Pacific Oak Capital Advisors LLC, a sponsor of commercial real estate-focused alternative investments programs, will soon take over advisory duties of three real estate investment trusts previously managed by KBS Capital Advisors including KBS Strategic Opportunity REIT Inc., KBS Strategic Opportunity REIT II, and Keppel Pacific Oak US REIT, which trades on the Singapore stock exchange. In addition to these changes, other clues suggest that KBS Strategic Opportunity REIT could be planning to launch a new offering under Pacific Oak.
While a spokesperson for Pacific Oak said that they could not comment on a potential new offering, we do know that KBS Strategic Opportunity REIT reiterated its plans to convert to a net asset value (NAV) REIT, which is a perpetual entity that offers limited periodic liquidity at net asset value. Why convert to an NAV REIT unless another offering is on the horizon?
Back in October 2017, KBS Strategic Opportunity REIT filed preliminary proxy materials with the SEC disclosing its plans to convert to an NAV REIT, which are by far the most successful non-traded REITs from an equity raise perspective.
Also, in the 2018 annual report, the company explained that pursuing an NAV REIT conversion could potentially maximize the return to stockholders and provide additional liquidity. The company said that it “believes it is in the company’s and stockholder’s interests to raise additional capital and make new investments.”
“As an NAV REIT, we expect that we would conduct ongoing primary public offerings of our shares on a continuous basis. Such offerings would likely include new classes of common stock, which would allow us to offer different classes of common stock with different combinations of upfront and ongoing commissions and other fees payable to our dealer manager and participating broker-dealers. We believe that having a number of different share classes with different distribution compensation structures will improve our ability to sell shares and raise capital in the current market,” the company stated in the last annual filing.”
According to Robert A. Stanger & Co., in the first three quarters of 2019, NAV REITs raised $6.9 billion in investor equity, up 180 percent from the same period of 2018.
KBS Strategic Opportunity REIT and KBS Strategic Opportunity REIT II plan to change their names to Pacific Oak Strategic Opportunity REIT and Pacific Oak Strategic Opportunity REIT II upon the conclusion of the transition.
KBS Strategic Opportunity REIT launched its initial public offering in November 2009 and has raised approximately $637 million in investor equity from the offering and distribution reimbursement plan, as of the second quarter 2019. The company owns seven office properties and one office portfolio consisting of four office buildings and 14 acres of undeveloped land valued at $731.9 million.
Pacific Oak and its affiliates facilitate the acquisition, disposition and management of commercial real estate and commercial real estate-related investment products. Investment offerings include tax-advantaged Delaware statutory trusts (DSTs) and qualified opportunity zone funds (QOZFs), real estate investment trusts (REITs), as well as other value-add alternative investment products. Pacific Oak was founded in 2018 by Keith Hall and Peter McMillan.