Mail Stop 4561
September 9, 2005
Jack A. Cuneo
President and Chief Executive Officer
CB Richard Ellis Realty Trust
865 South Figueroa Street, Suite 3500
Los Angeles, California 90017
Re: CB Richard Ellis Realty Trust
Form S-11
Filed on August 10, 2005
File No. 333-127405
Dear Mr. Cuneo:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General Comments
1. Please provide us with copies of any graphics, maps,
photographs,
and related captions or other artwork including logos that you
intend
to use in the prospectus.
2. We note that you are registering shares to be offered under a
dividend reinvestment plan to investors in the offering. Please
advise us whether persons who become shareholders other than by
participating in the offering may purchase shares through the
dividend reinvestment plan, and, if so, whether you intend to
distribute to those persons a separate prospectus relating solely
to
the dividend reinvestment plan. Please also advise us whether you
intend to keep updated and distribute the prospectus included in
this
registration statement so long as offers and sales are being made
under the dividend reinvestment plan or if you intend to use a
separate prospectus relating solely to the dividend reinvestment
plan. In either case, if you do intend to distribute a separate
prospectus relating to the dividend reinvestment plan, please
amend
the registration statement to include the separate prospectus or
alternate pages that provide a reasonably detailed description of
the
plan.
3. Please be advised that you are responsible for analyzing the
applicability of the tender offer rules to your share repurchase
plan
and for determining the availability of any exemption under Rule
13e-
4 and Regulation 14E. We urge you to consider all the elements of
your share repurchase program in determining whether the program
is
consistent with relief granted by the Division of Corporation
Finance
in prior no action letters. See, for example, T REIT Inc. (Letter
dated June 4, 2001), Wells Real Estate Investment Trust II, Inc.
(Letter dated December 3, 2003) and Hines Real Estate Investment
Trust, Inc. (Letter dated June 4, 2004). To the extent you have
questions as to whether the program is entirely consistent with
the
relief previously granted by the Division of Corporation Finance,
you
may contact the Division`s Office of Mergers and Acquisitions.
4. Please advise us how the redemption of shares will be conducted
in
a manner that is consistent with the restrictions on activities by
issuers during distributions of securities set forth in Regulation
M.
This discussion should address compliance with Regulation M in the
current offering and any offerings that may take place in the
future.
5. Please provide us with all promotional material and sales
literature, including material that will be used only by broker-
dealers. In this regard, note that sales materials must set forth
a
balanced presentation of the risks and rewards to investors and
should not contain any information or disclosure that is
inconsistent
with or not also provided in the prospectus. Refer to Item 19.B
of
Industry Guide 5.
6. We note that you do not appear to have included a dealer
prospectus delivery obligation on the outside back cover page of
the
prospectus. Please revise or alternatively tell us why it is not
appropriate. Refer to Item 502 of Regulation S-K.
7. The basis for comparative factual assertions and for your
management`s beliefs must be clear from the text of the prospectus
or
supporting documents must be provided to us. Please revise your
disclosure throughout the document to address our concerns, or
advise
us as necessary. In providing support, clearly mark the location
of
the information you believe is supportive of the statement
referenced. We note, for example, but without limitation that you
state:
* on page 10 and 48, "CBRE Investors` research department believes
that the U.S. economic expansion is broad-based and sustainable;"
* on page 1, 2 and 8, `CB Richard Ellis, the largest global
commercial real estate services firm, based on 2004 revenue;"
* on page 2, "CBRE Investors manages approximately $15.1 billion
in
real estate assets worldwide for some of the largest institutional
real estate investors in the world."
8. We note your use of the term "leading" throughout the document.
For instance, on page 9 you note that your "key resources include
local market intelligence from the CB Richard Ellis network and
analysis from its leading real estate market research affiliate,
Torto Wheaton Research." The term "leading" is vague and
abstract.
Please revise to clarify your use of this term and provide us with
current industry data that supports your assertions. In providing
support, clearly mark the location of the information you believe
is
supportive of the statement referenced.
9. Please clearly explain your business with the goals of plain
English in mind. The first time you utilize industry jargon and
technical terms please either define the terms or refrain from
using
them. In this regard, please either revise to explain or delete
the
following terms:
* "top-down" strategic research direction
* "bottom-up" analysis
* institutional quality properties
* Class A property (page 62)
10. Please provide the disclosure required by Item 11(d) of Form
S-11
regarding your promoters.
Cover
11. You state that that you invest in "high quality real estate
properties." Please revise to define the term "high quality."
12. The cover page should contain only information required by
Item
501 or that is key information. In this connection please delete
the
second sentence in the first paragraph. Further, please omit
cross-
references from the cover page other than the cross-reference to
the
risk factor section. See our Plain English Handbook available at
www.sec.gov.
13. In this connection, we note your statement that selling
commissions may be reduced or waived for "certain" categories of
purchasers. Please revise to briefly identify those categories of
purchasers rather than including a cross-reference to the "Plan of
Distribution."
14. Please revise the cover page risk factors to include the risk
that although you anticipate that aggregate borrowings will not
exceed 65% of the cost of your assets, the limitation on your
borrowings imposed by your charter is 300% of net assets and the
risk
that high leverage will reduce your ability to pay distributions.
15. Please revise the second cover page risk factor to clarify
that
you have not identified any specific property to purchase with the
proceeds of the offering.
16. Please revise the third cover page risk factor to briefly
identify the affiliated parties, how you are affiliated and to
briefly identify the nature of the conflicts including that the
advisory agreement was not negotiated at arms-length and that the
advisor will receive compensation regardless of the performance of
the properties.
Table of Contents
17. Please revise to include all risk factor subheadings.
Questions and Answers about this Offering, page 1
18. Please be aware that we view the Question and Answer section
and
the Summary section of the prospectus to be one section. Your Q&A
should not repeat any information that appears in the summary and
vice versa. To the extent there is repetitive text in these
sections, please revise to minimize the repetition. We note, for
example, that both sections contain information relating to your
intended operations and material terms of the offering. As
written,
the Q&A and Summary sections are lengthy and do not provide
investors
with a clear, concise and coherent "snapshot" description of the
most
significant aspects of the offering. Please limit your summary to
key information about your business and your offering, and provide
the more detailed disclosure in the body of the prospectus. Refer
to
Securities Release 33-6900 and Item 3 of Industry Guide 5.
How are you different from your competitors who offered unlisted
REIT
shares to the public, page 2
19. In listing the differences between yourself and your
competitors
who offer unlisted REITs, you state that your "investment strategy
is
research oriented and analytically based." You also note that you
"use a disciplined process in making investment decisions."
Please
advise us as to the basis for your assertions that your
competitors
are utilizing neither a research oriented and analytically based
investment strategy nor a disciplined investment decision process.
Summary, page 8
20. Please revise to include a separately captioned discussion of
conflicts of interest that identifies all persons and entities
with
conflicts of interests or potential conflicts of interests,
describe
the nature of each person`s affiliation with you and discuss the
nature of each conflict identified.
21. We note that you may invest in "mortgages or other investments
where we could seek to acquire the underlying property."
Similarly,
in the business section you state that you may invest in "other
real
estate-related assets." Please revise to briefly discuss here,
and
in more detail in the business section, the nature of the
mortgages
or "other investments" in which you may invest. For example, if
you
may invest in second mortgages, construction loans, subprime
mortgages, mezzanine debt or mortgage-backed securities, please
revise to discuss these investments and whether there are any
limitations on the amount that may be invested in each category of
investment. Further, please revise to include a discussion of
the
investment criteria for loans in which you may invest. Refer to
Item
13(b) of Form S-11.
22. Please revise to include an organization chart that reflects
your
current structure and ownership as well as the ownership of your
affiliates.
Acquisition Strategy, page 9
23. Please revise to disclose that there are no limitations on the
amount that you may invest in any type of permitted investment.
Risk Factors, page 11
24. Please revise so that your summary risk factors appear no
later
than the second page of your summary. Further, you state on the
cover page and on page 11 that the Risk Factors section begins on
page 16. Please note that the Risk Factors section begins on page
17.
Compensation To The Investment Advisor; Equity Investment By An
Affiliate Of The Investment Advisor, page 13
25. Please revise to specifically note that the Initial
Administration Fee are not related to the performance of the
properties you hold.
Distributions, page 14
26. You state that "[p]rovided we have sufficient cash flow to pay
dividends, we intend to declare dividends on a daily basis and we
expect to pay dividends to you on a quarterly basis." Please
revise
to note that you will have to sell properties or borrow money if
your
cash available for distribution is less than 90% of your REIT
taxable
income.
27. Please revise your disclosure to note that distributions may
constitute a return of capital, rather than a dividend on
investments.
Share Redemption Program, page 14
28. You note on page 80 that you cannot guarantee that any funds
set
aside for your share redemption program will be sufficient to
accommodate any requests made in any year. Please revise this
section to note this fact.
Risk Factors, page 17
29. Mitigating statements are not appropriate in the risk factor
discussion. Please revise your risk factors to remove all
mitigating
language. For example:
* on page 25, you state that "although we believe that the
properties
that we will acquire will be substantially in compliance with
present
requirements"
* on page 27, you state that "although this cannot be assured, we
believe that any noncompliance with the REIT 5% asset test
resulting
from our investment in the fund should be due to reasonable cause
and
not willful neglect and, therefore, our qualification as a REIT
should not be affected."
30. We note that you may invest in undeveloped property and
"mortgages or other investments where we could seek to acquire the
underlying property." Please revise to include separately
captioned
risk factors that discuss the risks associated with each of your
permitted types of investments and any impact on distributions to
investors. For example, if you may invest in second mortgages,
construction loans, subprime mortgages, mezzanine debt or
mortgage-
backed securities, please revise to discuss the risks associated
with
each type of investment.
31. We note that you plan to use derivative financial instruments
for
hedging such as interest rate swap and cap agreements. Please
disclose in the risk factors section all associated risks for all
of
your derivative instruments, including, without limitation, risks
such as basis risks, credit risk, and legal enforceability risks.
Make clear that hedging strategies may reduce the overall returns
on
your investments. Describe in sufficient detail the policies and
procedures implemented to address risks associated with the use of
derivatives. If no such policies and procedures are in place,
please
disclose so in the risk factor section.
If the Investment Advisor loses or is unable to obtain key
personnel,
our ability to implement our investment strategies could be
delayed
or hindered, page 17
32. You indicated that you are dependent on the Investment
Advisor`s
key personnel. Please revise to identify all of the Investment
Advisor`s key personnel. If key personnel refers to those
directors
and executive officers listed on page 65, so state.
Conflict of Interest Risks, page 18
33. On page 72, you state that you "will not purchase or lease
properties in which the Investment Advisor or its affiliates has
an
ownership interest without a determination by a majority of our
trustees, including a majority of any independent trustees not
otherwise interested in such transaction." Please add a risk
factor
addressing potential purchases or leases of properties from your
Investment Advisor or its affiliates.
We pay substantial fees and expenses to the Investment Advisor,
its
affiliates and participating broker-dealers, which payments
increase
the risk that you will not earn a profit on your investment, page
18
34. You state you will pay the Investment Advisor and its
affiliates
substantial fees for their services. Please expand your
disclosure
to briefly describe these fees.
Real estate investments are long-term illiquid investments and may
be
difficult to sell, page 21
35. Please provide a separate risk factor for the bullet that
addresses the changes in interest rates.
Managements Discussion and Analysis of Financial Condition and
Results of Operations, page 35
36. Please disclose and discuss your financial and non-financial
performance indicators that management uses to manage and assess
the
business and that would be material to investors. Refer to SEC
Release 33-8350.
Overview, page 35
37. You state that you "conduct substantially all of [your]
activities through, and substantially all of [your] real estate
investments are held, directly or indirectly, by CBRE OP." Please
revise to note who or what besides CBRE OP conducts your
activities
and holds your real estate investments.
Result of Operations, page 39
38. Please note the exact dates of expiration for the three
commercial properties leases.
39. You state that you are "actively seeking acquisition and other
investment opportunities in other markets of the US, and in
Western
Europe and Japan, some of which are in various stages of
negotiation
and due diligence." Please revise to note if you have entered
into
any firm commitments in regards to any of these properties.
40. We note that you are in various stages of negotiation and due
diligence with respect to additional acquisition activities.
Please
tell us and clarify if true that these do not represent probable
acquisitions, or advise us of your consideration of Rule 3-14 of
Regulation S-X.
Financial Condition, Liquidity and Capital Resources, page 39
41. Please revise your disclosure to include the anticipated cash
outlay under the advisory agreement with your Investment Advisor
and
affiliates.
42. Please revise to note whether you have sufficient cash
resources,
without the proceeds of this offering, to continue in operation
for
the next twelve months. If necessary, you may differentiate
between
cash needed to maintain versus grow the operations.
43. We note your statement that your declaration of trust limits
your
borrowing to 300% of your net assets which is equivalent to 75% of
the cost of your assets. Please revise to explain how you are
defining "net assets" and please show us how 300% of your net
assets
equals 75% of the cost of your assets.
Qualitative Disclosures about Market Risk, page 41
44. Please tell us how you considered the disclosure requirements
of
Item 3-05 of Regulation S-K with respect to your fixed rate debt.
The Company, page 42
45. Please disclose your website if any. Refer to Item 101(e)(3)
of
Regulation S-K.
46. We note that you have adopted a performance bonus plan for
employees but do not have any full time employees. Please revise
to
note if you anticipate any material changes in the number of
employees. Refer to Item 101(a)(2) of Regulation S-K.
Prior Performance Summary, page 45
47. We note your disclosure that the tables provide information
concerning real estate programs sponsored by CBRE Investors and
its
affiliates which have investment objectives similar to yours. We
further note from your response to comment 61 that you have
provided
information for a sponsor with no public track record. Since CBRE
Investors and its affiliates do not appear to have sponsored at
least
three public programs with investment objectives similar to yours,
please revise the tables to provide information for each prior
program even if the investment objectives for those programs are
dissimilar. Please note that as to the programs with dissimilar
investment objectives, those programs may be grouped together in
some
of the tables. Please revise or advise.
48. Please revise to provide the information required by Item 8A
of
Guide 5, including for example, the total number of investors.
49. Please expand your statement that each of the 8 prior programs
had investment objectives that are similar to yours by disclosing
the
factors considered in determining that the prior programs had
investment objectives similar to the registrant. Further, please
revise to disclose that unlike this offering there were no sales
commissions paid in the prior programs in which 100% of the
amounts
raised were invested.
50. In your narrative disclosure, please include a description of
any
major adverse business developments encountered by your Investment
Advisor. We refer to Item 8.A.2 of Guide 5.
51. Tell us what consideration was given to discussing your
distributions in comparison to cash flow from operating activities
for your programs in which the distributions exceeded operating
cash
flow, identifying the alternative source of the distributions.
Development and Construction of Properties, page 50
52. Please disclose whether there is currently an affiliate of the
Investment Advisor that performs development activities or if the
Investment Advisor or its affiliates have plans to form such an
entity.
Management of the Company, page 56
53. Please revise to include a compensation table detailing the
compensation paid to your executive officers for your most
recently
completed fiscal year. Refer to Item 402 of Regulation S-K.
Our Executive Officers and Trustees, page 56
54. On page 57, you state that prior to the commencement of this
offering you will have five trustees. Please revise this section
to
note the fifth trustee once the trustee has been selected.
2004 Performance Bonus Plan, page 60
55. Please revise to note who can participate in this Bonus Plan.
For instance, please note whether your executives, trustees, or
employees of your Investment Advisor are eligible to participate
in
the Bonus Plan.
Certain Relationships and Related Party Transaction, page 70
56. We note your statement that "certain of our executive officers
and trustees are also officers and directors of the Investment
Advisor." Please revise to identify all related parties by name
and
position. To the extent known, please quantify their interests in
your manager or its affiliates, and the resulting interest in the
related transactions.
57. Please revise to discuss that the advisory agreement was
negotiated by related parties and that it may not be terminated
(except for cause) without substantial penalties and that
advisor`s
compensation is not necessarily tied to the performance of the
portfolio-or that it may encourage speculative behavior.
Ownership by the Investment Advisor and its Affiliates, page 71
58. You state that an affiliate of the Investment Advisor owns
25,000
class A units in CBRE OP and class B and class C limited
partnership
interests in CBRE OP. Please revise to note the identity of the
affiliate. Also, please revise to note the consideration paid for
these units and interests and whether these transactions were
conducted at arms-length.
Conflict Resolution Procedures, page 72
59. You state that you "will not purchase or lease properties in
which the Investment Advisor or its affiliates has an ownership
interest without a determination by a majority of our trustees,
including a majority of any independent trustees not otherwise
interested in such transaction." Please advise us if you
anticipate
that you will or whether you already have identified for purchase,
prior to the effectiveness of this registration statement, any
properties in which your Investment Advisor or its affiliates has
an
interest.
Affiliated Service Providers, page 74
60. You state that the "Investment Advisor intends to capitalize
on
its affiliation with CB Richard Ellis through a preferred services
relationship which improves access to the highest quality
professionals, the potential for a discounted "portfolio level"
fee
structure in the future, and national purchasing power for
supplies
and vendor contracts." Please revise to provide further detail on
the Investment Advisors "preferred services relationship." This
discussion should include whether there is written agreement
regarding the services to be provided. Also, please note how the
potential for a discounted "portfolio level" fee structure can be
realized. Lastly, please advise or revise to note the basis for
your
assertion that you will have access "to the highest quality
professionals."
Meetings and Special Voting Requirements, page 77
61. You note that "shareholders are entitled to vote at a duly
held
meeting at which a quorum is present." Please revise to note the
quorum requirements under Maryland law.
Transfer Restrictions, page 77
62. We note that your declaration of trust provides that any
transfer
of shares that would violate your share ownership limitation is
null
and void. Please expand your disclosure to discuss any
restrictions
on the transferability of shares imposed by state suitability
standards or blue sky laws. Refer to Item 16 of Industry Guide 5.
63. On page 71, you state that CBRE Investors, an affiliate of the
Investment Advisor, purchased 225,000 of your common shares. In
this
section, you note that CBRE Investors, owns approximately 218,000
common shares. Please advise us as to the reason for the
discrepancy
in the amount of shares owned by CBRE Investors.
The Operating Partnership Agreement, page 87
General, page 87
64. You state that "an affiliate of the Investment Advisor
purchased
25,000 common, or class A, units in CBRE Operating Partnership,
L.P."
Please revise to describe the class A units and common units of
the
Operating Partnership.
Certain U.S. Federal Income Tax Consequences, page 90
65. Please revise to reflect that you have received an opinion of
counsel. The opinion must speak as of the effective date and you
must file a signed opinion prior to effectiveness.
Compensation We Will Pay for the Sale of Our Shares, page 111
66. You note that you "will indemnify a participating broker-
dealer
against some civil liabilities, including certain liabilities
under
the Securities Act and liabilities arising from breaches of our
representations and warranties contained in any broker-dealer
agreement." Please provide a brief description of such
indemnification provisions.
Financial Statements
General
67. Please update the financial statements in accordance with Rule
3-
12 of Regulation S-X.
Note 6 - Concentrations, page F-18
68. We note your presentation of the consolidated condensed
financial
information of Pinault-Printemps-Redoute and Cobham, PLC. Clarify
if
the parent companies are subject to filing periodic reports with
the
Commission. If not, please tell us your basis for presenting
summarized financial information in lieu of audited financial
statements. In addition, confirm that the parent companies are
guarantors under the lease agreements.
Note 7 - Asset Management and Other Fees to Related Parties
Affiliate Equity Investment, page F-20
69. Clarify how you accounted for the Class B and C limited
partnership interests upon issuance and your basis in GAAP for
your
accounting treatment. Also explain how these interests were
valued.
Schedule III, page F-22
70. Please advise us how this schedule includes all of the
information required by Rule 12-28 of Regulation S-X or revise
accordingly.
Appendix A
Table II, A-3
71. Please tell us why the amounts shown as cash generated from
operations plus the amounts paid to sponsors does not agree with
the
amounts shown as cash generated from operations in Table III.
Table III - Operating Results of Prior Programs, page A-4
72. We note that you present unrealized appreciation
(depreciation)
in this table. Please disclose if these funds presented their
assets
at fair market value or at historical cost.
Part II
Item 33. Recent Sales of Unregistered Securities, page II-1
73. In the last sentence of the first paragraph, you state that
"CB
Richard Ellis Investors, L.L.C. also purchased 225,000 common
shares
of beneficial interest in the private placements at $9.70 a
share."
Please revise to clarify if these shares were included in the
5,818,799 shares sold from July 2004 to October 2004 or if this
was a
separate offering.
74. Please revise to identify the affiliate that purchased the
Class
A units in the OP.
Item 37. Undertakings, page II-4
75. As a matter of consistency with the rest of the registration
statement, please revise this section to replace your use of
"Advisor" with "Investment Advisor."
Exhibits
76. Please file all required exhibits as promptly as possible. We
must review all the exhibits prior to granting effectiveness of
the
registration statement and may have further comments after our
review. If you are not in a position to file your legal and tax
opinions with the next amendment, please provide draft copies for
our
review.
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, when the company requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Thomas Flinn, Accountant, at (202) 551-3469
or
Cicely Luckey, Accounting Branch Chief, at (202) 551-3413 if you
have
questions regarding comments on the financial statements and
related
matters. Please contact David Roberts, Staff Attorney, at (202)
551-
3856 or the undersigned at (202) 551-3852 with any other
questions.
Sincerely,
Elaine Wolff
Legal Branch Chief
cc: Robert E. King, Jr., Esq. (via facsimile)
Clifford Chance US LLP
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Jack A. Cuneo
CB Richard Ellis Realty Trust
September 9, 2005
Page 1