In its recently filed quarterly report with the Securities and Exchange Commission, KBS Growth & Income REIT indicated that its portfolio was under significant duress that “raise substantial doubt” about its ability to “continue as a going concern.” The company reported that its board of directors has begun a review of strategic alternatives which would likely lead to the adoption of a plan of liquidation under which its assets would be liquidated and the company dissolved. Should the board decide on such a plan, it would be submitted for approval to stockholders.
The KBS-sponsored non-traded REIT reported that its portfolio occupancy has declined from 90.4% as of Dec. 31, 2020, to 73.1% as of Sept. 30, 2022 and that the occupancy may continue to decline in the future as tenant leases continue to expire. The decline has resulted in a decrease in both cash flow from operations and the market value of its properties.
The company is also facing near term loan maturities which it may not be able to refinance under current terms. Specifically, the company’s $45.7 million mortgage loan tied to the Commonwealth Building, an office building located in Portland, Oregon that is just 51.8% occupied, is maturing in February 2023. The company also has a modified term loan with an outstanding of $52.3 million due to mature in November 2023.
KBS may be required to pay down a portion of the maturing debt in order to refinance the loans, but cautioned that it currently lacks the required cash-on-hand to make such payments, or to invest the substantial amount that may be required for capital leasing costs to re-tenant their properties. If the company cannot refinance the loans, the lenders could foreclose on the assets that have been pledged as collateral.
In August 2020, KBS terminated their distribution reinvestment plan to pursue a liquidation strategy.