Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2020 | May 11, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
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 | 184,967,735 | |
Entity Central Index Key | 0001411059 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS $ in Thousands | Mar. 31, 2020USD ($) |
Assets | |
Real estate | $ 878,572 |
Cash and cash equivalents | 15,255 |
Restricted cash | 152 |
Rents and other receivables | 2,010 |
Other assets, net | 973 |
Total assets | 896,962 |
Liabilities | |
Liabilities for estimated costs in excess of estimated receipts during liquidation | 134,792 |
Notes payable | 240,520 |
Accounts payable and accrued liabilities | 6,306 |
Due to affiliate | 71 |
Liabilities for estimated closing costs and disposition fees | 19,896 |
Other liabilities | 2,912 |
Total liabilities | 404,497 |
Commitments and contingencies (Note 9) | |
Net assets in liquidation | $ 492,465 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET $ in Thousands | Dec. 31, 2019USD ($) |
Real estate: | |
Land | $ 118,955 |
Buildings and improvements | 590,950 |
Tenant origination and absorption costs | 28,025 |
Total real estate held for investment, cost | 737,930 |
Less accumulated depreciation and amortization | (141,323) |
Total real estate held for investment, net | 596,607 |
Real estate held for sale, net | 270,124 |
Total real estate, net | 866,731 |
Cash and cash equivalents | 31,674 |
Restricted cash | 15,208 |
Rents and other receivables, net | 82,470 |
Above-market leases, net | 150 |
Assets related to real estate held for sale | 39,975 |
Prepaid expenses and other assets | 22,841 |
Total assets | 1,059,049 |
Notes payable: | |
Notes payable, net | 300,780 |
Notes payable related to real estate held for sale, net | 115,827 |
Total notes payable, net | 416,607 |
Accounts payable and accrued liabilities | 68,539 |
Due to affiliate | 59 |
Below-market leases, net | 164 |
Liabilities related to real estate held for sale | 10,012 |
Other liabilities | 16,445 |
Total liabilities | 511,826 |
Commitments and contingencies (Note 9) | |
Redeemable common stock | 10,000 |
Stockholders’ equity: | |
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding | 0 |
Common stock, $.01 par value; 1,000,000,000 shares authorized, 185,302,037 shares issued and outstanding as of December 31, 2019 | 1,853 |
Additional paid-in capital | 1,662,555 |
Cumulative distributions in excess of net income | (1,127,185) |
Total stockholders’ equity | 537,223 |
Total liabilities and stockholders’ equity | $ 1,059,049 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) | Dec. 31, 2019$ / sharesshares |
Statement of Financial Position [Abstract] | |
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.01 |
Preferred stock, shares authorized (in shares) | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 |
Preferred stock, shares outstanding (in shares) | 0 |
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 |
Common stock, shares authorized (in shares) | 1,000,000,000 |
Common stock, shares issued (in shares) | 185,302,037 |
Common stock, shares outstanding (in shares) | 185,302,037 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS $ in Thousands | 2 Months Ended |
Mar. 31, 2020USD ($) | |
Changes in Net Assets in Liquidation [Roll Forward] | |
Net assets in liquidation, beginning of period | $ 704,404 |
Changes in net assets in liquidation | |
Change in liquidation value of real estate properties | (68,200) |
Change in estimated cash flow during liquidation | 2,995 |
Change in capital expenditures | (7,449) |
Other changes, net | (408) |
Net decrease in liquidation value | (73,062) |
Liquidating distribution to stockholders | (138,877) |
Changes in net assets in liquidation | (211,939) |
Net assets in liquidation, end of period | $ 492,465 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended |
Jan. 31, 2020 | Mar. 31, 2019 | |
Revenues: | ||
Rental income | $ 8,107 | $ 27,885 |
Other operating income | 483 | 1,997 |
Total revenues | 8,590 | 29,882 |
Expenses: | ||
Operating, maintenance, and management | 2,233 | 9,302 |
Real estate taxes and insurance | 1,336 | 5,083 |
Asset management fees to affiliate | 751 | 2,657 |
General and administrative expenses | 422 | 1,673 |
Depreciation and amortization | 2,586 | 11,785 |
Interest expense | 1,159 | 4,481 |
Total expenses | 8,487 | 34,981 |
Other income: | ||
Other interest income | 93 | 199 |
Loss from extinguishment of debt | (87) | 0 |
Gain on sale of real estate, net | 1,935 | 0 |
Total other income | 1,941 | 199 |
Net income (loss) | $ 2,044 | $ (4,900) |
Net income (loss) per common share, basic and diluted (in dollars per share) | $ 0.01 | $ (0.03) |
Weighted-average number of common shares outstanding, basic and diluted (in shares) | 185,299,655 | 186,376,862 |
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, 2018 | 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 income (loss) | (4,900) | (4,900) | ||
Redemptions of common stock (in shares) | (275,998) | |||
Redemptions of common stock | (1,367) | $ (3) | (1,364) | |
Transfers from redeemable common stock | 1,367 | 1,367 | ||
Distributions declared | (11,532) | (11,532) | ||
Balance (in shares) at Mar. 31, 2019 | 186,188,796 | |||
Balance at Mar. 31, 2019 | $ 645,042 | $ 1,862 | 1,667,900 | (1,024,720) |
Balance (in shares) at Dec. 31, 2019 | 185,302,037 | 185,302,037 | ||
Balance at Dec. 31, 2019 | $ 537,223 | $ 1,853 | 1,662,555 | (1,127,185) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income (loss) | 2,044 | 2,044 | ||
Redemptions of common stock (in shares) | (73,817) | |||
Redemptions of common stock | (280) | $ (1) | (279) | |
Transfers from redeemable common stock | 280 | 280 | ||
Balance (in shares) at Jan. 31, 2020 | 185,228,220 | |||
Balance at Jan. 31, 2020 | $ 539,267 | $ 1,852 | $ 1,662,556 | $ (1,125,141) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended |
Jan. 31, 2020 | Mar. 31, 2019 | |
Cash Flows from Operating Activities: | ||
Net income (loss) | $ 2,044 | $ (4,900) |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 2,586 | 11,785 |
Deferred rent | (638) | 1,788 |
Amortization of above- and below-market leases, net | (3) | (48) |
Amortization of deferred financing costs | 115 | 332 |
Loss from extinguishment of debt | 87 | 0 |
Gain on sale of real estate, net | (1,935) | 0 |
Changes in operating assets and liabilities: | ||
Rents and other receivables | (515) | 2,460 |
Prepaid expenses and other assets | (1,995) | (4,344) |
Accounts payable and accrued liabilities | (894) | 819 |
Due to affiliate | 32 | 23 |
Other liabilities | (6,264) | (1,460) |
Net cash (used in) provided by operating activities | (7,380) | 6,455 |
Cash Flows from Investing Activities: | ||
Proceeds from sale of real estate | 302,028 | 0 |
Improvements to real estate | (2,684) | (6,221) |
Net cash provided by (used in) investing activities | 299,344 | (6,221) |
Cash Flows from Financing Activities: | ||
Principal payments on notes payable | (176,687) | (321) |
Payments to redeem common stock | (280) | (1,367) |
Distributions paid to common stockholders | 0 | (11,564) |
Net cash used in financing activities | (176,967) | (13,252) |
Net increase (decrease) in cash and cash equivalents and restricted cash | 114,997 | (13,018) |
Cash and cash equivalents and restricted cash, beginning of period | 46,882 | 75,687 |
Cash and cash equivalents and restricted cash, end of period | 161,879 | 62,669 |
Supplemental Disclosure of Cash Flow Information: | ||
Interest paid | 1,246 | 4,026 |
Supplemental Disclosure of Noncash Transactions: | ||
Accrued improvements to real estate | 6,610 | 5,051 |
Distributions payable | $ 0 | $ 3,842 |
ORGANIZATION
ORGANIZATION | 3 Months Ended |
Mar. 31, 2020 | |
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. As of March 31, 2020, the Company owned four office properties 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 entered into with the Advisor, as amended (the “Advisory Agreement”). The Advisory Agreement is effective through May 21, 2020 and may be renewed for an unlimited number of one As of March 31, 2020, the Company had 185,062,935 shares of common stock issued and outstanding. On November 13, 2019, in connection with a review of potential strategic alternatives available to the Company, a special committee composed of all of the Company’s independent directors (the “Special Committee”) and the board of directors unanimously approved the sale of all of the Company’s assets and the dissolution of the Company pursuant to the terms of the plan of complete liquidation and dissolution (the “Plan of Liquidation”). The principal purpose of the Plan of Liquidation is to provide liquidity to the Company’s stockholders by selling the Company’s assets, paying its debts and distributing the net proceeds from liquidation to the Company’s stockholders. On March 5, 2020, the Company’s stockholders approved the Plan of Liquidation. The Plan of Liquidation is included as an exhibit to this Quarterly Report on Form 10-Q. COVID-19 Pandemic Currently, one of the most significant risks and uncertainties facing the Company and the real estate industry generally is the potential adverse effect of the ongoing public health crisis of the novel coronavirus disease (COVID-19) pandemic. The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants and the Company’s implementation of the Plan of Liquidation will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. See Note 2, “Plan of Liquidation” and Note 10, “Subsequent Events” for a further discussion on the COVID-19 pandemic. |
PLAN OF LIQUIDATION
PLAN OF LIQUIDATION | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
PLAN OF LIQUIDATION | PLAN OF LIQUIDATIONThe Plan of Liquidation authorizes the Company to undertake an orderly liquidation. In an orderly liquidation, the Company will sell all of its remaining properties, pay all of its known liabilities, provide for the payment of its unknown or contingent liabilities, distribute its remaining cash to its stockholders, wind up its operations and dissolve. The Company is authorized to provide for the payment of any unascertained or contingent liabilities and may do so by purchasing insurance, by establishing a reserve fund or in other ways. The Plan of Liquidation enables the Company to sell any and all of its assets without further approval of its stockholders and provides that the amounts and timing of liquidating distributions will be determined by the Company’s board of directors or, if a liquidating trust is formed, by the trustees of the liquidating trust, in their discretion. Pursuant to applicable REIT rules, liquidating distributions the Company pays pursuant to the Plan of Liquidation will qualify for the dividends paid deduction, provided that they are paid within 24 months of the March 5, 2020 approval of the plan by the Company’s stockholders. However, if the Company cannot sell its properties and pay its debts within such time period, or if the board of directors and the Special Committee determine that it is otherwise advisable to do so, the Company may transfer and assign its remaining assets to a liquidating trust. Upon such transfer and assignment, the Company’s stockholders would receive beneficial interests in the liquidating trust. The liquidating trust would pay or provide for all of the Company’s liabilities and distribute any remaining net proceeds from liquidation to the holders of beneficial interests in the liquidating trust. If the Company is not able to sell its properties and pay its debt within the 24-month period and the remaining assets are not transferred to a liquidating trust, the distributions made during the 24 months may not qualify for the dividends paid deduction and may increase the Company’s tax liability. The Company’s expectations about the implementation of the Plan of Liquidation and the amount of any additional liquidating distributions that the Company pays to its stockholders and when the Company will pay them are subject to risks and uncertainties and are based on certain estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of any additional liquidating distributions the Company pays to its stockholders may be more or less than the Company estimates and the liquidating distributions may be paid later than the Company predicts. There are many factors that may affect the amount of liquidating distributions the Company will ultimately pay to its stockholders. If the Company underestimates its existing obligations and liabilities or the amount of taxes, transaction fees and expenses relating to the liquidation and dissolution or if unanticipated or contingent liabilities arise, the amount of liquidating distributions ultimately paid to the Company’s stockholders could be less than estimated. Moreover, the liquidation value will fluctuate over time in response to developments related to individual assets in the Company’s portfolio and the management of those assets, in response to the real estate and finance markets, based on the amount of net proceeds received from the disposition of the remaining assets and due to other factors. In particular, the outbreak of COVID-19, together with the resulting restrictions on travel and quarantines imposed, has had a negative impact on the economy and business activity globally. As of March 31, 2020, tenants in the mining and oil and gas extraction industry represented approximately 17% of the Company’s base rent. Tenants in this sector have been adversely impacted by the reduced demand for oil as a result of the slowdown in economic activity resulting from the pandemic spread of COVID-19 and the collapse in oil prices. In the near term, many of the Company’s tenants will suffer reductions in revenue and, depending upon the duration of quarantines and the corresponding economic slowdown, some of the Company’s tenants have or will seek rent deferrals or become unable to pay their rent. While the Company has considered the impact from COVID-19 in its net assets in liquidation presented on the Condensed Consolidated Statement of Net Assets as of March 31, 2020, the extent to which the Company’s business may be affected by COVID-19 will largely depend on future developments with respect to the continued spread and treatment of the virus, and any long-term impact of this situation, even after an economic rebound, remains unclear. Given the uncertainty and current business disruptions as a result of the outbreak of COVID-19, the Company’s implementation of the Plan of Liquidation may be materially and adversely impacted and this may have a material effect on the ultimate amount and timing of liquidating distributions received by stockholders. Accordingly, it is not possible to precisely predict the timing of any additional liquidating distributions the Company pays to it stockholders or the aggregate amount of liquidating distributions that the Company will ultimately pay to its stockholders. No assurance can be given that any additional liquidating distributions the Company pays to its stockholders will equal or exceed the estimate of net assets in liquidation presented on the Condensed Consolidated Statement of Net Assets as of March 31, 2020. The Company expects to comply with the requirements necessary to continue to qualify as a REIT through the completion of the liquidation process, or until such time as any remaining assets are transferred into a liquidating trust. The board of directors shall use commercially reasonable efforts to continue to cause the Company to maintain its REIT status; provided, however, that the board of directors may elect to terminate the Company’s status as a REIT if it determines that such termination would be in the best interest of the stockholders. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), including Subtopic 205-30, “Liquidation Basis of Accounting,” as indicated, and the rules and regulations of the Securities and Exchange Commission, 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. Pursuant to the Company’s stockholders’ approval of the Plan of Liquidation, the Company adopted the liquidation basis of accounting as of and for the periods subsequent to February 1, 2020 (as the approval of the Plan of Liquidation by the Company’s stockholders became imminent within the first week of February 2020 based on the results of the Company’s solicitation of proxies from its stockholders for their approval of the Plan of Liquidation). Accordingly, on February 1, 2020, assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash that the Company will collect through the disposal of assets as it carries out the Plan of Liquidation. The liquidation values of the Company’s remaining real estate properties are presented on an undiscounted basis. Estimated costs to dispose of assets and estimated capital expenditures through the anticipated disposition date of the properties have been presented separately from the related assets. Liabilities are carried at their contractual amounts due or estimated settlement amounts. The Company accrues costs and income that it expects to incur and earn through the completion of its liquidation, including the estimated amount of cash the Company expects to collect through the disposal of its assets and the estimated costs to dispose of its assets, to the extent it has a reasonable basis for estimation. These amounts are classified as a liability for estimated costs in excess of estimated receipts during liquidation on the Condensed Consolidated Statement of Net Assets. Actual costs and income may differ from amounts reflected in the financial statements because of the inherent uncertainty in estimating future events. These differences may be material. See Note 2, “Plan of Liquidation” and Note 4, “Liabilities for Estimated Costs in Excess of Estimated Receipts During Liquidation” for further discussion. Actual costs incurred but unpaid as of March 31, 2020 are included in accounts payable and accrued liabilities, due to affiliates and other liabilities on the Condensed Consolidated Statement of Net Assets. Net assets in liquidation represents the remaining estimated liquidation value available to stockholders upon liquidation. Due to the uncertainty in the timing of the sale of the Company's remaining real estate properties and the estimated cash flows from operations, actual liquidation costs and sale proceeds may differ materially from the amounts estimated. All financial results and disclosures through January 31, 2020, prior to the adoption of the liquidation basis of accounting, are presented on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business. As a result, the balance sheet as of December 31, 2019, the statements of operations, the statements of stockholders’ equity and the statements of cash flows for the month ended January 31, 2020 and the comparative three months ended March 31, 2019 are presented using the going concern basis of accounting. Under the going concern basis of accounting, the Company’s consolidated financial statements included its accounts and the accounts of KBS REIT Holdings II, the Operating Partnership and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions were eliminated in consolidation. Use of Estimates The preparation of the unaudited 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. Real Estate Liquidation Basis of Accounting As of February 1, 2020, the Company’s investments in real estate were adjusted to their estimated net realizable value, or liquidation value, to reflect the change to the liquidation basis of accounting. The liquidation value represents the estimated amount of cash that the Company will collect through the disposal of its assets, including any residual value attributable to lease intangibles, as it carries out the Plan of Liquidation. The Company estimated the liquidation value of its investments in real estate based on internal valuation methodologies using a combination of the direct capitalization approach and discounted cash flow analyses and in one case an offer received which the Company intends to accept. The liquidation values of the Company’s investments in real estate are presented on an undiscounted basis and investments in real estate are no longer depreciated. Estimated costs to dispose of these investments are carried at their contractual amounts due or estimated settlement amounts and are presented separately from the related assets. Subsequent to February 1, 2020, all changes in the estimated liquidation value of the investments in real estate are reflected as a change to the Company’s net assets in liquidation. Rents and Other Receivables In accordance with the liquidation basis of accounting, as of February 1, 2020, rents and other receivables were adjusted to their net realizable value. The Company periodically evaluates the collectibility of amounts due from tenants. Any changes in the collectibility of the receivables are reflected as a change to the Company’s net assets in liquidation. Revenue Recognition Liquidation Basis of Accounting Under the liquidation basis of accounting, the Company has accrued all income that it expects to earn through the completion of its liquidation to the extent it has a reasonable basis for estimation. Revenue from tenants is estimated based on the contractual in-place leases and projected leases through the anticipated disposition date of the property. These amounts are classified in liabilities for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statement of Net Assets. Accrued Liquidation Costs In accordance with the liquidation basis of accounting, the Company accrues for certain estimated liquidation costs to the extent it has a reasonable basis for estimation. These consist of legal fees, dissolution costs, final audit/tax costs, insurance, and distribution processing costs. 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 month of January 31, 2020 and the three months ended March 31, 2019. Distributions declared per common share were $0.062 in the aggregate for the three months ended March 31, 2019. 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 period commencing January 2019 through March 2019. Pursuant to the Plan of Liquidation, on March 5, 2020, the Company’s board of directors authorized an initial liquidating distribution in the amount of $0.75 per share of common stock to the Company’s stockholders of record as of the close of business on March 5, 2020 (the “Initial Liquidating Distribution”). |
LIABILITIES FOR ESTIMATED COSTS
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION | 3 Months Ended |
Mar. 31, 2020 | |
Liability during Liquidation [Abstract] | |
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION | LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the Plan of Liquidation. As of March 31, 2020, the Company estimated that it will have costs in excess of estimated receipts during the liquidation process. These amounts can vary significantly due to, among other things, the timing and estimates for executing and renewing leases, estimates of tenant improvement costs and capital expenditures, the timing of property sales, direct costs incurred to complete the sales, the timing and amounts associated with discharging known and contingent liabilities and the costs associated with the winding down of operations. These costs are estimated and are anticipated to be paid out over the liquidation period. Upon transition to the liquidation basis of accounting on February 1, 2020, the Company accrued the following revenues and expenses expected to be incurred during liquidation (in thousands): As of February 1, 2020 Rental income $ 77,940 Other operating income 7,650 Operating, maintenance, and management (31,311) Real estate taxes and insurance (11,254) Asset management fees due to affiliate (7,883) General and administrative expenses (11,810) Interest expense (9,000) Other interest income 3,448 Liquidating transaction costs (3,500) Capital expenditures (146,524) Liabilities for estimated costs in excess of estimated receipts during liquidation $ (132,244) The change in the liabilities for estimated costs in excess of estimated receipts during liquidation as of March 31, 2020 is as follows (in thousands): February 1, 2020 Cash Payments Remeasurement of March 31, 2020 Assets: Estimated net inflows from investments in real estate $ 34,025 $ (9,287) $ 7,975 $ 32,713 34,025 (9,287) 7,975 32,713 Liabilities: Liquidation transaction costs (3,500) — — (3,500) Corporate expenditures (16,245) 1,619 (6,441) (21,067) Capital expenditures (146,524) 11,035 (7,449) (142,938) (166,269) 12,654 (13,890) (167,505) Total liabilities for estimated costs in excess of estimated receipts during liquidation $ (132,244) $ 3,367 $ (5,915) $ (134,792) |
NET ASSETS IN LIQUIDATION
NET ASSETS IN LIQUIDATION | 3 Months Ended |
Mar. 31, 2020 | |
Assets in Liquidation [Abstract] | |
NET ASSETS IN LIQUIDATION | NET ASSETS IN LIQUIDATION Net assets in liquidation decreased by approximately $211.9 million during the two month ended March 31, 2020 as follows: For the Period from Changes in net assets in liquidation Change in liquidation value of real estate properties $ (68,200) Change in estimated cash flow during liquidation 2,995 Change in capital expenditures (7,449) Other changes, net (408) Net decrease in liquidation value (73,062) Liquidating distribution to stockholders (138,877) Changes in net assets in liquidation $ (211,939) Pursuant to the Plan of Liquidation, on March 5, 2020, the Company’s board of directors authorized the Initial Liquidating Distribution in the amount of $0.75 per share of common stock to the Company’s stockholders of record as of the close of business on March 5, 2020, for an aggregate cash distribution of approximately $138.9 million, which was the primary reason for the decline in net assets in liquidation. The Initial Liquidating Distribution was paid on March 10, 2020 and was funded with proceeds from the sale of the Campus Drive Buildings. The estimated net realizable value of real estate decreased by $68.2 million during the two months ended March 31, 2020, which was primarily driven by the Company’s investment in an office building located in Los Angeles, California (the “Union Bank Plaza”) and an office property located in Denver, Colorado (“Granite Tower”), as follows: • Union Bank Plaza –The estimated sales price of the Union Bank Plaza decreased by approximately $28.5 million primarily due to changes in leasing projections to account for a longer lease-up period and lower projected rental rates caused by COVID-19. As of March 31, 2020, the Union Bank Plaza was 82% leased and due to the amount of vacancy, its valuation or projected sales price is more sensitive to the disruption caused by COVID-19 as compared to a fully stabilized property. Additionally, the valuation or projected sales price was adjusted to increase the terminal capitalization rates and discount rate to account for the increased risk and uncertainty in the current environment. • Granite Tower – The estimated sales price of Granite Tower decreased by $24.5 million. While Granite Tower was 96% leased as of March 31, 2020, the property does have nearly 85,000 square feet of occupied space representing approximately 14% of the building square footage that will be vacated during the remainder of 2020. As a result, the anticipated sales price was reduced to account for a longer lease-up period and lower projected rental rates caused by COVID-19. Granite Tower is further impacted by the deteriorating oil and gas industry as its anchor tenant that occupies approximately 61% of the building square footage as of March 31, 2020 is engaged in the exploration and production of oil and gas. The valuation or projected sales price was adjusted to increase the terminal capitalization rates and discount rate to account for the increased risk and uncertainty in the current environment caused by COVID-19 and the deteriorating oil and gas industry. • Other Properties – The estimated sales prices for the Company’s other real estate properties were adjusted to increase the terminal capitalization rates and discount rates to account for the increased risk and uncertainty caused by COVID-19 resulting in a reduction in the aggregate estimated sales prices of $15.2 million. |
REAL ESTATE
REAL ESTATE | 3 Months Ended |
Mar. 31, 2020 | |
Real Estate [Abstract] | |
REAL ESTATE | REAL ESTATE As of March 31, 2020, the Company’s real estate investments were 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 March 31, 2020, the Company’s real estate portfolio was 81% occupied. As of March 31, 2020, the Company’s liquidation value of real estate was $878.6 million. As a result of adopting the liquidation basis of accounting in February 2020, as of March 31, 2020, real estate properties were recorded at their estimated liquidation value, which represents the estimated gross amount of cash that the Company will collect through the sale of its real estate properties owned as of March 31, 2020 as it carries out its Plan of Liquidation. Real Estate Sales 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 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 (the “Purchaser”), an affiliate of Opal Holdings. On January 22, 2020, the Company completed the sale of the membership interests in the Property Owners to the Purchaser for $311.0 million, before third-party closing costs of approximately $4.3 million and excluding disposition fees payable to the Advisor of $3.1 million. In connection with the disposition of the properties, the Company repaid $136.1 million of the outstanding principal balance due under its Portfolio Loan Facility and the properties were released as collateral from the Portfolio Loan Facility. Additionally, on January 23, 2020, the Company used a portion of the proceeds generated by the sale of the membership interests in the Property Owners to repay the entire outstanding principal balance of $40.6 million due under the Corporate Centre Technology Mortgage Loan. See Note 7, “Notes Payable.” |
NOTES PAYABLE
NOTES PAYABLE | 1 Months Ended |
Jan. 31, 2020 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTES PAYABLE As of March 31, 2020 and December 31, 2019, the Company’s notes payable consisted of the following (dollars in thousands): Book Value as of Book Value as of Contractual Interest Rate as of March 31, 2020 (1) Effective Interest Rate as of March 31, 2020 (1) Payment Type Maturity Date (2) Corporate Technology Centre Mortgage Loan (3) $ — $ 40,564 (3) (3) (3) (3) Portfolio Loan Facility (4) 145,170 281,293 One-month LIBOR + 1.45% 3.0% Interest Only 03/29/2021 Granite Tower Mortgage Loan (5) 95,350 95,350 One-month LIBOR + 1.65% 3.2% (5) 09/01/2023 Total notes payable principal outstanding $ 240,520 $ 417,207 Deferred financing costs, net (6) — (600) Total notes payable, net $ 240,520 $ 416,607 _____________________ (1) Contractual interest rate represents the interest rate in effect under the loan as of March 31, 2020. Effective interest rate is calculated as the actual interest rate in effect as of March 31, 2020, using interest rate indices as of March 31, 2020, where applicable. (2) Represents the initial maturity date or the maturity date as extended as of March 31, 2020; subject to certain conditions, the maturity dates of certain loans may be extended beyond the maturity date shown. (3) On January 23, 2020, the Company repaid the outstanding principal and accrued interest due under the Corporate Technology Centre Mortgage Loan. (4) As of March 31, 2020, the Portfolio Loan Facility was secured by Willow Oaks Corporate Center, Union Bank Plaza and Fountainhead Plaza. As of March 31, 2020, $145.2 million of term debt of the Portfolio Loan Facility was outstanding and $48.4 million of revolving debt remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents. As of March 31, 2020, there is a one (5) As of March 31, 2020, $95.4 million had been disbursed to the Company with the remaining loan balance of $49.6 million available for future disbursements, subject to certain conditions set forth in the loan agreement. Monthly payments are initially interest-only. Beginning on January 1, 2022, monthly payments for the Granite Tower Mortgage Loan will begin to include principal and interest with principal payments calculated using an amortization schedule of 30 years for the balance of the loan term, with the remaining principal balance, all accrued and unpaid interest and any other amounts due at maturity. (6) As described in Note 3, “Summary of Significant Accounting Policies - Principles of Consolidation and Basis of Presentation,” on February 1, 2020, the Company adopted the liquidation basis of accounting which requires the Company to record notes payable at their contractual amounts. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2020 | |
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 KBS Capital Markets Group LLC (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 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 terminated as of December 31, 2019), 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 terminated 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 continue to indirectly own a 33 1/3% interest in the Advisor and the Dealer Manager. As of January 1, 2019, the Company, together with KBS REIT III and KBS Growth & Income REIT, 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. In June 2019, the Company renewed its participation in the program. The program is effective through June 30, 2020. During the three months ended March 31, 2020 and 2019, no other business transactions occurred between the Company and KBS REIT III, Pacific Oak Strategic Opportunity 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 three months ended March 31, 2020 and 2019, respectively, and any related amounts payable as of March 31, 2020 and December 31, 2019 (in thousands): Incurred Payable as of Three Months Ended March 31, March 31, December 31, 2020 2019 2020 2019 Expensed Asset management fees (1) $ 1,839 $ 2,657 $ — $ — Reimbursement of operating expenses (2) 76 80 71 59 Disposition fees (3) 3,082 — — — $ 4,997 $ 2,737 $ 71 $ 59 _____________________ (1) During the month ended January 31, 2020, asset management fees were $0.8 million and presented on a going concern basis. Asset management fees incurred for the two months ended March 31, 2020 were $1.0 million. (2) 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 $58,000 and $63,000 for the three months ended March 31, 2020 and 2019, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the three months ended March 31, 2020 and 2019. 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. During the month ended January 31, 2020, reimbursable operating expenses were $25,000 as presented on a going concern basis. Reimbursable operating expenses incurred for the two months ended March 31, 2020 were $33,000. (3) 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 presented on a going concern basis for the month ended January 31, 2020. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2020 | |
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 execution of the Plan of Liquidation; 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 March 31, 2020. Legal Matters |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS The Company evaluates subsequent events up until the date the consolidated financial statements are issued. Amendment to Advisory Agreement On May 6, 2020, the Company and the Advisor entered into an amendment to the Advisory Agreement between the parties (the “Amendment” ) to (i) remove the total operating expenses limitation and reimbursement and (ii) amend and restate Article 15, Indemnification and Limitation of Liability. On April 7, 2020, with the approval of the Company’s stockholders, the Company amended its charter to remove the charter limit on “total operating expenses” (as defined in the charter). Similarly, the Amendment removed this operating expenses limitation and reimbursement from the Advisory Agreement. Also on April 7, 2020, and with the approval of the Company’s stockholders, the Company amended its charter to eliminate (i) conditions and limitations on the Company’s exculpation and indemnification of its present or former directors and the Advisor and its affiliates and (ii) limitations on the Company’s ability to reimburse its present or former directors and the Advisor or its affiliates for reasonable legal expenses and other costs. Pursuant to the Amendment, the Advisor, its affiliates and their officers, directors, managers, members, employees, partners, equity holders, agents and representatives (each, an “Advisor Party” and together, the “Advisor Parties”) will not be liable for any act or omission by an Advisor Party performed in accordance with and pursuant to the Advisory Agreement, except by reason of acts or omissions constituting gross negligence, bad faith, willful misconduct or reckless disregard of duties under the Advisory Agreement. In addition, the Amendment requires the Advisor to maintain errors and omissions insurance coverage and other insurance coverage in amounts which are customarily carried by asset managers performing functions similar to those of the Advisor under the Advisory Agreement. The Amendment further provides that the Company will reimburse, indemnify and hold harmless the Advisor Parties, to the fullest and broadest extent permitted by law and under the Company’s charter and bylaws, from and against any and all losses, claims, damages, liabilities, costs and expenses of any nature whatsoever, including, without limitation, attorney’s fees, court costs, and similar fees and expenses (“Expenses”) with respect to or arising out of the Advisory Agreement or the performance by the Advisor of its responsibilities and obligations thereunder (including any pending or threatened litigation except for any proceeding filed by a member or manager of the Advisor against the Advisor), from any acts or omission of the Advisor (including ordinary negligence and any action taken by the Advisor following a directive by the Board of Directors in its capacity as such), except with respect to Expenses with respect to or arising out of the Advisor Party’s gross negligence, bad faith or willful misconduct, or reckless disregard of its duties under the Advisory Agreement; provided, however, that to the extent an Advisor Party actually recovers insurance proceeds with respect to any matter for which the Advisor Party is entitled to indemnification, then the amount payable to such Advisor Party in respect of such matter shall be reduced by the amount of such recovered insurance proceeds. The Advisor shall reimburse, indemnify and hold harmless the Company, to the fullest and broadest extent permitted by law, from and against any and all Expenses in respect of or arising from any acts or omissions of the Advisor constituting bad faith, willful misconduct, gross negligence or reckless disregard of duties of the Advisor under the Advisory Agreement; provided, however, that to the extent the Company actually recovers insurance proceeds with respect to any matter for which the Company is entitled to indemnification, then the amount payable to the Company in respect of such matter shall be reduced by the amount of such recovered insurance proceeds. The Amendment also contains standard provisions allowing the indemnifying party to join the defense in certain instances and provisions for advancement of expenses. COVID-19 Pandemic The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and its liquidation, including how the pandemic will impact its tenants and the Company’s ability to sell its remaining real estate properties at the times and prices it expects. While the Company did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020 with only a few tenants requesting rent deferral or abatements, the Company did decrease its real estate values by $68.2 million due to changes in leasing projections across its portfolio resulting in lower projected cash flow and projected sales prices caused by the impact of the COVID-19 pandemic. Many of the Company’s tenants have experienced disruptions in their business, some more severely than others. Since April 1, 2020, several tenants have requested rent relief as a result of the pandemic, and the Company is unable to predict the impact that the pandemic will have on its business and implementation of the Plan of Liquidation due to numerous uncertainties. The Company is evaluating each tenant rent relief request on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company forgoing its contractual rights under its lease agreements. The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants and the Company’s implementation of the Plan of Liquidation will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), including Subtopic 205-30, “Liquidation Basis of Accounting,” as indicated, and the rules and regulations of the Securities and Exchange Commission, 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. |
Use of Estimates | The preparation of the unaudited 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. |
Real Estate | Liquidation Basis of Accounting As of February 1, 2020, the Company’s investments in real estate were adjusted to their estimated net realizable value, or liquidation value, to reflect the change to the liquidation basis of accounting. The liquidation value represents the estimated amount of cash that the Company will collect through the disposal of its assets, including any residual value attributable to lease intangibles, as it carries out the Plan of Liquidation. The Company estimated the liquidation value of its investments in real estate based on internal valuation methodologies using a combination of the direct capitalization approach and discounted cash flow analyses and in one case an offer received which the Company intends to accept. The liquidation values of the Company’s investments in real estate are presented on an undiscounted basis and investments in real estate are no longer depreciated. Estimated costs to dispose of these investments are carried at their contractual amounts due or estimated settlement amounts and are presented separately from the related assets. Subsequent to February 1, 2020, all changes in the estimated liquidation value of the investments in real estate are reflected as a change to the Company’s net assets in liquidation. |
Rents and Other Receivables | In accordance with the liquidation basis of accounting, as of February 1, 2020, rents and other receivables were adjusted to their net realizable value. The Company periodically evaluates the collectibility of amounts due from tenants. Any changes in the collectibility of the receivables are reflected as a change to the Company’s net assets in liquidation. |
Revenue Recognition | Liquidation Basis of Accounting Under the liquidation basis of accounting, the Company has accrued all income that it expects to earn through the completion of its liquidation to the extent it has a reasonable basis for estimation. Revenue from tenants is estimated based on the contractual in-place leases and projected leases through the anticipated disposition date of the property. These amounts are classified in liabilities for estimated costs in excess of estimated receipts during liquidation on the Consolidated Statement of Net Assets. |
Accrued Liquidation Costs | In accordance with the liquidation basis of accounting, the Company accrues for certain estimated liquidation costs to the extent it has a reasonable basis for estimation. These consist of legal fees, dissolution costs, final audit/tax costs, insurance, and distribution processing costs. |
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 month of January 31, 2020 and the three months ended March 31, 2019. |
LIABILITIES FOR ESTIMATED COS_2
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Liability during Liquidation [Abstract] | |
Schedule of Revenues and Expenses Expected to be Incurred during Liquidation | Upon transition to the liquidation basis of accounting on February 1, 2020, the Company accrued the following revenues and expenses expected to be incurred during liquidation (in thousands): As of February 1, 2020 Rental income $ 77,940 Other operating income 7,650 Operating, maintenance, and management (31,311) Real estate taxes and insurance (11,254) Asset management fees due to affiliate (7,883) General and administrative expenses (11,810) Interest expense (9,000) Other interest income 3,448 Liquidating transaction costs (3,500) Capital expenditures (146,524) Liabilities for estimated costs in excess of estimated receipts during liquidation $ (132,244) |
Summary of Changes in Liquidation Accrual of Company | The change in the liabilities for estimated costs in excess of estimated receipts during liquidation as of March 31, 2020 is as follows (in thousands): February 1, 2020 Cash Payments Remeasurement of March 31, 2020 Assets: Estimated net inflows from investments in real estate $ 34,025 $ (9,287) $ 7,975 $ 32,713 34,025 (9,287) 7,975 32,713 Liabilities: Liquidation transaction costs (3,500) — — (3,500) Corporate expenditures (16,245) 1,619 (6,441) (21,067) Capital expenditures (146,524) 11,035 (7,449) (142,938) (166,269) 12,654 (13,890) (167,505) Total liabilities for estimated costs in excess of estimated receipts during liquidation $ (132,244) $ 3,367 $ (5,915) $ (134,792) |
NET ASSETS IN LIQUIDATION (Tabl
NET ASSETS IN LIQUIDATION (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Assets in Liquidation [Abstract] | |
Schedule of Change in Net Assets in Liquidation | Net assets in liquidation decreased by approximately $211.9 million during the two month ended March 31, 2020 as follows: For the Period from Changes in net assets in liquidation Change in liquidation value of real estate properties $ (68,200) Change in estimated cash flow during liquidation 2,995 Change in capital expenditures (7,449) Other changes, net (408) Net decrease in liquidation value (73,062) Liquidating distribution to stockholders (138,877) Changes in net assets in liquidation $ (211,939) |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | As of March 31, 2020 and December 31, 2019, the Company’s notes payable consisted of the following (dollars in thousands): Book Value as of Book Value as of Contractual Interest Rate as of March 31, 2020 (1) Effective Interest Rate as of March 31, 2020 (1) Payment Type Maturity Date (2) Corporate Technology Centre Mortgage Loan (3) $ — $ 40,564 (3) (3) (3) (3) Portfolio Loan Facility (4) 145,170 281,293 One-month LIBOR + 1.45% 3.0% Interest Only 03/29/2021 Granite Tower Mortgage Loan (5) 95,350 95,350 One-month LIBOR + 1.65% 3.2% (5) 09/01/2023 Total notes payable principal outstanding $ 240,520 $ 417,207 Deferred financing costs, net (6) — (600) Total notes payable, net $ 240,520 $ 416,607 _____________________ (1) Contractual interest rate represents the interest rate in effect under the loan as of March 31, 2020. Effective interest rate is calculated as the actual interest rate in effect as of March 31, 2020, using interest rate indices as of March 31, 2020, where applicable. (2) Represents the initial maturity date or the maturity date as extended as of March 31, 2020; subject to certain conditions, the maturity dates of certain loans may be extended beyond the maturity date shown. (3) On January 23, 2020, the Company repaid the outstanding principal and accrued interest due under the Corporate Technology Centre Mortgage Loan. (4) As of March 31, 2020, the Portfolio Loan Facility was secured by Willow Oaks Corporate Center, Union Bank Plaza and Fountainhead Plaza. As of March 31, 2020, $145.2 million of term debt of the Portfolio Loan Facility was outstanding and $48.4 million of revolving debt remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents. As of March 31, 2020, there is a one (5) As of March 31, 2020, $95.4 million had been disbursed to the Company with the remaining loan balance of $49.6 million available for future disbursements, subject to certain conditions set forth in the loan agreement. Monthly payments are initially interest-only. Beginning on January 1, 2022, monthly payments for the Granite Tower Mortgage Loan will begin to include principal and interest with principal payments calculated using an amortization schedule of 30 years for the balance of the loan term, with the remaining principal balance, all accrued and unpaid interest and any other amounts due at maturity. (6) As described in Note 3, “Summary of Significant Accounting Policies - Principles of Consolidation and Basis of Presentation,” on February 1, 2020, the Company adopted the liquidation basis of accounting which requires the Company to record notes payable at their contractual amounts. |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 three months ended March 31, 2020 and 2019, respectively, and any related amounts payable as of March 31, 2020 and December 31, 2019 (in thousands): Incurred Payable as of Three Months Ended March 31, March 31, December 31, 2020 2019 2020 2019 Expensed Asset management fees (1) $ 1,839 $ 2,657 $ — $ — Reimbursement of operating expenses (2) 76 80 71 59 Disposition fees (3) 3,082 — — — $ 4,997 $ 2,737 $ 71 $ 59 _____________________ (1) During the month ended January 31, 2020, asset management fees were $0.8 million and presented on a going concern basis. Asset management fees incurred for the two months ended March 31, 2020 were $1.0 million. (2) 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 $58,000 and $63,000 for the three months ended March 31, 2020 and 2019, respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the three months ended March 31, 2020 and 2019. 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. During the month ended January 31, 2020, reimbursable operating expenses were $25,000 as presented on a going concern basis. Reimbursable operating expenses incurred for the two months ended March 31, 2020 were $33,000. (3) 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 presented on a going concern basis for the month ended January 31, 2020. |
ORGANIZATION (Details)
ORGANIZATION (Details) | 3 Months Ended | ||||
Mar. 31, 2020numberOfPropertiesshares | Jan. 31, 2020shares | Dec. 31, 2019shares | Mar. 31, 2019shares | Dec. 31, 2018shares | |
Organizational Structure [Line Items] | |||||
Common stock, shares issued (in shares) | 185,062,935 | 185,302,037 | |||
Common stock, shares outstanding (in shares) | 185,062,935 | 185,302,037 | |||
Common Stock | |||||
Organizational Structure [Line Items] | |||||
Common stock, shares outstanding (in shares) | 185,228,220 | 185,302,037 | 186,188,796 | 186,464,794 | |
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 | 20,000 | ||||
Office Properties | |||||
Organizational Structure [Line Items] | |||||
Number of real estate properties | numberOfProperties | 4 | ||||
Office Campus | |||||
Organizational Structure [Line Items] | |||||
Number of real estate properties | numberOfProperties | 1 | ||||
Office Buildings, Campus | |||||
Organizational Structure [Line Items] | |||||
Number of real estate properties | numberOfProperties | 5 | ||||
KBS Limited Partnership II | |||||
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% |
PLAN OF LIQUIDATION (Details)
PLAN OF LIQUIDATION (Details) | Mar. 05, 2020 | Mar. 31, 2020 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Period of payment activities upon plan of liquidation | 24 months | |
Percent of base rent from tenants in mining and oil and gas extraction industry | 17.00% |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - $ / shares | 1 Months Ended | 3 Months Ended | |
Jan. 31, 2020 | Mar. 31, 2019 | Mar. 05, 2020 | |
Accounting Policies [Abstract] | |||
Potentially dilutive securities | 0 | 0 | |
Distributions declared per common share (in dollars per share) | $ 0.062 | ||
Initial liquidating distribution (in dollars per share) | $ 0.75 |
LIABILITIES FOR ESTIMATED COS_3
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION - Revenues and Expenses (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Feb. 01, 2020 |
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | $ (134,792) | $ (132,244) |
Rental income | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | 77,940 | |
Other operating income | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | 7,650 | |
Operating, maintenance, and management | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | (31,311) | |
Real estate taxes and insurance | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | (11,254) | |
Asset management fees due to affiliate | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | (7,883) | |
General and administrative expenses | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | (11,810) | |
Interest expense | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | (9,000) | |
Other interest income | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | 3,448 | |
Liquidating transaction costs | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | (3,500) | |
Capital expenditures | ||
Item Effected [Line Items] | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | $ (146,524) |
LIABILITIES FOR ESTIMATED COS_4
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION - Change in Liability (Details) $ in Thousands | 2 Months Ended |
Mar. 31, 2020USD ($) | |
Movement in Liquidation Accrual [Roll Forward] | |
Cash Payments (Receipts) | $ 3,367 |
Remeasurement of Assets and Liabilities | (5,915) |
Ending balance | (134,792) |
Assets: | |
Movement in Liquidation Accrual [Roll Forward] | |
Cash Payments (Receipts) | (9,287) |
Remeasurement of Assets and Liabilities | 7,975 |
Ending balance | 32,713 |
Estimated net inflows from investments in real estate | |
Movement in Liquidation Accrual [Roll Forward] | |
Cash Payments (Receipts) | (9,287) |
Remeasurement of Assets and Liabilities | 7,975 |
Ending balance | 32,713 |
Liabilities: | |
Movement in Liquidation Accrual [Roll Forward] | |
Cash Payments (Receipts) | 12,654 |
Remeasurement of Assets and Liabilities | (13,890) |
Ending balance | (167,505) |
Liquidation transaction costs | |
Movement in Liquidation Accrual [Roll Forward] | |
Cash Payments (Receipts) | 0 |
Remeasurement of Assets and Liabilities | 0 |
Ending balance | (3,500) |
Corporate expenditures | |
Movement in Liquidation Accrual [Roll Forward] | |
Cash Payments (Receipts) | 1,619 |
Remeasurement of Assets and Liabilities | (6,441) |
Ending balance | (21,067) |
Capital expenditures | |
Movement in Liquidation Accrual [Roll Forward] | |
Cash Payments (Receipts) | 11,035 |
Remeasurement of Assets and Liabilities | (7,449) |
Ending balance | $ (142,938) |
NET ASSETS IN LIQUIDATION - Add
NET ASSETS IN LIQUIDATION - Additional Information (Details) $ / shares in Units, $ in Millions | Mar. 05, 2020USD ($)$ / shares | Mar. 31, 2020USD ($)ft²$ / shares | Mar. 31, 2020USD ($)ft²$ / shares |
Assets in Liquidation [Abstract] | |||
Decrease in assets, net | $ (211.9) | ||
Initial liquidating distribution (in dollars per share) | $ / shares | $ 0.75 | ||
Aggregate cash distributions | $ 138.9 | ||
Additional estimated liquidation distribution (in dollars per share) | $ / shares | $ 2.66 | $ 2.66 | |
Real Estate Properties [Line Items] | |||
Percentage of real estate occupied | 81.00% | 81.00% | |
Office Properties | |||
Assets in Liquidation [Abstract] | |||
Decrease in real estate property values | $ (68.2) | $ (68.2) | |
Office Properties | Union Bank Plaza | |||
Real Estate Properties [Line Items] | |||
Decrease in real estate property sales price | $ (28.5) | ||
Percentage of real estate occupied | 82.00% | 82.00% | |
Office Properties | Granite Tower | |||
Real Estate Properties [Line Items] | |||
Decrease in real estate property sales price | $ (24.5) | ||
Percentage of real estate occupied | 96.00% | 96.00% | |
Area of real estate property occupied | ft² | 85,000 | 85,000 | |
Percent of vacated area in real estate property during remainder of year | 14.00% | ||
Percent of real estate property occupied by oil and gas industry tenants | 61.00% | 61.00% | |
Other Properties | |||
Real Estate Properties [Line Items] | |||
Decrease in real estate property sales price | $ (15.2) |
NET ASSETS IN LIQUIDATION - Cha
NET ASSETS IN LIQUIDATION - Change in Liquidation Value (Details) $ in Thousands | 2 Months Ended |
Mar. 31, 2020USD ($) | |
Assets in Liquidation [Abstract] | |
Change in liquidation value of real estate properties | $ (68,200) |
Change in estimated cash flow during liquidation | 2,995 |
Change in capital expenditures | (7,449) |
Other changes, net | (408) |
Net decrease in liquidation value | (73,062) |
Liquidating distribution to stockholders | (138,877) |
Changes in net assets in liquidation | $ (211,939) |
REAL ESTATE - Investments (Deta
REAL ESTATE - Investments (Details) $ in Thousands, ft² in Millions | Mar. 31, 2020USD ($)ft²numberOfProperties | Jan. 31, 2020numberOfProperties |
Real Estate Properties [Line Items] | ||
Percentage of real estate occupied | 81.00% | |
Real estate | $ | $ 878,572 | |
Office Properties | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 4 | |
Office Campus | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 1 | |
Office Campus | Held-for-sale | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 1 | |
Office Buildings, Campus | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 5 | |
Office Buildings, Campus | Held-for-sale | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 5 | |
Rentable square feet | ft² | 2.7 |
REAL ESTATE - Disposition (Deta
REAL ESTATE - Disposition (Details) $ in Millions | Jan. 23, 2020USD ($) | Jan. 22, 2020USD ($) | Oct. 10, 2008ft²anumberOfProperties | Sep. 09, 2008aft²numberOfProperties |
Portfolio Loan Facility | ||||
Real Estate Properties [Line Items] | ||||
Extinguishment of debt, amount | $ 136.1 | |||
Corporate Centre Technology Mortgage Loan [Member] | ||||
Real Estate Properties [Line Items] | ||||
Extinguishment of debt, amount | $ 40.6 | |||
Campus Drive Buildings | Disposed of by Sale | ||||
Real Estate Properties [Line Items] | ||||
Consideration | 311 | |||
Closing cost | 4.3 | |||
Campus Drive Buildings | Disposed of by Sale | KBS Capital Advisors LLC | ||||
Real Estate Properties [Line Items] | ||||
Disposition fees payable | $ 3.1 | |||
100 & 200 Campus Drive [Member] | Office Properties | ||||
Real Estate Properties [Line Items] | ||||
Number of real estate buildings acquired | numberOfProperties | 2 | |||
Net rentable area | ft² | 590,458 | |||
Area of land | a | 71.1 | |||
300-600 Campus Drive Buildings | Office Properties | ||||
Real Estate Properties [Line Items] | ||||
Number of real estate buildings acquired | numberOfProperties | 4 | |||
Net rentable area | ft² | 578,388 | |||
Area of land | a | 64.80 |
NOTES PAYABLE - Schedule of Lon
NOTES PAYABLE - Schedule of Long-term Debt Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | ||
Total notes payable principal outstanding | $ 240,520 | $ 417,207 |
Deferred financing costs, net (6) | 0 | (600) |
Total notes payable, net | 240,520 | 416,607 |
Portfolio Loan Facility | Secured Debt | ||
Debt Instrument [Line Items] | ||
Total notes payable principal outstanding | 145,200 | |
Remaining borrowing capacity | $ 48,400 | |
Extension period | 1 year | |
Granite Tower Mortgage Loan | ||
Debt Instrument [Line Items] | ||
Total notes payable principal outstanding | $ 95,400 | |
Remaining borrowing capacity | $ 49,600 | |
Amortization schedule of mortgage loans | 30 years | |
Mortgage | Corporate Technology Centre Mortgage Loan | ||
Debt Instrument [Line Items] | ||
Total notes payable principal outstanding | $ 0 | 40,564 |
Mortgage | Portfolio Loan Facility | ||
Debt Instrument [Line Items] | ||
Total notes payable principal outstanding | $ 145,170 | 281,293 |
Effective Interest Rate | 3.00% | |
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 | $ 95,350 |
Effective Interest Rate | 3.20% | |
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 | 1 Months Ended | 3 Months Ended | |
Jan. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |||
Interest expense | $ 1,159 | $ 4,481 | |
Amortization of deferred financing costs | $ 115 | $ 332 | |
Interest payable, current | $ 1,200 |
RELATED PARTY TRANSACTIONS - Ad
RELATED PARTY TRANSACTIONS - Additional Information (Details) | Nov. 01, 2019 |
GKP Holding LLC | KBS Capital Advisors LLC | |
Related Party Transaction [Line Items] | |
Ownership percentage | 33.33% |
RELATED PARTY TRANSACTIONS - Co
RELATED PARTY TRANSACTIONS - Costs (Details) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | ||
Jan. 31, 2020 | Mar. 31, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Related Party Transaction [Line Items] | |||||
Payable as of | $ 71 | $ 71 | $ 59 | ||
Administrative fees | 58 | $ 63 | |||
Reimbursable operating expenses | $ 25 | 33 | |||
Advisor and Dealer Manager | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 4,997 | 2,737 | |||
Payable as of | 71 | 71 | 59 | ||
Advisor and Dealer Manager | Asset management fees (1) | |||||
Related Party Transaction [Line Items] | |||||
Expenses | $ 800 | 1,000 | 1,839 | 2,657 | |
Payable as of | 0 | 0 | 0 | ||
Advisor and Dealer Manager | Reimbursement of operating expenses | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 76 | 80 | |||
Payable as of | 71 | 71 | 59 | ||
Advisor and Dealer Manager | Disposition fees | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 3,082 | $ 0 | |||
Payable as of | $ 0 | $ 0 | $ 0 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ in Millions | 2 Months Ended | 3 Months Ended |
Mar. 31, 2020 | Mar. 31, 2020 | |
Office Properties | ||
Subsequent Event [Line Items] | ||
Decrease in real estate property values | $ 68.2 | $ 68.2 |
Uncategorized Items - kbsrii-20
Label | Element | Value |
Estimated Net Inflows from Investments in Real Estate [Member] | ||
Net Assets, Adjusted Balance | us-gaap_NetAssetsAdjustedBalance | $ 34,025,000 |
Liquidation Transaction Costs [Member] | ||
Net Assets, Adjusted Balance | us-gaap_NetAssetsAdjustedBalance | (3,500,000) |
Assets [Member] | ||
Net Assets, Adjusted Balance | us-gaap_NetAssetsAdjustedBalance | 34,025,000 |
Liability [Member] | ||
Net Assets, Adjusted Balance | us-gaap_NetAssetsAdjustedBalance | (166,269,000) |
Capital Expenditures [Member] | ||
Net Assets, Adjusted Balance | us-gaap_NetAssetsAdjustedBalance | (146,524,000) |
Corporate Expenditures [Member] | ||
Net Assets, Adjusted Balance | us-gaap_NetAssetsAdjustedBalance | $ (16,245,000) |