Pacific Oak Strategic Opportunity REIT Inc., a publicly registered non-traded real estate investment trust formerly known as KBS Strategic Opportunity REIT Inc., has registered a $1 billion offering as a net asset value-based perpetual life REIT.
The offering is comprised of $850 million in shares in the primary offering and up to $150 million dividend reinvestment plan shares. Funds from the offering will be used to invest in a portfolio of opportunistic real estate, real estate-related loans, real estate-related securities and other real estate-related investments.
In October 2019, The DI Wire pointed to clues suggesting that KBS Strategic Opportunity REIT was planning to launch a new offering under Pacific Oak.
Back in October 2017, the 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 its 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.”
Now we know that the REIT plans to offer four classes of common stock: Class T, Class S, Class D and Class I shares. The purchase price per share for each class will vary and will generally equal the prior month’s NAV per share, plus upfront selling commissions and dealer manager fees.
The REIT recently declared a $10.63 net asset value per share of its common stock, as of September 30, 2019. Shares originally sold for $10.00 each.
The minimum purchase for all share classes is $2,500, except for Class I shares, which have a $1 million minimum. Pacific Oak Capital Markets Group LLC will serve as the dealer manager for the offering.
Class T shares will have upfront selling commissions of up to 3 percent of the transaction price, upfront dealer manager fees of 0.5 percent, and a 0.85 percent annual stockholder servicing fee comprised of a 0.65 percent advisor distribution fee and a 0.20 percent dealer distribution fee. These distribution fee amounts may vary as long as the sum equals 0.85 percent per year.
Class S shares include selling commissions of up to 3.5 percent and a stockholder servicing fee of 0.85 percent per year.
Class D shares have selling commissions of up to 1.5 percent and a stockholder servicing fee of 0.25 percent per year.
Class I shares have no upfront selling commissions, dealer manager fees, or stockholder servicing fees.
The stockholder servicing fee will cease when total upfront selling commissions, dealer manager fees and distribution fees reach 8.75 percent.
Pacific Oak Strategic Opportunity REIT launched its initial public offering in November 2009 and has raised approximately $638 million in investor equity from the offering and its distribution reimbursement plan, as of the third quarter 2019. In October the REIT terminated its advisory agreement with KBS Capital Advisors LLC and appointed Pacific Oak Capital Advisors LLC as its new external advisor. In November 2019, the REIT completed a merger with Reven Housing REIT Inc. (NASDAQ: RVEN), a publicly traded REIT, for approximately $56.6 million in cash, or $5.13 per share of Reven common stock.
The company oversees a $1.1 billion real estate portfolio comprised of 11 properties, as well as four investments in real estate equity securities valued at $79.1 million, as of September 30, 2019. The company also holds $219.2 million in unconsolidated joint ventures, and has other assets totaling $119 million.