KBS REIT Sells McEwen Building to Contribute to Loan Obligations

Earlier this month, KBS Real Estate Investment Trust III Inc. completed the sale of the McEwen Building, an office building containing 175,262 rentable square feet located on approximately 10.7 acres of land in Franklin, Tenn.

KBS REIT III acquired the Class A office building at 1550 W. McEwen Drive for $40 million in 2012 and sold to Boyle Investment Co. for $48.8 million, before third-party closing costs of approximately $1.1 million and excluding disposition fees payable to KBS Capital Advisors.

According to third-party reporting, the office had a 95 percent occupancy rate at the time of the sale.

In October 2018, KBS REIT III’s indirect wholly owned subsidiaries entered into a loan facility (as subsequently modified and amended, the “Modified Portfolio Revolving Loan Facility”) with U.S. Bank National Association, as administrative agent. The current lenders under the Modified Portfolio Revolving Loan Facility are U.S. Bank National Association, Regions Bank, Citizens Bank, City National Bank and Associated Bank, and National Association.

KBS said the latest sale allows them to capitalize on a high-performing property and achieve additional liquidity in the current debt environment. As reported by The DI Wire and stated in a December 2023 filing with the U.S. Securities and Exchange Commission, KBS REIT III was facing $1.7 billion in loan maturities in 2024 and its debt load on the 16 properties it owned at the time could affect its solvency.

The REIT had previously received a two-year extension on a loan that included the McEwen Building and three other properties. More recently, the REIT was granted a fourth extension on a $613 million loan covering a six-property office portfolio of more than 3 million square feet after agreeing to raise $100 million by July 15. Those properties are located in the Dallas-Fort Worth metro, the Bay Area, and Minneapolis.

In connection with the required McEwen payment and the release of the McEwen Building, the third modification agreement provides that terms apply to the Modified Portfolio Revolving Loan Facility, including that the maturity date is extended to March 1, 2026; and KBS REIT III is restricted from paying dividends or distributions to its stockholders or redeeming shares of its stock without prior written consent, except for any amounts that KBS REIT III is required to distribute to its stockholders to qualify as a REIT under the Internal Revenue Code of 1986.

As The DI Wire previously reported, the REIT had indicated “substantial doubt” regarding its “ability to continue as a going concern” with its net asset value per share falling from $9 in September 2022 to $5.60 in December 2023, a decline of 38%.

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