The board of KBS Real Estate Investment Trust III Inc., a publicly registered non-traded real estate investment trust, has approved an $11.65 net value per share of the company’s common stock as of September 30, 2019. The REIT’s previous NAV per share was $12.02, as of December 3, 2018.
Excluding an $0.80 special dividend declared in October 2019, the company’s NAV per share would have been $12.45. Shares originally sold for $10.00 each.
The valuation is based on the estimated value of the company’s assets less the estimated value of its liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2019.
The change in the estimated value of the company’s investment in units of Prime US REIT (SGX Ticker: OXMU) as of December 3, 2019.
Duff & Phelps LLC, an independent third-party real estate valuation firm, assisted with the valuation, which was performed within Institute for Portfolio Alternatives guidelines, the company said. Duff & Phelps provided a valuation of $10.93 to $12.43 per share, with an approximate mid-range of $11.65 per share.
The REIT’s property portfolio consists of 18 office properties, one mixed use office/retail property and a multifamily development project held through a consolidated joint venture, which were purchased for combined $2.4 billion, including $32.2 million in acquisition fees and acquisition expenses. As of September 30, 2019, the REIT had invested $560.9 million in capital expenses, development costs and tenant improvements in these properties.
The total appraised value of the properties was $3.3 billion which, when compared to the total purchase price plus after capital improvements of $2.9 billion, results in a 17.2 percent increase in the estimated value.
The decrease in the estimated value of real estate properties per share compared to last year was primarily due to the sale of 11 properties to Prime US REIT, a newly formed Singapore real estate investment trust, which partially offset the increased appraised value of real estate properties.
In connection with the sale of the Singapore portfolio, the REIT acquired nearly 308 million units in Prime US REIT for $271 million representing a 33.3 percent ownership interest. In August 2019, the REIT sold 18.4 million of its Prime US REIT units for $16.2 million, reducing its ownership to 31.3 percent. The company used the proceeds to repay or reduce its mortgage debt.
Prime US REIT is managed by a joint venture between KBS Asia Partners, and unaffiliated companies Keppel Capital Two Pte. Ltd and Experion Holdings Pte. Ltd. KBS Asia Partners is an entity owned by KBS CEO Charles Schreiber Jr. and the Linda Bren 2017 Trust, which has an indirect majority ownership interest in the joint venture. Linda Bren is the widow of KBS co-founder and president Peter Bren, who passed away earlier this year.
The decrease ($0.37) in the estimated value per share from $12.02 to $11.65, includes the impact of the special dividend ($0.80), interest rate swap liability ($0.29), advisor participation fee potential liability ($0.08), Capital expenditures on real estate ($0.62). The company’s joint venture investments increased the NAV per share by $1.31 per share.
The REIT is planning to convert to an NAV REIT, and therefore, the board has decided to suspend ordinary redemptions under the company’s share redemption program.
KBS REIT III’s initial offering commenced in October 2010 and closed in July 2015 after raising approximately $1.8 billion.