Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2020 | May 04, 2020 | |
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 000-56050 | |
Entity Registrant Name | KBS GROWTH & INCOME REIT, INC. | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 47-2778257 | |
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 | true | |
Entity Emerging Growth Company | true | |
Entity Shell Company | false | |
Entity Central Index Key | 0001631256 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Ex Transition Period | true | |
Class A Common Stock | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 9,867,520 | |
Class T Common Stock | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 309,864 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Real estate: | ||
Land | $ 19,545 | $ 20,709 |
Buildings and improvements | 131,829 | 138,600 |
Tenant origination and absorption costs | 11,875 | 13,822 |
Total real estate, cost | 163,249 | 173,131 |
Less accumulated depreciation and amortization | (19,967) | (22,688) |
Total real estate held for investment, net | 143,282 | 150,443 |
Real estate held for sale, net | 0 | 18,594 |
Total real estate, net | 143,282 | 169,037 |
Cash and cash equivalents | 4,188 | 6,287 |
Investment in unconsolidated joint venture | 528 | 1,000 |
Rents and other receivables | 3,074 | 3,284 |
Above-market leases, net | 113 | 120 |
Assets related to real estate held for sale | 0 | 760 |
Prepaid expenses and other assets | 2,003 | 1,753 |
Total assets | 153,188 | 182,241 |
Notes payable: | ||
Notes payable, net | 94,323 | 103,913 |
Notes payable related to real estate held for sale, net | 0 | 13,948 |
Total notes payable, net | 94,323 | 117,861 |
Accounts payable and accrued liabilities | 1,382 | 2,728 |
Due to affiliates | 5,993 | 5,552 |
Distributions payable | 215 | 467 |
Below-market leases, net | 2,248 | 2,533 |
Liabilities related to real estate held for sale | 0 | 1,057 |
Other liabilities | 5,182 | 3,765 |
Total liabilities | 109,343 | 133,963 |
Commitments and contingencies (Note 11) | ||
Redeemable common stock | 1,000 | 1,000 |
Stockholders’ equity: | ||
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Additional paid-in capital | 84,452 | 84,184 |
Cumulative distributions and net losses | (41,709) | (37,007) |
Total stockholders’ equity | 42,845 | 47,278 |
Total liabilities and stockholders’ equity | 153,188 | 182,241 |
Class A Common Stock | ||
Stockholders’ equity: | ||
Common stock | 99 | 98 |
Class T Common Stock | ||
Stockholders’ equity: | ||
Common stock | $ 3 | $ 3 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 9,870,515 | 9,841,004 |
Common stock, shares outstanding (in shares) | 9,870,515 | 9,841,004 |
Class T Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 308,712 | 306,292 |
Common stock, shares outstanding (in shares) | 308,712 | 306,292 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues: | ||
Rental income | $ 4,583 | $ 5,241 |
Other operating income | 34 | 76 |
Total revenues | 4,617 | 5,317 |
Expenses: | ||
Operating, maintenance, and management | 954 | 1,082 |
Property management fees and expenses to affiliate | 35 | 41 |
Real estate taxes and insurance | 733 | 777 |
Asset management fees to affiliate | 435 | 461 |
General and administrative expenses | 473 | 375 |
Depreciation and amortization | 2,166 | 2,200 |
Interest expense | 2,888 | 1,976 |
Impairment charges on real estate | 5,750 | 0 |
Total expenses | 13,434 | 6,912 |
Other income: | ||
Interest and other income | 12 | 14 |
Gain on sale of real estate | 5,245 | 0 |
Equity in loss of unconsolidated joint venture | (469) | 0 |
Loss from extinguishment of debt | (29) | 0 |
Total other income | 4,759 | 14 |
Net loss | $ (4,058) | $ (1,581) |
Net loss per common share, basic and diluted (in dollars per share) | $ (0.40) | $ (0.16) |
Weighted-average number of common shares outstanding, basic and diluted (in shares) | 10,171,186 | 9,751,203 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands | Total | Class A Common Stock | Class T Common Stock | Common StockClass A Common Stock | Common StockClass T Common Stock | Additional Paid-in Capital | Cumulative Distributions and Net Losses |
Balance (in shares) at Dec. 31, 2018 | 9,386,908 | 294,963 | |||||
Balance at Dec. 31, 2018 | $ 54,591 | $ 94 | $ 3 | $ 79,907 | $ (25,413) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net loss | (1,581) | (1,581) | |||||
Issuance of common stock (in shares) | 177,957 | 3,296 | |||||
Issuance of common stock | 1,667 | $ 2 | 1,665 | ||||
Transfers from redeemable common stock | 21 | 21 | |||||
Redemptions of common stock (in shares) | (2,245) | ||||||
Redemptions of common stock | (21) | (21) | |||||
Distributions declared | (1,328) | (1,328) | |||||
Balance (in shares) at Mar. 31, 2019 | 9,564,865 | 296,014 | |||||
Balance at Mar. 31, 2019 | 53,349 | $ 96 | $ 3 | 81,572 | (28,322) | ||
Balance (in shares) at Dec. 31, 2019 | 9,841,004 | 306,292 | 9,841,004 | 306,292 | |||
Balance at Dec. 31, 2019 | 47,278 | $ 98 | $ 3 | 84,184 | (37,007) | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net loss | (4,058) | (4,058) | |||||
Issuance of common stock (in shares) | 29,511 | 2,420 | |||||
Issuance of common stock | 269 | $ 1 | 268 | ||||
Distributions declared | (644) | (644) | |||||
Balance (in shares) at Mar. 31, 2020 | 9,870,515 | 308,712 | 9,870,515 | 308,712 | |||
Balance at Mar. 31, 2020 | $ 42,845 | $ 99 | $ 3 | $ 84,452 | $ (41,709) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (4,058) | $ (1,581) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 2,166 | 2,200 |
Impairment charges on real estate | 5,750 | 0 |
Equity in income of unconsolidated joint venture | 469 | 0 |
Deferred rents | 191 | (158) |
Amortization of above and below-market leases, net | (278) | (343) |
Amortization of deferred financing costs | 83 | 89 |
Unrealized loss on derivative instrument | 1,766 | 629 |
Loss from extinguishment of debt | 29 | 0 |
Gain on sale of real estate, net | (5,245) | 0 |
Changes in operating assets and liabilities: | ||
Rents and other receivables | (17) | (75) |
Prepaid expenses and other assets | (420) | (426) |
Accounts payable and accrued liabilities | (1,144) | (1,203) |
Due to affiliates | 441 | 483 |
Other liabilities | (327) | (171) |
Net cash used in operating activities | (594) | (556) |
Cash Flows from Investing Activities: | ||
Proceeds from sale of real estate | 23,603 | 0 |
Improvements to real estate | (834) | (893) |
Reimbursement from unconsolidated joint venture | 3 | 0 |
Net cash provided by (used in) investing activities | 22,772 | (893) |
Cash Flows from Financing Activities: | ||
Proceeds from notes payable | 0 | 681 |
Principal payments on notes payable | (23,650) | 0 |
Proceeds from issuance of common stock | 0 | 1,211 |
Payments to redeem common stock | 0 | (21) |
Distributions paid to common stockholders | (627) | (845) |
Net cash (used in) provided by financing activities | (24,277) | 1,026 |
Net decrease in cash and cash equivalents | (2,099) | (423) |
Cash and cash equivalents, beginning of period | 6,287 | 6,648 |
Cash and cash equivalents, end of period | 4,188 | 6,225 |
Supplemental Disclosure of Cash Flow Information | ||
Interest paid | 1,117 | 1,301 |
Supplemental Disclosure of Noncash Investing and Financing Activities: | ||
Distributions payable | 215 | 460 |
Accrued improvements to real estate | 259 | 402 |
Dividends paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan | $ 269 | $ 456 |
ORGANIZATION
ORGANIZATION | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | ORGANIZATION KBS Growth & Income REIT, Inc. (the “Company”) was formed on January 12, 2015 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2015. Substantially all of the Company’s business is conducted through KBS Growth & Income Limited Partnership (the “Operating Partnership”), a Delaware limited partnership formed on January 14, 2015. The Company is the sole general partner of, and owns a 0.1% partnership interest in, the Operating Partnership. KBS Growth & Income REIT Holdings LLC (“REIT Holdings”), a Delaware limited liability company formed on January 14, 2015, owns the remaining 99.9% partnership interest in the Operating Partnership and is the sole limited partner. The Company is the sole member and manager of REIT Holdings. Subject to certain restrictions and limitations, the business of the Company is externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement between the Company and the Advisor initially entered into on June 11, 2015, and amended at various times thereafter (the “Advisory Agreement”). The Advisor conducts the Company’s operations and manages its portfolio of core real estate properties. On January 27, 2015, the Company issued 20,000 shares of its common stock to the Advisor at a purchase price of $10.00 per share. On June 11, 2015, these outstanding shares of common stock were designated Class A shares of common stock. As of March 31, 2020, the Company had invested in three office properties and had made an investment in an unconsolidated joint venture. The Company has invested in a portfolio of core real estate properties. The Company considers core properties to be existing properties with at least 80% occupancy. Based on the market outlook, the Company’s core focus in the U.S. office sector reflects a value-creating core strategy, which is also known as a core-plus strategy. The Company commenced a private placement offering exempt from registration pursuant to Rule 506(b) of Regulation D of the Securities Act of 1933, as amended, on June 11, 2015, pursuant to which the Company offered a maximum of $105,000,000 in shares of its Class A common stock for sale to accredited investors (the “Initial Private Offering”), of which $5,000,000 of Class A shares were offered pursuant to the Company’s distribution reinvestment plan. The Company ceased offering shares in the primary portion of the Initial Private Offering on April 27, 2016 and processed subscriptions for the primary Initial Private Offering dated on or prior to April 27, 2016 through May 30, 2016. KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Advisor, served as the dealer manager of the Initial Private Offering pursuant to a dealer manager agreement dated June 11, 2015 (the “Initial Private Offering Dealer Manager Agreement”). On February 4, 2015, the Company filed a registration statement on Form S-11 with the Securities and Exchange Commission (the “SEC”) to register an initial public offering of its common stock to offer a maximum of $1,500,000,000 in shares of common stock for sale to the public in a primary offering, consisting of two classes of shares: Class A and Class T (the “Primary Offering”) and a maximum of $800,000,000 in both classes of shares of its common stock pursuant to the Company’s distribution reinvestment plan (the “DRP Offering” and, together with the Primary Offering, the “Public Offering”). The SEC declared the Company’s registration statement effective on April 28, 2016 and the Company retained the Dealer Manager to serve as the dealer manager of the Public Offering pursuant to a dealer manager agreement dated April 28, 2016 (the “Public Offering Dealer Manager Agreement”). The Company terminated the Primary Offering effective June 30, 2017. The Company continues to offer shares of common stock pursuant to the DRP Offering. In some states, the Company will need to renew the registration statement annually to continue the DRP Offering. The Company may terminate the DRP Offering at any time. On October 3, 2017, the Company launched a private placement offering exempt from registration pursuant to Rule 506(c) of Regulation D of the Securities Act pursuant to which the Company offered a maximum of $1,000,000,000 in shares of its Class A common stock to accredited investors (the “Second Private Offering”). Prior to the launch of the Second Private Offering, on September 29, 2017, the Company entered into a dealer manager agreement (the “NCPS Dealer Agreement”) with the Advisor and North Capital Private Securities Corporation (“NCPS”) in connection with the Second Private Offering. In December 2019, in connection with its consideration of strategic alternatives for the Company, the Company’s board of directors determined to suspend the Second Private Offering. The Company sold 8,548,972 shares of Class A common stock for gross offering proceeds of $76.8 million in the Initial Private Offering, including 74,744 shares of Class A common stock under its distribution reinvestment plan for gross offering proceeds of $0.7 million. The Company sold 122,721 and 270,415 shares of Class A and Class T common stock, respectively, in the Primary Offering for aggregate gross offering proceeds of $3.9 million. As of March 31, 2020, the Company had sold 855,475 and 38,768 shares of Class A and Class T common stock, respectively, in the DRP Offering for aggregate gross offering proceeds of $8.2 million. As of March 31, 2020, the Company had sold 612,272 shares of Class A common stock in the Second Private Offering for aggregate gross offering proceeds of $5.5 million. As of March 31, 2020, the Company had redeemed 422,286 and 2,245 Class A and Class T shares, respectively, for $3.5 million. Additionally, on August 11, 2015, the Company issued 46,362 shares of Class A common stock to the Company’s affiliates, for an aggregate of $0.3 million, in private transactions exempt from the registration requirements pursuant to Section 4(a)(2) of the Securities Act of 1933. 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 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 12, “Subsequent Events” for a further discussion on the COVID-19 pandemic. |
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 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, 2019. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“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”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership, and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements and the accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Segments The Company was invested in three office properties as of March 31, 2020 and had made an investment in an unconsolidated joint venture. Substantially all of the Company’s revenue and net loss is from real estate, and therefore, the Company currently operates in one reportable segment. 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 for the three months ended March 31, 2020 and 2019. Basic and diluted net income (loss) per share of Class A common stock and basic and diluted net income (loss) per share of Class T common stock were equal for the three months ended March 31, 2020 and 2019 as aggregate cash distributions for each share class were equal during those periods. During the three months ended March 31, 2020 and 2019, aggregate cash distributions declared per share of Class A and Class T common stock were $0.06322500 and $0.13610970, respectively, assuming the share was issued and outstanding each date that was a record date for distributions during the period. Class A and Class T common stock distributions for the period from January 1, 2019 through March 31, 2019 were calculated at a rate of $0.00151233 per share per day. Distributions declared per common share of Class A and Class T common stock were $0.02107500 per share for each month during the period from January 1, 2020 through March 31, 2020. Each day during the three months ended March 31, 2019 was a record date for distributions. During the three months ended March 31, 2020, distributions per common share were based on a monthly record date for each month. Square Footage, Occupancy and Other Measures Square footage, occupancy, number of tenants and other measures, including annualized base rent and annualized base rent per square foot, or amounts derived from such measures, used to describe real estate investments included in these condensed notes to consolidated financial statements are presented on an unaudited basis and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board. Recently Issued Accounting Standards Update In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”) to provide temporary optional expedients and exceptions to the guidance in GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR). Modified contracts that meet the following criteria are eligible for relief from the modification accounting requirements under GAAP: (1) The contract references LIBOR or another rate that is expected to be discontinued due to reference rate reform, (2) The modified terms directly replace or have the potential to replace the reference rate that is expected to be discontinued due to reference rate reform, and (3) Any contemporaneous changes to other terms (i.e., those that do not directly replace or have the potential to replace the reference rate) that change or have the potential to change the amount and timing of contractual cash flows must be related to the replacement of the reference rate. For a contract that meets the criteria, the guidance generally allows an entity to account for and present modifications as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. That is, the modified contract is accounted for as a continuation of the existing contract. In addition, ASU No. 2020-04 provides various optional expedients for hedging relationships affected by reference rate reform, if certain criteria are met. The amendments in ASU No. 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. An entity may elect to apply the amendments in ASU No. 2020-04 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU No. 2020-04) through March 31, 2020, the Company did not have any contract modifications that meet the criteria described above, specifically contract modifications that have been modified from LIBOR to an alternative reference rate. The Company’s loan agreements, derivative instruments, and certain lease agreements use LIBOR as the current reference rate. For eligible contract modifications, the Company expects to adopt the temporary optional expedients described in ASU No. 2020-04. The optional expedients for hedging relationships described in ASU No. 2020-04 are not expected to have an impact to the Company as the Company has elected to not designate its derivative instruments as a hedge. In April 2020, the FASB issued a FASB Staff Q&A related to Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic (the “Topic 842 Q&A”). The Company adopted the lease accounting standards of Topic 842 beginning January 1, 2019. Under Topic 842, subsequent changes to lease payments that are not stipulated in the original lease contract are generally accounted for as lease modifications. Some contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. If a lease contract provides enforceable rights and obligations for concessions in the contract and no changes are made to that contract, the concessions are not accounted for under the lease modification guidance in Topic 842. If concessions granted by lessors are beyond the enforceable rights and obligations in the contract, entities would generally account for those concessions in accordance with the lease modification guidance in Topic 842. Because of the unprecedented and global nature of the COVID-19 pandemic, the FASB staff is aware that it may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and whether those concessions are consistent with the terms of the contract or are modifications to the contract. As such, the FASB staff believes that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842 as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The FASB staff expects that reasonable judgment will be exercised in making those determinations. Some concessions will provide a deferral of payments with no substantive changes to the consideration in the original contract. A deferral affects the timing, but the amount of the consideration is substantially the same as that required by the original contract. The staff expects that there will be multiple ways to account for those deferrals, none of which the staff believes are more preferable than the others. Two of those methods are: (1) Account for the concessions as if no changes to the lease contract were made. Under that accounting, a lessor would increase its lease receivable, and a lessee would increase its accounts payable as receivables/payments accrue. In its income statement, a lessor would continue to recognize income, and a lessee would continue to recognize expense during the deferral period and (2) Account for the deferred payments as variable lease payments. The Company is evaluating the accounting elections available under Topic 842 Q&A for lease concessions related to the effects of the COVID-19 pandemic and its impact to the Company’s financial statements. The Company has created an inventory of tenants which have or are expected to request lease concessions. The Company did not have any material lease concessions related to the effects of the COVID-19 pandemic that had a material impact to the Company’s consolidated balance sheet as of March 31, 2020 or consolidated statement of operations for the three months ended March 31, 2020. Subsequent to March 31, 2020, a number of tenants have requested lease concessions or deferrals for future periods, which may have an impact on the Company’s business, financial condition and results of operations, but the ultimate impact will largely depend on future developments with respect to the continued spread and treatment of the virus, which the Company cannot accurately predict. |
REAL ESTATE HELD FOR INVESTMENT
REAL ESTATE HELD FOR INVESTMENT | 3 Months Ended |
Mar. 31, 2020 | |
Real Estate [Abstract] | |
REAL ESTATE HELD FOR INVESTMENT | REAL ESTATE HELD FOR INVESTMENT As of March 31, 2020, the Company’s portfolio of real estate held for investment was composed of three office buildings containing 582,791 rentable square feet, which were collectively 90.6% occupied. The following table provides summary information regarding the properties owned by the Company as of March 31, 2020 (in thousands): Property Date Acquired City State Property Type Total Real Estate at Cost (1) Accumulated Depreciation and Amortization (1) Total Real Estate, Net (1) Commonwealth Building 06/30/2016 Portland OR Office $ 78,863 $ (11,905) $ 66,958 The Offices at Greenhouse 11/14/2016 Houston TX Office 47,166 (8,062) 39,104 Institute Property 11/09/2017 Chicago IL Office 37,220 — 37,220 $ 163,249 $ (19,967) $ 143,282 _____________________ (1) Amounts presented are net of impairment charges and write-offs of fully depreciated/amortized assets. As of March 31, 2020, the following properties represented more than 10% of the Company’s total assets: Property Location Rentable Total Real Estate, Net Percentage of Annualized Base Rent (in thousands) (1) Average Annualized Base Rent per sq. ft. Occupancy Commonwealth Building Portland, OR 224,122 $ 66,958 43.7 % $ 5,585 $ 28.60 87.1 % The Offices at Greenhouse Houston, TX 203,284 39,104 25.5 % 4,206 20.69 100.0 % Institute Property Chicago, IL 155,385 37,220 24.3 % 3,626 28.01 83.3 % _____________________ (1) Annualized base rent represents annualized contractual base rental income as of March 31, 2020, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. Operating Leases The Company’s real estate properties held for investment are leased to tenants under operating leases for which the terms and expirations vary. As of March 31, 2020, the leases had remaining terms, excluding options to extend, of up to 9.3 years with a weighted-average remaining term of 3.5 years. Some of the leases have provisions to extend the term of the leases, options for early termination for all or a part of the leased premises after paying a specified penalty, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $0.9 million and $1.1 million as of March 31, 2020 and December 31, 2019, respectively. During the three months ended March 31, 2020 and 2019, the Company recognized deferred rent from tenants, net of lease incentive amortization, of $(0.2) million and $0.2 million, respectively. As of March 31, 2020 and December 31, 2019, the cumulative deferred rent balance was $2.8 million and $3.0 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $0.2 million and $0.2 million of unamortized lease incentives as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020, the future minimum rental income from the Company’s properties held for investment under its non-cancelable operating leases was as follows (in thousands): April 1, 2020 through December 31, 2020 $ 10,247 2021 12,692 2022 11,077 2023 8,426 2024 7,317 Thereafter 4,906 $ 54,665 As of March 31, 2020, the Company had a concentration of credit risk related to AECOM, one of the tenants in The Offices at Greenhouse in the engineering industry, which represented 22% of the Company’s annualized base rent. The tenant individually occupied 135,727 rentable square feet or approximately 23% of the total rentable square feet of the Company’s real estate portfolio held for investment, which expires on December 31, 2024, with two five As of March 31, 2020, the Company’s real estate properties held for investment were leased to 61 tenants over a diverse range of industries. The Company’s highest tenant industry concentration (greater than 10% of annualized base rent) was as follows: Industry Number of Tenants Annualized Base Rent (1) (in thousands) Percentage of Annualized Base Rent Professional, scientific and technical 9 $ 4,980 37.1 % Computer system design and related services 2 1,358 10.1 % _____________________ (1) Annualized base rent represents annualized contractual base rental income as of March 31, 2020, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. As of March 31, 2020, no other tenant industries accounted for more than 10% of annualized base rent. During the three months ended March 31, 2020 and 2019, the Company recorded an adjustment to rental income of $0.4 million and $12,000, respectively, for lease payments that were deemed not probable of collection. During the three months ended March 31, 2019, the Company recorded bad debt recovery of $27,000, which was included in operating, maintenance, and management expense in the accompanying consolidated statements of operations. No bad debt expense or recovery was recorded during the three months ended March 31, 2020. Impairment of Real Estate During the three months ended March 31, 2020, the Company recorded non-cash impairment charges of $5.8 million to write down the carrying value of the Institute Property, an office property located in Chicago, Illinois, to its estimated fair value as a result of changes in cash flow estimates including a change in leasing projections, which triggered the future estimated undiscounted cash flows to be lower than the net carrying value of the property. The decrease in cash flow projections was primarily due to reduced demand for the office space at the property resulting in longer lease-up periods and a decrease in projected rental rates and was further impacted by the COVID-19 pandemic which the Company believes will result in additional challenges to release the vacant space. Further, tenants at the Institute Property have been adversely impacted by the stay at home order issued for the City of Chicago and many tenants have requested rent concessions as their businesses have been severely impacted. |
TENANT ORIGINATION AND ABSORPTI
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES | 3 Months Ended |
Mar. 31, 2020 | |
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract] | |
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES | TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW- MARKET LEASE LIABILITIES As of March 31, 2020 and December 31, 2019, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands): Tenant Origination and Above-Market Below-Market March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 Cost $ 11,875 $ 13,822 $ 213 $ 213 $ (5,930) $ (6,213) Accumulated Amortization (5,696) (6,818) (100) (93) 3,682 3,680 Net Amount $ 6,179 $ 7,004 $ 113 $ 120 $ (2,248) $ (2,533) Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three months ended March 31, 2020 and 2019 were as follows (in thousands): Tenant Origination and Above-Market Below-Market For the Three Months Ended March 31, For the Three Months Ended March 31, For the Three Months Ended March 31, 2020 2019 2020 2019 2020 2019 Amortization $ (571) $ (690) $ (7) $ (7) $ 285 $ 350 |
REAL ESTATE SALES
REAL ESTATE SALES | 3 Months Ended |
Mar. 31, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
REAL ESTATE SALES | REAL ESTATE SALES During the three months ended March 31, 2020, the Company sold one office property. The results of operations for the property sold during the three months ended March 31, 2020 are included in continuing operations on the Company’s consolidated statements of operations. As of March 31, 2020, the Company did not have any real estate properties held for sale. The following table summarizes certain revenue and expenses related to the property that was sold during the three months ended March 31, 2020, which were included in continuing operations (in thousands): For the Three Months Ended March 31, 2020 2019 Revenues Rental income $ 102 $ 549 Other operating income — 21 Total revenues 102 570 Expenses Operating, maintenance, and management 39 163 Property management fees and expenses to affiliate 1 8 Real estate taxes and insurance 14 75 Asset management fees to affiliate 10 54 General and administrative expenses 13 2 Depreciation and amortization — 140 Interest expense 30 271 Total expenses 107 713 The following summary presents the major components of assets and liabilities related to real estate held for sale as of March 31, 2020 and December 31, 2019 (in thousands). No real estate properties were held for sale as of March 31, 2020: March 31, 2020 December 31, 2019 Assets related to real estate held for sale Total real estate, at cost $ — $ 20,602 Accumulated depreciation and amortization — (2,008) Real estate held for sale, net — 18,594 Other assets — 760 Total assets related to real estate held for sale $ — $ 19,354 Liabilities related to real estate held for sale Total notes payable, net $ — $ 13,948 Other liabilities — 1,057 Total liabilities related to real estate held for sale $ — $ 15,005 |
INVESTMENT IN UNCONSOLIDATED JO
INVESTMENT IN UNCONSOLIDATED JOINT VENTURE | 3 Months Ended |
Mar. 31, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
INVESTMENT IN UNCONSOLIDATED JOINT VENTURE | INVESTMENT IN UNCONSOLIDATED JOINT VENTURE On June 28, 2019, the Company, through an indirect wholly owned subsidiary, and FGPH 210 W. Chicago LLC (the “JV Partner”), entered into a limited liability company agreement to form a joint venture (the “Joint Venture”). Prior to entering into the Joint Venture, an affiliate of the JV Partner entered into a purchase and sale agreement to acquire an office property containing 16,239 rentable square feet located on approximately 8,072 square feet of land in Chicago, Illinois (“210 W. Chicago”), and such affiliate of the JV Partner assigned the purchase and sale agreement to the Joint Venture and the Joint Venture acquired 210 W. Chicago on June 28, 2019. The Company and the JV Partner each own a 50% equity interest in the Joint Venture, with the Company serving as the manager of the Joint Venture. Major decisions, as defined in the limited liability company agreement, require an affirmative unanimous written consent. Income, losses and distributions are generally allocated based on the members’ respective equity interests. Accordingly, the Company has accounted for its investment in the Joint Venture under the equity method of accounting. The contractual purchase price of 210 W. Chicago was $5.4 million plus closing costs. The Joint Venture funded the purchase of 210 W. Chicago with a $3.8 million mortgage loan from an unaffiliated lender and with contributions from the Joint Venture members. During the three months ended March 31, 2020, the Company recognized $0.5 million of equity loss, which included $0.5 million of impairment, related to its investment in the Joint Venture. As of March 31, 2020, the Company determined the carrying value of its investment to be less than fair value and measured the fair value of its investment to be $0.5 million, resulting in an impairment of $0.5 million for the three months ended March 31, 2020. The impairment was a result of the decline in fair value of the underlying 210 W. Chicago property due to changes in cash flow estimates including a change in leasing projections, which triggered future estimated undiscounted cash flows to be lower than the net carrying value of the property. The decrease in cash flow projections was primarily due to reduced demand for the office space at the property resulting in a decrease in projected rental rates as leases mature. Further, tenants at 210 W. Chicago have been adversely impacted by the stay at home order issued for the City of Chicago and many tenants have requested rent concessions as their businesses have been severely impacted. |
NOTES PAYABLE
NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2020 | |
Notes Payable [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 March 31, 2020 Book Value as of December 31, 2019 Contractual Interest Rate as of March 31, 2020 (1) Effective Interest Rate at March 31, 2020 (1) Payment Type Maturity Date (2) Commonwealth Building Mortgage Loan (3) $ 45,681 $ 45,681 One-month LIBOR +1.80% 3.39% Interest Only 02/01/2023 Term Loan (4) 49,150 72,800 One-month LIBOR + 2.00% 4.81% Interest Only 11/09/2020 Notes payable principal outstanding $ 94,831 $ 118,481 Deferred financing costs, net (508) (620) Notes payable, net $ 94,323 $ 117,861 _____________________ (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 (consisting of the contractual interest rate and the effect of interest rate swaps, if applicable), using interest rate indices as of March 31, 2020, where applicable. (2) Represents the maturity date as of March 31, 2020; subject to certain conditions, the maturity dates of certain loans may be extended beyond the dates shown. (3) As of March 31, 2020, there are two one (4) On January 17, 2020, in connection with the disposition of Von Karman Tech Center, pursuant to the terms of the Term Loan, the Company reduced the amount of the term commitment and revolving commitment to $39.4 million and $19.7 million, respectively. As of March 31, 2020, the outstanding balance under the Term Loan consisted of $39.4 million of term commitment and $9.7 million of revolving commitment. As of March 31, 2020, there are two one During the three months ended March 31, 2020 and 2019, the Company incurred $2.9 million and $2.0 million of interest expense, respectively. As of March 31, 2020 and December 31, 2019, $0.3 million and $0.4 million of interest expense were payable, respectively. Included in interest expense during the three months ended March 31, 2020 and 2019 were $0.1 million and $0.1 million of amortization of deferred financing costs, respectively. Interest expense (including gains and losses) incurred as a result of the Company’s derivative instruments increased interest expense by $1.9 million and $0.6 million for the three months ended March 31, 2020 and 2019, respectively. The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of March 31, 2020 (in thousands): April 1, 2020 through December 31, 2020 $ 49,150 2021 — 2022 — 2023 45,681 2024 — Thereafter — $ 94,831 |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes. The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate notes payable. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero. The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of March 31, 2020 and December 31, 2019. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands): March 31, 2020 December 31, 2019 Weighted-Average Weighted-Average Remaining Term in Years Derivative Instruments Number of Instruments Notional Amount Number of Instruments Notional Amount Reference Rate as of September 30, 2019 Derivative instruments not designated as hedging instruments Interest Rate Swaps 2 $ 78,533 2 $ 78,533 One-month LIBOR/ Fixed at 2.07% - 2.82% 2.36% 2.1 The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of March 31, 2020 and December 31, 2019 (dollars in thousands): March 31, 2020 December 31, 2019 Derivative Instruments Balance Sheet Location Number of Fair Value Number of Fair Value Derivative instruments not designated as hedging instruments Interest Rate Swaps Other liabilities, at fair value 2 $ (3,269) 2 $ (1,503) The change in fair value of a derivative instrument that is not designated as a cash flow hedge is included in interest expense in the accompanying consolidated statements of operations. The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations (in thousands): For the Three Months Ended March 31, 2020 2019 Income statement related Derivatives not designated as hedging instruments Realized loss (gain) recognized on interest rate swaps $ 132 $ (53) Unrealized loss on interest rate swaps 1,766 629 Increase in interest expense as a result of derivatives $ 1,898 $ 576 |
FAIR VALUE DISCLOSURES
FAIR VALUE DISCLOSURES | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE DISCLOSURES | FAIR VALUE DISCLOSURES Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other non-financial and financial assets at fair value on a non-recurring basis (e.g., carrying value of long-lived assets). Fair value, as defined under GAAP, is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories: • Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; • Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and • Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable. The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of financial instrument for which it is practicable to estimate the fair value: Cash and cash equivalents, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items. Derivative instruments: The Company’s derivative instruments are presented at fair value on the accompanying consolidated balance sheets. The valuation of these instruments is determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit risks to the contracts, are incorporated in the fair values to account for potential nonperformance risk. Notes payable: The fair value of the Company’s notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs. The following were the face values, carrying amounts and fair values of the Company’s notes payable as of March 31, 2020 and December 31, 2019, which carrying amounts generally do not approximate the fair values (in thousands): March 31, 2020 December 31, 2019 Face Value Carrying Amount Fair Value Face Value Carrying Amount Fair Value Financial liabilities: Notes payable $ 94,831 $ 94,323 $ 94,204 $ 118,481 $ 117,861 $ 119,196 Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. The actual value could be materially different from the Company’s estimate of value. As of March 31, 2020, the Company measured the following derivative instruments at fair value (in thousands): Fair Value Measurements Using Total Quoted Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs Recurring Basis: Liability derivative - interest rate swaps $ (3,269) $ — $ (3,269) $ — As of March 31, 2020, the Company measured the following asset(s) at fair value on a nonrecurring basis (in thousands): Fair Value Measurements Using Total Quoted Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs Nonrecurring Basis: Impaired real estate $ 37,100 $ — $ — $ 37,100 Investment in unconsolidated joint venture $ 528 $ — $ — $ 528 During the three months ended March 31, 2020, one of the Company’s real estate properties was measured at its estimated fair value based on a discounted cash flow approach. The significant unobservable inputs the Company used in measuring the estimated fair value of this property include a discount rate of 7.50% and a terminal cap rate of 6.25%. See Note 3, “Real Estate Held for Investment - Impairment of Real Estate” for further discussion on the impaired real estate property. In addition, during the three months ended March 31, 2020, the Company measured its investment in unconsolidated joint venture to its estimated fair value based on a discounted cash flow approach. The significant unobservable inputs the Company used in measuring the estimated fair value of the underlying property of the investment include a discount rate of 10.00% and a terminal cap rate of 6.75%. See Note 6, “Investment in Unconsolidated Joint Venture” for further discussion. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Pursuant to the Advisory Agreement, the Initial Private Offering Dealer Manager Agreement and the Public Offering Dealer Manager Agreement, the Company is or was obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Initial Private Offering and the Public Offering, the investment of funds in real estate, management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). The Company was also obligated to reimburse the Advisor and Dealer Manager for certain organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company, and the Company is obligated to reimburse the Advisor for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company. The Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. In addition, the Advisor has paid all offering expenses related to the Second Private Offering without reimbursement by the Company. In addition, in connection with certain property acquisitions, the Company, through indirect wholly owned subsidiaries, has entered into separate Property Management Agreements (defined below) with KBS Management Group, LLC, an affiliate of the Advisor (the “Co-Manager”). The Company has also entered into a fee reimbursement agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the DTCC Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor also serves or served as the advisor for KBS Real Estate Investment Trust II, Inc. (“KBS REIT II”), 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”) and Pacific Oak Strategic Opportunity REIT II, Inc., formerly KBS Strategic Opportunity REIT II, Inc. (“Pacific Oak Strategic Opportunity REIT II”). Effective October 31, 2019, the respective advisory agreements between the Advisor and Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II terminated. The Dealer Manager also serves or served as the dealer manager for KBS REIT II, KBS REIT III, Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II. Effective December 31, 2019, the respective dealer-manager agreements between the Dealer Manager, Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II terminated. 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 II, KBS REIT III, 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 II, KBS REIT III, Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II. 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, 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, 2020 2019 March 31, 2020 December 31, 2019 Expensed Asset management fees (1) $ 435 $ 461 $ 4,607 $ 4,171 Reimbursement of operating expenses (2) 54 49 37 29 Property management fees (3) 35 41 11 14 Disposition fees (4) 381 — — — Other Arrangement Advisor advance for cash distributions (5) — — 1,338 1,338 $ 905 $ 551 $ 5,993 $ 5,552 _____________________ (1) The asset management fee is a monthly fee payable to the Advisor in an amount equal to one-twelfth of 1.0% of the cost of the Company’s investments including the portion of the investment that is debt financed. As of March 31, 2020, the Company had accrued and deferred payment of $4.6 million of asset management fees related to October 2017 through March 2020. (2) See “Reimbursable Operating Expenses” below. (3) See “Real Estate Property Co-Management Agreements” below. (4) 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. (5) See “Advance from the Advisor” below. Reimbursable Operating Expenses Reimbursable operating expenses primarily related to directors and officers liability insurance, legal fees, state and local taxes, 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 $54,000 and $49,000 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, respectively. The Company does not reimburse for employee costs in connection with services for which the Advisor earned or 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. Effective September 29, 2017, the Company eliminated its obligation to reimburse expenses incurred by the Advisor in connection with providing services pursuant to the Advisory Agreement, other than (i) the allocable portion of the costs of the internal audit department and (ii) promotional costs and expenses related to the leasing of properties. The Advisor must reimburse the Company the amount by which the Company’s aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expenses for the four fiscal quarters ended March 31, 2020 did not exceed the charter-imposed limitation. Advance from the Advisor The Advisor advanced funds to the Company, which are non-interest bearing, for distribution record dates through the period ended May 31, 2016. As of March 31, 2020, the total advanced funds due to the Advisor from the Company was approximately $1.3 million, which is included in due to affiliates in the Company’s consolidated balance sheet. The Company is only obligated to repay the Advisor for its advance if and to the extent that: (i) the Company’s modified funds from operations (“MFFO”), as such term is defined by the Institute for Portfolio Alternatives and interpreted by the Company, for the immediately preceding month exceeds the amount of cash distributions declared for record dates of such prior month (an “MFFO Surplus”), and the Company will pay the Advisor the amount of the MFFO Surplus to reduce the principal amount outstanding under the advance, provided that such payments shall only be made if management in its sole discretion expects an MFFO Surplus to be recurring for at least the next two calendar quarters, determined on a quarterly basis; or (ii) Excess proceeds from third-party financings are available (“Excess Proceeds”), provided that the amount of any such Excess Proceeds that may be used to repay the principal amount outstanding under the advance shall be determined by the conflicts committee in its sole discretion. In determining whether Excess Proceeds are available to repay the advance, the Company’s conflicts committee will consider whether cash on hand could have been used to reduce the amount of third-party financing provided to us. If such cash could have been used instead of third-party financing, the third-party financing proceeds will be available to repay the advance. Real Estate Property Co-Management Agreements In connection with its property acquisitions, the Company, through separate, indirect, wholly-owned subsidiaries, entered into separate property management agreements (each, a “Property Management Agreement”) with the Co-Manager for each of its properties. Under each Property Management Agreement, the Co-Manager will provide certain management services related to these properties in addition to those provided by the third-party property managers. In exchange for these services, the Company pays the Co-Manager a monthly fee equal to a percentage of the rent, payable and actually collected for the month from each of the properties. Each Property Management Agreement has an initial term of one year and will be deemed renewed for successive one Property Name Effective Date Annual Fee Percentage Commonwealth Building 07/01/2016 1.25% The Offices at Greenhouse 11/14/2016 0.25% Institute Property 11/09/2017 1.00% Organization and Offering Costs Offering costs include all expenses incurred in connection with the offerings of securities by the Company. Organization costs include all expenses incurred in connection with the formation of the Company, including but not limited to legal fees and other costs to incorporate the Company. With respect to the Public Offering, the Advisor and the Dealer Manager generally paid the organization and offering expenses of the Company incurred in the Primary Offering (other than selling commissions, dealer manager fees and stockholder servicing fees) directly. The Company reimbursed the Advisor, the Dealer Manager and its affiliates up to 1% of gross proceeds raised in the Primary Offering for commercially reasonable organization and offering expenses (other than selling commissions, dealer manager fees and stockholder servicing fees). The Advisor, the Dealer Manager and their affiliates were responsible for all organization and other offering expenses (which excludes selling commissions, dealer manager fees and stockholder servicing fees) paid related to the Primary Offering to the extent they exceeded 1% of gross proceeds raised in the Primary Offering. The Company did not reimburse the Dealer Manager for wholesaling compensation expenses. During the Initial Private Offering, the Company was obligated to reimburse the Advisor and its affiliates for all organization and offering costs (excluding wholesaling compensation expenses) paid by them on behalf of the Company. The Advisor has agreed to pay directly all offering expenses related to the Second Private Offering without reimbursement by the Company. Through March 31, 2020, the Advisor and its affiliates had incurred organization and other offering costs (which exclude selling commissions, dealer manager fees and stockholder servicing fees) on the Company’s behalf in connection with the Public Offering of approximately $4.4 million. As of March 31, 2020, the Company had recorded $39,000 of organization and other offering expenses related to the Public Offering, which amount represents the Company’s maximum liability for organization and other offering costs as of March 31, 2020 based on the limitations described above. As of March 31, 2020, the Company had recorded $1.5 million of organization and other offering costs related to the Initial Private Offering. Organization costs were expensed as incurred and offering costs are deferred and charged to stockholders’ equity as such amounts were reimbursed to the Advisor, the Dealer Manager or their affiliates from the gross proceeds of the applicable offering. |
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 depends on the Advisor for certain services that are essential to the Company, including the management of the daily operations of the Company’s investment portfolio, disposition of investments and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services, the Company will be required to obtain such services from other sources. Legal Matters From time to time, the Company may become party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote. Environmental As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Although there can be no assurance, the Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s property, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the property could result in future environmental liabilities. |
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. Cash Distributions Paid On April 1, 2020, the Company paid cash distributions of $0.2 million, which related to a distribution declared for March 2020 in the amount of $0.02107500 per share of common stock to stockholders of record as of the close of business on March 20, 2020. On May 1, 2020, the Company paid cash distributions of $0.2 million, which related to a distribution declared for April 2020 in the amount of $0.02107500 per share of common stock to stockholders of record as of the close of business on April 20, 2020. COVID-19 Pandemic The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic will impact its tenants. While the Company did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, the Company did recognize impairment charges related to a projected reduction in cash flows related to a change in leasing projections that were impacted in part by the COVID-19 pandemic. Many of the Company’s tenants have experienced disruptions in their business, some more severely than others. In general, the Company’s retail tenants have been more severely impacted by the COVID-19 than the office tenants. In addition, in the last month, a number of tenants have requested rent relief as a result of the pandemic, and therefore, the Company is unable to predict the impact that the pandemic will have on its financial condition, results of operations and cash flows 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 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”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. |
Principles of Consolidation | The consolidated financial statements include the accounts of the Company, REIT Holdings, the Operating Partnership, and their direct and indirect wholly owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. |
Use of Estimates | The preparation of the consolidated financial statements and the accompanying notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. |
Segments | The Company was invested in three office properties as of March 31, 2020 and had made an investment in an unconsolidated joint venture. Substantially all of the Company’s revenue and net loss is from real estate, and therefore, the Company currently operates in one reportable segment. |
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 for the three months ended March 31, 2020 and 2019. Basic and diluted net income (loss) per share of Class A common stock and basic and diluted net income (loss) per share of Class T common stock were equal for the three months ended March 31, 2020 and 2019 as aggregate cash distributions for each share class were equal during those periods. During the three months ended March 31, 2020 and 2019, aggregate cash distributions declared per share of Class A and Class T common stock were $0.06322500 and $0.13610970, respectively, assuming the share was issued and outstanding each date that was a record date for distributions during the period. Class A and Class T common stock distributions for the period from January 1, 2019 through March 31, 2019 were calculated at a rate of $0.00151233 per share per day. Distributions declared per common share of Class A and Class T common stock were $0.02107500 per share for each month during the period from January 1, 2020 through March 31, 2020. Each day during the three months ended March 31, 2019 was a record date for distributions. During the three months ended March 31, 2020, distributions per common share were based on a monthly record date for each month. |
Square Footage, Occupancy and Other Measures | Square footage, occupancy, number of tenants and other measures, including annualized base rent and annualized base rent per square foot, or amounts derived from such measures, used to describe real estate investments included in these condensed notes to consolidated financial statements are presented on an unaudited basis and outside the scope of the Company’s independent registered public accounting firm’s review of the Company’s financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board. |
Recently Issued Accounting Standards Updates | In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”) to provide temporary optional expedients and exceptions to the guidance in GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR). Modified contracts that meet the following criteria are eligible for relief from the modification accounting requirements under GAAP: (1) The contract references LIBOR or another rate that is expected to be discontinued due to reference rate reform, (2) The modified terms directly replace or have the potential to replace the reference rate that is expected to be discontinued due to reference rate reform, and (3) Any contemporaneous changes to other terms (i.e., those that do not directly replace or have the potential to replace the reference rate) that change or have the potential to change the amount and timing of contractual cash flows must be related to the replacement of the reference rate. For a contract that meets the criteria, the guidance generally allows an entity to account for and present modifications as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. That is, the modified contract is accounted for as a continuation of the existing contract. In addition, ASU No. 2020-04 provides various optional expedients for hedging relationships affected by reference rate reform, if certain criteria are met. The amendments in ASU No. 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. An entity may elect to apply the amendments in ASU No. 2020-04 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. For the period from January 1, 2020 (the earliest date the Company may elect to apply ASU No. 2020-04) through March 31, 2020, the Company did not have any contract modifications that meet the criteria described above, specifically contract modifications that have been modified from LIBOR to an alternative reference rate. The Company’s loan agreements, derivative instruments, and certain lease agreements use LIBOR as the current reference rate. For eligible contract modifications, the Company expects to adopt the temporary optional expedients described in ASU No. 2020-04. The optional expedients for hedging relationships described in ASU No. 2020-04 are not expected to have an impact to the Company as the Company has elected to not designate its derivative instruments as a hedge. In April 2020, the FASB issued a FASB Staff Q&A related to Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic (the “Topic 842 Q&A”). The Company adopted the lease accounting standards of Topic 842 beginning January 1, 2019. Under Topic 842, subsequent changes to lease payments that are not stipulated in the original lease contract are generally accounted for as lease modifications. Some contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. If a lease contract provides enforceable rights and obligations for concessions in the contract and no changes are made to that contract, the concessions are not accounted for under the lease modification guidance in Topic 842. If concessions granted by lessors are beyond the enforceable rights and obligations in the contract, entities would generally account for those concessions in accordance with the lease modification guidance in Topic 842. Because of the unprecedented and global nature of the COVID-19 pandemic, the FASB staff is aware that it may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and whether those concessions are consistent with the terms of the contract or are modifications to the contract. As such, the FASB staff believes that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842 as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. For example, this election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. The FASB staff expects that reasonable judgment will be exercised in making those determinations. Some concessions will provide a deferral of payments with no substantive changes to the consideration in the original contract. A deferral affects the timing, but the amount of the consideration is substantially the same as that required by the original contract. The staff expects that there will be multiple ways to account for those deferrals, none of which the staff believes are more preferable than the others. Two of those methods are: (1) Account for the concessions as if no changes to the lease contract were made. Under that accounting, a lessor would increase its lease receivable, and a lessee would increase its accounts payable as receivables/payments accrue. In its income statement, a lessor would continue to recognize income, and a lessee would continue to recognize expense during the deferral period and (2) Account for the deferred payments as variable lease payments. The Company is evaluating the accounting elections available under Topic 842 Q&A for lease concessions related to the effects of the COVID-19 pandemic and its impact to the Company’s financial statements. The Company has created an inventory of tenants which have or are expected to request lease concessions. The Company did not have any material lease concessions related to the effects of the COVID-19 pandemic that had a material impact to the Company’s consolidated balance sheet as of March 31, 2020 or consolidated statement of operations for the three months ended March 31, 2020. Subsequent to March 31, 2020, a number of tenants have requested lease concessions or deferrals for future periods, which may have an impact on the Company’s business, financial condition and results of operations, but the ultimate impact will largely depend on future developments with respect to the continued spread and treatment of the virus, which the Company cannot accurately predict. |
REAL ESTATE HELD FOR INVESTME_2
REAL ESTATE HELD FOR INVESTMENT (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Real Estate [Abstract] | |
Schedule of Real Estate | The following table provides summary information regarding the properties owned by the Company as of March 31, 2020 (in thousands): Property Date Acquired City State Property Type Total Real Estate at Cost (1) Accumulated Depreciation and Amortization (1) Total Real Estate, Net (1) Commonwealth Building 06/30/2016 Portland OR Office $ 78,863 $ (11,905) $ 66,958 The Offices at Greenhouse 11/14/2016 Houston TX Office 47,166 (8,062) 39,104 Institute Property 11/09/2017 Chicago IL Office 37,220 — 37,220 $ 163,249 $ (19,967) $ 143,282 _____________________ (1) Amounts presented are net of impairment charges and write-offs of fully depreciated/amortized assets. |
Schedules of Concentration of Risk, by Risk Factor | As of March 31, 2020, the following properties represented more than 10% of the Company’s total assets: Property Location Rentable Total Real Estate, Net Percentage of Annualized Base Rent (in thousands) (1) Average Annualized Base Rent per sq. ft. Occupancy Commonwealth Building Portland, OR 224,122 $ 66,958 43.7 % $ 5,585 $ 28.60 87.1 % The Offices at Greenhouse Houston, TX 203,284 39,104 25.5 % 4,206 20.69 100.0 % Institute Property Chicago, IL 155,385 37,220 24.3 % 3,626 28.01 83.3 % _____________________ (1) Annualized base rent represents annualized contractual base rental income as of March 31, 2020, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term. |
Schedule of Future Minimum Rental Income for Company's Properties | As of March 31, 2020, the future minimum rental income from the Company’s properties held for investment under its non-cancelable operating leases was as follows (in thousands): April 1, 2020 through December 31, 2020 $ 10,247 2021 12,692 2022 11,077 2023 8,426 2024 7,317 Thereafter 4,906 $ 54,665 |
Schedules of Concentration of Risk, by Industry | As of March 31, 2020, the Company’s real estate properties held for investment were leased to 61 tenants over a diverse range of industries. The Company’s highest tenant industry concentration (greater than 10% of annualized base rent) was as follows: Industry Number of Tenants Annualized Base Rent (1) (in thousands) Percentage of Annualized Base Rent Professional, scientific and technical 9 $ 4,980 37.1 % Computer system design and related services 2 1,358 10.1 % _____________________ |
TENANT ORIGINATION AND ABSORP_2
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract] | |
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities | As of March 31, 2020 and December 31, 2019, the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands): Tenant Origination and Above-Market Below-Market March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 Cost $ 11,875 $ 13,822 $ 213 $ 213 $ (5,930) $ (6,213) Accumulated Amortization (5,696) (6,818) (100) (93) 3,682 3,680 Net Amount $ 6,179 $ 7,004 $ 113 $ 120 $ (2,248) $ (2,533) |
Amortization of Tenant Origination and Absorption Costs, Above-Market Leases and Below-Market Lease Liabilities | Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three months ended March 31, 2020 and 2019 were as follows (in thousands): Tenant Origination and Above-Market Below-Market For the Three Months Ended March 31, For the Three Months Ended March 31, For the Three Months Ended March 31, 2020 2019 2020 2019 2020 2019 Amortization $ (571) $ (690) $ (7) $ (7) $ 285 $ 350 |
REAL ESTATE SALES (Tables)
REAL ESTATE SALES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Revenue and Expenses of Real Estate Disposed | The following table summarizes certain revenue and expenses related to the property that was sold during the three months ended March 31, 2020, which were included in continuing operations (in thousands): For the Three Months Ended March 31, 2020 2019 Revenues Rental income $ 102 $ 549 Other operating income — 21 Total revenues 102 570 Expenses Operating, maintenance, and management 39 163 Property management fees and expenses to affiliate 1 8 Real estate taxes and insurance 14 75 Asset management fees to affiliate 10 54 General and administrative expenses 13 2 Depreciation and amortization — 140 Interest expense 30 271 Total expenses 107 713 |
Schedule of Assets and Liabilities of Properties Disposed | The following summary presents the major components of assets and liabilities related to real estate held for sale as of March 31, 2020 and December 31, 2019 (in thousands). No real estate properties were held for sale as of March 31, 2020: March 31, 2020 December 31, 2019 Assets related to real estate held for sale Total real estate, at cost $ — $ 20,602 Accumulated depreciation and amortization — (2,008) Real estate held for sale, net — 18,594 Other assets — 760 Total assets related to real estate held for sale $ — $ 19,354 Liabilities related to real estate held for sale Total notes payable, net $ — $ 13,948 Other liabilities — 1,057 Total liabilities related to real estate held for sale $ — $ 15,005 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Notes Payable [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 March 31, 2020 Book Value as of December 31, 2019 Contractual Interest Rate as of March 31, 2020 (1) Effective Interest Rate at March 31, 2020 (1) Payment Type Maturity Date (2) Commonwealth Building Mortgage Loan (3) $ 45,681 $ 45,681 One-month LIBOR +1.80% 3.39% Interest Only 02/01/2023 Term Loan (4) 49,150 72,800 One-month LIBOR + 2.00% 4.81% Interest Only 11/09/2020 Notes payable principal outstanding $ 94,831 $ 118,481 Deferred financing costs, net (508) (620) Notes payable, net $ 94,323 $ 117,861 _____________________ (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 (consisting of the contractual interest rate and the effect of interest rate swaps, if applicable), using interest rate indices as of March 31, 2020, where applicable. (2) Represents the maturity date as of March 31, 2020; subject to certain conditions, the maturity dates of certain loans may be extended beyond the dates shown. (3) As of March 31, 2020, there are two one (4) On January 17, 2020, in connection with the disposition of Von Karman Tech Center, pursuant to the terms of the Term Loan, the Company reduced the amount of the term commitment and revolving commitment to $39.4 million and $19.7 million, respectively. As of March 31, 2020, the outstanding balance under the Term Loan consisted of $39.4 million of term commitment and $9.7 million of revolving commitment. As of March 31, 2020, there are two one |
Schedule of Maturities of Long-term Debt | The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of March 31, 2020 (in thousands): April 1, 2020 through December 31, 2020 $ 49,150 2021 — 2022 — 2023 45,681 2024 — Thereafter — $ 94,831 |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Notional and Fair Value of Interest Rate Swaps | The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of March 31, 2020 and December 31, 2019. The notional amount is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands): March 31, 2020 December 31, 2019 Weighted-Average Weighted-Average Remaining Term in Years Derivative Instruments Number of Instruments Notional Amount Number of Instruments Notional Amount Reference Rate as of September 30, 2019 Derivative instruments not designated as hedging instruments Interest Rate Swaps 2 $ 78,533 2 $ 78,533 One-month LIBOR/ Fixed at 2.07% - 2.82% 2.36% 2.1 |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of March 31, 2020 and December 31, 2019 (dollars in thousands): March 31, 2020 December 31, 2019 Derivative Instruments Balance Sheet Location Number of Fair Value Number of Fair Value Derivative instruments not designated as hedging instruments Interest Rate Swaps Other liabilities, at fair value 2 $ (3,269) 2 $ (1,503) |
Schedule of Derivative Instruments in Statement of Operations | The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations (in thousands): For the Three Months Ended March 31, 2020 2019 Income statement related Derivatives not designated as hedging instruments Realized loss (gain) recognized on interest rate swaps $ 132 $ (53) Unrealized loss on interest rate swaps 1,766 629 Increase in interest expense as a result of derivatives $ 1,898 $ 576 |
FAIR VALUE DISCLOSURES (Tables)
FAIR VALUE DISCLOSURES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of Face Value, Carrying Amounts and Fair Value | The following were the face values, carrying amounts and fair values of the Company’s notes payable as of March 31, 2020 and December 31, 2019, which carrying amounts generally do not approximate the fair values (in thousands): March 31, 2020 December 31, 2019 Face Value Carrying Amount Fair Value Face Value Carrying Amount Fair Value Financial liabilities: Notes payable $ 94,831 $ 94,323 $ 94,204 $ 118,481 $ 117,861 $ 119,196 |
Fair Value Measurements, Recurring and Nonrecurring | As of March 31, 2020, the Company measured the following derivative instruments at fair value (in thousands): Fair Value Measurements Using Total Quoted Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs Recurring Basis: Liability derivative - interest rate swaps $ (3,269) $ — $ (3,269) $ — As of March 31, 2020, the Company measured the following asset(s) at fair value on a nonrecurring basis (in thousands): Fair Value Measurements Using Total Quoted Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs Nonrecurring Basis: Impaired real estate $ 37,100 $ — $ — $ 37,100 Investment in unconsolidated joint venture $ 528 $ — $ — $ 528 |
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, 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, 2020 2019 March 31, 2020 December 31, 2019 Expensed Asset management fees (1) $ 435 $ 461 $ 4,607 $ 4,171 Reimbursement of operating expenses (2) 54 49 37 29 Property management fees (3) 35 41 11 14 Disposition fees (4) 381 — — — Other Arrangement Advisor advance for cash distributions (5) — — 1,338 1,338 $ 905 $ 551 $ 5,993 $ 5,552 _____________________ (1) The asset management fee is a monthly fee payable to the Advisor in an amount equal to one-twelfth of 1.0% of the cost of the Company’s investments including the portion of the investment that is debt financed. As of March 31, 2020, the Company had accrued and deferred payment of $4.6 million of asset management fees related to October 2017 through March 2020. (2) See “Reimbursable Operating Expenses” below. (3) See “Real Estate Property Co-Management Agreements” below. (4) Disposition fees with respect to real estate sold are included in the gain on sale of real estate, net, in the accompanying consolidated statements of operations. (5) See “Advance from the Advisor” below. |
Schedule of Annual Fee Percentage | Property Name Effective Date Annual Fee Percentage Commonwealth Building 07/01/2016 1.25% The Offices at Greenhouse 11/14/2016 0.25% Institute Property 11/09/2017 1.00% |
ORGANIZATION (Details)
ORGANIZATION (Details) | Aug. 11, 2015USD ($)shares | Mar. 31, 2020USD ($)numberOfInvestmentsnumberOfPropertiesshares | Mar. 31, 2019USD ($)shares | Mar. 31, 2020USD ($)numberOfInvestmentsnumberOfPropertiesshares | Mar. 31, 2020USD ($)numberOfInvestmentsnumberOfPropertiesshares | Dec. 31, 2019shares | Oct. 03, 2017shares | Jun. 11, 2015shares | Feb. 04, 2015USD ($) | Jan. 27, 2015$ / sharesshares |
Organizational Structure [Line Items] | ||||||||||
Number of investments in unconsolidated joint venture | numberOfInvestments | 1 | 1 | 1 | |||||||
Core property, minimum percent of occupancy | 80.00% | 80.00% | 80.00% | |||||||
Issuance of common stock | $ | $ 269,000 | $ 1,667,000 | ||||||||
Redemptions of common stock | $ | $ 21,000 | |||||||||
Class A Common Stock | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Common stock, shares issued (in shares) | 9,870,515 | 9,870,515 | 9,870,515 | 9,841,004 | ||||||
Class T Common Stock | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Common stock, shares issued (in shares) | 308,712 | 308,712 | 308,712 | 306,292 | ||||||
Maximum | Class A Common Stock | Second Private Placement | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Shares authorized for issuance | 1,000,000,000 | |||||||||
Common Stock | Public Offering | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Issuance of common stock | $ | $ 3,900,000 | |||||||||
Stock issued during period, dividend reinvestment plan | $ | $ 8,200,000 | |||||||||
Common Stock | Class A Common Stock | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Shares authorized for dividend reinvestment plan | 5,000,000 | |||||||||
Issuance of common stock (in shares) | 46,362 | 29,511 | 177,957 | |||||||
Issuance of common stock | $ | $ 300,000 | $ 1,000 | $ 2,000 | |||||||
Redemptions of common stock (in shares) | 422,286 | |||||||||
Redemptions of common stock | $ | $ 3,500,000 | |||||||||
Common Stock | Class A Common Stock | Private Placement | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Issuance of common stock (in shares) | 8,548,972 | |||||||||
Issuance of common stock | $ | $ 76,800,000 | |||||||||
Stock issued during period, dividend reinvestment plan (in shares) | 74,744 | |||||||||
Stock issued during period, dividend reinvestment plan | $ | $ 700,000 | |||||||||
Common Stock | Class A Common Stock | Public Offering | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Issuance of common stock (in shares) | 122,721 | |||||||||
Stock issued during period, dividend reinvestment plan (in shares) | 855,475 | |||||||||
Common Stock | Class A Common Stock | Second Private Offering | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Issuance of common stock (in shares) | 612,272 | |||||||||
Issuance of common stock | $ | $ 5,500,000 | |||||||||
Common Stock | Class T Common Stock | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Issuance of common stock (in shares) | 2,420 | 3,296 | ||||||||
Redemptions of common stock (in shares) | 2,245 | 2,245 | ||||||||
Common Stock | Class T Common Stock | Public Offering | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Issuance of common stock (in shares) | 270,415 | |||||||||
Stock issued during period, dividend reinvestment plan (in shares) | 38,768 | |||||||||
Common Stock | Maximum | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Shares authorized for issuance, value | $ | $ 1,500,000,000 | |||||||||
Shares authorized for dividend reinvestment plan | $ | $ 800,000,000 | |||||||||
Common Stock | Maximum | Class A Common Stock | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Shares authorized for issuance | 105,000,000 | |||||||||
Office Building | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Number of real estate properties | numberOfProperties | 3 | 3 | 3 | |||||||
KBS Capital Advisors LLC | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Common stock, shares issued (in shares) | 20,000 | |||||||||
Purchase price per share (in usd per share) | $ / shares | $ 10 | |||||||||
KBS Growth & Income Limited Partnership | ||||||||||
Organizational Structure [Line Items] | ||||||||||
Managing member or general partner, ownership interest | 0.10% | |||||||||
Members or limited partners, ownership interest | 99.90% |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) | 3 Months Ended |
Mar. 31, 2020numberOfInvestmentsnumberOfPropertiesnumberOfSegments | |
Accounting Policies [Abstract] | |
Number of reportable segments | numberOfSegments | 1 |
Number of investments in unconsolidated joint venture | numberOfInvestments | 1 |
Office Building | |
Real Estate Properties [Line Items] | |
Number of real estate properties | numberOfProperties | 3 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Per Share Data (Details) - $ / shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Accounting Policies [Abstract] | ||
Potentially dilutive securities | 0 | 0 |
Class A Common Stock | ||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||
Distributions declared per share (in dollars per share) | $ 0.06322500 | $ 0.13610970 |
Distribution rate per share per day, declared (in dollars per share) | 0.02107500 | 0.00151233 |
Class T Common Stock | ||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||
Distributions declared per share (in dollars per share) | 0.06322500 | 0.13610970 |
Distribution rate per share per day, declared (in dollars per share) | $ 0.02107500 | $ 0.00151233 |
REAL ESTATE HELD FOR INVESTME_3
REAL ESTATE HELD FOR INVESTMENT - Additional Information (Details) | 3 Months Ended | |
Mar. 31, 2020USD ($)ft²numberOfProperties | Mar. 31, 2019USD ($) | |
Real Estate Properties [Line Items] | ||
Impairment charges | $ 5,800,000 | |
Lease Income | ||
Real Estate Properties [Line Items] | ||
Allowance for doubtful accounts | 400,000 | $ 12,000 |
Operating, Maintenance, and Management Expense | ||
Real Estate Properties [Line Items] | ||
Allowance for doubtful accounts | $ 0 | $ (27,000) |
Office Building | ||
Real Estate Properties [Line Items] | ||
Number of real estate properties | numberOfProperties | 3 | |
Rentable Square Feet | ft² | 582,791 | |
Occupancy | 90.60% |
REAL ESTATE HELD FOR INVESTME_4
REAL ESTATE HELD FOR INVESTMENT - Schedule of Real Estate Investments (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Real Estate Properties [Line Items] | ||
Total Real Estate at Cost | $ 163,249 | $ 173,131 |
Accumulated Depreciation and Amortization | (19,967) | $ (22,688) |
Total Real Estate, Net | $ 143,282 | |
Commonwealth Building | Office Building | ||
Real Estate Properties [Line Items] | ||
Date Acquired | Jun. 30, 2016 | |
Total Real Estate at Cost | $ 78,863 | |
Accumulated Depreciation and Amortization | (11,905) | |
Total Real Estate, Net | $ 66,958 | |
The Offices at Greenhouse | Office Building | ||
Real Estate Properties [Line Items] | ||
Date Acquired | Nov. 14, 2016 | |
Total Real Estate at Cost | $ 47,166 | |
Accumulated Depreciation and Amortization | (8,062) | |
Total Real Estate, Net | $ 39,104 | |
Institute Property | Office Building | ||
Real Estate Properties [Line Items] | ||
Date Acquired | Nov. 9, 2017 | |
Total Real Estate at Cost | $ 37,220 | |
Accumulated Depreciation and Amortization | 0 | |
Total Real Estate, Net | $ 37,220 |
REAL ESTATE HELD FOR INVESTME_5
REAL ESTATE HELD FOR INVESTMENT - Assets Concentration Risk (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($)ft²$ / ft² | |
Concentration Risk [Line Items] | |
Total Real Estate, Net | $ 143,282 |
Commonwealth Building | Assets, Total | |
Concentration Risk [Line Items] | |
Rentable Square Feet | ft² | 224,122 |
Total Real Estate, Net | $ 66,958 |
Percentage of Total Assets | 43.70% |
Annualized Base Rent | $ 5,585 |
Average Annualized Base Rent per sq. ft. | $ / ft² | 28.60 |
Occupancy | 87.10% |
The Offices at Greenhouse | Assets, Total | |
Concentration Risk [Line Items] | |
Rentable Square Feet | ft² | 203,284 |
Total Real Estate, Net | $ 39,104 |
Percentage of Total Assets | 25.50% |
Annualized Base Rent | $ 4,206 |
Average Annualized Base Rent per sq. ft. | $ / ft² | 20.69 |
Occupancy | 100.00% |
Institute Property | Assets, Total | |
Concentration Risk [Line Items] | |
Rentable Square Feet | ft² | 155,385 |
Total Real Estate, Net | $ 37,220 |
Percentage of Total Assets | 24.30% |
Annualized Base Rent | $ 3,626 |
Average Annualized Base Rent per sq. ft. | $ / ft² | 28.01 |
Occupancy | 83.30% |
REAL ESTATE HELD FOR INVESTME_6
REAL ESTATE HELD FOR INVESTMENT - Operating Leases, Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Operating Leased Assets [Line Items] | |||
Recognition of deferred revenue | $ (191) | $ 158 | |
Deferred rent receivables | 2,800 | $ 3,000 | |
Unamortized lease incentives | 200 | 200 | |
Other liabilities, at fair value | |||
Operating Leased Assets [Line Items] | |||
Security deposit liability | $ 900 | $ 1,100 | |
Maximum | |||
Operating Leased Assets [Line Items] | |||
Remaining terms | 9 years 3 months 18 days | ||
Weighted Average | |||
Operating Leased Assets [Line Items] | |||
Remaining terms | 3 years 6 months |
REAL ESTATE HELD FOR INVESTME_7
REAL ESTATE HELD FOR INVESTMENT - Future Minimum Rental Income (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Real Estate [Abstract] | |
April 1, 2020 through December 31, 2020 | $ 10,247 |
2021 | 12,692 |
2022 | 11,077 |
2023 | 8,426 |
2024 | 7,317 |
Thereafter | 4,906 |
Future minimum rental income | $ 54,665 |
REAL ESTATE HELD FOR INVESTME_8
REAL ESTATE HELD FOR INVESTMENT - Concentration Risk (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2020USD ($)ft²tenantextension$ / ft² | |
Concentration Risk [Line Items] | |
Number of tenants | 61 |
Customer Concentration Risk | |
Concentration Risk [Line Items] | |
Annualized base rent | $ | $ 2.9 |
Average Annualized Base Rent per sq. ft. | $ / ft² | 21.37 |
Customer Concentration Risk | Expires on December 31, 2024 | |
Concentration Risk [Line Items] | |
Extension options | extension | 2 |
Extension period | 5 years |
Customer Concentration Risk | Annualized Rent | |
Concentration Risk [Line Items] | |
Number of tenants | 1 |
Concentration risk, percentage | 22.00% |
Customer Concentration Risk | Rentable Square Feet | |
Concentration Risk [Line Items] | |
Concentration risk, percentage | 23.00% |
Net rentable area | ft² | 135,727 |
REAL ESTATE HELD FOR INVESTME_9
REAL ESTATE HELD FOR INVESTMENT - Highest Tenant Industry Concentrations- Grater than 10% of Annual Base Rent (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($)tenant | |
Concentration Risk [Line Items] | |
Number of Tenants | 61 |
Professional, scientific and technical | |
Concentration Risk [Line Items] | |
Number of Tenants | 9 |
Annualized Base Rent | $ | $ 4,980 |
Percentage of Annualized Base Rent | 37.10% |
Computer system design and related services | |
Concentration Risk [Line Items] | |
Number of Tenants | 2 |
Annualized Base Rent | $ | $ 1,358 |
Percentage of Annualized Base Rent | 10.10% |
TENANT ORIGINATION AND ABSORP_3
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Tenant Origination and Absorption Costs, Above-Market Lease Assets and Below-Market Lease Liabilities [Abstract] | |||
Tenant Origination And Absorption Costs, Cost | $ 11,875 | $ 13,822 | |
Tenant Origination and Absorption Costs, Accumulated Amortization | (5,696) | (6,818) | |
Tenant Origination and Absorption Costs, Net Amount | 6,179 | 7,004 | |
Tenant Origination and Absorption Costs, Amortization | (571) | $ (690) | |
Above-Market Lease Assets, Cost | 213 | 213 | |
Above-Market Lease Assets, Accumulated Amortization | (100) | (93) | |
Above-Market Lease Assets, Net Amount | 113 | 120 | |
Above-Market Lease Assets, Amortization | (7) | (7) | |
Below-Market Lease Liabilities, Cost | (5,930) | (6,213) | |
Below-Market Lease Liabilities, Accumulated Amortization | 3,682 | 3,680 | |
Below-Market Lease Liabilities, Net Amount | (2,248) | $ (2,533) | |
Below-Market Lease Liabilities, Amortization | $ 285 | $ 350 |
REAL ESTATE SALES (Revenue and
REAL ESTATE SALES (Revenue and Expenses) (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020USD ($)numberOfProperties | Mar. 31, 2019USD ($) | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Number of real estate properties sold | numberOfProperties | 1 | |
Revenues: | ||
Revenues | $ 4,617 | $ 5,317 |
Operating Expenses [Abstract] | ||
Operating, maintenance, and management | 954 | 1,082 |
Property management fees and expenses to affiliate | 35 | 41 |
Real estate taxes and insurance | 733 | 777 |
Asset management fees to affiliate | 435 | 461 |
General and administrative expenses | 473 | 375 |
Depreciation and amortization | 2,166 | 2,200 |
Interest expense | 2,888 | 1,976 |
Operating expenses | 13,434 | 6,912 |
Disposed of by Sale | ||
Revenues: | ||
Rental income | 102 | 549 |
Other Operating Income | 0 | 21 |
Revenues | 102 | 570 |
Operating Expenses [Abstract] | ||
Operating, maintenance, and management | 39 | 163 |
Property management fees and expenses to affiliate | 1 | 8 |
Real estate taxes and insurance | 14 | 75 |
Asset management fees to affiliate | 10 | 54 |
General and administrative expenses | 13 | 2 |
Depreciation and amortization | 0 | 140 |
Interest expense | 30 | 271 |
Operating expenses | $ 107 | $ 713 |
REAL ESTATE SALES (Assets and L
REAL ESTATE SALES (Assets and Liabilities) (Details) $ in Thousands | Mar. 31, 2020USD ($)numberOfProperties | Dec. 31, 2019USD ($) |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Real estate held for sale, net | $ 0 | $ 18,594 |
Total notes payable, net | $ 0 | 13,948 |
Held-for-Sale | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Number of real estate properties | numberOfProperties | 0 | |
Total real estate, at cost | $ 0 | 20,602 |
Accumulated depreciation and amortization | 0 | (2,008) |
Other assets | 0 | 760 |
Real estate held for sale, net | 0 | 18,594 |
Total assets related to real estate held for sale | 0 | 19,354 |
Total notes payable, net | 0 | 13,948 |
Other liabilities | 0 | 1,057 |
Total liabilities related to real estate held for sale | $ 0 | $ 15,005 |
INVESTMENT IN UNCONSOLIDATED _2
INVESTMENT IN UNCONSOLIDATED JOINT VENTURE (Details) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | Jun. 28, 2019USD ($)ft²numberOfProperties | |
Schedule of Equity Method Investments [Line Items] | ||||
Investment in unconsolidated joint venture | $ 528 | $ 1,000 | ||
Loss from equity method investments | 469 | $ 0 | ||
Impairment charges | 5,800 | |||
210 W. Chicago | Office Building | KBS Growth & Income REIT, Inc. | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Ownership percentage | 50.00% | |||
JV Partner | 210 W. Chicago | Office Building | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Number of real estate properties acquired | numberOfProperties | 1 | |||
Net rentable area | ft² | 16,239 | |||
Area of land | ft² | 8,072 | |||
Ownership percentage | 50.00% | |||
Investment in unconsolidated joint venture | $ 5,400 | |||
Current borrowing capacity | $ 3,800 | |||
Equity Method Investee | 210 W. Chicago | Office Building | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Investment in unconsolidated joint venture | 500 | |||
Loss from equity method investments | (500) | |||
Impairment charges | $ 500 |
NOTES PAYABLE - Schedule of Lon
NOTES PAYABLE - Schedule of Long-term Debt Instruments (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020USD ($)extension | Jan. 17, 2020USD ($) | Dec. 31, 2019USD ($) | |
Debt Instrument [Line Items] | |||
Notes payable principal outstanding | $ 94,831 | $ 118,481 | |
Deferred financing costs, net | (508) | (620) | |
Notes payable, net | 94,323 | 117,861 | |
Term Loan | |||
Debt Instrument [Line Items] | |||
Notes payable principal outstanding | $ 49,150 | 72,800 | |
Effective Interest Rate | 4.81% | ||
Mortgage | Commonwealth Building Mortgage Loan | |||
Debt Instrument [Line Items] | |||
Notes payable principal outstanding | $ 45,681 | $ 45,681 | |
Effective Interest Rate | 3.39% | ||
Amount outstanding | $ 45,700 | ||
Unused borrowing capacity, amount | $ 5,700 | ||
Number of extensions | extension | 2 | ||
Extension period | 1 year | ||
Mortgage | Commonwealth Building Mortgage Loan | One-month LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 1.80% | ||
Secured Debt | Term Loan | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 39,400 | $ 39,400 | |
Number of extensions | extension | 2 | ||
Extension period | 1 year | ||
Secured Debt | Term Loan | One-month LIBOR | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate | 2.00% | ||
Secured Debt | Term Loan | Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 9,700 | $ 19,700 |
NOTES PAYABLE - Additional Info
NOTES PAYABLE - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Notes Payable [Abstract] | |||
Interest expense | $ 2,888 | $ 1,976 | |
Interest payable, current | 300 | $ 400 | |
Amortization of deferred financing costs | 83 | 89 | |
Interest Rate Swaps | |||
Derivative [Line Items] | |||
Unrealized gain (loss) on derivatives | $ 1,900 | $ 600 |
NOTES PAYABLE - Schedule of Mat
NOTES PAYABLE - Schedule of Maturities of Long-Term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Notes Payable [Abstract] | ||
April 1, 2020 through December 31, 2020 | $ 49,150 | |
2021 | 0 | |
2022 | 0 | |
2023 | 45,681 | |
2024 | 0 | |
Thereafter | 0 | |
Total notes payable, net | $ 94,831 | $ 118,481 |
DERIVATIVE INSTRUMENTS - Notion
DERIVATIVE INSTRUMENTS - Notional Amount (Details) - Derivative instruments not designated as hedging instruments - Interest Rate Swaps | 3 Months Ended | |
Mar. 31, 2020USD ($)numberOfInvestments | Dec. 31, 2019USD ($)numberOfInvestments | |
Derivative [Line Items] | ||
Number of Instruments | numberOfInvestments | 2 | 2 |
Notional Amount | $ | $ 78,533,000 | $ 78,533,000 |
Weighted-Average Fix Pay Rate | 2.36% | |
Weighted-Average Remaining Term in Years | 2 years 1 month 6 days | |
Minimum | One-month LIBOR | ||
Derivative [Line Items] | ||
Reference Rate | 2.07% | |
Maximum | One-month LIBOR | ||
Derivative [Line Items] | ||
Reference Rate | 2.82% |
DERIVATIVE INSTRUMENTS - Balanc
DERIVATIVE INSTRUMENTS - Balance Sheet (Details) - Derivative instruments not designated as hedging instruments - Interest Rate Swaps $ in Thousands | Mar. 31, 2020USD ($)numberOfInvestments | Dec. 31, 2019USD ($)numberOfInvestments |
Derivative [Line Items] | ||
Number of Instruments | 2 | 2 |
Other liabilities, at fair value | ||
Derivative [Line Items] | ||
Number of Instruments | 2 | 2 |
Liability, Fair Value | $ | $ (3,269) | $ (1,503) |
DERIVATIVE INSTRUMENTS - Statem
DERIVATIVE INSTRUMENTS - Statement of Operations (Details) - Derivative instruments not designated as hedging instruments - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Derivative [Line Items] | ||
Increase in interest expense as a result of derivatives | $ 1,898 | $ 576 |
Interest Rate Swaps | ||
Derivative [Line Items] | ||
Realized loss (gain) recognized on interest rate swaps | 132 | (53) |
Unrealized loss on interest rate swaps | $ 1,766 | $ 629 |
FAIR VALUE DISCLOSURES - Carryi
FAIR VALUE DISCLOSURES - Carrying Amounts of Notes Payable (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Notes payable, Face Value | $ 94,831,000 | $ 118,481,000 |
Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Notes payable, Value | 94,323,000 | 117,861,000 |
Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Notes payable, Value | $ 94,204,000 | $ 119,196,000 |
FAIR VALUE DISCLOSURES - Schedu
FAIR VALUE DISCLOSURES - Schedule of Assets and Liabilities at Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investment in unconsolidated joint venture | $ 528 | $ 1,000 |
Recurring Basis | Interest Rate Swaps | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liability derivative - interest rate swaps | (3,269) | |
Recurring Basis | Interest Rate Swaps | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liability derivative - interest rate swaps | 0 | |
Recurring Basis | Interest Rate Swaps | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liability derivative - interest rate swaps | (3,269) | |
Recurring Basis | Interest Rate Swaps | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liability derivative - interest rate swaps | 0 | |
Nonrecurring Basis | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired real estate | 37,100 | |
Investment in unconsolidated joint venture | 528 | |
Nonrecurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired real estate | 0 | |
Investment in unconsolidated joint venture | 0 | |
Nonrecurring Basis | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired real estate | 0 | |
Investment in unconsolidated joint venture | 0 | |
Nonrecurring Basis | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Impaired real estate | 37,100 | |
Investment in unconsolidated joint venture | $ 528 |
FAIR VALUE DISCLOSURES - Additi
FAIR VALUE DISCLOSURES - Additional Information (Details) | Mar. 31, 2020 |
Discount Rate | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Impaired real estate, measurement input | 7.50% |
Investment in unconsolidated joint venture, measurement input | 10.00% |
Terminal Cap Rate | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Impaired real estate, measurement input | 6.25% |
Investment in unconsolidated joint venture, measurement input | 6.75% |
RELATED PARTY TRANSACTIONS - Ad
RELATED PARTY TRANSACTIONS - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Nov. 01, 2019 | |
Related Party Transaction [Line Items] | ||||
Payment for administrative fees | $ 54 | $ 49 | ||
Limit of total operating expenses as a percent of net income for the four most recently completed fiscal quarters | 2.00% | |||
Limit of total operating expenses as a percent of average invested assets | 25.00% | |||
Due to affiliates | $ 5,993 | $ 5,552 | ||
Private Placement | ||||
Related Party Transaction [Line Items] | ||||
Other organization and offering costs | 1,500 | |||
KBS Capital Advisors LLC | ||||
Related Party Transaction [Line Items] | ||||
Due to affiliates | 1,300 | |||
KBS Capital Advisors LLC | Public Offering | ||||
Related Party Transaction [Line Items] | ||||
Offering costs, other than selling commissions and dealer manager fees | 4,400 | |||
Organization and offering costs | $ 39 | |||
KBS Capital Advisors LLC | Public Offering | Minimum | ||||
Related Party Transaction [Line Items] | ||||
Reimbursable offering costs determination, gross offering costs, percentage | 1.00% | |||
KBS Capital Advisors LLC | Public Offering | Maximum | ||||
Related Party Transaction [Line Items] | ||||
Reimbursable offering costs determination, gross offering costs, percentage | 1.00% | |||
KBS Capital Advisors LLC | Second Private Placement | ||||
Related Party Transaction [Line Items] | ||||
Amounts of transaction | $ 5,500 | |||
KBS Capital Advisors LLC | GKP Holding LLC | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 33.33% |
RELATED PARTY TRANSACTIONS - Re
RELATED PARTY TRANSACTIONS - Related-party Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Related Party Transaction [Line Items] | |||
Payable as of | $ 5,993 | $ 5,552 | |
Advisor and Dealer Manager | |||
Related Party Transaction [Line Items] | |||
Incurred | 905 | $ 551 | |
Payable as of | 5,993 | 5,552 | |
Advisor and Dealer Manager | Asset management fees | |||
Related Party Transaction [Line Items] | |||
Expenses | 435 | 461 | |
Payable as of | 4,607 | 4,171 | |
Advisor and Dealer Manager | Reimbursement of operating expenses | |||
Related Party Transaction [Line Items] | |||
Expenses | 54 | 49 | |
Payable as of | 37 | 29 | |
Advisor and Dealer Manager | Property management fees | |||
Related Party Transaction [Line Items] | |||
Expenses | 35 | 41 | |
Payable as of | 11 | 14 | |
Advisor and Dealer Manager | Disposition Fees | |||
Related Party Transaction [Line Items] | |||
Expenses | 381 | 0 | |
Payable as of | 0 | 0 | |
Advisor and Dealer Manager | Advisor advance for cash distributions | |||
Related Party Transaction [Line Items] | |||
Incurred | 0 | $ 0 | |
Payable as of | 1,338 | $ 1,338 | |
KBS Capital Advisors LLC | |||
Related Party Transaction [Line Items] | |||
Payable as of | $ 1,300 | ||
KBS Capital Advisors LLC | Cost of Investments | |||
Related Party Transaction [Line Items] | |||
Property management fee, percent fee | 1.00% |
RELATED PARTY TRANSACTIONS - _2
RELATED PARTY TRANSACTIONS - Real Estate Property Co-Management Agreement (Details) - KBS Management Group, LLC | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transaction [Line Items] | |
Initial term of management agreements | 1 year |
Successive periods, renewal | 1 year |
Period of termination notice | 30 days |
Period of termination notice with cause | 5 days |
Commonwealth Building | |
Related Party Transaction [Line Items] | |
Annual fee percentage | 1.25% |
The Offices at Greenhouse | |
Related Party Transaction [Line Items] | |
Annual fee percentage | 0.25% |
Institute Property | |
Related Party Transaction [Line Items] | |
Annual fee percentage | 1.00% |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands | May 01, 2020 | Apr. 01, 2020 | Apr. 30, 2020 | Mar. 31, 2020 | Mar. 31, 2019 |
Subsequent Event [Line Items] | |||||
Distributions declared | $ 644 | $ 1,328 | |||
Subsequent Event | Dividend Paid | |||||
Subsequent Event [Line Items] | |||||
Distributions declared | $ 200 | $ 200 | |||
Distributions declared per share (in dollars per share) | $ 0.02107500 | $ 0.02107500 |