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Another KBS REIT Warns It May Be Unable to Continue as a “Going Concern”

Another KBS REIT Warns It May Be Unable to Continue as a “Going Concern” Commercial Real Estate, Investment, KBS, Investment, Liquidation, Office, Real Estate, Real Estate Investment Trust, REIT, SEC, Alternative Investment

KBS Real Estate Investment Trust III Inc., a publicly registered non-traded real estate investment trust, indicated in a recent filing that, due to the current commercial real estate lending environment, there is “substantial doubt” regarding the REIT’s “ability to continue as a going concern.”

The KBS-sponsored non-traded REIT reported that its estimated net asset value fell from approximately $1.3 billion in September 2022 to around $833 million in December 2023. Similarly, it’s NAV per share fell from $9.00 in September 2022 to $5.60 in December 2023.

Additionally, the REIT reported that it has more than $1.7 billion in debt maturities in the next 12 months and “anticipates it may relinquish ownership of one or more secured properties,” as stated in the recent filing.

The first property which the REIT is relinquishing is 201 Spear Street, a roughly 300,000-square-foot office building located in San Francisco. The REIT reported that the lender on 201 Spear Street is finalizing the sale of the mortgage loan and title to the property via a prepackaged Deed in Lieu agreement with KBS. According to recent reports, the deal is expected to close for approximately $60 million, less than half of the $121 million that the REIT paid for the property in 2013.

The REIT cited the “severe leasing challenges” facing the San Francisco market due to ongoing crime, homelessness, and the slower-than-expected return of many office workers. As reported by the REIT, leasing at 201 Spear Street fell from 97% in 2019 to 64% in September 2023.

The REIT also reported challenges with 60th South Street, a Minneapolis office building which was only 77% leased, as of September 2023.

Earlier this year, The DI Wire reported on KBS Growth & Income REIT Inc., another KBS-backed, publicly registered non-traded real estate investment trust, which lost a Portland office tower to foreclosure. That REIT had also issued a “going concern” warning regarding its portfolio. In August 2020, KBS terminated their distribution reinvestment plan to pursue a liquidation strategy.

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