement, 64,841 rentable square feet will expire on April 30, 2021 and the remainder will expire on April 30, 2033. Anadarko Petroleum Corporation has an option to terminate all or a portion of its leased space effective April 30, 2028 or April 30, 2030. No other tenant accounted for more than 10% of annualized base rent. Geographic Concentration Risk |
TENANT ORIGINATION AND ABSORPTI
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES | 9 Months Ended |
Sep. 30, 2019 | |
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract] | |
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES | TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW- MARKET LEASE LIABILITIES As of September 30, 2019 and December 31, 2018, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands): Tenant Origination and Above-Market Below-Market September 30, December 31, September 30, December 31, September 30, December 31, Cost $ 28,025 $ 30,846 $ 835 $ 835 $ (1,154) $ (2,635) Accumulated amortization (16,785) (16,869) (666) (611) 964 2,327 Net amount $ 11,240 $ 13,977 $ 169 $ 224 $ (190) $ (308) Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 2019 and 2018 were as follows (in thousands): Tenant Origination and Above-Market Below-Market For the Three Months Ended September 30, For the Three Months Ended September 30, For the Three Months Ended September 30, 2019 2018 2019 2018 2019 2018 Amortization $ (920) $ (1,410) $ (18) $ (555) $ 27 $ 144 Tenant Origination and Above-Market Below-Market For the Nine Months Ended September 30, For the Nine Months Ended September 30, For the Nine Months Ended September 30, 2019 2018 2019 2018 2019 2018 Amortization $ (2,761) $ (5,815) $ (55) $ (1,697) $ 120 $ 749 |
REAL ESTATE HELD FOR SALE
REAL ESTATE HELD FOR SALE | 9 Months Ended |
Sep. 30, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
REAL ESTATE HELD FOR SALE | REAL ESTATE HELD FOR SALE During the nine months ended September 30, 2019, the Company sold two office properties and as of September 30, 2019, the Company had classified two office properties as held for sale. During the year ended December 31, 2018, the Company sold three office buildings that were part of an eight-building office campus. The results of operations for the properties sold during the nine months ended September 30, 2019 and the year ended December 31, 2018 and the two office properties classified as held for sale as of September 30, 2019 are included in continuing operations on the Company’s consolidated statements of operations. The following table summarizes certain revenue and expenses related to the Company’s real estate properties that were sold during the year ended December 31, 2018 and the three and nine months ended September 30, 2019 and the two office properties that were classified as held for sale as of September 30, 2019, which were included in continuing operations (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Revenues Rental income $ 7,918 $ 12,390 $ 30,575 $ 40,030 Other operating income 354 959 1,786 2,630 Total revenues 8,272 13,349 32,361 42,660 Expenses Operating, maintenance, and management 2,393 3,845 9,845 11,859 Real estate taxes and insurance 750 1,525 3,698 5,156 Asset management fees to affiliate 835 1,117 2,653 3,520 General and administrative expenses 41 36 45 63 Depreciation and amortization 3,599 5,132 12,304 15,961 Interest expense 1,233 1,544 4,379 5,573 Impairment charges on real estate 14,300 — 14,300 — Total expenses $ 23,151 $ 13,199 $ 47,224 $ 42,132 The following summary presents the major components of assets and liabilities related to real estate held for sale as of September 30, 2019 and December 31, 2018 (in thousands). September 30, 2019 December 31, 2018 Assets related to real estate held for sale Total real estate, at cost $ 304,436 $ 427,335 Accumulated depreciation and amortization (47,273) (57,017) Real estate held for sale, net 257,163 370,318 Other assets 38,571 46,817 Total assets related to real estate held for sale $ 295,734 $ 417,135 Liabilities related to real estate held for sale Notes payable, net 115,693 148,912 Other liabilities — 6 Total liabilities related to real estate held for sale $ 115,693 $ 148,918 As of September 30, 2019, the following properties held for sale represented more than 10% of the Company’s total assets: Property Location Rentable Total Real Estate, Net Percentage of Annualized Base Rent (in thousands) (1) Average Annualized Base Rent per Sq. Ft. Occupancy Campus Drive Buildings (2) Florham Park, NJ 1,168,846 $ 257,164 24.3 % $ 32,181 $ 32.78 84 % _____________________ (1) Annualized base rent represents annualized contractual base rental income as of September 30, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. Annualized base rent excludes leases that have been executed but have not commenced as of September 30, 2019. (2) Subsequent to September 30, 2019, the Company entered into a purchase and sale agreement for the 100 & 200 Campus Driving Buildings and the 300-600 Campus Buildings (together, the “Campus Drive Buildings”) with a buyer unaffiliated with the Company or the Advisor. See Note 10, “Subsequent Events - Purchase and Sale Agreement for Sale of the Membership Interests in KBSII 100-200 Campus Drive, LLC and KBSII 300-600 Campus Drive, LLC.” During the three and nine months ended September 30, 2019, the Company recorded non-cash impairment charges of $14.3 million to write down the carrying value of the Company’s investment in the Campus Drive Buildings to their contractual sales price less estimated costs to sell. The impairment was primarily due to estimated closing costs and disposition fees, which are reflected upon classification of the Campus Drive Buildings to held for sale. Subsequent to September 30, 2019, the Company entered into a purchase and sale agreement for the Campus Drive Buildings with a buyer unaffiliated with the Company or the Advisor. See Note 10, “Subsequent Events - Purchase and Sale Agreement for Sale of the Membership Interests in KBSII 100-200 Campus Drive, LLC and KBSII 300-600 Campus Drive, LLC.” |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTES PAYABLE As of September 30, 2019 and December 31, 2018, the Company’s notes payable, including notes payable related to real estate held for sale, consisted of the following (dollars in thousands): Book Value as of Book Value as of Contractual Interest Rate as of September 30, 2019 (1) Effective Interest Rate as of September 30, 2019 (1) Payment Type Maturity Date (2) Corporate Technology Centre Mortgage Loan (3) $ 40,894 $ 41,868 3.50% 3.5% Principal & Interest 04/01/2020 Portfolio Loan Facility (4) 281,293 375,000 One-month LIBOR + 1.45% 3.6% Interest Only 03/29/2020 Granite Tower Mortgage Loan (5) 95,350 — One-month LIBOR + 1.65% 3.8% (5) 09/01/2023 Total notes payable principal outstanding $ 417,537 $ 416,868 Deferred financing costs, net (944) (1,660) Total notes payable, net $ 416,593 $ 415,208 _____________________ (1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2019. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2019, using interest rate indices as of September 30, 2019, where applicable. (2) Represents the initial maturity date or the maturity date as extended as of September 30, 2019; subject to certain conditions, the maturity dates of certain loans may be extended beyond the maturity date shown. (3) The loan documents require the Company to reserve for the annual charges for real estate taxes by making monthly deposits to an account held by the lender, subject to certain terms and conditions contained in the loan documents. (4) On August 30, 2019, the Company repaid $62.0 million due under this loan and Granite Tower was released as security from the Portfolio Loan Facility. See below, “- Recent Financing Transactions - Granite Tower Mortgage Loan.” As of September 30, 2019, the Portfolio Loan Facility is secured by the 100 & 200 Campus Drive Buildings, the 300-600 Campus Drive Buildings, Willow Oaks Corporate Center, Union Bank Plaza and Fountainhead Plaza. As of September 30, 2019, $281.3 million of term debt of the Portfolio Loan Facility was outstanding and $62.4 million of revolving debt remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents. (5) See below, “- Recent Financing Transaction - Granite Tower Mortgage Loan.” During the three and nine months ended September 30, 2019, the Company incurred $4.4 million and $13.3 million of interest expense, respectively. During the three and nine months ended September 30, 2018, the Company incurred $4.2 million and $13.5 million of interest expense, respectively. As of September 30, 2019 and December 31, 2018, $1.3 million of interest expense was payable. Included in interest expense for the three and nine months ended September 30, 2019 were $0.4 million and $1.2 million of amortization of deferred financing costs, respectively. Included in interest expense for the three and nine months ended September 30, 2018 were $0.3 million and $0.9 million of amortization of deferred financing costs, respectively. Also included in interest expense for the nine months ended September 30, 2018 was $0.3 million of debt refinancing costs. The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of September 30, 2019 (in thousands): October 1, 2019 through December 31, 2019 $ 330 2020 321,857 2021 — 2022 — 2023 95,350 Thereafter — $ 417,537 Certain of the Company’s notes payable contain financial debt covenants. As of September 30, 2019, the Company was in compliance with these debt covenants. Recent Financing Transaction Granite Tower Mortgage Loan On August 30, 2019, in connection with the partial principal repayment of the Portfolio Loan Facility, the Company, through an indirect wholly owned subsidiary (the “Granite Tower Mortgage Loan Borrower”), entered into a four KBS REIT Properties II, LLC (“REIT Properties II”), the Company’s wholly owned subsidiary, is providing a guaranty of (i) payment of, and agrees to protect, defend, indemnify and hold harmless the Granite Tower Mortgage Loan Agent and each lender for, from and against, any liability, obligation, deficiency, loss, damage, costs and expenses (including reasonable attorney’s fees), and any litigation which may at any time be imposed upon, incurred or suffered by the Granite Tower Mortgage Loan Agent or any lender because of (a) certain intentional actions committed by the Granite Tower Mortgage Loan Borrower, (b) fraud or intentional misrepresentations by the Granite Tower Mortgage Loan Borrower or REIT Properties II in connection with the loan documents as described in the guaranty agreement, and (c) certain bankruptcy or insolvency proceedings involving the Granite Tower Mortgage Loan Borrower, as such acts are described in the guaranty, and (ii) upon and subject to the events and conditions described in the guaranty, payment of certain indemnity obligations of the Granite Tower Mortgage Loan Borrower related to environmental matters. REIT Properties II also provides a limited completion guaranty of all obligations of the Granite Tower Mortgage Loan Borrower under an amendment of a major tenant’s lease up to a maximum guaranteed amount of $45.7 million. |
FAIR VALUE DISCLOSURES
FAIR VALUE DISCLOSURES | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE DISCLOSURES | FAIR VALUE DISCLOSURES Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of impaired long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories: • Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; • Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and • Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable. The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of assets and liabilities for which it is practicable to estimate the fair value: Cash and cash equivalents, restricted cash, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items. Notes payable: The fair value of the Company’s notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs. The following were the face values, carrying amounts and fair values of the Company’s notes payable as of September 30, 2019 and December 31, 2018, which carrying amounts do not generally approximate the fair values (in thousands): September 30, 2019 December 31, 2018 Face Value Carrying Amount Fair Value Face Value Carrying Amount Fair Value Financial liabilities: Notes payable $ 417,537 $ 416,593 $ 418,212 $ 416,868 $ 415,208 $ 416,163 Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. Low levels of transaction volume for certain financial instruments have made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different. Assets Recorded at Fair Value During the nine months ended September 30, 2019, the Company measured the following assets at fair value on a nonrecurring basis (in thousands): Fair Value Measurements Using Total Quoted Prices in Active Significant Other Significant Nonrecurring Basis: Impaired real estate held for sale $ 295,803 $ — $ — $ 295,803 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS The Company has entered into the Advisory Agreement with the Advisor. This agreement entitles the Advisor to specified fees upon the provision of certain services with regard to the management of the Company’s investments, among other services, and the disposition of investments, as well as reimbursement of certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. The Company has also entered into a fee reimbursement agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the Depository Trust & Clearing Corporation Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor and Dealer Manager also serve or served as the advisor and dealer manager, respectively, for KBS Real Estate Investment Trust, Inc. (“KBS REIT I”) (which liquidated in December 2018), KBS Real Estate Investment Trust III, Inc. (“KBS REIT III”), Pacific Oak Strategic Opportunity REIT, Inc., formerly KBS Strategic Opportunity REIT, Inc., (“Pacific Oak Strategic Opportunity REIT”) (advisory agreement terminated as of October 31, 2019 and the dealer manager agreement will terminate as of December 31, 2019), KBS Legacy Partners Apartment REIT, Inc. (“KBS Legacy Partners Apartment REIT”) (which liquidated in December 2018), Pacific Oak Strategic Opportunity REIT II, Inc., formerly KBS Strategic Opportunity REIT II, Inc., (“Pacific Oak Strategic Opportunity REIT II”) (advisory agreement terminated as of October 31, 2019 and the dealer manager agreement will terminate as of December 31, 2019) and KBS Growth & Income REIT, Inc. (“KBS Growth & Income REIT”). On November 1, 2019, Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II each entered into advisory agreements with a new external advisor, Pacific Oak Capital Advisors, LLC. Pacific Oak Capital Advisors, LLC is part of a group of companies formed, owned and managed by Keith D. Hall and Peter McMillan III. Together, through GKP Holding LLC, Messrs. Hall and McMillan, indirectly own a 33 1/3% interest in the Advisor and the Dealer Manager. As of January 1, 2018, the Company, together with KBS REIT III, KBS Growth & Income REIT, Pacific Oak Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, Pacific Oak Strategic Opportunity REIT II, the Dealer Manager, the Advisor and other KBS-affiliated entities, had entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage were shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. At the June 2018 renewal, Pacific Oak Strategic Opportunity REIT, Pacific Oak Strategic Opportunity REIT II and Legacy Partners Apartment REIT elected to cease participation in the program and obtained separate insurance coverage. In June 2019, the Company renewed its participation in the program. The program is effective through June 30, 2020. During the nine months ended September 30, 2019 and 2018, no other business transactions occurred between the Company and KBS REIT I, KBS REIT III, Pacific Oak Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, Pacific Oak Strategic Opportunity REIT II, KBS Growth & Income REIT, the Advisor, the Dealer Manager or other KBS-affiliated entities. Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the nine months ended September 30, 2019 and 2018, respectively, and any related amounts payable as of September 30, 2019 and December 31, 2018 (in thousands): Incurred Payable as of Three Months Ended September 30, Nine Months Ended September 30, September 30, December 31, 2019 2018 2019 2018 2019 2018 Expensed Asset management fees $ 2,469 $ 2,688 $ 7,707 $ 8,192 $ — $ — Reimbursement of operating expenses (1) 69 69 222 246 102 55 Disposition fees (2) — — 1,334 972 — — $ 2,538 $ 2,757 $ 9,263 $ 9,410 $ 102 $ 55 _____________________ (1) Reimbursable operating expenses primarily consists of internal audit personnel costs, accounting software and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $55,000 and $53,000 for the three months ended September 30, 2019 and 2018, respectively, and $170,000 and $181,000 for the nine months ended September 30, 2019 and 2018, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the nine months ended September 30, 2019 and 2018. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company. (2) Disposition fees with respect to real estate sold are included in the gain on sale of real estate, net, in the accompanying consolidated statements of operations. During the nine months ended September 30, 2018, the Advisor reimbursed the Company for a $0.1 million property insurance rebate. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Economic Dependency The Company is dependent on the Advisor for certain services that are essential to the Company, including the disposition of real estate investments; management of the daily operations of the Company’s real estate investment portfolio; and other general and administrative responsibilities. In the event the Advisor is unable to provide any of these services, the Company will be required to obtain such services from other sources. Environmental As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Compliance with existing environmental laws is not expected to have a material adverse effect on the Company’s financial condition and results of operations as of September 30, 2019. Legal Matters |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS The Company evaluates subsequent events up until the date the consolidated financial statements are issued. Distributions Paid On October 1, 2019, the Company paid distributions of $3.5 million, which related to distributions declared for September 2019 in the amount of $0.01875000 per share of common stock to stockholders of record as of the close of business on September 20, 2019. On November 1, 2019, the Company paid distributions of $3.5 million, which related to distributions declared for October 2019 in the amount of $0.01875000 per share of common stock to stockholders of record as of the close of business on October 21, 2019. Purchase and Sale Agreement for Sale of the Membership Interests in KBSII 100-200 Campus Drive, LLC and KBSII 300-600 Campus Drive, LLC On September 9, 2008, the Company, through an indirect wholly owned subsidiary, KBSII 100-200 Campus Drive, LLC, purchased two four-story office buildings located at 100 & 200 Campus Drive in Florham Park, New Jersey containing 590,458 rentable square feet on an approximate 71.1-acre parcel of land (the “100 & 200 Campus Drive Buildings”). On October 10, 2008, the Company, through an indirect wholly owned subsidiary, KBSII 300-600 Campus Drive, LLC, purchased four four-story office buildings containing 578,388 rentable square feet (the “300-600 Campus Drive Buildings”). The 300-600 Campus Drive Buildings are located at 300, 400, 500 and 600 Campus Drive in Florham Park, New Jersey on an approximate 64.80-acre parcel of land. On October 22, 2019, the Company, through indirect wholly owned subsidiaries, entered into a membership interest purchase and sale agreement and escrow instructions (the “Agreement”) for the sale of all of the membership interests of KBSII 300-600 Campus Drive, LLC (the owner of the 300-600 Campus Drive Buildings) and KBSII 100-200 Campus Drive, LLC (the owner of the 100 & 200 Campus Drive Buildings)(together, the “Property Owners”) to a buyer unaffiliated with the Company or the Advisor (the “Purchaser”). Pursuant to the Agreement, the total purchase price for the Property Owners is $320.0 million. On October 30, 2019, the Company, through indirect wholly owned subsidiaries, entered into the first amendment to the Agreement (the “First Amendment”) with the Purchaser to extend the ending date of the due diligence period from October 30, 2019 to October 31, 2019, and on October 31, 2019, the Company, through indirect wholly owned subsidiaries, entered into the second amendment to the Agreement (the “Second Amendment”) with the Purchaser to reduce the total purchase price for the Property Owners to $311.0 million. Per the Agreement, the closing date is expected to be on or before December 16, 2019. Under the Second Amendment, the Purchaser has an option to extend the closing date to January 16, 2020 and a second option to extend the closing date to January 31, 2020, subject to certain conditions set forth in the Second Amendment. There can be no assurance that the Company will complete the sale of the Property Owners. The Purchaser would be obligated to purchase the Property Owners only after satisfaction of agreed upon closing conditions. In some circumstances, if the Purchaser fails to complete the acquisition, it may forfeit up to $4.0 million of earnest money. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the FASB Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. |
Principles of Consolidation | The consolidated financial statements include the accounts of the Company, KBS REIT Holdings II, the Operating Partnership, and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. |
Use of Estimates | The preparation of the consolidated financial statements and condensed notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and condensed notes. Actual results could materially differ from those estimates. |
Per Share Data | Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the nine months ended September 30, 2019 and 2018. |
Segments | The Company invested in core real estate properties and real estate-related investments with the goal of acquiring a portfolio of income-producing investments. The Company’s real estate properties exhibit similar long-term financial performance and have similar economic characteristics to each other. As of September 30, 2019, the Company aggregated its investments in real estate properties into one reportable business segment. |
Reclassifications | Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. Upon adoption of the lease accounting standards of Topic 842 on January 1, 2019 (described below), the Company accounted for tenant reimbursements for property taxes, insurance and common area maintenance as variable lease payments and recorded these amounts as rental income on the statement of operations. For the three and nine months ended September 30, 2018, the Company reclassified $2.0 million and $7.6 million, respectively, of tenant reimbursement revenue for property taxes, insurance, and common area maintenance to rental income for comparability purposes. In addition, during the nine months ended September 30, 2019, the Company sold two office properties and classified two office properties as held for sale. As a result, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets for all periods presented. |
Revenue Recognition | Real Estate On January 1, 2019, the Company adopted the lease accounting standards under Topic 842 including the package of practical expedients for all leases that commenced before the effective date of January 1, 2019. Accordingly, the Company (i) did not reassess whether any expired or existing contracts are or contain leases, (ii) did not reassess the lease classification for any expired or existing lease, and (iii) did not reassess initial direct costs for any existing leases. The Company did not elect the practical expedient related to using hindsight to reevaluate the lease term. In addition, the Company adopted the practical expedient for land easements and did not assess whether existing or expired land easements that were not previously accounted for as leases under the lease accounting standards of Topic 840 are or contain a lease under Topic 842. In addition, Topic 842 provides an optional transition method to allow entities to apply the new lease accounting standards at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company adopted this transition method upon its adoption of the lease accounting standards of Topic 842, which did not result in a cumulative effect adjustment to the opening balance of retained earnings on January 1, 2019. The Company’s comparative periods presented in the financial statements will continue to be reported under the lease accounting standards of Topic 840. In accordance with Topic 842, tenant reimbursements for property taxes and insurance are included in the single lease component of the lease contract (the right of the lessee to use the leased space) and therefore are accounted for as variable lease payments and are recorded as rental income on the Company’s statement of operations beginning January 1, 2019. In addition, the Company adopted the practical expedient available under Topic 842 to not separate nonlease components from the associated lease component and instead to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue recognition standard (Topic 606) and if certain conditions are met, specifically related to tenant reimbursements for common area maintenance which would otherwise be accounted for under the revenue recognition standard. The Company believes the two conditions have been met for tenant reimbursements for common area maintenance as (i) the timing and pattern of transfer of the nonlease components and associated lease components are the same and (ii) the lease component would be classified as an operating lease. Accordingly, tenant reimbursements for common area maintenance are also accounted for as variable lease payments and recorded as rental income on the Company’s statement of operations beginning January 1, 2019. The Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectibility is probable and records amounts expected to be received in later years as deferred rent receivable. If the lease provides for tenant improvements, the Company determines whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When the Company is the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive and amortized as a reduction of rental revenue over the lease term. Tenant improvement ownership is determined based on various factors including, but not limited to: • whether the lease stipulates how a tenant improvement allowance may be spent; • whether the lessee or lessor supervises the construction and bears the risk of cost overruns; • whether the amount of a tenant improvement allowance is in excess of market rates; • whether the tenant or landlord retains legal title to the improvements at the end of the lease term; • whether the tenant improvements are unique to the tenant or general purpose in nature; and • whether the tenant improvements are expected to have any residual value at the end of the lease. |
Square Footage, Occupancy and Other Measures | Square footage, occupancy, number of tenants and other similar measures, including annualized base rent and annualized base rent per square foot, used to describe real estate investments included in these condensed notes to the consolidated financial statements are unaudited and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board. |
Recently Issued Accounting Standards Update | In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments (“ASU No. 2016-13”). ASU No. 2016-13 affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The amendments in ASU No. 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. ASU No. 2016-13 also amends the impairment model for available-for-sale securities. An entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required. ASU No. 2016-13 also requires new disclosures. For financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance for credit losses, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. For financing receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year of the asset’s origination for as many as five annual periods. For available-for-sale securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still evaluating the impact of adopting ASU No. 2016-13 on its financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -Changes to the Disclosure Requirements for Fair Value Measurement |
REAL ESTATE HELD FOR INVESTME_2
REAL ESTATE HELD FOR INVESTMENT (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Real Estate [Abstract] | |
Schedule of Real Estate Investments | The following table summarizes the Company’s real estate portfolio as of September 30, 2019 (in thousands): Property Date Acquired City State Property Type Total Real Estate Accumulated Depreciation and Amortization Total Real Estate, Net Willow Oaks Corporate Center 08/26/2009 Fairfax VA Office $ 118,547 $ (24,520) $ 94,027 Union Bank Plaza 09/15/2010 Los Angeles CA Office 195,544 (34,710) 160,834 Granite Tower 12/16/2010 Denver CO Office 144,368 (31,588) 112,780 Fountainhead Plaza 09/13/2011 Tempe AZ Office 119,384 (27,357) 92,027 Corporate Technology Centre 03/28/2013 San Jose CA Office 149,306 (15,254) 134,052 $ 727,149 $ (133,429) $ 593,720 |
Schedule of Concentration of Risk, by Assets | As of September 30, 2019, the following properties represented more than 10% of the Company’s total assets: Property Location Rentable Total Real Estate, Net Percentage of Annualized Base Rent (in thousands) (1) Average Annualized Base Rent per Sq. Ft. Occupancy Union Bank Plaza Los Angeles, CA 701,888 $ 160,834 15.2 % $ 23,798 $ 42.29 80 % Corporate Technology Centre San Jose, CA 415,492 134,052 12.7 % 5,774 33.39 42 % Granite Tower Denver, CO 591,070 112,780 10.7 % 18,884 34.86 92 % _____________________ (1) Annualized base rent represents annualized contractual base rental income as of September 30, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. Annualized base rent excludes leases that have been executed but have not commenced as of September 30, 2019. |
Schedule of Future Minimum Rental Income for Company's Properties | As of September 30, 2019, the future minimum rental income from the Company’s properties held for investment under non-cancelable operating leases was as follows (in thousands): October 1, 2019 through December 31, 2019 $ 14,264 2020 59,820 2021 55,459 2022 59,634 2023 54,929 Thereafter 388,947 $ 633,053 |
Schedules of Concentration of Risk, by Industry | The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows: Industry Number of Tenants Annualized Base Rent (1) (in thousands) Percentage of Annualized Base Rent Finance 12 $ 19,363 28.1 % Mining, Oil & Gas Extraction 3 13,154 19.1 % Educational Services 1 11,728 17.0 % $ 44,245 64.2 % _____________________ |
Schedules of Concentration of Risk, by Risk Factor | As of September 30, 2019, the Company had a concentration of credit risk related to the following tenant leases that represented more than 10% of the Company’s annualized base rent: Annualized Base Rent Statistics Tenant Property Tenant Industry Square Feet % of Portfolio Annualized Base Rent (in thousands) (1) % of Portfolio Annualized Base Rent Annualized Base Rent per Sq. Ft. Lease Expiration Union Bank Union Bank Plaza Finance 295,563 14.6% $ 15,730 22.8% $ 53.22 05/31/2020 03/31/2021/ 05/31/2021/ 05/31/2022 05/31/2035 (2)(3) The University of Phoenix Fountainhead Plaza Educational Services 445,957 22.0% 11,728 17.0% 26.30 08/31/2023 (4) Anadarko Petroleum Corporation Granite Tower Mining, Oil & Gas Extraction 360,584 17.8% 12,256 17.8% 33.99 04/30/2021 / 04/30/2033 (5) _____________________ (1) Annualized base rent represents annualized contractual base rental income as of September 30, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. (2) Represents the expiration dates of the lease as of September 30, 2019 and does not take into account any tenant renewal options. Pursuant to a lease amendment that the Company entered into with Union Bank on December 31, 2017, Union Bank surrendered 15,829 rentable square feet of its total rentable square footage on March 31, 2018 and 31,320 rentable square feet of its total rentable square footage on June 30, 2018. In addition, Union Bank also surrendered 321 parking area passes on March 31, 2018. During the year ended December 31, 2018, the Company received $11.4 million of lease termination fees from Union Bank, of which $8.5 million was deferred as of December 31, 2018. During the nine months ended September 30, 2018, $1.4 million was recognized as rental income and $0.8 million was recognized as other operating income in the accompanying consolidated statement of operations. During the nine months ended September 30, 2019, $1.4 million was recognized as rental income and $0.7 million was recognized as other operating income in the accompanying consolidated statements of operations, and $6.4 million was deferred as of September 30, 2019 and included in other liabilities on the accompanying consolidated balance sheets. (3) On August 2, 2019, the Company entered into amended and restated lease agreements with Union Bank relating to Union Bank’s office, retail, and storage spaces, which amended the terms of the leases as follows: (i) remeasured the existing rentable square footage from 295,563 rentable square feet to 307,729 rentable square feet effective June 1, 2020, (ii) of the 307,729 rentable square feet, a total of 131,135 rentable square feet of office space and 11,985 rentable square feet of retail space will be surrendered at various dates between May 31, 2020 and May 31, 2022 and the remaining 164,609 rentable square feet will expire on May 31, 2035, and (iii) the addition of 3,152 rentable square feet of retail space for a 15-year lease term expiring on May 31, 2035. Each of Union Bank’s amended and restated office and retail lease agreements has two five (4) The University of Phoenix has two options to extend the term of this lease for five years per option term. (5) Per the lease agreement, 64,841 rentable square feet will expire on April 30, 2021 and the remainder will expire on April 30, 2033. |
TENANT ORIGINATION AND ABSORP_2
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract] | |
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities | As of September 30, 2019 and December 31, 2018, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands): Tenant Origination and Above-Market Below-Market September 30, December 31, September 30, December 31, September 30, December 31, Cost $ 28,025 $ 30,846 $ 835 $ 835 $ (1,154) $ (2,635) Accumulated amortization (16,785) (16,869) (666) (611) 964 2,327 Net amount $ 11,240 $ 13,977 $ 169 $ 224 $ (190) $ (308) |
Amortization of Tenant Origination and Absorption Costs, Above-Market Leases and Below-Market Lease Liabilities | Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 2019 and 2018 were as follows (in thousands): Tenant Origination and Above-Market Below-Market For the Three Months Ended September 30, For the Three Months Ended September 30, For the Three Months Ended September 30, 2019 2018 2019 2018 2019 2018 Amortization $ (920) $ (1,410) $ (18) $ (555) $ 27 $ 144 Tenant Origination and Above-Market Below-Market For the Nine Months Ended September 30, For the Nine Months Ended September 30, For the Nine Months Ended September 30, 2019 2018 2019 2018 2019 2018 Amortization $ (2,761) $ (5,815) $ (55) $ (1,697) $ 120 $ 749 |
REAL ESTATE HELD FOR SALE (Tabl
REAL ESTATE HELD FOR SALE (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Revenue and Expenses of Real Estate Disposed of by Sale | The following table summarizes certain revenue and expenses related to the Company’s real estate properties that were sold during the year ended December 31, 2018 and the three and nine months ended September 30, 2019 and the two office properties that were classified as held for sale as of September 30, 2019, which were included in continuing operations (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Revenues Rental income $ 7,918 $ 12,390 $ 30,575 $ 40,030 Other operating income 354 959 1,786 2,630 Total revenues 8,272 13,349 32,361 42,660 Expenses Operating, maintenance, and management 2,393 3,845 9,845 11,859 Real estate taxes and insurance 750 1,525 3,698 5,156 Asset management fees to affiliate 835 1,117 2,653 3,520 General and administrative expenses 41 36 45 63 Depreciation and amortization 3,599 5,132 12,304 15,961 Interest expense 1,233 1,544 4,379 5,573 Impairment charges on real estate 14,300 — 14,300 — Total expenses $ 23,151 $ 13,199 $ 47,224 $ 42,132 |
Schedule of Assets and Liabilities of Real Estate Held-for-Sale | The following summary presents the major components of assets and liabilities related to real estate held for sale as of September 30, 2019 and December 31, 2018 (in thousands). September 30, 2019 December 31, 2018 Assets related to real estate held for sale Total real estate, at cost $ 304,436 $ 427,335 Accumulated depreciation and amortization (47,273) (57,017) Real estate held for sale, net 257,163 370,318 Other assets 38,571 46,817 Total assets related to real estate held for sale $ 295,734 $ 417,135 Liabilities related to real estate held for sale Notes payable, net 115,693 148,912 Other liabilities — 6 Total liabilities related to real estate held for sale $ 115,693 $ 148,918 As of September 30, 2019, the following properties held for sale represented more than 10% of the Company’s total assets: Property Location Rentable Total Real Estate, Net Percentage of Annualized Base Rent (in thousands) (1) Average Annualized Base Rent per Sq. Ft. Occupancy Campus Drive Buildings (2) Florham Park, NJ 1,168,846 $ 257,164 24.3 % $ 32,181 $ 32.78 84 % _____________________ (1) Annualized base rent represents annualized contractual base rental income as of September 30, 2019, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. Annualized base rent excludes leases that have been executed but have not commenced as of September 30, 2019. (2) Subsequent to September 30, 2019, the Company entered into a purchase and sale agreement for the 100 & 200 Campus Driving Buildings and the 300-600 Campus Buildings (together, the “Campus Drive Buildings”) with a buyer unaffiliated with the Company or the Advisor. See Note 10, “Subsequent Events - Purchase and Sale Agreement for Sale of the Membership Interests in KBSII 100-200 Campus Drive, LLC and KBSII 300-600 Campus Drive, LLC.” |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | As of September 30, 2019 and December 31, 2018, the Company’s notes payable, including notes payable related to real estate held for sale, consisted of the following (dollars in thousands): Book Value as of Book Value as of Contractual Interest Rate as of September 30, 2019 (1) Effective Interest Rate as of September 30, 2019 (1) Payment Type Maturity Date (2) Corporate Technology Centre Mortgage Loan (3) $ 40,894 $ 41,868 3.50% 3.5% Principal & Interest 04/01/2020 Portfolio Loan Facility (4) 281,293 375,000 One-month LIBOR + 1.45% 3.6% Interest Only 03/29/2020 Granite Tower Mortgage Loan (5) 95,350 — One-month LIBOR + 1.65% 3.8% (5) 09/01/2023 Total notes payable principal outstanding $ 417,537 $ 416,868 Deferred financing costs, net (944) (1,660) Total notes payable, net $ 416,593 $ 415,208 _____________________ (1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2019. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2019, using interest rate indices as of September 30, 2019, where applicable. (2) Represents the initial maturity date or the maturity date as extended as of September 30, 2019; subject to certain conditions, the maturity dates of certain loans may be extended beyond the maturity date shown. (3) The loan documents require the Company to reserve for the annual charges for real estate taxes by making monthly deposits to an account held by the lender, subject to certain terms and conditions contained in the loan documents. (4) On August 30, 2019, the Company repaid $62.0 million due under this loan and Granite Tower was released as security from the Portfolio Loan Facility. See below, “- Recent Financing Transactions - Granite Tower Mortgage Loan.” As of September 30, 2019, the Portfolio Loan Facility is secured by the 100 & 200 Campus Drive Buildings, the 300-600 Campus Drive Buildings, Willow Oaks Corporate Center, Union Bank Plaza and Fountainhead Plaza. As of September 30, 2019, $281.3 million of term debt of the Portfolio Loan Facility was outstanding and $62.4 million of revolving debt remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents. (5) See below, “- Recent Financing Transaction - Granite Tower Mortgage Loan.” |
Schedule of Maturities of Long-term Debt | The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of September 30, 2019 (in thousands): October 1, 2019 through December 31, 2019 $ 330 2020 321,857 2021 — 2022 — 2023 95,350 Thereafter — $ 417,537 |
FAIR VALUE DISCLOSURES (Tables)
FAIR VALUE DISCLOSURES (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Schedule of Face Value, Carrying Amounts and Fair Value | The following were the face values, carrying amounts and fair values of the Company’s notes payable as of September 30, 2019 and December 31, 2018, which carrying amounts do not generally approximate the fair values (in thousands): September 30, 2019 December 31, 2018 Face Value Carrying Amount Fair Value Face Value Carrying Amount Fair Value Financial liabilities: Notes payable $ 417,537 $ 416,593 $ 418,212 $ 416,868 $ 415,208 $ 416,163 |
Schedule of Fair Value Measurements, Nonrecurring | During the nine months ended September 30, 2019, the Company measured the following assets at fair value on a nonrecurring basis (in thousands): Fair Value Measurements Using Total Quoted Prices in Active Significant Other Significant Nonrecurring Basis: Impaired real estate held for sale $ 295,803 $ — $ — $ 295,803 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Costs | Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the nine months ended September 30, 2019 and 2018, respectively, and any related amounts payable as of September 30, 2019 and December 31, 2018 (in thousands): Incurred Payable as of Three Months Ended September 30, Nine Months Ended September 30, September 30, December 31, 2019 2018 2019 2018 2019 2018 Expensed Asset management fees $ 2,469 $ 2,688 $ 7,707 $ 8,192 $ — $ — Reimbursement of operating expenses (1) 69 69 222 246 102 55 Disposition fees (2) — — 1,334 972 — — $ 2,538 $ 2,757 $ 9,263 $ 9,410 $ 102 $ 55 _____________________ (1) Reimbursable operating expenses primarily consists of internal audit personnel costs, accounting software and cybersecurity related expenses incurred by the Advisor under the Advisory Agreement. The Company has reimbursed the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $55,000 and $53,000 for the three months ended September 30, 2019 and 2018, respectively, and $170,000 and $181,000 for the nine months ended September 30, 2019 and 2018, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the nine months ended September 30, 2019 and 2018. The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers. In addition to the amounts above, the Company reimburses the Advisor for certain of the Company’s direct costs incurred from third parties that were initially paid by the Advisor on behalf of the Company. (2) Disposition fees with respect to real estate sold are included in the gain on sale of real estate, net, in the accompanying consolidated statements of operations. |
ORGANIZATION (Details)
ORGANIZATION (Details) $ in Thousands | Jun. 06, 2019shares | Sep. 30, 2019USD ($)propertyshares | Sep. 30, 2018USD ($)shares | Sep. 30, 2019USD ($)propertyshares | Sep. 30, 2018USD ($)shares | Mar. 22, 2011USD ($)shares | Sep. 30, 2019USD ($)propertyshares | Dec. 31, 2018property |
Organizational Structure [Line Items] | ||||||||
Partnership interest in Operating Partnership | 0.10% | |||||||
Partnership interest in the Operating Partnership and is its sole limited partner | 99.90% | |||||||
Issuance of common stock, value | $ | $ 1,800,000 | |||||||
Shares of common stock sold under dividend reinvestment plan, value | $ | $ 298,200 | |||||||
Redemptions of common stock | $ | $ 1,438 | $ 2,037 | $ 4,345 | $ 4,502 | ||||
Common Stock | ||||||||
Organizational Structure [Line Items] | ||||||||
Issuance of common stock, shares | shares | 182,681,633 | |||||||
Shares of common stock sold under dividend reinvestment plan, shares | shares | 30,903,504 | |||||||
Redemptions of common stock (in shares) | shares | 319,587 | 416,615 | 913,358 | 920,643 | 28,053,701 | |||
Redemptions of common stock | $ | $ 3 | $ 4 | $ 9 | $ 9 | $ 256,100 | |||
KBS Capital Advisors LLC | ||||||||
Organizational Structure [Line Items] | ||||||||
Period of Advisory Agreement renewal | 1 year | |||||||
Period of termination notice | 60 days | |||||||
KBS Capital Advisors LLC | Common Stock | ||||||||
Organizational Structure [Line Items] | ||||||||
Shares held by affiliate | shares | 20,000 | |||||||
Office Properties | ||||||||
Organizational Structure [Line Items] | ||||||||
Number of real estate properties | property | 6 | 6 | 6 | |||||
Office Properties | Held-for-sale | ||||||||
Organizational Structure [Line Items] | ||||||||
Number of real estate properties | property | 2 | 2 | 2 | |||||
Office Campus | ||||||||
Organizational Structure [Line Items] | ||||||||
Number of real estate properties | property | 1 | 1 | 1 | |||||
Office Buildings, Campus | ||||||||
Organizational Structure [Line Items] | ||||||||
Number of real estate properties | property | 5 | 5 | 5 | 8 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ / shares in Units, $ in Millions | Jun. 12, 2019$ / shares | Sep. 30, 2019$ / shares | Sep. 30, 2018USD ($)$ / shares | Jun. 30, 2019$ / shares | Sep. 30, 2019segmentproperty$ / sharesshares | Sep. 30, 2018USD ($)$ / sharesshares | Dec. 31, 2018property |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||||
Potentially dilutive securities | shares | 0 | 0 | |||||
Distributions declared per common share (in dollars per share) | $ 0.45 | $ 0.056 | $ 0.062 | $ 0.630 | $ 0.183 | ||
Distribution rate per share per day, declared (in dollars per share) | $ 0.01875000 | $ 0.02062500 | |||||
Number of reportable segments | segment | 1 | ||||||
Office Properties | Disposed of by Sale | |||||||
Real Estate [Line Items] | |||||||
Number of real estate properties sold | property | 2 | 3 | |||||
Accounting Standards Update 2016-02 | |||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||||
Tenant reimbursement revenue | $ | $ 2 | $ 7.6 |
REAL ESTATE HELD FOR INVESTME_3
REAL ESTATE HELD FOR INVESTMENT - Additional Information (Details) ft² in Millions | Sep. 30, 2019ft²property | Dec. 31, 2018property |
Real Estate Properties [Line Items] | ||
Occupancy | 74.00% | |
Office Properties | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 6 | |
Office Properties | Held-for-Investment | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 4 | |
Office Buildings, Campus | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 5 | 8 |
Rentable square feet | ft² | 2.7 | |
Office Buildings, Campus | Excluding Held-for-sale | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 5 |
REAL ESTATE HELD FOR INVESTME_4
REAL ESTATE HELD FOR INVESTMENT - Schedule of Real Estate Investments (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Real Estate Properties [Line Items] | ||
Total Real Estate at Cost | $ 727,149 | $ 700,603 |
Accumulated Depreciation and Amortization | (133,429) | (116,714) |
Total real estate held for investment, net | 593,720 | $ 583,889 |
Office Properties | ||
Real Estate Properties [Line Items] | ||
Total Real Estate at Cost | 727,149 | |
Accumulated Depreciation and Amortization | (133,429) | |
Total real estate held for investment, net | $ 593,720 | |
Willow Oaks Corporate Center | Office Properties | ||
Real Estate Properties [Line Items] | ||
Date Acquired | Aug. 26, 2009 | |
Total Real Estate at Cost | $ 118,547 | |
Accumulated Depreciation and Amortization | (24,520) | |
Total real estate held for investment, net | $ 94,027 | |
Union Bank Plaza | Office Properties | ||
Real Estate Properties [Line Items] | ||
Date Acquired | Sep. 15, 2010 | |
Total Real Estate at Cost | $ 195,544 | |
Accumulated Depreciation and Amortization | (34,710) | |
Total real estate held for investment, net | $ 160,834 | |
Granite Tower | Office Properties | ||
Real Estate Properties [Line Items] | ||
Date Acquired | Dec. 16, 2010 | |
Total Real Estate at Cost | $ 144,368 | |
Accumulated Depreciation and Amortization | (31,588) | |
Total real estate held for investment, net | $ 112,780 | |
Fountainhead Plaza | Office Properties | ||
Real Estate Properties [Line Items] | ||
Date Acquired | Sep. 13, 2011 | |
Total Real Estate at Cost | $ 119,384 | |
Accumulated Depreciation and Amortization | (27,357) | |
Total real estate held for investment, net | $ 92,027 | |
Corporate Technology Centre | Office Properties | ||
Real Estate Properties [Line Items] | ||
Date Acquired | Mar. 28, 2013 | |
Total Real Estate at Cost | $ 149,306 | |
Accumulated Depreciation and Amortization | (15,254) | |
Total real estate held for investment, net | $ 134,052 |
REAL ESTATE HELD FOR INVESTME_5
REAL ESTATE HELD FOR INVESTMENT - Properties Represented More than 10% of Company’s Total Assets (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019USD ($)ft²$ / ft² | Dec. 31, 2018USD ($) | |
Real Estate Properties [Line Items] | ||
Total Real Estate, Net | $ 593,720 | $ 583,889 |
Percentage of Total Assets | 64.20% | |
Annualized Base Rent | $ 44,245 | |
Occupancy | 74.00% | |
Assets, Total | Union Bank Plaza | ||
Real Estate Properties [Line Items] | ||
Rentable Square Feet | ft² | 701,888 | |
Total Real Estate, Net | $ 160,834 | |
Percentage of Total Assets | 15.20% | |
Annualized Base Rent | $ 23,798 | |
Average Annualized Base Rent per Sq. Ft. | $ / ft² | 42.29 | |
Occupancy | 80.00% | |
Assets, Total | Corporate Technology Centre | ||
Real Estate Properties [Line Items] | ||
Rentable Square Feet | ft² | 415,492 | |
Total Real Estate, Net | $ 134,052 | |
Percentage of Total Assets | 12.70% | |
Annualized Base Rent | $ 5,774 | |
Average Annualized Base Rent per Sq. Ft. | $ / ft² | 33.39 | |
Occupancy | 42.00% | |
Assets, Total | Granite Tower | ||
Real Estate Properties [Line Items] | ||
Rentable Square Feet | ft² | 591,070 | |
Total Real Estate, Net | $ 112,780 | |
Percentage of Total Assets | 10.70% | |
Annualized Base Rent | $ 18,884 | |
Average Annualized Base Rent per Sq. Ft. | $ / ft² | 34.86 | |
Occupancy | 92.00% |
REAL ESTATE HELD FOR INVESTME_6
REAL ESTATE HELD FOR INVESTMENT - Operating Leases, Additional Information (Details) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2019USD ($)tenant | Sep. 30, 2018USD ($) | Dec. 31, 2018USD ($) | |
Operating Leased Assets [Line Items] | |||
Weighted average remaining lease term | 6 years 7 months 6 days | ||
Reduction in rental income | $ 2,761 | $ 3,096 | |
Deferred rent receivables | 78,800 | $ 61,700 | |
Unamortized lease incentives | $ 54,800 | 38,600 | |
Number of tenants | tenant | 80 | ||
Recorded bad debt expense (recovery) related to tenant | $ 0 | 213 | |
Other liabilities | |||
Operating Leased Assets [Line Items] | |||
Security deposit liability | 3,400 | 2,500 | |
Accounts payable and accrued liabilities | |||
Operating Leased Assets [Line Items] | |||
Lease incentive, payable | $ 52,100 | $ 35,200 | |
Maximum | |||
Operating Leased Assets [Line Items] | |||
Operating lease, term | 15 years 8 months 12 days | ||
Adjustment to Rental Income | |||
Operating Leased Assets [Line Items] | |||
Recorded bad debt expense (recovery) related to tenant | $ 900 | ||
Operating, Maintenance, and Management Expense | |||
Operating Leased Assets [Line Items] | |||
Recorded bad debt expense (recovery) related to tenant | $ (100) | $ 200 |
REAL ESTATE HELD FOR INVESTME_7
REAL ESTATE HELD FOR INVESTMENT - Future Minimum Rental Income (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Real Estate [Abstract] | |
October 1, 2019 through December 31, 2019 | $ 14,264 |
2020 | 59,820 |
2021 | 55,459 |
2022 | 59,634 |
2023 | 54,929 |
Thereafter | 388,947 |
Future minimum rental income | $ 633,053 |
REAL ESTATE HELD FOR INVESTME_8
REAL ESTATE HELD FOR INVESTMENT - Highest Tenant Industry Concentrations- Grater than 10% of Annual Base Rent (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2019USD ($)tenant | |
Concentration Risk [Line Items] | |
Number of Tenants | tenant | 80 |
Annualized Base Rent | $ | $ 44,245 |
Percentage of Annualized Base Rent | 64.20% |
Finance | |
Concentration Risk [Line Items] | |
Number of Tenants | tenant | 12 |
Annualized Base Rent | $ | $ 19,363 |
Percentage of Annualized Base Rent | 28.10% |
Mining, Oil & Gas Extraction | |
Concentration Risk [Line Items] | |
Number of Tenants | tenant | 3 |
Annualized Base Rent | $ | $ 13,154 |
Percentage of Annualized Base Rent | 19.10% |
Educational Services | |
Concentration Risk [Line Items] | |
Number of Tenants | tenant | 1 |
Annualized Base Rent | $ | $ 11,728 |
Percentage of Annualized Base Rent | 17.00% |
REAL ESTATE HELD FOR INVESTME_9
REAL ESTATE HELD FOR INVESTMENT - Concentration of Credit Risk for Tenant Leases (Details) $ in Thousands | Aug. 02, 2019ft²extensionnumberOfOptions | Sep. 30, 2019USD ($)ft² | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)ft²extension$ / ft² | Sep. 30, 2018USD ($) | Dec. 31, 2018USD ($) | Jun. 30, 2018ft² | Mar. 31, 2018ft²numberOfParkingAreaPasses |
Real Estate Properties [Line Items] | ||||||||
Annualized Base Rent | $ | $ 44,245 | $ 44,245 | ||||||
Rental income | $ | 24,943 | $ 30,411 | 78,619 | $ 95,578 | ||||
Other operating income | $ | $ 1,480 | $ 2,271 | $ 5,359 | 6,968 | ||||
Tenant Lease - Union Bank Plaza | ||||||||
Real Estate Properties [Line Items] | ||||||||
Square Feet | ft² | 295,563 | 295,563 | 295,563 | |||||
% of Portfolio (Net Rentable Sq. Ft.) | 14.60% | 14.60% | ||||||
Annualized Base Rent | $ | $ 15,730 | $ 15,730 | ||||||
% of Portfolio Annualized Base Rent | 22.80% | 22.80% | ||||||
Annualized Base Rent per Sq. Ft. | $ / ft² | 53.22 | |||||||
Square feet surrender | ft² | 31,320 | 15,829 | ||||||
Termination of lease | $ | $ 11,400 | |||||||
Number of parking area passes | numberOfParkingAreaPasses | 321 | |||||||
Rental income | $ | $ 1,400 | 1,400 | ||||||
Extension option | extension | 2 | |||||||
Extension period | 5 years | |||||||
Option to terminate | one | |||||||
Period of termination notice | 18 months | |||||||
Option to terminate and cancel a portion of lease | numberOfOptions | 2 | |||||||
Tenant Lease - Union Bank Plaza | Effective June 1, 2020 | ||||||||
Real Estate Properties [Line Items] | ||||||||
Square Feet | ft² | 307,729 | |||||||
Tenant Lease - Union Bank Plaza | Will be Surrendered at Various Dates Between May 31, 2020 and May 31, 2022 | Office Space | ||||||||
Real Estate Properties [Line Items] | ||||||||
Square Feet | ft² | 131,135 | |||||||
Tenant Lease - Union Bank Plaza | Will be Surrendered at Various Dates Between May 31, 2020 and May 31, 2022 | Retail Space | ||||||||
Real Estate Properties [Line Items] | ||||||||
Square Feet | ft² | 11,985 | |||||||
Tenant Lease - Union Bank Plaza | Expiring on May 31, 2035 | ||||||||
Real Estate Properties [Line Items] | ||||||||
Square Feet | ft² | 164,609 | |||||||
Lease term | 15 years | |||||||
Tenant Lease - Union Bank Plaza | Expiring on May 31, 2035 | Retail Space | ||||||||
Real Estate Properties [Line Items] | ||||||||
Square Feet | ft² | 3,152 | |||||||
Tenant Lease - Union Bank Plaza | Real Estate, Other | ||||||||
Real Estate Properties [Line Items] | ||||||||
Other operating income | $ | 700 | $ 800 | ||||||
Tenant Lease - Union Bank Plaza | Other Liabilities | ||||||||
Real Estate Properties [Line Items] | ||||||||
Deferred revenue | $ | $ 6,400 | $ 6,400 | $ 8,500 | |||||
Tenant Lease - The University of Phoenix | ||||||||
Real Estate Properties [Line Items] | ||||||||
Square Feet | ft² | 445,957 | 445,957 | ||||||
% of Portfolio (Net Rentable Sq. Ft.) | 22.00% | 22.00% | ||||||
Annualized Base Rent | $ | $ 11,728 | $ 11,728 | ||||||
% of Portfolio Annualized Base Rent | 17.00% | 17.00% | ||||||
Annualized Base Rent per Sq. Ft. | $ / ft² | 26.30 | |||||||
Extension option | extension | 2 | |||||||
Extension period | 5 years | |||||||
Term Lease - Anadarko Petroleum Corporation | ||||||||
Real Estate Properties [Line Items] | ||||||||
Square Feet | ft² | 360,584 | 360,584 | ||||||
% of Portfolio (Net Rentable Sq. Ft.) | 17.80% | 17.80% | ||||||
Annualized Base Rent | $ | $ 12,256 | $ 12,256 | ||||||
% of Portfolio Annualized Base Rent | 17.80% | 17.80% | ||||||
Annualized Base Rent per Sq. Ft. | $ / ft² | 33.99 | |||||||
Term Lease - Anadarko Petroleum Corporation | Will Expire on April 30, 2021 | ||||||||
Real Estate Properties [Line Items] | ||||||||
Square Feet | ft² | 64,841 | 64,841 |
REAL ESTATE HELD FOR INVESTM_10
REAL ESTATE HELD FOR INVESTMENT - Geographic Concentration Risk (Details) | 9 Months Ended |
Sep. 30, 2019 | |
Concentration Risk [Line Items] | |
Concentration risk, percentage | 64.20% |
Assets, Total | California | |
Concentration Risk [Line Items] | |
Concentration risk, percentage | 27.90% |
Assets, Total | Colorado | |
Concentration Risk [Line Items] | |
Concentration risk, percentage | 10.70% |
TENANT ORIGINATION AND ABSORP_3
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract] | |||||
Tenant Origination And Absorption Costs, Cost | $ 28,025 | $ 28,025 | $ 30,846 | ||
Tenant Origination and Absorption Costs, Accumulated amortization | (16,785) | (16,785) | (16,869) | ||
Tenant Origination and Absorption Costs, Net amount | 11,240 | 11,240 | 13,977 | ||
Tenant Origination and Absorption Costs, Amortization | (920) | $ (1,410) | (2,761) | $ (5,815) | |
Above-Market Lease Assets, Cost | 835 | 835 | 835 | ||
Above-Market Lease Assets, Accumulated amortization | (666) | (666) | (611) | ||
Above-Market Lease Assets, Net amount | 169 | 169 | 224 | ||
Above-Market Lease Assets, Amortization | (18) | (555) | (55) | (1,697) | |
Below-Market Lease Liabilities, Cost | (1,154) | (1,154) | (2,635) | ||
Below-Market Lease Liabilities, Accumulated amortization | 964 | 964 | 2,327 | ||
Below-Market Lease Liabilities, Net amount | (190) | (190) | $ (308) | ||
Below-Market Lease Liabilities, Amortization | $ 27 | $ 144 | $ 120 | $ 749 |
REAL ESTATE HELD FOR SALE - Add
REAL ESTATE HELD FOR SALE - Additional Information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019USD ($)property | Sep. 30, 2018USD ($) | Sep. 30, 2019USD ($)property | Sep. 30, 2018USD ($) | Dec. 31, 2018property | |
Real Estate Properties [Line Items] | |||||
Impairment charges on real estate | $ | $ 14,300 | $ 0 | $ 14,300 | $ 0 | |
Disposed of by Sale | |||||
Real Estate Properties [Line Items] | |||||
Impairment charges on real estate | $ | $ 14,300 | $ 0 | $ 14,300 | $ 0 | |
Office Properties | |||||
Real Estate Properties [Line Items] | |||||
Number of real estate properties | 6 | 6 | |||
Office Properties | Disposed of by Sale | |||||
Real Estate Properties [Line Items] | |||||
Number of real estate properties sold | 2 | 3 | |||
Office Properties | Held-for-sale | |||||
Real Estate Properties [Line Items] | |||||
Number of real estate properties | 2 | 2 | |||
Office Buildings, Campus | |||||
Real Estate Properties [Line Items] | |||||
Number of real estate properties | 5 | 5 | 8 |
REAL ESTATE HELD FOR SALE - Rev
REAL ESTATE HELD FOR SALE - Revenue and Expenses of Real Estate Held-for-Sale (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Expenses | ||||
Impairment charges on real estate | $ 14,300 | $ 0 | $ 14,300 | $ 0 |
Disposed of by Sale | ||||
Revenues | ||||
Rental income | 7,918 | 12,390 | 30,575 | 40,030 |
Other operating income | 354 | 959 | 1,786 | 2,630 |
Total revenues | 8,272 | 13,349 | 32,361 | 42,660 |
Expenses | ||||
Operating, maintenance, and management | 2,393 | 3,845 | 9,845 | 11,859 |
Real estate taxes and insurance | 750 | 1,525 | 3,698 | 5,156 |
Asset management fees to affiliate | 835 | 1,117 | 2,653 | 3,520 |
General and administrative expenses | 41 | 36 | 45 | 63 |
Depreciation and amortization | 3,599 | 5,132 | 12,304 | 15,961 |
Interest expense | 1,233 | 1,544 | 4,379 | 5,573 |
Impairment charges on real estate | 14,300 | 0 | 14,300 | 0 |
Total expenses | $ 23,151 | $ 13,199 | $ 47,224 | $ 42,132 |
REAL ESTATE HELD FOR SALE - Sch
REAL ESTATE HELD FOR SALE - Schedule of Assets and Liabilities Related to Real Estate Held for Sale (Details) - Held-for-sale - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Assets related to real estate held for sale | ||
Total real estate, at cost | $ 304,436 | $ 427,335 |
Accumulated depreciation and amortization | (47,273) | (57,017) |
Real estate held for sale, net | 257,163 | 370,318 |
Other assets | 38,571 | 46,817 |
Total assets related to real estate held for sale | 295,734 | 417,135 |
Liabilities related to real estate held for sale | ||
Notes payable, net | 115,693 | 148,912 |
Other liabilities | 0 | 6 |
Total liabilities related to real estate held for sale | $ 115,693 | $ 148,918 |
REAL ESTATE HELD FOR SALE - As
REAL ESTATE HELD FOR SALE - As Percent of Total Assets (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019USD ($)ft²$ / ft² | Dec. 31, 2018USD ($) | |
Real Estate [Line Items] | ||
Total Real Estate, Net | $ 593,720 | $ 583,889 |
Percentage of Total Assets | 64.20% | |
Annualized Base Rent | $ 44,245 | |
Occupancy | 74.00% | |
Campus Drive Buildings | Assets, Total | ||
Real Estate [Line Items] | ||
Rentable square feet | ft² | 1,168,846 | |
Total Real Estate, Net | $ 257,164 | |
Percentage of Total Assets | 24.30% | |
Annualized Base Rent | $ 32,181 | |
Average Annualized Base Rent per Sq. Ft. | $ / ft² | 32.78 | |
Occupancy | 84.00% |
NOTES PAYABLE - Schedule of Lon
NOTES PAYABLE - Schedule of Long-term Debt Instruments (Details) - USD ($) $ in Thousands | Aug. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | |||
Total notes payable principal outstanding | $ 417,537 | $ 416,868 | |
Deferred financing costs, net | (944) | (1,660) | |
Total notes payable, net | 416,593 | 415,208 | |
Portfolio Loan Facility | |||
Debt Instrument [Line Items] | |||
Extinguishment of debt, amount | $ 62,000 | ||
Portfolio Loan Facility | Secured Debt | |||
Debt Instrument [Line Items] | |||
Total notes payable principal outstanding | 281,300 | ||
Remaining borrowing capacity | 62,400 | ||
Granite Tower Mortgage Loan | |||
Debt Instrument [Line Items] | |||
Total notes payable principal outstanding | 95,400 | ||
Remaining borrowing capacity | $ 49,600 | ||
Granite Tower Mortgage Loan | One-month LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 1.65% | ||
Mortgage | Corporate Technology Centre Mortgage Loan | |||
Debt Instrument [Line Items] | |||
Total notes payable principal outstanding | $ 40,894 | 41,868 | |
Contractual Interest Rate | 3.50% | ||
Effective Interest Rate | 3.50% | ||
Mortgage | Portfolio Loan Facility | |||
Debt Instrument [Line Items] | |||
Total notes payable principal outstanding | $ 281,293 | 375,000 | |
Effective Interest Rate | 3.60% | ||
Mortgage | Portfolio Loan Facility | One-month LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 1.45% | ||
Mortgage | Granite Tower Mortgage Loan | |||
Debt Instrument [Line Items] | |||
Total notes payable principal outstanding | $ 95,350 | $ 0 | |
Effective Interest Rate | 3.80% | ||
Mortgage | Granite Tower Mortgage Loan | One-month LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 1.65% |
NOTES PAYABLE - Additional Info
NOTES PAYABLE - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |||||
Interest expense | $ 4,418 | $ 4,175 | $ 13,262 | $ 13,494 | |
Interest payable, current | 1,300 | 1,300 | $ 1,300 | ||
Amortization of deferred financing costs | $ 400 | $ 300 | $ 1,169 | 940 | |
Debt refinancing costs | $ 300 |
NOTES PAYABLE - Schedule of Mat
NOTES PAYABLE - Schedule of Maturities of Long-Term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Debt Disclosure [Abstract] | ||
October 1, 2019 through December 31, 2019 | $ 330 | |
2020 | 321,857 | |
2021 | 0 | |
2022 | 0 | |
2023 | 95,350 | |
Thereafter | 0 | |
Total notes payable, net | $ 417,537 | $ 416,868 |
NOTES PAYABLE - Recent Financin
NOTES PAYABLE - Recent Financing Transactions (Details) - USD ($) | Aug. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | |||
Debt instrument, face amount | $ 417,537,000 | $ 416,868,000 | |
Total notes payable principal outstanding | 417,537,000 | $ 416,868,000 | |
Granite Tower Mortgage Loan | |||
Debt Instrument [Line Items] | |||
Duration period | 4 years | ||
Debt instrument, face amount | $ 145,000,000 | ||
Total notes payable principal outstanding | 95,400,000 | ||
Remaining borrowing capacity | 49,600,000 | ||
Amortization schedule of mortgage loans | 30 years | ||
Limited Completion Guaranty of Major Tenant Lease | $ 45,700,000 | ||
Granite Tower Mortgage Loan | One-month LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 1.65% |
FAIR VALUE DISCLOSURES - Notes
FAIR VALUE DISCLOSURES - Notes Payable (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Notes payable, Face Value | $ 417,537,000 | $ 416,868,000 |
Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Notes payable, Value | 416,593,000 | 415,208,000 |
Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Notes payable, Value | $ 418,212,000 | $ 416,163,000 |
FAIR VALUE DISCLOSURES - Real E
FAIR VALUE DISCLOSURES - Real Estate (Details) - Nonrecurring Basis: $ in Thousands | Sep. 30, 2019USD ($) |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Impaired real estate held for sale | $ 295,803 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Impaired real estate held for sale | 0 |
Significant Other Observable Inputs (Level 2) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Impaired real estate held for sale | 0 |
Significant Unobservable Inputs (Level 3) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Impaired real estate held for sale | $ 295,803 |
RELATED PARTY TRANSACTIONS - Co
RELATED PARTY TRANSACTIONS - Cost Incurred (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Related Party Transaction [Line Items] | |||||
Payable as of | $ 102 | $ 102 | $ 55 | ||
Administrative fees | 55 | $ 53 | 170 | $ 181 | |
Advisor and Dealer Manager | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 2,538 | 2,757 | 9,263 | 9,410 | |
Payable as of | 102 | 102 | 55 | ||
Advisor and Dealer Manager | Asset management fees | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 2,469 | 2,688 | 7,707 | 8,192 | |
Payable as of | 0 | 0 | 0 | ||
Advisor and Dealer Manager | Reimbursement of operating expenses | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 69 | 69 | 222 | 246 | |
Payable as of | 102 | 102 | 55 | ||
Advisor and Dealer Manager | Disposition fees | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 0 | $ 0 | 1,334 | $ 972 | |
Payable as of | $ 0 | $ 0 | $ 0 |
RELATED PARTY TRANSACTIONS - Ad
RELATED PARTY TRANSACTIONS - Additional Information (Details) - KBS Capital Advisors LLC - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Nov. 01, 2019 | |
Property Insurance Rebate | ||
Related Party Transaction [Line Items] | ||
Paid from related parties | $ 0.1 | |
GKP Holding LLC | Subsequent Event | ||
Related Party Transaction [Line Items] | ||
Ownership percentage | 33.33% |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) $ / shares in Units, $ in Millions | Nov. 01, 2019USD ($) | Oct. 01, 2019USD ($) | Oct. 10, 2008aproperty | Sep. 09, 2008aproperty | Oct. 31, 2019USD ($)$ / shares | Sep. 30, 2019ft²$ / shares | Oct. 22, 2019USD ($) |
100 & 200 Campus Drive Buildings | |||||||
Subsequent Event [Line Items] | |||||||
Number of real estate properties acquired | property | 2 | ||||||
Rentable square feet | ft² | 590,458 | ||||||
Area of land | a | 71.1 | ||||||
300-600 Campus Drive Buildings | |||||||
Subsequent Event [Line Items] | |||||||
Number of real estate properties acquired | property | 4 | ||||||
Rentable square feet | ft² | 578,388 | ||||||
Area of land | a | 64.80 | ||||||
Dividend Paid | |||||||
Subsequent Event [Line Items] | |||||||
Distribution rate per share per day, declared | $ / shares | $ 0.01875000 | ||||||
Subsequent Event | Property Owners | Scenario, Forecast | |||||||
Subsequent Event [Line Items] | |||||||
Consideration | $ 311 | $ 320 | |||||
Earnest money deposit, amount that may be forfeited | $ 4 | ||||||
Subsequent Event | Dividend Paid | |||||||
Subsequent Event [Line Items] | |||||||
Paid distributions | $ 3.5 | $ 3.5 | |||||
Distribution rate per share per day, declared | $ / shares | $ 0.01875000 |