KBS Real Estate Investment Trust III Inc.’s board of directors, citing “the continued impact of the economic slowdown on the company’s cash flows, which is primarily the result of rising interest rates and tenant lease expirations” announced a reduction in distribution and the suspension of ordinary redemptions.
KBS REIT III authorized a January 2023 distribution in the amount of $0.03833333 per share on the outstanding shares of the company’s common stock to stockholders as of Jan. 20, 2023, which the company expects to pay in February 2023. The company previously paid a distribution of $0.0498333 per share.
KBS REIT III’s board of directors also suspended ordinary redemptions under the company’s share redemption program. According to a filing with the SEC, the suspension is a direct result of the ongoing challenges affecting the commercial real estate industry, specifically commercial office buildings. According to the filing, a combination of the continued economic slowdown, rapidly rising interest rates, significant inflation and a lack of lending activity in the debt markets have contributed to considerable weakness in the commercial real estate capital markets.
Additionally, both upcoming and recent tenant lease expirations amidst the aforementioned headwinds coupled with slower than expected return-to-office, most notably in the San Francisco Bay Area where KBS REIT III owns several large assets, have had direct and material impacts on the company’s ability to access certain credit facilities which, in large part, provide liquidity to manage redemption requests.
According to the filing, KBS REIT III has concluded that it is critical to preserve capital given the current state of the markets. Doing so will allow the company to manage the real estate portfolio “more effectively in an effort to create the best outcome for stockholders.”
KBS REIT III says it will continue to evaluate the markets and its overall liquidity profile as it determines when to potentially remove the suspension on ordinary redemptions, though the company can give no assurance in this regard.
The company stated that all ordinary received redemption requests will be canceled and no ordinary redemption requests will be processed on the Jan. 31, 2023, redemption date. Further, no ordinary redemptions will be accepted or collected during the suspension of the share redemption program.