Struggling KBS REIT III Announces Newest Loan Extension Agreement as NAV Plummets 30%
By Staff
KBS Real Estate Investment Trust III, Inc., a publicly registered non-traded real estate investment trust, announced that it has amended its loan agreement with U.S. Bank, Bank of America and other lenders on its Accenture Tower property to extend the loan’s maturity date to Nov. 2, 2026. This marks the fourth modification agreement for the loan.
As of Dec. 20, 2024, the outstanding principal balance of the loan was $306 million. In addition to extending the maturity date, the new modification agreement also adds $16 million of new funding, raising the loan total to $322 million and raises the secured overnight financing rate from 235 basis points to 300 basis points. It also adds a provision for a cash sweep collateral account, which requires that all withdrawn funds require prior approval from U.S. Bank, along with an updated default agreement and other certain cash controls. A 12-month extension beyond the 2026 date is also available pursuant to certain terms and conditions.
According to the fund, the newly available $16 million may be used solely for approved tenant improvements, leasing commissions and capital improvement costs, certain approved monthly operating shortfall amounts, or other capital expenditures related to the property.
This announcement follows closely on the REIT’s recent extension on its $600 million property loan, which the REIT reported was down to approximately $460.9 million, as of Nov. 22, 2024. This was due to the disposition of the REIT’s Preston Commons property, an office property in Dallas consisting of three office buildings located on approximately 6.3 acres of the land.
The REIT first purchased the property in 2013 for $110 million and sold it for $146 million net of credits given to the purchaser. Ultimately, after various operating prorations, $140.4 million was used to pay down the debt’s outstanding principal.
In similar news, the REIT reported that its net asset value, as of Dec. 12, 2024, fell to $3.89 per share, a decrease of 30.5% compared to the Dec. 12, 2023 valuation of $5.60 per share. The REIT attributed the lower valuation to a decrease in the appraised value of real estate properties, a decrease in capital expenditures, interest rate swaps and loan financing fees. At one time, the REIT’s estimated net asset value was more than $12.00 per share.
The valuation is based on the estimated value of the REIT’s assets less the estimated value of its liabilities divided by the number of shares outstanding. The REIT stated that its conflicts committee, composed solely of the REIT’s independent directors, is responsible for the oversight of the valuation process used to determine the estimated value per share of the REIT’s common stock. The REIT engaged Kroll, LLC, an independent third-party real estate valuation firm, to provide appraisals for 14 of its consolidated real estate properties owned as of September 30, 2024.
Overall, it has been a challenging year for the REIT, which first issued a “going concern” warning in late 2023, a warning which remained as of its Sept. 30, 2024 quarterly filing. In February, the REIT sold an office building in Franklin, Tenn. to contribute to its loan obligations, and in January, the REIT had to return the keys to an office building in San Francisco.
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