Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2021 | Nov. 02, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2021 | |
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 | 183,357,258 | |
Entity Central Index Key | 0001411059 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF NET ASSETS - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Assets | ||
Real estate | $ 348,755 | $ 698,491 |
Cash and cash equivalents | 128,589 | 21,796 |
Restricted cash | 50 | 0 |
Rents and other receivables | 441 | 489 |
Other assets | 214 | 461 |
Total assets | 478,049 | 721,237 |
Liabilities | ||
Liabilities for estimated costs in excess of estimated receipts during liquidation | 26,317 | 72,528 |
Notes payable | 83,632 | 240,520 |
Accounts payable and accrued liabilities | 3,315 | 7,308 |
Due to affiliate | 22 | 49 |
Liabilities for estimated closing costs and disposition fees | 7,246 | 16,458 |
Other liabilities | 2,437 | 2,879 |
Total liabilities | 122,969 | 339,742 |
Commitments and contingencies (Note 9) | ||
Net assets in liquidation | 355,080 | 381,495 |
Distributions declared and payable | (91,700) | 0 |
Remaining net assets in liquidation | $ 263,380 | $ 381,495 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | |
Changes in Net Assets in Liquidation [Roll Forward] | ||
Net assets in liquidation, beginning of period | $ 381,495 | |
Changes in net assets in liquidation | ||
Change in liquidation value of real estate properties after closing costs/disposition fees | (54,418) | |
Change in estimated cash flow during liquidation | 7,083 | |
Change in estimated capital expenditures | 23,468 | |
Redemptions | (1,784) | |
Other changes, net | (764) | |
Changes in net assets in liquidation | (26,415) | |
Net assets in liquidation, end of period | 355,080 | |
Distributions declared and payable | (91,700) | $ 0 |
Remaining net assets in liquidation | $ 263,380 | $ 381,495 |
ORGANIZATION
ORGANIZATION | 9 Months Ended |
Sep. 30, 2021 | |
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 September 30, 2021, the Company owned two office properties and an office building that is part of an office campus. 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 (the “Advisory Agreement”). The Advisory Agreement is effective through May 21, 2022 and may be renewed for an unlimited number of one As of September 30, 2021, the Company had 183,432,091 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 One of the most significant risks and uncertainties facing the Company and the real estate industry generally continues to be the effect of the ongoing public health crisis of the novel coronavirus disease (“COVID-19”) pandemic. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business and its liquidation, including how the pandemic is affecting its tenants and the Company’s ability to sell its remaining real estate properties at the times and prices it expects. From March 2020 through September 30, 2021, the Company did not experience significant disruptions in its operations from the COVID-19 pandemic. During the year ended December 31, 2020 and the nine months ended September 30, 2021, the Company reduced the estimated liquidation value of its real estate portfolio by $90.2 million and $54.4 million (or $30.9 million after accounting for the decrease in estimated capital expenditures of $23.5 million that was previously projected to be spent), respectively, 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. As of September 30, 2021, the Company had granted rent relief to eight tenants as a result of the pandemic, but as the impact of the pandemic continues to be felt, these tenants or additional tenants may request rent relief in future periods or become unable to pay rent and therefore, the Company is unable to predict the ultimate impact 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. Further, significant reductions in rental revenue in the future related to the impact of the COVID-19 pandemic may limit the Company’s ability to draw on its portfolio loan facility due to covenants described in the Company’s loan agreements. |
PLAN OF LIQUIDATION
PLAN OF LIQUIDATION | 9 Months Ended |
Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
PLAN OF LIQUIDATION | PLAN OF LIQUIDATION The 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 actual liquidation timing and 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 measures imposed to help control the spread of the virus, has had a negative impact on the economy and business activity globally. 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 September 30, 2021, the extent to which the Company’s business may be affected by COVID-19 depends on future developments with respect to the continued spread and treatment of the virus, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures. 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 September 30, 2021. 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 | 9 Months Ended |
Sep. 30, 2021 | |
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, 2020. 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, 2020 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 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 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. 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 September 30, 2021 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. Use of Estimates |
LIABILITIES FOR ESTIMATED COSTS
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION | 9 Months Ended |
Sep. 30, 2021 | |
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 September 30, 2021, 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. The change in the liabilities for estimated costs in excess of estimated receipts during liquidation as of September 30, 2021 is as follows (in thousands): December 31, 2020 Cash Payments Remeasurement of September 30, 2021 Assets: Estimated net inflows from investments in real estate $ 12,667 $ (17,085) $ 5,693 $ 1,275 12,667 (17,085) 5,693 1,275 Liabilities: Liquidation transaction costs (2,760) — — (2,760) Corporate expenditures (11,466) 7,885 1,390 (2,191) Capital expenditures (70,969) 24,860 23,468 (22,641) (85,195) 32,745 24,858 (27,592) Total liabilities for estimated costs in excess of estimated receipts during liquidation $ (72,528) $ 15,660 $ 30,551 $ (26,317) |
NET ASSETS IN LIQUIDATION
NET ASSETS IN LIQUIDATION | 9 Months Ended |
Sep. 30, 2021 | |
Assets in Liquidation [Abstract] | |
NET ASSETS IN LIQUIDATION | NET ASSETS IN LIQUIDATION Net assets in liquidation decreased by approximately $26.4 million during the nine months ended September 30, 2021 as follows (in thousands): Changes in net assets in liquidation Change in liquidation value of real estate properties after closing costs/disposition fees $ (54,418) Change in estimated cash flow during liquidation 7,083 Change in estimated capital expenditures 23,468 Redemptions (1,784) Other changes, net (764) Changes in net assets in liquidation $ (26,415) During the nine months ended September 30, 2021, the estimated net realizable value of real estate after estimated closing costs and disposition fees decreased by $54.4 million, primarily driven by the Company’s investments in Granite Tower (defined below), an office property located in Fairfax, Virginia (“Willow Oaks Corporate Center”) and an office building located in Los Angeles, California (“Union Bank Plaza”), as follows: • Granite Tower – The net proceeds from the sale of Granite Tower decreased by approximately $24.1 million due to an increase in outstanding capital costs that were previously projected to be spent prior to disposition of the property. The decrease in the net realizable value of Granite Tower was offset by a decrease in capital expenditures of $23.5 million primarily due to a reduction in tenant improvement costs. • Willow Oaks Corporate Center – The estimated net proceeds from the sale of Willow Oaks Corporate Center decreased by approximately $11.3 million to reflect the contractual sales price as the property was under contract to sell as of September 30, 2021. • Union Bank Plaza – The estimated net proceeds from the sale of Union Bank Plaza decreased by approximately $22.3 million as the liquidation value was adjusted based on information received from prospective buyers as the property is currently being marketed for sale. The net assets in liquidation as of September 30, 2021 would result in the payment of additional estimated liquidating distributions of approximately $1.94 per share of common stock to the Company’s stockholders of record as of September 30, 2021. This estimate of additional liquidating distributions includes projections of costs and expenses to be incurred during the estimated period required to complete the Plan of Liquidation. There is inherent uncertainty with these estimates and projections, and they could change materially based on the timing of the sales of the Company’s remaining real estate properties, the performance of the Company’s remaining assets and any changes in the underlying assumptions of the projected cash flows from such properties. See Note 2, “Plan of Liquidation.” |
REAL ESTATE
REAL ESTATE | 9 Months Ended |
Sep. 30, 2021 | |
Real Estate [Abstract] | |
REAL ESTATE | REAL ESTATE As of September 30, 2021, the Company’s real estate investments were composed of two office properties and an office building that is part of an office campus, encompassing in the aggregate approximately 1.4 million rentable square feet. As of September 30, 2021, the Company’s real estate portfolio was 60% occupied. As of September 30, 2021, the Company’s liquidation value of real estate was $348.8 million, exclusive of net operating income to be earned and projected capital expenditures to be incurred over the expected hold period through sale. As a result of adopting the liquidation basis of accounting as of February 1, 2020, as of September 30, 2021, 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 September 30, 2021 as it carries out its Plan of Liquidation. Real Estate Sales Granite Tower On December 16, 2010, the Company, through an indirect wholly owned subsidiary, acquired a 31-story office building located in Denver, Colorado containing 593,527 rentable square feet on approximately 0.7 acres of land (“Granite Tower”). On September 3, 2021, the Company completed the sale of Granite Tower to a purchaser unaffiliated with the Company or the Advisor for $203.5 million, or $174.1 million net of credits given to the purchaser primarily for outstanding tenant improvements and lease incentives, before third-party closing costs of approximately $1.0 million and excluding disposition fees payable to the Advisor of $1.7 million. In connection with the disposition of Granite Tower, the Company repaid the entire $95.4 million principal balance and all other sums due under a mortgage loan secured by Granite Tower. See Note 7, “Notes Payable.” Fountainhead Plaza On September 13, 2011, the Company, through an indirect wholly owned subsidiary, purchased two office buildings totaling 445,957 rentable square feet located on approximately 11.33 acres of land in Tempe, Arizona (“Fountainhead Plaza”). |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2021 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTES PAYABLE As of September 30, 2021 and December 31, 2020, 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 September 30, 2021 (1) Effective Interest Rate as of September 30, 2021 (1) Payment Type Maturity Date (2) Portfolio Loan Facility (3) $ 83,632 $ 145,170 One-month LIBOR + 1.45% 1.5% Interest Only 03/29/2022 Granite Tower Mortgage Loan (4) — 95,350 (4) (4) (4) (4) Total notes payable principal outstanding $ 83,632 $ 240,520 _____________________ (1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2021. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2021, using interest rate indices as of September 30, 2021, where applicable. (2) Represents the initial maturity date or the maturity date as extended as of September 30, 2021. (3) On September 20, 2021, in connection with the disposition of Fountainhead Plaza, the Company paid down $61.5 million of the principal balance due under the Portfolio Loan Facility and Fountainhead Plaza was released as security from the Portfolio Loan Facility. As of September 30, 2021, $83.6 million of term debt of the Portfolio Loan Facility was outstanding and $27.9 million of revolving debt remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents. As of September 30, 2021, the Portfolio Loan Facility was secured by Willow Oaks Corporate Center and Union Bank Plaza. (4) On September 3, 2021, in connection with the disposition of Granite Tower, the Company repaid the outstanding principal and accrued interest due under the Granite Tower Mortgage Loan. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2021 | |
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”) and KBS Growth & Income REIT, Inc. (“KBS Growth & Income REIT”). As of January 1, 2020, the Company, together with KBS REIT III, 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 2021, the Company renewed its participation in the program. The program is effective through June 30, 2022. During the nine months ended September 30, 2021 and 2020, no other business transactions occurred between the Company and KBS REIT III, 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 and nine months ended September 30, 2021 and 2020, respectively, and any related amounts payable as of September 30, 2021 and December 31, 2020 (in thousands): Incurred Payable as of Three Months Ended September 30, Nine Months Ended September 30, September 30, December 31, 2021 2020 2021 2020 2021 2020 Expensed Asset management fees $ 1,363 $ 1,577 $ 4,277 $ 5,076 $ — $ — Reimbursement of operating expenses (1) 64 89 285 311 22 49 Disposition fees 2,919 381 2,919 4,148 — — $ 4,346 $ 2,047 $ 7,481 $ 9,535 $ 22 $ 49 _____________________ |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2021 | |
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 September 30, 2021. Legal Matters |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Liquidating Distributions Paid On October 5, 2021, the Company paid a liquidating distribution of $0.50 per share of common stock to the Company’s stockholders of record as of the close of business on October 1, 2021 (the “Fourth Liquidating Distribution”) for an aggregate distribution of $91.7 million. The Fourth Liquidating Distribution was funded with proceeds from the sale of Fountainhead Plaza and Granite Tower. Since the Fourth Liquidating Distribution was a liquidating distribution pursuant to the Plan of Liquidation, it reduced the Company’s stockholders’ remaining investment in the Company and reduced the estimated future liquidating distributions per share to be received by the Company’s stockholders by $0.50 per share. Updated Estimated Value Per Share In connection with the authorization of the Fourth Liquidating Distribution, on September 29, 2021, the Company’s board of directors approved an updated estimated value per share of the Company’s common stock of $1.57, effective October 5, 2021 (the “October 2021 Estimated Value Per Share”), to reflect the impact of the payment of the Fourth Liquidating Distribution. On March 11, 2021, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $2.07 based on the Company’s net assets in liquidation, divided by the number of shares outstanding, all as of December 31, 2020 (the “March Estimated Value Per Share”). Net assets in liquidation represents the remaining estimated liquidation value available to stockholders upon liquidation. The October 2021 Estimated Value Per Share is equal to the March Estimated Value Per Share of $2.07 reduced by the Company’s authorization of the Fourth Liquidating Distribution of $0.50 per share of common stock. Thus, the October 2021 Estimated Value Per Share reflects the resulting reduction of the stockholders’ remaining investment in the Company. The Company did not obtain updated appraisals in connection with the determination of the October 2021 Estimated Value Per Share, and the determination was based solely on the factors above. For a description of the methodologies, limitations and assumptions used in the determination of the October 2021 Estimated Value Per Share, see the Company’s Current Report on Form 8-K, filed with the SEC on September 30, 2021. Share Redemption Program On November 1, 2021, in connection with the Company’s liquidation pursuant to the Plan of Liquidation, the Company’s board of directors approved the termination of the Company’s share redemption program effective as of November 22, 2021. Prior to termination, the Company’s share redemption program was limited to redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program). The redemption price per share of the Company’s common stock eligible for redemption on the October 29, 2021 redemption date was equal to $1.57 as a result of the Fourth Liquidating Distribution and establishment of the October 2021 Estimated Value Per Share. Purchase and Sale Agreement for Sale of Corporate Technology Centre - 300 Holger On March 28, 2013, the Company, through an indirect wholly owned subsidiary, acquired an office campus consisting of eight office buildings totaling 610,083 rentable square feet located on approximately 32.7 acres of land in San Jose, California (“Corporate Technology Centre”). In 2018, the Company completed the sale of three office buildings in Corporate Technology Centre to three separate purchasers unaffiliated with the Company or the Advisor, and in 2020, the Company completed the sale of four office buildings in Corporate Technology Centre to three separate purchasers unaffiliated with the Company or the Advisor. On November 3, 2021, the due diligence period expired under the purchase and sale agreement and escrow instructions (the “Agreement”) for the sale of an office building in Corporate Technology Centre containing 99,870 rentable square feet (“300 Holger”) by and between an indirect wholly owned subsidiary of the Company and an unaffiliated purchaser (the “Purchaser”). Pursuant to the Agreement, the sale price for 300 Holger is $35.0 million, subject to prorations and adjustments as provided in the Agreement. The expected closing date is November 23, 2021. There can be no assurance that the Company will complete the sale of 300 Holger. The Purchaser would be obligated to purchase 300 Holger only after satisfaction of agreed upon closing conditions. In certain circumstances, if the Purchaser fails to complete the acquisition, it may forfeit up to $2.0 million of earnest money. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
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 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. |
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. |
LIABILITIES FOR ESTIMATED COS_2
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Liability during Liquidation [Abstract] | |
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 September 30, 2021 is as follows (in thousands): December 31, 2020 Cash Payments Remeasurement of September 30, 2021 Assets: Estimated net inflows from investments in real estate $ 12,667 $ (17,085) $ 5,693 $ 1,275 12,667 (17,085) 5,693 1,275 Liabilities: Liquidation transaction costs (2,760) — — (2,760) Corporate expenditures (11,466) 7,885 1,390 (2,191) Capital expenditures (70,969) 24,860 23,468 (22,641) (85,195) 32,745 24,858 (27,592) Total liabilities for estimated costs in excess of estimated receipts during liquidation $ (72,528) $ 15,660 $ 30,551 $ (26,317) |
NET ASSETS IN LIQUIDATION (Tabl
NET ASSETS IN LIQUIDATION (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Assets in Liquidation [Abstract] | |
Schedule of Change in Net Assets in Liquidation | Net assets in liquidation decreased by approximately $26.4 million during the nine months ended September 30, 2021 as follows (in thousands): Changes in net assets in liquidation Change in liquidation value of real estate properties after closing costs/disposition fees $ (54,418) Change in estimated cash flow during liquidation 7,083 Change in estimated capital expenditures 23,468 Redemptions (1,784) Other changes, net (764) Changes in net assets in liquidation $ (26,415) |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | As of September 30, 2021 and December 31, 2020, 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 September 30, 2021 (1) Effective Interest Rate as of September 30, 2021 (1) Payment Type Maturity Date (2) Portfolio Loan Facility (3) $ 83,632 $ 145,170 One-month LIBOR + 1.45% 1.5% Interest Only 03/29/2022 Granite Tower Mortgage Loan (4) — 95,350 (4) (4) (4) (4) Total notes payable principal outstanding $ 83,632 $ 240,520 _____________________ (1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2021. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2021, using interest rate indices as of September 30, 2021, where applicable. (2) Represents the initial maturity date or the maturity date as extended as of September 30, 2021. (3) On September 20, 2021, in connection with the disposition of Fountainhead Plaza, the Company paid down $61.5 million of the principal balance due under the Portfolio Loan Facility and Fountainhead Plaza was released as security from the Portfolio Loan Facility. As of September 30, 2021, $83.6 million of term debt of the Portfolio Loan Facility was outstanding and $27.9 million of revolving debt remained available for future disbursements, subject to certain terms and conditions set forth in the loan documents. As of September 30, 2021, the Portfolio Loan Facility was secured by Willow Oaks Corporate Center and Union Bank Plaza. (4) On September 3, 2021, in connection with the disposition of Granite Tower, the Company repaid the outstanding principal and accrued interest due under the Granite Tower Mortgage Loan. |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
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 and nine months ended September 30, 2021 and 2020, respectively, and any related amounts payable as of September 30, 2021 and December 31, 2020 (in thousands): Incurred Payable as of Three Months Ended September 30, Nine Months Ended September 30, September 30, December 31, 2021 2020 2021 2020 2021 2020 Expensed Asset management fees $ 1,363 $ 1,577 $ 4,277 $ 5,076 $ — $ — Reimbursement of operating expenses (1) 64 89 285 311 22 49 Disposition fees 2,919 381 2,919 4,148 — — $ 4,346 $ 2,047 $ 7,481 $ 9,535 $ 22 $ 49 _____________________ |
ORGANIZATION (Details)
ORGANIZATION (Details) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021USD ($)propertyshares | Dec. 31, 2020USD ($) | |
Organizational Structure [Line Items] | ||
Common stock, shares issued (in shares) | shares | 183,432,091 | |
Common stock, shares outstanding (in shares) | shares | 183,432,091 | |
Number of tenants with rent relief, COVID-19 | 8 | |
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 | 2 | |
Decrease in real estate property values, COVID-19 | $ | $ 54.4 | $ 90.2 |
Decrease in real estate property values, after decrease in capital expenditures, COVID-19 | $ | 30.9 | |
Decrease in estimated capital expenditures, COVID-19 | $ | $ 23.5 | |
Office Campus | ||
Organizational Structure [Line Items] | ||
Number of real estate properties | 1 | |
Office Buildings, Campus | ||
Organizational Structure [Line Items] | ||
Number of real estate properties | 1 | |
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) - property | Mar. 05, 2020 | Sep. 30, 2021 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Period of payment activities upon plan of liquidation | 24 months | |
Number of tenants with rent relief, COVID-19 | 8 |
LIABILITIES FOR ESTIMATED COS_3
LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION - Change in Liability (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Movement in Liquidation Accrual [Roll Forward] | |
Beginning balance | $ (72,528) |
Cash Payments (Receipts) | 15,660 |
Remeasurement of Assets and Liabilities | 30,551 |
Ending balance | (26,317) |
Assets: | |
Movement in Liquidation Accrual [Roll Forward] | |
Beginning balance | 12,667 |
Cash Payments (Receipts) | (17,085) |
Remeasurement of Assets and Liabilities | 5,693 |
Ending balance | 1,275 |
Estimated net inflows from investments in real estate | |
Movement in Liquidation Accrual [Roll Forward] | |
Beginning balance | 12,667 |
Cash Payments (Receipts) | (17,085) |
Remeasurement of Assets and Liabilities | 5,693 |
Ending balance | 1,275 |
Liabilities: | |
Movement in Liquidation Accrual [Roll Forward] | |
Beginning balance | (85,195) |
Cash Payments (Receipts) | 32,745 |
Remeasurement of Assets and Liabilities | 24,858 |
Ending balance | (27,592) |
Liquidation transaction costs | |
Movement in Liquidation Accrual [Roll Forward] | |
Beginning balance | (2,760) |
Cash Payments (Receipts) | 0 |
Remeasurement of Assets and Liabilities | 0 |
Ending balance | (2,760) |
Corporate expenditures | |
Movement in Liquidation Accrual [Roll Forward] | |
Beginning balance | (11,466) |
Cash Payments (Receipts) | 7,885 |
Remeasurement of Assets and Liabilities | 1,390 |
Ending balance | (2,191) |
Capital expenditures | |
Movement in Liquidation Accrual [Roll Forward] | |
Beginning balance | (70,969) |
Cash Payments (Receipts) | 24,860 |
Remeasurement of Assets and Liabilities | 23,468 |
Ending balance | $ (22,641) |
NET ASSETS IN LIQUIDATION - Add
NET ASSETS IN LIQUIDATION - Additional Information (Details) $ / shares in Units, $ in Thousands | 9 Months Ended |
Sep. 30, 2021USD ($)$ / shares | |
Assets in Liquidation [Abstract] | |
Decrease in assets, net | $ (26,400) |
Change in liquidation value of real estate properties after closing costs/disposition fees | $ (54,418) |
Additional estimated liquidation distribution (in dollars per share) | $ / shares | $ 1.94 |
Real Estate Properties [Line Items] | |
Change in estimated capital expenditures | $ (23,468) |
Granite Tower | |
Real Estate Properties [Line Items] | |
Decrease in estimated net realizable value of real estate | 24,100 |
Change in estimated capital expenditures | (23,500) |
Willow Oaks | |
Real Estate Properties [Line Items] | |
Decrease in estimated net realizable value of real estate | 11,300 |
Union Bank Plaza | |
Real Estate Properties [Line Items] | |
Decrease in estimated net realizable value of real estate | $ 22,300 |
NET ASSETS IN LIQUIDATION - Cha
NET ASSETS IN LIQUIDATION - Change in Liquidation Value (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Assets in Liquidation [Abstract] | |
Change in liquidation value of real estate properties after closing costs/disposition fees | $ (54,418) |
Change in estimated cash flow during liquidation | 7,083 |
Change in estimated capital expenditures | 23,468 |
Redemptions | (1,784) |
Other changes, net | (764) |
Changes in net assets in liquidation | $ (26,415) |
REAL ESTATE - Investments (Deta
REAL ESTATE - Investments (Details) $ in Thousands, ft² in Millions | Sep. 30, 2021USD ($)ft²property | Dec. 31, 2020USD ($) |
Real Estate Properties [Line Items] | ||
Rentable square feet | ft² | 1.4 | |
Percentage of real estate occupied | 60.00% | |
Real estate | $ | $ 348,755 | $ 698,491 |
Office Properties | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 2 | |
Office Campus | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 1 | |
Office Buildings, Campus | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | 1 |
REAL ESTATE - Sales (Details)
REAL ESTATE - Sales (Details) $ in Millions | Sep. 20, 2021USD ($) | Sep. 03, 2021USD ($) | Sep. 13, 2011aproperty | Dec. 16, 2010a |
Granite Tower Mortgage Loan | ||||
Real Estate Properties [Line Items] | ||||
Extinguishment of debt, amount | $ 95.4 | |||
Portfolio Loan Facility | ||||
Real Estate Properties [Line Items] | ||||
Extinguishment of debt, amount | $ 61.5 | |||
Office Properties | Granite Tower | Disposed of by Sale | ||||
Real Estate Properties [Line Items] | ||||
Consideration | 203.5 | |||
Consideration, net of credits | 174.1 | |||
Closing cost | 1 | |||
Disposition fees payable | $ 1.7 | |||
Office Properties | Fountainhead Plaza | Disposed of by Sale | ||||
Real Estate Properties [Line Items] | ||||
Consideration | 117.5 | |||
Consideration, net of credits | 117.3 | |||
Closing cost | 0.8 | |||
Disposition fees payable | $ 1.2 | |||
Granite Tower | Office Properties | ||||
Real Estate Properties [Line Items] | ||||
Net rentable area (in sq feet) | a | 593,527 | |||
Area of land (in acres) | a | 0.7 | |||
Fountainhead Plaza | Office Properties | ||||
Real Estate Properties [Line Items] | ||||
Number of real estate buildings acquired | property | 2 | |||
Net rentable area (in sq feet) | a | 445,957 | |||
Area of land (in acres) | a | 11.33 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) $ in Thousands | Sep. 20, 2021 | Sep. 03, 2021 | Sep. 30, 2021 | Dec. 31, 2020 |
Debt Instrument [Line Items] | ||||
Total notes payable principal outstanding | $ 83,632 | $ 240,520 | ||
Portfolio Loan Facility | ||||
Debt Instrument [Line Items] | ||||
Extinguishment of debt, amount | $ 61,500 | |||
Portfolio Loan Facility | Secured Debt | ||||
Debt Instrument [Line Items] | ||||
Total notes payable principal outstanding | 83,600 | |||
Remaining borrowing capacity | 27,900 | |||
Granite Tower Mortgage Loan | ||||
Debt Instrument [Line Items] | ||||
Extinguishment of debt, amount | $ 95,400 | |||
Mortgage | Portfolio Loan Facility | ||||
Debt Instrument [Line Items] | ||||
Total notes payable principal outstanding | $ 83,632 | 145,170 | ||
Effective Interest Rate | 1.50% | |||
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 | $ 0 | $ 95,350 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Related Party Transaction [Line Items] | |||||
Payable as of | $ 22 | $ 22 | $ 49 | ||
Administrative fees | 66 | $ 70 | 229 | $ 235 | |
Advisor and Dealer Manager | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 4,346 | 2,047 | 7,481 | 9,535 | |
Payable as of | 22 | 22 | 49 | ||
Advisor and Dealer Manager | Asset management fees | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 1,363 | 1,577 | 4,277 | 5,076 | |
Payable as of | 0 | 0 | 0 | ||
Advisor and Dealer Manager | Reimbursement of operating expenses | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 64 | 89 | 285 | 311 | |
Payable as of | 22 | 22 | 49 | ||
Advisor and Dealer Manager | Disposition fees | |||||
Related Party Transaction [Line Items] | |||||
Expenses | 2,919 | $ 381 | 2,919 | $ 4,148 | |
Payable as of | $ 0 | $ 0 | $ 0 |
SUBSEQUENT EVENTS - Additional
SUBSEQUENT EVENTS - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions | Oct. 05, 2021 | Oct. 29, 2021 | Mar. 11, 2021 |
Subsequent Event [Line Items] | |||
Updated estimated value per share (in dollars per share) | $ 2.07 | ||
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Fourth liquidation distribution (in dollars per share) | $ 0.50 | ||
Paid distributions | $ 91.7 | ||
Updated estimated value per share (in dollars per share) | $ 1.57 | ||
Redemption price (in dollars per share) | $ 1.57 |
SUBSEQUENT EVENTS - Purchase an
SUBSEQUENT EVENTS - Purchase and Sale Agreement (Details) - Office Properties $ in Millions | Mar. 28, 2013aft²property | Dec. 31, 2020property | Dec. 31, 2018property | Nov. 03, 2021USD ($)ft² |
Subsequent Event | 300 Holger | Disposed of by Sale | ||||
Subsequent Event [Line Items] | ||||
Net rentable area (in sq feet) | ft² | 99,870 | |||
Consideration | $ | $ 35 | |||
Earnest money deposit, amount that may be forfeited | $ | $ 2 | |||
Corporate Technology Centre | ||||
Subsequent Event [Line Items] | ||||
Number of real estate properties acquired | property | 8 | |||
Net rentable area (in sq feet) | ft² | 610,083 | |||
Area of land (in acres) | a | 32.7 | |||
Number of real estate properties sold | property | 4 | 3 |