September 2, 2005
Mail Stop 4561
Charles J. Schreiber, Jr.
Chief Executive Officer
KBS Real Estate Investment Trust, Inc.
4343 Von Karman Avenue
Newport Beach, CA 92660
Re: KBS Real Estate Investment Trust, Inc.
Registration Statement on Form S-11/A-1
Filed August 10, 2005
Registration No. 333-126087
Dear Mr. Schreiber:
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
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.
Form S-11
1. We note your responses to previous comments 1 and 2. We may
have
further comment once you have submitted any additional material
requested.
2. We note your response to previous comment 3. Please revise the
chart to include the ownership interest of the executive officers
over GKP Holdings, PBren Investments, and Schreiber Real Estate
Investments in the chart rather than in the footnotes. Please
also
clarify in a footnote or otherwise that Peter McMillan is an
Executive Vice President, Treasurer, Secretary and Director of KBS
REIT, that Keith Hall is an Executive Vice President, that Peter
Bren
is your President, and that Charles Schreiber is your Chief
Executive
Officer and a Director. Please also revise to disclose the extent
to
which the executive officers of the registrant have received or
will
receive compensation from the registrant for services provided in
their capacity as principals of the advisor, dealer manager, or
their
affiliates.
Cover Page
3. We note your response to previous comment 9. Please make a
conforming change to the reference in the second paragraph that
discounts are available for "certain" categories of purchasers as
described under the "Plan of Distribution." In this connection,
please revise to substitute for the use of the word "certain" and
the
cross reference to the "Plan of Distribution" an explanation that
volume discounts are available to investors who purchase more than
50,000 shares through the same participating broker-dealer.
4. We reissue previous comment 12 as it relates to the risk factor
regarding your ability under your organizational documents to pay
distributions from the proceeds of the offering. You may include
disclosure relating to your general policy of not paying
distributions from offering proceeds. Please also revise here and
throughout your document, including in response to previous
comment
46, to use the 300% of net assets figure consistent with your
charter
and the NASAA Guidelines.
Summary
Will you use leverage, page 7
5. In your response to previous comment 17, please balance your
disclosure by stating that the amount of leverage may reduce the
amount of distributions to investors. Please clarify whether your
policy for borrowing in the early stages of development is
unlimited
once you have sought and obtained board approval to borrow beyond
the
75% limit. Tell us also how you calculated the debt financing
figure
of 50% of the value of your real estate investments.
What conflicts of interest will your advisor face? Page 8
6. In your response to previous comment 19, please remove the
mitigating language contained in the penultimate paragraph on this
page.
If I buy shares, will I receive dividends and how often?, page 13
7. We note the statement that "as explained below, for tax
purposes a
portion of your distribution will be treated as a return of
capital."
Please revise to clarify the circumstances under which a
distribution
will be treated as a return of capital.
How does a "best efforts" offering work? What happens if you
don`t
raise at least $2,500,000 in gross proceeds? Page 15
8. We are still considering your responses to previous comment 31
and
66 and may have further comment.
Management, beginning on page 49
9. We note your response to previous comment 38 and the added
organizational chart. Please also quantify the ownership
interests
in the Management section as previously requested.
Prior Performance, page 89
10. We note your response to previous comment 47. It appears from
the terms of some of the agreements that the limited partners have
decision making authority in the investment of funds in real
property
and that the general partner may not act without the approval of
the
limited partners in acquiring property or making investment
decisions
on behalf of the limited partnership without approval from the
limited partners. For example, we note section 6 of the
Investment
Management Agreement with the Teachers Retirement System of the
State
of Illinois (relating to separate accounts 6/93,10/94, 5/96, and
3/03), and page 16 of exhibit A to that agreement. We note
section
7.3(a) of the agreements with Separate Account 10/04, SM Brell,
L.P.,
and with Separate Account 1/98. Since the investors in those
agreements play a central role in the investment decision making
process and do not appear to be passive investors, it does not
appear
that these are the types of prior programs that should be included
in
your discussion of prior performance as contemplated under Guide
5.
Please delete the references to programs where investors play a
central role in investment decision making for the program or
advise
further.
11. In your response to previous comment 50 and 62, we note your
statement that the excess distribution was "generally
attributable"
to the release of cash reserves generated from prior years`
operations. Please disclose specifically the sources of
distribution
other than from excess cash generated from operations in prior
periods.
12. In your response to previous comment 50 we note your statement
that you have included disclosure that the properties owned by the
funds have already generated $4.5 billion in operating cash flow
and
sales proceeds to "complete the summary description of the
sponsor`s
track record." We reissue the comment asking you to present a
more
balanced summary of the results of operations of these programs as
disclosed in Table III. Further, the aggregation of cash flows
and
sales proceeds of 17 funds does not appear to provide investors
with
meaningful information regarding the sponsor`s track record.
Federal Income Tax Considerations, page 89
13. We note your response to previous comment 51 and reissue the
comment. Please revise to reflect that you have received an
opinion
of counsel which opinion must speak as of the effective date and
must
be filed prior to effectiveness.
14. We note your response to previous comment 52. Please revise
to
clarify that DLA Piper Rudnick Gray Cary US LLP has opined that
you
were organized in conformity with the requirements for
qualification
and taxation as a REIT and that your proposed method of operation
will allow you to meet the requirements for qualification and
taxation as a REIT under the Code rather than that you expect them
to
render an opinion on this issue.
15. We note your statement on page 95 that the opinion of DLA
Piper
Rudnick Gray Cary US LLP will be based on various assumptions and
will be subject to limitations. Please revise to briefly describe
those assumptions and limitations.
Consolidated Balance Sheet
Notes to Consolidated Balance Sheet
Summary of Significant Accounting Policies
Organizational, Offering and Related Costs, page F-8
16. We note your response to prior comment 57 and still do not
understand the considerations that you made in determining that
reimbursement of the $785,000 of organizational and offering costs
is
not probable or estimable. Specifically confirm whether or not
you
believe it is likely that you will be able to sell enough shares
in
the offering to achieve the minimum offering level and,
separately,
the level that the full $785,000 in costs will be reimbursed to
the
Advisor. Please clarify what it means that the reimbursement will
not exceed 15% of gross offering proceeds on a continuing basis.
Does it mean that organizational costs incurred by the advisor as
of
June 15, 2005 may be reimbursed in a subsequent period or year and
that it is likely that all costs will be reimbursed as some point
as
long as you are able to achieve a sales breakeven point in the
future? Additionally, please advise if you have considered SOP
98-5
and SAB Topic 1B in reaching your determination on how to account
for
organization and offering costs incurred through June 15, 2005.
17. We note your disclosure that the $785,000 in costs are not
recorded in the financial statements as of June 15, 2005 because
such
costs are not a liability until the Advisory Agreement is executed
and the terms related to the reimbursement of such costs are
determined. Based upon your response to prior comment 57, it
appears
that the execution of the Advisory Agreement is virtually assured
and
that it will include terms substantially identical to those
disclosed
in this filing. As such, please revise your disclosure.
Performance Tables, beginning on page F-13
Table II
18. We refer to your response to previous comment 59 and reissue
the
comment. We note from disclosure in the introduction to the
tables
on page F-13 your statement that all prior programs contained in
the
tables had investment objectives similar to the registrant.
However,
Instruction 3 to Table II provides that only nonpublic programs
with
dissimilar investment objectives should be grouped together or
aggregated.
Table III, Commingled Account 6/99
19. We note your response to prior comment 62. We also note that
amounts distributed in commingled account 6/99 during the years
2000
and 2001 were in excess of cash generated from operations and
sales
during those same years by approximately $270,000 and $1,017,000,
respectively. Please advise whether the excess distributions
mentioned above can be attributed to the release of cash reserves
generated from operations and sales during the period from June
1999
to December 1999 or otherwise help us to understand the source for
the excess distributions.
20. We note your response to previous comment 63. As previously
requested, please identify the unconsolidated subsidiary and
disclose
any affiliation between the unconsolidated subsidiary and Separate
Account 12/98.
Part II
Item 33. Recent Sales of Unregistered Securities
21. Please revise to clarify here and throughout Part II, to whom
you
are referring when you refer to the "Company." In this
connection,
we note your statement that "the Company" and KBS REIT filed
Articles
of Merger and KBS REIT was merged into the Company.
* * *
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 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 filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed 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, in the event 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 Howard Efron at 202-551-3439 or Steven
Jacobs,
Accounting Branch Chief, at 202-551-3403 if you have questions
regarding comments on the financial statements and related
matters.
Please contact Charito A. Mittelman at 202-551-3404 or me at 202-
551-
3495 with any other questions.
Sincerely,
Elaine Wolff
Legal Branch Chief
cc: Robert H. Bergdolt, Esq. (via facsimile)
DLA Piper Rudnick Gray Cary U.S. LLP
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Charles J. Schreiber, Jr.
KBS Real Estate Investment Trust, Inc.
September 2, 2005
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