S-11/A

As filed with the Securities and Exchange Commission on January 12, 2010

Registration No. 333-161449

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 4

TO

FORM S-11

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

KBS Legacy Partners Apartment REIT, Inc.

(Exact name of registrant as specified in its charter)

Maryland	6798	27-0668930
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. employer identification number)

620 Newport Center Drive, Suite 1300

Newport Beach, California 92660

(949) 417-6500

(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)

C. Preston Butcher

Chief Executive Officer

KBS Legacy Partners Apartment REIT, Inc.

620 Newport Center Drive, Suite 1300

Newport Beach, California 92660

(949) 417-6500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Robert H. Bergdolt, Esq. Damon M. McLean, Esq. DLA Piper LLP (US) 4141 Parklake Avenue, Suite 300 Raleigh, North Carolina 27612-2350 (919) 786-2000 Steven J. Schultz, Esq. Schultz & Wright, LLP 545 Middlefield Road, Suite 160 Menlo Park, CA 94025 (650) 462-0900

Approximate date of commencement of proposed sale to public:  As soon as practicable after the effectiveness of the registration statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:  x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):

	Large accelerated filer  ¨	Accelerated filer  ¨
	Non-accelerated filer  ¨	Smaller Reporting Company  x
(Do not check if smaller reporting company)

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the SEC and various states is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED JANUARY 12, 2010

	KBS LEGACY PARTNERS APARTMENT REIT, INC.
	Maximum Offering of 280,000,000 Shares of Common Stock
	Minimum Offering of 250,000 Shares of Common Stock

KBS Legacy Partners Apartment REIT, Inc. is a newly organized Maryland corporation sponsored by KBS Capital Advisors LLC and Legacy Partners Residential Realty LLC, that intends to qualify as a real estate investment trust beginning with the taxable year that will end December 31, 2010. We expect to use substantially all of the net proceeds from this offering to invest in and manage a diverse portfolio of equity investments in high quality apartment communities located throughout the United States. We expect that our portfolio will include “core” apartment buildings that are already well positioned and producing rental income, as well as more opportunity oriented properties at various phases of leasing, development, redevelopment or repositioning. Because we have not yet identified any specific assets to acquire, we are considered a blind pool.

We are offering up to 200,000,000 shares of common stock in our primary offering for $10 per share, with volume discounts available to investors who purchase more than $1,000,000 of shares through the same participating broker-dealer. Discounts are also available for other categories of investors. We are also offering up to 80,000,000 shares pursuant to our dividend reinvestment plan at a purchase price initially equal to $9.50 per share. We expect to offer shares of common stock in our primary offering until January     , 2012.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 29 to read about risks you should consider before buying shares of our common stock. These risks include the following:

• Our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require our directors to list our shares for trading by a specified date. No public market currently exists for our shares, and we have no plans to list our shares on an exchange. Until our shares are listed, if ever, you may not sell your shares unless the buyer meets the applicable suitability and minimum purchase standards and such sale complies with state and federal securities laws. If you are able to sell your shares, you would likely have to sell them at a substantial loss.

• No one may own more than 9.8% of our stock unless exempted by our board.

• We set the offering price of our shares arbitrarily. This price is unrelated to the book or net value of our assets or to our expected operating income.

• We depend on our advisor to conduct our operations. Our advisor has a limited operating history.

• We have no operating history, and our total assets consist of $200,000 cash. We have not identified any investments to acquire.

• All of our executive officers, some of our directors and other key real estate professionals are also officers, managers, directors, key professionals and/or holders of a controlling interest in our advisor, the sub-advisor, our dealer manager and other sponsor-affiliated entities. As a result, they face conflicts of interest, including significant conflicts created by our advisor’s compensation arrangements with us and other programs and investors advised by our sponsors. Fees paid to our advisor in connection with transactions involving the acquisition and management of our properties are based on the cost of the property, not on the quality of the investment or services rendered to us. This arrangement could influence our advisor to recommend riskier transactions to us.

• There is no assurance that we will raise the maximum offering amount. If we raise substantially less than the maximum offering amount, we may not be able to invest in as diverse a portfolio of real estate properties as we otherwise would and the value of your investment may vary more widely with the performance of specific assets. There is a greater risk that you will lose money in your investment if we have less diversity in our portfolio.

• We will pay substantial fees and expenses to our advisor, affiliates of our sponsors and broker-dealers. These fees increase your risk of loss.

• Until the proceeds from this offering are fully invested and from time to time during our operational stage, we expect to use proceeds from financings to fund distributions in anticipation of cash flow to be received in later periods. However, our organizational documents permit us to pay distributions from any source, including offering proceeds, which may constitute a return of capital. We have not established a limit on the amount of distributions that we may fund from sources other than from cash flows from operations.

• We may incur debt exceeding 75% of the cost of our tangible assets with the approval of the conflicts committee. During the early stages of this offering, we expect that our conflicts committee may approve debt in excess of this limit. Higher debt levels increase the risk of your investment.

• Continued disruptions in the financial markets and poor economic conditions could adversely affect our ability to implement our business strategy and generate returns to you.

Neither the SEC, the Attorney General of the State of New York nor any other state securities regulator has approved or disapproved of our common stock, determined if this prospectus is truthful or complete or passed on or endorsed the merits of this offering. Any representation to the contrary is a criminal offense.

This investment involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. The use of projections or forecasts in this offering is prohibited. No one is permitted to make any oral or written predictions about the cash benefits or tax consequences you will receive from your investment.

	Price to Public			Selling Commissions			Dealer Manager Fee			Net Proceeds (Before Expenses)
Primary Offering
Per Share	$	10.00	*	$	0.65	*	$	0.30	*	$	9.05
Total Minimum	$	2,500,000.00	*	$	162,500.00	*	$	75,000	*	$	2,262,500.00
Total Maximum	$	2,000,000,000.00	*	$	130,000,000.00	*	$	60,000,000.00	*	$	1,810,000,000.00
Dividend Reinvestment Plan
Per Share	$	9.50		$	0.00		$	0.00		$	9.50
Total Maximum	$	760,000,000.00		$	0.00		$	0.00		$	760,000,000.00

* Discounts are available for some categories of investors. Reductions in commissions and fees will result in corresponding reductions in the purchase price.

The dealer manager, KBS Capital Markets Group LLC, our affiliate, is not required to sell any specific number or dollar amount of shares but will use its best efforts to sell the shares offered. The minimum permitted purchase is $4,000. We will not sell any shares unless we raise gross offering proceeds of $2,500,000 from persons who are not affiliated with us or our sponsors by January     , 2011. Pending satisfaction of this condition, all subscription payments will be placed in an account held by the escrow agent, UMB Bank, N.A., in trust for our subscribers’ benefit, pending release to us. If we do not raise gross offering proceeds of $2,500,000 by January     , 2011, we will promptly return all funds in the escrow account (including interest), and we will stop selling shares. We will not deduct any fees if we return funds from the escrow account.

We expect to sell the 200,000,000 shares offered in our primary offering over a two-year period. If we decide to continue our primary offering beyond two years from the date of this prospectus, we will provide that information in a prospectus supplement. We may continue to offer shares under our dividend reinvestment plan beyond two years from the date of this prospectus until we have sold 80,000,000 shares through the reinvestment of distributions. In many states, we will need to renew the registration statement or file a new registration statement to continue the offering beyond one year from the date of this prospectus. We may terminate this offering at any time.

We will not sell any shares to Pennsylvania investors unless we raise $66.7 million in gross offering proceeds (including sales made to residents of other jurisdictions) from persons not affiliated with us or our sponsors. If we do not raise this amount by January     , 2012, we will promptly return all funds held in escrow for the benefit of Pennsylvania investors. In addition, we will not sell any shares to Tennessee investors unless we raise $10 million in gross offering proceeds (including sales made to residents of other jurisdictions) from persons not affiliated with us or our sponsors. If we do not raise this amount by January     , 2012, we will promptly return all funds held in escrow for the benefit of Tennessee investors.

The date of this prospectus is                     , 2010.

SUITABILITY STANDARDS

The shares we are offering through this prospectus are suitable only as a long-term investment for persons of adequate financial means and who have no need for liquidity in this investment. Because there is no public market for our shares, you will have difficulty selling your shares.

In consideration of these factors, we have established suitability standards for investors in this offering and subsequent purchasers of our shares. These suitability standards require that a purchaser of shares have either:

— a net worth of at least $250,000; or

— gross annual income of at least $70,000 and a net worth of at least $70,000.

In addition, the states listed below have established suitability requirements that are more stringent than ours and investors in these states are directed to the following special suitability standards:

— Alabama, Michigan, Ohio and Oregon – Investors must have a liquid net worth of at least ten times their investment in us and our affiliates.

— California – Investors must have either (a) a net worth of at least $350,000 or (b) a gross annual income of at least $70,000 and a net worth of at least $150,000. In addition, shares will only be sold to California residents that have a liquid net worth of at least ten times their investment in us.

— Iowa – Investors must have either (a) a net worth of at least $350,000 or (b) a gross annual income of at least $70,000 and a net worth of at least $100,000. In addition, shares will only be sold to Iowa residents that have a liquid net worth of at least ten times their investment in us.

— Kansas – It is recommended by the office of the Kansas Securities Commissioner that Kansas investors not invest, in the aggregate, more than 10% of their liquid net worth in this and similar direct participation investments. Liquid net worth is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.

— Kentucky, Massachusetts, Pennsylvania and Tennessee – Investors must have a liquid net worth of at least ten times their investment in us.

In addition, because the minimum offering amount is less than $133,333,333, Pennsylvania investors are cautioned to carefully evaluate our ability to fully accomplish our stated objectives and to inquire as to the current dollar volume of subscriptions.

For purposes of determining the suitability of an investor, net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles. In the case of sales to fiduciary accounts, these suitability standards must be met by the fiduciary account, by the person who directly or indirectly supplied the funds for the purchase of the shares if such person is the fiduciary or by the beneficiary of the account.

Our sponsor, those selling shares on our behalf and participating broker-dealers and registered investment advisors recommending the purchase of shares in this offering must make every reasonable effort to determine that the purchase of shares in this offering is a suitable and appropriate investment for each stockholder based on information provided by the stockholder regarding the stockholder’s financial situation and investment objectives. See “Plan of Distribution — Suitability Standards” for a detailed discussion of the determinations regarding suitability that we require.

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TABLE OF CONTENTS

SUITABILITY STANDARDS	i
PROSPECTUS SUMMARY	1
RISK FACTORS	29
Risks Related to an Investment in Us	29
Risks Related to Conflicts of Interest	34
Risks Related to This Offering and Our Corporate Structure	36
General Risks Related to Investments in Real Estate	41
Risks Associated with Debt Financing	47
Federal Income Tax Risks	49
Retirement Plan Risks	52
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	54
ESTIMATED USE OF PROCEEDS	55
MANAGEMENT	57
Board of Directors	57
Committees of the Board of Directors	58
Executive Officers and Directors	59
Compensation of Directors	63
Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents	64
The Advisor	65
The Advisory Agreement	65
Our Sponsors and their Key Professionals	67
Other Affiliates	73
Initial Investment by Our Sponsors	75
MANAGEMENT COMPENSATION	76
STOCK OWNERSHIP	81
CONFLICTS OF INTEREST	81
Our Sponsors’ Interests in Other Real Estate Programs	81
Receipt of Fees and Other Compensation by our Sponsors and their Affiliates	84
Fiduciary Duties Owed by Some of Our Affiliates to Our Advisor and Our Advisor’s Affiliates	85
Affiliated Dealer Manager	85
Certain Conflict Resolution Measures	85
INVESTMENT OBJECTIVES AND CRITERIA	91
General	91
Acquisition and Investment Policies	94
Other Investments	101
Joint Venture Investments	102
Borrowing Policies	102
Operating Policies	103
Disposition Policies	104
Charter-imposed Investment Limitations	104
PLAN OF OPERATION	106
General	106
Liquidity and Capital Resources	107
Results of Operations	108
Critical Accounting Policies	108
PRIOR PERFORMANCE SUMMARY	112
Prior Investment Programs – Legacy Sponsors	112
Prior Investment Programs – KBS Sponsors	115
FEDERAL INCOME TAX CONSIDERATIONS	127

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Taxation of KBS Legacy Partners REIT	128
Taxation of Stockholders	141
Backup Withholding and Information Reporting	146
Other Tax Considerations	146
ERISA CONSIDERATIONS	147
Prohibited Transactions	148
Plan Asset Considerations	148
Other Prohibited Transactions	151
Annual Valuation	151
DESCRIPTION OF SHARES	152
Common Stock	153
Preferred Stock	153
Meetings and Special Voting Requirements	153
Advance Notice for Stockholder Nominations for Directors and Proposals of New Business	154
Restriction on Ownership of Shares	155
Distributions	157
Inspection of Books and Records	157
Business Combinations	158
Control Share Acquisitions	159
Subtitle 8	160
Tender Offers by Stockholders	160
Dividend Reinvestment Plan	161
Share Redemption Program	164
Registrar and Transfer Agent	167
Restrictions on Roll-Up Transactions	167
THE OPERATING PARTNERSHIP AGREEMENT	168
General	168
Capital Contributions	169
Operations	169
Distributions and Allocations of Profits and Losses	169
Rights, Obligations and Powers of the General Partner	170
Exchange Rights	171
Change in General Partner	171
Transferability of Interests	172
Amendment of Limited Partnership Agreement	172
PLAN OF DISTRIBUTION	172
General	172
Compensation of Dealer Manager and Participating Broker-Dealers	173
Subscription Procedures	178
Suitability Standards	179
Minimum Purchase Requirements	180
Special Notice to Pennsylvania and Tennessee Investors	181
Investments by Qualified Accounts	181
Investments through IRA Accounts	182
SUPPLEMENTAL SALES MATERIAL	182
LEGAL MATTERS	183
EXPERTS	183
WHERE YOU CAN FIND MORE INFORMATION	183
INDEX TO CONSOLIDATED BALANCE SHEET AND PRIOR PERFORMANCE TABLES	F-1
Appendix A – Form of Subscription Agreement with Instructions	A-1

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Appendix B – Form of Amended and Restated Dividend Reinvestment Plan B-1

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PROSPECTUS SUMMARY

As used herein and unless otherwise required by context, the term “prospectus” refers to this prospectus as amended and supplemented. This prospectus summary highlights material information contained elsewhere in this prospectus. Because it is a summary, it may not contain all of the information that is important to you. To understand this offering fully, you should read the entire prospectus carefully, including the “Risk Factors” section and the financial statements, before making a decision to invest in our common stock.

What is KBS Legacy Partners Apartment REIT, Inc.?

KBS Legacy Partners Apartment REIT, Inc. (f.k.a. KBS Legacy Apartment Community REIT, Inc.) is a newly organized Maryland corporation that intends to qualify as a real estate investment trust, or REIT, beginning with the taxable year that will end December 31, 2010. We expect to use substantially all of the net proceeds from this offering to invest in and manage a diverse portfolio of equity investments in high quality apartment communities located throughout the United States. We expect that our portfolio will include “core” apartment buildings that are already well positioned and producing rental income, as well as more opportunity oriented properties at various phases of leasing, development, redevelopment or repositioning. We may make our investments through the acquisition of individual assets or by acquiring portfolios of assets, other REITs or real estate companies. We plan to diversify our portfolio by investment type, investment size and investment risk with the goal of attaining a portfolio of income-producing properties that provide attractive and stable returns to our investors.

We were incorporated in the State of Maryland on July 31, 2009 and we currently do not own any real estate assets. Because we have not yet identified any specific assets to acquire, we are considered to be a blind pool.

Our external advisor, KBS Capital Advisors, is responsible for conducting our operations and managing our portfolio of real estate investments. We have no paid employees.

Our office is located at 620 Newport Center Drive, Suite 1300, Newport Beach, California 92660. Our telephone number is (949) 417-6500. Our fax number is (949) 417-6520, and our web site address is www.kbslegacyreit.com.

What is a REIT?

In general, a REIT is an entity that:

— combines the capital of many investors to acquire or provide financing for real estate investments;

— allows individual investors to invest in a professionally managed, large-scale, diversified portfolio of real estate assets;

— pays distributions to investors of at least 90% of its annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain); and

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— avoids the “double taxation” treatment of income that normally results from investments in a corporation because a REIT is not generally subject to federal corporate income taxes on that portion of its income distributed to its stockholders, provided certain income tax requirements are satisfied.

However, under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), REITs are subject to numerous organizational and operational requirements. If we fail to qualify for taxation as a REIT in any year after electing REIT status, our income will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify. Even if we qualify as a REIT for federal income tax purposes, we may still be subject to state and local taxes on our income and property and to federal income and excise taxes on our undistributed income.

What are your investment objectives?

Our primary investment objectives are:

— to preserve and return your capital contribution; and

— to provide you with attractive and stable cash distributions.

We will also seek to realize growth in the value of our investments by timing asset sales to maximize asset value.

We may return all or a portion of your capital contribution in connection with the sale of the company or the assets we will acquire. Alternatively, you may be able to obtain a return of all or a portion of your capital contribution in connection with the sale of your shares.

Though we intend to authorize and declare daily distributions that will be paid on a monthly basis, we may be unable or limited in our ability to make distributions to our stockholders. Further, no public trading market for our shares currently exists and, until our shares are listed, if ever, it may be difficult for you to sell your shares. Until our shares are listed, you may not sell your shares unless the buyer meets the applicable suitability and minimum purchase standards and such sale complies with state and federal securities laws.

Are there any risks involved in an investment in your shares?

Investing in our common stock involves a high degree of risk. You should carefully review the “Risk Factors” section of this prospectus beginning on page 29, which contains a detailed discussion of the material risks that you should consider before you invest in our common stock. Some of the more significant risks relating to an investment in our shares include:

— Our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require our directors to list our shares for trading by a specified date. No public market currently exists for our shares of common stock, and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, you may not sell your shares unless the buyer meets the applicable suitability and minimum purchase standards and such sale complies with state and federal securities laws. In addition, our charter prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit

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large investors from purchasing your shares. Our shares cannot be readily sold and, if you are able to sell your shares, you would likely have to sell them at a substantial discount from their public offering price.

— We established the offering price of our shares on an arbitrary basis. This price may not be indicative of the price at which our shares would trade if they were listed on an exchange or actively traded, and this price bears no relationship to the book or net value of our assets or to our expected operating income.

— We are dependent on our advisor to select investments and conduct our operations. Our advisor has a limited operating history. This limited operating history makes our future performance difficult to predict.

— We have no operating history and, as of the date of this prospectus, our total assets consist of $200,000 cash. Because we have not identified any real estate assets to acquire with proceeds from this offering, you will not have an opportunity to evaluate our investments before we make them, making an investment in us more speculative.

— We may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this prospectus.

— All of our executive officers, some of our directors and other key real estate professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, the sub-advisor, our dealer manager and other sponsor-affiliated entities. As a result, our executive officers, some of our directors, some of our key real estate professionals, our advisor and its affiliates face conflicts of interest, including significant conflicts created by our advisor’s compensation arrangements with us and other programs and investors advised by our sponsors and conflicts in allocating time among us and these other programs and investors. Furthermore, these individuals may become employees of another program advised by our sponsors in an internalization transaction or, if we internalize our advisor, may not become our employees as a result of their relationship with other programs advised by our sponsors. These conflicts could result in action or inaction that is not in the best interests of our stockholders.

— Affiliates of our sponsors will receive fees in connection with transactions involving the purchase and management of our investments. These fees will be based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us.

— We may also pay significant fees during our listing/liquidation stage. Although most of the fees payable during our listing/liquidation stage are contingent on our investors first enjoying agreed-upon investment returns, affiliates of our sponsors could also receive significant payments even without our reaching the investment-return thresholds were we to seek to become self-managed. Due to the apparent preference of the public markets for self-managed companies, a decision to list our shares on a national securities exchange might well be preceded by a decision to become self-managed. And given our sponsors’ familiarity with our assets and operations, we might prefer to become self-managed by acquiring entities affiliated with our sponsors. Such an internalization transaction could result in significant payments to

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affiliates of our sponsors irrespective of whether you enjoyed the returns on which we have conditioned other incentive compensation.

— There is no assurance that we will raise the maximum offering amount. If we raise substantially less than the maximum offering amount, we may not be able to invest in as diverse a portfolio of real estate properties as we otherwise would and the value of your investment may vary more widely with the performance of specific assets. There is a greater risk that you will lose money in your investment if we have less diversity in our portfolio.

— We pay substantial fees to and expenses of our sponsors, our advisor, their affiliates and participating broker-dealers, which payments increase the risk that you will not earn a profit on your investment. For a summary of these fees, see “Prospectus Summary – What are the fees that you will pay to your sponsors, their respective affiliates and your directors?”

— Until the proceeds from this offering are fully invested and from time to time during our operational stage, we expect to use proceeds from financings to fund distributions in anticipation of cash flow to be received in later periods. We may also fund such distributions from advances from our advisor or sponsors or from our advisor’s deferral of its asset management fee. However, our organizational documents permit us to pay distributions from any source, including offering proceeds, which may constitute a return of capital. We have not established a limit on the amount of distributions that we may fund from sources other than from cash flows from operations.

— Our policies do not limit us from incurring debt until our borrowings would exceed 75% of the cost (before deducting depreciation or other non-cash reserves) of our tangible assets, and we may exceed this limit with the approval of the conflicts committee of our board of directors. During the early stages of this offering, we expect that our conflicts committee will approve debt in excess of this limit. High debt levels could limit the amount of cash we have available to distribute and could result in a decline in the value of your investment. Once we have fully invested the proceeds of this offering, we expect our debt financing to be between 50% and 65% of the cost of our tangible assets (before deducting depreciation or other noncash reserves).

— If we are unable to locate attractive real estate investments while we are investing the proceeds of this offering, our distributions and the long-term returns of our investors may be lower than they otherwise would.

— Our future investments in real estate properties may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to you.

— Continued disruptions in the financial markets and poor economic conditions could adversely affect the value of investments we make.

— A concentration of our investments in the apartment community sector may leave our profitability, and ultimately our cash available for distribution to stockholders, vulnerable to a downturn or slowdown in the sector.

What is the role of the board of directors?

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. There are five members of our board of directors, three of which are independent of our sponsors. Our charter requires that a majority of our directors be independent of our sponsors and creates a committee of our board consisting solely of all of our independent directors. This committee, which we call the conflicts committee, is responsible for reviewing the performance of our advisor and must approve other matters set forth in our charter. Our directors are elected annually by the stockholders.

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Who is your advisor and what does the advisor do?

KBS Capital Advisors LLC, an affiliate of ours, is our advisor. As our advisor, KBS Capital Advisors is responsible for managing our day-to-day operations and for identifying and making investments in real estate properties on our behalf, subject to the supervision of our board of directors. Subject to the terms of the advisory agreement between KBS Capital Advisors and us, KBS Capital Advisors will delegate certain advisory duties to KBS-Legacy Apartment Community REIT Venture, LLC, which is a joint venture among KBS Capital Advisors and Legacy Partners Residential Realty LLC, and which we generally refer to throughout this prospectus as the “sub-advisor.” Notwithstanding such delegation to the sub-advisor, KBS Capital Advisors retains ultimate responsibility for the performance of all the matters entrusted to it under the advisory agreement.

As a result of the joint venture arrangement among KBS Capital Advisors and Legacy Partners Residential Realty LLC, we consider ourselves to be co-sponsored by the individuals who own and control KBS Capital Advisors and by the individuals who indirectly through their trusts own and control Legacy Partners Residential Realty LLC. Unless context dictates otherwise, throughout this prospectus we generally refer collectively to the individuals who own and control KBS Capital Advisors, as our “KBS sponsors.” We generally refer collectively to Legacy Partners Residential Realty LLC, and the individuals who indirectly through their trusts own and control it, as our “Legacy sponsors.”

Pursuant to the operating agreement of the sub-advisor, Legacy Partners Residential Realty LLC is assigned direct responsibility for sourcing and proposing target properties for investment by us, managing the acquisition process for investments approved by our board of directors and performing asset management services related to our investments. KBS Capital Advisors retains direct responsibility for managing our compliance and reporting functions under securities laws applicable to our business, managing all of our accounting and financial reporting functions, managing our tax matters and providing marketing, investor-relations and other administrative services on our behalf. Compensation received by KBS Capital Advisors pursuant to the advisory agreement is assigned to the sub-advisor, from which it is then distributed to KBS Capital Advisors and to Legacy Partners Residential Realty LLC in accordance with the sub-advisor’s operating agreement.

An investment and management committee of the sub-advisor, composed of two representatives appointed by Legacy Partners Residential Realty LLC and three representatives appointed by KBS Capital Advisors, approves major decisions of the sub-advisor, including the final approval of all investments to recommend to our advisor for investment. Based on these determinations, KBS Capital Advisors recommends investments to our board of directors and our board of directors, or a majority of the conflicts committee that constitutes a majority of our board of directors, approves all proposed investments.

What is the experience of your advisor?

KBS Capital Advisors is a limited liability company that was formed in the State of Delaware on October 18, 2004. Our advisor has a limited operating history. As of the date of this prospectus, its operations have consisted solely of serving as the external advisor to KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust II, Inc., and KBS Strategic Opportunity REIT, Inc. KBS REIT I and KBS REIT II launched their initial public offerings and commenced real estate operations in 2006 and 2008 respectively. KBS Strategic Opportunity REIT launched its initial public offering in November of 2009.

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What is the experience of your Legacy sponsors?

C. Preston Butcher, W. Dean Henry, and Guy K. Hays indirectly through their trusts own and control Legacy Partners Residential Realty LLC, a limited liability company formed in the State of Delaware on July 10, 2009 to be the co-manager of the sub-advisor. Together with Legacy Partners Residential Realty LLC, we generally refer to these individuals as our “Legacy sponsors.” Messrs. Butcher, Henry and Hays work together and, directly or through their trusts, are also owners and/or officers of Legacy Partners Residential, Inc. (“LPRI”), which oversees the management and operations of all of its affiliated Legacy residential related entities (LPRI and Legacy Partners Residential Realty LLC together with all such affiliated Legacy residential related entities are hereinafter collectively referred to as “Legacy Residential”). These individual Legacy sponsors also actively participate in the management and operations of Legacy Residential. Mr. Butcher, directly or through a trust, is also an owner, partner, manager, officer and/or director of various other entities affiliated with Legacy Partners Commercial, LLC which are involved directly or indirectly through other entities in the acquisition, development, ownership and management of commercial properties (all of such entities other than the entities comprising Legacy Residential are hereinafter collectively referred to as “Legacy Commercial”).

Mr. Butcher has been involved exclusively in real estate acquisitions, development, financing, asset and property management, and dispositions for over 40 years. He joined Lincoln Property Company in 1968 and was President of the Western Region until 1998, at which time he became Chairman of the Board and Chief Executive Officer of LPRI. In 1999, Mr. Butcher purchased the interests of the other Lincoln Property Company shareholders in the Western Region operations and continued these operations under the new “Legacy Partners” name. Focusing on high-quality U.S. real estate for institutional investors and high net worth individuals, Mr. Butcher has been integral to Legacy Residential’s and Legacy Commercial’s success and growth into a nationally recognized manager and operator of multifamily and commercial real estate investments, respectively. Mr. Butcher serves on the Executive Committee of the National Multi-Housing Council and the Board of Trustees for the Urban Land Institute. He is a member of the Policy Advisory Board of the Center for Real Estate at the University of California at Berkeley, and is a Director of the Charles Schwab Corporation and NorthStar Realty Finance Corporation.

Mr. Henry is President of LPRI and has been involved exclusively in multifamily real estate acquisitions/development, financing, asset and property management, and dispositions for nearly 40 years. He joined Lincoln Property Company in 1973, was promoted to Senior Vice President in charge of all residential operations of the Western Region in 1995, and then became the President and Chief Operating Officer of LPRI in 1998 and has continued as President only since 2001. Mr. Henry is widely recognized as a leading expert on multifamily real estate and is frequently invited to speak at conferences and participate in industry panels. Mr. Henry serves on the Executive Committee of the National Multi-Housing Council. He is a member of the Policy Advisory Board of the Center for Real Estate at the University of California at Berkeley. He is an active member of the Urban Land Institute and is a former Board Member of Mercy Housing, a non-profit affordable housing organization which has participated in the development, preservation and/or financing of more than 36,900 affordable homes in the United States.

Mr. Hays is Chief Financial Officer and Executive Managing Director of LPRI and has been involved exclusively in multifamily real estate acquisitions/development, financing, asset and property management, and dispositions for over 26 years. He joined Lincoln Property Company in 1986, was promoted to Vice President of Finance for all residential operations of the Western Region in 1995, and became Senior Vice President – Finance of LPRI in 1998, then Senior Vice President and Chief Financial Officer – Residential in 2001, Senior Managing Director and Chief Financial Officer in January 2008, and since January 1, 2009, Chief Financial Officer and Executive Managing Director. Prior to joining Lincoln Property Company in 1986, Mr. Hays was with Kenneth Leventhal and Company, a CPA firm specializing in real estate, in Dallas, Texas where he earned his Certified Public Accountant designation. Mr. Hays is an active member of the National Multi-Housing Council and serves on the Multifamily Council of the Urban Land Institute.

Messrs. Butcher and Henry have been working together with Legacy Residential entities and/or Lincoln Property Company for over 35 years, and Messrs. Butcher, Henry and Hays for over 20 years.

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Other key real estate professionals with Legacy Residential entities include Jeffrey Byrd, Kerry Nicholson, Timothy O’Brien, Spencer Stuart, Carol Foster, and Robert Calleja. These individuals have over 25 years of real estate industry experience, on average, and over 12 years with Legacy Residential entities and/or Lincoln Property Company, on average. They have been through multiple real estate cycles in their careers and have the expertise gained through hands-on experience in property selection, acquisitions/development, financing, asset and property management, and dispositions. Together with Messrs. Butcher, Henry, and Hays, these individuals comprise the Investment Acquisition and Management Committee at Legacy Residential.

Historically, the investment strategy of Legacy Residential has been threefold:

1. To identify and acquire/develop attractive multifamily real estate investment opportunities that meet the investment criteria of their investors;

2. To aggressively manage and add value to each asset acquired/developed; and

3. To execute a well-defined exit strategy in order to achieve the investment objectives of their clients.

We believe that the experience of our Legacy sponsors and the team of key real estate professionals they have assembled to manage our acquisitions, development, operations, and dispositions, combined with their disciplined investment approach, will allow us to successfully execute the business model. The experience of the Legacy sponsors includes:

— Identifying and acquiring/developing over 68,000 residential units exceeding $5.3 billion of cost across 276 assets since 1968;

— Selling nearly 57,000 residential units exceeding $3.3 billion of cost across 237 assets;

— Sponsoring a $269 million residential real estate program commencing in 2002 for a large institutional investor, and acquiring and developing/rehabilitating four large multifamily and multifamily mixed-use assets totaling over 1,600 units and $661 million in total acquisition cost; and

— Since 1995, acting as a sub-advisor to numerous large institutional investor clients in connection with identifying and acquiring/developing $2.6 billion of residential real estate across 56 properties with a total of 17,900 units - and formulating and executing investment strategies to meet each of these client’s unique investment objectives.

What is the experience of your KBS sponsors?

Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr. control and indirectly own our advisor and the dealer manager of this offering. We generally refer to these individuals as our “KBS sponsors.” Messrs. Bren and Schreiber are the managers of our advisor, although all four of our KBS sponsors actively participate in the management and operations of our advisor.

Our KBS sponsors work together at KBS Capital Advisors with their team of real estate professionals. Two key real estate professionals at KBS Capital Advisors, James Chiboucas and David E.

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Snyder, will be significantly involved in our operations and each has over 15 years of direct real estate experience. These professionals have been responsible for overseeing and managing several public and private real estate programs through multiple real estate cycles in their careers. Although we expect our Legacy sponsors and the real estate professionals associated with Legacy Partners Residential Realty, LLC to perform day-to-day duties related to the acquisition and asset management of our investments, our KBS sponsors and the professionals associated with them will be critical to our success due in part to their significant expertise and experience in sponsoring and managing public REIT programs.

On January 27, 2006, our KBS sponsors launched the initial public offering of KBS Real Estate Investment Trust, Inc., which we refer to as KBS REIT I in this prospectus. As of December 31, 2008, KBS REIT I had accepted aggregate gross offering proceeds of approximately $1.8 billion, including 71.3 million from shares issued pursuant to its dividend reinvestment plan. Of the amount raised pursuant to its dividend reinvestment plan, as of December 31, 2008, $15.4 million has been used to fund share redemptions pursuant to its share redemption program. KBS REIT I ceased offering shares in its primary initial public offering on May 30, 2008. On April 22, 2008, our KBS sponsors launched the initial public offering of KBS Real Estate Investment Trust II, Inc., which we refer to as KBS REIT II in this prospectus. As of December 31, 2008, KBS REIT II had accepted aggregate gross offering proceeds of approximately $314.2 million, including $1.9 million from shares issued pursuant to its dividend reinvestment plan. Of the amount raised pursuant to its dividend reinvestment plan, as of December 31, 2008, none had been used to fund share redemptions pursuant to its share redemption program as no shares were yet eligible for redemption under the program. KBS REIT II’s offering is expected to last until April 22, 2010, but KBS REIT II may extend its offering beyond that date. Our sponsors are also sponsoring another public real estate investment trust, KBS Strategic Opportunity REIT, which commenced its initial public offering on November 20, 2009. Our advisor is also the external advisor of KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT, and our KBS sponsors are directors and/or executive officers of KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT. Through their affiliations with KBS REIT I, KBS REIT II and KBS Capital Advisors, as of December 31, 2008, our sponsors have overseen the investment in and management of over $3.6 billion of real estate and real estate-related investments on behalf of the investors in KBS REIT I and KBS REIT II.

Since 1992, Messrs. Bren and Schreiber have teamed to invest in, manage and sell real estate and real estate-related investments on behalf of institutional investors. Together, Messrs. Bren and Schreiber founded KBS Realty Advisors, a registered investment advisor with the Securities and Exchange Commission (the “SEC”) and a nationally recognized real estate investment advisor. When we refer to a “KBS-sponsored” fund or program, we are referring to the private entities sponsored by an investment advisor affiliated with Messrs. Bren and Schreiber, and KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT, the public, non-traded REITs that are currently being sponsored by Messrs. Bren, Hall, McMillan and Schreiber. When we refer to a “KBS-advised” investor, we are referring to institutional investors that have engaged an investment advisor affiliated with Messrs. Bren and Schreiber to provide real estate-related investment advice.

Messrs. Bren and Schreiber each have been involved exclusively in real estate development, management, acquisition, disposition and financing for more than 30 years. Over that time, Messrs. Bren and Schreiber have developed extensive experience investing in and managing a broad range of real estate assets classes, including multifamily residential real estate. During the 21-year period from 1970 to 1991 when Mr. Bren was a senior partner of Lincoln Property Company, it financed, developed, leased and managed more than 135,000 apartment units. Since 1992, the experience of the investment advisors affiliated with Messrs. Bren and Schreiber includes (as of December 31, 2008) sponsoring 14 private real estate funds that have invested over $3.1 billion (including equity, debt and investment of income and sales proceeds) in 286 real estate assets. Of this amount, approximately $104 million has been invested in 20 multifamily residential-related real estate assets. In addition to their experience with these 14 funds, investment advisors affiliated with Messrs. Bren and Schreiber have also been engaged by four institutional investors to recommend real estate acquisitions and manage some of their investments. The amounts paid for the assets acquired and/or managed pursuant to these arrangements and for subsequent capital expenditures totaled over $3.9 billion.

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With respect to the experience of Messrs. Hall and McMillan, each has over 25 years of experience in real estate-related investments. Prior to founding KBS Capital Advisors with Messrs. Bren and Schreiber, Messrs. Hall and McMillan founded Willowbrook Capital Group, LLC, an asset-management company, in 2000. Before forming Willowbrook, Mr. McMillan served as the Executive Vice President and Chief Investment Officer of SunAmerica Investments, Inc., which was later acquired by AIG. As Chief Investment Officer, he was responsible for over $75 billion in assets, including residential and commercial mortgage-backed securities, public and private investment grade and non-investment grade corporate bonds and commercial mortgage loans and real estate investments.

Prior to forming Willowbrook, Mr. Hall was a Managing Director at CS First Boston, where he managed CSFB’s distribution strategy and business development for the Principal Transaction Group’s $18 billion real estate securities portfolio. Before joining CSFB in 1996, he served as a Director in the Real Estate Products Group at Nomura Securities, with responsibility for the company’s $6 billion annual pipeline of fixed-income securities. Mr. Hall spent the 1980s as a Senior Vice President in the High Yield Department of Drexel Burnham Lambert’s Beverly Hills office, where he was responsible for distribution of the group’s high-yield real estate securities.

Do you expect any of the institutions that invested in the private Legacy- or KBS-sponsored funds or that have been advised by your affiliates to invest in this offering?

We believe such institutional investors are more likely to invest in offerings that can be conducted with lower offering expenses than those found in a public offering, such as this one, in which the securities are sold by participating broker-dealers on a best-efforts basis. If institutional investors do participate in this offering, they would likely invest in amounts entitling them to volume discounts such that their returns, if any, would likely be greater than those who purchase shares in this offering at $10 per share.

How will you select potential properties for acquisition?

Our sponsors believe that successful multifamily real estate investment requires a disciplined approach that results in favorable acquisition pricing, effective asset and property management, and the timely disposition of assets. As such, our Legacy sponsors and their team of real estate professionals have developed a highly disciplined investment and management approach that combines their extensive experience with a structured program that features thorough market research, stringent underwriting standards, aggressive asset and property management, and a well-defined exit strategy for every asset. Working on our behalf in conjunction with our advisor, these real estate professionals will utilize the Legacy approach to acquire a diverse portfolio of multifamily residential properties that we expect to include “core” apartment buildings that are already well positioned and producing rental income, as well as more opportunity oriented properties at various phases of leasing, development, redevelopment or repositioning. We may make our investments through the acquisition of individual assets or by acquiring portfolios of assets, other REITs or real estate companies. We plan to diversify our portfolio by investment type, investment size and investment risk with the goal of attaining a portfolio of income-producing properties that provide attractive and stable returns to our investors.

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What types of investments will you make in the equity securities of other companies?

We may make equity investments in REITs and other real estate companies. We may purchase the common or preferred stock of these entities or options to acquire their stock. If we make such investments, we will target a public company that owns commercial real estate or real estate-related assets when we believe its stock is trading at a discount to that company’s net asset value. We may eventually seek to acquire or gain a controlling interest in the companies that we target. We do not expect our non-controlling equity investments in other public companies to exceed 5% of the proceeds of this offering, assuming we sell the maximum offering amount, or to represent a substantial portion of our assets at any one time.

We will make investments in other entities when we consider it more efficient to acquire an entity that already owns properties meeting our investment objectives than to acquire such properties directly. We may also participate with other entities (including non-affiliated entities) in property ownership through joint ventures, limited liability companies, partnerships and other types of common ownership.

Will you use leverage?

Yes. We expect that once we have fully invested the proceeds of this offering, our debt financing will be between 50% and 65% of the cost of our tangible assets (before deducting depreciation or other non-cash reserves). There is no limitation on the amount we may borrow for the purchase of any single property. Our charter limits our borrowings to 75% of the cost (before deducting depreciation or other non-cash reserves) of our tangible assets; however, we may exceed that limit if a majority of the conflicts committee approves each borrowing in excess of our charter limitation and we disclose such borrowing to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing.

During the early stages of this offering, and to the extent financing in excess of this limit is available at attractive terms, the conflicts committee may approve debt in excess of our charter limitation. From time to time, our debt financing may be below 50% of the cost of our tangible assets due to the lack of availability of debt financing. Careful use of debt will help us to achieve our diversification goals because we will have more funds available for investment. However, high levels of debt could cause us to incur higher interest charges and higher debt service payments, which would decrease the amount of cash available for distribution to our investors.

Except with respect to the borrowing limits contained in our charter, we may reevaluate and change our debt policy in the future without a stockholder vote. Factors that we would consider when reevaluating or changing our debt policy include: then-current economic conditions, the relative cost of debt and equity capital, any acquisition opportunities, the ability of our properties and other investments to generate sufficient cash flow to cover debt service requirements and other similar factors.

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How will you structure the ownership and operation of your assets?

We plan to own substantially all of our assets and conduct our operations through KBS Legacy Partners Limited Partnership, which we refer to as our Operating Partnership in this prospectus. We are the sole general partner of the Operating Partnership and, as of the date of this prospectus, our wholly owned subsidiary, KBS Legacy Partners Holdings LLC, is the sole limited partner of the Operating Partnership. We will present our financial statements, operating partnership income, expenses, and depreciation on a consolidated basis with KBS Legacy Partners Holdings LLC and our Operating Partnership. Neither subsidiary will file a federal income tax return. All items of income, gain, deduction (including depreciation), loss and credit will flow through the Operating Partnership and KBS Legacy Partners Holdings LLC to us as each of these subsidiary entities will be disregarded for federal tax purposes. These tax items will not generally flow through us to the investors however. Rather, our net income and net capital gain will effectively flow through us to the shareholders as and when dividends are paid to our shareholders. Because we plan to conduct substantially all of our operations through the Operating Partnership, we are considered an UPREIT.

What is an “UPREIT”?

UPREIT stands for “Umbrella Partnership Real Estate Investment Trust.” The UPREIT structure is used because a sale of property directly to the REIT is generally a taxable transaction to the selling property owner. In an UPREIT structure, a seller of a property who desires to defer taxable gain on the sale of his property may transfer the property to the UPREIT in exchange for limited partnership units in the UPREIT and defer taxation of gain until the seller later sells or exchanges his UPREIT units. Using an UPREIT structure may give us an advantage in acquiring desired properties from persons who may not otherwise sell their properties because of unfavorable tax results.

What conflicts of interest will your sponsors face?

KBS Capital Advisors and Legacy Partners Residential Realty LLC, and their respective affiliates and personnel, will experience conflicts of interest in connection with the management of our business.

KBS Capital Advisors is also the external advisor to KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT. Messrs. Bren, Hall, McMillan and Schreiber, our KBS sponsors, indirectly own and control KBS Capital Advisors. Messrs. Bren and McMillan are two of our executive officers, and Mr. Bren is also one of our directors. Messrs. Bren, Hall, McMillan and Schreiber are executive officers of KBS REIT I and KBS REIT II, and Messrs. McMillan and Schreiber are also directors of KBS REIT I and KBS REIT II. Messrs. Hall and McMillan are executive officers and directors of KBS Strategic Opportunity REIT. In addition, Messrs. Bren and Schreiber and their team of real estate professionals are also key real estate professionals at KBS Realty Advisors and its affiliates, the advisors to the private KBS-sponsored programs and the investment advisors to institutional investors in real estate properties and real estate-related assets.

Similarly, Messrs. Butcher, Henry and Hays, our individual Legacy sponsors, will face conflicts of interest due to their existing obligations to other programs. Mr. Butcher is Chairman of the Board and Chief Executive Officer of Legacy Partners Residential, Inc., a firm that together with Legacy Commercial and other affiliated entities manages a commercial and residential real estate portfolio currently valued in excess of $6 billion. Mr. Butcher, through Legacy Commercial affiliated entities, is integral to the management of Legacy Partners Realty Funds I, II & III. Mr. Henry is President of Legacy Partners Residential, Inc., for which Mr. Hays acts as Chief Financial Officer and Executive Managing Director. Messrs. Butcher, Henry and Hays are all involved in the management of the Legacy Partners Affordable Housing Fund.

Some of the material conflicts that our sponsors and their respective affiliates will face include the following:

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— Our sponsors and their teams of professionals have to allocate their time between us and other programs and activities in which they are involved;

— Because other programs sponsored by our sponsors may conduct public offerings concurrently with this offering, we may have to compete with other programs sponsored by our sponsors for the same investors when raising capital;

— Our sponsors and their affiliates receive fees in connection with transactions involving the purchase, origination, management and sale of our assets regardless of the quality of the asset acquired or the services provided to us;

— Our dealer manager, KBS Capital Markets Group, is an affiliate of KBS Capital Advisors and will receive fees in connection with our public offerings of equity securities;

— The negotiations of the advisory agreement and the dealer manager agreement (including the substantial fees KBS Capital Advisors and its affiliates receive thereunder) were not at arm’s length;

— KBS Capital Advisors may terminate the advisory agreement without penalty upon 60 days’ written notice. Upon termination of the advisory agreement by either party, KBS Capital Advisors may be entitled to receive a termination fee in the form of a promissory note that becomes due only upon the sale, exchange or other disposition of one or more assets, and the fee is payable solely from the proceeds from the sale, exchange or other disposition of an asset and future asset sales, exchanges or dispositions. The amount of the fee would be 15% of the amount, if any, by which (i) the hypothetical liquidation proceeds plus distributions paid exceed (ii) the amount necessary to provide investors with a return of their net capital contributions and an 8.0% per year cumulative, non-compounded return through the termination date; however, the agreement does not require that the investors actually have received such return prior to issuance of the promissory note or payments under it. The amount due under the promissory note would not be adjusted upwards or downwards to reflect any difference in the appraised value of our portfolio at termination and the amount ultimately realized by us. Therefore, if the ultimate liquidation value of our assets were to decline relative to the appraised value of our assets as of the termination date of the advisory agreement, we may be obligated to pay a termination fee even if our stockholders do not ultimately receive an 8.0% per year cumulative, non-compounded return on their investment in us. The termination fee would be reduced by the amount of any prior payment to the advisor of a subordinated participation in net cash flows;

— We may seek stockholder approval to internalize our management by acquiring assets and the key real estate professionals at our advisor and its affiliates for consideration that would be negotiated at that time. The payment of such consideration could result in dilution to your interest in us and could reduce the net income per share and funds from operations per share attributable to your investment. Additionally, in an internalization transaction, the real estate professionals at our advisor that become our employees may receive more compensation than they receive from our advisor or its affiliates. These possibilities may provide incentives to our advisor or these individuals to pursue an internalization transaction rather than an alternative strategy, even if such alternative strategy might otherwise be in our stockholders’ best interests; and

— The key real estate professionals associated with KBS Capital Advisors may become employees of another KBS-sponsored program in an internalization transaction or, if we internalize our advisor, may not become our employees as a result of their relationship with other KBS-sponsored programs.

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What is your organizational structure?

The following chart shows the general structure and ownership of our company and the management relationship between the advisor and us:

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⁽¹⁾ Peter McMillan III is our Executive Vice President.

⁽²⁾ Peter M. Bren is our President and one of our directors. Other than de minimis amounts owned by family members or family trusts, Mr. Bren indirectly owns and controls PBren Investments, L.P.

⁽³⁾ Other than de minimis amounts owned by family members or trusts, Mr. Schreiber indirectly owns and controls Schreiber Real Estate Investments, L.P.

⁽⁴⁾ As trustee of the Preston Butcher Legacy Partners Business Assets Revocable Trust u/d/t dated May 12, 2003. C. Preston Butcher is our Chief Executive Officer and Chairman of our Board of Directors.

⁽⁵⁾ As trustee of the W. Dean Henry Legacy Partners Business Assets Revocable Trust u/d/t dated January 22, 2007. W. Dean Henry is our Executive Vice President.

⁽⁶⁾ As trustee of the Hays 2009 Revocable Trust u/d/t dated November 12, 2009. Guy K. Hays is our Executive Vice President.

⁽⁷⁾ Our advisor has agreed to grant to the sub-advisor an assignment of our advisor’s rights to receive the following payments under the advisory agreement: (i) the acquisition advisory fee; (ii) the asset management fee; (iii) any construction and development fees we pay to our advisor; (iv) any disposition fee we pay to our advisor; (v) any incentive fee or termination fee we pay to our advisor; and (vi) all reimbursements of organization and offering expenses (except for those relating to the salaries and benefits of the accounting and reporting employees of our advisor) that we reimburse to our advisor pursuant to the advisory agreement, but only to the extent funded by the sub-advisor. The sub-advisor’s limited liability company operating agreement in turn delineates the allocation and distribution priorities of these amounts between our advisor and Legacy Partners Residential Realty LLC, the two sole members of the sub-advisor. For a description of the fees and reimbursements subject to the assignment, see “Management Compensation.”

⁽⁸⁾ As of the date of this prospectus, KBS-Legacy Apartment Community REIT Venture, LLC owns 20,000 shares of our common stock, which it acquired in exchange for an initial investment of $200,000.

⁽⁹⁾ We are the sole member and manager of KBS Legacy Partners Holdings LLC. KBS Legacy Partners Holdings LLC is the sole limited partner of, and owns a 99.9% partnership interest in, KBS Legacy Partners Limited Partnership. We are the sole general partner of, and own the remaining 0.1% partnership interest in, KBS Legacy Partners Limited Partnership.

As of the date of this prospectus, our sponsors have not received any compensation from us for services provided in their capacity as principals of KBS Capital Advisors or Legacy Partners Residential Realty LLC, or their respective affiliates. In connection with this offering, we pay or reimburse our advisor and its affiliates for the services described below.

What are the fees that you will pay to your sponsors, their respective affiliates and your directors?

Our sponsors and their respective affiliates will receive compensation and reimbursement for services relating to this offering and the investment and management of our assets. We also compensate our independent directors for their service to us. The most significant items of compensation are included in the table below. Selling commissions and dealer manager fees may vary for different categories of purchasers. With respect to development services, construction services and property management services, although we do not rely exclusively on, nor have a written agreement to exclusively receive services from affiliates of our Legacy sponsors, our advisor may seek such services from our Legacy sponsors. All such service transactions would be subject to approval by our conflicts committee as fair and reasonable and on terms no less favorable than those available from unaffiliated third parties. This table assumes that we sell all shares at the highest possible selling commissions and dealer manager fees (with no discounts to any categories of purchasers) and assumes a $9.50 price for each share sold through our dividend reinvestment plan. No selling commissions or dealer manager fees are payable on shares sold through our dividend reinvestment plan.

Type of Compensation	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares)
	Organization and Offering Stage
Selling Commissions	Up to 6.5% of gross offering proceeds in the primary offering; no selling commissions are payable on shares sold under the	$162,500/ $130,000,000

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Type of Compensation	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares)
	dividend reinvestment plan; all selling commissions are reallowed to participating broker-dealers.
Dealer Manager Fee	Up to 3.0% of gross offering proceeds in the primary offering; the dealer manager may reallow to any participating broker-dealer up to 1.0% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee and in special cases the dealer manager may increase the reallowance; no dealer manager fee is payable on shares sold under the dividend reinvestment plan.	$75,000/ $60,000,000
Other Organization and Offering Expenses	To date, our sponsors, through our advisor, have paid certain organization and offering expenses on our behalf. As of January 5, 2010 the sponsors have incurred $1,361,740 of other organization and offering expenses on our behalf, of which $625,398 has been paid. We will reimburse our advisor for these costs and future organization and offering costs it may incur on our behalf but only to the extent that the reimbursement would not cause the selling commissions, the dealer manager fee and the other organization and offering expenses borne by us to exceed 15.0% of gross offering proceeds as of the date of the reimbursement. If we raise the maximum offering amount in the primary offering and under the dividend reinvestment plan, we expect organization and offering expenses (other than selling commissions and the dealer manager fee) to be $21,690,423 or 0.79% of gross offering proceeds. These organization and offering expenses include all expenses (other than selling commissions and the dealer manager fee) to be paid by us in connection with the offering, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and transfer agent, charges of our advisor for administrative services related to the issuance of shares in the offering, reimbursement of bona fide due diligence expenses of broker-dealers, reimbursement of our advisor for costs in connection with preparing supplemental sales materials, the cost of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and travel, meal and lodging costs for registered persons associated with our dealer manager and officers and employees of our affiliates to attend retail seminars conducted by broker-dealers and, in special cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares by such broker-dealers and the ownership of our shares by such broker-dealers’ customers.	$137,500/ $21,690,423

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Type of Compensation	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares)
	Acquisition and Development Stage
Acquisition Advisory Fees	1.0% of the cost of investments acquired by us, including any acquisition expenses and any debt attributable to such investments and budgeted capital improvement costs. Under our charter, a majority of the independent directors would have to approve any increase in the acquisition advisory fee payable to our advisor. Our charter limits our ability to make an investment if the total of all acquisition fees and expenses relating to the investment exceeds 6% of the contract purchase price or 6% of the total funds advanced. This limit may only be exceeded if the conflicts committee approves (by majority vote) the fees and expenses and finds the transaction to be commercially competitive, fair and reasonable to us.	$20,916 (minimum offering and no debt)/ $17,617,669 (maximum offering and no debt)/ $50,336,197 (maximum offering and target leverage of 65% of the cost of our real estate investments)
Development Fees	In the event we engage an affiliate of one of our sponsors to provide development services with respect to a particular property, we will pay a development fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project.	Actual amounts are dependent upon usual and customary development fees for specific projects and therefore the amount cannot be determined at the present time.
Construction Fees	In the event we engage an affiliate of one of our sponsors to provide construction services with respect to a particular property, we will pay a construction fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project.	Actual amounts are dependent upon usual and customary construction fees for specific projects and therefore the amount cannot be determined at the present time.
Acquisition Expenses	Reimbursement of customary acquisition expenses (including expenses relating to potential investments that we do not close), such as legal fees and expenses (including fees of independent contractor in-house counsel that are not employees of the advisor), costs of due diligence, accounting fees and expenses and other closing costs and miscellaneous expenses relating to the acquisition of real estate. We estimate that these expenses will average approximately 0.6% of the contract purchase prices of our real property acquisitions.	Actual amounts are dependent upon the total equity and debt capital we raise, the cost and location of our investments and the results of our operations; we cannot determine these amounts at the present time.

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Type of Compensation	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares)
	Operational Stage
Asset Management Fee	Monthly fee equal to one-twelfth of 1.0% of the sum of the cost of all real estate investments we own and of our investments in joint ventures, including acquisition expenses, any debt attributable to such investments and budgeted capital improvement costs.	Actual amounts are dependent upon the total equity and debt capital we raise and the results of our operations; we cannot determine these amounts at the present time.
Property Management Fees	In the event we engage an affiliate of our Legacy sponsors to provide property management services with respect to a particular property, we will pay a property management fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project.	Actual amounts are dependent upon gross revenues of specific properties and actual management fees or property management fees and therefore cannot be determined at the present time.
Other Operating Expenses	We will reimburse our advisor for costs of providing services to us, including our allocable share of the advisor’s overhead, such as rent, employee costs, utilities and IT costs. Though our advisor may seek reimbursement for employee costs under the advisory agreement, the advisor does not intend to do so at this time. If our advisor does decide to seek reimbursement for employee costs, such costs may include our proportionate share of the salaries of persons involved in the preparation of documents to meet SEC reporting requirements. We will not reimburse the advisor or its affiliates for employee costs in connection with services for which our advisor earns acquisition or disposition fees or for the salaries and benefits our advisor or its affiliates may pay to our executive officers.	Actual amounts are dependent upon the total equity and debt capital we raise, the cost of our investments and the results of our operations; we cannot determine these amounts at the present time.
Independent Director Compensation	We will pay each of our independent directors an annual retainer of $40,000. We will also pay our independent directors for attending meetings as follows: (i) $2,500 for each board meeting attended, (ii) $2,500 for each committee meeting attended (except that the committee chairman will be paid $3,000 for each meeting attended), (iii) $2,000 for each teleconference board meeting attended, and (iv) $2,000 for each teleconference committee meeting attended (except that the committee chairman will be paid $3,000 for each teleconference committee meeting attended). All directors will receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors.	Actual amounts are dependent upon the total number of board and committee meetings that each independent director attends; we cannot determine these amounts at the present time.

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Type of Compensation	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares)
	Operational and Liquidation/Listing Stage
Subordinated Participation in Net Cash Flows (payable only if we are not listed on a national exchange)	After investors in our offering have received a return of their net capital contributions and an 8.0% per year cumulative, non-compounded return, KBS Capital Advisors is entitled to receive 15.0% of our net cash flows, whether from continuing operations, net sale proceeds or otherwise, for which full consideration is not already paid in cash or property of equivalent value for services rendered. The 8.0% per year cumulative, non-compounded return is calculated based on the amount of capital invested in the offering. In making this calculation, an investor’s net capital contribution is reduced to the extent distributions in excess of a cumulative, non-compounded, annual return of 8.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order to achieve a cumulative, non-compounded, annual return of 8.0%. This fee is payable only if we are not listed on an exchange.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.
Subordinated Performance Fee due upon termination of the advisory agreement (payable only if we are not listed on a national exchange)	Upon termination of our advisory agreement, KBS Capital Advisors may be entitled to receive a subordinated termination fee in the form of a promissory note that becomes due only upon the sale, exchange or other disposition of one or more of our assets, and the fee would be payable solely from the proceeds from the sale, exchange or other disposition of an asset and future asset sales, exchanges or dispositions. The amount of the fee would be 15% of the amount, if any, by which (i) the hypothetical liquidation proceeds plus distributions paid exceed (ii) the amount necessary to provide investors with a return of their net capital contributions and an 8.0% per year cumulative, non-compounded return through the termination date; however, the agreement does not require that the investors actually have received such return prior to issuance of the promissory note or payments under it. The amount due under the promissory note would not be adjusted upwards or downwards to reflect any difference in the appraised value of our portfolio at termination and the amount ultimately realized by us. The fee would be reduced by the amount of any prior payment to the advisor of a subordinated participation in net cash flows.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.
	Liquidation/Listing Stage
Disposition Fees	For substantial assistance in connection with the sale of properties or other investments, we will pay our advisor or its affiliates 1.0% of the contract sales price of each property or other investment sold; provided, however, in no event may the disposition fees paid to our advisor, its affiliates and unaffiliated third parties exceed 6.0% of the contract sales price. The conflicts committee will determine whether the advisor or its affiliate has provided substantial assistance to us in connection with the sale of an asset. Substantial assistance in connection with the sale of a property includes the advisor’s preparation of an investment package for the property (including a new investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a structural report and exhibits) or such other substantial services performed by the advisor in connection with a sale. We do not intend to sell properties or other assets to affiliates. However, if we do sell an asset to an affiliate, our organizational documents would not prohibit us from paying our advisor a disposition fee. Before we sold an asset to an affiliate, the charter would require that our conflicts committee conclude, by a majority vote, that the transaction is fair and reasonable to us and on terms and conditions no less	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.

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Type of Compensation	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares)
	favorable to us than those available from third parties. Although we are most likely to pay disposition fees to our advisor or an affiliate during our liquidation stage, these fees may also be incurred during our operational stage.
Subordinated Incentive Listing Fee (payable only if we are listed on a national exchange)	15.0% of the amount by which (i) our adjusted market value plus distributions paid by us prior to listing exceeds (ii) the aggregate capital contributed by investors plus an amount equal to an 8.0% cumulative, non-compounded return to investors.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.

How many real estate investments do you currently own?

We currently do not own any properties, and our total assets consist of $200,000 cash. Because we have not yet identified any specific assets to acquire, we are considered to be a blind pool. As significant property acquisitions become probable, we will supplement this prospectus to provide information regarding the likely acquisition to the extent material to an investment decision with respect to our common stock. We will also supplement this prospectus to provide information regarding material changes to our portfolio, including the closing of significant asset originations or acquisitions.

Will you acquire properties or other assets in joint ventures?

Probably. Among other reasons, joint venture investments permit us to own interests in large assets without unduly restricting the diversity of our portfolio. We may also want to acquire properties and other investments through joint ventures in order to diversify our portfolio by investment size, investment type or investment risk. In determining whether to invest in a particular joint venture, we will evaluate the real estate assets that such joint venture owns or is being formed to own under the same criteria as our other investments.

What steps will you take to make sure you purchase environmentally compliant properties?

We will obtain a Phase I environmental assessment of each property purchased and, in our discretion, may obtain additional environmental assessments. We will not close the purchase of any property unless we are generally satisfied with the environmental status of the property.

If I buy shares, will I receive distributions and how often?

In order that investors may generally begin earning distributions immediately upon our acceptance of their subscription, we expect to authorize and declare distributions based on daily record dates. We expect to pay distributions on a monthly basis.

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Generally, our policy will be to pay distributions from cash flow from operations. However, we expect to have little, if any, cash flow from operations available for distribution until we make substantial investments. During our offering stage, when we may raise capital in this offering (and possibly future offerings) more quickly than we acquire income-producing assets and for some period after our offering stage, we may not be able to pay distributions solely from our cash flow from operations. Further, because we may receive income at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, we expect to look to third-party borrowings to fund our distributions. We may also fund such distributions from advances from our advisor or sponsors or from our advisor’s deferral of its fees under the advisory agreement. Our distribution policy is not to use the proceeds of this offering to pay distributions. However, our board has the authority under our organizational documents, to the extent permitted by Maryland law, to pay distributions from any source, including proceeds from this offering or the proceeds from the issuance of securities in the future.

To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. See “Federal Income Tax Considerations — Taxation of KBS Legacy Partners REIT — Annual Distribution Requirements.” Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.

May I reinvest my distributions in shares of KBS Legacy Partners Apartment REIT?

Yes. You may participate in our dividend reinvestment plan by checking the appropriate box on the subscription agreement or by filling out an enrollment form we will provide to you at your request. The purchase price for shares purchased under the dividend reinvestment plan will initially be $9.50. Once we establish an estimated value per share that is not based on the price to acquire a share in our primary offering or a follow-on public or private offering, shares issued pursuant to our dividend reinvestment plan will be priced at the estimated value per share of our common stock, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share not based on the price to acquire a share in the primary offering or a follow-on public or private offering after the completion of our offering stage. We will consider our offering stage complete when we are no longer offering equity securities – whether through this offering or follow-on public or private offerings – and have not done so for 18 months. No selling commissions or dealer manager fees will be payable on shares sold under our dividend reinvestment plan. We may amend or terminate the dividend reinvestment plan for any reason at any time upon ten days’ notice to the participants. We may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to the participants.

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Will the distributions I receive be taxable as ordinary income?

Yes and No. Generally, distributions that you receive, including distributions that are reinvested pursuant to our dividend reinvestment plan, will be taxed as ordinary income to the extent they are from current or accumulated earnings and profits. Participants in our dividend reinvestment plan will also be treated for tax purposes as having received an additional distribution to the extent that they purchase shares under the dividend reinvestment plan at a discount to fair market value. As a result, participants in our dividend reinvestment plan may have tax liability with respect to their share of our taxable income, but they will not receive cash distributions to pay such liability.

To the extent any portion of your distribution is not from current or accumulated earnings and profits, it will generally not be subject to tax immediately; it will be considered a return of capital for tax purposes and will reduce the tax basis of your investment (and potentially result in taxable gain). Distributions that constitute a return of capital, in effect, defer a portion of your tax until your investment is sold or we are liquidated, at which time you will be taxed at capital gains rates. Because each investor’s tax considerations are different, we suggest that you consult with your tax advisor in this regard.

How will you use the proceeds raised in this offering?

We expect to use substantially all of the net proceeds from this offering to invest in and manage a diverse portfolio of equity investments in high quality apartment communities located throughout the United States. Depending primarily upon the number of shares we sell in this offering and assuming a $10.00 purchase price for shares sold in the primary offering, we estimate that we will use 83.66% to 88.09% of the gross proceeds from the primary offering, or between $8.37 and $8.81 per share, for investments. We will use the remainder to pay offering expenses, including selling commissions and the dealer manager fee, and to pay a fee to our advisor for its services in connection with the selection and acquisition or origination of our real estate investments. Until we invest the proceeds of this offering in real estate investments, we may invest in short-term, highly liquid or other authorized investments. Such short-term investments will not earn as high of a return as we expect to earn on our real estate investments, and we may be not be able to invest the proceeds in real estate promptly.

We expect to use substantially all of the net proceeds from the sale of shares under our dividend reinvestment plan for general corporate purposes, including, but not limited to, the repurchase of shares under our share redemption program; capital expenditures, tenant improvement costs and leasing costs related to our investments in real estate properties; reserves required by any financings of our investments in real estate properties; future funding obligations under any of our real estate loans receivable; investments in real estate properties and real estate-related assets, which would include payment of acquisition advisory fees to our advisor; and the repayment of debt.

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	250,000 Shares		280,000,000 Shares
	Minimum Offering         ($10.00/share)		Primary Offering (200,000,000 shares)       ($10.00/share)		Div. Reinv. Plan (80,000,000 shares) ($9.50/share)
	$	%	$	%	$	%
Gross Offering Proceeds	2,500,000	100.00%	2,000,000,000	100.00%	760,000,000	100.00%
Selling Commissions	162,500	6.50%	130,000,000	6.50%	0	0.00%
Dealer Manager Fee	75,000	3.00%	60,000,000	3.00%	0	0.00%
Other Organization and Offering Expenses	137,500	5.50%	20,615,423	1.03%	1,075,000	0.14%
Acquisition Advisory Fees(1)	20,916	0.84%	17,617,669	0.88%	0	0.00%
Initial Working Capital Reserve	12,500	0.50%	10,000,000	0.50%	0	0.00%
Amount Available for Investment	2,091,584	83.66%	1,761,766,908	88.09%	758,925,000	99.86%

⁽¹⁾ If we raise the maximum offering amount and our debt financing is equal to 65% of the cost of our investments, then acquisition advisory fees would be $50,336,197.

What kind of offering is this?

We are offering up to 280,000,000 shares of common stock on a “best efforts” basis. We are offering 200,000,000 of these shares in our primary offering at $10 per share, with volume discounts available to investors who purchase more than $1,000,000 in shares through the same participating broker-dealer. Discounts are also available for investors who purchase shares through certain distribution channels. We are offering up to 80,000,000 shares pursuant to our dividend reinvestment plan at a purchase price initially equal to $9.50 per share.

How does a “best efforts” offering work? What happens if you don’t raise at least $2,500,000 in gross offering proceeds?

When shares are offered on a “best efforts” basis, the dealer manager will be required to use only its best efforts to sell the shares and it has no firm commitment or obligation to purchase any of the shares. Therefore, we may not sell all or any of the shares that we are offering.

We will not sell any shares unless we raise a minimum of $2,500,000 in gross offering proceeds from persons who are not affiliated with us or our sponsors. Pending satisfaction of this condition, all subscription payments will be placed in an account held by the escrow agent in trust for our subscribers’ benefit, pending release to us. You are entitled to receive the interest earned on your subscription payment while it is held in the escrow account. Once we have raised the minimum offering amount and instructed the escrow agent to disburse the funds in the account, funds representing the gross purchase price for the shares will be distributed to us and the escrow agent will disburse directly to you any interest earned on your subscription payment while it was held in the escrow account. If we do not raise $2,500,000 in gross offering proceeds by January     , 2011, we will terminate this offering and promptly return all subscribers’ funds in the escrow account (plus interest). Funds in escrow will be invested in short-term investments that mature on or before the termination of the escrow period or that

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can be readily sold or otherwise disposed of for cash by such date without any dissipation of the offering proceeds invested. We will not deduct any fees if we return funds from the escrow account. Because of the higher minimum offering requirement for Pennsylvania and Tennessee investors (described below), subscription payments made by such investors will not count toward the $2,500,000 minimum offering for all other jurisdictions.

Notwithstanding our $2,500,000 minimum offering amount for all other jurisdictions, we will not sell any shares to Pennsylvania investors unless we raise a minimum of $66.7 million in gross offering proceeds (including sales made to residents of other jurisdictions). Pending satisfaction of this condition, all subscription payments by Pennsylvania investors will be placed in a segregated account held by the escrow agent in trust for Pennsylvania subscribers’ benefit, pending release to us. If we have not reached this $66.7 million threshold within 120 days of the date that we first accept a subscription payment from a Pennsylvania investor, we will, within ten days of the end of that 120-day period, notify Pennsylvania investors in writing of their right to receive refunds, with interest. If you request a refund within ten days of receiving that notice, we will arrange for the escrow agent to promptly return by check your subscription amount with interest. Amounts held in the Pennsylvania escrow account from Pennsylvania investors not requesting a refund will continue to be held for subsequent 120-day periods until we raise at least $66.7 million or until the end of the subsequent escrow periods. At the end of each subsequent escrow period, we will again notify you of your right to receive a refund of your subscription amount with interest. In the event we do not raise gross offering proceeds of $66.7 million by January     , 2012, we will promptly return all funds held in escrow for the benefit of Pennsylvania investors (in which case, Pennsylvania investors will not be required to request a refund of their investment). Purchases by persons affiliated with us or our sponsors will not count toward the Pennsylvania minimum.

In addition, we will not sell any shares to Tennessee investors unless we raise a minimum of $10 million in gross offering proceeds (including sales made to residents of other jurisdictions). Pending satisfaction of this condition, all subscription payments by Tennessee investors will be placed in a segregated account held by the escrow agent in trust for Tennessee subscribers’ benefit, pending release to us. In the event we do not raise gross offering proceeds of $10 million by January     , 2012, we will promptly return all funds held in escrow for the benefit of Tennessee investors. Purchases by persons affiliated with us or our sponsors will not count toward the Tennessee minimum.

How long will this offering last?

We expect to sell the 200,000,000 shares offered in our primary offering over a two-year period, or by January     , 2012. If we have not sold all of the shares within two years, we may continue the primary offering for an additional year until January     , 2013. Under rules promulgated by the SEC, should we determine to register a follow-on offering, we may extend this offering up to an additional 180 days beyond January     , 2013. If we decide to continue our primary offering beyond two years from the date of this prospectus, we will provide that information in a prospectus supplement. We may continue to offer shares under our dividend reinvestment plan beyond these dates until we have sold 80,000,000 shares through the reinvestment of distributions. In many states, we will need to renew the registration statement or file a new registration statement annually to continue the offering. We may terminate this offering at any time.

If our board of directors determines that it is in our best interest, we may conduct follow-on offerings upon the termination of this offering. Our charter does not restrict our ability to conduct offerings in the future.

Who can buy shares?

An investment in our shares is only suitable for persons who have adequate financial means and who will not need immediate liquidity from their investment. Residents of most states can buy shares in this offering provided that they have either (1) a net worth of at least $70,000 and an annual gross income of at least $70,000 or (2) a net worth of at least $250,000. For the purpose of determining suitability, net worth does not include an investor’s home, home furnishings or personal automobiles. The minimum

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suitability standards are more stringent for investors in Alabama, California, Iowa, Kansas, Kentucky, Massachusetts, Michigan, Ohio, Oregon, Pennsylvania and Tennessee.

Who might benefit from an investment in our shares?

An investment in our shares may be beneficial for you if you meet the minimum suitability standards described in this prospectus, seek to diversify your personal portfolio with a real estate-based investment, seek to receive current income, seek to preserve capital, seek to obtain the benefits of potential long-term capital appreciation and are able to hold your investment for a time period consistent with our liquidity strategy. On the other hand, we caution persons who require immediate liquidity or guaranteed income, or who seek a short-term investment, that an investment in our shares will not meet those needs.

Is there any minimum investment required?

Yes. We require a minimum investment of $4,000. If you own the minimum investment in shares in KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT or any future KBS-sponsored public program, you may invest less than the minimum amount set forth above, but in no event less than $100. After you have satisfied the minimum investment requirement, any additional purchases must be in increments of at least $100. The investment minimum for subsequent purchases does not apply to shares purchased pursuant to our dividend reinvestment plan.

Are there any special restrictions on the ownership or transfer of shares?

Yes. Our charter contains restrictions on the ownership of our shares that prevent any one person from owning more than 9.8% of our aggregate outstanding shares unless exempted by our board of directors. These restrictions are designed to enable us to comply with ownership restrictions imposed on REITs by the Internal Revenue Code.

Our charter also limits your ability to sell your shares. Subsequent purchasers, i.e., potential purchasers of your shares, must also meet the net worth or income standards, and unless you are transferring all of your shares, you may not transfer your shares in a manner that causes you or your transferee to own fewer than the number of shares required to meet the minimum purchase requirements, except for the following transfers without consideration: transfers by gift, transfers by inheritance, intrafamily transfers, family dissolutions, transfers to affiliates and transfers by operation of law.

Are there any special considerations that apply to employee benefit plans subject to ERISA or other retirement plans that are investing in shares?

Yes. The section of this prospectus entitled “ERISA Considerations” describes the effect the purchase of shares will have on individual retirement accounts and retirement plans subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA), and/or the Internal Revenue Code. ERISA is a federal law that regulates the operation of certain tax-advantaged retirement plans. Any retirement plan trustee or individual considering purchasing shares for a retirement plan or an individual retirement account should carefully read this section of the prospectus.

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May I make an investment through my IRA, SEP or other tax-deferred account?

Yes. You may make an investment through your individual retirement account (IRA), a simplified employee pension (SEP) plan or other tax-deferred account. In making these investment decisions, you should consider, at a minimum, (1) whether the investment is in accordance with the documents and instruments governing your IRA, plan or other account, (2) whether the investment satisfies the fiduciary requirements associated with your IRA, plan or other account, (3) whether the investment will generate UBTI to your IRA, plan or other account, (4) whether there is sufficient liquidity for such investment under your IRA, plan or other account, (5) the need to value the assets of your IRA, plan or other account annually or more frequently, and (6) whether the investment would constitute a prohibited transaction under applicable law.

How do I subscribe for shares?

If you choose to purchase shares in this offering, you will need to complete and sign a subscription agreement (in the form attached to this prospectus as Appendix A) for a specific number of shares and pay for the shares at the time of your subscription.

If I buy shares in this offering, how may I later sell them?

At the time you purchase the shares, they will not be listed for trading on any securities exchange or over-the-counter market. In fact, we expect that there will not be any public market for the shares when you purchase them, and we cannot be sure if one will ever develop. In addition, our charter imposes restrictions on the ownership of our common stock that will apply to potential purchasers of your shares. As a result, if you wish to sell your shares, you may not be able to do so promptly or at all, or you may only be able to sell them at a substantial discount from the price you paid.

After you have held your shares for at least one year, you may be able to have your shares repurchased by us pursuant to our share redemption program. The prices at which we will initially redeem shares are as follows:

— The lower of $9.25 or 92.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least one year;

— The lower of $9.50 or 95.0% of the price paid to acquire the shares from us for stockholders who have held their shares for at least two years;

— The lower of $9.75 or 97.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least three years; and

— The lower of $10.00 or 100% of the price paid to acquire the shares from us for stockholders who have held their shares for at least four years.

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Notwithstanding the above, once we establish an estimated value per share of our common stock that is not based on the price to acquire a share in our primary offering or a follow-on public or private offering, the redemption price per share for all stockholders would be equal to the estimated value per share, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share after the completion of our offering stage. We will consider our offering stage complete when we are no longer offering equity securities – whether through this offering or follow-on public or private offerings – and have not done so for 18 months.

The terms of our share redemption program are more generous with respect to redemptions sought upon a stockholder’s death, qualifying disability or determination of incompetence:

— There is no one-year holding requirement;

— Until we establish an estimated value per share, which we expect to be after the completion of our offering stage (as described above), the redemption price is the amount paid to acquire the shares from us; and

— Once we have established an estimated value per share, the redemption price would be the estimated value of the shares, as determined by our advisor or another firm chosen for that purpose.

In order for a determination of disability or incompetence to entitle a stockholder to these special redemption terms, the determination of disability or incompetence must be made by the government entities specified in the share redemption program.

The share redemption program contains numerous other restrictions on your ability to sell your shares to us. During each calendar year, redemptions are limited to the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year. Further, during any calendar year, we may redeem no more than 5% of the weighted average number of shares outstanding during the prior calendar year. We also have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. We may amend, suspend or terminate the program for any reason upon 30 days’ notice.

When will the company seek to list its shares of common stock or liquidate its assets?

We may seek to list our shares of common stock if our independent directors believe listing would be in the best interests of our stockholders. If we do not list our shares of common stock on a national securities exchange by January 31, 2020, our charter requires that we either:

— seek stockholder approval of the liquidation of the company; or

— if a majority of the conflicts committee determines that liquidation is not then in the best interests of our stockholders, postpone the decision of whether to liquidate the company.

If a majority of the conflicts committee does determine that liquidation is not then in the best interests of our stockholders, our charter requires that the conflicts committee revisit the issue of liquidation at least annually. Further postponement of listing or stockholder action regarding liquidation would only be permitted if a majority of the conflicts committee again determined that liquidation would

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not be in the best interest of our stockholders. If we sought and failed to obtain stockholder approval of our liquidation, our charter would not require us to list or liquidate, and we could continue to operate as before. If we sought and obtained stockholder approval of our liquidation, we would begin an orderly sale of our properties and other assets. The precise timing of such sales would take account of the prevailing real estate and financial markets, the economic conditions in the submarkets where our properties are located and the federal income tax consequences to our stockholders. In making the decision to apply for listing of our shares, our directors will try to determine whether listing our shares or liquidating our assets will result in greater value for stockholders.

One of the factors our board of directors will consider when making this determination is the liquidity needs of our stockholders. In assessing whether to list or liquidate, our board of directors would likely solicit input from financial advisors as to the likely demand for our shares upon listing. If, after listing, the board believed that it would be difficult for stockholders to dispose of their shares, then that factor would weigh against listing. However, this would not be the only factor considered by the board. If listing still appeared to be in the best long-term interest of our stockholders, despite the prospects of a relatively small market for our shares upon the initial listing, the board may still opt to list our shares of common stock in keeping with its obligations under Maryland law. The board would also likely consider whether there was a large pent-up demand to sell our shares when making decisions regarding listing or liquidation. The degree of participation in our dividend reinvestment plan and the number of requests for redemptions under the share redemption program at this time could be an indicator of stockholder demand to liquidate their investment.

Will I be notified of how my investment is doing?

Yes, we will provide you with periodic updates on the performance of your investment in us, including:

— detailed quarterly dividend reports;

— an annual report;

— supplements to the prospectus, provided quarterly during the primary offering; and

— three quarterly financial reports.

We will provide this information to you via one or more of the following methods, in our discretion and with your consent, if necessary:

— U.S. mail or other courier;

— facsimile;

— electronic delivery; or

— posting on our web site at www.kbslegacyreit.com.

To assist the Financial Industry Regulatory Authority (“FINRA”) members and their associated persons that participate in this offering, pursuant to FINRA Conduct Rule 5110, we will disclose in each annual report distributed to stockholders a per share estimated value of our shares, the method by which it

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was developed, and the date of the data used to develop the estimated value. In addition, KBS Capital Advisors, our advisor, will prepare annual statements of estimated share values to assist fiduciaries of retirement plans subject to the annual reporting requirements of ERISA in the preparation of their reports relating to an investment in our shares. Our advisor has indicated that it intends to use the most recent price paid to acquire a share in this offering (ignoring purchase price discounts for certain categories of purchasers) or a follow-on public or private offering as its estimated per share value of our shares until we have completed our offering stage. Therefore, you will not be notified of a per share value of our shares that is based on an estimate of the fair market value of our assets, or upon any basis other than the most recent offering price, until 18 months after the completion of our offering stage, which may extend beyond the completion of this offering. We will consider our offering stage complete when we are no longer offering equity securities – whether through this offering or follow-on public or private offerings – and have not done so for 18 months. If our board of directors determines that it is in our best interest, we may conduct follow-on offerings upon the termination of this offering. Our charter does not restrict our ability to conduct offerings in the future. (For purposes of determining completion of our offering stage, we will not consider an “equity offering” to include offerings on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership.)

Although this initial estimated value represents the most recent price at which most investors are willing to purchase shares in an offering, this reported value is likely to differ from the price at which a stockholder could resell his or her shares because (i) there is no public trading market for the shares at this time; (ii) the estimated value does not reflect, and is not derived from, the fair market value of our properties and other assets, nor does it represent the amount of net proceeds that would result from an immediate liquidation of those assets, because the amount of proceeds available for investment from an offering is net of selling commissions, dealer manager fees, other organization and offering costs and acquisition fees and expenses; (iii) the estimated value does not take into account how market fluctuations affect the value of our investments, including how the current disruptions in the financial and real estate markets may affect the values of our investments; and (iv) the estimated value does not take into account how developments related to individual assets may have increased or decreased the value of our portfolio.

When determining the estimated value of our shares by methods other than the last price paid to acquire a share in an offering, our advisor, or another firm we choose for that purpose, will estimate the value of our shares based upon a number of assumptions that may not be accurate or complete. Specifically, we expect that the value of our investments in real estate will be determined using either a direct capitalization or a discounted cash flow analysis that will employ internally prepared cash flow estimates, initial and/or terminal capitalization rates within historical average ranges and discount rates that fall within ranges that the firm performing the valuation believes are used by similar investors. We expect that the capitalization rate ranges and discount rate ranges will be obtained from third-party services and the capitalization rate ranges will be gathered for specific metro areas and applied on a property-by-property basis. To the extent that relevant data is available, the value of our real estate assets may also be estimated by taking into account the relative prices paid in connection with comparable real estate transactions in the markets where our properties are located. Although we believe direct capitalization, discounted cash flow analysis and the use of comparable transaction data are all industry standards and acceptable valuation methodologies to determine fair value in accordance with generally accepted accounting principals, the estimated values for our investments in real estate may not represent current market values. We expect our notes payable would be valued using a similar methodology using estimates of cash flows based on the remaining loan terms and on estimates of current market interest rates for instruments with similar characteristics. Our other assets and liabilities would generally be valued at their book value, except that certain assets and liabilities would be excluded from the calculation to the extent they were already considered in the real estate or other valuations. Accordingly, these estimates may not be an accurate reflection of the fair market value of our investments and will not likely represent the amount of net proceeds that would result from an immediate sale of our assets.

When will I get my detailed tax information?

Your Form 1099-DIV tax information, if required, will be mailed by January 31 of each year.

Who can help answer my questions about the offering?

If you have more questions about the offering, or if you would like additional copies of this prospectus, you should contact your registered representative or contact:

KBS Capital Markets Group LLC

660 Newport Center Drive, Suite 1200

Newport Beach, California 92660

Telephone:   (866) KBS-4CMG or (866) 527-4264

Fax:   (949) 717-6201

www.kbs-cmg.com

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RISK FACTORS

An investment in our common stock involves various risks and uncertainties. You should carefully consider the following risk factors in conjunction with the other information contained in this prospectus before purchasing our common stock. The risks discussed in this prospectus could adversely affect our business, operating results, prospects and financial condition. This could cause the value of our common stock to decline and could cause you to lose all or part of your investment. The material risks and uncertainties are described below.

Risks Related to an Investment in Us

Because no public trading market for your shares currently exists, it will be difficult for you to sell your shares and, if you are able to sell your shares, you will likely sell them at a substantial discount to the public offering price.

Our charter does not require our directors to seek stockholder approval to liquidate our assets by a specified date, nor does our charter require our directors to list our shares for trading on a national securities exchange by a specified date. There is no public market for our shares and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, you may not sell your shares unless the buyer meets the applicable suitability and minimum purchase standards and such sale complies with state and federal securities laws. In addition, our charter prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit large investors from purchasing your shares. In its sole discretion, our board of directors could amend, suspend or terminate our share redemption program upon 30 days’ notice. Further, the share redemption program includes numerous restrictions that would limit your ability to sell your shares. We describe these restrictions in more detail under “Description of Shares—Share Redemption Program.” Therefore, it will be difficult for you to sell your shares promptly or at all. If you are able to sell your shares, you would likely have to sell them at a substantial discount to their public offering price. It is also likely that your shares would not be accepted as the primary collateral for a loan. Because of the illiquid nature of our shares, you should purchase our shares only as a long-term investment and be prepared to hold them for an indefinite period of time.

If we are unable to find suitable investments, we may not be able to achieve our investment objectives or pay distributions.

Our ability to achieve our investment objectives and to pay distributions depends upon the performance of KBS Capital Advisors, our advisor, in the acquisition of our investments, including the determination of any financing arrangements. Competition from competing entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Additionally, disruptions and dislocations in the credit markets have materially impacted the cost and availability of debt to finance real estate acquisitions, which is a key component of our acquisition strategy. This lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage to other entities that have greater financial resources than we do. We are also subject to competition in seeking to acquire real estate-related investments. The more shares we sell in this offering, the greater our challenge will be to invest all of the net offering proceeds on attractive terms. Our investors must rely entirely on the management abilities of KBS Capital Advisors, the property managers KBS Capital Advisors selects and the oversight of our board of directors. We can give no assurance that KBS Capital Advisors will be successful in obtaining suitable investments on financially attractive terms or that, if KBS Capital Advisors makes investments

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on our behalf, our objectives will be achieved. If we, through KBS Capital Advisors, are unable to find suitable investments promptly, we will hold the proceeds from this offering in an interest-bearing account or invest the proceeds in short-term assets. If we would continue to be unsuccessful in locating suitable investments, we may ultimately decide to liquidate. In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions and we may not be able to meet our investment objectives.

Continued disruptions in the financial markets and poor economic conditions could adversely affect our ability to secure debt financing on attractive terms and the values of the investments we make.

The capital and credit markets have been experiencing extreme volatility and disruption for more than two years. Liquidity in the global credit market has been severely contracted by these market disruptions, making it costly to obtain new lines of credit. We intend to rely on debt financing to finance our properties. As a result of the ongoing credit market turmoil, we may not be able to obtain debt financing on attractive terms. As such, we may be forced to use a greater proportion of our offering proceeds to finance our acquisitions, reducing the number of acquisitions we would otherwise make. If the current debt market environment persists we may modify our investment strategy in order to optimize our portfolio performance. Our options would include limiting or eliminating the use of debt and focusing on those higher yielding investments that do not require the use of leverage to meet our portfolio goals.

The continued disruptions in the financial markets and poor economic conditions could adversely affect the values of investments we make. Turmoil in the capital markets has constrained equity and debt capital available for investment in real estate, resulting in fewer buyers seeking to acquire properties and possible increases in capitalization rates and lower property values. Furthermore, these poor economic conditions could negatively impact real estate fundamentals and result in lower occupancy, lower rental rates and declining values in real estate that we may acquire. These could have the following negative effects on us:

— the values of our investments in properties could decrease below the amounts we pay for such investments; and

— revenues from properties we acquire could decrease due to fewer tenants and/or lower rental rates, making it more difficult for us to pay dividends or meet our debt service obligations on debt financing.

These factors could impair our ability to make distributions to our investors and decrease the value of an investment in us.

We may suffer from delays in locating suitable investments, which could limit our ability to make distributions and lower the overall return on our stockholders’ investment.

We rely upon our sponsors and the other real estate professionals affiliated with our sponsors, to identify suitable investments. The private KBS-sponsored programs, especially those that are currently raising offering proceeds, as well as the institutional investors for whom KBS affiliates serve as investment advisors, also rely upon our KBS sponsors for investment opportunities. In addition, KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT, which are also externally advised by our advisor, rely upon our KBS sponsors. The private Legacy-sponsored programs rely upon certain of our Legacy sponsors for investment

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opportunities. To the extent that our sponsors and the other real estate professionals affiliated with our sponsors face competing demands upon their time at times when we have capital ready for investment, we may face delays in locating suitable investments. Further, the more money we raise in this offering, the more difficult it will be to invest the net offering proceeds promptly and on attractive terms. Therefore, the large size of this offering and the competition from other entities that may be better positioned to acquire the types of properties and other investments we desire to purchase increase the risk of delays in investing our net offering proceeds. Delays we encounter in the selection and acquisition or origination of income-producing assets would likely limit our ability to pay distributions to our stockholders and lower their overall returns. Further, if we acquire properties prior to the start of construction or during the early stages of construction, it will typically take several months to complete construction and rent available space. Therefore, our stockholders could suffer delays in the distribution of cash distributions attributable to those particular properties. Our stockholders should expect to wait at least several months after the closing of a property acquisition before receiving cash distributions attributable to that property.

Because this is a blind-pool offering, you will not have the opportunity to evaluate our investments before we make them, which makes your investment more speculative.

Because we have not yet acquired or identified any investments that we may make, we are not able to provide you with any information to assist you in evaluating the merits of any specific properties that we may acquire, except for investments that may be described in one or more supplements to this prospectus. We will seek to invest substantially all of the net offering proceeds from the primary offering, after the payment of fees and expenses, in the acquisition of or investment in interests in real estate properties. However, because you will be unable to evaluate the economic merit of real estate projects before we invest in them, you will have to rely entirely on the ability of our advisor to select suitable and successful investment opportunities. Furthermore, our board of directors will have broad discretion in implementing policies regarding tenant or mortgagor creditworthiness and you will not have the opportunity to evaluate potential tenants, managers or borrowers. These factors increase the risk that your investment may not generate returns comparable to our competitors.

If we raise substantially less than the maximum offering amount, we will be limited in the number and type of investments we make and the value of your investment in us will fluctuate with the performance of the specific assets we acquire.

This offering is being made on a “best efforts” basis, meaning that our dealer manager is only required to use its best efforts to sell our shares and has no firm commitment or obligation to purchase any of the shares. As a result, there is no assurance that we will raise the maximum offering amount and the amount of proceeds we raise in this offering may be substantially less than the amount we would need to achieve a fully diversified portfolio of investments. We may be unable to raise even the minimum offering amount. If we are unable to raise substantial funds, we will make fewer investments resulting in less diversification in terms of the type, number, size and geographic location of investments that we make. In that case, the likelihood that any single property’s performance would adversely affect our profitability will increase. If most of our properties are located in a single geographic area, our operating results and ability to make distributions are likely to be impacted by economic changes affecting the real estate markets in that area. Your investment in our shares will be subject to greater risk to the extent that we lack a diversified portfolio of investments. Further, we will have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in this offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and cash flow and limiting our ability to make distributions.

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We are a recently formed company with no operating history and our advisor has a limited operating history, which makes our future performance difficult to predict.

We are a recently formed company and have no operating history. We were incorporated in the State of Maryland on July 31, 2009. As of the date of this prospectus, we have not made any investments, and our total assets consist of $200,000 cash. You should not assume that our performance will be similar to the past performance of other real estate investment programs sponsored by affiliates of our sponsors.

Our advisor was formed on October 18, 2004 and its operations have consisted solely of serving as the external advisor to KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT and to us. KBS REIT I was the first publicly offered investment program sponsored by our KBS sponsors. Our Legacy sponsors have not sponsored a publicly offered investment program during the last 15 years. The private KBS- and Legacy-sponsored programs were not subject to the up-front commissions, fees and expenses associated with a public offering nor all of the laws and regulations that will apply to us. For all of these reasons, our stockholders should be especially cautious when drawing conclusions about our future performance and they should not assume that it will be similar to the prior performance of other KBS- or Legacy-sponsored programs. Our limited operating history, our advisor’s limited operating history and the differences between us and the private KBS- and Legacy-sponsored programs significantly increase the risk and uncertainty our stockholders face in making an investment in our shares.

Because we are dependent upon our advisor and its affiliates to conduct our operations, any adverse changes in the financial health of our advisor or its affiliates or our relationship with them could hinder our operating performance and the return on our stockholders’ investment.

We are dependent on KBS Capital Advisors to manage our operations and our portfolio of real estate properties. Our advisor has a limited operating history and it will depend upon the fees and other compensation that it will receive from us, KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT and other public KBS-sponsored programs in connection with the purchase, management and sale of assets to conduct its operations. Any adverse changes in the financial condition of KBS Capital Advisors or our relationship with KBS Capital Advisors could hinder its ability to successfully manage our operations and our portfolio of investments.

Our dealer manager, KBS Capital Markets Group, has a limited operating history and our ability to implement our investment strategy is dependent, in part, upon the ability of KBS Capital Markets Group to successfully conduct this offering, which makes an investment in us more speculative.

We have retained KBS Capital Markets Group, an affiliate of our advisor, to conduct this offering. KBS Capital Markets Group has a limited operating history. The initial public offering of KBS REIT I, which commenced its initial public offering in January 2006 and ceased offering shares in its primary initial public offering on May 30, 2008, was the first offering conducted by our dealer manager. This offering is the fourth public offering conducted by our dealer manager. The success of this offering, and our ability to implement our business strategy, is dependent upon the ability of KBS Capital Markets Group to build and maintain a network of broker-dealers to sell our shares to their clients. If KBS Capital Markets Group is not successful in establishing, operating and managing this network of broker-dealers, our ability to raise proceeds through this offering will be limited and we may not have adequate capital to implement our investment strategy. If we are unsuccessful in implementing our investment strategy, our stockholders could lose all or a part of their investment.

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If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investment in properties, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.

Our organizational documents permit us to pay distributions from any source. If we fund distributions from financings, the net proceeds from this offering or sources other than cash flow from operations, we will have fewer funds available for investment in real estate properties, the overall return to our stockholders may be reduced and subsequent investors may experience dilution. We expect to have little, if any, cash flow from operations available for distribution until we make substantial investments. Further, because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that at least during the early stages of our development and from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, we expect to utilize third-party borrowings to fund our distributions. We may also fund such distributions from advances from our advisor or sponsors or from our advisor’s deferral of its asset management fee. In addition, to the extent distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. There is no limit on the amount of distributions we can fund from sources other than from cash flows from operations.

The inability of our advisor to engage and retain the services of key real estate professionals, and the inability of our dealer manager to retain key employees, could delay or hinder implementation of our investment strategies, which could limit our ability to make distributions and decrease the value of an investment in our shares.

Our success depends to a significant degree upon the contributions of Messrs. Bren, Butcher, Henry and McMillan and, through our dealer manager, Michael Crimmins, each of whom would be difficult to replace. Neither we nor our affiliates have employment agreements with these individuals and they may not remain associated with us. If any of these persons were to cease their association with us, our operating results could suffer. We do not intend to maintain key person life insurance on any person. We believe that our future success depends, in large part, upon our advisor’s and its affiliates’ ability to attract and retain highly skilled managerial, operational and marketing professionals. Competition for such professionals is intense, and our advisor and its affiliates may be unsuccessful in attracting and retaining such skilled individuals. Further, we intend to establish strategic relationships with firms that have special expertise in certain services or detailed knowledge regarding real properties in certain geographic regions. Maintaining such relationships will be important for us to effectively compete with other investors for properties and tenants in such regions. We may be unsuccessful in establishing and retaining such relationships. If we lose or are unable to obtain the services of highly skilled professionals or do not establish or maintain appropriate strategic relationships, our ability to implement our investment strategies could be delayed or hindered, and the value of our stockholders’ investment may decline.

Our rights and the rights of our stockholders to recover claims against our independent directors are limited, which could reduce our stockholders’ and our recovery against them if they negligently cause us to incur losses.

Maryland law provides that a director has no liability in that capacity if he performs his duties in good faith, in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that no independent director shall be liable to us or our stockholders for monetary damages and that we will generally indemnify them for losses unless they are grossly negligent or engage in willful misconduct. As a result, our stockholders and we may have more limited rights against our independent

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directors than might otherwise exist under common law, which could reduce our stockholders’ and our recovery from these persons if they act in a negligent manner. In addition, we may be obligated to fund the defense costs incurred by our independent directors (as well as by our other directors, officers, employees (if we ever have employees) and agents) in some cases, which would decrease the cash otherwise available for distribution to our stockholders.

We may change our targeted investments without stockholder consent.

We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities, and we may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this prospectus. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to our stockholders.

Risks Related to Conflicts of Interest

Our sponsors and their respective affiliates, including our advisor, all of our executive officers and some of our directors and other key real estate professionals, face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.

Our advisor and its affiliates will receive substantial fees from us. These fees could influence our advisor’s advice to us as well as the judgment of affiliates of our advisor. Among other matters, these compensation arrangements could affect their judgment with respect to:

— the continuation, renewal or enforcement of our agreements with KBS Capital Advisors and its affiliates, including the advisory agreement and the dealer-manager agreement;

— public offerings of equity by us, which entitle KBS Capital Markets Group to dealer-manager fees and will likely entitle KBS Capital Advisors to increased acquisition and asset-management fees;

— sales of properties and other investments (including, subject to the approval of our conflicts committee, sales to affiliates), which entitle KBS Capital Advisors to disposition fees and possible subordinated incentive fees;

— acquisitions of properties and other investments, which entitle KBS Capital Advisors to acquisition and asset-management fees, and, in the case of acquisitions of investments from other KBS-sponsored programs, might entitle affiliates of KBS Capital Advisors to disposition fees and possible subordinated incentive fees in connection with its services for the seller;

— borrowings to acquire properties and other investments, which borrowings will increase the acquisition and asset-management fees payable to KBS Capital Advisors;

— whether and when we seek to list our common stock on a national securities exchange, which listing could entitle KBS Capital Advisors to a subordinated incentive listing fee;

— whether we seek stockholder approval to internalize our management, which may entail acquiring assets (such as office space, furnishings and technology costs) and negotiating

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compensation for real estate professionals at our advisor and its affiliates that may result in such individuals receiving more compensation from us than they currently receive from our advisor;

— whether and when to terminate our advisory agreement with KBS Capital Advisors, which may entitle KBS Capital Advisors to receive a subordinated performance fee that, under certain circumstances, we may be required to pay even though our stockholders do not ultimately realize a return on their investment in us; and

— whether and when we seek to sell the company or its assets, which sale could entitle KBS Capital Advisors to a subordinated incentive fee.

The fees our advisor receives in connection with the acquisition, origination and management of assets are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us.

Because other real estate programs sponsored by our sponsors and offered through our dealer manager may conduct offerings concurrently with our offering, our sponsors and our dealer manager will face potential conflicts of interest arising from competition among us and these other programs for investors and investment capital, and such conflicts may not be resolved in our favor.

Our advisor is also the advisor of KBS REIT II and KBS Strategic Opportunity REIT, which are raising capital in ongoing public offerings of common stock. KBS Capital Markets Group, the affiliated dealer manager of our KBS sponsors and the dealer manager for our offering, also acts as the dealer manager for the KBS REIT II and KBS Strategic Opportunity REIT offerings. We expect that both KBS REIT II and KBS Strategic Opportunity REIT will be raising capital in their respective public offerings concurrently with our offering. In addition, our sponsors may decide to sponsor future programs that would seek to raise capital through public offerings conducted concurrently with our offering. As a result, our sponsors and our dealer manager may face conflicts of interest arising from potential competition with these other programs for investors and investment capital. Our sponsors generally seek to avoid simultaneous public offerings by programs that have a substantially similar mix of investment characteristics, including targeted investment types and key investment objectives. Nevertheless, there may be periods during which one or more programs sponsored by our sponsors will be raising capital and which might compete with us for investment capital. Such conflicts may not be resolved in our favor and you will not have the opportunity to evaluate the manner in which these conflicts of interest are resolved before or after making your investment.

Our sponsors, our officers, KBS Capital Advisors and the real estate professionals assembled by our advisor will face competing demands relating to their time and this may cause our operations and our stockholders’ investment to suffer.

We rely on our sponsors, our officers, KBS Capital Advisors and on real estate professionals that our advisor retains to provide services to us, for the day-to-day operation of our business. Messrs. Bren, McMillan and Snyder and Ms. Yamane are also executive officers of KBS REIT I and KBS REIT II, and Mr. Bren is an executive officer of KBS Realty Advisors and its affiliates, the advisors of the other KBS-sponsored programs and the investment advisors to institutional investors in real estate and real estate-related assets. In addition, Messrs. McMillan and Snyder and Ms. Yamane are executive officers of KBS Strategic Opportunity REIT. Mr. Butcher is Chairman of the Board and Chief Executive Officer of Legacy Partners Residential, Inc., a firm that, together with Legacy Commercial and other affiliated entities, manages a commercial and residential real estate portfolio currently valued in excess of $6 billion. Mr. Butcher is integral to the management of Legacy Partners Realty Funds I, II & III. Mr. Henry is President of Legacy Partners Residential, Inc., for which Mr. Hays acts as Chief Financial Officer and Executive Managing Director. Messrs. Butcher, Henry and Hays are all involved in the management of the Legacy Partners Affordable Housing Fund. As a result of their interests in other programs, their obligations to other investors and the fact that they engage in and they will continue to engage in other business activities, on behalf of themselves and others, Messrs. Bren, Butcher, Henry, Hays, McMillan and Snyder and Ms. Yamane face conflicts of interest in allocating their time among us and other KBS- and Legacy-sponsored programs and other business activities in which they are involved. During times of intense activity in other programs and ventures, these individuals may devote less time and fewer resources to our business than are necessary or appropriate to manage our business. If this occurs, the returns on our investments, and the value of our stockholders’ investment, may decline.

All of our executive officers, some of our directors and the key real estate professionals assembled by our advisor face conflicts of interest related to their positions and/or interests in affiliates of our sponsors, including our dealer manager, which could hinder our ability to implement our business strategy and to generate returns to our stockholders.

All of our executive officers, some of our directors and key real estate professionals assembled by our advisor are also executive officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, the sub-advisor, our dealer manager and other sponsor-affiliated entities. Through sponsor-affiliated entities, some of these persons also serve as the investment advisors to institutional investors in real estate and real estate-related assets. Through KBS Capital Advisors and KBS Realty Advisors some of these persons work on behalf of KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT and other KBS-sponsored programs. And through Legacy Residential and Legacy Commercial affiliated entities some of these persons serve as managers for Legacy Partners Affordable Housing Fund, Legacy Partners Realty Fund I, Legacy Partners Realty Fund II, and Legacy Partners Realty Fund III. As

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a result, they owe fiduciary duties to each of these entities, their members and limited partners and these investors, which fiduciary duties may from time to time conflict with the fiduciary duties that they owe to us and our stockholders. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to our stockholders and to maintain or increase the value of our assets.

Risks Related to This Offering and Our Corporate Structure

Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Internal Revenue Code, our charter prohibits a person from directly or constructively owning more than 9.8% of our outstanding shares, unless exempted by our board of directors. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock.

Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.

Our board of directors may classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms or conditions of redemption of any such stock. Thus, our board of directors could authorize the issuance of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.

You will have limited control over changes in our policies and operations, which increases the uncertainty and risks you face as a stockholder.

Our board of directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. Our board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks our stockholders face.

You may not be able to sell your shares under our share redemption program and, if you are able to sell your shares under the program, you may not be able to recover the amount of your investment in our shares.

Our share redemption program includes numerous restrictions that limit your ability to sell your shares. You must hold your shares for at least one year in order to participate in the share redemption

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program, except for redemptions sought upon a stockholder’s death or “qualifying disability” or “determination of incompetence.” We limit the number of shares redeemed pursuant to the share redemption program as follows: (1) during any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year and (2) during each calendar year, redemptions are limited to the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year. Further, we have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. These limits may prevent us from accommodating all redemption requests made in any year. Our board would be free to amend, suspend or terminate the share redemption program upon 30 days’ notice.

The prices at which we will initially redeem shares under the program are as follows:

— The lower of $9.25 or 92.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least one year;

— The lower of $9.50 or 95.0% of the price paid to acquire the shares from us for stockholders who have held their shares for at least two years;

— The lower of $9.75 or 97.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least three years; and

— The lower of $10.00 or 100% of the price paid to acquire the shares from us for stockholders who have held their shares for at least four years.

Notwithstanding the above, once we establish an estimated value per share of our common stock that is not based on the price to acquire a share in our primary offering or a follow-on public or private offering, the redemption price per share for all stockholders would be equal to the estimated value per share, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share after the completion of our offering stage. We will consider our offering stage complete when we are no longer offering equity securities – whether through this offering or follow-on public or private offerings – and have not done so for 18 months. See “Description of Shares – Share Redemption Program” for more information about the program. These restrictions would severely limit your ability to sell your shares should you require liquidity and would limit your ability to recover the value you invested.

The offering price of our shares was not established on an independent basis; the actual value of your investment may be substantially less than what you pay. We may use the most recent price paid to acquire a share in our offering or a follow-on public or private offering as the estimated value of our shares until we have completed our offering stage. Even when our advisor begins to use other valuation methods to estimate the value of our shares, the value of our shares will be based upon a number of assumptions that may not be accurate or complete.

We established the offering price of our shares on an arbitrary basis. The selling price of our shares bears no relationship to our book or asset values or to any other established criteria for valuing shares. Because the offering price is not based upon any independent valuation, the offering price may not be indicative of the proceeds that you would receive upon liquidation. Further, the offering price may be significantly more than the price at which the shares would trade if they were to be listed on an exchange or actively traded by broker-dealers.

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To assist FINRA members and their associated persons that participate in this public offering of common stock, pursuant to FINRA Conduct Rule 5110, we disclose in each annual report distributed to stockholders a per share estimated value of the shares, the method by which it was developed, and the date of the data used to develop the estimated value. In addition, KBS Capital Advisors, our advisor, will prepare annual statements of estimated share values to assist fiduciaries of retirement plans subject to the annual reporting requirements of ERISA in the preparation of their reports relating to an investment in our shares. Our advisor has indicated that it intends to use the most recent price paid to acquire a share in this offering (ignoring purchase price discounts for certain categories of purchasers) or a follow-on public or private offering as its estimated per share value of our shares until we have completed our offering stage. Therefore, you will not be notified of a per share value of our shares that is based on an estimate of the fair market value of our assets, or upon any basis other than the most recent offering price, until 18 months after the completion of our offering stage, which may extend beyond the completion of this offering. We will consider our offering stage complete when we are no longer offering equity securities – whether through this offering or follow-on public or private offerings – and have not done so for 18 months. If our board of directors determines that it is in our best interest, we may conduct follow-on offerings upon the termination of this offering. (For purposes of this definition, we will not consider an “equity offering” to include offerings on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership.) Our charter does not restrict our ability to conduct offerings in the future.

Although this initial estimated value will represent the most recent price at which most investors will purchase shares in an offering, this reported value will likely differ from the price at which a stockholder could resell his or her shares because (i) there is no public trading market for the shares at this time; (ii) the estimated value will not reflect, and will not be derived from, the fair market value of our properties and other assets, nor will it represent the amount of net proceeds that would result from an immediate liquidation of those assets, because the amount of proceeds available for investment from an offering will be net of selling commissions, dealer manager fees, other organization and offering costs and acquisition fees and expenses; (iii) the estimated value will not take into account how market fluctuations affect the value of our investments, including how the current disruptions in the financial and real estate markets may affect the values of our investments; and (iv) the estimated value will not take into account how developments related to individual assets may increase or decrease the value of our portfolio.

When determining the estimated value of our shares by methods other than the last price paid to acquire a share in an offering, our advisor, or another firm we choose for that purpose, will estimate the value of our shares based upon a number of assumptions that may not be accurate or complete. Accordingly, these estimates may not be an accurate reflection of the fair market value of our investments and will not likely represent the amount of net proceeds that would result from an immediate sale of our assets.

Because the dealer manager is one of our affiliates, you will not have the benefit of an independent due diligence review of us, which is customarily performed in underwritten offerings; the absence of an independent due diligence review increases the risks and uncertainty you face as a stockholder.

Our dealer manager, KBS Capital Markets Group, is one of our affiliates. Because KBS Capital Markets Group is an affiliate, its due diligence review and investigation of us and our prospectus cannot be considered to be an independent review. Therefore, our stockholders do not have the benefit of an independent review and investigation of this offering of the type normally performed by an unaffiliated, independent underwriter in a public securities offering. In addition, it is likely that there will be little or no coverage of us by independent research analysts. Consequently, you will not receive the benefits associated with an independent review of our performance, and of the value of our shares, relative to traded REITs.

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Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of your investment.

Our common stockholders do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 1,010,000,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock. Our board of directors may increase the number of authorized shares of capital stock without stockholder approval. After your purchase in this offering, our board may elect to (1) sell additional shares in this or future public offerings, including through the dividend reinvestment plan, (2) issue equity interests in private offerings, (3) issue shares to our advisor, or its successors or assigns, in payment of an outstanding fee obligation or (4) issue shares of our common stock to sellers of properties or assets we acquire in connection with an exchange of limited partnership interests of the Operating Partnership. To the extent we issue additional equity interests after your purchase in this offering, whether in a primary offering, the dividend reinvestment plan or otherwise, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings, the use of the proceeds and the value of our real estate investments, you may also experience dilution in the book value and fair value of your shares and in the earnings and distributions per share.

Payment of fees to KBS Capital Advisors and its affiliates will reduce cash available for investment and distribution and increases the risk that you will not be able to recover the amount of you investment in our shares.

KBS Capital Advisors and its affiliates will perform services for us in connection with the selection, acquisition, management, and administration of our investments. We will pay them substantial fees for these services, which will result in immediate dilution to the value of your investment and will reduce the amount of cash available for investment or distribution to stockholders. Compensation to be paid to our advisor may be increased subject to approval by our conflicts committee and the other limitations in our charter, which would further dilute your investment and reduce the amount of cash available for investment or distribution to stockholders. Depending primarily upon the number of shares we sell in our primary offering and assuming a $10.00 purchase price for shares sold in the primary offering, we estimate that we will use 83.66% to 88.09% of the gross proceeds from the primary offering, or between $8.37 and $8.81 per share, for investments.

We may also pay significant fees during our listing/liquidation stage. Although most of the fees payable during our listing/liquidation stage are contingent on our investors first enjoying agreed-upon investment returns, the investment-return thresholds may be reduced subject to approval by our conflicts committee and the other limitations in our charter. For instance, although our advisory agreement currently requires that our stockholders receive a return of their net capital plus an 8.0% per year cumulative, non-compounded return before our advisor is entitled to receive a subordinated participation in our net cash flows, our charter would permit our conflicts committee to reduce the applicable investment-return threshold to as low as a return of net capital plus a 6.0% per year cumulative, non-compounded return without stockholder approval. In addition, affiliates of KBS Capital Advisors could receive significant payments even without our reaching the investment-return thresholds should we seek to become self-managed. Due to the apparent preference of the public markets for self-managed companies, a decision to list our shares on a national securities exchange might well be preceded by a decision to become self-managed. And given our advisor’s familiarity with our assets and operations, we might prefer to become self-managed by acquiring entities affiliated with our advisor. Such an internalization transaction could result in significant payments to affiliates of our advisor irrespective of whether you enjoyed the returns on which we have conditioned other incentive compensation.

Therefore, these fees increase the risk that the amount available for distribution to common stockholders upon a liquidation of our portfolio would be less than the purchase price of the shares in this offering. These substantial fees and other payments also increase the risk that you will not be able to resell your shares at a profit, even if our shares are listed on a national securities exchange. For a discussion of our fee arrangement with KBS Capital Advisors and its affiliates, see “Management Compensation.”

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You may be more likely to sustain a loss on your investment because our sponsors do not have as strong an economic incentive to avoid losses as do sponsors who have made significant equity investments in their companies.

Our sponsors have only invested $200,000 in us through the purchase of 20,000 shares of our common stock at $10 per share. Therefore, if we are successful in raising enough proceeds to reimburse our sponsors for our significant organization and offering expenses, our sponsors will have little exposure to loss in the value of our shares. Without this exposure, our investors may be at a greater risk of loss because our sponsors do not have as much to lose from a decrease in the value of our shares as do those sponsors who make more significant equity investments in their companies.

Although we will not currently be afforded the protection of the Maryland General Corporation Law relating to deterring or defending hostile takeovers, our board of directors could opt into these provisions of Maryland law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.

Under Maryland law, “business combinations” between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Should our board opt into these provisions of Maryland law, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Similarly, provisions of Title 3, Subtitle 8 of the Maryland General Corporation Law could provide similar anti-takeover protection. For more information about the business combination, control share acquisition and Subtitle 8 provisions of Maryland law, see “Description of Shares – Business Combinations,” “Description of Shares – Control Share Acquisitions” and “Description of Shares – Subtitle 8.”

If we do not successfully implement our liquidation policy, you may have to hold your investment for an indefinite period.

Although we presently intend to complete a transaction providing liquidity to stockholders within ten years from the completion of our offering stage, our charter does not require our board of directors to pursue such a liquidity event. Market conditions and other factors could cause us to delay the listing of our shares on a national securities exchange or delay the commencement of our liquidation beyond ten years from the termination of our offering stage. If our board of directors does determine to pursue our liquidation policy, we would be under no obligation to conclude the process within a set time. The timing of the sale of assets will depend on real estate and financial markets, economic conditions in the areas in which properties are located, and federal income tax effects on stockholders, that may prevail in the future. We cannot guarantee that we will be able to liquidate all assets. After we adopt a plan of liquidation, we would remain in existence until all properties and assets are liquidated. If we do not pursue a liquidity event, or delay such an event due to market conditions, your shares may continue to be illiquid and you may, for an indefinite period of time, be unable to convert your investment to cash easily and could suffer losses on your investment.

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Our charter includes an anti-takeover provision that may discourage a stockholder from launching a tender offer for our shares.

Our charter provides that any tender offer made by a stockholder, including any “mini-tender” offer, must comply with most provisions of Regulation 14D of the Securities Exchange Act of 1934, as amended. The offering stockholder must provide our company notice of such tender offer at least ten business days before initiating the tender offer. If the offering stockholder does not comply with these requirements, our company will have the right to redeem that stockholder’s shares and any shares acquired in such tender offer. In addition, the noncomplying stockholder shall be responsible for all of our company’s expenses in connection with that stockholder’s noncompliance. This provision of our charter may discourage a stockholder from initiating a tender offer for our shares and prevent you from receiving a premium price for your shares in such a transaction.

General Risks Related to Investments in Real Estate

Economic and regulatory changes that impact the real estate market generally may weaken our operating results and cause us to be unable to realize appreciation in the value of properties we acquire.

The performance of properties that we acquire is subject to the risks typically associated with real estate, including:

— downturns in national, regional and local economic conditions;

— competition from residential buildings;

— adverse local conditions, such as oversupply or reduction in demand for residential buildings and changes in real estate zoning laws that may reduce the desirability of real estate in an area;

— vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;

— changes in the supply of or the demand for similar or competing properties in an area;

— changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property or loan difficult or unattractive;

— changes or increases in tax, including real and personal property taxes, real estate, environmental and zoning laws; and

— periods of high interest rates and tight money supply, all of which could adversely affect our cash flows from operations.

In addition, local conditions in the markets in which we intend to own apartment communities may significantly affect occupancy or rental rates at such properties. The risks that may adversely affect conditions in those markets include the following:

— layoffs and relocations of significant local employers and other events negatively impacting local employment rates and the local economy;

— an oversupply of, or a lack of demand for, apartments;

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— the inability or unwillingness of residents to pay rent increases; and

— rent control or rent stabilization laws or other housing laws, which could prevent us from raising rents.

These factors could weaken our operating results or cause us to be unable to realize growth in the value of our real estate properties.

A concentration of our investments in the apartment community sector may leave our profitability vulnerable to a downturn or slowdown in the sector.

We expect to concentrate our investments in the apartment community sector. As a result, we will be subject to risks inherent in investments in a single type of property. If our investments are substantially in the apartment community sector, then the potential effects on our revenues, and as a result, on cash available for distribution to our stockholders, resulting from a downturn or slowdown in the apartment community sector could be more pronounced than if we had more fully diversified our investments. See “Market Outlook for Multifamily Real Estate” on page 93.

We depend on tenants for our revenue, and, accordingly, our revenue and our ability to make distributions to our stockholders is dependent upon the ability of the tenants of our properties to generate enough income to pay their rents in a timely manner.

The underlying value of our properties and the ability to make distributions to you depend upon the ability of the tenants of our properties to generate enough income to pay their rents in a timely manner, and the success of our investments depends upon the occupancy levels, rental income and operating expenses of our properties and our company. Tenants’ inability to timely pay their rents may be impacted by employment and other constraints on their personal finances, including debts, purchases and other factors. These and other changes beyond our control may adversely affect our tenants’ ability to make lease payments. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur costs in protecting our investment and re-leasing our property. We may be unable to re-lease the property for the rent previously received. We may be unable to sell a property with low occupancy without incurring a loss. These events and others could cause us to reduce the amount of distributions we make to stockholders and the value of your investment to decline.

Short-term multifamily and apartment leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions to our stockholders.

We expect that substantially all of our apartment leases will be for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

Properties that have significant vacancies could be difficult to sell, which could diminish the return on these properties.

A property may incur vacancies either by the expiration of tenant leases or the continued default of tenants under their leases. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in less cash available to distribute to stockholders. In addition, the resale value of the property could be diminished because the market value of a particular property depends principally upon

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the value of the cash flow generated by the leases associated with that property. Such a reduction on the resale value of a property could also reduce the value of your investment.

We may be unable to secure funds for future capital improvements, which could adversely impact our ability to make cash distributions to our stockholders.

When residents do not renew their leases or otherwise vacate their space, in order to attract replacement residents, we may be required to expend funds for capital improvements to the vacated apartment units. In addition, we may require substantial funds to renovate an apartment community in order to sell it, upgrade it or reposition it in the market. If we have insufficient capital reserves, we will have to obtain financing from other sources. We intend to establish capital reserves in an amount we, in our discretion, believe is necessary. A lender also may require escrow of capital reserves in excess of any established reserves. If these reserves or any reserves otherwise established are designated for other uses or are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. We cannot assure you that sufficient financing will be available or, if available, will be available on economically feasible terms or on terms acceptable to us. Moreover, certain reserves required by lenders may be designated for specific uses and may not be available for capital purposes such as future capital improvements. Additional borrowing for capital needs and capital improvements will increase our interest expense, and therefore our financial condition and our ability to make cash distributions to our stockholders may be adversely affected.

Our inability to sell a property when we want could limit our ability to pay cash distributions to our stockholders.

Many factors that are beyond our control affect the real estate market and could affect our ability to sell properties for the price, on the terms or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Because real estate investments are relatively illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Further, before we can sell a property on the terms we want, it may be necessary to expend funds to correct defects or to make improvements. However, we can give no assurance that we will have the funds available to correct such defects or to make such improvements. We may be unable to sell our properties at a profit. Our inability to sell properties at the time and on the terms we want could reduce our cash flow and limit our ability to make distributions to our stockholders and could reduce the value of your investment.

If we sell a property by providing financing to the purchaser, we will bear the risk of default by the purchaser, which could delay or reduce the distributions available to our stockholders.

If we decide to sell any of our properties, we intend to use our best efforts to sell them for cash; however, in some instances, we may sell our properties by providing financing to purchasers. When we provide financing to a purchaser, we will bear the risk that the purchaser may default, which could reduce our cash distributions to stockholders. Even in the absence of a purchaser default, the distribution of the proceeds of the sale to our stockholders, or the reinvestment of the proceeds in other assets, will be delayed until the promissory notes or other property we may accept upon a sale are actually paid, sold, refinanced or otherwise disposed.

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Potential development and construction delays and resultant increased costs and risks may hinder our operating results and decrease our net income.

From time to time we expect to acquire unimproved real property or properties that are under development or construction. Investments in such properties will be subject to the uncertainties associated with the development and construction of real property, including those related to re-zoning land for development, environmental concerns of governmental entities and/or community groups and our builders’ ability to build in conformity with plans, specifications, budgeted costs and timetables. If a builder fails to perform, we may resort to legal action to rescind the purchase or the construction contract or to compel performance. A builder’s performance may also be affected or delayed by conditions beyond the builder’s control. Delays in completing construction could also give tenants the right to terminate preconstruction leases. We may incur additional risks when we make periodic progress payments or other advances to builders before they complete construction. These and other factors can result in increased costs of a project or loss of our investment. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a purchase price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and the return on our investment could suffer.

Competition with third parties in acquiring properties may reduce our profitability and the return on your investment.

We face competition from various entities for investment opportunities in apartment community properties, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships, and developers. Many of these entities have substantially greater financial resources than we do and may be able to accept more risk than we can prudently manage. Competition from these entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Additionally, disruptions and dislocations in the credit markets have materially impacted the cost and availability of debt to finance real estate acquisitions, which is a key component of our acquisition strategy. This lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage for other entities that have greater financial resources than we do. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If we acquire properties and other investments at higher prices and/or by using less-than-ideal capital structures, our returns will be lower and the value of our assets may not appreciate or may decrease significantly below the amount we paid for such assets. If such events occur, you may experience a lower return on your investment.

Competition from other apartment communities for tenants could reduce our profitability and the return on your investment.

The apartment community industry is highly competitive. This competition could reduce occupancy levels and revenues at our apartment communities, which would adversely affect our operations. We expect to face competition from many sources. We will face competition from other apartment communities both in the immediate vicinity and in the larger geographic market where our apartment communities will be located. Overbuilding of apartment communities may occur. If so, this will increase the number of apartment units available and may decrease occupancy and apartment rental rates. In addition, increases in operating costs due to inflation may not be offset by increased apartment rental rates.

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Increased competition and increased affordability of single-family homes could limit our ability to retain residents, lease apartment units or increase or maintain rents.

Any apartment communities we may acquire will most likely compete with numerous housing alternatives in attracting residents, including single-family homes, as well as owner occupied single- and multifamily homes available to rent. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy caused by declining mortgage interest rates and government programs to promote home ownership could adversely affect our ability to retain our residents, lease apartment units and increase or maintain rental rates.

Our joint venture partners could take actions that decrease the value of an investment to us and lower your overall return.

We may enter into joint ventures with third parties to acquire properties. We may also purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the following risks:

— that our co-venturer, co-tenant or partner in an investment could become insolvent or bankrupt;

— that such co-venturer, co-tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals; or

— that such co-venturer, co-tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives.

Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce our returns on that investment and the value of our stockholders’ investment.

Costs imposed pursuant to governmental laws and regulations may reduce our net income and the cash available for distributions to you.

Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials, and other health and safety-related concerns.

Some of these laws and regulations may impose joint and several liability on the tenants, owners or operators of real property for the costs to investigate or remediate contaminated properties, regardless of fault, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. Activities of our tenants, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.

The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings.

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Any material expenditures, fines, penalties, or damages we must pay will reduce our ability to make distributions and may reduce the value of our stockholders’ investment.

The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to our stockholders.

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous real property owner or operator may be liable for the cost of removing or remediating hazardous or toxic substances on, under or in such property. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose liens on property or restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The costs of defending against claims of environmental liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could reduce the amounts available for distribution to our stockholders.

Costs associated with complying with the Americans with Disabilities Act may decrease cash available for distributions.

Our properties may be subject to the Americans with Disabilities Act of 1990, as amended. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. Any funds used for Disabilities Act compliance will reduce our net income and the amount of cash available for distributions to you.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows and the return on your investment.

There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases have begun to insist that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such

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uninsured loss, which may reduce the value of our stockholders’ investment. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to stockholders.

Risks Associated with Debt Financing

We may incur mortgage indebtedness and other borrowings, which increases our risk of loss due to foreclosure.

We may obtain lines of credit and long-term financing that may be secured by our properties and other assets. In some instances, we may acquire real properties by financing a portion of the price of the properties and mortgaging or pledging some or all of the properties purchased as security for that debt. We may also incur mortgage debt on properties that we already own in order to obtain funds to acquire additional properties. In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes, including borrowings to satisfy the REIT requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the dividends-paid deduction and excluding net capital gain). We, however, can give you no assurance that we will be able to obtain such borrowings on satisfactory terms.

If we do mortgage a property and there is a shortfall between the cash flow from that property and the cash flow needed to service mortgage debt on that property, then the amount of cash available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, reducing the value of your investment. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure even though we would not necessarily receive any cash proceeds. We may give full or partial guaranties to lenders of mortgage debt on behalf of the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties.

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We may also obtain recourse debt to finance our acquisitions and meet our REIT distribution requirements. If we have insufficient income to service our recourse debt obligations, our lenders could institute proceedings against us to foreclose upon our assets. If a lender successfully forecloses upon any of our assets, our ability to pay cash distributions to our stockholders will be limited and you could lose all or part of your investment.

High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flows from operations and the amount of cash distributions we can make.

If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the debt becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. We may be unable to refinance properties. If any of these events occurs, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our ability to raise capital by issuing more stock or borrowing more money.

We may not be able to access financing sources on attractive terms, which could adversely affect our ability to execute our business plan.

We may finance our assets over the long-term through a variety of means, including through the use of credit facilities. Our ability to execute this strategy will depend on various conditions in the markets for financing in this manner that are beyond our control, including lack of liquidity and greater credit spreads. We cannot be certain that these markets will remain an efficient source of long-term financing for our assets. If our strategy is not viable, we will have to find alternative forms of long-term financing for our assets, as secured revolving credit facilities may not accommodate long-term financing. This could subject us to more recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders and funds available for operations as well as for future business opportunities.

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan agreements we enter may contain covenants that limit our ability to further mortgage a property or that prohibit us from discontinuing insurance coverage or replacing KBS Capital Advisors as our advisor. These or other limitations would decrease our operating flexibility and our ability to achieve our operating objectives.

Increases in interest rates could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.

We expect that we will incur debt in the future and increases in interest rates will increase the cost of that debt, which could reduce the cash we have available for distributions. Additionally, if we incur variable rate debt, increases in interest rates would increase our interest costs, which would reduce our cash flows and our ability to pay distributions to you. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times that may not permit realization of the maximum return on such investments.

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We have broad authority to incur debt and high debt levels could hinder our ability to make distributions and decrease the value of your investment.

Our policies do not limit us from incurring debt until our borrowings would exceed 75% of the cost of our tangible assets (before deducting depreciation or other noncash reserves) and we may exceed this limit with the approval of the conflicts committee of our board of directors. During the early stages of this offering, we expect that our conflicts committee will approve debt in excess of this limit. See “Investment Objectives and Criteria – Borrowing Policies.” High debt levels would cause us to incur higher interest charges and higher debt service payments and may also be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute and could result in a decline in the value of your investment.

Federal Income Tax Risks

Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.

DLA Piper LLP (US) has rendered an opinion to us that we will be organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code for our taxable year ending December 31, 2010 and that our proposed method of operations will enable us to meet the requirements for qualification and taxation as a REIT beginning with our taxable year ending December 31, 2010. This opinion is based upon, among other things, our representations as to the manner in which we are and will be owned and the manner in which we will invest in and operate assets. However, our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Internal Revenue Code. DLA Piper LLP (US) will not review our compliance with the REIT qualification standards on an ongoing basis, and we may fail to satisfy the REIT requirements in the future. Also, the opinion represents DLA Piper LLP (US)’s legal judgment based on the law in effect as of the date of the opinion. DLA Piper LLP (US)’s opinion is not binding on the Internal Revenue Service or the courts. Future legislative, judicial or administrative changes to the federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT.

If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax. For a discussion of the REIT qualification tests and other considerations relating to our election to be taxed as REIT, see “Federal Income Tax Considerations.”

You may have current tax liability on distributions you elect to reinvest in our common stock.

If you participate in our dividend reinvestment plan, you will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. In addition, you will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value. As a result, unless you are a tax-exempt entity, you may have to use funds from

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other sources to pay your tax liability on the value of the shares of common stock received. See “Description of Shares — Dividend Reinvestment Plan — Tax Consequences of Participation.”

Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to our stockholders.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:

— In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.

— We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

— If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as “foreclosure property,” we may avoid the 100% tax on gain from a resale of that property, but the income from the sale or operation of that property may be subject to corporate income tax at the highest applicable rate.

— If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries.

We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.

To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions to make distributions to our stockholders, which could increase our operating costs and decrease the value of your investment.

To qualify as a REIT, we must distribute to our stockholders each year 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain). At times, we may not have sufficient funds to satisfy these distribution requirements and may need to borrow funds to maintain our REIT status and avoid the payment of income and excise taxes. These borrowing needs could result from (i) differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, (ii) the effect of non-deductible capital expenditures, (iii) the creation of reserves or (iv) required debt or amortization payments. We may need to borrow funds at times when the market conditions are unfavorable. Such borrowings could increase our costs and reduce the value of your investment.

To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.

To qualify as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders.

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We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of our stockholders’ investment.

The “taxable mortgage pool” rules may increase the taxes that we or our stockholders incur and may limit the manner in which we conduct securitizations.

We may be deemed to be, or make investments in entities that own or are themselves deemed to be taxable mortgage pools. Similarly, certain of our securitizations or other borrowings could be considered to result in the creation of a taxable mortgage pool for federal income tax purposes. As a REIT, provided that we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable mortgage pool. Certain categories of stockholders, however, such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. In addition, to the extent that our stock is owned by tax-exempt “disqualified organizations,” such as certain government-related entities that are not subject to tax on unrelated business income, we will incur a corporate-level tax on a portion of our income from the taxable mortgage pool. In that case, we are authorized to reduce and intend to reduce the amount of our distributions to any disqualified organization whose stock ownership gave rise to the tax by the amount of such tax paid by us that is attributable to such stockholder’s ownership. Moreover, we would be precluded from selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for federal income tax purposes. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.

The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, that would be treated as sales for federal income tax purposes.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets, other than foreclosure property, deemed held primarily for sale to customers in the ordinary course of business. We might be subject to this tax if we were to dispose of or securitize loans in a manner that was treated as a sale of the loans for federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans at the REIT level, and may limit the structures we utilize for our securitization transactions, even though the sales or structures might otherwise be beneficial to us.

It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through taxable REIT subsidiaries. However, to the extent that we engage in such activities through taxable REIT subsidiaries, the income associated with such activities may be subject to full corporate income tax.

The Internal Revenue Service may challenge our characterization of certain income from offshore taxable REIT subsidiaries.

We may form offshore corporate entities treated as taxable REIT subsidiaries. If we form such subsidiaries, we may receive certain “income inclusions” with respect to our equity investments in these entities. We intend to treat such income inclusions, to the extent matched by repatriations of cash in the same taxable year, as qualifying income for purposes of the 95% gross income test but not the 75% gross

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income test. See “Federal Income Tax Considerations – Taxation of KBS Legacy Partners REIT – Income Tests.” Because there is no clear precedent with respect to the qualification of such income inclusions for purposes of the REIT gross income tests, no assurance can be given that the Internal Revenue Service will not assert a contrary position. If such income does not qualify for the 95% gross income test, we could be subject to a penalty tax or we could fail to qualify as a REIT, in both events only if such inclusions (along with certain other non-qualifying income) exceed 5% of our gross income.

We may be subject to adverse legislative or regulatory tax changes.

At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new federal income tax law, regulation or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation.

Retirement Plan Risks

If the fiduciary of an employee pension benefit plan subject to ERISA (such as profit sharing, Section 401(k) or pension plan) or any other retirement plan or account fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, the fiduciary could be subject to criminal and civil penalties.

There are special considerations that apply to employee benefit plans subject to ERISA (such as profit sharing, Section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (such as an IRA) that are investing in our shares. Fiduciaries investing the assets of such a plan or account in our common stock should satisfy themselves that:

— the investment is consistent with their fiduciary obligations under ERISA and the Internal Revenue Code;

— the investment is made in accordance with the documents and instruments governing the plan or IRA, including the plan’s or account’s investment policy;

— the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code;

— the investment will not impair the liquidity of the plan or IRA;

— the investment will not produce an unacceptable amount of “unrelated business taxable income” for the plan or IRA;

— our stockholders will be able to value the assets of the plan annually in accordance with ERISA requirements and applicable provisions of the plan or IRA; and

— the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA

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and the Internal Revenue Code may result in the imposition of civil and criminal penalties and could subject the fiduciary to equitable remedies. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements about our business, including, in particular, statements about our plans, strategies and objectives. You can generally identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. You should not rely on these forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements.

You should carefully review the “Risk Factors” section of this prospectus for a discussion of the risks and uncertainties that we believe are material to our business, operating results, prospects and financial condition. Except as otherwise required by federal securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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ESTIMATED USE OF PROCEEDS

The following tables set forth information about how we intend to use the proceeds raised in this offering assuming that we sell the minimum of 250,000 shares, a mid-point range of 140,000,000 shares and the maximum of 280,000,000 shares of common stock. Many of the amounts set forth below represent management’s best estimate since they cannot be precisely calculated at this time. Depending primarily upon the number of shares we sell in this offering and assuming a $10.00 purchase price for shares sold in the primary offering, we estimate that we will use 83.66% to 88.09% of the gross proceeds from the primary offering, or between $8.37 and $8.81 per share, for investments, assuming the minimum and maximum offering amounts, respectively. We will use the remainder of the gross proceeds from the primary offering to pay offering expenses, including selling commissions and the dealer manager fee, to maintain a working capital reserve and, upon investment in properties and other assets, to pay a fee to our advisor for its services in connection with the selection and acquisition of our investments in real estate properties and real estate-related assets. Though our board has the authority under our organizational documents, our distribution policy is not to use the proceeds of this offering to pay distributions. We have not established a limit on the amount of distributions that we may fund from sources other than from cash flows from operations.

We expect to use substantially all of the net proceeds from the sale of shares under our dividend reinvestment plan for general corporate purposes, including, but not limited to, the repurchase of shares under our share redemption program; capital expenditures, tenant improvement costs and leasing costs related to our investments in real estate properties; reserves required by any financings of our investments in real estate properties; funding obligations under any of our real estate loans receivable; investments in real estate properties and real estate-related assets, which would include payment of acquisition fees to our advisor; and the repayment of debt. We cannot predict with any certainty how much, if any, dividend reinvestment plan proceeds will be available for specific purposes. To the extent proceeds from our dividend reinvestment plan are used for investments in real estate properties and for real estate-related assets, sales under our dividend reinvestment plan will result in greater fee income for our advisor because of acquisition advisory fees. See “Management Compensation.”

	250,000 Shares		140,000,000 Shares
	Minimum Offering ($10.00/share)		Primary Offering (100,000,000 shares) ($10.00/share)		Div. Reinv. Plan (40,000,000 shares) ($9.50/share)
	$	%	$	%	$	%
Gross Offering Proceeds	2,500,000	100.00%	1,000,000,000	100.00%	380,000,000	100.00%
Selling Commissions	162,500	6.50%	65,000,000	6.50%	0	0.00%
Dealer Manager Fee	75,000	3.00%	30,000,000	3.00%	0	0.00%
Other Organization and Offering Expenses (1)	137,500	5.50%	12,052,183	1.20%	645,000	0.17%
Acquisition Advisory Fees (2)	20,916	0.84%	8,791,563	0.88%	0	0.00%
Initial Working Capital Reserve (3)	12,500	0.50%	5,000,000	0.50%	0	0.00%
Amount Available for Investment (4)	2,091,584	83.66%	879,156,254	87.92%	379,355,000	99.83%

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	280,000,000 Shares
	Primary Offering (200,000,000 shares) ($10.00/share)		Div. Reinv. Plan (80,000,000 shares) ($9.50/share)
	$	%	$	%
Gross Offering Proceeds	2,000,000,000	100.00%	760,000,000	100.00%
Selling Commissions	130,000,000	6.50%	0	0.00%
Dealer Manager Fee	60,000,000	3.00%	0	0.00%
Other Organization and Offering Expenses (1)	20,615,423	1.03%	1,075,000	0.14%
Acquisition Advisory Fees (2)	17,617,669	0.88%	0	0.00%
Initial Working Capital Reserve (3)	10,000,000	0.50%	0	0.00%
Amount Available for Investment (4)	1,761,766,908	88.09%	758,925,000	99.86%

⁽¹⁾ Includes all expenses (other than selling commissions and the dealer manager fee) to be paid by us in connection with the offering, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and transfer agent, charges of our advisor for administrative services related to the issuance of shares in the offering, reimbursing the dealer manager for amounts it may pay to reimburse the bona fide due diligence expenses of broker-dealers, amounts to reimburse KBS Capital Advisors for costs in connection with preparing supplemental sales materials, the cost of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement for employees of our affiliates to attend retail seminars conducted by broker-dealers and, in special cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares by such broker-dealers and the ownership of our shares by such broker-dealers’ customers. KBS Capital Advisors has agreed to reimburse us to the extent selling commissions, the dealer manager fee and other organization and offering expenses incurred by us exceed 15% of aggregate gross offering proceeds. See “Plan of Distribution.”

⁽²⁾ We pay our advisor an acquisition advisory fee equal to 1.0% of the cost of the investment, including acquisition expenses and any debt attributable to such investment and budgeted capital improvement costs. We incur customary acquisition expenses in connection with the acquisition (or attempted acquisition) of a property.

This table excludes debt proceeds. To the extent we fund our investments with debt, as we expect, the amount available for investment and the amount of acquisition advisory fees will be proportionately greater. If we raise the maximum offering amount and our debt financing is equal to 65% of the cost of our real estate investments, then acquisition advisory fees would be $50,336,197.

This table assumes that we will not use the net proceeds from the sale of shares under our dividend reinvestment plan to invest in real estate properties and real estate-related assets. To the extent we use the net proceeds from the dividend reinvestment plan to invest in real estate properties and real estate-related assets, our advisor or its subsidiary would earn the related acquisition advisory fees.

⁽³⁾ We do not expect to use more than 0.5% of the gross proceeds from our primary offering for working capital reserves. We may also use debt proceeds, our cash flow from operations and proceeds from our dividend reinvestment plan to meet our needs for working capital and to build a moderate level of cash reserves.

⁽⁴⁾ Amount available for investment from the primary offering will include customary acquisition expenses, such as legal fees and expenses, costs of due diligence, appraisals, accounting fees and expenses, title insurance premiums and other closing costs and miscellaneous expenses relating to the acquisition of real estate properties and real estate-related investments. Until required in connection with investment in real estate properties, substantially all of the net proceeds of the offering and, thereafter, our working capital reserves, may be invested in short-term, highly liquid investments, including government obligations, bank certificates of deposit, short-term debt obligations and interest-bearing accounts or other authorized investments as determined by our board of directors. Amount available for investment from the primary offering may also include anticipated capital improvement expenditures and tenant leasing costs.

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MANAGEMENT

Board of Directors

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. The board is responsible for the management and control of our affairs. The board has retained KBS Capital Advisors to manage our day-to-day operations and our portfolio of real estate properties, subject to the board’s supervision. Because of the conflicts of interest created by the relationships among us, our sponsors, KBS Capital Advisors and various affiliates, many of the responsibilities of the board have been delegated to a committee that consists solely of independent directors. This committee is the conflicts committee and is discussed below and under “Conflicts of Interest.”

We have three independent directors. An “independent director” is a person who is not one of our officers or employees or an officer or employee of a sponsor, KBS Capital Advisors, Legacy Partners Residential Realty LLC or their respective affiliates, has not been so for the previous two years and meets the other requirements set forth in our charter. Our independent directors also meet the director independence standards of the New York Stock Exchange, Inc.

Each director serves until the next annual meeting of stockholders and until his successor has been duly elected and qualified. The presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at any stockholder meeting constitutes a quorum. With respect to the election of directors, each candidate nominated for election to the board of directors must receive a majority of the votes present, in person or by proxy, in order to be elected. Therefore, if a nominee receives fewer “for” votes than “withhold” votes in an election, then the nominee will not be elected.

Although our board of directors may increase or decrease the number of directors, a decrease may not have the effect of shortening the term of any incumbent director. Any director may resign at any time or may be removed with or without cause by the stockholders upon the affirmative vote of at least a majority of all the votes entitled to be cast at a meeting called for the purpose of the proposed removal. The notice of the meeting will indicate that the purpose, or one of the purposes, of the meeting is to determine if the director shall be removed.

Unless otherwise provided by Maryland law, the board of directors is responsible for selecting its own nominees and recommending them for election by the stockholders, provided that the conflicts committee nominates replacements for any vacancies among the independent director positions. Unless filled by a vote of the stockholders as permitted by Maryland General Corporation Law, a vacancy that results from the removal of a director will be filled by a vote of a majority of the remaining directors. Any vacancy on the board of directors for any other cause will be filled by a majority of the remaining directors, even if such majority is less than a quorum.

Our directors are accountable to us and our stockholders as fiduciaries. This means that our directors must perform their duties in good faith and in a manner each director believes to be in our and our stockholders’ best interests. Further, our directors must act with such care as a prudent person in a similar position would use under similar circumstances, including exercising reasonable inquiry when taking actions. However, our directors and executive officers are not required to devote all of their time to our business and must only devote such time to our affairs as their duties may require. We do not expect that our directors will be required to devote a substantial portion of their time to us in discharging their duties.

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In addition to meetings of the various committees of the board, which committees we describe below, we expect our directors to hold at least four regular board meetings each year. Our board has the authority to fix the compensation of all officers that it selects and may pay compensation to directors for services rendered to us in any other capacity.

Our general investment and borrowing policies are set forth in this prospectus. Our directors may establish further written policies on investments and borrowings and monitor our administrative procedures, investment operations and performance to ensure that our executive officers and advisor follow these policies and that these policies continue to be in the best interests of our stockholders. Unless modified by our directors, we will follow the policies on investments and borrowings set forth in this prospectus.

Committees of the Board of Directors

Our board of directors may delegate many of its powers to one or more committees. Our charter requires that each committee consist of at least a majority of independent directors, and our board has two committees, the audit committee and the conflicts committee, that consist solely of independent directors.

Audit Committee

Prior to the commencement of this offering our board of directors will establish an audit committee that consists solely of independent directors. The audit committee will assist the board in overseeing:

— our accounting and financial reporting processes;

— the integrity and audits of our financial statements;

— our compliance with legal and regulatory requirements;

— the qualifications and independence of our independent auditors; and

— the performance of our internal and independent auditors.

The audit committee will select the independent public accountants to audit our annual financial statements, will review with the independent public accountants the plans and results of the audit engagement and will consider and approve the audit and non-audit services and fees provided by the independent public accountants.

Conflicts Committee

In order to reduce or eliminate certain potential conflicts of interest, our charter creates a conflicts committee of our board of directors consisting solely of all of our independent directors. Our charter authorizes the conflicts committee to act on any matter permitted under Maryland law. Both the board of directors and the conflicts committee must act upon those conflict-of-interest matters that cannot be delegated to a committee under Maryland law. Our charter also empowers the conflicts committee to retain its own legal and financial advisors. See “Conflicts of Interest — Certain Conflict Resolution Measures.”

Our charter requires that the conflicts committee discharge the board’s responsibilities relating to the nomination of independent directors and the compensation of our independent directors. Our conflicts committee will also discharge the board’s responsibilities relating to the compensation of our executives.

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Subject to the limitations in our charter and with stockholder approval, the conflicts committee may also create stock-award plans. Our charter also requires that any action by our board of directors regarding our organization and offering expenses must be approved by a majority of the conflicts committee.

Executive Officers and Directors

We have provided below certain information about our executive officers and directors.

Name	Age*	Positions
C. Preston Butcher	70	Chairman of the Board, Chief Executive Officer and Director
Peter M. Bren	76	President and Director
Guy K. Hays	49	Executive Vice President
W. Dean Henry	64	Executive Vice President
Peter McMillan III	52	Executive Vice President
David E. Snyder	38	Chief Financial Officer, Treasurer and Secretary
Stacie K. Yamane	45	Chief Accounting Officer
Gary T. Kachadurian	59	Independent Director
Michael L. Meyer	71	Independent Director
Ronald E. Zuzack	66	Independent Director

*As of January 11, 2010

C. Preston Butcher is our Chairman of the Board and Chief Executive Officer, positions which he has held since our inception. Mr. Butcher is also the Chairman of the Board and Chief Executive Officer of Legacy Partners Residential, Inc. (“LPRI”). He joined Lincoln Property Company in 1968 and was President of the Western Region until 1998 at which time he became Chairman of the Board and Chief Executive Officer of LPRI. In 1999, Mr. Butcher purchased the interests of the other Lincoln Property Company shareholders in the Western Region operations and continued these operations under the new “Legacy Partners” name. Mr. Butcher indirectly through a trust owns and controls 100% of LPRI and 60% of Legacy Partners Residential Realty LLC. As Chief Executive Officer of LPRI, Mr. Butcher oversees the management and operations of the Legacy Residential entities, including setting company strategy and monitoring performance.

Mr. Butcher is also the Chairman of the Board of Legacy Partners Commercial, LLC, a position he has held since 2003, as well as a director of various other of the Legacy Commercial entities involved in the ownership of Legacy Partners Realty Fund I, LLC, Legacy Partners Realty Fund II, LLC and Legacy Partners Realty Fund III, LLC. As a member of the Investment Committee for all of the Legacy Residential and Legacy Commercial affiliated entities, he reviews and approves the acquisition, financing, and disposition of multifamily and commercial real estate investments, respectively. Mr. Butcher routinely reviews significant asset management related issues and the status and progress of properties under development. He is also shares responsibility for investor relationships.

Mr. Butcher has been involved exclusively in real estate acquisitions, development, financing, management, and dispositions for over 40 years. Over the course of his career he has overseen the acquisition/development, financing, and management of over 68,000 residential units exceeding $5.3 billion in cost across 276 multifamily assets. He has also overseen the acquisition/development, financing, and management of over 68 million square feet of office and industrial space exceeding $8.7 billion in cost across 379 commercial assets. In terms of sales of real estate assets, Mr. Butcher has overseen the sale of 237 multifamily assets with nearly 57,000 units and exceeding $3.3 billion in cost, and 310 commercial assets with over 54 million square feet of space and exceeding $4.4 billion in cost.

Since 2002, Mr. Butcher, through Legacy Residential and Legacy Commercial affiliated entities, has been integral to the sponsorship of four real estate funds and raising nearly $1.5 billion of equity from institutional investors

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for the funds. Mr. Butcher has also been a key figure in Legacy Residential’s real estate investment, management, and disposition activities as a sub-advisor to institutional clients. Mr. Butcher has been involved in entities, as a sub-advisor, that raised over $2 billion since 1995 from large institutional clients such as the AFL-CIO Building Investment Trust, AIG Global Real Estate Investment Corp., BlackRock Realty Advisors, Inc., Capmark Investments, LP, a subsidiary of Capmark Financial Group Inc. (formerly known as GMAC Commercial Holding Corp.), Donaldson Lufkin & Jenrette, Inc. (now Credit Suisse (USA), Inc.), Equity Residential, and Goldman Sachs.

Mr. Butcher is a co-founder and past Chairman of the Board and presently serves on the Executive Committee of the National Multi-Housing Council. He was a co-founder of the California Housing Council. Mr. Butcher is also a member of the Policy Advisory Board of the Center for Real Estate at the University of California at Berkeley. In 1991, Mr. Butcher was invited to serve on the Board of Trustees of the Urban Land Institute. He is a Director of the Charles Schwab Corporation and NorthStar Realty Finance Corporation. Mr. Butcher was a founding board member of BRIDGE, a non-profit housing corporation created to provide low to moderate income housing. Mr. Butcher received a Bachelor of Science in Electrical Engineering from the University of Texas at Austin.

Peter M. Bren is our President, a position he has held since our inception. He is also the President of our advisor, KBS Capital Advisors, and President of KBS REIT I and KBS REIT II. Mr. Bren has served as President of these entities since their formations in October 2004, June 2005 and July 2007, respectively. Mr. Bren is also a sponsor of KBS Strategic Opportunity REIT. Other than de minimis amounts owned by family members or family trusts, Mr. Bren indirectly owns and controls a 33 ¹/3% interest in KBS Holdings LLC, which entity is the sole owner of our advisor and the dealer manager of this offering. Messrs. Bren and Schreiber are the managers of our advisor, although all four of our sponsors actively participate in the management and operations of our advisor.

Mr. Bren is also a principal of KBS Realty Advisors, LLC and Koll Bren Schreiber Realty Advisors, Inc., each an active and nationally recognized real estate investment advisor. These entities were first registered as investment advisors with the SEC in 2002 and 1999, respectively. The first investment advisor affiliated with Messrs. Bren and Schreiber was formed in 1992. KBS Realty Advisors, together with KBS affiliates, including KBS Capital Advisors, has been involved in the investment in or management of over $10.0 billion of real estate investments on behalf of institutional investors, including public and private pension plans, endowments and foundations, and the investors in KBS REIT I and KBS REIT II. These investments have included investment in and/ or management of real estate-related debt investments such as mortgage loans and commercial mortgage-backed securities.

Mr. Bren has been involved in real estate development, management, acquisition, disposition and financing for 40 years and with the acquisition, origination, management, disposition and financing of real estate-related debt investments for more than 16 years as the President of The Bren Company; a former Senior Partner of Lincoln Property Company; President of Lincoln Property Company, Europe; and Chairman of the Board and President of KBS Realty Advisors and KBS Capital Advisors. Mr. Bren is also a founding member of The Richard S. Ziman Center for Real Estate at the UCLA Anderson School of Management.

Guy K. Hays is our Executive Vice President, a position he has held since our inception. Mr. Hays is Chief Financial Officer and Executive Managing Director of LPRI, positions he has held since January 1, 2009. Mr. Hays joined Lincoln Property Company in 1986, was promoted to Vice President of Finance for all residential operations of the Western Region in 1995, and became Senior Vice President – Finance of LPRI in 1998, then Senior Vice President and Chief Financial Officer – Residential in 2001, and Senior Managing Director and Chief Financial Officer in January 2008. Mr. Hays indirectly through a trust owns and controls 10% of Legacy Partners Residential Realty LLC.

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As Chief Financial Officer of LPRI, Mr. Hays oversees the management, operations and financial affairs of the Legacy Residential entities, including setting out company strategy and monitoring financial performance. As a member of Legacy Residential’s Investment Acquisition and Management Committee, he reviews and approves the acquisition, financing, and disposition of multifamily real estate investments. Mr. Hays routinely reviews significant asset and property management related issues, as well as the financing of properties and the firm’s banking, accounting and reporting functions. He is also responsible for investor, lender, and banking relationships.

Over the course of his career, he has overseen the acquisition/development and financing of over 20,000 units exceeding $3.25 billion in cost. Since 2002, Mr. Hays has been a key figure in Legacy Residential’s sponsorship of the $269 million Legacy Residential Affordable Housing Fund, LLC, advising and investing on behalf of the State of California Public Employees’ Retirement System. He has also been a key figure in Legacy Residential’s affiliated entities’ real estate investment, management, and disposition activities as a sub-advisor to institutional clients. Mr. Hays has been involved in entities, as a sub-advisor, that raised and invested nearly $1 billion from large institutional clients such as the AFL-CIO Building Investment Trust, AIG Global Real Estate Investment Corp., BlackRock Realty Advisors, Inc., Capmark Investments, LP, a subsidiary of Capmark Financial Group Inc. (formerly known as GMAC Commercial Holding Corp.), Donaldson Lufkin & Jenrette, Inc. (now Credit Suisse (USA), Inc.), Equity Residential, and Goldman Sachs.

Prior to joining Lincoln Property Company in 1986, Mr. Hays was with Kenneth Leventhal and Company, a CPA firm specializing in real estate, in Dallas, Texas where he earned his Certified Public Accountant designation. Mr. Hays is an active member of the National Multi-Housing Council and serves on the Multifamily Council of the Urban Land Institute. Mr. Hays received a Bachelor of Science in Accounting from Oral Roberts University.

W. Dean Henry is our Executive Vice President, a position he has held since our inception. He is also the President of LPRI, a position he has held since 1998. Mr. Henry joined Lincoln Property Company in 1973 and was promoted to Senior Vice President in charge of all residential operations of the Western Region in 1995, and then became the President and Chief Operating Officer of LPRI in 1998 and continuing as President only since 2001. Mr. Henry indirectly through a trust owns and controls 30% of Legacy Partners Residential Realty LLC.

As President of LPRI, Mr. Henry oversees the management and operations of the Legacy Residential entities, including setting out company strategy and monitoring performance. As a member of Legacy Residential’s Investment Acquisition and Management Committee, he reviews and approves the acquisition, financing, and disposition of multifamily real estate investments. Mr. Henry routinely reviews significant asset and property management issues and the status and progress of properties under development. He is also responsible for investor relationships.

Mr. Henry has been involved exclusively in multifamily real estate acquisitions, development, financing, management, and dispositions for nearly 40 years. Over the course of his career, he has overseen the acquisition/development, financing, and management of over 33,000 residential units exceeding $3.78 billion in cost.

Since 2002, Mr. Henry has been a key figure in Legacy Residential’s sponsorship of the $269 million Legacy Residential Affordable Housing Fund, LLC, advising and investing for the State of California Public Employees’ Retirement System. He has also been a key figure in Legacy Residential’s affiliated entities’ real estate investment, management, and disposition activities as a sub-advisor to institutional clients and high net worth individuals. Mr. Henry has been involved in entities, as a sub-advisor, that raised and invested nearly $1 billion since 1995 from large institutional clients such as the AFL-CIO Building Investment Trust, AIG Global Real Estate Investment Corp., BlackRock Realty

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Advisors, Inc., Capmark Investments, LP, a subsidiary of Capmark Financial Group Inc. (formerly known as GMAC Commercial Holding Corp.), Donaldson Lufkin & Jenrette, Inc. (now Credit Suisse (USA), Inc.), Equity Residential, and Goldman Sachs.

Mr. Henry serves on the Executive Committee of the National Multi-Housing Council and the California Housing Council. He is a member of the Policy Advisory Board of the Center for Real Estate at the University of California at Berkeley, and is an active member of the Urban Land Institute. Mr. Henry is past Chairman of the San Francisco YMCA and a former Board Member of Mercy Housing, a not-for-profit affordable housing organization which has participated in the development, preservation and/or financing of more than 36,900 affordable homes in the United States. Mr. Henry received a Bachelor’s degree in Political Science from University of Puget Sound.

Peter McMillan III is our Executive Vice President. He is also Executive Vice President, Treasurer, Secretary and a director of KBS REIT I and KBS REIT II, and President and the chairman of the board of directors of KBS Strategic Opportunity REIT, positions he has held since the respective formations of these entities in June 2005, July 2007 and October 2008. Mr. McMillan also owns and controls a 50% interest in GKP Holding LLC. GKP Holding owns a 33 ¹/3% interest in KBS Holdings LLC, which entity is the sole owner of our advisor and the dealer manager of this offering. Mr. McMillan is also a member of the investment committee formed by KBS Capital Advisors to evaluate and authorize new investment opportunities for KBS Strategic Opportunity REIT.

Mr. McMillan is a co-founder and the Managing Partner of Willowbrook Capital Group, LLC. Prior to forming Willowbrook in 2000, Mr. McMillan served as the Executive Vice President and Chief Investment Officer of SunAmerica Investments, Inc., which was later acquired by AIG. As Chief Investment Officer, he was responsible for over $75.0 billion in assets, including residential and commercial mortgage-backed securities, public and private investment grade and non-investment grade corporate bonds and commercial mortgage loans and real estate investments. Before joining SunAmerica in 1989, he served as Assistant Vice President for Aetna Life Insurance and Annuity Company with responsibility for the company’s $6.0 billion fixed income portfolios. Mr. McMillan received his Master of Business Administration in Finance from the Wharton Graduate School of Business at the University of Pennsylvania and his Bachelor of Arts Degree with honors in Economics from Clark University. Mr. McMillan is a director of Steinway Musical Instruments, Inc. and Metropolitan West Funds.

David E. Snyder is our Chief Financial Officer, Treasurer and Secretary. He is also the Chief Financial Officer of KBS REIT I and KBS REIT II, and the Chief Financial Officer, Treasurer and Secretary of KBS Strategic Opportunity REIT, positions he has held since December 2008. In late November 2008, Mr. Snyder was appointed Chief Financial Officer of KBS Capital Advisors. He is also a member of the investment committee formed by KBS Capital Advisors to evaluate and recommend new investment opportunities for KBS REIT II.

From January 1998 to May 2008, Mr. Snyder was at Nationwide Health Properties, Inc. (“NHP”), a real estate investment trust specializing in healthcare related property. He served as the Vice President and Controller from July 2005 to February 2008 and Controller from January 1998 to July 2005. At NHP, Mr. Snyder was responsible for internal and external financial reporting, Sarbanes-Oxley compliance, budgeting, debt compliance, negotiation and documentation of debt and equity financing and the negotiation of acquisition and leasing documentation. In addition, Mr. Snyder was part of the senior management team that approved investments, determined appropriate financing and developed strategic goals and plans. As part of his investment and financing responsibilities, Mr. Snyder participated in the origination, modification and refinancing of mortgage loans made to customers, mortgages obtained on real estate and unsecured credit facilities.

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Mr. Snyder was an adjunct accounting professor at Biola University from 1998 to May 2005, teaching courses in auditing and accounting. He was the director of financial reporting at Regency Health Services, Inc., a skilled nursing provider, from November 1996 to December 1997. From October 1993 to October 1996, Mr. Snyder worked for Arthur Andersen LLP. Mr. Snyder received a Bachelor of Arts Degree in Business Administration with an emphasis in Accounting from Biola University in La Mirada, California. Mr. Snyder is a Certified Public Accountant.

Stacie K. Yamane is our Chief Accounting Officer, a position she has held since our inception. Ms. Yamane is also the Fund Controller of our advisor and Chief Accounting Officer of KBS REIT I and KBS REIT II. She has been an officer of these entities since their formations in October 2004, June 2005 and July 2007, respectively. In August 2009, she was also appointed Chief Accounting Officer for KBS Strategic Opportunity REIT.

In addition, Ms. Yamane serves as Senior Vice President/Controller, Portfolio Accounting for KBS Realty Advisors LLC, a position she has held since 2004. She served as a Vice President/ Portfolio Accounting with KBS-affiliated investment advisers from 1995 to 2004. At KBS Realty Advisors, Ms. Yamane is responsible for client accounting/ reporting for four real estate portfolios. These portfolios consist of industrial, office and retail properties as well as land parcels. Ms. Yamane works closely with portfolio managers, asset managers, property managers and clients to ensure the completion of timely and accurate accounting, budgeting and financial reporting. In addition, she assists in the supervision and management of KBS Realty Advisors’ accounting department.

Prior to joining an affiliate of KBS Realty Advisors in February of 1995, Ms. Yamane was an audit manager at Kenneth Leventhal & Company, a CPA firm specializing in real estate. During her eight years at Kenneth Leventhal & Company, Ms. Yamane performed or supervised a variety of auditing, accounting and consulting engagements including the audit of financial statements presented under the U.S. generally accepted accounting principles (“GAAP”) basis, as well as financial statements presented on a cash and tax basis, the valuation of asset portfolios and the review and analysis of internal control systems. Her experiences at KBS and Kenneth Leventhal & Company give her 20 years of real estate experience.

Ms. Yamane received a Bachelor of Arts Degree in Business Administration with a dual concentration in Accounting and Management Information Systems from California State University, Fullerton. She is a Certified Public Accountant (inactive California).

Gary T. Kachadurian is one of our independent directors. Mr. Kachadurian has 30 years of real estate experience specializing in land and asset acquisition, construction, development, financing, and management. Since August 2007, Mr. Kachadurian has served as Chairman of Apartment Realty Advisors, the nation’s largest privately owned multihousing investment advisory company. Also, as President of Kach Enterprises LLC from October 2006 to the present, he has been retained as consultant on apartment acquisition and development transactions.

He was formerly Senior Managing Director for Global Business Development for Deutsche Bank Real Estate. His responsibilities included raising equity in Japan, Germany, and other countries for new real estate products. Until May 2005 he was also a senior member of the Policy Committee of RREEF, a leading pension fund advisor, in addition to being a member of RREEF’s Investment Committee for 14 years. He was in charge of RREEF’s National Acquisitions Group and Value-Added and Development lines of business from 1999 to 2002, and also had oversight in the acquisition and management of RREEF’s 24,000 unit apartment investment portfolio. Prior to joining RREEF, he was the Midwest Regional Operating Partner for Lincoln Property Company, developing and managing apartment communities in Illinois, Indiana, Wisconsin, Kansas and Pennsylvania.

Mr. Kachadurian is a founding Board Member of the Chicago Apartment Association, was formerly Chairman of the National Multi Housing Council and serves as Board Member of the Multifamily Council of the National Association of Home Builders. He has been a featured speaker and panelist at many apartment industry events. He is on the Board of Managers and co-chair of the Real Estate Committee of the Chicago YMCA, is Chairman of the Village Foundation of Children’s Memorial Hospital, and serves as Director of Leaders Bank in Oak Brook, Illinois. Mr. Kachadurian received his B.S. in Accounting from the University of Illinois.

Michael L. Meyer is one of our independent directors. Mr. Meyer is also an independent director of KBS Strategic Opportunity REIT. Mr. Meyer is a private real estate investor and since 1999 has been the Chief Executive Officer of the Michael L. Meyer Company. The Michael L. Meyer Company is a principal of and/or manager of real estate entities that provides those entities with property acquisition, financing and management services and advice. Since June 2006, Mr. Meyer has also been a principal of AMG Realty Investors, LLC, a commercial real estate investment company. From 2000 to 2003, Mr. Meyer was a principal in Advantage 4 LLC, a provider of telecommunications systems for real estate projects. From 1999 to 2003, Mr. Meyer was also a principal of Pacific Capital Investors, which acquired non-performing loans secured by real estate in Japan. From 1974 to 1998, Mr. Meyer was Managing Partner—Orange County of the E&Y Kenneth Leventhal Real Estate Group of Ernst & Young LLP and its predecessor. Mr. Meyer is a director of City National Bank, City National Corporation and Paladin Realty Income Properties, Inc.

Mr. Meyer was inducted into the California Building Industry Foundation Hall of Fame in June of 1999 for outstanding achievements in the real estate industry and community. Mr. Meyer was also the recipient of the University of California Irvine Graduate School of Management Real Estate Program Lifetime Achievement Award. Mr. Meyer is a graduate of the University of Iowa.

Ronald E. Zuzack is one of our independent directors. Since January 2008, Mr. Zuzack has been Global Chief Operating Officer for BlackRock Realty Advisors, Inc.’s Real Estate Equity Business. BlackRock Realty is a division of BlackRock, Inc., a premier provider of global investment management, risk management and advisory services. Blackrock Realty is a leading real estate equity investment manager and, in his capacity as Global COO, Mr. Zuzack is responsible for the day-to-day operations of a platform in the Americas, the UK, Continental Europe, Australia and Asia with total assets under management of approximately US$26 billion. The firm manages a variety of separate accounts, closed-end funds and open-end funds with a focus on core, value-added and opportunistic investment strategies. Since January 2008, Mr. Zuzack has been Chairman of Blackrock Realty’s Operating Committee and a member of the Executive, Investment and Leadership Committees for the firm’s Real Estate Group.

Mr. Zuzack joined BlackRock Realty’s predecessor, SSR Realty Advisors, Inc., in 1981 as a Portfolio Manager, serving as Executive Vice President and Director of Portfolio Services from 1988 to 1997 and Chief Investment Officer from 1996 to 1997, Head of Acquisitions, Dispositions and Financing from 1997 to December 2005 and Head of BlackRock Realty Americas from January 2006 to January 2008. Prior to joining SSR Realty Advisors, he held positions as Vice President and Real Estate Manager with Union Bank and as Vice President, Development and Property Manager for Inter-Cal Real Estate Corporation.

Mr. Zuzack earned a BS in Finance and Economics in 1969 and an MBA in 1970 from the University of Missouri. He also was recognized as a Willis Bryant Scholar in Mortgage Banking at Northwestern University in 1972. He is currently a member of the Policy Advisory Board for the University of California, Berkeley Fisher Center for Real Estate and Urban Economics. He has also served as Chairman of the Multi-Family Gold Council of the Urban Land Institute, as a member of the Executive Committee of the National Multi-Housing Council, as Chairman of the Rent Control Committee of the National Multi-Housing Council, and as a board member of the Mid-Penninsula Housing Authority.

Compensation of Directors

We compensate each of our independent directors with an annual retainer of $40,000. In addition, we pay independent directors for attending board and committee meetings as follows:

— $2,500 in cash for each board meeting attended.

— $2,500 in cash for each committee meeting attended, except that the chairman of the committee will be paid $3,000 for each meeting attended.

— $2,000 in cash for each teleconference meeting of the board.

— $2,000 in cash for each teleconference meeting of any committee, except that the chairman of the committee will be paid $3,000 for each teleconference meeting of the committee.

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All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors. If a director is also one of our officers, we do not pay any compensation for services rendered as a director.

Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents

Our charter limits the liability of our directors and officers to us and our stockholders for monetary damages and requires us to indemnify our directors, officers, KBS Capital Advisors (including the sub-advisor) and their affiliates for losses they may incur by reason of their service in that capacity if all of the following conditions are met:

— the party seeking exculpation or indemnification has determined, in good faith, that the course of conduct that caused the loss or liability was in our best interests;

— the party seeking exculpation or indemnification was acting on our behalf or performing services for us;

— in the case of an independent director, the liability or loss was not the result of gross negligence or willful misconduct by the independent director;

— in the case of an affiliated director, KBS Capital Advisors (including the sub-advisor) or one of its affiliates, the liability or loss was not the result of negligence or misconduct by the party seeking exculpation or indemnification; and

— the indemnification is recoverable only out of our net assets and not from the stockholders.

The SEC takes the position that indemnification against liabilities arising under the Securities Act of 1933 is against public policy and unenforceable. Furthermore, our charter prohibits the indemnification of our directors, our sponsors, KBS Capital Advisors (including the sub-advisor), their affiliates or any person acting as a broker-dealer for liabilities arising from or out of a violation of state or federal securities laws, unless one or more of the following conditions are met:

— there has been a successful adjudication on the merits of each count involving alleged securities law violations;

— such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or

— a court of competent jurisdiction approves a settlement of the claims against the indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which the securities were offered as to indemnification for violations of securities laws.

Our charter further provides that the advancement of funds to our directors and to KBS Capital Advisors (including the sub-advisor) and its affiliates for reasonable legal expenses and other costs incurred in advance of the final disposition of a proceeding for which indemnification is being sought is permissible only if all of the following conditions are satisfied: the proceeding relates to acts or omissions with respect to the performance of duties or services on our behalf; the legal proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as

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such, a court of competent jurisdiction approves such advancement; and the person seeking the advancement undertakes to repay the amount paid or reimbursed by us, together with the applicable legal rate of interest thereon, if it is ultimately determined that such person is not entitled to indemnification.

We will also purchase and maintain insurance on behalf of all of our directors and officers against liability asserted against or incurred by them in their official capacities with us, whether or not we are required or have the power to indemnify them against the same liability.

The Advisor

Our advisor is KBS Capital Advisors. KBS Capital Advisors is a limited liability company that was formed in the State of Delaware on October 18, 2004. Our advisor has a limited operating history. As our advisor, KBS Capital Advisors has contractual and fiduciary responsibilities to us and our stockholders.

Peter M. Bren and Charles J. Schreiber, Jr., two of our KBS sponsors, indirectly own a controlling interest in and are the managers of KBS Capital Advisors. Our other two KBS sponsors, Keith D. Hall and Peter McMillan III, also indirectly own an ownership interest in KBS Capital Advisors. Messrs. Bren, Hall, McMillan and Schreiber all actively participate in the management and operations of the advisor. For more information regarding the background and experience of Messrs. Bren, Hall, McMillan and Schreiber, see “Management – Executive Officers and Directors” and “Management – Our Sponsors and their Key Professionals.”

The Advisory Agreement

Under the terms of the advisory agreement, KBS Capital Advisors must use its best efforts to present to us investment opportunities that provide a continuing and suitable investment program for us consistent with our investment policies and objectives as adopted by our board of directors. Pursuant to the advisory agreement, KBS Capital Advisors is responsible for managing our day-to-day operations, retaining the property managers for our property investments (subject to the authority of our board of directors and officers) and performing other duties, including, but not limited to, the following:

— finding, presenting and recommending to us real estate property opportunities consistent with our investment policies and objectives;

— structuring the terms and conditions of our investments, sales and joint ventures;

— acquiring properties on our behalf in compliance with our investment objectives and policies;

— arranging for financing and refinancing of properties;

— entering into leases and service contracts for our properties;

— supervising and evaluating each property manager’s performance;

— reviewing and analyzing the properties’ operating and capital budgets;

— assisting us in obtaining insurance;

— generating an annual budget for us;

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— reviewing and analyzing financial information for each of our assets and the overall portfolio;

— formulating and overseeing the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of our properties and other investments;

— performing investor-relations services;

— maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the Internal Revenue Service and other regulatory agencies;

— engaging and supervising the performance of our agents, including our registrar and transfer agent; and

— performing any other services reasonably requested by us.

See “Management Compensation” for a detailed discussion of the fees payable to KBS Capital Advisors under the advisory agreement. We also describe in that section our obligation to reimburse KBS Capital Advisors for organization and offering expenses, the costs of providing services to us (other than for services for which it earns acquisition advisory fees or disposition fees for sales of properties or other investments) and payments made by KBS Capital Advisors in connection with potential investments, whether or not we ultimately acquire the investment.

The advisory agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of KBS Capital Advisors and us. Additionally, either party may terminate the advisory agreement without cause or penalty upon 60 days’ written notice and, in such event, KBS Capital Advisors must cooperate with us and our directors in making an orderly transition of the advisory function. Upon termination of the advisory agreement, KBS Capital Advisors may be entitled to a termination fee if (based upon an independent appraised value of the portfolio) KBS Capital Advisors would have been entitled to a subordinated participation in net cash flows had the portfolio been liquidated on the termination date. The termination fee would be payable in the form of a promissory note that becomes due only upon the sale, exchange or other disposition of one or more assets. The fee is payable solely from the proceeds from the sale, exchange or other disposition of an asset and future asset sales, exchanges or dispositions, and all of such proceeds must be used to repay the promissory note until it is fully repaid. The amount of the termination fee would be 15% of the amount by which (i) the hypothetical liquidation proceeds plus distributions paid exceed (ii) the amount necessary to provide investors with a return of their net capital contributions and an 8.0% per year cumulative, non-compounded return through the termination date; however, the agreement does not require that the investors actually have received such return prior to issuance of the promissory note or payments under it. The amount due under the promissory note would not be adjusted upwards or downwards to reflect any difference in the appraised value of our portfolio at termination and the amount ultimately realized by us. Therefore, if the ultimate liquidation value of our assets were to decline relative to the appraised value of our assets as of the termination date of the advisory agreement, we may be obligated to pay a termination fee even if our stockholders do not ultimately receive an 8.0% per year cumulative, non-compounded return on their investment in us. For more information regarding the terms of the advisory agreement, see “Management Compensation.”

KBS Capital Advisors and its affiliates engage in other business ventures, and, as a result, they will not dedicate their resources exclusively to our business. However, pursuant to the advisory agreement, KBS Capital Advisors must devote sufficient resources to our business to discharge its obligations to us. KBS Capital Advisors may assign the advisory agreement to an affiliate upon our approval. We may assign or transfer the advisory agreement to a successor entity.

As further described below under the heading “—Other Affiliates—The Sub-Advisor,” our advisor will delegate duties under the advisory agreement to a sub-advisor, KBS-Legacy Apartment Community REIT Venture, LLC, which is a joint venture among KBS Capital Advisors and Legacy Partners Residential Realty LLC. As a result of this joint venture arrangement, and subject to the oversight of our board of directors, personnel associated with Legacy Partners Residential Realty LLC will have direct day-to-day responsibility for sourcing and proposing target properties for investment by us, managing the acquisition process for investments approved by our board of directors and performing asset management services related to our investments. Personnel associated with KBS Capital Advisors will have direct day-to-day responsibility for managing our compliance and reporting functions under securities laws applicable to our business, managing all of our accounting and financial reporting functions, managing our tax matters and providing marketing, investor-relations and other administrative services on our behalf. An investment and management committee of the sub-advisor, composed of two representatives appointed by Legacy Partners Residential Realty LLC and three representatives appointed by KBS Capital Advisors will approve all major decisions of the sub-advisor.

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Our Sponsors and their Key Professionals

In addition to the directors and executive officers listed above, our advisor will rely on our KBS and Legacy sponsors and on key professionals employed or retained by affiliates of our sponsors. These individuals have extensive real estate industry experience through multiple real estate cycles in their careers and have the expertise gained through hands-on experience in property selection, acquisitions/development, financing, asset and property management, and dispositions.

Below is a brief description of the background and experience of our KBS and Legacy sponsors and the senior real estate professionals employed or retained by affiliates of our sponsors.

Our Legacy Sponsors

C. Preston Butcher, W. Dean Henry, and Guy K. Hays indirectly through their trusts own and control Legacy Partners Residential Realty LLC, a limited liability company formed in the State of Delaware on July 10, 2009 to be the co-manager of the sub-advisor. Together with Legacy Partners Residential Realty LLC, we generally refer to these individuals as our “Legacy sponsors.” Messrs. Butcher, Henry and Hays work together and directly or through their trusts are also owners and/or officers of Legacy Partners Residential, Inc. (“LPRI”), which oversees the management and operations of all of its affiliated Legacy residential related entities (LPRI and Legacy Partners Residential Realty LLC together with all such affiliated Legacy residential related entities are hereinafter collectively referred to as “Legacy Residential”). These individual Legacy sponsors also actively participate in the management and operations of Legacy Residential. Mr. Butcher, directly or through a trust, is also an owner, partner, manager, officer and/or director of various other entities affiliated with Legacy Partners Commercial, LLC which are involved directly or indirectly through other entities in the acquisition, development, ownership and management of commercial properties (all of such entities other than the entities comprising Legacy Residential are hereinafter collectively referred to as “Legacy Commercial”).

Mr. Butcher has been involved exclusively in real estate acquisitions, development, financing, asset and property management, and dispositions for over 40 years. He joined Lincoln Property Company in 1968 and was President of the Western Region until 1998, at which time he became Chairman of the Board and Chief Executive Officer of LPRI. In 1999, Mr. Butcher purchased the interests of the other Lincoln Property Company shareholders in the Western Region operations and continued these operations under the new “Legacy Partners” name. Focusing on high-quality U.S. real estate for institutional investors and high net worth individuals, Mr. Butcher has been integral to Legacy Residential’s and Legacy Commercial’s success and growth into a nationally recognized manager and operator of multifamily and commercial real estate investments, respectively. Mr. Butcher serves on the Executive Committee of the National Multi-Housing Council and the Board of Trustees for the Urban Land Institute. He is a member of the Policy Advisory Board of the Center for Real Estate at the University of California at Berkeley, and is a Director of the Charles Schwab Corporation and NorthStar Realty Finance Corporation.

Mr. Henry is President of LPRI and has been involved exclusively in multifamily real estate acquisitions/development, financing, asset and property management, and dispositions for nearly 40 years. He joined Lincoln Property Company in 1973, was promoted to Senior Vice President in charge of all residential operations of the Western Region in 1995, and then became the President and Chief Operating Officer of LPRI in 1998, and has continued as President only since 2001. Mr. Henry is widely recognized as a leading expert on multifamily real estate and is frequently invited to speak at conferences and participate in industry panels. Mr. Henry serves on the Executive Committee of the National Multi-Housing Council. He is a member of the Policy Advisory Board of the Center for Real Estate at the University of California at Berkeley. He is an active member of the Urban Land Institute and is a former Board Member of Mercy Housing, a non-profit affordable housing organization which has participated in the development, preservation and/or financing of more than 36,900 affordable homes in the United States.

Mr. Hays is Chief Financial Officer and Executive Managing Director of LPRI, positions he has held since January 1, 2009, and has been involved exclusively in multifamily real estate acquisitions/development, financing, asset and property management, and

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dispositions for over 26 years. He joined Lincoln Property Company in 1986, was promoted to Vice President of Finance for all residential operations of the Western Region in 1995, and became Senior Vice President – Finance of LPRI in 1998, then Senior Vice President and Chief Financial Officer – Residential in 2001, and Senior Managing Director and Chief Financial Officer in January 2008. Prior to joining Lincoln Property Company in 1986, Mr. Hays was with Kenneth Leventhal and Company, a CPA firm specializing in real estate, in Dallas, Texas where he earned his Certified Public Accountant designation. Mr. Hays is an active member of the National Multi-Housing Council and serves on the Multifamily Council of the Urban Land Institute.

Messrs. Butcher and Henry have been working together with Legacy Residential entities and/or Lincoln Property Company for over 35 years, and Messrs. Butcher, Henry and Hays for over 20 years.

Other key real estate professionals with Legacy Residential entities include Jeffrey Byrd, Kerry Nicholson, Timothy O’Brien, Spencer Stuart, Carol Foster, and Robert Calleja. These individuals have over 25 years of real estate industry experience, on average, and over 12 years with Legacy Residential entities and/or Lincoln Property Company, on average. They have been through multiple real estate cycles in their careers and have the expertise gained through hands-on experience in property selection, acquisitions/development, financing, asset and property management, and dispositions. Together with Messrs. Butcher, Henry, and Hays, these individuals comprise the Investment Acquisition and Management Team at Legacy Residential.

Historically, the investment strategy of Legacy Residential has been threefold:

1. To identify and acquire/develop attractive multifamily real estate investment opportunities that meet the investment criteria of their investors;

2. To aggressively manage and add value to each asset acquired/developed; and

3. To execute a well-defined exit strategy in order to achieve the investment objectives of their clients.

We believe that the experience of our Legacy sponsors and the team of key real estate professionals they have assembled to manage our acquisitions, development, operations, and dispositions, combined with their disciplined investment approach, will allow us to successfully execute the business model. The experience of the Legacy sponsors includes:

— Identifying and acquiring/developing over 68,000 residential units exceeding $5.3 billion of cost across 276 assets since 1968;

— Selling nearly 57,000 residential units exceeding $3.3 billion of cost across 237 assets;

— Sponsoring a $269 million residential real estate program commencing in 2002 for a large institutional investor, and acquiring and developing/rehabilitating four large multifamily and multifamily mixed-use assets totaling over 1,600 units and $661 million in total acquisition cost; and

— Since 1995, acting as a sub-advisor to numerous large institutional clients in connection with identifying and acquiring/developing $2.6 billion of residential real estate across 56 properties with a total of 17,900 units - and formulating and executing investment strategies to meet each of these client’s unique investment objectives. Legacy Residential’s top five sub-advisory clients by capital invested since 1995 are:

— AIG Global Real Estate Investment Corp.;

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— BlackRock Realty Advisors, Inc.;

— Equity Residential;

— Capmark Investments, LP, a subsidiary of Capmark Financial Group Inc., (formerly known as GMAC Commercial Holding Corp.); and

— the AFL-CIO Building Investment Trust.

The investments on behalf of these clients are made pursuant to agreements that permit the institutional investors to reject acquisitions recommended by the investment adviser. Because these investors are not as passive as those who invest in this offering, we have not described the performance of the real estate assets acquired or managed for these clients.

You should note that we believe that the institutional investors named above and that invested in private Legacy-sponsored funds or that have been advised by Legacy affiliates are more likely to invest in offerings that can be conducted with lower offering expenses than those found in a public offering, such as this one, in which the securities are sold by participating broker-dealers on a best-efforts basis. If institutional investors do participate in this offering, they would likely invest in amounts entitling them to volume discounts such that their returns, if any, would likely be greater than those who purchase shares in this offering at $10 per share.

None of the institutional investors named above have endorsed this offering. By including their names, we do not suggest that any of these investors approved of the services provided by any affiliate of our advisor. We have included their names only for purposes of your evaluation of the experience and reputation of our sponsors and their team of real estate professionals.

Our KBS Sponsors

Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr. control and indirectly own our advisor and the dealer manager of this offering. We refer to these individuals as our “KBS sponsors.” Mr. Bren is one of our directors, and Messrs. Bren and McMillan are also our executive officers. Messrs. Bren and Schreiber are the managers of our advisor, although all four of our KBS sponsors actively participate in the management and operations of our advisor.

On January 27, 2006, our KBS sponsors launched the initial public offering of KBS Real Estate Investment Trust, Inc., which we refer to as KBS REIT I in this prospectus. As of December 31, 2008, KBS REIT I had accepted aggregate gross offering proceeds of approximately $1.8 billion, including 71.3 million from shares issued pursuant to its dividend reinvestment plan. Of the amount raised pursuant to its dividend reinvestment plan, as of December 31, 2008, $15.4 million has been used to fund share redemptions pursuant to its share redemption program. KBS REIT I ceased offering shares in its primary initial public offering on May 30, 2008. On April 22, 2008, our KBS sponsors launched the initial public offering of KBS Real Estate Investment Trust II, Inc., which we refer to as KBS REIT II in this prospectus. As of December 31, 2008, KBS REIT II had accepted aggregate gross offering proceeds of approximately $314.2 million, including $1.9 million from shares issued pursuant to its dividend reinvestment plan. Of the amount raised pursuant to its dividend reinvestment plan, as of December 31, 2008, none had been used to fund share redemptions pursuant to its share redemption program as no shares were yet eligible for redemption under the program. KBS REIT II’s offering is expected to last until April 22, 2010, but KBS REIT II may extend its offering beyond that date. Our sponsors are also sponsoring another public real estate investment trust, KBS Strategic Opportunity REIT, Inc. which commenced its initial public offering on November 20, 2009. Our

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advisor is also the external advisor of KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT, and our KBS sponsors are directors and/or executive officers of KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT. Through their affiliations with KBS REIT I, KBS REIT II and KBS Capital Advisors, as of December 31, 2008, our sponsors have overseen the investment in and management of approximately $3.6 billion of real estate and real estate-related investments on behalf of the investors in KBS REIT I and KBS REIT II.

Since 1992, Messrs. Bren and Schreiber have teamed to invest in, manage and sell real estate and real estate-related investments on behalf of institutional investors. Together, Messrs. Bren and Schreiber founded KBS Realty Advisors, a registered investment advisor with the Securities and Exchange Commission (the “SEC”) and a nationally recognized real estate investment advisor. When we refer to a “KBS-sponsored” fund or program, we are referring to the private entities sponsored by an investment advisor affiliated with Messrs. Bren and Schreiber, and KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT, the public, non-traded REITs that are currently being sponsored by Messrs. Bren, Hall, McMillan and Schreiber. When we refer to a “KBS-advised” investor, we are referring to institutional investors that have engaged an investment advisor affiliated with Messrs. Bren and Schreiber to provide real estate-related investment advice.

Messrs. Bren and Schreiber each have been involved exclusively in real estate development, management, acquisition, disposition and financing for more than 30 years. Over that time, Messrs. Bren and Schreiber have developed extensive experience investing in and managing a broad range of real estate assets classes, including multifamily residential real estate. During the 21-year period from 1970 to 1991 when Mr. Bren was a senior partner of Lincoln Property Company, it financed, developed, leased and managed more than 135,000 apartment units. Since 1992, the experience of the investment advisors affiliated with Messrs. Bren and Schreiber includes (as of December 31, 2008) sponsoring 14 private real estate funds that have invested over $3.1 billion (including equity, debt and investment of income and sales proceeds) in 286 real estate assets. Of this amount, approximately $104 million has been invested in 20 multifamily residential-related real estate assets. In addition to their experience with these 14 funds, investment advisors affiliated with Messrs. Bren and Schreiber have also been engaged by four institutional investors to recommend real estate acquisitions and manage some of their investments. The amounts paid for the assets acquired and/or managed pursuant to these arrangements and for subsequent capital expenditures totaled over $3.9 billion.

With respect to the experience of Messrs. Hall and McMillan, each has over 25 years of experience in real estate-related investments. Prior to founding KBS Capital Advisors with Messrs. Bren and Schreiber, Messrs. Hall and McMillan founded Willowbrook Capital Group, LLC, an asset-management company, in 2000. Before forming Willowbrook, Mr. McMillan served as the Executive Vice President and Chief Investment Officer of SunAmerica Investments, Inc., which was later acquired by AIG. As Chief Investment Officer, he was responsible for over $75 billion in assets, including residential and commercial mortgage-backed securities, public and private investment grade and non-investment grade corporate bonds and commercial mortgage loans and real estate investments.

Prior to forming Willowbrook, Mr. Hall was a Managing Director at CS First Boston, where he managed CSFB’s distribution strategy and business development for the Principal Transaction Group’s $18 billion real estate securities portfolio. Before joining CSFB in 1996, he served as a Director in the Real Estate Products Group at Nomura Securities, with responsibility for the company’s $6 billion annual pipeline of fixed-income securities. Mr. Hall spent the 1980s as a Senior Vice President in the High Yield Department of Drexel Burnham Lambert’s Beverly Hills office, where he was responsible for distribution of the group’s high-yield real estate securities.

Our KBS sponsors work together at KBS Capital Advisors with their team of real estate professionals. Three key real estate professionals at KBS Capital Advisors, James Chiboucas, David E. Snyder and Stacie K. Yamane, will be significantly involved in our operations and each has over 15 years of direct real estate experience. These professionals have been responsible for overseeing and managing several public and private real estate programs through multiple real estate cycles in their careers.

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Key Legacy Professionals

Jeffrey K. Byrd is Senior Managing Director of Northern California for LPRI. He joined Lincoln Property Company in 1990 and was promoted to Vice President in 1995 and became Senior Managing Director of Northern California for LPRI in 1998.

As Senior Managing Director of Northern California, Mr. Byrd oversees all operations of the Northern California Region, including acquisitions/development, dispositions, construction management, marketing and leasing, and asset and property management. He is also responsible for relationships with investors, brokers and their agents, city officials, contractors, vendors and tenants.

Mr. Byrd has been involved exclusively in real estate acquisition, development, finance, management and disposition for over 24 years. Over the course of his career he has overseen acquisition, disposition, development and financing of over 10,000 multi-family units and 250,000 square feet of related retail space. Before joining Lincoln Property Company Mr. Byrd was responsible for financing and developing multi-family communities with Property Company of America (a spin-off of Lincoln Property Company) in Texas, Colorado and California. Mr. Byrd began his professional career with Arthur Andersen Company, a global accounting and consulting firm in Dallas, Texas, where he earned his Certified Public Accountant designation.

Mr. Byrd supports a number of non-profit educational organizations in his local community and has volunteered his expertise in various capacities to facilitate the development of educational campuses for these organizations. These organizations include the Odyssey School, the Wornick Jewish Day School and two campuses for the Hausner Jewish Day School. Mr. Byrd received his Bachelor Degree in Business Administration in Accounting and Finance from Baylor University.

Timothy J. O’Brien started work with LPRI in April 2008 and now is Senior Managing Director of Southern California, Arizona, and Nevada for LPRI. In this role, Mr. O’Brien oversees all multifamily operations of the Southern California, Arizona, and Nevada Regions, including acquisitions/development, dispositions, construction management, marketing and leasing, and asset and property management. He is also responsible for relationships with investors, brokers and their agents, city officials, contractors, vendors, and tenants.

Mr. O’Brien has been involved exclusively in real estate acquisitions, development, financing, management, and dispositions for over 22 years, holding positions such as West Coast Operating Partner for Fifield Companies (2005 to 2008) and Vice President of Acquisitions and Development for Lincoln Property Company (1999 to 2005). During the course of his career he has overseen the acquisition/development, financing, and management of over $1 billion of high rise residential property. He has also developed approximately 1 million square feet of office and industrial product.

Mr. O’Brien is a licensed California Real Estate Broker. He is a member of the National Multi-Housing Council and the Urban Land Institute. He is also a member of the California Board of Directors for Mercy Housing, a not-for-profit affordable housing organization which has participated in the development, preservation and/or financing of more than 36,900 affordable homes in the United States. Mr. O’Brien received a Bachelor of Science in Business Administration from the University of Southern California.

Kerry L. Nicholson started work with LPRI in 1999 and now is Senior Managing Director of the Pacific Northwest for LPRI. In this role, he oversees all multifamily operations of the Pacific Northwest Region, including acquisitions/development, dispositions, construction management, marketing and

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leasing, and asset and property management. He is also responsible for relationships with investors, brokers and their agents, city officials, contractors, vendors, and tenants.

Mr. Nicholson has been involved exclusively in real estate acquisitions, development, financing, management, and dispositions for over 30 years. Prior to joining LPRI, he had a career in commercial real estate procuring over $2 billion in debt and equity commitments as a senior manager for firms such as GE Capital, Bank of America, and Wells Fargo.

Mr. Nicholson has served on the Advisory Board of the University of Washington’s Center for Community Development and Real Estate and the Advisory Board for the Washington State University. He is on the Executive Committee of the Seattle District Council of the Urban Land Institute and an active member of the Master Builder’s Association. He is also a Co-Chair of the Public Relations Committee for the Quality Growth Alliance. Mr. Nicholson has been on the Board of the Big Brothers and Big Sisters of Seattle since 1990. Mr. Nicholson graduated Phi Beta Kappa with a Bachelor’s degree in Political Science from the University of California at Berkeley and holds a Master’s of Business Administration from the University of Chicago.

Spencer R. Stuart, Jr. started work with LPRI in October 2004 and now is Senior Managing Director of Texas and Colorado for LPRI. In this role, he oversees all multifamily operations of the Texas and Colorado Regions, including acquisitions, development, dispositions, construction management, marketing and leasing, and asset and property management. He is also responsible for relationships with investors, brokers and their agents, city officials, contractors, vendors, and third party property management providers.

Mr. Stuart has been involved exclusively in real estate acquisitions, development, financing, management, and dispositions for over 28 years. Prior to joining LPRI, Mr. Stuart held the roles of Chief Executive Officer, Executive Vice President and Chief Operating Officer, and President for the Palladium Group, where he successfully organized and grew a new U.S. division for a Europe based, multi-national real estate firm. Mr. Stuart was a key player in the initial public offering (IPO) of the multifamily REIT Walden Residential Properties, Inc. Since 1994, he has been directly responsible for $415 million of mid and high rise multifamily development and multifamily acquisitions in excess of $230 million.

Mr. Stuart serves on the National Association of Home Builders’ Multifamily Leadership Board. He is a member of the Home and Builder’s Association of Greater Dallas and the Urban Land Institute. He is a member and previously served as an officer of the Real Estate Financial Executives Association of Dallas. Mr. Stuart has also been an associate member of the National Association of Real Estate Investment Trusts (NAREIT). Mr. Stuart holds a Bachelor’s degree in Fine Arts from the University of Connecticut. He previously held Series 7 and 63 licenses from the National Association of Securities Dealers.

Carol S. Foster is Senior Vice President and Chief Accounting Officer of LPRI, positions she has held since August 2007 and June 2004, respectively. In this role, she is responsible for accounting, audits, reporting, banking, and income tax returns for LPRI’s various affiliated entities. She is also responsible for relationships with investors, audit firms, and banks.

Ms. Foster has been involved exclusively in real estate accounting, auditing, reporting, banking, and income tax returns for over 29 years. She joined Lincoln Property Company in 1983 and became an officer of LPRI in 1998. Prior to joining Lincoln Property Company, Ms. Foster worked for Williams & Wood LLP in Dallas, Texas, where she provided tax and audit services to real estate clients.

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Ms. Foster is a Certified Public Accountant. She is a member of the AICPA, the California society of Certified Public Accountants, and the National Multi-Housing Council. She has a Bachelor’s degree in Business Administration with a concentration in Accounting from Baylor University.

Robert A. Calleja is Senior Vice President of Finance for LPRI, a position he has held since January 2009. In this role, he is responsible for closing acquisitions and dispositions, procuring debt financing, loan and credit facility administration, and asset and portfolio analytics. Mr. Calleja has closed acquisitions of over 12,000 units exceeding $2.5 billion in cost, loan refinancings of $500 million, and the disposition of over 16,000 units valued in excess of $2 billion.

Mr. Calleja has been involved exclusively in real estate acquisitions/development, financing, and dispositions for over 16 years. He joined Lincoln Property Company in 1997 and became Vice President-Finance of LPRI in 2003. Prior to joining Lincoln Property Company, he was a Real Estate Consulting Manager for Arthur Andersen, LLP. He is an associate member of the Urban Land Institute. Mr. Calleja graduated cum laude from the Wharton School of Business, University of Pennsylvania with a Bachelor of Science in Applied Economics, concentration in Finance. He also holds a Master of Business Administration degree from the University of California Berkeley’s Haas School of Business.

Key KBS Professionals

James Chiboucas is Vice Chairman and Chief Legal Officer of KBS Capital Advisors. Mr. Chiboucas has served as the Chief Legal Officer of KBS Realty Advisors since its formation and the Chief Legal Officer of the other KBS-affiliated investment advisors since 1996. He became Vice Chairman of KBS Realty Advisors in 2006. He has represented KBS since the first investment advisor was formed in 1992. As Vice Chairman and Chief Legal Officer, Mr. Chiboucas is responsible for the negotiation and documentation of the company’s real estate investments across the United States, including management of local counsel in each of the jurisdictions involved with acquisitions and dispositions. He also manages legal counsel retained to provide services for KBS Capital Advisors and KBS Realty Advisors.

Mr. Chiboucas has over 30 years of legal experience in the real estate industry, including real estate investment, finance, acquisitions, dispositions, development and management. Before joining KBS, Mr. Chiboucas was a partner of Paone, Callahan, McHolm & Winton, L.L.P. and Vice-President of Signal Landmark, a national real estate development company, where he was responsible for all of Signal Landmark’s legal real estate transactional matters across the United States. Mr. Chiboucas received a Bachelor’s Degree in Business and a Juris Doctorate degree from the University of Southern California.

Other Affiliates

The Sub-Advisor

Subject to the terms of the advisory agreement between KBS Capital Advisors and us, KBS Capital Advisors will delegate advisory duties to a sub-advisor entity, KBS-Legacy Apartment Community REIT Venture, LLC, which is a joint venture among KBS Capital Advisors and Legacy Partners Residential Realty LLC. Notwithstanding such delegation to the sub-advisor, KBS Capital Advisors retains ultimate responsibility for the performance of all the matters entrusted to it under the advisory agreement.

The sub-advisor is not an operating entity and has no employees of its own. Rather, the sub-advisor, through its limited liability company operating agreement, establishes the economic terms of the joint venture among the KBS and Legacy sponsors and allocates responsibility for particular advisory functions among the sponsors. Advisory operations and duties that are assigned by the sub-advisor’s operating agreement to be the responsibility of the Legacy sponsor are performed by employees of, or persons associated with, Legacy Partners Residential Realty LLC. Similarly, advisory operations and duties that are assigned by the sub-advisor’s operating agreement to be the responsibility of the KBS sponsor are performed by employees of, or persons associated with, KBS Capital Advisors LLC.

Pursuant to the operating agreement of the sub-advisor, and subject to the oversight of our board of directors, our Legacy sponsors and their team of real estate professionals are assigned direct responsibility for, among others, the following duties:

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— sourcing and proposing target properties for investment by us;

— conducting due diligence on target properties;

— managing the acquisition process for investments approved by our board of directors;

— managing legal matters involving our properties;

— supervising the compilation of financial information concerning our investments;

— arranging financing and refinancing for our investments; and

— performing asset management services related to our investments.

Subject to the oversight of our board of directors, personnel associated with KBS Capital Advisors retain direct responsibility for the following:

— managing our compliance and reporting functions under securities laws applicable to our business;

— managing all of our accounting and financial reporting functions;

— managing our tax matters; and

— providing marketing, investor-relations and other administrative services on our behalf.

As consideration for the services delegated to the sub-advisor, the advisor has agreed to grant to the sub-advisor an assignment of its rights to receive all of the fees and certain expense reimbursements payable to the advisor under the advisory agreement, including:

— the acquisition advisory fee;

— the asset management fee;

— any construction and development fees we pay to our advisor;

— any disposition fee we pay to our advisor;

— any incentive fee or termination fee we pay to our advisor; and

— all reimbursements of organization and offering expenses (except for those relating to the salaries and benefits of the accounting and reporting employees of our advisor) that we reimburse to our advisor pursuant to the advisory agreement, but only to the extent funded by the sub-advisor.

The sub-advisor’s limited liability company operating agreement in turn delineates the allocation and distribution priorities of these amounts between our advisor and Legacy Partners Residential Realty LLC, the two sole members of the sub-advisor. For a description of the fees and reimbursements subject to the assignment, see “Management Compensation.”

An investment and management committee of the sub-advisor, composed of two representatives appointed by our Legacy sponsors and three representatives appointed by our KBS sponsors, approves major decisions of the sub-advisor, including the final approval of all investments to recommend to our advisor for investment. Based on these determinations, KBS Capital Advisors recommends investments to our board of directors and our board of directors, or a majority of the conflicts committee that constitutes a majority of our board of directors, approves all proposed investments.

Dealer Manager

We have retained KBS Capital Markets Group LLC, an affiliate of our advisor, to conduct this offering. KBS Capital Markets Group has a limited operating history. KBS Capital Markets Group will provide wholesaling, sales, promotional and marketing assistance services to us in connection with the distribution of the shares offered pursuant to this prospectus. It may also sell shares at the retail level. The principal business of KBS Capital Markets Group will be participating in and facilitating the distribution of securities of KBS-sponsored programs. KBS Capital Markets Group served as dealer manager for KBS REIT I’s initial public offering and continues to serve as the dealer manager for KBS REIT I’s offering under its dividend reinvestment plan. KBS Capital Markets Group also currently serves as dealer manager for the initial public offerings of KBS REIT II and KBS Strategic Opportunity REIT.

Our KBS sponsors, Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., indirectly own a controlling interest in KBS Capital Markets Group.

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Below is a brief description of the background and experience of the Managing Director and Chief Executive Officer of KBS Capital Markets Group:

Mike Crimmins was appointed Managing Director and Chief Executive Officer of KBS Capital Markets Group on June 2, 2009. As Managing Director, Mr. Crimmins is responsible for overseeing the day-to-day operations of the company and for oversight of both internal and external wholesaling operations and activities. Mr. Crimmins has been employed by KBS Capital Markets Group since February 2006. From February 2006 to April 2009, he was a Divisional Sales Manager, and on April 2009, Mr. Crimmins was named National Sales Manager. From October 2000 to October 2005, Mr. Crimmins was Western Division Sales Manager for AXA Distributors, LLC. Prior to AXA, Mr. Crimmins served from April 1991 to October 2000 as an Executive Sales Consultant for The Guardian Life Insurance Company. Mr.  Crimmins holds a Bachelor of Science in Business Administration and Finance from the University of Missouri.

Initial Investment by Our Sponsors

Our sponsors have invested $200,000 in us through the purchase of 20,000 shares of our common stock at $10 per share. The sub-advisor, KBS-Legacy Apartment Community REIT Venture, LLC is the owner of these 20,000 shares. KBS-Legacy Apartment Community REIT Venture may transfer these shares to another affiliate of our sponsors, but it may not otherwise sell any of these shares during the period KBS Capital Advisors serves as our advisor. Although nothing prohibits our sponsors or their affiliates from acquiring additional shares of our common stock, they currently have no options or warrants to acquire any shares. The sub-advisor has agreed to abstain from voting any shares it acquires in any vote regarding the removal of KBS Capital Advisors, a director, the sub-advisor or any of its affiliates, or any vote regarding a transaction between us and KBS Capital Advisors, a director, the sub-advisor or any of its affiliates. KBS-Legacy Apartment Community REIT Venture is indirectly owned and controlled, individually or as trustees, by C. Preston Butcher, W. Dean Henry, Guy K. Hays, Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., who are our sponsors.

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MANAGEMENT COMPENSATION

Although we have executive officers who manage our operations, we have no paid employees. Our advisor, KBS Capital Advisors, and real estate professionals engaged by our advisor will manage our day-to-day affairs and our portfolio of real estate properties, subject to the board’s supervision. The following table summarizes all of the compensation and fees that we pay to our sponsors and their affiliates, including amounts to reimburse their costs in providing services, and amounts that we pay to our independent directors. Selling commissions and dealer manager fees may vary for different categories of purchasers as described under “Plan of Distribution.” This table assumes that we sell all shares at the highest possible selling commissions and dealer manager fees (with no discounts to any categories of purchasers) and assumes a $9.50 price for each share sold through our dividend reinvestment plan. No selling commissions or dealer manager fees are payable on shares sold through our dividend reinvestment plan.

Form of Compensation and Recipient	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares) (1)
	Organization and Offering Stage
Selling Commissions – KBS Capital Markets Group (2)	Up to 6.5% of gross offering proceeds before reallowance of commissions earned by participating broker-dealers, except no selling commissions are payable on shares sold under the dividend reinvestment plan. KBS Capital Markets Group, our dealer manager, reallows 100% of commissions earned to participating broker-dealers.	$162,500/ $130,000,000
Dealer Manager Fee – KBS Capital Markets Group (2)	Up to 3.0% of gross offering proceeds, except no dealer manager fee is payable on shares sold under the dividend reinvestment plan. KBS Capital Markets Group may reallow to any participating broker-dealer up to 1.0% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee and in special cases the dealer manager may increase the reallowance. See “Plan of Distribution.”	$75,000/ $60,000,000
Other Organization and Offering Expenses – KBS Capital Advisors, KBS Capital Markets Group (3)(4)	To date, our sponsors, through our advisor, have paid certain organization and offering expenses on our behalf. As of January 5, 2010 the sponsors have incurred $1,361,740 of other organization and offering expenses on our behalf, of which $625,398 has been paid. We will reimburse our advisor for these costs and future organization and offering costs it may incur on our behalf but only to the extent that the reimbursement would not cause the selling commissions, the dealer manager fee and the other organization and offering expenses borne by us to exceed 15.0% of gross offering proceeds as of the date of the reimbursement. If we raise the maximum offering amount in the primary offering and under the dividend reinvestment plan, we expect organization and offering expenses (other than selling commissions and the dealer manager fee) to be $21,690,423 or 0.79% of gross offering proceeds. These organization and offering expenses include all expenses (other than selling commissions and the dealer manager fee) to be paid by us in connection with the offering, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and transfer agent, charges of our advisor for administrative services related to the issuance of shares in the offering, reimbursement of bona fide due diligence expenses of broker-dealers, reimbursement of our advisor for costs in connection with preparing supplemental sales materials, the cost of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and travel, meal and lodging costs for registered persons associated with our dealer manager and officers and employees of our affiliates to attend retail seminars conducted by broker-dealers and, in special cases, reimbursement to participating broker-dealers for technology costs associated	$137,500/ $21,690,423

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Form of Compensation and Recipient	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares) (1)
	with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares by such broker-dealers and the ownership of our shares by such broker-dealers’ customers.
	Acquisition and Development Stage
Acquisition Advisory Fees – KBS Capital Advisors (4)(5)(6)(7)	1.0% of the cost of investments acquired by us, including any acquisition expenses and any debt attributable to such investments and budgeted capital improvement costs. Under our charter, a majority of the independent directors would have to approve any increase in the acquisition advisory fee payable to our advisor. Our charter limits our ability to make an investment if the total of all acquisition fees and expenses relating to the investment exceeds 6% of the contract purchase price or 6% of the total funds advanced. This limit may only be exceeded if the conflicts committee approves (by majority vote) the fees and expenses and finds the transaction to be commercially competitive, fair and reasonable to us.	$20,916 (minimum offering and no debt)/$17,617,669 (maximum offering and no debt)/ $50,336,197 (maximum offering and target leverage of 65% of the cost of our real estate investments)
Development Fees – KBS Capital Advisors (4)(8)	In the event we engage an affiliate of one of our sponsors to provide development services with respect to a particular property, we will pay a development fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project.	Actual amounts are dependent upon usual and customary development fees for specific projects and therefore the amount cannot be determined at the present time.
Construction Fees – KBS Capital Advisors (4)(8)	In the event we engage an affiliate of one of our sponsors to provide construction services with respect to a particular property, we will pay a construction fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project.	Actual amounts are dependent upon usual and customary construction fees for specific projects and therefore the amount cannot be determined at the present time.
Acquisition Expenses – KBS Capital Advisors (6)	Reimbursement of customary acquisition expenses (including expenses relating to potential investments that we do not close), such as legal fees and expenses (including fees of independent contractor in-house counsel that are not employees of the advisor), costs of due diligence, accounting fees and expenses and other closing costs and miscellaneous expenses relating to the acquisition of real estate. We estimate that these expenses will average approximately 0.6% of the contract purchase prices of our real property acquisitions.	Actual amounts are dependent upon the total equity and debt capital we raise, the cost and location of our investments and the results of our operations; we cannot determine these amounts at the present time.
	Operational Stage
Asset Management Fee – KBS Capital Advisors (4)(7)(9)	Monthly fee equal to one-twelfth of 1.0% of the sum of the cost of all real estate investments we own and of our investments in joint ventures, including and acquisition expenses, any debt attributable to such	The actual amounts are dependent upon the total equity and debt capital we raise and the results of our

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Form of Compensation and Recipient	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares) (1)
	investments and budgeted capital improvement costs.	operations; we cannot determine these amounts at the present time.
Property Management Fees – Affiliates of our Legacy Sponsors (8)	In the event we engage an affiliate of our Legacy sponsors to provide property management services with respect to a particular property, we will pay a property management fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project.	Actual amounts are dependent upon gross revenues of specific properties and actual management fees or property management fees and therefore cannot be determined at the present time.
Other Operating Expenses – KBS Capital Advisors (4)(9)	We will reimburse our advisor for costs of providing services to us, including our allocable share of the advisor’s overhead, such as rent, employee costs, utilities and IT costs. Though our advisor may seek reimbursement for employee costs under the advisory agreement, the advisor does not intend to do so at this time. If our advisor does decide to seek reimbursement for employee costs, such costs may include our proportionate share of the salaries of persons involved in the preparation of documents to meet SEC reporting requirements. We will not reimburse the advisor or its affiliates for employee costs in connection with services for which our advisor earns acquisition or disposition fees or for the salaries and benefits our advisor or its affiliates may pay to our executive officers.	Actual amounts are dependent upon the total equity and debt capital we raise, the cost of our investments and the results of our operations; we cannot determine these amounts at the present time.
Independent Director Compensation	We will pay each of our independent directors an annual retainer of $40,000. We will also pay our independent directors for attending meetings as follows: (i) $2,500 for each board meeting attended, (ii) $2,500 for each committee meeting attended (except that the committee chairman will be paid $3,000 for each meeting attended), (iii) $2,000 for each teleconference board meeting attended, and (iv) $2,000 for each teleconference committee meeting attended (except that the committee chairman will be paid $3,000 for each teleconference committee meeting attended). All directors will receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors.	Actual amounts are dependent upon the total number of board and committee meetings that each independent director attends; we cannot determine these amounts at the present time.
	Operational and Liquidation/Listing Stage
Subordinated Participation in Net Cash Flows – KBS Capital Advisors (4)(10)	After investors in our offering have received a return of their net capital contributions and an 8.0% per year cumulative, non-compounded return, KBS Capital Advisors is entitled to receive 15.0% of our net cash flows, whether from continuing operations, net sale proceeds or otherwise, for which full consideration is not already paid in cash or property of equivalent value for services rendered. The 8.0% per year cumulative, non-compounded return is calculated based on the amount of capital invested in the offering. In making this calculation, an investor’s net capital contribution is reduced to the extent distributions in excess of a cumulative, non-compounded, annual return of 8.0% are paid (from whatever source), except to the extent such distributions would be required to supplement prior distributions paid in order to achieve a cumulative, non-compounded, annual return of 8.0%. This fee is payable only if we are not listed on an exchange.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.
Subordinated Performance Fee due upon termination of the advisory agreement – KBS Capital Advisors (4)	Upon termination of our advisory agreement, KBS Capital Advisors may be entitled to receive a subordinated termination fee in the form of a promissory note that becomes due only upon the sale, exchange or other disposition of one or more of our assets, and the fee would be payable solely from the proceeds from the sale, exchange or other disposition of an asset and future asset sales, exchanges or dispositions. The amount of the fee would be 15% of the amount, if any, by which (i) the hypothetical liquidation proceeds plus distributions paid exceed (ii) the amount necessary to provide investors with a return of their net capital contributions and an 8.0% per year cumulative, non-compounded return through the termination date; however, the agreement does not require that the investors actually have received such return prior to issuance of the promissory note or payments under it. The amount due under the promissory note would not be adjusted upwards or downwards to reflect any difference in the appraised value of our portfolio at termination and the amount ultimately realized by us. The fee would be reduced by the amount of any prior payment to the advisor of a subordinated participation in net cash flows. This fee is payable only if we are not listed on a national exchange.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.

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Form of Compensation and Recipient	Determination of Amount	Estimated Amount for Minimum Offering (250,000 shares)/ Maximum Offering (280,000,000 shares) (1)
	Liquidation/Listing Stage
Disposition Fees – KBS Capital Advisors or its affiliates (4)(11)	For substantial assistance in connection with the sale of properties or other investments, we will pay our advisor or its affiliates 1.0% of the contract sales price of each property or other investment sold; provided, however, in no event may the disposition fees paid to our advisor, its affiliates and unaffiliated third parties exceed 6.0% of the contract sales price. The conflicts committee will determine whether the advisor or its affiliate has provided substantial assistance to us in connection with the sale of an asset. Substantial assistance in connection with the sale of a property includes the advisor’s preparation of an investment package for the property (including a new investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a structural report and exhibits) or such other substantial services performed by the advisor in connection with a sale. Even when the conflicts committee determines that the advisor has provided substantial assistance in connection with the sale of an asset, we are not precluded from also engaging an unaffiliated third party to assist with the sale and we may be obligated to pay that party an additional amount, subject to the 6.0% limitation described above. We do not intend to sell properties or other assets to affiliates. However, if we do sell an asset to an affiliate, our organizational documents would not prohibit us from paying our advisor a disposition fee. Before we sold an asset to an affiliate, the charter would require that our conflicts committee conclude, by a majority vote, that the transaction is fair and reasonable to us and on terms and conditions no less favorable to us than those available from third parties. Although we are most likely to pay disposition fees to our advisor or an affiliate during our liquidation stage, these fees may also be incurred during our operational stage.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.
Subordinated Incentive Listing Fee – KBS Capital Advisors (4)(10)(12)	Upon listing our common stock on a national securities exchange, a fee equal to 15.0% of the amount by which (i) our adjusted market value plus distributions paid by us prior to listing exceeds (ii) the aggregate capital contributed by investors plus an amount equal to an 8.0% cumulative, non-compounded return to investors.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.

⁽¹⁾ The estimated maximum dollar amounts are based on the sale of the maximum of 280,000,000 shares to the public, including 80,000,000 shares through our dividend reinvestment plan.

⁽²⁾ All or a portion of the selling commissions will not be charged with regard to shares sold to certain categories of purchasers. A reduced dealer manager fee is payable with respect to certain volume discount sales. See “Plan of Distribution.”

⁽³⁾ After the termination of the primary offering, KBS Capital Advisors has agreed to reimburse us to the extent total organization and offering expenses borne by us exceed 15% of the gross proceeds raised in the primary offering. KBS Capital Advisors will do the same after termination of the offering pursuant to our dividend reinvestment plan.

⁽⁴⁾ Pursuant to the joint venture arrangement between KBS Capital Advisors and Legacy Partners Residential Realty LLC, income received by KBS Capital Advisors in satisfaction of these fees is assigned to the sub-advisor, KBS-Legacy Apartment Community REIT Venture, LLC, from which it is then distributed to KBS Capital Advisors and Legacy Partners Residential Realty LLC in accordance with the sub-advisor’s operating agreement.

⁽⁵⁾ Because the acquisition advisory fees we pay our advisor are a percentage of the purchase price of an investment, these fees will be greater to the extent we fund acquisitions through (i) the incurrence of debt (which we expect to represent between 50% and 65% of the purchase price of our investments if we sell the maximum number of shares offered hereby), (ii) retained cash flow from operations, (iii) issuances of equity in exchange for properties and other assets and (iv) proceeds from the sale of shares under our dividend reinvestment plan.

⁽⁶⁾ In addition to acquisition advisory fees, we will reimburse KBS Capital Advisors for amounts it pays in connection with the selection, acquisition or development of a property, whether or not we ultimately acquire the property. Under our charter, a majority of the independent directors would have to approve any increase in the acquisition advisory fees payable to our advisor. Our charter also limits our ability to make or purchase property or other investments if the total of all acquisition fees and expenses relating to the investment exceeds 6% of the contract purchase price or 6% of the total funds advanced unless our conflicts committee approves (by majority vote) the acquisition fees and acquisition expenses and determines the transaction to be commercially competitive, fair and reasonable to us.

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⁽⁷⁾ For the purpose of determining the acquisition advisory fee with respect to an acquired property, the cost of investment includes amounts budgeted and allocated for capital improvement of the property, however our advisor intends to defer the portion of the fee attributable to budgeted capital improvement costs until such costs are actually incurred. For example, if we acquire a property for an initial cost of $15 million (inclusive of acquisition expenses), but the investment plan proposed by our advisor and approved by our board of directors budgets an additional $2 million of capital improvement costs, the total cost for the property would be $17 million. However, if only $15 million of this amount is incurred upon the closing of the acquisition, the advisor would be paid $150,000 (or 1.0% of $15 million) upon closing. The remaining $20,000 of the fee attributable to budgeted capital improvement costs of $2 million would be paid when and if budgeted costs are actually incurred.

Budgeted capital improvement costs are treated similarly for the purpose of determining the monthly asset management fee. For each monthly period in which an asset management fee is payable, the cost of investment for a property would include its initial acquisition cost (inclusive of acquisition expenses), plus budgeted and allocated capital improvement costs actually incurred to date. For example, assume a portfolio consisting of one property that we initially acquired for $15 million (inclusive of acquisition expenses) and for which we have budgeted an additional $2 million of capital improvement costs. Assuming we had not incurred any capital improvement costs during the initial monthly period following this acquisition, the asset management fee for the first month period would be as follows:

First monthly asset management fee	=	1/12 X 1.0% of incurred cost
	=	1/12 X 1.0% of 15,000,000
	=	1/12 X 150,000
	=	$12,500

Assuming we had incurred $2 million of capital improvement costs in the following month, the asset management fee for the period would be as follows:

Second monthly asset management fee	=	1/12 X 1.0% of 17,000,000
	=	1/12 X 170,000
	=	$14,167

⁽⁸⁾ With respect to development services, construction services and property management services, although we do not rely exclusively on, nor have a written agreement to exclusively receive services from affiliates of our Legacy sponsors, our advisor may seek such services from our Legacy sponsors. All such service transactions would be subject to approval by our conflicts committee as fair and reasonable and on terms no less favorable than those available from unaffiliated third parties.

⁽⁹⁾ Commencing on the earlier of four fiscal quarters after (i) we make our first investment or (ii) six months after commencement of this offering, KBS Capital Advisors must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. “Average invested assets” means the average monthly book value of our assets during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation, including advisory fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of our stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of our assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that we do not close), disposition fees on the sale of real property and other expenses connected with the acquisition, disposition and ownership of real estate, such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

⁽¹⁰⁾ To the extent this incentive fee is derived from cash flows other than net sales proceeds, the incentive fee will count against the limit on “total operating expenses” described in note 9 above. Furthermore, upon termination of the advisory agreement, KBS Capital Advisors may be entitled to a similar fee if KBS Capital Advisors would have been entitled to a subordinated participation in net cash flows had the portfolio been liquidated (based on an independent appraised value of the portfolio) on the date of termination. The termination fee would be payable in the form of a promissory note that becomes due only upon the sale of one or more assets, and the fee is payable solely from the proceeds from the sale of an asset and future asset sales. See “Management – The Advisory Agreement.”

Our charter requires that any gain from the sale of assets that we may pay KBS Capital Advisors be reasonable. Under our charter, an interest in gain from the sale of assets is “presumptively reasonable” if it does not exceed 15% of the balance of net sale proceeds remaining after investors have received a return of their net capital contributions and a 6% per year cumulative, non-compounded return. Our advisory agreement sets a higher threshold for the payment of a subordinated incentive fee than that required by our charter. Any lowering of the threshold set forth in the advisory agreement would require the approval of a majority of the members of the conflicts committee.

An investor’s net capital contribution is calculated by multiplying the issue price of the shares by the total number of shares purchased by the investor.

KBS Capital Advisors cannot earn both the subordinated participation in net cash flows and the subordinated incentive listing fee. Any portion of the subordinated participation in net cash flows that KBS Capital Advisors receives prior to our listing will offset the amount otherwise due pursuant to the subordinated incentive listing fee.

⁽¹¹⁾ Although we are most likely to pay disposition fees to KBS Capital Advisors or an affiliate in the event of our liquidation, these fees may also be incurred during our operational stage. Under our charter, a majority of the independent directors would have to approve any increase in the disposition fees payable to our advisor and its affiliates above 1% of the contract sales price. Our charter also limits the maximum amount of the disposition fees payable to the advisor and its affiliates to 3% of the contract sales price.

To the extent this disposition fee is paid upon the sale of any assets other than real property, it will count against the limit on “total operating expenses” described in note 9 above.

⁽¹²⁾ The market value of our outstanding stock will be calculated based on the average market value of the shares issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed on a stock exchange. In the event the subordinated incentive listing fee is earned by KBS Capital Advisors as a result of the listing of the shares, any previous payments of the subordinated participation in net cash flows will offset the amounts due pursuant to the subordinated incentive listing fee, and we will not be required to pay KBS Capital Advisors any further subordinated participation in net cash flows. The subordinated incentive listing fee will count against the limit on “total operating expenses” described in note 9 above.

Due to the public market’s preference for self-managed companies, a decision to list our shares on a national securities exchange might well be preceded by a decision to become self-managed. Given our advisor’s familiarity with our assets and operations, we might prefer to become self-managed by acquiring entities affiliated with our advisor. Such an internalization transaction could result in significant payments to affiliates of our advisor irrespective of whether you enjoyed the returns on which we have conditioned other incentive compensation. We cannot predict whether, and on what terms, an internalization transaction would occur in the future. If we internalize the advisor before listing the subordinated incentive listing fee would not be payable; however, when negotiating the purchase price of the advisor or an affiliate of the advisor pursuant to an internalization transaction, the amount of any foregone incentive fee would likely be a consideration. Our charter would require that the conflicts committee conclude, by a majority vote, that an internalization transaction is fair and reasonable to us and on terms and conditions no less favorable to us than those available from third parties.

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STOCK OWNERSHIP

The following table sets forth the beneficial ownership of our common stock as of the date of this prospectus for each person or group that holds more than 5% of our common stock, for each director and executive officer and for our directors and executive officers as a group.

Name of Beneficial Owner	Number of Shares Beneficially Owned (1)	Percent of All Shares
KBS-Legacy Apartment Community REIT Venture, LLC	20,000	100.0%
C. Preston Butcher, Chairman of the Board, Chief Executive Officer and Director	20,000(2)	100.0%
Peter M. Bren, President and Director	20,000(2)	100.0%
Guy K. Hays, Executive Vice President	20,000(2)	100.0%
W. Dean Henry, Executive Vice President	20,000(2)	100.0%
Peter McMillan III, Executive Vice President	20,000(2)	100.0%
Charles J. Schreiber, Jr., co-sponsor	20,000(2)	100.0%
Keith D. Hall, co-sponsor	20,000(2)	100.0%
David E. Snyder, Chief Financial Officer, Treasurer and Secretary	-	-
Stacie K. Yamane, Chief Accounting Officer	-	-
Gary T. Kachadurian, Independent Director	-	-
Michael L. Meyer, Independent Director	-	-
Ronald E. Zuzack, Independent Director	-	-
All directors and executive officers as a group	20,000(2)	100.0%

⁽¹⁾ The address of each beneficial owner listed is 620 Newport Center Drive, Suite 1300, Newport Beach, California 92660.

⁽²⁾ Under applicable federal regulations, shares of our common stock held of record by KBS-Legacy Apartment Community REIT Venture, LLC are deemed to be beneficially owned by each of the persons that have or share voting or investment power with respect to such shares. KBS-Legacy Apartment Community REIT Venture, LLC is indirectly owned and controlled by C. Preston Butcher, W. Dean Henry, Guy K. Hays, Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr.

CONFLICTS OF INTEREST

We are subject to various conflicts of interest arising out of our relationships with our KBS and Legacy sponsors and their respective affiliates, some of whom serve as our executive officers and directors. We discuss these conflicts below and conclude this section with a discussion of the corporate governance measures we have adopted to ameliorate some of the risks posed by these conflicts.

Our Sponsors’ Interests in Other Real Estate Programs

General

All of our executive officers, some of our directors and other key professionals engaged by our advisor to provide services on our behalf are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, the sub-advisor, our dealer manager and other KBS and Legacy affiliates that are the sponsors of other real estate programs. In addition, some of our executive officers, one of our directors and some of our key professionals are executive officers, directors and/or key professionals of KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT, which are also public, non-traded REITs advised by KBS Capital Advisors. Through affiliates of our advisor, our KBS sponsors and other key professionals at KBS Capital Advisors also serve as investment advisors to institutional investors in real estate properties and real estate-related assets. Through affiliates of Legacy Partners Residential Realty LLC, our Legacy sponsors and other key professionals employed by them also serve as sponsors for institutional investors in residential real estate similar to the types of properties that we intend to acquire. These individuals have legal and financial obligations with respect to those programs, entities and investors that are similar to their obligations to us. In the future, these individuals and other affiliates of our sponsors may organize other real estate programs, serve as the

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investment advisor to other investors and acquire for their own account real estate properties that may be suitable for us.

Since 2002, certain of our Legacy sponsors and their affiliates have sponsored four private real estate programs, including one program focused on acquiring/developing residential real estate assets and three focused on acquiring/developing commercial real estate assets. All four of these programs are still operating and, notwithstanding that the investment focus of some of these programs is on the acquisition/development of commercial real estate, rather than residential real estate, they all have investment objectives that are similar to ours. In addition, affiliates of our Legacy sponsors have performed as key sub-advisors to a number of institutional clients, assisting these institutional investors to locate, acquire/develop, finance, manage, and sell high-quality residential real estate assets. Conflicts of interest may arise between us and the prior Legacy programs, between us and future programs and between us and the institutional investors for which a Legacy Residential entity serves as a sub-advisor.

Since 1992, investment advisors affiliated with two of our KBS sponsors, Peter M. Bren and Charles J. Schreiber, Jr., have sponsored 14 privately offered real estate programs. Ten of these programs are still operating. Our KBS sponsors, Messrs. Bren, Hall, McMillan and Schreiber, are also the sponsors of KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT. Notwithstanding that the investment focus of these programs is on the acquisition of commercial and industrial real estate and real estate related assets, rather than apartment community properties, they all have investment objectives that are similar to ours. Conflicts of interest may arise between us and the programs that have not yet been liquidated, between us and future programs and between us and the investors for which a KBS entity serves as an investment advisor.

Competition for Investors

As of the date of this prospectus, KBS REIT II is raising capital in an ongoing public offering of its common stock, which we expect will continue until April 22, 2010 unless it is extended for an additional year. KBS Strategic Opportunity REIT is a newly organized program sponsored by our KBS sponsors that commenced its initial public offering on November 20, 2009. KBS Strategic Opportunity REIT’s public offering is expected to continue until November 20, 2011 unless it is extended for an additional year. We expect that both KBS REIT II and KBS Strategic Opportunity REIT will be raising capital in their respective public offerings concurrently with our offering. In addition, our sponsors may decide to sponsor future programs that would seek to raise capital through public offerings conducted concurrently with our offering. As a result, we face a conflict of interest due to the potential competition among us and these other programs for investors and investment capital.

Our sponsors generally seek to reduce the conflicts that may arise among their various programs by avoiding simultaneous public offerings by programs that have a substantially similar mix of investment characteristics, including targeted investment types and key investment objectives. Nevertheless, there may be periods during which one or more programs sponsored by our sponsors will be raising capital and which might compete with us for investment capital.

Joint Ventures with Affiliates

With the approval of a majority of our board of directors (including a majority of our conflicts committee) not interested in the transaction, we may enter into joint venture agreements with other KBS- or Legacy-sponsored programs for the acquisition, development or improvement of properties or other investments that meet our investment objectives. KBS Capital Advisors, our advisor and the advisor to KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT and KBS Realty Advisors and its affiliates, the advisors to the private KBS-sponsored programs and affiliated entities, have some of the same executive officers and key employees, and these persons, may face conflicts of interest in determining whether and which KBS program or other KBS-advised entity should enter into any particular joint venture agreement. Similarly our Legacy sponsors and their affiliates have some of the same executive officers and key real estate professionals as we do, and, as a consequence, these persons may face conflicts of interest in determining whether and which Legacy Residential program or other Legacy-advised entity should enter into any particular joint venture agreement with us. These persons may also face a conflict in structuring the terms of the relationship between our interests and the interests of the sponsor-affiliated co-venturer and in managing the joint venture. Any joint venture agreement or transaction between us and a sponsor-affiliated co-venturer will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers. The sponsor-affiliated co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. These co-venturers may thus benefit to our and your detriment.

Allocation of Investment Opportunities

We rely on our KBS and Legacy sponsors, and the executive officers and real estate professionals engaged by our advisor to identify suitable investments. Other KBS-sponsored programs are also advised by KBS Capital Advisors and rely on some of the same executive officers and key professionals, as will future KBS-sponsored programs. Messrs. Bren and Schreiber and other key professionals at KBS Capital Advisors are also the key professionals of KBS Realty Advisors and its affiliates, the advisors to the private KBS-sponsored programs and the investment advisors to institutional investors in real estate and real estate-related assets. As such, other KBS-sponsored programs and KBS-advised clients that are seeking investment opportunities as of the date of this prospectus, including KBS REIT II and KBS Strategic Opportunity REIT, one private KBS-sponsored program and three KBS-advised institutional investors, rely on many of the same key professionals, as will future programs. In addition, other programs sponsored by our Legacy sponsors rely on some of the same Legacy-affiliated real estate professionals who will be providing services to us.

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Mr. Butcher and other key professionals with certain of the Legacy Commercial affiliated entities have sponsored Legacy Partners Realty Fund I, Legacy Partners Realty Fund II and Legacy Partners Realty Fund III. Mr. Butcher and our other individual Legacy sponsors have also sponsored Legacy Partners Affordable Housing Fund. As such, as certain of these funds are seeking investment opportunities as of the date of this prospectus, these funds rely on many of the same key professionals as us. Generally, when these real estate professionals direct an investment opportunity to a KBS- or Legacy-sponsored program or investor, they, in their sole discretion, will offer the opportunity to the program or investor for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program or investor. As a result, absent contractual restrictions on our sponsors with respect to the allocation of investment opportunities, these real estate professionals could direct attractive investment opportunities to other entities or investors. In order to mitigate the risks created by this potential conflict of interest, our sponsors have agreed to certain restriction on business activities that compete with us. See “— Certain Conflict Resolution Measures — Restrictions on Competing Business Activities by our Sponsors.”

Competition for Tenants and Others

Conflicts of interest may exist to the extent that we acquire properties in the same geographic areas where other Legacy Residential programs or affiliated entities own residential properties. In such a case, a conflict could arise in the leasing of properties in the event that we and another Legacy Residential program or affiliated entity were to compete for the same tenants in negotiating leases, or a conflict could arise in connection with the resale of properties in the event that we and another Legacy Residential program or affiliated entity were to attempt to sell similar properties at the same time. See “Risk Factors — Risks Related to Conflicts of Interest.” Conflicts of interest may also exist at such time as we or KBS Capital Advisors seek to employ developers, contractors, building managers or other third parties. Our advisor will seek to reduce conflicts that may arise with respect to properties available for sale or rent by making prospective purchasers or tenants aware of all such properties. Our advisor will also seek to reduce conflicts relating to the employment of developers, contractors or building managers by making prospective service providers aware of all properties in need of their services. However, our advisor and the advisors of other Legacy Residential programs and affiliated entities cannot fully avoid these conflicts because they may establish differing terms for resales or leasing of the various properties or differing compensation arrangements for service providers at different properties.

Allocation of Our Affiliates’ Time

We rely on the key professionals that KBS Capital Advisors has assembled to provide services on our behalf, including our KBS and Legacy sponsors, for the day-to-day operation of our business.

All four of our KBS Sponsors, Messrs. Bren, Hall, McMillan and Schreiber, are also executive officers of KBS REIT I and KBS REIT II. Messrs. Hall and McMillan are executive officers of KBS Strategic Opportunity REIT, and Messrs. Bren and Schreiber are executive officers of KBS Realty Advisors and its affiliates, the advisors of the other KBS-sponsored programs and the investment advisors to institutional investors in real estate and real estate-related assets.

Our three individual Legacy sponsors also have interests in other programs and obligations to other investors. Mr. Butcher is Chairman of the Board and Chief Executive Officer of Legacy Partners Residential, Inc., a firm that together with Legacy Commercial and other affiliated entities manages a commercial and residential real estate portfolio currently valued in excess of $6 billion. Mr. Butcher, through Legacy Commercial affiliated entities, is integral to the management of Legacy Partners Realty Funds I, II & III. Mr. Henry is President of Legacy Partners Residential, Inc. and Mr. Hays is Chief Financial Officer and Executive Managing Director of Legacy Partners Residential, Inc. Messrs. Butcher, Henry and Hays are all involved in the management of the Legacy Partners Affordable Housing Fund.

Our other executive officers also face conflicts with respect to the allocation of their time. Mr. Snyder and Ms. Yamane are also executive officers of KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT and KBS Capital Advisors. Ms. Yamane is also an executive officer of KBS Realty Advisors LLC.

As a result of their interests in other programs, their obligations to other investors and the fact that they engage in and they will continue to engage in other business activities on behalf of themselves and

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others, our executive officers and our KBS and Legacy sponsors face conflicts of interest in allocating their time among us and other KBS- and Legacy -sponsored programs and other business activities in which they are involved. In addition, many of the same key professionals associated with our KBS and Legacy sponsors have existing obligations to other program sponsored by our sponsors. Our executive officers and the key professionals associated with our sponsors who provide services to us are not obligated to devote a fixed amount of their time to us, but our sponsors believe that our executive officers and the other key professionals have sufficient time to fully discharge their responsibilities to us and to the other business in which they are involved.

Transactions with Related Persons

We have no employees and are supported by arrangements with related persons. Our advisor and certain of its affiliates, including our dealer manager, earn fees and compensation in connection with our offering and in connection with the acquisition, management, and disposition of our properties. See “Management—Management Compensation” for a discussion of the amounts and nature of the fees that we will expect to pay under agreements with related persons.

None of the agreements that provide for fees and other compensation to the advisor and other related persons will be the result of arm’s length negotiations and therefore all of these agreements are subject to inherent conflicts of interest. As further described below under the heading “—Certain Conflict Resolution Procedures—Other Charter Provisions Relating to Conflicts of Interest—Advisor Compensation,” in order to mitigate these conflicts of interest our charter limits the compensation that we may pay to our advisor and, among other things, requires our conflicts committee to annually evaluate the compensation that we pay to our advisor. All other agreements that we enter into with related persons, including the dealer manager agreement, require approval by a majority of our board of directors, including a majority of the independent directors, not otherwise interested in such transactions, as being fair and reasonable to us and on terms and conditions no less favorable than those which could be obtained from unaffiliated entities.

Receipt of Fees and Other Compensation by our Sponsors and their Affiliates

Our sponsors and their affiliates receive substantial fees from us, which fees have not been negotiated at arm’s length. These fees could influence our advisor’s and the sub-advisor’s advice to us as well as the judgment of affiliates of our sponsors, some of whom also serve as our executive officers and directors and as key professionals of our sponsors. Among other matters, these compensation arrangements could affect their judgment with respect to:

— the continuation, renewal or enforcement of our agreements with KBS Capital Advisors and its affiliates, including the advisory agreement and the dealer-manager agreement;

— the continuation, renewal or enforcement of the agreement between KBS Capital Advisors and the sub-advisor;

— public offerings of equity by us, which entitle KBS Capital Markets Group to dealer-manager fees and will likely entitle KBS Capital Advisors to increased acquisition advisory fees and asset-management fees;

— sales of properties and other investments (including, subject to the approval of our conflicts committee, sales to affiliates), which, through KBS Capital Advisors, entitle our sponsors to disposition fees and possible subordinated incentive fees;

— acquisitions of properties and other investments, which through KBS Capital Advisors, entitle our sponsors to acquisition fees and asset management fees and, in the case of acquisitions of investments from other programs sponsored by KBS and Legacy Residential, might entitle affiliates of our sponsors to disposition fees and possible subordinated incentive fees in connection with its services for the seller;

— borrowings to acquire properties and other investments, which borrowings will increase the acquisition and asset-management fees payable to our sponsors;

— whether and when we seek to list our common stock on a national securities exchange, which listing could entitle our sponsors to a subordinated incentive listing fee;

— whether we seek stockholder approval to internalize our management, which may entail acquiring assets (such as office space, furnishings and technology costs) and negotiating compensation for real estate professionals at our advisor and its affiliates that may result in these individuals receiving more compensation from us than they currently receive from our advisor and its affiliates; and

— whether and when we seek to sell the company or its assets, which sale could entitle our sponsors to a subordinated incentive fee.

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Fiduciary Duties Owed by Some of Our Affiliates to Our Advisor and Our Advisor’s Affiliates

All of our executive officers and some of our directors are also executive officers, directors, managers and/ or holders of a direct or indirect controlling interest in:

— KBS Capital Advisors, our advisor;

— Legacy Partners Residential Realty LLC, a sponsoring entity of our offering;

— KBS-Legacy Apartment Community REIT Venture, LLC, the sub-advisor;

— KBS Capital Markets Group, our dealer manager; and

— other Legacy- and KBS-sponsored programs (see the “Prior Performance Summary” section of this prospectus).

Through Legacy- or KBS-affiliated entities, these persons also serve as the investment advisers to institutional investors in real estate and real estate-related assets. As a result, they owe fiduciary duties to each of these programs, their stockholders, members and limited partners and the institutional investors advised by such Legacy- and KBS-affiliated entities. These fiduciary duties may from time to time conflict with the fiduciary duties that they owe to us.

Affiliated Dealer Manager

Since KBS Capital Markets Group, our dealer manager, is an affiliate of KBS Capital Advisors, you will not have the benefit of an independent due diligence review and investigation of the type normally performed by an independent underwriter in connection with the offering of securities. See “Plan of Distribution.”

Certain Conflict Resolution Measures

Conflicts Committee

In order to ameliorate the risks created by conflicts of interest, our charter creates a conflicts committee of our board of directors composed of all of our independent directors. An “independent director” is a person who is not one of our officers or employees or an officer or employee of KBS Capital Advisors (including the sub-advisor) or their affiliates and has not been so for the previous two years. Our charter authorizes the conflicts committee to act on any matter permitted under Maryland law. Both the board of directors and the conflicts committee must act upon those conflict-of-interest matters that cannot be delegated to a committee under Maryland law. Our charter also empowers the conflicts committee to retain its own legal and financial advisors. Among the matters we expect the conflicts committee to act upon are:

— the continuation, renewal or enforcement of our agreements with KBS Capital Advisors and its affiliates, including the advisory agreement and the dealer-manager agreement;

— public offerings of securities;

— sales of properties;

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— investments in properties;

— borrowings;

— transactions with affiliates;

— compensation of our officers and directors who are affiliated with our sponsors;

— whether and when we seek to list our shares of common stock on a national securities exchange;

— whether and when we seek to become self-managed, which decision could lead to our acquisition of entities affiliated with our sponsors at a substantial price; and

— whether and when we seek to sell the company or its assets.

All proposed investments must be approved by at least a majority of our board of directors, including a majority of the conflicts committee. The conflicts committee may approve a proposed investment without action by the full board of directors if the approving members of the conflicts committee constitute at least a majority of the board of directors.

Restrictions on Competing Business Activities by our Sponsors

In order to mitigate potential conflicts of interest that would arise if investment opportunities that are suitable for us were also suitable for other KBS or Legacy Residential programs and investors, Legacy Partners Residential Realty LLC and KBS Capital Advisors and their affiliates have agreed to restrictions on their competing business activities during the period of time from the commencement of our initial public offering until either:

(1)	the later of:
	(A)	the date when we are no longer publicly offering equity securities – whether through this offering or follow-on public offerings – and have not done so for one year (other than pursuant to a dividend reinvestment plan, employee benefit plan or similar plan); or
	(B)	the time when we no longer have sufficient offering proceeds remaining to acquire additional properties; or
(2)	if earlier, one of the following occurrences:
	(A)	the termination of our advisory agreement with KBS Capital Advisors;
	(B)	an amendment to our advisory agreement, or an amendment to the assignment agreement from our advisor to the sub-advisor, resulting in the elimination of any of the fees currently payable by us under the agreement; or
	(C)	an event of dissolution of the sub-advisor, KBS-Legacy Apartment Community REIT Venture, LLC.

During this period, Legacy Partners Residential Realty LLC and its affiliates are required to refrain from, directly or indirectly, acquiring, facilitating the acquisition of, servicing or asset managing, or engaging in any other investment activities other than the acquisition of debt investments involving assets that are suitable for us based on our investment objectives, other than those assets already owned by Legacy Partners Residential Realty LLC and its affiliates. However,

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this restriction will not apply to properties that would have been suitable for us but for the fact that such property is under contract or option to be acquired and/or developed by Legacy Partners Residential Realty LLC and/or one of its affiliates at any time prior to the effectiveness with the SEC of the registration statement relating to our initial public offering. Additionally, this restriction will not apply to one particular development project in which affiliates of Legacy Partners Residential Realty LLC have been involved in the pre-development stages if KBS Capital Advisors determines that our acquisition of that project would not be in our best interest. Nor will the restriction apply to development projects where the anticipated development period is estimated to extend beyond our anticipated remaining life. Nor does this prohibition prevent Legacy Partners Residential Realty LLC or its affiliates from performing third party property management activities provided that such activities do not interfere with their time commitment obligations to us or with their provision of property management or asset management services to us. The restriction is not intended to prohibit our individual Legacy Sponsors, their family members, or their associated professionals, from making limited amounts of personal, passive investments in equity interests of unaffiliated entities that may invest in properties that could be suitable for us. Finally, subject to review and approval by our conflicts committee of all future proposed exclusions which are proposed after the effective date of this registration statement, KBS Capital Advisors and Legacy Partners Residential Realty LLC may also mutually agree to exclude other investment activities from the scope of the restriction if they determine that those activities would not be competitive with us or our investments.

Similarly, in order to mitigate conflicts of interest due to the potential competition among us and other programs sponsored by our sponsors for investors, investment capital and allocation of investment opportunities, during the period described above, our KBS sponsors and its affiliates are required to refrain from directly or indirectly, causing the effectiveness with the SEC of a registration statement covering the offering and sale of shares of a publicly registered, unlisted real estate investment trust, the principal investment focus of which is substantially the same as ours.

Other Charter Provisions Relating to Conflicts of Interest

In addition to the creation of the conflicts committee, our charter contains many other restrictions relating to conflicts of interest including the following:

Advisor Compensation. The conflicts committee evaluates at least annually whether the compensation that we contract to pay to KBS Capital Advisors and its affiliates is reasonable in relation to the nature and quality of services performed and whether such compensation is within the limits prescribed by the charter. The conflicts committee supervises the performance of KBS Capital Advisors and its affiliates and the compensation we pay to them to determine whether the provisions of our compensation arrangements are being carried out. This evaluation is based on the following factors as well as any other factors deemed relevant by the conflicts committee:

— the amount of the fees and any other compensation, including stock-based compensation, paid to KBS Capital Advisors and its affiliates in relation to the size, composition and performance of our investments;

— whether the expenses incurred by us are reasonable in light of our investment performance, net assets, net income and the fees and expenses of other comparable unaffiliated REITs;

— the success of KBS Capital Advisors in generating appropriate investment opportunities;

— the rates charged to other companies, including other REITs, by advisors performing similar services;

— additional revenues realized by KBS Capital Advisors and its affiliates through their relationship with us, including whether we pay them or they are paid by others with whom we do business;

— the quality and extent of service and advice furnished by KBS Capital Advisors and its affiliates;

— the performance of our investment portfolio; and

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— the quality of our portfolio relative to the investments generated by KBS Capital Advisors and its affiliates for their own account and for their other clients.

Under our charter, we can only pay KBS Capital Advisors a disposition fee in connection with the sale of an asset if it provides a substantial amount of the services in the effort to sell the asset, the commission does not exceed 3% of the sales price of the asset, and, if in connection with a disposition commissions are paid to third parties unaffiliated with our advisor, the commission paid to our advisor does not exceed the commissions paid to such unaffiliated third parties. Although our charter limits the disposition fee we may pay to our advisor to 3% of the sales price, our advisory agreement provides for a 1% fee. Any increase in this fee would require the approval of a majority of the members of our conflicts committee. Moreover, our charter also provides that the commission, when added to all other disposition fees paid to unaffiliated parties in connection with the sale, may not exceed the lesser of a competitive real estate commission or 6% of the sales price of the asset. To the extent this disposition fee is paid upon the sale of any assets other than real property, it will count against the limit on “total operating expenses” described below. We do not intend to sell assets to affiliates. However, if we do sell an asset to an affiliate, our organizational documents would not prohibit us from paying our advisor a disposition fee. Before we sold an asset to an affiliate, our charter would require that the conflicts committee conclude, by a majority vote, that the transaction is fair and reasonable to us and on terms and conditions no less favorable to us than those available from third parties.

Our charter also requires that any gain from the sale of assets that we may pay our advisor or an entity affiliated with our advisor be reasonable. Such an interest in gain from the sale of assets is presumed reasonable if it does not exceed 15% of the balance of the net sale proceeds remaining after payment to common stockholders, in the aggregate, of an amount equal to 100% of the original issue price of the common stock, plus an amount equal to 6% of the original issue price of the common stock per year cumulative. Our advisory agreement sets a higher threshold for the payment of a subordinated incentive fee than that required by our charter. Under the advisory agreement, an incentive fee may be paid only if the stockholders first enjoy an 8% per year cumulative, non-compounded return. Any lowering of the threshold set forth in the advisory agreement would require the approval of a majority of the members of the conflicts committee. The subordinated incentive fee payable under the advisory agreement is a subordinated participation in net cash flows, whether from continuing operations, net sale proceeds or otherwise; however, to the extent that this incentive fee is derived from cash flows other than net sales proceeds, the incentive fee will count against the limit on “total operating expenses” described below.

If we ever decided to become self-managed by acquiring entities affiliated with our advisor, our charter would require that the conflicts committee conclude, by a majority vote, that such internalization transaction is fair and reasonable to us and on terms and conditions no less favorable to us than those available from third parties.

Our charter also limits the amount of acquisition fees and acquisition expenses we can incur to a total of 6% of the contract purchase price for the property or, in the case of a loan, our charter limits origination fees and expenses we can incur to 6% of the funds advanced. This limit may only be exceeded if the conflicts committee approves (by majority vote) the fees and expenses and finds the transaction to be commercially competitive, fair and reasonable to us. Although our charter permits combined acquisition fees and expenses to equal 6% of the purchase price, our advisory agreement limits the acquisition advisory fee to 1.0% of the purchase price (including any acquisition expenses and any debt attributable to such investments plus budgeted capital improvement costs). Any increase in the acquisition advisory fee stipulated in the advisory agreement would require the approval of a majority of the members of the conflicts committee.

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Term of Advisory Agreement.  Each contract for the services of our advisor may not exceed one year, although there is no limit on the number of times that we may retain a particular advisor. The conflicts committee or our advisor may terminate our advisory agreement with KBS Capital Advisors without cause or penalty on 60 days’ written notice. In such event, KBS Capital Advisors must cooperate with us and our directors in making an orderly transition of the advisory function.

Upon termination of the advisory agreement, KBS Capital Advisors may be entitled to a termination fee if (based upon an independent appraised value of the portfolio) KBS Capital Advisors would have been entitled to a subordinated participation in net cash flows had the portfolio been liquidated on the termination date. The termination fee would be payable in the form of a promissory note that becomes due only upon the sale, exchange or other disposition of one or more assets. The fee is payable solely from the proceeds from the sale, exchange or other disposition of an asset and future asset sales, exchanges or dispositions, and all of such proceeds must be used to repay the promissory note until it is fully repaid. The amount of the termination fee would be 15% of the amount by which (i) the hypothetical liquidation proceeds plus distributions paid exceed (ii) the amount necessary to provide investors with a return of their net capital contributions and an 8.0% per year cumulative, non-compounded return through the termination date; however, the agreement does not require that the investors actually have received such return prior to issuance of the promissory note or payments under it. The amount due under the promissory note would not be adjusted upwards or downwards to reflect any difference in the appraised value of our portfolio at termination and the amount ultimately realized by us.

Our Acquisitions.  We will not purchase or lease properties in which KBS Capital Advisors, any of our directors or officers or any of their affiliates has an interest without a determination by a majority of our directors (including a majority of the conflicts committee) not otherwise interested in the transaction that such transaction is fair and reasonable to us and at a price to us no greater than the cost of the property to the affiliated seller or lessor, unless there is substantial justification for the excess amount. In no event will we acquire any such property at an amount in excess of its current appraised value as determined by an independent expert selected by our independent directors not otherwise interested in the transaction. An appraisal is “current” if obtained within the prior year. If a property with a current appraisal is acquired indirectly from an affiliated seller through the acquisition of securities in an entity that directly or indirectly owns the property, a second appraisal on the value of the securities of the entity shall not be required if (i) the conflicts committee determines that such transaction is fair and reasonable, (ii) the transaction is at a price to us no greater than the cost of the securities to the affiliated seller, (iii) the entity has conducted no business other than the financing, acquisition and ownership of the property and (iv) the price paid by the entity to acquire the property did not exceed the current appraised value.

Mortgage Loans Involving Affiliates.  Our charter prohibits us from investing in or making mortgage loans in which the transaction is with KBS Capital Advisors, our directors or officers or any of their affiliates, unless an independent expert appraises the underlying property. We must keep the appraisal for at least five years and make it available for inspection and duplication by any of our stockholders. In addition, we must obtain a mortgagee’s or owner’s title insurance policy or commitment as to the priority of the mortgage or the condition of the title. Our charter prohibits us from making or investing in any mortgage loans that are subordinate to any mortgage or equity interest of KBS Capital Advisors, our directors or officers or any of their affiliates.

Other Transactions Involving Affiliates.  A majority of our directors (including a majority of the conflicts committee) not otherwise interested in the transaction must conclude that all other transactions between us and KBS Capital Advisors, any of our officers or directors or any of their affiliates are fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties.

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Limitation on Operating Expenses.  Commencing on the earlier of four fiscal quarters after (i) we make our first investment or (ii) six months after commencement of this offering, KBS Capital Advisors must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. “Average invested assets” means the average monthly book value of our assets during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation, including advisory fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of our stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of our assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that we do not close), disposition fees on the sale of real property and other expenses connected with the acquisition, disposition and ownership of real estate, including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

Issuance of Options and Warrants to Certain Affiliates.  Until our shares of common stock are listed on a national securities exchange, we will not issue options or warrants to purchase our capital stock to KBS Capital Advisors, our directors, the sponsors or any of their affiliates, except on the same terms as such options or warrants are sold to the general public. We may issue options or warrants to persons other than KBS Capital Advisors, our directors, the sponsors and their affiliates prior to listing our common stock on a national securities exchange, but not at exercise prices less than the fair market value of the underlying securities on the date of grant and not for consideration (which may include services) that in the judgment of the conflicts committee has a market value less than the value of such option or warrant on the date of grant. Any options or warrants we issue to KBS Capital Advisors, our directors, the sponsors or any of their affiliates shall not exceed an amount equal to 10% of the outstanding shares of our capital stock on the date of grant.

Repurchase of Our Shares.  Our charter provides that we may not voluntarily repurchase shares of our common stock if such repurchase would impair our capital or operations. In addition, our charter prohibits us from paying a fee to KBS Capital Advisors or our directors or officers or any of their affiliates in connection with our repurchase of our common stock.

Loans.  We will not make any loans to our sponsors, KBS Capital Advisors or to our directors or officers or any of their affiliates. In addition, we will not borrow from these affiliates unless a majority of our directors (including a majority of the conflicts committee) not otherwise interested in the transaction approves the transaction as being fair, competitive and commercially reasonable and no less favorable to us than comparable loans between unaffiliated parties. These restrictions on loans will only apply to advances of cash that are commonly viewed as loans, as determined by the conflicts committee. By way of example only, the prohibition on loans would not restrict advances of cash for legal expenses or other costs incurred as a result of any legal action for which indemnification is being sought nor would the prohibition limit our ability to advance reimbursable expenses incurred by directors or officers or KBS Capital Advisors or its affiliates.

Reports to Stockholders.  Our charter requires that we prepare an annual report and deliver it to our stockholders within 120 days after the end of each fiscal year. Our directors are required to take reasonable steps to ensure that the annual report complies with our charter provisions. Among the matters that must be included in the annual report or included in a proxy statement delivered with the annual report are:

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— financial statements prepared in accordance with GAAP that are audited and reported on by independent certified public accountants;

— the ratio of the costs of raising capital during the year to the capital raised;

— the aggregate amount of advisory fees and the aggregate amount of other fees paid to KBS Capital Advisors and any affiliates of KBS Capital Advisors by us or third parties doing business with us during the year;

— our total operating expenses for the year stated as a percentage of our average invested assets and as a percentage of our net income;

— a report from the conflicts committee that our policies are in the best interests of our common stockholders and the basis for such determination; and

— a separately stated, full disclosure of all material terms, factors and circumstances surrounding any and all transactions involving us and our advisor, a director or any affiliate thereof during the year, which disclosure has been examined and commented upon in the report by the conflicts committee with regard to the fairness of such transactions.

Voting of Shares Owned by Affiliates.  Our charter prohibits KBS Capital Advisors, our directors and officers and their affiliates from voting their shares regarding (i) the removal of any of these affiliates or (ii) any transaction between them and us.

Ratification of Charter Provisions.  Prior to the commencement of this offering, our board of directors and the conflicts committee will review and ratify our charter by the vote of a majority of their respective members, as required by our charter.

INVESTMENT OBJECTIVES AND CRITERIA

General

We intend to invest in and manage a diverse portfolio of equity investments in high quality apartment communities located throughout the United States. We expect that our portfolio will include “core” apartment buildings that are already well positioned and producing rental income, as well as more opportunity oriented properties at various phases of leasing, development, redevelopment or repositioning. We may make our investments through the acquisition of individual assets or by acquiring portfolios of assets, other REITs or real estate companies. We plan to diversify our portfolio by investment type, investment size and investment risk with the goal of attaining a portfolio of income-producing properties that provide attractive and stable returns to our investors. We expect our real property investments will be located in large metropolitan areas in the United States and will be more heavily weighted towards investments in faster growing and/or supply constrained areas in the West and South. Our primary investment objectives are:

— to preserve and return your capital contribution; and

— to provide you with attractive and stable cash distributions.

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We will also seek to realize growth in the value of our investments by timing asset sales to maximize their value.

We may return all or a portion of your capital contribution in connection with the sale of the company or the assets we acquire. Alternatively, you may be able to obtain a return of all or a portion of your capital contribution in connection with the sale of your shares.

We may seek to list our shares of common stock if our independent directors believe listing would be in the best interests of our stockholders. If we do not list our shares of common stock on a national securities exchange by January 31, 2020, our charter requires that we either:

— seek stockholder approval of the liquidation of the company; or

— if a majority of the conflicts committee determines that liquidation is not then in the best interests of our stockholders, postpone the decision of whether to liquidate the company.

If a majority of the conflicts committee does determine that liquidation is not then in the best interests of our stockholders, our charter requires that the conflicts committee revisit the issue of liquidation at least annually. Further postponement of listing or stockholder action regarding liquidation would only be permitted if a majority of the conflicts committee again determined that liquidation would not be in the best interest of our stockholders. Subject to this requirement to annually reconsider the issue, our charter does not prohibit the conflicts committee from indefinitely extending our liquidation date if it continues to determine that such extension is in the best interests of our stockholders. If we sought and failed to obtain stockholder approval of our liquidation, our charter would not require us to list or liquidate, and we could continue to operate as before. If we sought and obtained stockholder approval of our liquidation, we would begin an orderly sale of our properties and other assets. The precise timing of such sales would take account of the prevailing real estate and financial markets, the economic conditions in the submarkets where our properties are located and the federal income tax consequences to our stockholders. In making the decision to apply for listing of our shares, our directors will try to determine whether listing our shares or liquidating our assets will result in greater value for stockholders.

One of the factors our board of directors will consider when making this determination is the liquidity needs of our stockholders. In assessing whether to list or liquidate, our board of directors would likely solicit input from financial advisors as to the likely demand for our shares upon listing. If, after listing, the board believed that it would be difficult for stockholders to dispose of their shares, then that factor would weigh against listing. However, this would not be the only factor considered by the board. If listing still appeared to be in the best long-term interest of our stockholders, despite the prospects of a relatively small market for our shares upon the initial listing, the board may still opt to list our shares of common stock in keeping with its obligations under Maryland law. The board would also likely consider whether there was a large pent-up demand to sell our shares when making decisions regarding listing or liquidation. The degree of participation in our dividend reinvestment plan and the number of requests for redemptions under the share redemption program at this time could be an indicator of stockholder demand to liquidate their investment.

Our board may revise our investment policies, which we describe in more detail below, without the approval of our stockholders. Our board of directors will review our investment policies at least annually to determine whether our policies are in the best interests of our stockholders. The board’s determination must be approved by a majority of the directors (including a majority of the conflicts committee) and the board must include the basis for its determination in its minutes and in an annual report delivered to stockholders.

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Legacy Residential Experience

Pursuant to the operating agreement of the sub-advisor, our Legacy sponsors and their team of real estate professionals are assigned direct responsibility for sourcing and proposing target properties for investment by us, managing the acquisition process for investments approved by our board of directors and performing asset management services related to our investments. We believe that the experience of our Legacy sponsors and their team of key real estate professionals, combined with their disciplined investment approach, will allow us to successfully execute our business model. The individual Legacy sponsors, Messrs. C. Preston Butcher, W. Dean Henry, and Guy K. Hays, have over 36 years of real estate experience, on average. The other key real estate professionals with Legacy Residential have over 25 years of real estate industry experience, on average, and over 12 years with Legacy Residential entities and/or Lincoln Property Company, on average. The experience of these Legacy sponsors includes, among other things, identifying and acquiring or developing over 68,000 residential units exceeding $5.3 billion of cost across 276 assets since inception in 1968, and selling nearly 57,000 residential units exceeding $3.3 billion of cost across 237 assets. For further discussion of the residential real estate experience of our Legacy sponsors, see “Management – Our Sponsors and Their Key Personnel – Our Legacy Sponsors” and “Prior Performance Summary – Prior Investment Programs – Legacy Sponsors.”

Market Outlook for Multifamily Real Estate

The United States economy is currently in a recession, and the resulting job losses and rising unemployment are having an adverse effect on multifamily real estate. Vacancies at multifamily properties are rising and net operating incomes are decreasing. Moreover, capitalization rates of multifamily properties are increasing, causing values to decline. The duration and ultimate severity of the recession, including its negative impact on multifamily real estate, are difficult to predict. However, in the mid to long-term, there are several trends that we expect will increase the demand for and fundamentals of multifamily housing.

In the short-term, we expect ongoing weakness in the economy and further weakening of multifamily real estate fundamentals. According to U.S. Bureau of Labor Statistics, there have been 7.9 million jobs lost in the United States since December 2007, pushing unemployment to 10% as of November 2009. According to the National Multi Housing Council, U.S. unemployment may rise as high as 11%, with the peak expected to occur in the first half of 2010 (The National Multi Housing Council, “State of the Multifamily Sector,” July 9, 2009 RealShare Virtual Conference, referred to in this prospectus as the National Multi Housing Council Conference). According to REIS, Inc., multifamily vacancy reached 8% for the year ending December 31, 2009, its highest level on record since 1980, and effective rents fell 3% in 2009 (The Wall Street Journal, January 7, 2010). Also, multifamily capitalization rates currently average 7.2%, up from 5.6%, the record low in 2006 (Marcus & Millichap Research Services – “The Outlook,” June 2009).

In the medium- and long-term, however, we believe the prospects for multifamily real estate investment are promising. We expect several positive demographic trends, as noted below, will drive the demand for multifamily housing throughout the next decade.

— U.S. population growth – The U.S. Census Bureau projects that the U.S. population will increase by approximately 37 million (12%) between 2008 and 2020, predominantly in the West and South.

— Immigration – Foreign-born renters represented 18.4% of all renters in 2005. (Rosen Consulting Group, “The National Apartment Market,” June 2009). According the U.S. Census Bureau, immigration is expected to add about 1.4 million per year to the U.S. population. This immigration-driven increase in population, when combined with the natural

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U.S. population increase, will increase the demand for all types of housing, including apartments, over the next decade.

— Echo Boom – The children of the Baby Boom generation, dubbed the Echo Boomers, will increase the prime rental-age group, 20 to 34 year olds, by 4 million, and will remain at that elevated level throughout the next decade according to the U.S. Census Bureau.

— Baby Boom – The population of people aged 50 to 64 is expected to increase by nearly 15 million between 2003 and 2013 (Rosen Consulting Group, “The National Apartment Market,” June 2009). These Baby Boomers generally have enough income to purchase a home but are increasingly choosing to downsize. Those Baby Boomers who choose to downsize generally prefer the conveniences of apartments, particularly those in urban infill locations.

Other positive factors for multifamily real estate investment include:

— Lower pricing – The short-term weakening of multifamily real estate fundamentals noted above, most notably decreasing values, will create opportunities to acquire multifamily assets at capitalization rates closer to historic norms, as opposed to the historic lows of 2005 to 2008.

— Maturing loans and possible distressed buying opportunities – More than $300 billion of multifamily loans are expected to mature from 2009 to 2012, including $36 billion in CMBS mortgages – 70% of which may not qualify for refinancing. We believe these conditions will provide opportunities to purchase properties at reduced prices from distressed sellers in need of liquidity or those faced with repayment deadlines (Marcus & Millichap Research Services – “The Outlook,” June 2009).

— Diminished supply – New supply of multifamily units is anticipated to be down 25% in 2009 from the level of new multifamily units delivered in 2008, and is expected to drop even more dramatically in 2010 (Marcus & Millichap Research Services – “The Outlook,” June 2009).Witten Advisors predicts that multifamily rental starts will set a post-World War II low in 2010 and 2011 (Witten Advisors, LLC, “U.S. Apartments Market Forecast,” second quarter 2009).

— Availability of Debt Capital – Although there has been a tightening of lending standards for multifamily real estate loans, capital has remained readily available for the multifamily sector, which is in stark contrast to other commercial real estate sectors. This is in part due to the lower risk of multifamily investments as compared to the other primary property types and the continued support of government sponsored entities such as Fannie Mae, Freddie Mac, and the Federal Housing Administration.

Acquisition and Investment Policies

Primary Investment Focus

We intend to focus our investment activities on, and use the proceeds of this offering principally for, investment in and management of a diverse portfolio of equity investments in high quality apartment communities located throughout the United States.

We plan to diversify our portfolio by investment type and investment risk, as well as by other factors, with the goal of attaining a portfolio of income-producing properties that provide attractive and stable returns to our investors. As the table below illustrates, we intend to make the majority of our equity investments in investment types that have relatively low investment risk characteristics.

Investment Type	Equity Allocation	Investment Risk
Core	High	Low
Value-added
Opportunity	Low	High

— Core Apartment Properties.  We intend to allocate between 70% and 80% of our portfolio to investments in core apartment communities, which are high quality, well positioned, existing

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properties producing rental income, generally with at least 85% occupancy. Such properties are generally newer properties that are well-located in major urban or suburban submarkets. Core apartment communities generally have fewer near-term capital expenditure requirements (with minor deferred maintenance or cosmetic improvements, if any, required) and have the demonstrated ability to produce high occupancies and stable cash flows. As a result, core apartment communities tend to have a relatively low investment risk profile.

— Value-Added and Opportunity-Oriented Properties.  We intend to allocate between 20% and 30% of our portfolio to investments in value-added and opportunity-oriented properties at various phases of leasing, development, redevelopment or repositioning. These properties are higher-yield and higher-risk investments than core properties and may experience short-term decreases in income during the lease-up, redevelopment or repositioning phase. Examples of value-added properties include: properties with moderate vacancies, poorly managed and positioned properties and properties owned by distressed sellers. Examples of opportunity-oriented properties include properties under development or construction. Properties that need to be redeveloped or repositioned may require minor or even major construction activity. Construction and development activities will expose us to risks such as cost overruns, carrying costs of projects under construction and development, our builder’s ability to build in conformity with plans and specifications, availability and costs of materials and labor, our inability to obtain tenants, weather conditions and government regulation. Because of these risks, we will seek to acquire such properties only if our Legacy sponsor believes that there is long-term growth potential of the investment after the necessary lease-up, redevelopment or repositioning is complete.

We may make our investments through the acquisition of individual assets or by acquiring portfolios of assets. We may also make equity investments in REITs and other real estate companies with investment objectives similar to ours. We do not expect our non-controlling equity investments in other public companies to exceed 5% of the proceeds of this offering, assuming we sell the maximum offering amount, or to represent a substantial portion of our assets at any one time.

Although this is our target portfolio, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a good investment because it does not precisely fit our expected portfolio composition. We believe that we are most likely to meet our investment objectives through the careful selection and underwriting of assets. When making an acquisition, we focus on the performance and risk characteristics of that investment, how that investment will fit with our portfolio-level performance objectives, the other assets in our portfolio and how the returns and risks of that investment compare to the returns and risks of available investment alternatives. Thus, to the extent that our Legacy sponsor presents us with good investment opportunities that allow us to meet the REIT requirements under the Internal Revenue Code, our portfolio may consist of a greater percentage of real estate-related investments.

We will generally hold fee title or a long-term leasehold estate in the properties we acquire. We may also invest in or acquire operating companies or other entities that own and operate assets that meet our investment objectives. We will make investments in other entities when we consider it more efficient to acquire an entity that already owns assets meeting our investment objectives than to acquire such assets directly. We may also participate with other entities (including non-affiliated entities) in property ownership through joint ventures, limited liability companies, partnerships and other types of common ownership.

Our Legacy sponsor also intends to diversify our real estate property investments by geographic region. Though we are not limited as to the specific geographic areas where we may conduct our operations, we expect to purchase properties in or in close proximity to large metropolitan areas located in the United States. We believe the most attractive investment opportunities

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will be found in markets that either exhibit high population and employment growth rates or that have significant new supply constraints due to high barriers to entry as a consequence of limited land availability, significant zoning, land use or entitlement restrictions, and high land and construction costs. We will initially focus on markets where Legacy Residential has an established market presence, market knowledge and access to potential investments, as well as an ability to direct property management and leasing operations efficiently, all of which are located in either fast growing or high barrier to entry markets in the South and West. Outside of markets where Legacy Residential has an established presence we will leverage the knowledge of our key real estate professionals who have experience in other markets as well as our network of nationwide broker and investor relationships to identify suitable investments, including joint ventures. Although we intend to acquire real estate throughout the U.S., based on the projected population growth in the South and West, the large proportion of Baby Boomers continuing to retire in these regions, and Legacy Residential’s extensive experience acquiring, developing and managing apartment properties in the South and West, it is likely that a significant portion of our portfolio will be located in these areas. We will review and change our target markets periodically in response to changing market opportunities and to maintain a diverse portfolio. Economic and real estate market conditions vary widely across the United States, and we intend to spread our investments across various regions of the United States and among the submarkets within these regions.

We also intend to diversify by investment size. We expect that our real property investments will typically range in size from $15 million to $100 million; however, we may make investments outside of this range. For example, we may make investments for less than $15 million if the acquired property will complement our existing portfolio or we might acquire several smaller properties in close proximity in a desirable supply constrained market that can be operated efficiently on a collective basis. Further, we may invest more than $100 million in a single property if we believe that property will help us meet our investment objectives. We do not expect that we will invest more than $300 million in any single property. For acquisitions requiring more than $100 million of equity investment, we may seek a joint venture partner in order to reduce our equity requirement and associated risk.

We generally intend to hold our core properties for five to ten years, which we believe is the optimal period to enable us to capitalize on the potential for increased income and capital appreciation of properties. We may need to hold our opportunity oriented properties for slightly longer periods to realize the potential for increased income and capital appreciation. However, economic and market conditions may influence us to hold our investments for different periods of time.

Description of Our Apartment Leases.  We expect that all of our apartment communities will lease to their tenants under similar lease terms. Consistent with the multi-family industry, we anticipate that our lease terms will range from month-to-month up to fourteen months. These terms provide maximum flexibility for us to implement rental increases when the market will bear such increases.

Property Management and Other Services.  With respect to development services, construction services and property management services, although we do not rely exclusively on, nor have a written agreement to exclusively receive services from affiliates of our Legacy sponsors, our advisor may seek such services from our Legacy sponsors. All such service transactions would be subject to approval by our conflicts committee as fair and reasonable and on terms no less favorable than those available from unaffiliated third parties.

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Investment Decisions and Asset Management:  The Legacy Residential Approach

Within our investment policies and objectives, our Legacy sponsor has substantial discretion with respect to the selection of specific investments and the purchase and sale of our assets, subject to the approval of our conflicts committee. Our board of directors will review our investment policies at least annually to determine whether our investment policies are in the best interests of our stockholders.

Legacy Residential believes that successful multifamily real estate investment requires a disciplined approach that results in favorable purchases, effective asset and property management, and the timely disposition of assets. As such, Legacy Residential has developed a highly disciplined investment and management program that combines the extensive experience of the Legacy sponsors and their team of key real estate professionals with a structured approach that features thorough market research, stringent underwriting standards, aggressive asset and property management, and a well-defined exit strategy for every asset.

The individual Legacy sponsors, Messrs. C. Preston Butcher, W. Dean Henry, and Guy K. Hays, have over 36 years of real estate experience, on average. Messrs. Butcher and Henry have been working together with Legacy Residential entities and/or Lincoln Property Company for over 35 years, and Messrs. Butcher, Henry and Hays for over 20 years.

Other key real estate professionals with Legacy Residential entities include Jeffrey K. Byrd, Timothy J. O’Brien, Kerry L. Nicholson, Spencer R. Stuart, Carol S. Foster, and Robert A. Calleja. These individuals have over 25 years of real estate industry experience, on average, and over 12 years with Legacy Residential entities and/or Lincoln Property Company, on average. They have been through multiple real estate cycles in their careers and have expertise gained through hands-on experience in property selection, acquisitions and development, financing, asset and property management, and dispositions. Together with Messrs. Butcher, Henry, and Hays, these individuals comprise the Investment Acquisition and Management Committee at Legacy Residential.

Legacy Residential is both a market-aligned and vertically-integrated multifamily real estate investment firm. Operating through six regional offices in the western and southern U.S., Legacy Residential believes that a market-aligned structure provides greater insight into local market and submarket intricacies and leads to better investment selection, quicker lease-up, higher occupancy, and more timely and favorable sales results. While Legacy Residential does not have offices outside of the western and southern U.S., some of its key real estate professionals have experience investing in other markets. Our Legacy sponsors intend to utilize these professional’s experience, its extensive nationwide broker relationships, as well as joint ventures with regional real estate firms with whom Legacy Residential has strong relationships to source investment opportunities outside its current markets. Legacy Residential may also open additional offices beyond the six it currently has, although there is no assurance that it will do so. The firm’s vertically-integrated structural component results in better asset operating performance. Legacy Residential utilizes a team approach through each phase of an asset’s investment life cycle: acquisition, operation, and sale. Individuals from its Acquisitions, Asset Management, Property Management, Marketing and Leasing, and Construction Administration teams work together through each of these phases, providing their functional expertise and insights. Legacy Residential has found that this team approach eliminates oversights and results in the optimal performance of an asset from “womb-to-tomb.”

In addition to its extensive experience, Legacy Residential’s disciplined investment and management program is integral to successful multifamily real estate investing. Aspects of its investment and management program include the following:

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— Market research real-time market information – Legacy Residential has forged strong relationships with real estate brokers, property owners, lenders, consultants, and public agencies over the more than 36 years of real estate experience, on average, of the individual Legacy sponsors. Such relationships provide the firm with varied perspectives and opinions and a wealth of market information on multifamily properties.

Through various entities, these Legacy sponsors have acquired or developed and managed over $5 billion, at cost, of multifamily real estate assets in the western U.S. The firm’s current portfolio under management is valued in excess of $3 billion, based on Legacy Residential’s internal valuation. Being a “hands-on” owner, manager, and operator of multifamily real estate allows Legacy Residential access to real-time market information. The firm has first-hand knowledge of the latest trends in terms of property values, transaction costs, development and construction costs, financing costs, leasing activity and trends, and property management service standards.

— Disciplined underwriting – Legacy Residential’s acquisition underwriting is a team effort involving the Legacy sponsors and experienced real estate professionals from its Acquisitions, Asset Management, Property Management, Marketing and Leasing, and Construction Administration teams. This team approach, combined with a disciplined process, has been found to yield the best possible results in terms of a thorough underwriting of a property’s location, submarket dynamics, tenant base, income-producing capacity, capital improvement requirements, expenses, on-site management, and prospects for liquidity and appreciation.

Milestones in the underwriting and acquisition process include:

- Bi-Weekly Review Meeting:  The status and progress of potential acquisitions are reviewed bi-weekly by W. Dean Henry and Guy Hays and the functional teams. Property issues and opportunities are discussed and decisions are made on whether or not to proceed with underwriting based on the suitability of the property with our investment criteria, the success factors of the property, the property’s inherent risks, and the results of preliminary financial forecasts.

- Bubble Meeting:  Prior to presenting a potential acquisition to the Investment Committee, a potential acquisition must receive formal approval to proceed from W. Dean Henry and Guy Hays at a Bubble Meeting. At a Bubble Meeting, a detailed financial pro forma, an Investment Memo — clearly stating the property’s investment potential and success and risk factors, and the completed underwriting package with analyses and reports on every aspect of the property’s status, including title, environmental, physical, mechanical, market/submarket, competition, tenant base, collections, expenses, and prior financial statements — are reviewed in detail.

- Investment Committee Meeting:  Provided a potential acquisition is approved at a Bubble Meeting, the next step in the acquisition process is the property’s review and approval by the Investment Committee. The Investment Committee is composed of C. Preston Butcher, Peter M. Bren, W. Dean Henry, Charles J. Schreiber, Jr., and James Chiboucas.

- Board Meeting:  The final step in the acquisition process is review and approval of a potential acquisition by the Board of Directors. The Board of Directors is composed of C. Preston Butcher, Peter M. Bren, Gary T. Kachadurian, Michael L. Meyer and Ronald E. Zuzack.

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— Asset Management:  The hallmark of Legacy Residential’s investment and management program is the Asset Business Plan. The original Asset Business Plan is developed prior to an asset’s acquisition and sets out the asset’s acquisition, financing, capital improvements, marketing and leasing, operating, and disposition strategies in terms of the overall performance objectives of the asset. It is a “womb-to-tomb” document that provides direction to Legacy Residential team members, clearly laying out specific action items required to achieve the asset’s performance objectives. The Asset Business Plan is a continuously evolving document that is updated to reflect and anticipate economic and market changes or opportunities, as well as changes in the asset’s performance and status over time.

— Execution in the field – First and foremost, Legacy Residential relies on the extensive experience of the Legacy sponsors and their team of key real estate professionals to execute time tested strategies in the field, as they have through multiple real estate cycles. Further, and as noted above, Legacy Residential is a vertically-integrated organization that utilizes a team approach throughout a real estate asset’s investment life cycle. Legacy Residential has found that bringing together teams of experienced professionals from Acquisitions, Asset Management, Property Management, Marketing and Leasing, Construction Administration, and Sales results in the optimal performance of the asset from “womb-to-tomb.”

— The Legacy Standard – Legacy Residential strives to ensure that its properties are well maintained and attractively positioned in their submarket. Tenant satisfaction is paramount to Legacy Residential. Legacy Residential’s goals are that its properties out-perform the competition and exceed resident’s expectations. Legacy Residential believes it has achieved these two basic goals consistently with its properties, which has resulted in higher occupancies, higher rents, and higher returns for investors.

— Control and management of the sale process – The sale of a property begins with its acquisition and management. Quality underwriting at acquisition and thorough, effective management during the hold period, result in a property that is well prepared for sale. Prior to offering a property for sale, Legacy Residential will conduct a complete “re-underwriting” of the property. This process accelerates the buyer’s underwriting process, results in a shorter sale time-line, and provides for a frictionless transaction. Finally, in Legacy Residential’s experience, a well managed and sale-ready property results in the best possible pricing.

Conditions to Closing Real Property Investments.  Our Legacy sponsor will perform a diligence review on each property that we purchase. As part of this review, our Legacy sponsor will obtain an environmental site assessment for each proposed acquisition (which at a minimum includes a Phase I assessment). We will not close the purchase of any property unless we are generally satisfied with the environmental status of the property. We will also generally seek to condition our obligation to close the purchase of any investment on the delivery of certain documents from the seller or developer, and our approval of these documents. Such documents include, where available:

— plans and specifications;

— ALTA surveys;

— evidence of marketable title, together with copies of all title exceptions, which shall be subject only to acceptable liens and encumbrances;

— title insurance policies;

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— certificates of occupancy (for completed buildings) and operating permits and licenses;

— environmental, asbestos, soil, physical, structural and engineering reports;

— evidence of compliance with zoning, ADA, and fair housing laws;

— financial statements covering recent operations of properties having operating histories;

— operating and rental activity report;

— real estate tax bills;

— utility bills;

— copies of service contracts;

— personal property inventory;

— rent roll for the most recent month, including concessions, security deposits, delinquencies, rents charged to existing tenants and new tenants;

— historical maintenance and capital expenditures records; and

— existing and form leases and tenant files.

Factors Considered in Evaluating Potential Real Property Investments.  Legacy Partners Residential Realty LLC believes that the experience of the Legacy sponsors and their team of key real estate professionals will allow us to identify quality properties, enabling us to successfully execute our business model. In evaluating potential acquisitions, a primary factor our Legacy sponsor will consider is the property’s current and projected cash flows. Our Legacy sponsor will also consider a number of other factors, including:

— geographic location and type;

— condition of title;

— construction quality and condition;

— compliance with applicable laws, rules and regulations;

— potential for capital appreciation;

— the net income and general credit quality of current and potential tenants;

— the potential for rent increases;

— the interest rate environment;

— potential for economic and employment growth in the community in which the property is located or serves as a housing resource;

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— potential for expanding the physical layout of the property or upgrading the apartment units or common area amenities;

— occupancy and demand by tenants for properties of a similar type in the same geographic vicinity;

— prospects for liquidity through sale, financing or refinancing of the property;

— competition from existing properties and the potential for the construction of new properties in the area; and

— treatment under applicable federal, state and local tax and other laws and regulations.

Other Investments

Development and Construction of Properties

Although we expect that we will invest primarily in properties that have operating histories or whose construction is complete, from time to time we may invest in unimproved property. However, such investment will not comprise more than 10% of our total assets. We define unimproved property as property not acquired for the purpose of producing rental or other operating income, on which there is no development or construction in progress and none is planned in good faith to commence within one year.

Investments in Equity Securities

We may make equity investments in REITs and other real estate companies with investment objectives similar to ours. We may purchase the common or preferred stock of these entities or options to acquire their stock. We may target a public company that owns multifamily real estate when we believe its stock is trading at a discount to that company’s net asset value. We may eventually seek to acquire or gain a controlling interest in the companies that we target. We do not expect our non-controlling equity investments in other public companies to exceed 5% of the proceeds of this offering, assuming we sell the maximum offering amount, or to represent a substantial portion of our assets at any one time.

We will make investments in other entities when we consider it more efficient to acquire an entity that already owns assets meeting our investment objectives than to acquire such assets directly. We may also participate with other entities in property ownership through joint ventures, limited liability companies, partnerships and other types of common ownership.

Other Possible Investments

Although we expect that most of our property acquisitions will be of the type described above, we may make other investments, such as options to purchase properties and other real estate-related assets. We may enter into arrangements with the seller or developer of a property whereby the seller or developer agrees that if, during a stated period, the property does not generate a specified cash flow, the seller or developer will pay in cash to us a sum necessary to reach the specified cash flow level, subject in some cases to negotiated dollar limitations. In fact, we may invest in whatever types of interests in real estate that we believe are in our best interests. Although we can purchase any type of interest in real estate- related assets, our charter does limit certain types of investments. See “—Charter-imposed Investment Limitations.” We do not expect to invest in properties located outside of the United States. We also do not intend to invest in debt, such as mortgages, subordinated, bridge or other real estate-related loans or debt securities related to or secured by real estate, or make loans to other persons, to underwrite securities

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of other issuers or to engage in the purchase and sale of any types of investments other than interests in real estate properties and other real estate-related assets.

Joint Venture Investments

We may enter into joint ventures, partnerships and other co-ownership arrangements or participations for the purpose of obtaining interests in real estate properties. We may also enter into joint ventures for the development or improvement of properties. Joint venture investments permit us to own interests in large properties and other investments without unduly restricting the diversity of our portfolio. In determining whether to invest in a particular joint venture, our Legacy sponsor will evaluate the real estate properties that such joint venture owns or is being formed to own under the same criteria described elsewhere in this prospectus for the selection of our investments.

Our Legacy sponsor and KBS Capital Advisors will also evaluate the potential joint venture partner as to its financial condition, operating capabilities and integrity. At such time during the term of this offering that KBS Capital Advisors believes that there is a reasonable probability that we will enter into a joint venture for the acquisition of a significant investment, we will supplement this prospectus to disclose the terms of such investment transaction. You should not rely upon such initial disclosure of any proposed transaction as an assurance that we will ultimately consummate the proposed transaction or that the information we provide in any supplement to this prospectus concerning any proposed transaction will not change after the date of the supplement.

We have not established the specific terms we will require in the joint venture agreements we may enter into. Instead, we will establish the terms with respect to any particular joint venture agreement on a case-by-case basis after our board of directors considers all of the facts that are relevant, such as the nature and attributes of our other potential joint venture partners, the proposed structure of the joint venture, the nature of the operations, the liabilities and assets associated with the proposed joint venture and the size of our interest when compared to the interests owned by other partners in the venture. With respect to any joint venture we enter, we expect to consider the following types of concerns and safeguards:

— Our ability to manage and control the joint venture — We will consider whether we should obtain certain approval rights in joint ventures we do not control. For proposed joint ventures in which we are to share control with another entity, we will consider the procedures to address decisions in the event of an impasse.

— Our ability to exit a joint venture — We will consider requiring buy/sell rights, redemption rights or forced liquidation rights.

— Our ability to control transfers of interests held by other partners to the venture — We will consider requiring consent provisions, a right of first refusal and/or forced redemption rights in connection with transfers.

Borrowing Policies

We may use borrowing proceeds to finance acquisitions of new properties or assets; to pay for capital improvements or repairs to properties; to refinance existing indebtedness; to pay distributions; or to provide working capital. Careful use of debt will help us to achieve our diversification goals because we will have more funds available for investment. Our investment strategy is to utilize primarily secured and possibly unsecured debt to finance our investment portfolio; however, given the current debt market

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environment, we may elect to forego the use of debt on some or all of our future real estate acquisitions. We may elect to secure financing subsequent to the acquisition date on future real estate properties and initially acquire investments without debt financing. To the extent that we do not finance our properties and other investments, our ability to acquire additional properties will be restricted.

Once we have fully invested the proceeds of this offering, we expect our debt financing to be between 50% and 65% of the cost of our tangible assets (before deducting depreciation or other noncash reserves). There is no limitation on the amount we may borrow for the purchase of any single asset. Our charter limits our borrowings to 75% of the cost (before deducting depreciation or other noncash reserves) of our tangible assets; however, we may exceed that limit if the majority of the conflicts committee approves each borrowing in excess of our charter limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. We do not intend to exceed the leverage limit in our charter except in the early stages of development when the costs of our investments are most likely to exceed our net offering proceeds, to the extent financing in excess of our charter limit is available at attractive terms. From time to time, our debt financing may be below 50% of the cost of our tangible assets due to the lack of availability of debt financing.

We may incur indebtedness in the form of bank borrowings, purchase money obligations to the sellers of properties we purchase, publicly and privately-placed debt instruments and/ or financings from institutional investors or other lenders. This indebtedness may be unsecured or secured by mortgages or other interests in our assets, or may be limited to the particular property to which the indebtedness relates.

The form of our indebtedness may be long-term or short-term, fixed or floating rate or in the form of a revolving credit facility. Our Legacy sponsor will seek to obtain financing on our behalf on the most favorable terms available. For a discussion of the risks associated with the use of debt, see “Risk Factors — Risks Associated with Debt Financing.”

Except with respect to the borrowing limits contained in our charter, we may reevaluate and change our debt policy in the future without a stockholder vote. Factors that we would consider when reevaluating or changing our debt policy include: then-current economic conditions, the relative cost and availability of debt and equity capital, any investment opportunities, the ability of our properties and other investments to generate sufficient cash flow to cover debt service requirements and other similar factors. Further, we may increase or decrease our ratio of debt to book value in connection with any change of our borrowing policies.

We will not borrow from our advisor or its affiliates to purchase properties or make other investments unless a majority of the conflicts committee approves the transaction as being fair, competitive and commercially reasonable and no less favorable to us than comparable loans between unaffiliated parties.

Operating Policies

Hedging Activities.  We may engage in hedging transactions to protect our investment portfolio from interest rate fluctuations and other changes in market conditions. These transactions may include interest rate swaps, the purchase or sale of interest rate collars, caps or floors, options, mortgage derivatives and other hedging instruments. These instruments may be used to hedge as much of the interest rate risk as we determine is in the best interest of our stockholders, given the cost of such hedges and the need to maintain our qualification as a REIT. We may elect to bear a level of interest rate risk that could otherwise be hedged when we believe, based on all relevant facts, that bearing such risk is advisable.

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Equity Capital Policies.  Our board of directors may increase the number of authorized shares of capital stock without stockholder approval. After your purchase in this offering, our board may elect to (1) sell additional shares in this or future public offerings, (2) issue equity interests in private offerings, (3) issue shares to our advisor, or its successors or assigns, in payment of an outstanding fee obligation or (4) issue shares of our common stock to sellers of assets we acquire in connection with an exchange of limited partnership interests of the Operating Partnership. To the extent we issue additional equity interests after your purchase in this offering, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.

Disposition Policies

We intend to hold our properties for an extended period, typically five to ten years, which we believe is the optimal period to enable us to capitalize on the potential for increased income and capital appreciation. The hold period for properties undergoing development or significant rehabilitation will likely be longer to account for the time necessary to construct, lease up, and stabilize the property’s operations before sale. Our Legacy sponsor will develop a well-defined exit strategy for each investment we make. Our Legacy sponsor will continually perform a hold-sell analysis on each asset in order to determine the optimal time to sell the asset and generate a strong return for you. Periodic reviews of each asset will focus on the remaining available value enhancement opportunities for the asset and the demand for the asset in the marketplace. Economic and market conditions may influence us to hold our investments for different periods of time. We may sell an asset before the end of the expected holding period if we believe that market conditions and asset positioning have maximized its value to us or the sale of the asset would otherwise be in the best interests of our stockholders.

Although we presently intend to complete a transaction providing liquidity to stockholders within ten years from the completion of our offering stage, our charter does not require our board of directors to pursue such an event. If we do not list our shares of common stock on a national securities exchange by January 31, 2020, our charter requires that we seek stockholder approval of the liquidation of the company, unless a majority of the conflicts committee determines that liquidation is not then in the best interests of our stockholders. If a majority of the conflicts committee does determine that liquidation is not then in the best interests of our stockholders, our charter requires that the conflicts committee revisit the issue of liquidation at least annually. Further postponement of listing or stockholder action regarding liquidation would only be permitted if a majority of the conflicts committee again determined that liquidation would not be in the best interest of our stockholders. If we sought and failed to obtain stockholder approval of our liquidation, our charter would not require us to list or liquidate, and we could continue to operate as before. If we sought and obtained stockholder approval of our liquidation, we would begin an orderly sale of our properties and other assets. The precise timing of such sales would take account of the prevailing real estate and financial markets, the economic conditions in the submarkets where our properties are located and the federal income tax consequences to our stockholders. In making the decision to apply for listing of our shares, our directors will try to determine whether listing our shares or liquidating our assets will result in greater value for our stockholders. One of the factors our board of directors will consider when making this determination is the liquidity needs of our stockholders. See the discussion above under “Investment Objectives and Criteria — General.”

Charter-imposed Investment Limitations

Our charter places numerous limitations on us with respect to the manner in which we may invest our funds or issue securities. We may not:

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— borrow in excess of 75% of the aggregate cost (before deducting depreciation or other non-cash reserves) of tangible assets owned by us, unless approved by a majority of the conflicts committee;

— invest, directly or indirectly, more than 10% of our total assets in unimproved property or mortgage loans on unimproved property, which we define as property not acquired for the purpose of producing rental or other operating income, on which there is no development or construction in progress and none is planned in good faith to commence within one year;

— make or invest in mortgage loans unless an appraisal is obtained concerning the underlying property, except for those mortgage loans insured or guaranteed by a government or government agency;

— make or invest in mortgage loans, including construction loans, on any one property if the aggregate amount of all mortgage loans on such property would exceed an amount equal to 85% of the appraised value of such property as determined by appraisal, unless substantial justification exists for exceeding such limit because of the presence of other underwriting criteria;

— make an investment in a property if the related acquisition fees and acquisition expenses are not reasonable or exceed 6% of the purchase price of the property, provided that the investment may be made if a majority of the conflicts committee determines that the transaction is commercially competitive, fair and reasonable to us;

— acquire equity securities unless a majority of our directors (including a majority of our conflicts committee) not otherwise interested in the transaction approves such investment as being fair, competitive and commercially reasonable, provided that investments in equity securities in “publicly traded entities” that are otherwise approved by a majority of our directors (including a majority of our conflicts committee) shall be deemed fair, competitive and commercially reasonable if we acquire the equity securities through a trade that is effected in a recognized securities market (a “publicly traded entity” shall mean any entity having securities listed on a national securities exchange or included for quotation on an inter–dealer quotation system), and provided further that this limitation does not apply to (i) real estate acquisitions effected through the purchase of all of the equity securities of an existing entity, (ii) the investment in wholly owned subsidiaries of ours or (iii) investments in mortgage-backed securities;

— invest in real estate contracts of sale, otherwise known as land sale contracts, unless the contract is in recordable form and is appropriately recorded in the chain of title;

— invest in commodities or commodity futures contracts, except for futures contracts when used solely for the purpose of hedging in connection with our ordinary business of investing in real estate assets and mortgages;

— issue equity securities on a deferred payment basis or other similar arrangement;

— issue debt securities in the absence of adequate cash flow to cover debt service unless the historical debt service coverage (in the most recently completed fiscal year), as adjusted for known changes, is sufficient to service that higher level of debt as determined by the board of directors or a duly authorized executive officer;

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— issue equity securities that are assessable after we have received the consideration for which our board of directors authorized their issuance; or

— issue equity securities redeemable solely at the option of the holder, which restriction has no effect on our share redemption program or the ability of our Operating Partnership to issue redeemable partnership interests.

In addition, our charter includes many other investment limitations in connection with conflict-of-interest transactions, which limitations are described above under “Conflicts of Interest.” Our charter also includes restrictions on roll-up transactions, which are described under “Description of Shares” below.

PLAN OF OPERATION

General

We are a newly organized Maryland corporation that intends to qualify as a REIT beginning with the taxable year that will end December 31, 2010. We intend to acquire and manage a diverse portfolio of equity investments in high quality apartment communities located throughout the United States. We expect that our portfolio will include “core” apartment buildings that are already well positioned and producing rental income, as well as more opportunity oriented properties at various phases of leasing, development, redevelopment or repositioning. We may make our investments through the acquisition of individual assets or by acquiring portfolios of assets, other REITs or real estate companies. We plan to diversify our portfolio by investment type, investment size and investment risk with the goal of attaining a portfolio of income-producing properties that provide attractive and stable returns to our investors. We do not expect our non-controlling equity investments in other public companies to exceed 5% of the proceeds of this offering, assuming we sell the maximum offering amount, or to represent a substantial portion of our assets at any one time. Although this is our current target portfolio, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forgo a good investment because it does not precisely fit our expected portfolio composition. Thus, to the extent that our advisor presents us with good investment opportunities that allow us to meet the REIT requirements under the Internal Revenue Code, our portfolio composition may vary from what we initially expect. As of the date of this prospectus, we have not commenced operations nor have we identified any properties or other investments in which there is a reasonable probability that we will invest.

KBS Capital Advisors is our advisor. As our advisor, KBS Capital Advisors will manage our day-to-day operations and our portfolio of real estate assets. Subject to the terms of the advisory agreement between KBS Capital Advisors and us, KBS Capital Advisors will delegate certain advisory duties to a sub-advisor, KBS-Legacy Apartment Community REIT Venture, LLC, which is a joint venture among KBS Capital Advisors and Legacy Partners Residential Realty LLC. Notwithstanding such delegation to the sub-advisor, KBS Capital Advisors retains ultimate responsibility for the performance of all the matters entrusted to it under the advisory agreement. KBS Capital Advisors will make recommendations on all investments to our board of directors. A majority of our board of directors, including a majority of our independent directors acting through the conflicts committee, will approve our property and real estate-related investments. KBS Capital Advisors, either directly or through the sub-advisor, will also provide asset-management, marketing, investor-relations and other administrative services on our behalf.

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We intend to make an election to be taxed as a REIT under the Internal Revenue Code, beginning with the taxable year ending December 31, 2010. If we qualify as a REIT for federal income tax purposes, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income and cash available for distribution. However, we believe that we will be organized and will operate in a manner that will enable us to qualify for treatment as a REIT for federal income tax purposes beginning with our taxable year ending December 31, 2010, and we intend to continue to operate so as to remain qualified as a REIT for federal income tax purposes thereafter.

Liquidity and Capital Resources

We are dependent upon the net proceeds from this offering to conduct our proposed operations. We will obtain the capital required to purchase properties and other investments and conduct our operations from the proceeds of this offering and any future offerings we may conduct, from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. As of the date of this prospectus, we have not made any investments in real estate or otherwise, and our total assets consist of $200,000 cash. For information regarding the anticipated use of proceeds from this offering, see “Estimated Use of Proceeds.”

We will not sell any shares in this offering unless we raise a minimum of $2,500,000 in gross offering proceeds from persons who are not affiliated with us or our sponsors. If we are unable to raise substantially more funds in the offering than the minimum offering amount, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in this offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions. We do not expect to establish a permanent reserve from our offering proceeds for maintenance and repairs of real properties, as we expect the vast majority of leases for the properties we acquire will provide for tenant reimbursement of operating expenses. However, to the extent that we have insufficient funds for such purposes, we may establish reserves from gross offering proceeds, out of cash flow from operations or net cash proceeds from the sale of properties.

We currently have no outstanding debt. Once we have fully invested the proceeds of this offering, we expect our debt financing to be between 50% and 65% of the cost of our real estate investments (before deducting depreciation or other non-cash reserves) plus the value of our other assets. Our charter does not limit us from incurring debt until our borrowings would exceed 75% of the cost (before deducting depreciation or other non-cash reserves) of our tangible assets, though we may exceed this limit under certain circumstances. During the early stages of this offering, we expect that the conflicts committee will approve debt in excess of this limit.

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our advisor and the dealer manager. During our organization and offering stage, these payments will include payments to the dealer manager for selling commissions and the dealer manager fee and payments to the dealer manager and our advisor for reimbursement of certain organization and offering expenses. However, our advisor has agreed to

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reimburse us to the extent that selling commissions, the dealer manager fee and other organization and offering expenses incurred by us exceed 15% of our gross offering proceeds. During our acquisition and development stage, we expect to make payments to our advisor in connection with the selection and purchase of real estate investments, the management of our assets and costs incurred by our advisor in providing services to us. For a discussion of the compensation to be paid to our advisor and the dealer manager, see “Management Compensation.” The advisory agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of KBS Capital Advisors and our conflicts committee.

We intend to elect to be taxed as a REIT and to operate as a REIT beginning with our taxable year ending December 31, 2010. To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant. Provided we have sufficient available cash flow, we intend to authorize and declare daily distributions and pay distributions on a monthly basis. We have not established a minimum distribution level.

Results of Operations

We were formed on July 31, 2009 and, as of the date of this prospectus, we have not commenced operations. We expect to use substantially all of the net proceeds from this offering to invest in and manage a diverse portfolio of equity investments in high quality apartment communities located throughout the United States. We will not commence any significant operations until we have raised the minimum offering amount of $2,500,000 from persons who are not affiliated with us or our sponsors.

Market Outlook – Multifamily Real Estate Market

Job losses and rising unemployment associated with the current recession in the United States economy have had and are having an adverse affect on multifamily real estate. Vacancies are rising and net operating incomes are decreasing. Moreover, capitalization rates are increasing, causing values of multifamily properties to decline. The duration and ultimate severity of the recession, including its negative impact on multifamily real estate, are difficult to predict. In the short-term, we expect ongoing weakness in the economy and further weakening of multifamily real estate fundamentals. However, in the mid to longer-term we expect positive demographic trends to drive improving demand for multifamily real estate through the next decade. These demographics include (i) steady population growth, (ii) steady immigration, (iii) increases in the size of the prime-rental age group as children of the baby boom generation, so- called “Echo Boomers,” mature, and (iv) increasing numbers of Baby Boomers choosing to downsize. For further discussion of the market outlook for multifamily real estate see “Investment Objectives.”

Critical Accounting Policies

Below is a discussion of the accounting policies that management believes will be critical once we commence operations. We consider these policies critical because they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be

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reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Real Estate

Depreciation and Amortization

Investments in real estate properties will be carried at cost and depreciated using the straight-line method over the estimated useful lives. Third party acquisitions costs will generally be expensed as incurred. Repair and maintenance costs will be charged to expense as incurred and significant replacements and betterments will be capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate property. We will consider the period of future benefit of an asset to determine its appropriate useful life. Costs directly associated with the development of land and those incurred during construction will be capitalized as part of the investment basis. Expenditures for tenant improvements and construction allowances related to a tenant’s space will be capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. We anticipate the estimated useful lives of our assets by class to be generally as follows:

Buildings	40 years
Building improvements	20 – 40 years
Tenant improvements	Shorter of lease term or expected useful life
Tenant origination and absorption costs	Remaining term of related lease
Furniture, fixtures and equipment	5 – 12 years

Development Costs

We will capitalize development and construction costs (including interest and other financing fees, property taxes, and other direct and indirect development costs) beginning when active development commences and ending when apartment units are available for occupancy and all infrastructure is substantially complete.

Real Estate Acquisition Valuation

We will record the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination. All assets acquired and liabilities assumed in a business combination will be measured at their acquisition-date fair values. Acquisition costs will generally be expensed as incurred and restructuring costs that do not meet the definition of a liability at the acquisition date will be expensed in periods subsequent to the acquisition date. In addition, changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period will be recorded to income tax expense.

Intangible assets include the value of in-place leases, which represents the estimated value of the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. Acquired in-place lease value will be amortized to expense over the average remaining non-cancelable terms of the respective in-place leases.

We will assess the acquisition-date fair values of all tangible assets, identifiable intangibles and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

We will record above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining average non-cancelable term of the leases. We will amortize any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease.

We will estimate the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease-up periods, considering current market conditions. In estimating carrying costs, management will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods.

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We will amortize the value of in-place leases to depreciation and amortization expense over the remaining average non-cancelable term of the leases.

Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities will require us to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of our acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of our net income.

Impairment of Real Estate and Related Intangible Assets and Liabilities

We will monitor events and changes in circumstances that could indicate that the carrying amounts of its real estate and related intangible assets and liabilities may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, we will assess the recoverability by estimating whether we will recover the carrying value of the real estate and related intangible assets and liabilities through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, we do not believe that we will be able to recover the carrying value of the real estate and related intangible assets and liabilities, we would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities.

Rents and Other Receivables

We will periodically evaluate the collectibility of amounts due from tenants and will maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. We will write off the balance of amounts due from tenants when we deem the amounts to be uncollectible.

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Revenue Recognition

We expect to lease apartment units under operating leases with terms generally of one year or less. Generally, credit investigations will be performed for prospective residents and security deposits are obtained. Rental revenue, net of concessions, will be recognized on a straight-line basis over the term of the lease.

We will recognize gains on sales of real estate either in total or deferred for a period of time, depending on whether a sale has been consummated, the extent of the buyer’s investment in the property being sold, whether our receivable is subject to future subordination, and the degree of our continuing involvement with the property after the sale. If the criteria for profit recognition under the full-accrual method are not met, we will defer gain recognition and account for the continued operations of the property by applying the percentage-of-completion, reduced profit, deposit, installment or cost recovery method, as appropriate, until the appropriate criteria are met.

Other income, including interest earned on our cash, will be recognized as it is earned.

Income Taxes

We intend to elect to be taxed as a REIT under the Internal Revenue Code and intend to operate as such beginning with our taxable year ending December 31, 2010. We expect to have little or no taxable income prior to electing REIT status. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we intend to organize and operate in such a manner as to qualify for treatment as a REIT.

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PRIOR PERFORMANCE SUMMARY

Prior Investment Programs – Legacy Sponsors

The information presented in this section represents the historical experience of real estate programs organized by affiliates of our Legacy sponsors. Our Legacy sponsors include C. Preston Butcher, our Chief Executive Officer and Chairman of our board of directors, W. Dean Henry, our Executive Vice President, and Guy K. Hays, our Executive Vice President. The information presented in this section should be read in conjunction with the Prior Performance Tables – Legacy Sponsors included in this prospectus. Prospective investors should not assume they will experience returns comparable to those experienced by investors in past real estate programs sponsored by affiliates of the Legacy sponsors. Further, by purchasing our shares, investors will not acquire ownership interests in any partnerships or corporations to which the following information relates. The private funds discussed in this section were conducted through privately held entities that were subject neither to the up-front commissions, fees and expenses associated with this offering nor all of the laws and regulations that will apply to us as a publicly offered REIT.

Since 1968, Mr. Butcher has been involved in entities that have acquired/developed 655 real estate assets on behalf of private funds and sub-advisory accounts with over 68,000 residential units exceeding $5.3 billion in cost and 68 million square feet of office and industrial space exceeding $8.7 billion in cost. These entities have sold 547 real estate assets with nearly 57,000 residential units exceeding $3.32 billion in cost and over 54 million square feet of office and industrial space exceeding $4.4 billion in cost. These entities have been a conduit for leading institutional investors and high net worth individuals to invest in real estate assets throughout the western U.S. As an owner, manager and operator of real estate assets, the Legacy Residential and Legacy Commercial entities offer investors a trusted, highly-experienced advisor or sub-advisor with regards to locating, acquiring/developing, financing, managing, and selling high quality real estate assets. Since 1973 and 1986, respectively, Mr. Henry and Mr. Hays have worked with Mr. Butcher on a significant number of the foregoing residential real estate assets.

The information presented below represents the historical experience as of the ten years ending December 31, 2008 of the private real estate funds sponsored by certain of our Legacy sponsors through Legacy Residential and Legacy Commercial affiliated entities, namely, Legacy Partners Affordable Housing Fund, Legacy Partners Realty Fund I, Legacy Partners Realty Fund II and Legacy Partners Realty Fund III. You should not assume that you will experience returns, if any, comparable to those experienced by investors in current/prior programs. Further, the programs discussed in this summary were conducted through privately held entities that were subject to neither up-front commissions, fees, and expenses associated with this offering, nor all of the laws and regulations that will apply to it as a publicly offered REIT. We have omitted from the discussion below information regarding the prior performance of entities for which an institutional investor engaged a Legacy Residential or Legacy Commercial affiliate entity if the investor had the power to reject the real estate acquisitions proposed by the Legacy Residential or Legacy Commercial affiliate manager. Such entities are not considered “funds” or “programs” as those terms are used in this prospectus.

Though the private funds were not subject to the up-front commissions, fees and expenses associated with this offering, the private funds have fee arrangements with Legacy Residential or Legacy Commercial entity affiliates structured similar to ours. The percentage of the fees varied based on the market factors at the time the particular fund was formed. The private funds have paid (i) asset management fees, (ii) acquisition fees, (iii) development/construction fees and (iv) real estate commissions, disposition fees, incentive fees and/or carried interest based on participation interests in the funds’ assets after achieving a stipulated return for the investors or based on gains from the sale of assets.

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For additional information about the private programs discussed below, see the Prior Performance Tables – Legacy Sponsors included in this prospectus. These tables present information with respect to (1) the experience of our Legacy sponsors in raising and investing private real estate programs, (ii) the compensation paid by prior programs to the Legacy sponsors and their affiliates, (iii) the operating results of prior programs, and (iv) acquisitions of properties by current/prior programs.

Legacy Partners Affordable Housing Fund

In December of 2002, Legacy Partners 1002 LLC (“LP 1002”) formed the Legacy Partners Affordable Housing Fund, LLC with a single large institutional investor, the State of California Public Employees’ Retirement System. The Legacy Partners Affordable Housing Fund is focused on the renovation or new development of multifamily housing with an affordable housing component of 15% - 20%. The program was initially focused exclusively on acquisitions/development of multifamily housing in urban areas of California with committed equity of $63.2 million, including a 5% co-investment of equity from LP 1002. The scope of the program was subsequently expanded to include urban areas of Colorado and Texas, and the equity commitment was increased to $269.5 million, including LP 1002’s 5% co-investment. As of December 31, 2008, the offering amount for the program was fully committed.

Messrs. Butcher, Henry and Hays, as managing members of LP 1002 indirectly through their trusts, along with certain of the other key real estate professionals with Legacy Residential entities, collectively have the sole responsibility for acquiring, financing, managing, developing and selling the real estate assets owned by the various wholly-owned subsidiaries of Legacy Partners Affordable Housing Fund in accordance with the terms and parameters of the operating agreement of Legacy Partners Affordable Housing Fund. These other key real estate professionals include Jeffrey K. Byrd and Spencer R. Stuart, Jr. who are referenced on pages 71 and 72, respectively, along with one other individual, who is no longer employed by LPRI or an officer of LPRI nor involved in the management of LP 1002. The investor does not have the right to approve an investment property prior to purchase or to approve a sale or refinancing of the property provided that the acquisition, sale or refinancing of the property is made in accordance with the terms and parameters of the operating agreement of Legacy Partners Affordable Housing Fund.

The Legacy Partners Affordable Housing Fund has investment objectives that are similar to ours. Like ours, its primary investment objectives are to provide investors with attractive and stable returns and to preserve and return their capital contributions and, like us, it will seek to realize growth in the value of its investments by timing asset sales to maximize asset value. However, note that the investment risk profile of Legacy Partners Affordable Housing Fund differs from ours in that it is predominantly focused on development, which typically has a higher risk profile in that it requires significant capital improvements and extensive leasing. Although we may invest in development properties as a part of our opportunity-oriented investment allocation, we expect that such opportunity-oriented investments will account for only 20% to 30% of our portfolio, with development properties not to exceed 10%.

The continued disruptions in the financial markets and poor economic conditions have adversely affected the fair values and recoverability of certain of Legacy Partners Affordable Housing Fund’s investments. Although estimates of the fair value of its assets have been reduced below book value, as of June 30, 2009, no impairments have been recognized pursuant to generally accepted accounting principles.

From April 2003 through November 2008, the Legacy Partners Affordable Housing Fund purchased four large residential assets through wholly-owned subsidiaries: the Main & Jamboree property located in Irvine, California; the Hollywood & Vine property located in Los Angeles, California; the Mission Pointe Property located in Sunnyvale, California; and the Legacy at Memorial property located in Houston, Texas.

The Main & Jamboree property is a mixed use development project of 290 apartment homes and 7,500 square feet of street retail space. The property was purchased in July of 2004 and construction commenced early in 2005. Construction was completed in 2007. The project was sold prior to the completion of construction in March 2006 for $94.5 million, subject to a $26.5 million completion reserve.

The Hollywood & Vine property is a mixed-use development project of 375 apartment homes and 28,700 square feet of street retail space located in Los Angeles, California. This project was approved for investment in July of 2006 and construction commenced early in April 2007. Construction is ongoing and the project is scheduled for completion in January 2010. The total development cost is projected to be $264.0 million. As of December 31, 2008, total costs incurred were $131.0 million and the balance of construction financing was $91.4 million (69.8%). The affordable housing component will be 20.8%, meeting the program’s predetermined affordable housing objective.

The Mission Pointe property is an acquisition and renovation project consisting of 617 apartments located in Sunnyvale, California. This project was approved for investment in December of 2006. The property was acquired in November 2008 at the end of an option period, during which Legacy Partners Affordable Housing Fund controlled the management of the asset. Exterior and common area renovations were completed on schedule and renovation of unit interiors is ongoing. The property is 98% leased. The total redevelopment cost is projected to be $170 million. As of December 31, 2008, total costs incurred were $166.4 million and the

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balance of construction financing was $137.3 million (82.5%). The affordable housing component is 15%, meeting the program’s predetermined affordable housing objective.

The Legacy at Memorial property is a 330 unit apartment development project located in Houston, Texas. The project consists of a 25-story residential tower and a 4-story residential building partially wrapping a 6-story structured parking garage. Construction commenced early in January 2008 and is scheduled for completion late in 2009. The total development cost is projected to be $101.2 million. As of December 31, 2008, total costs incurred were $43.4 million and the balance of construction financing was $28.2 million (65.0%). With the investor’s consent, the affordable housing component for this property was terminated prior to the leasing of any units.

Legacy Partners Realty Fund I

In December of 2004, Legacy Partners Commercial, LLC (“Legacy Commercial LLC”), an affiliate of our Legacy sponsors, commenced the operations of Legacy Partners Realty Fund I, LLC, a private program seeking to raise $331.6 million of committed equity from accredited institutional investors. As of December 31, 2008 the full offering amount had been committed. Legacy Partners Realty Fund I is focused primarily on the acquisition, value-enhancement, management, and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. The program’s objective is to employ leverage up to 65% of the value of the program’s assets as part of its strategy and generate competitive internal rates of return, net of management fees and incentives paid to the sponsor, over an eight to ten-year period.

Mr. Butcher is Chairman of the Board of Legacy Commercial LLC, as well as a director of various other of the Legacy Commercial entities involved in the ownership of Legacy Partners Realty Fund I, LLC. Barry S. DiRaimondo and Paul J. Meyer are each a Director and the President and Chief Financial Officer, respectively, of Legacy Commercial LLC, as well as directors and officers of various other of the Legacy Commercial entities involved in the ownership of Legacy Partners Realty Fund I, LLC. Messrs. DiRaimondo and Meyer, along with Mr. Butcher, collectively have the responsibility for acquiring, financing, managing, developing and selling the real estate and real estate-related assets owned by Legacy Partners Realty Fund I in accordance with the terms and parameters of the operating agreement of Legacy Partners Realty Fund I without the consent or approval of the investors.

Although Legacy Partners Realty Fund I targets assets in the commercial real estate sector rather than the residential sector, it nevertheless has investment objectives that are similar to ours. Like ours, its primary investment objectives are to provide investors with attractive and stable returns and to preserve and return their capital contributions and, like us, it will seek to realize growth in the value of its investments by timing asset sales to maximize asset value. However, note that the investment risk profile of Legacy Partners Realty Fund I differs from ours in that it is predominantly focused on “value-added” investment types, which typically have a higher risk profile in that they require moderate to significant capital improvements and/or moderate to extensive leasing or releasing. Although we may invest in value-added properties as a part of our opportunity-oriented investment allocation, we expect that such opportunity-oriented investments will account for only 20% to 30% of our portfolio.

All of the assets acquired by Legacy Partners Realty Fund I have involved commercial properties. As of December 31, 2008, Legacy Partners Realty Fund I had acquired a total of 32 properties, including 30 office properties and two parcels of raw land for development, with an aggregate of 5.9 million square feet of space and totaling $909.4 million in cost. At that time, $331.6 million of capital had been called and contributed. As of December 31, 2008, the fund had sold six of its properties and four partial properties for $191.9 million, an average of 69% over their net cost, and there had been $36 million in cash distributions. The occupancy of the fund’s portfolio was 81%, compared to 64% on average at acquisition.

The continued disruptions in the financial markets and poor economic conditions have adversely affected the performance of certain of Legacy Partners Realty Fund I’s investments. In general, commercial real estate markets have been experiencing increased vacancy and decreasing market rental rates as a result of the current economic slowdown and attendant job losses. A few of the fund’s properties have significant current vacancy or near-term lease expirations and these assets are experiencing effective rental rates on newly leased space and renewals at rates below the highs of 2007 which, in some cases, may be below the market rental rates at the time of acquisition. These factors have affected the revenues of the fund.

            Legacy Partners Realty Fund I acquired the majority of its assets early in the last economic expansion during 2005 and early 2006 when pricing was lower than the highs of 2007. The fund was focused on the acquisition and repositioning of “A” and “B” quality assets in major western markets—both in terms of location and physical characteristics. Additionally, the fund’s assets had sufficient time to lease vacant space and stabilize their income streams before the economy retracted and has experienced positive net absorption across the portfolio since acquisition. Thirty-three assets were acquired in the fund and seven assets were successfully repositioned and liquidated prior to the economic retraction at pricing that met or exceeded original projections. In addition, five more assets were in the market for sale in the summer and fall of 2008 that have subsequently been removed from the market due to the economic slowdown. Although some of Legacy Partners Realty Fund I’s assets have been negatively affected by vacancy and lower market rental rates, as noted above, the majority of assets are benefiting from in place, longer term leases which has mitigated the typical experience during an economic downturn where “B” quality assets tend to lose tenants to “A” quality assets due to the severe compression between market rents for “A” and “B” assets. Additionally, a few of the fund’s assets have loans maturing in the near term and the general lack of available financing for commercial real estate may impact the ability of the fund to refinance or extend these loans. As a precautionary measure, the fund is not making cash distributions at this time.

The adverse market conditions noted above may also cause the total returns to investors in Legacy Partners Realty Fund I to be lower than originally projected. However, in light of the lack of available financing for commercial real estate, which is affecting the ability of the fund as well as other market participants to competitively sell properties, the current business plans generally do not contemplate a disposition in the near future. Therefore the total returns to investors in Legacy Partners Realty Fund I are unknown at this time.

Legacy Partners Realty Fund II

In April 2006, Legacy Commercial LLC commenced Legacy Partners Realty Fund II, LLC, a private program seeking to raise $456.8 million of committed equity from accredited institutional investors. As of December 31, 2008 the full offering amount had been committed. Legacy Partners Realty Fund II is focused primarily on the acquisition, value-enhancement, management, and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. The program’s objective is to employ leverage up to 65% of the value of the program’s assets as part of its strategy and generate competitive internal rates of return, net of management fees and incentives paid to the sponsor, over an eight to ten-year period.

Mr. Butcher is Chairman of the Board of Legacy Commercial LLC, as well as a director of various other of the Legacy Commercial entities involved in the ownership of Legacy Partners Realty Fund II, LLC. Barry S. DiRaimondo and Paul J. Meyer are each a Director and the President and Chief Financial Officer, respectively, of Legacy Commercial LLC, as well as directors and officers of various other of the Legacy Commercial entities involved in the ownership of Legacy Partners Realty Fund II, LLC. Messrs. DiRaimondo and Meyer, along with Mr. Butcher, collectively have the responsibility for acquiring, financing, managing, developing and selling the real estate and real estate-related assets owned by Legacy Partners Realty Fund II in accordance with the terms and parameters of the operating agreement of Legacy Partners Realty Fund II without the consent or approval of the investors.

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Although Legacy Partners Realty Fund II targets assets in the commercial real estate sector rather than the residential sector, it nevertheless has investment objectives that are similar to ours. Like ours, its primary investment objectives are to provide investors with attractive and stable returns and to preserve and return their capital contributions and, like us, it will seek to realize growth in the value of its investments by timing asset sales to maximize asset value. However, note that the investment risk profile of Legacy Partners Realty Fund II differs from ours in that it is predominantly focused on “value-added” investment types, which typically have a higher risk profile in that they require moderate to significant capital improvements and/or moderate to extensive leasing or releasing. Although we may invest in value-added properties as a part of our opportunity-oriented investment allocation, we expect that such opportunity-oriented investments will account for only 20% to 30% of our portfolio.

Substantially all of the assets acquired by Legacy Partners Realty Fund II have involved commercial properties. As of December 31, 2008, Legacy Partners Realty Fund II had acquired a total of 28 properties, including 24 office properties, one industrial property, and three parcels of raw land for development, with an aggregate of 5.9 million square feet of space and totaling $1.5 billion in cost. $455.2 million of capital had been called and contributed by that time. As of December 31, 2008, the fund had not sold any properties and there had been no cash distributions. Occupancy was 81%, consistent with the average occupancy for the properties at acquisition.

The continued disruptions in the financial markets and poor economic conditions have adversely affected the performance of certain of Legacy Partners Realty Fund II’s investments. In general, commercial real estate markets have been experiencing increased vacancy and decreasing market rental rates as a result of the current economic slowdown and attendant job losses. Properties that have significant current vacancy or near-term lease expirations are experiencing effective rental rates on newly leased space and renewals at rates below the highs of 2007. These rates may, in some cases, be below the market rental rates at the time of acquisition. These factors have affected the revenues of the fund.

Legacy Partners Realty Fund II purchased the majority of its assets late in the last economic expansion, between mid 2006 and mid 2007 when pricing reached its recent cyclical highs. The fund was focused on the acquisition and repositioning of assets that were in “A” locations but that needed rehabilitation to bring them fully up to “A” quality. Also, as a consequence of being acquired late in the last economic expansion, the fund’s assets had less time to lease vacant space and stabilize their income streams before the economy retracted. The fund acquired and repositioned twenty-eight assets. Eight of this fund’s assets were in the market for sale in the summer and fall of 2008 that have subsequently been removed from the market due to the economic slowdown. Since acquisition, the fund has experienced a small amount of negative net absorption in the aggregate. Also, as a result of declines in market rental rates, the economic downturn has resulted in a “flight to quality” and therefore benefited “A” quality assets at the expense of “B” quality assets in competing for tenants. In some cases the current rents available in the market have made it uneconomic to incur the significant capital expenditures for tenant improvements and leasing commission and the fund has decided to leave space vacant until conditions improve. Additionally, some of the fund’s assets have loans maturing in the near term and the general lack of available financing for commercial real estate may impact the ability of the fund to refinance or extend these loans. The fund is not making current distributions at this time.

The adverse market conditions noted above may also cause the total returns to investors in Legacy Partners Realty Fund II to be lower than originally projected. However, in light of the lack of available financing for commercial real estate, which is affecting the ability of the fund as well as other market participants to competitively sell properties, the current business plans generally do not contemplate a disposition in the near future. Therefore the total returns to investors in Legacy Partners Realty Fund II are unknown at this time.

Legacy Partners Realty Fund III

In August of 2007, Legacy Commercial LLC commenced Legacy Partners Realty Fund III, LLC, a private program seeking to raise $475 million of committed equity from accredited institutional investors. As of December 31, 2008, $451.1 million was raised and the offering had ceased. Legacy Partners Realty Fund III is focused primarily on the acquisition, value-enhancement, management, and sale of office, research and development and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. The program’s objective is to employ leverage up to 65% of the value of the program’s assets as part of its strategy and generate competitive internal rates of return, net of management fees and incentives paid to the sponsor, over an eight to ten-year period.

Mr. Butcher is Chairman of the Board of Legacy Commercial LLC, as well as a director of various other of the Legacy Commercial entities involved in the ownership of Legacy Partners Realty Fund III, LLC. Barry S. DiRaimondo and Paul J. Meyer are each a Director and the President and Chief Financial Officer, respectively, of Legacy Commercial LLC, as well as directors and officers of various other of the Legacy Commercial entities involved in the ownership of Legacy Partners Realty Fund III, LLC. Messrs. DiRaimondo and Meyer, along with Mr. Butcher, collectively have the responsibility for acquiring, financing, managing, developing and selling the real estate and real estate-related assets owned by Legacy Partners Realty Fund III in accordance with the terms and parameters of the operating agreement of Legacy Partners Realty Fund III without the consent or approval of the investors.

Although Legacy Partners Realty Fund III targets assets in the commercial real estate sector rather than the residential sector, it nevertheless has investment objectives that are similar to ours. Like ours, its primary investment objectives are to provide investors with attractive and stable returns and to preserve and return their capital contributions and, like us, it will seek to realize growth in the value of its investments by timing asset sales to maximize asset value. However, note that the investment risk profile of Legacy Partners Realty Fund III differs from ours in that it is predominantly focused on “value-added” investment types, which typically have a higher risk profile in that they require moderate to significant capital improvements and/or moderate to extensive leasing or releasing. Although we may invest in value-added properties as a part of our opportunity-oriented investment allocation, we expect that such opportunity-oriented investments will account for only 20% to 30% of our portfolio.

As of December 31, 2008, Legacy Partners Realty Fund III had acquired a total of ten properties, including nine office properties and one parcel of land for development, with an aggregate of 2.6 million square feet of space and totaling $705 million in cost. At that time, $208 million of capital had been called and contributed. As of December 31, 2008, the fund had not sold any assets and there had been no cash distributions to investors. Occupancy was 68%, down from the average occupancy for the properties at acquisition of 75%.

The continued disruptions in the financial markets and poor economic conditions have adversely affected the performance of certain of Legacy Partners Realty Fund III’s investments. In general, commercial real estate markets have been experiencing increased vacancy and decreasing market rental rates as a result of the current economic slowdown and attendant job losses. Properties that have significant current vacancy or near-term lease expirations are experiencing effective rental rates on newly leased space and renewals at rates below the highs of 2007. These rates may, in some cases, be below the market rental rates at the time of acquisition. These factors have affected the revenues of the fund.

Legacy Partners Realty Fund III began purchasing assets late in the last economic expansion in the fall of 2007 at the recent cyclical peak before it suspended acquisitions due to the economic downturn in the spring of 2008, having drawn approximately half of its funding commitments. As a consequence of being acquired just as the economy began to decline, the fund’s nine assets, which are generally “A” quality, had very little time to lease vacant space and stabilize their income streams before the economy weakened. Since acquisition, the fund’s assets have experienced a small amount of negative net absorption in the aggregate and several of its assets have significant current vacancy. Currently the fund is drawing on interest and operating reserves established for the assets with significant vacancy but may be required to call a portion of its uncommitted capital to support projects until the pace of leasing increases. This fund has been successful in buying back some of its asset level debt at a significant discount to par thereby reducing its basis in the real estate. Additional debt buybacks are anticipated and would require calling some of the fund’s uncommitted capital to do so. Additionally, some of the fund’s assets have loans maturing in the near term and the general lack of available financing for commercial real estate may impact the ability of the fund to refinance or extend these loans. The fund is not making current distributions at this time.

The adverse market conditions noted above may also cause the total returns to investors in Legacy Partners Realty Fund III to be lower than originally projected. However, in light of the lack of available financing for commercial real estate, which is affecting the ability of the fund as well as other market participants to competitively sell properties, the current business plans generally do not contemplate a disposition in the near future. Therefore the total returns to investors in Legacy Partners Realty Fund III are unknown at this time.

Prior Investment Programs – KBS Sponsors

The information presented in this section represents the historical experience of real estate programs organized by affiliates of our KBS sponsors. Our KBS sponsors include Peter M. Bren, our President and one of our directors, Peter McMillan III, our Executive Vice President, Keith D. Hall and Charles J. Schreiber, Jr. The information presented in this section should be read in conjunction with the Prior Performance Tables – KBS Sponsors included in this prospectus. Prospective investors should not assume they will experience returns comparable to those experienced by investors in past KBS-sponsored real estate programs. Further, by purchasing our shares, investors will not acquire ownership interests in any partnerships or corporations to which the following information relates. The private funds discussed in this section were conducted through privately held entities that were subject neither to the up-front

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commissions, fees and expenses associated with this offering nor all of the laws and regulations that will apply to us as a publicly offered REIT. We have omitted from this discussion information regarding the prior performance of entities for which an institutional investor engaged a KBS investment advisor if the investor had the power to reject the real estate acquisitions proposed by the KBS investment advisor. Such entities are not considered “funds” or “programs” as those terms are used in this prospectus.

In January 2006, our KBS sponsors teamed to launch the initial public offering of their first public non-traded REIT, KBS Real Estate Investment Trust, Inc., which we refer to as KBS REIT I. They are currently sponsoring the initial public offerings of KBS Real Estate Investment Trust II, Inc., which we refer to as KBS REIT II, and KBS Strategic Opportunity REIT, Inc. As described below, KBS REIT I and KBS REIT II are targeting to acquire a portfolio of commercial properties and enhanced-return real estate-related debt and equity investments. KBS Strategic Opportunity REIT is targeting to acquire a diverse portfolio of real estate-related loans, real estate-related debt securities and other real estate-related investments. Our advisor, KBS Capital Advisors, is also the external advisor to KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT.

Since 1992, two of our KBS sponsors, Peter M. Bren and Charles J. Schreiber, Jr., have partnered to acquire, manage, develop and sell high-quality U.S. commercial real estate assets as well as real estate-related investments on behalf of institutional investors. Since the formation of the first investment advisor affiliated with Messrs. Bren and Schreiber in 1992, investment advisors affiliated with Messrs. Bren and Schreiber have sponsored 14 private real estate funds that have raised over $2.0 billion of equity from institutional investors. Together, Messrs. Bren and Schreiber founded KBS Realty Advisors, LLC, a registered investment advisor with the SEC and a nationally recognized real estate investment advisor. We refer to the investment advisors affiliated with Messrs. Bren and Schreiber as KBS investment advisors.

Unless otherwise indicated, the information presented below represents the historical experience of KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT and the private real estate funds sponsored by KBS investment advisors as of the ten years ending December 31, 2008.

KBS REIT I

On January 27, 2006, our KBS sponsors launched the initial public offering of KBS REIT I, a publicly registered, non-traded REIT. Its initial public offering was for a maximum of 200,000,000 shares of common stock at a price of $10.00 per share, plus an additional 80,000,000 shares of common stock at $9.50 per share pursuant to its dividend reinvestment plan. As of December 31, 2008, KBS REIT I had accepted gross offering proceeds of $1.8 billion, including $71.3 million from shares issued pursuant to its dividend reinvestment plan, from approximately 42,553 investors. Of the amount raised pursuant to its dividend reinvestment plan, $15.4 million has been used to fund share redemptions pursuant to its share redemption program. KBS REIT I ceased offering shares in its primary public offering on May 30, 2008, and KBS REIT I continues to offer shares under its dividend reinvestment plan.

As of December 31, 2008, KBS REIT I owned 22 office buildings, one light industrial property, three corporate research properties, two distribution facilities, one industrial portfolio consisting of nine distribution and office/warehouse properties, one office/ flex portfolio consisting of four properties and an 80% membership interest in a joint venture that owns a portfolio of 23 institutional quality industrial properties and holds a master lease with a remaining term of 14.25 years with respect to another industrial property (by “institutional quality” we mean properties with certain features (tenancy, location,

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construction quality, management, functionality, etc.) and benefits that help distinguish them as desirable investments to relatively risk adverse high net worth entities). At December 31, 2008, the portfolio was approximately 93% leased. In addition, KBS REIT I owned seven mezzanine real estate loans, two B-notes, a partial ownership interest in three mezzanine real estate loans, a partial ownership interest in a senior mortgage loan, two loans representing senior subordinated debt of a private REIT and two first mortgage loans. KBS REIT I had also originated three secured loans and one mezzanine loan and holds two investments in securities directly or indirectly backed by commercial mortgage loans. KBS REIT I used the net proceeds from its initial public offering and debt financing to purchase or fund $3.1 billion of real estate and real estate-related investments as of December 31, 2008, including $34.5 million in acquisition fees and closing costs. As of December 31, 2008, KBS REIT I had used $0.8 billion and $0.8 billion of the net proceeds from its initial public offering for real estate and real estate-related assets, respectively, and had used $1.2 billion and $0.3 billion of debt financing on its real estate and real estate-related assets, respectively.

Although KBS REIT I targets assets in the commercial and industrial real estate sectors rather than the residential sector, it nevertheless has investment objectives that are similar to ours. Like ours, its primary investment objectives are to provide investors with attractive and stable returns and to preserve and return their capital contributions and, like us, it will seek to realize growth in the value of its investments by timing asset sales to maximize asset value.

KBS REIT I has acquired and manages a diverse portfolio of real estate and real estate-related assets. It has diversified the portfolio by property type, geographic region, investment size and investment risk with the goal of attaining a portfolio of income-producing real estate and real estate-related assets that provide attractive and stable returns to its investors. In constructing its portfolio, KBS REIT I has targeted approximately 70% core investments (which are generally existing properties with at least 80% occupancy and minimal near-term lease rollover) and approximately 30% enhanced-return properties (which are higher-yield and higher-risk investments than core properties, such as properties with moderate vacancies or near-term lease rollovers, poorly managed and positioned properties, properties owned by distressed sellers and built-to-suit properties) and real estate-related investments, including mortgage loans, mezzanine debt, commercial mortgage-backed securities and other similar structured finance investments. Though this is its target portfolio, KBS REIT I’s portfolio may vary from its expected composition to the extent that KBS Capital Advisors presents KBS REIT I with good investment opportunities that allow it to meet the REIT requirements under the Internal Revenue Code. As of December 31, 2008, as a percentage of its total investments, the purchase price of KBS REIT I’s real estate properties represented 65% of its portfolio and the purchase price of its real estate-related investments represented 35% of its portfolio.

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As of December 31, 2008, as a percentage of the amount invested (based on purchase price), KBS REIT I had invested in the following types of assets (including its investments through a consolidated joint venture): 36% in 22 office properties, 29% in 42 industrial properties and a master lease with a remaining term of 14.25 years in another industrial property, 25% in interests in ten mezzanine loans, 5% in interests in seven mortgage loans, 2% in interests in two loans representing subordinated debt of a private REIT, 2% in two investments in securities directly or indirectly backed by commercial mortgage loans and 1% in interests in two B-notes. All of KBS REIT I’s real property investments have been made within the United States. Also as of December 31, 2008 and as a percentage of amount invested (based on purchase price), the geographic locations of KBS REIT I’s investments in real properties were as follows (including its investments through a consolidated joint venture): 41% in 26 properties and a master lease with a remaining term of 14.25 years in another property in the East; 30% in 22 properties in the South; 15% in nine properties in the West; and 14% in seven properties in the Midwest. All of the real properties purchased by KBS REIT I had prior owners and operators.

For more detailed information regarding acquisitions by KBS REIT I as of December 31, 2008, see Table VI contained in Part II of the registration statement, which is not part of this prospectus. We will provide a copy of Table VI to you upon written request and without charge.

KBS REIT I had not sold any properties or other investments as of December 31, 2008. KBS REIT I intends to hold its properties and other investments for an extended period, typically four to seven years for real properties. In November 2007, the borrowers of a mezzanine loan in which KBS REIT I held a $21 million interest paid off the loan in full, including a spread maintenance premium.

KBS REIT I’s primary public offering was subject to the up-front commissions, fees and expenses associated with this offering and KBS REIT I has fee arrangements with KBS affiliates structured similar to ours. For more information regarding the fees paid to KBS affiliates by KBS REIT I and the operating results of KBS REIT I, see Tables II and III under Prior Performance Tables – KBS Sponsors in this prospectus.

The KBS REIT I prospectus disclosed that KBS REIT I may seek to list its shares of common stock if its independent directors believe listing would be in the best interests of its stockholders. To date, the independent directors have not made such a determination. If KBS REIT I does not list its shares of common stock on a national securities exchange by November 2012, its charter requires that KBS REIT I either (i) seek stockholder approval of the liquidation of the company or (ii) if a majority of its conflicts committee determines that liquidation is not then in the best interests of the stockholders, postpone the decision of whether to liquidate the company. As we have not reached November 2012, none of the actions described in (i) or (ii) above have occurred. However, KBS REIT I has disclosed that due to the continuing impact of the disruptions in the financial markets on the values of KBS REIT I’s investments, it is increasingly likely that KBS REIT I will postpone such a liquidity event in order to improve the prospects for investors to realize a profit on their investment, likely through sales of individual or pooled assets.

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If a majority of its conflicts committee does determine that liquidation is not then in the best interests of KBS REIT I’s stockholders, its charter requires that the conflicts committee revisit the issue of liquidation at least annually. Further postponement of listing or stockholder action regarding liquidation would only be permitted if a majority of the conflicts committee again determined that liquidation would not be in the best interest of the stockholders. If KBS REIT I sought and failed to obtain stockholder approval of its liquidation, the KBS REIT I charter would not require KBS REIT I to list or liquidate and would not require the conflicts committee to revisit the issue of liquidation, and KBS REIT I could continue to operate as before. If KBS REIT I sought and obtained stockholder approval of its liquidation, KBS REIT I would begin an orderly sale of its properties and other assets. The precise timing of such sales would take account of the prevailing real estate and financial markets, the economic conditions in the submarkets where its properties are located and the federal income tax consequences to the stockholders. In making the decision to apply for listing of its shares, KBS REIT I’s directors will try to determine whether listing its shares or liquidating its assets will result in greater value for stockholders.

The continued disruptions in the financial markets and deteriorating economic conditions have adversely affected the fair values and recoverability of certain of KBS REIT I’s investments. KBS REIT I disclosed fair values below its book values for certain assets in its financial statements and recognized impairments related to a limited number of assets.

On a quarterly basis, KBS REIT I evaluates its real estate securities for impairment. KBS REIT I reviews the projected future cash flows under these securities for changes in assumptions due to prepayments, credit loss experience and other factors. If, based on KBS REIT I’s quarterly estimate of cash flows, there has been an adverse change in the estimated cash flows from the cash flows previously estimated and the present value of the revised cash flows is less than the present value previously estimated, an other-than-temporary impairment is deemed to have occurred. During the year ended December 31, 2008, KBS REIT I recognized other-than-temporary impairments of marketable real estate securities totaling approximately $50.1 million, $18.2 million of which related to the total impairment of its floating rate CMBS and $31.9 million related to its fixed rate securities. For the nine months ended September 30, 2009, KBS REIT I recognized an other-than-temporary impairment related to its fixed rate securities of $5.1 million. These securities had an aggregate acquisition cost of $62 million.

Continued stress in the economy in general and the CMBS market in particular could result in additional other-than-temporary impairments on the fixed rate securities in the future.

With respect to its loan portfolio, KBS REIT I considers a loan held for investment to be impaired when it becomes probable, based on current information, that it will be unable to collect all amounts estimated to be collected at the time of acquisition. The amount of impairment, if any, will be measured by comparing the recorded amount of the loan to (i) the present value of the expected cash flows discounted at the loan’s effective interest rate, (ii) the loan’s observable market price or (iii) the fair value of the collateral. During the year ended December 31, 2008, KBS REIT I recorded an impairment charge for the full amount of a $50 million subordinated debt investment. In addition, as of December 31, 2008, KBS REIT I recorded a provision for portfolio-based loan losses of $54.0 million related to its investment in the remaining real estate loans receivable. The portfolio-based reserve covers the pool of KBS REIT I’s loans that do not have asset-specific reserves. A provision for loan losses is recorded when available information as of each balance sheet date indicates that it is probable that the pool of loans will recognize a loss and the amount of the loss can be reasonably estimated.

For the nine months ended September 30, 2009, KBS REIT I’s provision for loan losses increased by $178.6 million due to the determination that the 200 Professional Drive Mortgage was impaired as of March 31, 2009; the determination that the Tribeca Mezzanine Loans, 18301 Von Karman Loans, the 2600 Michelson Mezzanine Loan and the full amount of its investment in the Arden Portfolio Mezzanine Loans were impaired as of June 30, 2009; and the determination that the Sandmar Mezzanine Loan was impaired as of September 30, 2009. As a result, as of September 30, 2009, KBS REIT I’s total reserve for loan losses of $133.4 million consisted of $109.4 million of asset-specific reserves against investments with an amortized cost basis of $188.2 million and $24.0 million of portfolio-based reserves against investments with an amortized cost basis of $652.7 million. On July 8, 2009, KBS REIT I released the borrowers under the Arden Portfolio Mezzanine Loans from liability and received preferred membership interests in a joint venture that indirectly owns the properties that had served as collateral for the loans. As of June 30, 2009, KBS REIT I had determined the fair value of its investment in the Arden Portfolio Mezzanine Loans, which were purchased in January 2008 for $144.0 million plus closing costs, to be $0 and as such the preferred membership interests were initially recorded by KBS REIT I at a fair value of $0.

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In the future, especially given the current market instability, KBS REIT I may recognize material charges for impairment with respect to investments other than those described above or a different impairment charge for investments described above. Moreover, even if KBS REIT I does not recognize any material charge for impairment with respect to an asset, the fair value of the asset may have declined based on general economic conditions or other factors.

As a result of the above factors, reductions in benchmark interest rates and their resulting impact on interest income on our variable rate loans receivable and the general impact of current economic conditions on rental rates, occupancy rates and property cash flows, on June 4, 2009, the KBS REIT I board of directors declared a July 2009 distribution at an annualized rate of 5.25% with the expectation that projected operating cash flows would be sufficient to cover the dividend. The prior annualized distribution rate was 7.0%. These and other factors could result in further decreases in the distribution rate in future periods.

Due to the level of share redemption requests already received in 2009 and the amounts KBS REIT I had budgeted from net proceeds from the dividend reinvestment plan for capital expenditures, tenant improvement costs and other funding obligations, on March 25, 2009, KBS REIT I amended and restated its share redemption program. Pursuant to the amended and restated share redemption program, KBS REIT I will limit ordinary redemptions to the net proceeds from the sale of shares under its dividend reinvestment plan during the prior calendar year less amounts it deems necessary from such proceeds to fund current and future capital expenditures, tenant improvements and other costs and obligations related to its investments. Based on its 2010 budgeted expenditures, and except with respect to redemptions sought upon a stockholder’s death, qualifying disability or determination of incompetence, KBS REIT I has disclosed it does not expect to have funds available for redemption in 2010.

In February 2009, the Financial Industry Regulatory Authority (FINRA) issued FINRA Regulatory Notice 09-09 to broker dealers that sell the shares of non-traded REITs. This notice informs broker-dealers that they may not report in a customer account statement an estimated value per share that is developed from data more than 18 months old, which in effect requires non-traded REITs to provide broker dealers with an estimated value per share of their common stock within 18 months of the completion of their offering stage.

In response to FINRA Regulatory Notice 09-09, on November 20, 2009, the Board of Directors of KBS REIT I approved an estimated value per share of the common stock of KBS REIT I of $7.17 based on the estimated value of KBS REIT I’s assets less the estimated value of its liabilities divided by the number of shares outstanding, all as of September 30, 2009. KBS REIT I provided this estimated value per share (i) to assist broker dealers that participated in its initial public offering in meeting their customer account statement reporting obligations under NASD Conduct Rule 2340 as required by FINRA and (ii) to assist fiduciaries of retirement plans subject to the annual reporting requirements of ERISA in the preparation of their reports. The estimated value per share was based upon the recommendation and valuation of KBS Capital Advisors. As with any valuation methodology, KBS Capital Advisor’s methodology was based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could have derived a different estimated value per share, and such differences could be significant. The estimated value per share did not represent the fair value according to generally accepted accounting principles of KBS REIT I’s assets less its liabilities, nor did it represent a liquidation value of KBS REIT I’s assets and liabilities or the price at which KBS REIT I’s shares of common stock would trade on a national securities exchange as of September 30, 2009. Markets for real estate and real estate-related investments can fluctuate and values are expected to change in the future.

Upon request, prospective investors may obtain from us without charge copies of offering materials and any public reports prepared in connection with KBS REIT I, including a copy of the most recent Annual Report on Form 10-K filed with the SEC. For a reasonable fee, we also will furnish upon request copies of the exhibits to the Form 10-K. Many of the offering materials and reports prepared in connection with KBS REIT I are also available on its web site at www.kbsreit.com. Neither the contents of that web site nor any of the materials or reports relating to KBS REIT I are incorporated by reference in or otherwise a part of this prospectus. In addition, the SEC maintains a web site at www.sec.gov that contains reports, proxy and other information that KBS REIT I files electronically as KBS Real Estate Investment Trust, Inc. with the SEC.

KBS REIT II

On April 22, 2008, our KBS sponsors launched the initial public offering of KBS REIT II, a publicly registered, non-traded REIT. Its initial public offering is for a maximum of 200,000,000 shares of common stock at a price of $10.00 per share, plus an additional 80,000,000 shares of common stock at $9.50 per share pursuant to its dividend reinvestment plan. As of December 31, 2008, KBS REIT II had accepted aggregate gross offering proceeds of approximately $314.2 million, including $1.9 million issued pursuant to its dividend reinvestment plan, from approximately 8,900 investors. Of the amount raised pursuant to its dividend reinvestment plan, none had been used to fund share redemptions pursuant to its share redemption program as no shares were yet eligible for redemption under the program. KBS REIT II’s offering is expected to last until April 22, 2010, but KBS REIT II may extend its offering beyond that date.

KBS REIT II has used the net proceeds from its initial public offering and debt financing to purchase or fund $495.5 million of real estate and real estate-related assets as of December 31, 2008, including $10.1 million in acquisition fees and closing costs. As of December 31, 2008, KBS REIT II had used $166.0 million and $58.1 million of the net proceeds from its initial public offering for real

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estate and real estate-related assets, respectively, and had used $271.4 million and $0 of debt financing on its real estate and real estate-related assets, respectively.

Although KBS REIT II targets assets in the commercial and industrial real estate sectors rather than the residential sector, it nevertheless has investment objectives that are similar to ours. Like ours, its primary investment objectives are to provide investors with attractive and stable returns and to preserve and return their capital contributions and, like us, it will seek to realize growth in the value of its investments by timing asset sales to maximize asset value.

KBS REIT II intends to acquire and manage a diverse portfolio of real estate and real estate-related assets. It plans to diversify its portfolio by investment type, investment size and investment risk with the goal of attaining a portfolio of income-producing real estate and real estate-related assets that provide attractive and stable returns to its investors. It intends to allocate between 60% and 70% of its portfolio to investments in core properties and between 30% and 40% of its portfolio to other real estate-related investments such as mortgage, mezzanine, bridge and other loans, debt and derivative securities related to real estate assets, including mortgage-backed securities, and the equity securities of other REITs and real estate companies. It does not expect its non-controlling equity investments in other public companies to exceed 5% of the proceeds of its offering, assuming it sells the maximum offering amount, or to represent a substantial portion of its assets at any one time. Though this is its target portfolio, KBS REIT II’s portfolio may vary from its expected composition to the extent that KBS Capital Advisors presents KBS REIT II with good investment opportunities that allow it to meet the REIT requirements under the Internal Revenue Code.

As of December 31, 2008, KBS REIT II owned four real estate properties encompassing 1.4 million rentable square feet and one real estate loan receivable. As of December 31, 2008, as a percentage of amount invested (based on purchase price), KBS REIT II had invested in the following types of assets: 81% in three office properties, 12% in the A-Note of a mortgage loan and 7% in one office/ flex property. All of KBS REIT II’s real property investments have been made within the United States. As of December 31, 2008, as a percentage of amount invested (based on purchase price), the geographic locations of KBS REIT II’s investments in real properties were as follows: 92% in three properties in New Jersey and 8% in one property in California. All of the real properties purchased by KBS REIT II had prior owners and operators.

For more detailed information regarding acquisitions by KBS REIT II as of December 31, 2008, see Table VI contained in Part II of the registration statement, which is not part of this prospectus. We will provide a copy of Table VI to you upon written request and without charge.

KBS REIT II has not sold any assets and intends to hold its properties for an extended period, typically four to seven years. The period KBS REIT II will hold its real estate-related assets will vary depending upon the type of asset, interest rates and other factors.

KBS REIT II is subject to the up-front commissions, fees and expenses associated with this offering and it has fee arrangements with KBS affiliates structured similar to ours. See Table II under “Prior Performance Tables” for more information regarding the fees paid to KBS affiliates by KBS REIT II.

The KBS REIT II prospectus discloses that KBS REIT II may seek to list its shares of common stock if its independent directors believe listing would be in the best interests of its stockholders. To date, the independent directors have not made such a determination. If KBS REIT II does not list its shares of

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common stock on a national securities exchange by March 2018, its charter requires that KBS REIT II either (i) seek stockholder approval of the liquidation of the company or (ii) if a majority of its conflicts committee determines that liquidation is not then in the best interests of the stockholders, postpone the decision of whether to liquidate the company. As we have not reached March 2018, none of the actions described in (i) or (ii) above have occurred.

If a majority of its conflicts committee does determine that liquidation is not then in the best interests of KBS REIT II’s stockholders, its charter requires that the conflicts committee revisit the issue of liquidation at least annually. Further postponement of listing or stockholder action regarding liquidation would only be permitted if a majority of the conflicts committee again determined that liquidation would not be in the best interest of the stockholders. If KBS REIT II sought and failed to obtain stockholder approval of its liquidation, the KBS REIT II charter would not require KBS REIT II to list or liquidate and would not require the conflicts committee to revisit the issue of liquidation, and KBS REIT II could continue to operate as before. If KBS REIT II sought and obtained stockholder approval of its liquidation, KBS REIT II would begin an orderly sale of its properties and other assets. The precise timing of such sales would take account of the prevailing real estate and financial markets, the economic conditions in the submarkets where its properties are located and the federal income tax consequences to the stockholders. In making the decision to apply for listing of its shares, KBS REIT II’s directors will try to determine whether listing its shares or liquidating its assets will result in greater value for stockholders.

Upon request, prospective investors may obtain from us without charge copies of offering materials and any public reports prepared in connection with KBS REIT II, including a copy of the most recent Annual Report on Form 10-K filed with the SEC. For a reasonable fee, we also will furnish upon request copies of the exhibits to the Form 10-K. Many of the offering materials and reports prepared in connection with KBS REIT II are also available on its web site at www.reitii.com. Neither the contents of that web site nor any of the materials or reports relating to KBS REIT II are incorporated by reference in or otherwise a part of this prospectus. In addition, the SEC maintains a web site at www.sec.gov that contains reports, proxy and other information that KBS REIT II files electronically as KBS Real Estate Investment Trust II, Inc. with the SEC.

KBS Strategic Opportunity REIT

KBS Strategic Opportunity REIT commenced its public offering on November 20, 2009 but as of the date of this prospectus had not yet raised its minimum offering amount of $2.5 million or acquired any assets. The KBS Strategic Opportunity REIT prospectus discloses that the program may seek to list its shares of common stock if its independent directors believe listing would be in the best interests of its stockholders. To date, such a determination has not been made. If KBS Strategic Opportunity REIT does not list its shares of common stock on a national securities exchange by July 31, 2019, its proposed charter will require that KBS Strategic Opportunity REIT either (i) seek stockholder approval of the liquidation of the company or (ii) if a majority of its conflicts committee determines that liquidation is not then in the best interests of the stockholders, postpone the decision of whether to liquidate the company. As we have not reached July 31, 2019, none of the actions described in (i) or (ii) above have occurred.

If a majority of the conflicts committee of KBS Strategic Opportunity REIT would determine that liquidation is not then in the best interests of its stockholders, KBS Strategic Opportunity REIT’s proposed charter would require that its conflicts committee revisit the issue of liquidation at least annually. Further postponement of listing or stockholder action regarding liquidation would only be permitted if a majority of the conflicts committee again determined that liquidation would not be in the

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best interest of the stockholders. If KBS Strategic Opportunity REIT sought and failed to obtain stockholder approval of its liquidation, the KBS Strategic Opportunity REIT charter would not require KBS Strategic Opportunity REIT to list or liquidate, and the company could continue to operate as before. If KBS Strategic Opportunity REIT sought and obtained stockholder approval of its liquidation, it would begin an orderly sale of its assets. The precise timing of such sales would take account of the prevailing real estate finance markets and the debt markets generally as well as the federal income tax consequences to its stockholders. In making the decision to apply for listing of its shares, KBS Strategic Opportunity REIT’s directors will try to determine whether listing its shares or liquidating its assets will result in greater value for stockholders.

Private Programs

During the ten-year period ending December 31, 2008, KBS investment advisors managed 14 private real estate funds, six of which were multi-investor, commingled funds and eight of which were single-client, separate accounts. All of these private funds were limited partnerships for which affiliates of Messrs. Bren and Schreiber act or acted as a general partner. In all cases, Messrs. Bren and Schreiber, through their control of the general partner entities, had sole responsibility for acquiring, investing, managing, developing and selling the real estate and real estate-related assets of each of the funds. Six of the 14 private funds managed by KBS investment advisors during the ten-year period ending December 31, 2008 used private REITs to structure the ownership of some of their investments.

Ten of the 14 private real estate funds managed by KBS investment advisors raised approximately $605.5 million of equity capital from 20 institutional investors during the ten-year period ending December 31, 2008. The institutional investors investing in the private funds include public and corporate pension funds, endowments and foundations. See Table I and Table II under “Prior Performance Tables” in this prospectus for more information regarding the experience of our KBS sponsors in raising funds from investors. During this ten-year period, four of the 14 private funds managed by KBS investment advisors did not raise any capital and three other private funds did not buy any new assets but raised capital only for on-going capital expenditure requirements.

During the ten-year period ending December 31, 2008, KBS investment advisors acquired 58 real estate investments and invested over $1.2 billion in these assets (including equity, debt and reinvestment of income and sales proceeds) on behalf of the seven private funds raising capital for new investments during this period. Debt financing was used in acquiring the properties in all of these seven private funds.

Despite their general commercial property focus, each of the private funds managed by KBS investment advisors during the ten-year period ending December 31, 2008 have or had (four of the funds have been fully liquidated) investment objectives that are similar to ours. Like ours, their primary investment objectives are to provide investors with attractive and stable returns and to preserve and return their capital contributions and, like us, they seek to realize growth in the value of their investments by timing asset sales to maximize asset value.

For each of the private funds, the KBS investment advisor has focused on acquiring a diverse portfolio of real estate investments. The KBS investment advisor typically diversified the portfolios of the private funds by property type and geographic region as well as investment size and investment risk. In constructing the portfolios for 12 of the 14 private funds, the KBS investment advisor specialized in acquiring a mix of value-added, enhanced-return and core real estate assets, focusing primarily on value-added and enhanced-return properties. Value-added and enhanced-return assets are assets that are undervalued or that could be repositioned to enhance their value. For two of the 14 private funds, the

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KBS investment advisor is focusing on the acquisition of core real estate assets.

Substantially all of the assets acquired by the private funds have involved commercial properties. During the ten-year period ending December 31, 2008, amount invested (based on purchase price) by property type by KBS investment advisors on behalf of the private funds was: 83% of amount invested in 51 office properties, 9% of amount invested in four industrial properties, 7% of amount invested in commercial mortgage-backed securities, and 1% of amount invested in one retail property and a mortgage loan.

The KBS investment advisors for the private funds also sought to diversify the investments of the funds by geographic region as illustrated by the chart below. This chart shows investments in different geographic regions by amount invested (based on purchase price) during the ten-year period ending December 31, 2008. KBS investment advisors have emphasized their investment activity within those regions that have exhibited the potential for strong or sustainable growth. All investments by the private funds were within the United States. Amount invested (based on purchase price) in acquired properties during the ten-year period ending December 31, 2008 by geographic region is as follows: 39% of amount invested in the South in 23 properties, 36% of amount invested in the East in 18 properties, 18% of amount invested in the West in 12 properties and 7% of amount invested in the Midwest in five properties.

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In seeking to diversify the portfolios of the private funds by investment risk, KBS investment advisors have purchased both low risk, high-quality properties and high-quality but under-performing properties in need of repositioning. Substantially all of the properties purchased by the private funds had prior owners and operators.

For more detailed information regarding acquisitions by the private funds in the three years ending December 31, 2008, see Table VI of the Prior Performance Tables in Part II of the registration statement, which is not part of this prospectus. We will provide a copy of Table VI to you upon written request and without charge.

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During the ten-year period ending December 31, 2008, KBS investment advisors have invested over $1.2 billion (including equity, debt and reinvestment of income and sales proceeds) for its clients through seven private funds. Of the properties acquired during the ten-year period ending December 31, 2008, KBS investment advisors had sold 29 properties on behalf of these seven private funds, which represents 50% of all properties these seven private funds had acquired during this period. These seven funds also sold one property during the ten-year period ending December 31, 2008 that had been acquired before January 1, 1999. During the ten-year period ending December 31, 2008, KBS investment advisors sold another 215 properties on behalf of the seven funds that had acquired properties prior to January 1, 1999. KBS investment advisors continue to actively manage the unsold properties of these private funds.

Though the private funds were not subject to the up-front commissions, fees and expenses associated with this offering, the private funds have fee arrangements with KBS affiliates structured similar to ours. The percentage of the fees varied based on the market factors at the time the particular fund was formed. Historically a majority of the private funds paid (i) asset management fees, (ii) acquisition fees and (iii) real estate commissions, disposition fees and/or incentive fees based on participation interests in the net cash flows of the funds’ assets after achieving a stipulated return for the investors or based on gains from the sale of assets.

For more information regarding the fees paid to KBS affiliates by these private funds and the operating results of these private funds, please see Tables II and III under “Prior Performance Tables” in this prospectus. Only one of the private funds represented in Table II, which we refer to as Commingled Account 6/99, paid incentive fees during the three years ended December 31, 2008. Two of the ten private funds in Table II, Commingled Account 6/98 and Commingled Account 6/99, pay incentive fees based on gains from the sale of assets, and both of these funds are in their liquidation stage. The incentive fees for the remaining eight private funds represented in Table II, which we refer to as Commingled Account 12/96, Separate Account 10/97, Separate Account 12/98, Separate Account 6/05, Separate Account 8/05, Separate Account 5/06, Separate Account 10/06 and Separate Account 01/07, are back-end fees based on participation interests in the net cash flows of the funds’ assets after achieving a stipulated return for the investors. These back-end incentive fees will be paid during the final liquidation stage of the private funds. Two of the private funds with back-end fees based on participation interests (Commingled Account 12/96 and Separate Account 10/97) are in their liquidation stage.

Adverse changes in general economic conditions have occasionally affected the performance of the private funds. For example, in the mid-1990s, in an effort to take advantage of what the KBS investment advisors believed was attractive, discounted portfolio pricing, five of the private funds invested in real estate portfolios in the Southwest, primarily in Arizona and Texas. These portfolios were composed principally of smaller Class B buildings. The recession, beginning around 1999, resulted in more business failures among smaller tenants typical to Class B buildings. This resulted in higher vacancy rates for these buildings and in the funds investing additional capital to cover the costs of re-letting the properties. The private funds also retained the buildings for a longer period of time so that the buildings would be sufficiently leased for disposition. The five private funds that made such investments were Commingled Account 12/96, Commingled Account 6/98, Commingled Account 6/99, Separate Account 10/97 and Separate Account 12/98. Also in the late 1990s, three private funds, Commingled Account 6/98, Commingled Account 6/99 and Separate Account 12/98, made investments in real estate located in the Northeast, primarily in Massachusetts. At that time, this area had a high concentration of tenants that were technology companies. While the private funds did not have a significant number of technology companies as their tenants, the collapse of the dot-com market did result in a significant amount of office-building space being returned to the marketplace, increasing vacancy

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rates and substantially lowering market rents. As a result, rental rates on newly leased space and renewals in the buildings owned by these funds decreased. The area’s higher vacancy rates also increased the period of time it took the KBS investment advisors to get the properties to the planned stabilized occupancy level for disposition. These adverse market conditions reduced the distributions made by these private funds and may cause the total returns to investors to be lower than they otherwise would. Separate Account 12/98 is still in its operating stage. The other four funds (Commingled Account 12/96, Separate Account 10/97, Commingled Account 6/98 and Commingled Account 6/99) are currently in their liquidation stage. However, the reduction in availability of financing and the recent deterioration of general economic conditions has led to a more difficult environment for selling properties and other real estate assets. As a result, over the past 12 months, our prior programs that are liquidating their assets have needed more time to sell their assets than they have historically required.

For more information regarding the operating results of the private funds sponsored by KBS investment advisors, information regarding the results of the completed funds and information regarding the sales or disposals of properties by these private funds, please see Tables III, IV and V under “Prior Performance Tables” in this prospectus.

FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material U.S. federal income tax consequences of an investment in our common stock. The law firm of DLA Piper LLP (US) has acted as our tax counsel and reviewed this summary. For purposes of this section under the heading “Federal Income Tax Considerations,” references to “KBS Legacy Partners REIT,” “we,” “our” and “us” mean only KBS Legacy Partners Apartment REIT, Inc. and not its subsidiaries or other lower-tier entities, except as otherwise indicated. This summary is based upon the Internal Revenue Code, the regulations promulgated by the U.S. Treasury Department, rulings and other administrative pronouncements issued by the Internal Revenue Service, and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the Internal Revenue Service would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. We have not sought and do not currently expect to seek an advance ruling from the Internal Revenue Service regarding any matter discussed in this prospectus. The summary is also based upon the assumption that we will operate KBS Legacy Partners Apartment REIT, Inc. and its subsidiaries and affiliated entities in accordance with their applicable organizational documents. This summary is for general information only and does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular investor in light of its investment or tax circumstances or to investors subject to special tax rules, such as:

— financial institutions;

— insurance companies;

— broker-dealers;

— regulated investment companies;

— partnerships and trusts;

— persons who hold our stock on behalf of other persons as nominees;

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— persons who receive our stock through the exercise of employee stock options (if we ever have employees) or otherwise as compensation;

— persons holding our stock as part of a “straddle,” “hedge,” “conversion transaction,” “constructive ownership transaction,” “synthetic security” or other integrated investment;

— “S” corporations;

and, except to the extent discussed below:

— tax-exempt organizations; and

— foreign investors.

This summary assumes that investors will hold their common stock as a capital asset, which generally means as property held for investment.

The federal income tax treatment of holders of our common stock depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. In addition, the tax consequences to any particular stockholder of holding our common stock will depend on the stockholder’s particular tax circumstances. For example, a stockholder that is a partnership or trust that has issued an equity interest to certain types of tax-exempt organizations may be subject to a special entity-level tax if we make distributions attributable to “excess inclusion income.” See “—Taxation of KBS Legacy Partners REIT—Taxable Mortgage Pools and Excess Inclusion Income.” A similar tax may be payable by persons who hold our stock as nominees on behalf of tax-exempt organizations. You are urged to consult your tax advisor regarding the federal, state, local and foreign income and other tax consequences to you in light of your particular investment or tax circumstances of acquiring, holding, exchanging, or otherwise disposing of our common stock.

Taxation of KBS Legacy Partners REIT

We intend to elect to be taxed as a REIT commencing with our taxable year ended December 31, 2010. We believe that we have been organized and operate in such a manner as to qualify for taxation as a REIT.

The law firm of DLA Piper LLP (US), acting as our tax counsel in connection with this offering, has rendered an opinion that we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and that our proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT for our taxable year ending December 31, 2010. It must be emphasized that the opinion of DLA Piper LLP (US) is based on various assumptions relating to our organization and operation and is conditioned upon fact-based representations and covenants made by our management regarding our organization, assets, and income, and the past, present and future conduct of our business operations. While we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given by DLA Piper LLP (US) or by us that we will qualify as a REIT for any particular year. The opinion is expressed as of the date issued and will not cover subsequent periods. Counsel will have no obligation to advise us or our stockholders of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law. You should be aware that opinions of counsel are not binding on

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the Internal Revenue Service, and no assurance can be given that the Internal Revenue Service will not challenge the conclusions set forth in such opinions.

Qualification and taxation as a REIT depends on our ability to meet on a continuing basis, through actual operating results, distribution levels, and diversity of stock and asset ownership, various qualification requirements imposed upon REITs by the Internal Revenue Code, the compliance with which will not be reviewed by DLA Piper LLP (US). Our ability to qualify as a REIT also requires that we satisfy certain asset tests, some of which depend upon the fair market values of assets that we own directly or indirectly. Such values may not be susceptible to a precise determination. Accordingly, no assurance can be given that the actual results of our operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT.

Taxation of REITs in General

As indicated above, our qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, various qualification requirements imposed upon REITs by the Internal Revenue Code. The material qualification requirements are summarized below under “—Requirements for Qualification—General.” While we intend to operate so that we qualify as a REIT, no assurance can be given that the Internal Revenue Service will not challenge our qualification, or that we will be able to operate in accordance with the REIT requirements in the future. See “—Failure to Qualify.”

Provided that we qualify as a REIT, generally we will be entitled to a deduction for distributions that we pay and therefore will not be subject to federal corporate income tax on our taxable income that is currently distributed to our stockholders. This treatment substantially eliminates the “double taxation” at the corporate and stockholder levels that generally results from investment in a corporation. In general, the income that we generate is taxed only at the stockholder level upon distribution to our stockholders.

For tax years through 2010, most domestic stockholders that are individuals, trusts or estates are taxed on corporate distributions at a maximum rate of 15% (the same as long-term capital gains). With limited exceptions, however, distributions from us or from other entities that are taxed as REITs are generally not eligible for this rate and will continue to be taxed at rates applicable to ordinary income, which will be as high as 35% through 2010. See “—Taxation of Stockholders—Taxation of Taxable Domestic Stockholders—Distributions.”

Any net operating losses and other tax attributes generally do not pass through to our stockholders, subject to special rules for certain items such as the capital gains that we recognize. See “—Taxation of Stockholders.”

If we qualify as a REIT, we will nonetheless be subject to federal tax in the following circumstances:

— We will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains.

— We may be subject to the “alternative minimum tax” on our items of tax preference, including any deductions of net operating losses.

— If we have net income from prohibited transactions, which are, in general, sales or other dispositions of inventory or property held primarily for sale to customers in the ordinary

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course of business, other than foreclosure property, such income will be subject to a 100% tax. See “—Prohibited Transactions” and “—Foreclosure Property” below.

— If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as “foreclosure property,” we may thereby avoid the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction), but the income from the sale or operation of the property may be subject to corporate income tax at the highest applicable rate (currently 35%).

— If we should fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below, but nonetheless maintain our qualification as a REIT because we satisfy other requirements, we will be subject to a 100% tax on an amount based on the magnitude of the failure, as adjusted to reflect the profit margin associated with our gross income.

— If we should violate the asset tests (other than certain de minimis violations) or other requirements applicable to REITs, as described below, and yet maintain our qualification as a REIT because there is reasonable cause for the failure and other applicable requirements are met, we may be subject to an excise tax. In that case, the amount of the excise tax will be at least $50,000 per failure, and, in the case of certain asset test failures, will be determined as the amount of net income generated by the assets in question multiplied by the highest corporate tax rate (currently 35%) if that amount exceeds $50,000 per failure.

— If we should fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for such year, (b) 95% of our REIT capital gain net income for such year, and (c) any undistributed taxable income from prior periods, we would be subject to a nondeductible 4% excise tax on the excess of the required distribution over the sum of (i) the amounts that we actually distributed and (ii) the amounts we retained and upon which we paid income tax at the corporate level.

— We may be required to pay monetary penalties to the Internal Revenue Service in certain circumstances, including if we fail to meet record keeping requirements intended to monitor our compliance with rules relating to the composition of a REIT’s stockholders, as described below in “—Requirements for Qualification—General.”

— A 100% tax may be imposed on transactions between us and a TRS (as described below) that do not reflect arms’-length terms.

— If we acquire appreciated assets from a corporation that is not a REIT (i.e., a corporation taxable under subchapter C of the Internal Revenue Code) in a transaction in which the adjusted tax basis of the assets in our hands is determined by reference to the adjusted tax basis of the assets in the hands of the subchapter C corporation, we may be subject to tax on such appreciation at the highest corporate income tax rate then applicable if we subsequently recognize gain on a disposition of any such assets during the ten-year period following their acquisition from the subchapter C corporation.

— The earnings of our subsidiaries, including any subsidiary we may elect to treat as a TRS, are subject to federal corporate income tax to the extent that such subsidiaries are subchapter C corporations.

In addition, we and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state and local and foreign income, property and other taxes on our assets and operations. We could also be subject to tax in situations and on transactions not presently contemplated.

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Requirements for Qualification—General

The Internal Revenue Code defines a REIT as a corporation, trust or association:

(1) that is managed by one or more trustees or directors;

(2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;

(3) that would be taxable as a domestic corporation but for its election to be subject to tax as a REIT;

(4) that is neither a financial institution nor an insurance company subject to specific provisions of the Internal Revenue Code;

(5) the beneficial ownership of which is held by 100 or more persons;

(6) in which, during the last half of each taxable year, not more than 50% in value of the outstanding stock is owned, directly or indirectly, by five or fewer “individuals” (as defined in the Internal Revenue Code to include specified tax-exempt entities);

(7) that elects to be taxed as a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements that must be met to elect and maintain REIT qualification; and

(8) that meets other tests described below, including with respect to the nature of its income and assets.

The Internal Revenue Code provides that conditions (1) through (4) must be met during the entire taxable year, and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a shorter taxable year. Conditions (5) and (6) need not be met during a corporation’s initial tax year as a REIT. (In our case, we intend to elect to be taxed as a REIT commencing with our taxable year ended December 31, 2010.) Our charter provides restrictions regarding the ownership and transfer of our shares, which are intended to assist us in satisfying the share ownership requirements described in conditions (5) and (6) above.

We believe that we will issue in this offering common stock with sufficient diversity of ownership to satisfy conditions (5) and (6). In addition, our charter restricts the ownership and transfer of our stock so that we should continue to satisfy these requirements. The provisions of our charter restricting the ownership and transfer of our common stock are described in “Description of Shares—Restriction on Ownership of Shares.”

To monitor compliance with the share ownership requirements, we generally are required to maintain records regarding the actual ownership of our shares. To do so, we must demand written statements each year from the record holders of significant percentages of our stock pursuant to which the record holders must disclose the actual owners of the shares (i.e., the persons required to include our distributions in their gross income). We must maintain a list of those persons failing or refusing to comply with this demand as part of our records. We could be subject to monetary penalties if we fail to comply with these record-keeping requirements. If you fail or refuse to comply with the demands, you will be required by Treasury regulations to submit a statement with your tax return disclosing your actual ownership of our shares and other information.

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In addition, a corporation generally may not elect to become a REIT unless its taxable year is the calendar year. We intend to adopt December 31 as our year-end, and thereby satisfy this requirement.

The Internal Revenue Code provides relief from violations of the REIT gross income requirements, as described below under “—Income Tests,” in cases where a violation is due to reasonable cause and not to willful neglect, and other requirements are met, including the payment of a penalty tax that is based upon the magnitude of the violation. In addition, certain provisions of the Internal Revenue Code extend similar relief in the case of certain violations of the REIT asset requirements (see “—Asset Tests” below) and other REIT requirements, again provided that the violation is due to reasonable cause and not willful neglect, and other conditions are met, including the payment of a penalty tax. If we fail to satisfy any of the various REIT requirements, there can be no assurance that these relief provisions would be available to enable us to maintain our qualification as a REIT, and, if such relief provisions are available, the amount of any resultant penalty tax could be substantial.

Effect of Subsidiary Entities

Ownership of Partnership Interests. An unincorporated domestic entity, such as a partnership, limited liability company, or trust, that has a single owner generally is not treated as an entity separate from its parent for federal income tax purposes. An unincorporated domestic entity with two or more owners generally is treated as a partnership for federal income tax purposes. If we are a partner in an entity that is treated as a partnership for federal income tax purposes, Treasury regulations provide that we are deemed to own our proportionate share of the partnership’s assets, and to earn our proportionate share of the partnership’s income, for purposes of the asset and gross income tests applicable to REITs. Our proportionate share of a partnership’s assets and income is based on our capital interest in the partnership (except that for purposes of the 10% value test, our proportionate share of the partnership’s assets is based on our proportionate interest in the equity and certain debt securities issued by the partnership). In addition, the assets and gross income of the partnership are deemed to retain the same character in our hands. Thus, our proportionate share of the assets and items of income of any of our subsidiary partnerships will be treated as our assets and items of income for purposes of applying the REIT requirements. For any period of time that we own 100% of our Operating Partnership, all of the Operating Partnership’s assets and income will be deemed to be ours for federal income tax purposes.

Disregarded Subsidiaries. If we own a corporate subsidiary that is a “qualified REIT subsidiary,” that subsidiary is generally disregarded for federal income tax purposes, and all of the subsidiary’s assets, liabilities and items of income, deduction and credit are treated as our assets, liabilities and items of income, deduction and credit, including for purposes of the gross income and asset tests applicable to REITs. A qualified REIT subsidiary is any corporation, other than a TRS (as described below), that is directly or indirectly wholly owned by a REIT. Other entities that are wholly owned by us, including single member limited liability companies that have not elected to be taxed as corporations for federal income tax purposes, are also generally disregarded as separate entities for federal income tax purposes, including for purposes of the REIT income and asset tests. Disregarded subsidiaries, along with any partnerships in which we hold an equity interest, are sometimes referred to herein as “pass-through subsidiaries.”

In the event that a disregarded subsidiary of ours ceases to be wholly owned—for example, if any equity interest in the subsidiary is acquired by a person other than us or another disregarded subsidiary of ours—the subsidiary’s separate existence would no longer be disregarded for federal income tax purposes. Instead, the subsidiary would have multiple owners and would be treated as either a partnership or a taxable corporation. Such an event could, depending on the circumstances, adversely affect our

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ability to satisfy the various asset and gross income requirements applicable to REITs, including the requirement that REITs generally may not own, directly or indirectly, more than 10% of the securities of another corporation. See “—Asset Tests” and “—Income Tests.”

Taxable Corporate Subsidiaries.  In the future we may jointly elect with any of our subsidiary corporations, whether or not wholly owned, to treat such subsidiary corporations as taxable REIT subsidiaries, or TRSs. A REIT is permitted to own up to 100% of the stock of one or more TRSs. A domestic TRS is a fully taxable corporation that may earn income that would not be qualifying income if earned directly by the parent REIT. The subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation with respect to which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. We generally may not own more than 10% of the securities of a taxable corporation, as measured by voting power or value, unless we and such corporation elect to treat such corporation as a TRS. Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.

The separate existence of a TRS or other taxable corporation is not ignored for federal income tax purposes. Accordingly, a TRS or other taxable corporation generally would be subject to corporate income tax on its earnings, which may reduce the cash flow that we and our subsidiaries generate in the aggregate, and may reduce our ability to make distributions to our stockholders.

We are not treated as holding the assets of a TRS or other taxable subsidiary corporation or as receiving any income that the subsidiary earns. Rather, the stock issued by a taxable subsidiary to us is an asset in our hands, and we treat the distributions paid to us from such taxable subsidiary, if any, as income. This treatment can affect our income and asset test calculations, as described below. Because we do not include the assets and income of TRSs or other taxable subsidiary corporations in determining our compliance with the REIT requirements, we may use such entities to undertake indirectly activities that the REIT rules might otherwise preclude us from doing directly or through pass-through subsidiaries. For example, we may use TRSs or other taxable subsidiary corporations to conduct activities that give rise to certain categories of income such as management fees or activities that would be treated in our hands as prohibited transactions.

Certain restrictions imposed on TRSs are intended to ensure that such entities will be subject to appropriate levels of U.S. federal income taxation. First, a TRS with a debt-equity ratio in excess of 1.5 to 1 may not deduct interest payments made in any year to an affiliated REIT to the extent that such payments exceed, generally, 50% of the TRS’s adjusted taxable income for that year (although the TRS may carry forward to, and deduct in, a succeeding year the disallowed interest amount if the 50% test is satisfied in that year). In addition, if amounts are paid to a REIT or deducted by a TRS due to transactions between the REIT and a TRS that exceed the amount that would be paid to or deducted by a party in an arm’s-length transaction, the REIT generally will be subject to an excise tax equal to 100% of such excess. We intend to scrutinize all of our transactions with any of our subsidiaries that are treated as a TRS in an effort to ensure that we do not become subject to this excise tax; however, we cannot assure you that we will be successful in avoiding this excise tax.

We may own TRSs that are organized outside of the United States. For example, we may hold certain investments and instruments through TRSs to the extent that direct ownership by us could jeopardize our compliance with the REIT qualification requirements, and we may make TRS elections with respect to certain offshore issuers of CDOs and/or other instruments to the extent that we do not own 100% of the offshore issuer’s equity. Special rules apply in the case of income earned by a taxable subsidiary corporation that is organized outside of the United States. Depending upon the nature of the subsidiary’s income, the parent REIT may be required to include in its taxable income an amount equal to

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its share of the subsidiary’s income, without regard to whether, or when, such income is distributed by the subsidiary. See “—Income Tests” below. A TRS that is organized outside of the United States may, depending upon the nature of its operations, be subject to little or no federal income tax. There is a specific exemption from federal income tax for non-U.S. corporations that restrict their activities in the United States to trading stock and securities (or any activity closely related thereto) for their own account, whether such trading (or such other activity) is conducted by the corporation or its employees through a resident broker, commission agent, custodian or other agent. We currently expect that any offshore TRSs will rely on that exemption or otherwise operate in a manner so that they will generally not be subject to federal income tax on their net income at the entity level.

Income Tests

In order to qualify as a REIT, we must satisfy two gross income requirements on an annual basis. First, at least 75% of our gross income for each taxable year, excluding gross income from sales of inventory or dealer property in “prohibited transactions,” generally must be derived from investments relating to real property or mortgages on real property, including interest income derived from mortgage loans secured by real property (including certain types of mortgage-backed securities), “rents from real property,” distributions received from other REITs, and gains from the sale of real estate assets, as well as specified income from temporary investments. Second, at least 95% of our gross income in each taxable year, excluding gross income from prohibited transactions and certain hedging transactions, must be derived from some combination of such income from investments in real property (i.e., income that qualifies under the 75% income test described above), as well as other distributions, interest, and gain from the sale or disposition of stock or securities, which need not have any relation to real property.

Interest income constitutes qualifying mortgage interest for purposes of the 75% income test (as described above) to the extent that the obligation upon which such interest is paid is secured by a mortgage on real property. If we receive interest income with respect to a mortgage loan that is secured by both real property and other property, and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property on the date that we acquired or originated the mortgage loan, the interest income will be apportioned between the real property and the other collateral, and our income from the arrangement will qualify for purposes of the 75% income test only to the extent that the interest is allocable to the real property. Even if a loan is not secured by real property, or is undersecured, the income that it generates may nonetheless qualify for purposes of the 95% income test.

To the extent that the terms of a loan provide for contingent interest that is based on the cash proceeds realized upon the sale of the property securing the loan (a “shared appreciation provision”), income attributable to the participation feature will be treated as gain from sale of the underlying property, which generally will be qualifying income for purposes of both the 75% and 95% gross income tests provided that the real property is not held as inventory or dealer property or primarily for sale to customers in the ordinary course of business. To the extent that we derive interest income from a mortgage loan or income from the rental of real property (discussed below) where all or a portion of the amount of interest or rental income payable is contingent, such income generally will qualify for purposes of the gross income tests only if it is based upon the gross receipts or sales and not on the net income or profits of the borrower or lessee. This limitation does not apply, however, where the borrower or lessee leases substantially all of its interest in the property to tenants or subtenants to the extent that the rental income derived by the borrower or lessee, as the case may be, would qualify as rents from real property had we earned the income directly.

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Rents received by us will qualify as “rents from real property” in satisfying the gross income requirements described above only if several conditions are met. If rent is partly attributable to personal property leased in connection with a lease of real property, the portion of the rent that is attributable to the personal property will not qualify as “rents from real property” unless it constitutes 15% or less of the total rent received under the lease. In addition, the amount of rent must not be based in whole or in part on the income or profits of any person. Amounts received as rent, however, generally will not be excluded from rents from real property solely by reason of being based on fixed percentages of gross receipts or sales. Moreover, for rents received to qualify as “rents from real property,” we generally must not operate or manage the property or furnish or render services to the tenants of such property, other than through an “independent contractor” from which we derive no revenue. We are permitted, however, to perform services that are “usually or customarily rendered” in connection with the rental of space for occupancy only and which are not otherwise considered rendered to the occupant of the property. In addition, we may directly or indirectly provide noncustomary services to tenants of our properties without disqualifying all of the rent from the property if the payments for such services do not exceed 1% of the total gross income from the properties. For purposes of this test, we are deemed to have received income from such non-customary services in an amount at least 150% of the direct cost of providing the services. Moreover, we are generally permitted to provide services to tenants or others through a TRS without disqualifying the rental income received from tenants for purposes of the income tests. Also, rental income will qualify as rents from real property only to the extent that we do not directly or constructively hold a 10% or greater interest, as measured by vote or value, in the lessee’s equity.

We may directly or indirectly receive distributions from TRSs or other corporations that are not REITs or qualified REIT subsidiaries. These distributions generally are treated as dividend income to the extent of the earnings and profits of the distributing corporation. Such distributions will generally constitute qualifying income for purposes of the 95% gross income test, but not for purposes of the 75% gross income test. Any distributions that we receive from a REIT, however, will be qualifying income for purposes of both the 95% and 75% income tests.

We and our subsidiaries may enter into hedging transactions with respect to one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including interest rate swap agreements, interest rate cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent provided by Treasury regulations, any income from a hedging transaction we entered into (1) in the normal course of our business primarily to manage risk of interest rate, inflation and/or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets, which is clearly identified as specified in Treasury regulations before the closing of the day on which it was acquired, originated, or entered into, including gain from the sale or disposition of such a transaction, or (2) primarily to manage risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests which is clearly identified as such before the closing of the day on which it was acquired, originated, or entered to, will not constitute gross income for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of the 75% or 95% gross income tests. We intend to structure any hedging transactions in a manner that does not jeopardize our qualification as a REIT.

If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may still qualify as a REIT for such year if we are entitled to relief under applicable provisions of the Internal Revenue Code. These relief provisions will be generally available if (1) our failure to meet these tests was due to reasonable cause and not due to willful neglect and (2) following our identification of the

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failure to meet the 75% or 95% gross income test for any taxable year, we file a schedule with the Internal Revenue Service setting forth each item of our gross income for purposes of the 75% or 95% gross income test for such taxable year in accordance with Treasury regulations yet to be issued. It is not possible to state whether we would be entitled to the benefit of these relief provisions in all circumstances. If these relief provisions are inapplicable to a particular set of circumstances, we will not qualify as a REIT. As discussed above under “—Taxation of REITs in General,” even where these relief provisions apply, the Internal Revenue Code imposes a tax based upon the amount by which we fail to satisfy the particular gross income test.

Asset Tests

At the close of each calendar quarter, we must also satisfy four tests relating to the nature of our assets. First, at least 75% of the value of our total assets must be represented by some combination of “real estate assets,” cash, cash items, U.S. government securities, and, under some circumstances, stock or debt instruments purchased with new capital. For this purpose, real estate assets include interests in real property, such as land, buildings, leasehold interests in real property, stock of other corporations that qualify as REITs, and some kinds of mortgage-backed securities and mortgage loans. Assets that do not qualify for purposes of the 75% test are subject to the additional asset tests described below.

Second, the value of any one issuer’s securities that we own may not exceed 5% of the value of our total assets.

Third, we may not own more than 10% of any one issuer’s outstanding securities, as measured by either voting power or value. The 5% and 10% asset tests do not apply to securities of TRSs and qualified REIT subsidiaries and the 10% asset test does not apply to “straight debt” having specified characteristics and to certain other securities described below. Solely for purposes of the 10% asset test, the determination of our interest in the assets of a partnership or limited liability company in which we own an interest will be based on our proportionate interest in any securities issued by the partnership or limited liability company, excluding for this purpose certain securities described in the Internal Revenue Code. Fourth, the aggregate value of all securities of taxable REIT subsidiaries that we hold may not exceed 25% of the value of our total assets.

Notwithstanding the general rule, as noted above, that for purposes of the REIT income and asset tests we are treated as owning our proportionate share of the underlying assets of a subsidiary partnership, if we hold indebtedness issued by a partnership, the indebtedness will be subject to, and may cause a violation of, the asset tests unless the indebtedness is a qualifying mortgage asset or other conditions are met. Similarly, although stock of another REIT is a qualifying asset for purposes of the REIT asset tests, any non-mortgage debt that is issued by another REIT may not so qualify (such debt, however, will not be treated as “securities” for purposes of the 10% asset test, as explained below).

Certain relief provisions are available to REITs to satisfy the asset requirements or to maintain REIT qualification notwithstanding certain violations of the asset and other requirements. One such provision allows a REIT which fails one or more of the asset requirements to nevertheless maintain its REIT qualification if (1) the REIT provides the Internal Revenue Service with a description of each asset causing the failure, (2) the failure is due to reasonable cause and not willful neglect, (3) the REIT pays a tax equal to the greater of (a) $50,000 per failure, and (b) the product of the net income generated by the assets that caused the failure multiplied by the highest applicable corporate tax rate (currently 35%), and (4) the REIT either disposes of the assets causing the failure within six months after the last day of the

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quarter in which it identifies the failure, or otherwise satisfies the relevant asset tests within that time frame.

In the case of de minimis violations of the 10% and 5% asset tests, a REIT may maintain its qualification despite a violation of such requirements if (1) the value of the assets causing the violation does not exceed the lesser of 1% of the REIT’s total assets and $10,000,000, and (2) the REIT either disposes of the assets causing the failure within six months after the last day of the quarter in which it identifies the failure, or the relevant tests are otherwise satisfied within that time frame.

Certain securities will not cause a violation of the 10% asset test described above. Such securities include instruments that constitute “straight debt,” which includes, among other things, securities having certain contingency features. A security does not qualify as “straight debt” where a REIT (or a controlled TRS of the REIT) owns other securities of the same issuer which do not qualify as straight debt, unless the value of those other securities constitute, in the aggregate, 1% or less of the total value of that issuer’s outstanding securities. In addition to straight debt, the Internal Revenue Code provides that certain other securities will not violate the 10% asset test. Such securities include (1) any loan made to an individual or an estate, (2) certain rental agreements pursuant to which one or more payments are to be made in subsequent years (other than agreements between a REIT and certain persons related to the REIT under attribution rules), (3) any obligation to pay rents from real property, (4) securities issued by governmental entities that are not dependent in whole or in part on the profits of (or payments made by) a non-governmental entity, (5) any security (including debt securities) issued by another REIT, and (6) any debt instrument issued by a partnership if the partnership’s income is of a nature that it would satisfy the 75% gross income test described above under “—Income Tests.” In applying the 10% asset test, a debt security issued by a partnership is not taken into account to the extent, if any, of the REIT’s proportionate interest in the equity and certain debt securities issued by that partnership.

We believe that our holdings of securities and other assets will comply with the foregoing REIT asset requirements, and we intend to monitor compliance on an ongoing basis.

No independent appraisals will be obtained to support our conclusions as to the value of our total assets or the value of any particular security or securities. Moreover, values of some assets, including instruments issued in securitization transactions, may not be susceptible to a precise determination, and values are subject to change in the future. Furthermore, the proper classification of an instrument as debt or equity for federal income tax purposes may be uncertain in some circumstances, which could affect the application of the REIT asset requirements. Accordingly, there can be no assurance that the Internal Revenue Service will not contend that our interests in our subsidiaries or in the securities of other issuers will not cause a violation of the REIT asset tests.

If we should fail to satisfy the asset tests at the end of a calendar quarter, such a failure would not cause us to lose our REIT qualification if we (1) satisfied the asset tests at the close of the preceding calendar quarter and (2) the discrepancy between the value of our assets and the asset requirements was not wholly or partly caused by an acquisition of non-qualifying assets, but instead arose from changes in the market value of our assets. If the condition described in (2) were not satisfied, we still could avoid disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which it arose or by making use of relief provisions described below.

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Annual Distribution Requirements

In order to qualify as a REIT, we are required to make distributions, other than capital gain distributions, to our stockholders in an amount at least equal to:

(a) the sum of

(1) 90% of our “REIT taxable income,” computed without regard to our net capital gains and the dividends paid deduction, and

(2) 90% of our net income, if any, (after tax) from foreclosure property (as described below), minus

(b) the sum of specified items of non-cash income.

In addition, if we were to recognize “built-in-gain” (as defined below) on the disposition of any assets acquired from a “C” corporation in a transaction in which our basis in the assets was determined by reference to the “C” corporation’s basis (for instance, if the assets were acquired in a tax-free reorganization), we would be required to distribute at least 90% of the built-in-gain recognized net of the tax we would pay on such gain. “Built-in-gain” is the excess of (i) the fair market value of an asset (measured at the time of acquisition) over (ii) the basis of the asset (measured at the time of acquisition).

We generally must make these distributions in the taxable year to which they relate, or in the following taxable year if either (i) declared before we timely file our tax return for the year and if paid with or before the first regular distribution payment after such declaration; or (ii) declared in October, November or December of the taxable year, payable to stockholders of record on a specified day in any such month, and actually paid before the end of January of the following year. The distributions under clause (i) are taxable to the holders of our common stock in the year in which paid, and the distributions in clause (ii) are treated as paid on December 31 of the prior taxable year. In both instances, these distributions relate to our prior taxable year for purposes of the 90% distribution requirement.

To the extent that we distribute at least 90%, but less than 100%, of our “REIT taxable income,” as adjusted, we will be subject to tax at ordinary corporate tax rates on the retained portion. We may elect to retain, rather than distribute, our net long-term capital gains and pay tax on such gains. In this case, we could elect for our stockholders to include their proportionate shares of such undistributed long-term capital gains in income, and to receive a corresponding credit for their share of the tax that we paid. Our stockholders would then increase their adjusted basis of their stock by the difference between (a) the amounts of capital gain distributions that we designated and that they include in their taxable income, minus (b) the tax that we paid on their behalf with respect to that income.

To the extent that we have available net operating losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. Such losses, however, will generally not affect the character, in the hands of our stockholders, of any distributions that are actually made as ordinary dividends or capital gains. See “—Taxation of Stockholders—Taxation of Taxable Domestic Stockholders—Distributions.”

If we should fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for such year, (b) 95% of our REIT capital gain net income for such year, and (c) any undistributed taxable income from prior periods, we would be subject to a non-deductible 4% excise tax

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on the excess of such required distribution over the sum of (x) the amounts actually distributed, plus (y) the amounts of income we retained and on which we have paid corporate income tax.

It is possible that, from time to time, we may not have sufficient cash to meet the distribution requirements due to timing differences between (a) our actual receipt of cash, including receipt of distributions from our subsidiaries, and (b) our inclusion of items in income for federal income tax purposes. In the event that such timing differences occur, in order to meet the distribution requirements, it might be necessary for us to arrange for short-term, or possibly long-term, borrowings, or to pay distributions in the form of taxable in-kind distributions of property.

We may be able to rectify a failure to meet the distribution requirements for a year by paying “deficiency dividends” to stockholders in a later year, which may be included in our deduction for distributions paid for the earlier year. In this case, we may be able to avoid losing REIT qualification or being taxed on amounts distributed as deficiency dividends. We will be required to pay interest and a penalty based on the amount of any deduction taken for deficiency dividends.

Failure to Qualify

If we fail to satisfy one or more requirements for REIT qualification other than the gross income or asset tests, we could avoid disqualification if our failure is due to reasonable cause and not to willful neglect and we pay a penalty of $50,000 for each such failure. Relief provisions are available for failures of the gross income tests and asset tests, as described above in “—Income Tests” and “—Asset Tests.”

If we fail to qualify for taxation as a REIT in any taxable year, and the relief provisions described above do not apply, we would be subject to tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. We cannot deduct distributions to stockholders in any year in which we are not a REIT, nor would we be required to make distributions in such a year. In this situation, to the extent of current and accumulated earnings and profits, distributions to domestic stockholders that are individuals, trusts and estates will generally be taxable at capital gains rates (through 2010). In addition, subject to the limitations of the Internal Revenue Code, corporate distributees may be eligible for the dividends received deduction. Unless we are entitled to relief under specific statutory provisions, we would also be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year during which we lost qualification. It is not possible to state whether, in all circumstances, we would be entitled to this statutory relief.

Prohibited Transactions

Net income that we derive from a prohibited transaction is subject to a 100% tax. The term “prohibited transaction” generally includes a sale or other disposition of property (other than foreclosure property, as discussed below) that is held primarily for sale to customers in the ordinary course of a trade or business. We intend to conduct our operations so that no asset that we own (or are treated as owning) will be treated as, or as having been, held for sale to customers, and that a sale of any such asset will not be treated as having been in the ordinary course of our business. Whether property is held “primarily for sale to customers in the ordinary course of a trade or business” depends on the particular facts and circumstances. No assurance can be given that any property that we sell will not be treated as property held for sale to customers, or that we can comply with certain safe-harbor provisions of the Internal Revenue Code that would prevent such treatment. The 100% tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will potentially be subject to tax in the hands of the corporation at regular corporate rates, nor does the tax apply to sales that qualify for a safe harbor as described in Section 857(b)(6) of the Internal Revenue Code.

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Foreclosure Property

Foreclosure property is real property and any personal property incident to such real property (1) that we acquire as the result of having bid on the property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after a default (or upon imminent default) on a lease of the property or a mortgage loan held by us and secured by the property, (2) for which we acquired the related loan or lease at a time when default was not imminent or anticipated, and (3) with respect to which we made a proper election to treat the property as foreclosure property. We generally will be subject to tax at the maximum corporate rate (currently 35%) on any net income from foreclosure property, including any gain from the disposition of the foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% gross income test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property. To the extent that we receive any income from foreclosure property that does not qualify for purposes of the 75% gross income test, we intend to make an election to treat the related property as foreclosure property.

Derivatives and Hedging Transactions

We and our subsidiaries may enter into hedging transactions with respect to interest rate exposure on one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including the use of derivative instruments such as interest rate swap agreements, interest rate cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent provided by Treasury regulations, any income from a hedging transaction we entered into (1) in the normal course of our business primarily to manage risk of interest rate, inflation and/or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets, which is clearly identified as specified in Treasury regulations before the closing of the day on which it was acquired, originated, or entered into, including gain from the sale or disposition of such a transaction, and (2) primarily to manage risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests which is clearly identified as such before the closing of the day on which it was acquired, originated, or entered into, will not constitute gross income for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of the 75% or 95% gross income tests. We intend to structure any hedging transactions in a manner that does not jeopardize our qualification as a REIT. We may conduct some or all of our hedging activities through our TRS or other corporate entity, the income from which may be subject to federal income tax, rather than by participating in the arrangements directly or through pass-through subsidiaries. No assurance can be given, however, that our hedging activities will not give rise to income that does not qualify for purposes of either or both of the REIT gross income tests, or that our hedging activities will not adversely affect our ability to satisfy the REIT qualification requirements.

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Taxation of Stockholders

Taxation of Taxable Domestic Stockholders

Distributions. So long as we qualify as a REIT, the distributions that we make to our taxable domestic stockholders out of current or accumulated earnings and profits that we do not designate as capital gain distributions will generally be taken into account by stockholders as ordinary income and will not be eligible for the dividends received deduction for corporations. With limited exceptions, our distributions are not eligible for taxation at the preferential income tax rates (i.e., the 15% maximum federal rate through 2010) for qualified distributions received by domestic stockholders that are individuals, trusts and estates from taxable C corporations. Such stockholders, however, are taxed at the preferential rates on distributions designated by and received from REITs to the extent that the distributions are attributable to:

— income retained by the REIT in the prior taxable year on which the REIT was subject to corporate level income tax (less the amount of tax);

— distributions received by the REIT from TRSs or other taxable C corporations; or

— income in the prior taxable year from the sales of “built-in gain” property acquired by the REIT from C corporations in carryover basis transactions (less the amount of corporate tax on such income).

Distributions that we designate as capital gain dividends will generally be taxed to our stockholders as long-term capital gains, to the extent that such distributions do not exceed our actual net capital gain for the taxable year, without regard to the period for which the stockholder that receives such distribution has held its stock. We may elect to retain and pay taxes on some or all of our net long-term capital gains, in which case provisions of the Internal Revenue Code will treat our stockholders as having received, solely for tax purposes, our undistributed capital gains, and the stockholders will receive a corresponding credit for taxes that we paid on such undistributed capital gains. See “—Taxation of KBS Legacy Partners REIT—Annual Distribution Requirements.” Corporate stockholders may be required to treat up to 20% of some capital gain distributions as ordinary income. Long-term capital gains are generally taxable at maximum federal rates of 15% (through 2010) in the case of stockholders that are individuals, trusts and estates, and 35% in the case of stockholders that are corporations. Capital gains attributable to the sale of depreciable real property held for more than 12 months are subject to a 25% maximum federal income tax rate for taxpayers who are taxed as individuals, to the extent of previously claimed depreciation deductions.

Distributions in excess of our current and accumulated earnings and profits will generally represent a return of capital and will not be taxable to a stockholder to the extent that the amount of such distributions do not exceed the adjusted basis of the stockholder’s shares in respect of which the distributions were made. Rather, the distribution will reduce the adjusted basis of the stockholder’s shares. To the extent that such distributions exceed the adjusted basis of a stockholder’s shares, the stockholder generally must include such distributions in income as long-term capital gain, or short-term capital gain if the shares have been held for one year or less. In addition, any distribution that we declare in October, November or December of any year and that is payable to a stockholder of record on a specified date in any such month will be treated as both paid by us and received by the stockholder on December 31 of such year, provided that we actually pay the distribution before the end of January of the following calendar year.

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To the extent that we have available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. See “—Taxation of KBS Legacy Partners REIT —Annual Distribution Requirements.” Such losses, however, are not passed through to stockholders and do not offset income of stockholders from other sources, nor would such losses affect the character of any distributions that we make, which are generally subject to tax in the hands of stockholders to the extent that we have current or accumulated earnings and profits.

Dispositions of Our Stock.  In general, capital gains recognized by individuals, trusts and estates upon the sale or disposition of our stock will be subject to a maximum federal income tax rate of 15% (through 2010) if the stock is held for more than one year, and will be taxed at ordinary income rates (of up to 35% through 2010) if the stock is held for one year or less. Gains recognized by stockholders that are corporations are subject to federal income tax at a maximum rate of 35%, whether or not such gains are classified as long-term capital gains. Capital losses recognized by a stockholder upon the disposition of our stock that was held for more than one year at the time of disposition will be considered long-term capital losses, and are generally available only to offset capital gain income of the stockholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year). In addition, any loss upon a sale or exchange of shares of our stock by a stockholder who has held the shares for six months or less, after applying holding period rules, will be treated as a long-term capital loss to the extent of distributions that we make that are required to be treated by the stockholder as long-term capital gain.

If an investor recognizes a loss upon a subsequent disposition of our stock or other securities in an amount that exceeds a prescribed threshold, it is possible that the provisions of Treasury regulations involving “reportable transactions” could apply, with a resulting requirement to separately disclose the loss-generating transaction to the Internal Revenue Service. These regulations, though directed towards “tax shelters,” are broadly written and apply to transactions that would not typically be considered tax shelters. The Internal Revenue Code imposes significant penalties for failure to comply with these requirements. You should consult your tax advisor concerning any possible disclosure obligation with respect to the receipt or disposition of our stock or securities or transactions that we might undertake directly or indirectly. Moreover, you should be aware that we and other participants in the transactions in which we are involved (including their advisors) might be subject to disclosure or other requirements pursuant to these regulations.

Passive Activity Losses and Investment Interest Limitations.  Distributions that we make and gain arising from the sale or exchange by a domestic stockholder of our stock will not be treated as passive activity income. As a result, stockholders will not be able to apply any “passive losses” against income or gain relating to our stock. To the extent that distributions we make do not constitute a return of capital, they will be treated as investment income for purposes of computing the investment interest limitation.

Taxation of Foreign Stockholders

The following is a summary of certain U.S. federal income and estate tax consequences of the ownership and disposition of our stock applicable to non-U.S. holders. A “non-U.S. holder” is any person other than:

— a citizen or resident of the United States;

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— a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, or of any state thereof, or the District of Columbia;

— an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source; or

— a trust if a United States court is able to exercise primary supervision over the administration of such trust and one or more United States fiduciaries have the authority to control all substantial decisions of the trust.

If a partnership, including for this purpose any entity that is treated as a partnership for U.S. federal income tax purposes, holds our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. An investor that is a partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the acquisition, ownership and disposition of our common stock.

The following discussion is based on current law, and is for general information only. It addresses only selected, and not all, aspects of U.S. federal income and estate taxation.

Ordinary Dividends.  The portion of distributions received by non-U.S. holders (1) that is payable out of our earnings and profits, (2) which is not attributable to our capital gains and (3) which is not effectively connected with a U.S. trade or business of the non-U.S. holder, will be subject to U.S. withholding tax at the rate of 30%, unless reduced or eliminated by treaty.

In general, non-U.S. holders will not be considered to be engaged in a U.S. trade or business solely as a result of their ownership of our stock. In cases where the dividend income from a non-U.S. holder’s investment in our stock is, or is treated as, effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business, the non-U.S. holder generally will be subject to U.S. federal income tax at graduated rates, in the same manner as domestic stockholders are taxed with respect to such distributions. Such income must generally be reported on a U.S. income tax return filed by or on behalf of the non-U.S. holder. The income may also be subject to the 30% branch profits tax in the case of a non-U.S. holder that is a corporation.

Non-Dividend Distributions.  Unless our stock constitutes a U.S. real property interest (a “USRPI”), distributions that we make that are not out of our earnings and profits will not be subject to U.S. income tax. If we cannot determine at the time a distribution is made whether or not the distribution will exceed current and accumulated earnings and profits, the distribution will be subject to withholding at the rate applicable to ordinary dividends. The non-U.S. holder may seek a refund from the Internal Revenue Service of any amounts withheld if it is subsequently determined that the distribution was, in fact, in excess of our current and accumulated earnings and profits. If our stock constitutes a USRPI, as described below, distributions that we make in excess of the sum of (a) the stockholder’s proportionate share of our earnings and profits, plus (b) the stockholder’s basis in its stock, will be taxed under the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, at the rate of tax, including any applicable capital gains rates, that would apply to a domestic stockholder of the same type (e.g., an individual or a corporation, as the case may be), and the collection of the tax will be enforced by a refundable withholding at a rate of 10% of the amount by which the distribution exceeds the stockholder’s share of our earnings and profits.

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Capital Gain Distributions.  Under FIRPTA, a distribution that we make to a non-U.S. holder, to the extent attributable to gains from dispositions of USRPIs that we held directly or through pass-through subsidiaries, or USRPI capital gains, will, except as described below, be considered effectively connected with a U.S. trade or business of the non-U.S. holder and will be subject to U.S. income tax at the rates applicable to U.S. individuals or corporations, without regard to whether we designate the distribution as a capital gain distribution. See above under “—Taxation of Foreign Stockholders—Ordinary Dividends,” for a discussion of the consequences of income that is effectively connected with a U.S. trade or business. In addition, we will be required to withhold tax equal to 35% of the amount of distributions to the extent the distributions constitute USRPI capital gains. Distributions subject to FIRPTA may also be subject to a 30% branch profits tax in the hands of a non-U.S. holder that is a corporation. A distribution is not a USRPI capital gain if we held an interest in the underlying asset solely as a creditor. Capital gain distributions received by a non-U.S. holder that are attributable to dispositions of our assets other than USRPIs are not subject to U.S. federal income or withholding tax, unless (1) the gain is effectively connected with the non-U.S. holder’s U.S. trade or business, in which case the non-U.S. holder would be subject to the same treatment as U.S. holders with respect to such gain, or (2) the non- U.S. holder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, in which case the non-U.S. holder will incur a 30% tax on his or her capital gains.

A capital gain distribution that would otherwise have been treated as a USRPI capital gain will not be so treated or be subject to FIRPTA, and generally will not be treated as income that is effectively connected with a U.S. trade or business, and instead will be treated in the same manner as an ordinary dividend (see “—Taxation of Foreign Stockholders—Ordinary Dividends”), if (1) the capital gain distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States, and (2) the recipient non-U.S. holder does not own more than 5% of that class of stock at any time during the year ending on the date on which the capital gain distribution is received. At the time you purchase shares in this offering, our shares will not be publicly traded and we can give you no assurance that our shares will ever be publicly traded on an established securities market. Therefore, these rules will not apply to our capital gain distributions.

Dispositions of Our Stock.  Unless our stock constitutes a USRPI, a sale of our stock by a non-U.S. holder generally will not be subject to U.S. taxation under FIRPTA. Our stock will not be treated as a USRPI if less than 50% of our assets throughout a prescribed testing period consist of interests in real property located within the United States, excluding, for this purpose, interests in real property solely in a capacity as a creditor.

Even if the foregoing 50% test is not met, our stock nonetheless will not constitute a USRPI if we are a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT, less than 50% of value of which is held directly or indirectly by non-U.S. holders at all times during a specified testing period. We believe that we will be a domestically-controlled qualified investment entity, and that a sale of our stock should not be subject to taxation under FIRPTA. If our stock constitutes a USRPI and we do not constitute a domestically controlled qualified investment entity, but our stock becomes “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, a non-U.S. holder’s sale of our stock nonetheless would not be subject to tax under FIRPTA as a sale of a USRPI, provided that the selling non-U.S. holder held 5% or less of the outstanding stock at all times during a specified testing period. However, as mentioned above, we can give you no assurance that our shares will ever be publicly traded on an established securities market.

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If gain on the sale of our stock were subject to taxation under FIRPTA, the non-U.S. holder would be required to file a U.S. federal income tax return and would be subject to the same treatment as a U.S. stockholder with respect to such gain, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of non-resident alien individuals, and the purchaser of the stock could be required to withhold 10% of the purchase price and remit such amount to the Internal Revenue Service.

Gain from the sale of our stock that would not otherwise be subject to FIRPTA will nonetheless be taxable in the United States to a non-U.S. holder in two cases: (1) if the non-U.S. holder’s investment in our stock is effectively connected with a U.S. trade or business conducted by such non-U.S. holder, the non-U.S. holder will be subject to the same treatment as a U.S. stockholder with respect to such gain, or (2) if the non-U.S. holder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, the nonresident alien individual will be subject to a 30% tax on the individual’s capital gain. In addition, even if we are a domestically controlled qualified investment entity, upon disposition of our stock, a non-U.S. holder may be treated as having gain from the sale or exchange of a USRPI if the non-U.S. holder (1) disposes of our common stock within a 30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been treated as gain from the sale or exchange of a USRPI and (2) acquires, or enters into a contract or option to acquire, other shares of our common stock within 30 days after such ex-dividend date.

Estate Tax.  If our stock is owned or treated as owned by an individual who is not a citizen or resident (as specially defined for U.S. federal estate tax purposes) of the United States at the time of such individual’s death, the stock will be includable in the individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise, and may therefore be subject to U.S. federal estate tax.

Taxation of Tax-Exempt Stockholders

Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from federal income taxation. However, they may be subject to taxation on their unrelated business taxable income, or UBTI. While some investments in real estate may generate UBTI, the Internal Revenue Service has ruled that dividend distributions from a REIT to a tax-exempt entity do not constitute UBTI. Based on that ruling, and provided that (1) a tax-exempt stockholder has not held our stock as “debt financed property” within the meaning of the Internal Revenue Code (i.e., where the acquisition or holding of the property is financed through a borrowing by the tax-exempt stockholder), and (2) our stock is not otherwise used in an unrelated trade or business, distributions that we make and income from the sale of our stock generally should not give rise to UBTI to a tax-exempt stockholder.

Tax-exempt stockholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code are subject to different UBTI rules, which generally require such stockholders to characterize distributions that we make as UBTI.

In certain circumstances, a pension trust that owns more than 10% of our stock (by value) could be required to treat a percentage of its distributions as UBTI, if we are a “pension-held REIT.” We will not be a pension-held REIT unless either (1) one pension trust owns more than 25% of the value of our stock, or (2) a group of pension trusts, each individually holding more than 10% of the value of our stock,

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collectively owns more than 50% of our stock. Certain restrictions on ownership and transfer of our stock should generally prevent a tax-exempt entity from owning more than 10% of the value of our stock and should generally prevent us from becoming a pension-held REIT.

Tax-exempt stockholders are urged to consult their tax advisors regarding the federal, state, local and foreign income and other tax consequences of owning our stock.

Backup Withholding and Information Reporting

We will report to our domestic stockholders and the Internal Revenue Service the amount of dividends paid during each calendar year and the amount of any tax withheld. Under the backup withholding rules, a domestic stockholder may be subject to backup withholding with respect to dividends paid unless the holder is a corporation or comes within other exempt categories and, when required, demonstrates this fact or provides a taxpayer identification number or social security number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A domestic stockholder that does not provide his or her correct taxpayer identification number or social security number may also be subject to penalties imposed by the Internal Revenue Service. Backup withholding is not an additional tax. In addition, we may be required to withhold a portion of a capital gain distribution to any domestic stockholder who fails to certify its non-foreign status.

We must report annually to the Internal Revenue Service and to each non-U.S. stockholder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. stockholder resides under the provisions of an applicable income tax treaty. A non-U.S. stockholder may be subject to backup withholding unless applicable certification requirements are met.

Payment of the proceeds of a sale of our common stock within the U.S. is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that it is a non-U.S. stockholder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. person) or the holder otherwise establishes an exemption. Payment of the proceeds of a sale of our common stock conducted through certain U.S. related financial intermediaries is subject to information reporting (but not backup withholding) unless the financial intermediary has documentary evidence in its records that the beneficial owner is a non-U.S. stockholder and specified conditions are met or an exemption is otherwise established. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such holder’s U.S. federal income tax liability provided the required information is furnished to the Internal Revenue Service.

Other Tax Considerations

Legislative or Other Actions Affecting REITs

The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to the federal tax laws and interpretations thereof could adversely affect an investment in our stock.

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State, Local and Foreign Taxes

We and our subsidiaries and stockholders may be subject to state, local or foreign taxation in various jurisdictions including those in which we or they transact business, own property or reside. We may own real property assets located in numerous jurisdictions, and may be required to file tax returns in some or all of those jurisdictions. Our state, local or foreign tax treatment and that of our stockholders may not conform to the federal income tax treatment discussed above. We may own foreign real estate assets and pay foreign property taxes, and dispositions of foreign property or operations involving, or investments in, foreign real estate assets may give rise to foreign income or other tax liability in amounts that could be substantial. Any foreign taxes that we incur do not pass through to stockholders as a credit against their U.S. federal income tax liability. Prospective investors should consult their tax advisors regarding the application and effect of state, local and foreign income and other tax laws on an investment in our stock.

ERISA CONSIDERATIONS

The following is a summary of some considerations associated with an investment in our shares by a qualified employee pension benefit plan or an individual retirement account (IRA). This summary is based on provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code, each as amended through the date of this prospectus, and the relevant regulations, opinions and other authority issued by the Department of Labor and the Internal Revenue Service. We cannot assure you that there will not be adverse tax or labor decisions or legislative, regulatory or administrative changes that would significantly modify the statements expressed herein. Any such changes may apply to transactions entered into prior to the date of their enactment.

Each fiduciary of an employee pension benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or any other retirement plan or account subject to Section 4975 of the Internal Revenue Code, such as an IRA, seeking to invest plan assets in our shares must consider, taking into account the facts and circumstances of each such plan or IRA (Benefit Plan), among other matters:

— whether the investment is consistent with the applicable provisions of ERISA and the Internal Revenue Code;

— whether, under the facts and circumstances pertaining to the Benefit Plan in question, the fiduciary’s responsibility to the plan has been satisfied;

— whether the investment will produce an unacceptable amount of “unrelated business taxable income” (“UBTI”) to the Benefit Plan (see “Federal Income Tax Considerations — Taxation of Stockholders — Taxation of Tax-Exempt Stockholders”); and

— the need to value the assets of the Benefit Plan annually.

Under ERISA, a plan fiduciary’s responsibilities include the following duties:

— to act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits to them, as well as defraying reasonable expenses of plan administration;

— to invest plan assets prudently;

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— to diversify the investments of the plan, unless it is clearly prudent not to do so;

— to ensure sufficient liquidity for the plan;

— to ensure that plan investments are made in accordance with plan documents; and

— to consider whether an investment would constitute or give rise to a prohibited transaction under ERISA or the Internal Revenue Code.

ERISA also requires that, with certain exceptions, the assets of an employee benefit plan be held in trust and that the trustee, or a duly authorized named fiduciary or investment manager, have exclusive authority and discretion to manage and control the assets of the plan.

Prohibited Transactions

Generally, both ERISA and the Internal Revenue Code prohibit Benefit Plans from engaging in certain transactions involving plan assets with specified parties, such as sales or exchanges or leasing of property, loans or other extensions of credit, furnishing goods or services, or transfers to, or use of, plan assets. The specified parties are referred to as “parties-in-interest” under ERISA and as “disqualified persons” under the Internal Revenue Code. These definitions generally include both parties owning threshold percentage interests in an investment entity and “persons providing services” to the Benefit Plan, as well as employer sponsors of the Benefit Plan, fiduciaries and other individuals or entities affiliated with the foregoing. For this purpose, a person generally is a fiduciary with respect to a Benefit Plan if, among other things, the person has discretionary authority or control with respect to plan assets or provides investment advice for a fee with respect to plan assets. Under Department of Labor regulations, a person shall be deemed to be providing investment advice if that person renders advice as to the advisability of investing in our shares, and that person regularly provides investment advice to the Benefit Plan pursuant to a mutual agreement or understanding that such advice will serve as the primary basis for investment decisions, and that the advice will be individualized for the Benefit Plan based on its particular needs. Thus, if we are deemed to hold plan assets, our management could be characterized as fiduciaries with respect to such assets, and each would be deemed to be a party-in-interest under ERISA and a disqualified person under the Internal Revenue Code with respect to investing Benefit Plans. Whether or not we are deemed to hold plan assets, if we or our affiliates are affiliated with a Benefit Plan investor, we might be a disqualified person or party-in-interest with respect to such Benefit Plan investor, resulting in a prohibited transaction merely upon investment by such Benefit Plan in our shares.

Plan Asset Considerations

In order to determine whether an investment in our shares by a Benefit Plan creates or gives rise to the potential for either prohibited transactions or a commingling of assets as referred to above, a fiduciary must consider whether an investment in our shares will cause our assets to be treated as assets of the investing Benefit Plan. Neither ERISA nor the Internal Revenue Code defines the term “plan assets”; however, regulations promulgated by the Department of Labor provide guidelines as to whether, and under what circumstances, the underlying assets of an entity will be deemed to constitute assets of a Benefit Plan when the plan invests in that entity (Plan Assets Regulation). Under the Plan Assets Regulation, the assets of an entity in which a Benefit Plan makes an equity investment will generally be deemed to be assets of the Benefit Plan, unless one of the exceptions to this general rule applies.

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In the event that our underlying assets were treated as the assets of investing Benefit Plans, our management would be treated as fiduciaries with respect to each Benefit Plan stockholder and an investment in our shares might constitute an ineffective delegation of fiduciary responsibility to KBS Capital Advisors, our advisor, and expose the fiduciary of the Benefit Plan to co-fiduciary liability under ERISA for any breach by KBS Capital Advisors of the fiduciary duties mandated under ERISA. Further, if our assets are deemed to be “plan assets,” an investment by an IRA in our shares might be deemed to result in an impermissible commingling of IRA assets with other property.

If KBS Capital Advisors or its affiliates were treated as fiduciaries with respect to Benefit Plan stockholders, the prohibited transaction restrictions of ERISA and the Internal Revenue Code would apply to any transaction involving our assets. These restrictions could, for example, require that we avoid transactions with persons that are affiliated with or related to us or our affiliates or require that we restructure our activities in order to obtain an administrative exemption from the prohibited transaction restrictions. Alternatively, we might have to provide Benefit Plan stockholders with the opportunity to sell their shares to us or we might dissolve.

If a prohibited transaction were to occur, the Internal Revenue Code imposes an excise tax equal to 15% of the amount involved and authorizes the Internal Revenue Service to impose an additional 100% excise tax if the prohibited transaction is not “corrected” in a timely manner. These taxes would be imposed on any disqualified person who participates in the prohibited transaction. In addition, KBS Capital Advisors and possibly other fiduciaries of Benefit Plan stockholders subject to ERISA who permitted the prohibited transaction to occur or who otherwise breached their fiduciary responsibilities (or a non-fiduciary participating in a prohibited transaction) could be required to restore to the Benefit Plan any profits they realized as a result of the transaction or breach and make good to the Benefit Plan any losses incurred by the Benefit Plan as a result of the transaction or breach. With respect to an IRA that invests in our shares, the occurrence of a prohibited transaction involving the individual who established the IRA, or his or her beneficiary, would cause the IRA to lose its tax-exempt status under Section 408(e)(2) of the Internal Revenue Code.

The Plan Assets Regulation provides that the underlying assets of an entity such as a REIT will be treated as assets of a Benefit Plan investing therein unless the entity satisfies one of the exceptions to the general rule. We believe that we will satisfy one or more of the exceptions.

Exception for “Publicly-Offered Securities.”  If a Benefit Plan acquires “publicly-offered securities,” the assets of the issuer of the securities will not be deemed to be “plan assets” under the Plan Assets Regulation. A publicly-offered security must be:

— sold as part of a public offering registered under the Securities Act of 1933, as amended, and be part of a class of securities registered under the Securities Exchange Act of 1934, as amended, within a specified time period;

— part of a class of securities that is owned by 100 or more persons who are independent of the issuer and one another; and

— “freely transferable.”

Our shares are being sold as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act of 1933 and are part of a class that will be registered under the Securities Exchange Act of 1934 within the specified period. In addition, we anticipate having in

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excess of 100 independent stockholders; however, having 100 independent stockholders is not a condition to our selling shares in this offering.

Whether a security is “freely transferable” depends upon the particular facts and circumstances. The Plan Assets Regulation provides several examples of restrictions on transferability that, absent unusual circumstances, will not prevent the rights of ownership in question from being considered “freely transferable” if the minimum investment is $10,000 or less. Where the minimum investment in a public offering of securities is $10,000 or less, the presence of the following restrictions on transfer will not ordinarily affect a determination that such securities are “freely transferable”:

— any restriction on, or prohibition against, any transfer or assignment that would either result in a termination or reclassification of the entity for federal or state tax purposes or that would violate any state or federal statute, regulation, court order, judicial decree or rule of law;

— any requirement that not less than a minimum number of shares or units of such security be transferred or assigned by any investor, provided that such requirement does not prevent transfer of all of the then remaining shares or units held by an investor;

— any prohibition against transfer or assignment of such security or rights in respect thereof to an ineligible or unsuitable investor; and

— any requirement that reasonable transfer or administrative fees be paid in connection with a transfer or assignment.

We have been structured with the intent to satisfy the “freely transferable” requirement set forth in the Plan Assets Regulation with respect to our shares, although there is no assurance that our shares will meet such requirement. Our shares are subject to certain restrictions on transfer intended to ensure that we continue to qualify for federal income tax treatment as a REIT and to comply with state securities laws and regulations with respect to investor suitability. The minimum investment in our shares is less than $10,000; thus, these restrictions should not cause the shares to be deemed not “freely transferable.”

If our common stock is held by 100 or more independent stockholders, and assuming that no other facts and circumstances other than those referred to in the preceding paragraphs exist that restrict transferability of shares of our common stock and the offering takes place as described in this prospectus, shares of our common stock should constitute “publicly-offered securities” and, accordingly, we believe that our underlying assets should not be considered “plan assets” under the Plan Assets Regulation.

Exception for Insignificant Participation by Benefit Plan Investors.  The Plan Assets Regulation provides that the assets of an entity will not be deemed to be the assets of a Benefit Plan if equity participation in the entity by employee benefit plans, including Benefit Plans, is not significant. The Plan Assets Regulation provides that equity participation in an entity by Benefit Plan investors is “significant” if at any time 25% or more of the value of any class of equity interest is held by Benefit Plan investors. The term “Benefit Plan investors” is defined for this purpose under ERISA Section 3(42) and includes any employee benefit plan subject to Part 4 of ERISA, any plan subject Section 4975 of the Internal Revenue Code, and any entity whose underlying assets include plan assets by reasons of a plan’s investment in such entity. In calculating the value of a class of equity interests, the value of any equity interests held by us or any of our affiliates must be excluded. It is not clear whether we will qualify for this exception since we do expect to have equity participation by “Benefit Plan investors” that may be in excess of 25%, which would be deemed to be significant, as defined above.

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Exception for Operating Companies.  The Plan Assets Regulation provides an exception with respect to securities issued by an operating company, which includes a “real estate operating company” or a “venture capital operating company.” Generally, we will be deemed to be a real estate operating company if during the relevant valuation periods at least 50% of our assets are invested in real estate that is managed or developed and with respect to which we have the right to participate substantially in management or development activities. To constitute a venture capital operating company, 50% or more of our assets must be invested in “venture capital investments” during the relevant valuation periods. A venture capital investment is an investment in an operating company, including a “real estate operating company,” as to which the investing entity has or obtains direct management rights. If an entity satisfies these requirements on the date it first makes a long-term investment (the “initial investment date”), or at any time during the entity’s first annual valuation period, it will be considered a real estate operating company for the entire period beginning on the initial investment date and ending on the last day of the first annual valuation period. Because this is a blind pool offering, we cannot assure you that we will be a real estate or venture capital operating company within the meaning of the Plan Assets Regulations.

Other Prohibited Transactions

Regardless of whether the shares qualify for the “publicly-offered securities” exception of the Plan Assets Regulation, a prohibited transaction could occur if we, KBS Capital Advisors, any selected broker-dealer or any of their affiliates is a fiduciary (within the meaning of Section 3(21) of ERISA) with respect to any Benefit Plan purchasing our shares. Accordingly, unless an administrative or statutory exemption applies, shares should not be purchased by a Benefit Plan with respect to which any of the above persons is a fiduciary. A person is a fiduciary with respect to a Benefit Plan under Section 3(21) of ERISA if, among other things, the person has discretionary authority or control with respect to the Benefit Plan or “plan assets” or provides investment advice for a fee with respect to “plan assets.” Under a regulation issued by the Department of Labor, a person shall be deemed to be providing investment advice if that person renders advice as to the advisability of investing in our shares and that person regularly provides investment advice to the Benefit Plan pursuant to a mutual agreement or understanding (written or otherwise) (1) that the advice will serve as the primary basis for investment decisions and (2) that the advice will be individualized for the Benefit Plan based on its particular needs.

Annual Valuation

A fiduciary of an employee benefit plan subject to ERISA is required to determine annually the fair market value of each asset of the plan as of the end of the plan’s fiscal year and to file a report reflecting that value with the Department of Labor. When the fair market value of any particular asset is not available, the fiduciary is required to make a good faith determination of that asset’s fair market value, assuming an orderly liquidation at the time the determination is made. In addition, a trustee or custodian of an IRA must provide an IRA participant with a statement of the value of the IRA each year. In discharging its obligation to value assets of a plan, a fiduciary subject to ERISA must act consistently with the relevant provisions of the plan and the general fiduciary standards of ERISA.

Unless and until our shares are listed on a national securities exchange, we do not expect that a public market for our shares will develop. To date, neither the Internal Revenue Service nor the Department of Labor has promulgated regulations specifying how a plan fiduciary should determine the fair market value of shares when the fair market value of such shares is not determined in the marketplace. Therefore, to assist fiduciaries in fulfilling their valuation and annual reporting responsibilities, we intend to have our advisor prepare annual reports of the estimated value of our shares.

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We expect that we will engage our advisor to value our shares, though in the future we may hire a third-party valuation firm for that purpose. Until we have completed our offering stage, our advisor has indicated that it intends to use the most recent price paid to acquire a share in the primary offering (ignoring purchase price discounts for certain categories of purchasers) or a follow-on public or private offering as its estimated per share value of our shares. Although this approach to valuing our shares would represent the most recent price at which most investors are willing to purchase shares in an offering, this reported value is likely to differ from the price at which a stockholder could resell his or her shares because (i) there will be no public trading market for the shares at the time such valuation is made; (ii) the estimated value will not reflect, and will not be derived from, the fair market value of the properties we may acquire, nor will it represent the amount of net proceeds that would result from an immediate liquidation of those assets, because the amount of proceeds available for investment from an offering will be net of selling commissions, dealer manager fees, other organization and offering costs and acquisition fees and expenses; (iii) the estimated value will not take into account how market fluctuations affect the value of investments we may make, including how the current disruptions in the financial and real estate markets may affect the values of those investments; and (iv) the estimated value will not take into account how developments related to individual assets we may acquire may have increased or decreased the value of our portfolio. We will consider our offering stage complete when we are no longer offering equity securities – whether through this offering or follow-on public or private offerings – and have not done so for 18 months. (For purposes of this definition, we will not consider an “equity offering” to include offerings on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan or the redemption of interests in the Operating Partnership).

When determining the estimated per share value of our shares by methods other than the last price paid to acquire a share in an offering, our advisor, or another firm we choose for that purpose, will estimate the value of our shares based upon a number of assumptions that may not be accurate or complete. Specifically, we expect that the value of our investments in real estate will be determined using either a direct capitalization or a discounted cash flow analysis that will employ internally prepared cash flow estimates, initial and/or terminal capitalization rates within historical average ranges and discount rates that fall within ranges that the firm performing the valuation believes are used by similar investors. We expect that the capitalization rate ranges and discount rate ranges will be obtained from third-party services and the capitalization rate ranges will be gathered for specific metro areas and applied on a property-by-property basis. To the extent that relevant data is available, the value of our real estate assets may also be estimated by taking into account the relative prices paid in connection with comparable real estate transactions in the markets where our properties are located. Although we believe direct capitalization, discounted cash flow analysis and the use of comparable transaction data are all industry standards and acceptable valuation methodologies to determine fair value in accordance with generally accepted accounting principals, the estimated values for our investments in real estate may not represent current market values. We expect our notes payable would be valued using a similar methodology using estimates of cash flows based on the remaining loan terms and on estimates of current market interest rates for instruments with similar characteristics. Our other assets and liabilities would generally be valued at their book value, except that certain assets and liabilities would be excluded from the calculation to the extent they were already considered in the real estate or other valuations. We do not currently anticipate obtaining appraisals for our investments and, accordingly, the estimates should not be viewed as an accurate reflection of the fair market value of our investments nor will they represent the amount of net proceeds that would result from an immediate sale of our assets. For these reasons, the estimated valuations should not be utilized for any purpose other than to assist plan fiduciaries in fulfilling their annual valuation and reporting responsibilities. Even after our advisor no longer uses the most recent offering price as the estimated value of our shares, you should be aware of the following:

— the estimated values may not be realized by us or by you upon liquidation (in part because estimated values do not necessarily indicate the price at which assets could be sold and because the estimates may not take into account the expenses of selling our assets);

— you may not realize these values if you were to attempt to sell your shares; and

— the estimated values, or the method used to establish values, may not comply with the ERISA or IRA requirements described above.

DESCRIPTION OF SHARES

Our charter authorizes the issuance of 1,010,000,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock with a par value of $0.01 per share and 10,000,000 shares are designated as preferred stock with a par value of $0.01 per share. In addition, our board of directors may amend our charter to increase or decrease the amount of our authorized shares. As of the

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date of this prospectus, 20,000 shares of our common stock are issued and outstanding, and no shares of preferred stock are issued and outstanding.

Common Stock

The holders of our common stock are entitled to one vote per share on all matters submitted to a stockholder vote, including the election of our directors. Our charter does not provide for cumulative voting in the election of our directors. Therefore, the holders of a majority of our outstanding common shares can elect our entire board of directors. Unless applicable law requires otherwise, and except as our charter may provide with respect to any series of preferred stock that we may issue in the future, the holders of our common stock will possess exclusive voting power.

Holders of our common stock will be entitled to receive such distributions as declared from time to time by our board of directors out of legally available funds, subject to any preferential rights of any preferred stock that we issue in the future. In any liquidation, each outstanding share of common stock entitles its holder to share (based on the percentage of shares held) in the assets that remain after we pay our liabilities and any preferential distributions owed to preferred stockholders. Holders of shares of our common stock will not have preemptive rights, which means that you will not have an automatic option to purchase any new shares that we issue, nor will holders of our shares of common stock have any preference, conversion, exchange, sinking fund, redemption or appraisal rights. Our common stock shall be non-assessable by us upon our receipt of the consideration for which our board of directors authorized its issuance.

Our board of directors has authorized the issuance of shares of our capital stock without certificates. We expect that, until our shares are listed on a national securities exchange, we will not issue shares in certificated form. Information regarding restrictions on the transferability of our shares that, under Maryland law, would otherwise have been required to appear on our share certificates will instead be furnished to stockholders upon request and without charge.

We maintain a stock ledger that contains the name and address of each stockholder and the number of shares that the stockholder holds. With respect to uncertificated stock, we will continue to treat the stockholder registered on our stock ledger as the owner of the shares until the new owner delivers a properly executed form to us, which form we will provide to any registered holder upon request.

Preferred Stock

Our charter authorizes our board of directors to designate and issue one or more classes or series of preferred stock without approval of our common stockholders if a majority of our independent directors who do not have an interest in the transaction approve the issuance. Our board of directors may determine the relative rights, preferences and privileges of each class or series of preferred stock so issued, which may be more beneficial than the rights, preferences and privileges attributable to our common stock. The issuance of preferred stock could have the effect of delaying or preventing a change in control. Our board of directors has no present plans to issue preferred stock but may do so at any time in the future without stockholder approval.

Meetings and Special Voting Requirements

An annual meeting of our stockholders will be held each year, at least 30 days after delivery of our annual report. Special meetings of stockholders may be called only upon the request of a majority of our directors, a majority of our independent directors, our chief executive officer, our president or upon

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the written request of stockholders holding at least 10% of the shares entitled to be cast on any issue proposed to be considered at the special meeting. Upon receipt of a written request of stockholders holding at least 10% of the shares of common stock entitled to be cast stating the purpose of the special meeting, our secretary will provide all of our common stockholders written notice of the meeting and the purpose of such meeting. The meeting must be held not less than 15 days or more than 60 days after the distribution of the notice of the meeting. The presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at any stockholder meeting constitutes a quorum. Unless otherwise provided by the Maryland General Corporation Law or our charter, the affirmative vote of a majority of all votes cast is necessary to take stockholder action. With respect to the election of directors, each candidate nominated for election to the board of directors must receive a majority of the votes present, in person or by proxy, in order to be elected. Therefore, if a nominee receives fewer “for” votes than “withhold” votes in an election, then the nominee will not be elected.

Our charter provides that the concurrence of the board is not required in order for the common stockholders to amend the charter, dissolve the corporation or remove directors. However, we have been advised that Maryland General Corporation Law does require board approval in order to amend our charter or dissolve. Without the approval of a majority of the shares of common stock entitled to vote on the matter, the board of directors may not:

— amend the charter to adversely affect the rights, preferences and privileges of the common stockholders;

— amend charter provisions relating to director qualifications, fiduciary duties, liability and indemnification, conflicts of interest, investment policies or investment restrictions;

— cause our liquidation or dissolution after our initial investment in property;

— sell all or substantially all of our assets other than in the ordinary course of business; or

— cause our merger or reorganization.

Our advisory agreement with KBS Capital Advisors will have a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of KBS Capital Advisors and us. Our independent directors will annually review our advisory agreement with KBS Capital Advisors. While the stockholders do not have the ability to vote to replace KBS Capital Advisors or to select a new advisor, stockholders do have the ability, by the affirmative vote of a majority of the shares entitled to vote on such matter, to remove a director from our board.

Advance Notice for Stockholder Nominations for Directors and Proposals of New Business

In order for a stockholder to nominate a director or propose new business at the annual stockholders’ meeting, our bylaws generally require that the stockholder give notice of the nomination or proposal not less than 90 days prior to the first anniversary of the date of the mailing of the notice for the preceding year’s annual stockholders’ meeting, unless such nomination or proposal is made pursuant to the company’s notice of the meeting or by or at the direction of our board of directors. Our bylaws contain a similar notice requirement in connection with nominations for directors at a special meeting of stockholders called for the purpose of electing one or more directors. Failure to comply with the notice provisions will make stockholders unable to nominate directors or propose new business.

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Restriction on Ownership of Shares

Ownership Limit

To maintain our REIT qualification, not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (including certain entities treated as individuals under the Internal Revenue Code) during the last half of each taxable year. In addition, at least 100 persons who are independent of us and each other must beneficially own our outstanding shares for at least 335 days per 12-month taxable year or during a proportionate part of a shorter taxable year. Each of the requirements specified in the two preceding sentences need not be met during a corporation’s initial tax year as a REIT. We intend to elect to be taxed as a REIT commencing with our taxable year that will end December 31, 2010. We may prohibit certain acquisitions and transfers of shares so as to ensure our continued qualification as a REIT under the Internal Revenue Code. However, we cannot assure you that this prohibition will be effective.

To help ensure that we meet these tests, our charter prohibits any person or group of persons from acquiring, directly or indirectly, beneficial ownership of more than 9.8% of our aggregate outstanding shares unless exempted by our board of directors. Our board of directors may waive this ownership limit with respect to a particular person if the board receives evidence that ownership in excess of the limit will not jeopardize our REIT status. For purposes of this provision, we treat corporations, partnerships and other entities as single persons.

Any attempted transfer of our shares that, if effective, would result in a violation of our ownership limit or would result in our shares being owned by fewer than 100 persons will be null and void and will cause the number of shares causing the violation to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries. The prohibited transferee will not acquire any rights in the shares. The automatic transfer will be deemed to be effective as of the close of business on the business day prior to the date of the attempted transfer. We will designate a trustee of the trust that will not be affiliated with us or the prohibited transferee. We will also name one or more charitable organizations as a beneficiary of the share trust.

Shares held in trust will remain issued and outstanding shares and will be entitled to the same rights and privileges as all other shares of the same class or series. The prohibited transferee will not benefit economically from any of the shares held in trust, will not have any rights to dividends or distributions and will not have the right to vote or any other rights attributable to the shares held in the trust. The trustee will receive all dividends and distributions on the shares held in trust and will hold such dividends or distributions in trust for the benefit of the charitable beneficiary. The trustee may vote any shares held in trust.

Within 20 days of receiving notice from us that any of our shares have been transferred to the trust for the charitable beneficiary, the trustee will sell those shares to a person designated by the trustee whose ownership of the shares will not violate the above restrictions. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited transferee and to the charitable beneficiary as follows. The prohibited transferee will receive the lesser of (i) the price paid by the prohibited transferee for the shares or, if the prohibited transferee did not give value for the shares in connection with the event causing the shares to be held in the trust (e.g., a gift, devise or other similar transaction), the market price (as defined in our charter) of the shares on the day of the event causing the shares to be held in the trust and (ii) the price received by the trustee from the sale or other disposition of the shares. Any net sale proceeds in excess of the amount

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payable to the prohibited transferee will be paid immediately to the charitable beneficiary. If, prior to our discovery that shares have been transferred to the trust, the shares are sold by the prohibited transferee, then (i) the shares shall be deemed to have been sold on behalf of the trust and (ii) to the extent that the prohibited transferee received an amount for the shares that exceeds the amount he was entitled to receive, the excess shall be paid to the trustee upon demand.

In addition, shares held in the trust for the charitable beneficiary will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift, the market price at the time of the devise or gift) and (ii) the market price on the date we, or our designee, accept the offer. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited transferee.

Any person who acquires or attempts to acquire shares in violation of the foregoing restrictions or who would have owned the shares that were transferred to any such trust must give us immediate written notice of such event, and any person who proposes or attempts to acquire or receive shares in violation of the foregoing restrictions must give us at least 15 days’ written notice prior to such transaction. In both cases, such persons shall provide to us such other information as we may request in order to determine the effect, if any, of such transfer on our status as a REIT.

The foregoing restrictions will continue to apply until our board of directors determines it is no longer in our best interest to continue to qualify as a REIT. The ownership limit does not apply to any underwriter in an offering of our shares or to a person or persons exempted from the ownership limit by our board of directors based upon appropriate assurances that our qualification as a REIT would not be jeopardized.

Within 30 days after the end of each taxable year, every owner of 5% or more of our outstanding capital stock will be asked to deliver to us a statement setting forth the number of shares owned directly or indirectly by such person and a description of how such person holds the shares. Each such owner shall also provide us with such additional information as we may request in order to determine the effect, if any, of his or her beneficial ownership on our status as a REIT and to ensure compliance with our ownership limit.

These restrictions could delay, defer or prevent a transaction or change in control of our company that might involve a premium price for our shares of common stock or otherwise be in the best interests of our stockholders.

Suitability Standards and Minimum Purchase Requirements

State securities laws and our charter require that purchasers of our common stock meet standards regarding (i) net worth or income and (ii) minimum purchase amounts. These standards are described above at “Suitability Standards” immediately following the cover page of this prospectus and below at “Plan of Distribution — Minimum Purchase Requirements.” Subsequent purchasers, i.e., potential purchasers of your shares, must also meet the net worth or income standards, and unless you are transferring all of your shares, you may not transfer your shares in a manner that causes you or your transferee to own fewer than the number of shares required to meet the minimum purchase requirements, except for the following transfers without consideration: transfers by gift, transfers by inheritance, intrafamily transfers, family dissolutions, transfers to affiliates and transfers by operation of law. These

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suitability and minimum purchase requirements are applicable until our shares of common stock are listed on a national securities exchange, and these requirements may make it more difficult for you to sell your shares.

Distributions

We expect to authorize and declare distributions based on daily record dates and expect to pay distributions on a monthly basis. We intend to use daily record dates for the determination of who is entitled to a distribution so that investors may generally begin earning distributions immediately upon our acceptance of their subscription.

Generally, our policy will be to pay distributions from cash flow from operations. However, we expect to have little, if any, cash flow from operations available for distribution until we make substantial investments. During our offering stage, when we may raise capital in this offering (and possibly future offerings) more quickly than we acquire income-producing assets and for some period after our offering stage, we may not be able to pay distributions solely from our cash flow from operations. Further, because we may receive income at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, we expect to look to third-party borrowings to fund our distributions. We may also fund such distributions from advances from our advisor or sponsors or from our advisor’s deferral of its fees under the advisory agreement.

Our distribution policy is not to use the proceeds of this offering to pay distributions. However, our board has the authority under our organizational documents, to the extent permitted by Maryland law, to pay distributions from any source, including proceeds from this offering or the proceeds from the issuance of securities in the future. If we pay distributions from offering proceeds, or from any sources other than our cash flow from operations, we will have less funds available for investment in properties, the overall return to our stockholders may be reduced and subsequent investors may experience dilution. There is no limit on the amount of distributions we can fund from sources other than from cash flows from operations.

To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. See “Federal Income Tax Considerations — Taxation of KBS Legacy Partners REIT — Annual Distribution Requirements.” Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.

Inspection of Books and Records

Our books and records may be inspected by our stockholders (or such stockholders’ designated representatives) at our principal office during normal business hours. The books and records for the Operating Partnership and KBS Legacy Partners Holdings LLC will be maintained on a consolidated basis with our records such that an inspection of our books and records will constitute an inspection of the books and records of the Operating Partnership and KBS Legacy Partners Holdings LLC. As a part of our books and records, we will maintain at our principal office an alphabetical list of the names of our common stockholders, along with their addresses and telephone numbers and the number of shares of common stock held by each of them. We will update this stockholder list at least quarterly and it will be available for inspection at our principal office by a common stockholder or his or her designated agent upon request of the stockholder. We will also mail this list to any common

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stockholder within ten days of receipt of his or her request. We may impose a reasonable charge for expenses incurred in reproducing such list. Stockholders, however, may not sell or use this list for commercial purposes. The purposes for which stockholders may request this list include matters relating to their voting rights.

If our advisor or our board of directors neglects or refuses to exhibit, produce or mail a copy of the stockholder list as requested, our advisor and/ or board, as the case may be, shall be liable to the common stockholder requesting the list for the costs, including attorneys’ fees, incurred by that stockholder for compelling the production of the stockholder list and any actual damages suffered by any common stockholder for the neglect or refusal to produce the list. It shall be a defense that the actual purpose and reason for the requests for inspection or for a copy of the stockholder list is not for a proper purpose but is instead for the purpose of securing such list of stockholders or other information for the purpose of selling such list or copies thereof, or of using the same for a commercial purpose other than in the interest of the applicant as a stockholder relative to the affairs of our company. We may require that the stockholder requesting the stockholder list represent that the request is not for a commercial purpose unrelated to the stockholder’s interest in our company. The remedies provided by our charter to stockholders requesting copies of the stockholder list are in addition to, and do not in any way limit, other remedies available to stockholders under federal law, or the law of any state.

Business Combinations

Under the Maryland General Corporation Law, business combinations between a Maryland corporation and an interested stockholder or the interested stockholder’s affiliate are prohibited for five years after the most recent date on which the stockholder becomes an interested stockholder. For this purpose, the term “business combination” includes mergers, consolidations, share exchanges, asset transfers and issuances or reclassifications of equity securities. An “interested stockholder” is defined for this purpose as: (1) any person who beneficially owns ten percent or more of the voting power of the corporation’s shares; or (2) an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of ten percent or more of the voting power of the then outstanding voting shares of the corporation. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which he otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any business combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least: (1) 80% of the votes entitled to be cast by holders of outstanding voting shares of the corporation; and (2) two-thirds of the votes entitled to be cast by holders of voting shares of the corporation other than shares held by the interested stockholder or its affiliate with whom the business combination is to be effected, or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under the Maryland General Corporation Law, for their shares in the

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form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

None of these provisions of the Maryland General Corporation Law will apply, however, to business combinations that are approved or exempted by the board of directors of the corporation prior to the time that the interested stockholder becomes an interested stockholder. We have opted out of these provisions by resolution of our board of directors. However, our board of directors may, by resolution, opt in to the business combination statute in the future.

Control Share Acquisitions

The Maryland General Corporation Law provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. “Control shares” are voting shares that, if aggregated with all other shares owned by the acquirer or with respect to which the acquirer has the right to vote or to direct the voting of, other than solely by virtue of revocable proxy, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:

— one-tenth or more but less than one-third;

— one-third or more but less than a majority; or

— a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. Except as otherwise specified in the statute, a “control share acquisition” means the acquisition of control shares.

Once a person who has made or proposes to make a control share acquisition has undertaken to pay expenses and has satisfied other required conditions, the person may compel the board of directors to call a special meeting of stockholders to be held within 50 days of the demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved for the control shares at the meeting or if the acquiring person does not deliver an “acquiring person statement” for the control shares as required by the statute, the corporation may redeem any or all of the control shares for their fair value, except for control shares for which voting rights have previously been approved. Fair value is to be determined for this purpose without regard to the absence of voting rights for the control shares, and is to be determined as of the date of the last control share acquisition or of any meeting of stockholders at which the voting rights for control shares are considered and not approved.

If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of these appraisal rights may not be less than the highest price per share paid in the control share acquisition. Some of the limitations and

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restrictions otherwise applicable to the exercise of dissenters’ rights do not apply in the context of a control share acquisition.

The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or to acquisitions approved or exempted by the charter or bylaws of the corporation.

Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our stock. There can be no assurance that this provision will not be amended or eliminated at any time in the future.

Subtitle 8

Subtitle 8 of Title 3 of the Maryland General Corporation Law permits a Maryland corporation with a class of equity securities registered under the Securities Exchange Act of 1934, as amended, and at least three independent directors, to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:

— a classified board,

— a two-thirds vote requirement for removing a director,

— a requirement that the number of directors be fixed only by vote of the directors,

— a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred, and

— a majority requirement for the calling of a special meeting of stockholders.

We have added provisions to our charter that prohibit us, until such time that our shares of common stock are listed on a national securities exchange, from electing to be subject to the provisions under Subtitle 8. Through provisions in our bylaws unrelated to Subtitle 8, we already vest in our board of directors the exclusive power to fix the number of directorships. Our bylaws may be amended by our stockholders or the board of directors.

Tender Offers by Stockholders

Our charter provides that any tender offer made by a stockholder, including any “mini-tender” offer, must comply with certain notice and disclosure requirements. These procedural requirements with respect to tender offers apply to any widespread solicitation for shares of our stock at firm prices for a limited time period.

In order for one of our stockholders to conduct a tender offer to another stockholder, our charter requires that the stockholder comply with Regulation 14D of the Securities Exchange Act of 1934, as amended, and provide the Company notice of such tender offer at least ten business days before initiating the tender offer. Pursuant to our charter, Regulation 14D would require any stockholder initiating a tender offer to provide:

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— Specific disclosure to stockholders focusing on the terms of the offer and information about the bidder;

— The ability to allow stockholders to withdraw tendered shares while the offer remains open;

— The right to have tendered shares accepted on a pro rata basis throughout the term of the offer if the offer is for less than all of our shares; and

— That all stockholders of the subject class of shares be treated equally.

In addition to the foregoing, there are certain ramifications to stockholders should they attempt to conduct a noncompliant tender offer. If any stockholder initiates a tender offer without complying with the provisions set forth above, in our sole discretion, we shall have the right to redeem such noncompliant stockholder’s shares and any shares acquired in such tender offer. The noncomplying stockholder shall also be responsible for all of our expenses in connection with that stockholder’s noncompliance.

Dividend Reinvestment Plan

We have adopted a dividend reinvestment plan pursuant to which you may elect to have your dividends and other distributions reinvested in additional shares of our common stock. The following discussion summarizes the principal terms of this plan. Appendix B to this prospectus contains the full text of our dividend reinvestment plan as is currently in effect.

Eligibility

All of our common stockholders are eligible to participate in our dividend reinvestment plan; however, we may elect to deny your participation in the dividend reinvestment plan if you reside in a jurisdiction or foreign country where, in our judgment, the burden or expense of compliance with applicable securities laws makes your participation impracticable or inadvisable.

At any time prior to the listing of our shares on a national stock exchange, you must cease participation in our dividend reinvestment plan if you no longer meet the suitability standards or cannot make the other investor representations set forth in the then-current prospectus or in the subscription agreement. Participants must agree to notify us promptly when they no longer meet these standards. See the “Suitability Standards” section of this prospectus (immediately following the cover page) and the form of subscription agreement attached hereto as Appendix A.

Election to Participate

You may elect to participate in the dividend reinvestment plan by completing the subscription agreement or other approved enrollment form available from the dealer manager or a participating broker-dealer. Your participation in the dividend reinvestment plan will begin with the next distribution made after receipt of your enrollment form. You can choose to have all or a portion of your distributions reinvested through the dividend reinvestment plan. You may also change the percentage of your distributions that will be reinvested at any time by completing a new enrollment form or other form provided for that purpose. You must make any election to increase your level of participation through your participating broker-dealer or the dealer manager.

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Stock Purchases

Shares will be purchased under the dividend reinvestment plan on the monthly distribution payment dates. The purchase of fractional shares is a permissible and likely result of the reinvestment of distributions under the dividend reinvestment plan.

The purchase price for shares purchased under the dividend reinvestment plan will initially be $9.50 per share. Once we establish an estimated value per share that is not based on the price to acquire a share in the primary offering or a follow-on public or private offering, shares issued pursuant to our dividend reinvestment plan will be priced at the estimated value per share of our common stock, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share not based on the price to acquire a share in the primary offering or a follow-on public or private offering upon the completion of our offering stage. We will consider our offering stage complete when we are no longer offering equity securities – whether through this offering or follow-on public or private offerings – and have not done so for 18 months. (For purposes of this definition, we will not consider “equity offerings” to include offerings on behalf of selling stockholders or offerings related to any dividend reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership.)

Account Statements

You or your designee will receive a confirmation of your purchases under the dividend reinvestment plan no less than quarterly. Your confirmation will disclose the following information:

— each distribution reinvested for your account during the period;

— the date of the reinvestment;

— the number and price of the shares purchased by you; and

— the total number of shares in your account.

In addition, within 90 days after the end of each calendar year, we will provide you with an individualized report on your investment, including the purchase dates, purchase price, number of shares owned and the amount of distributions made in the prior year. We will also provide to all participants in the plan, without charge, all supplements to and updated versions of this prospectus, as required under applicable securities laws. Furthermore, if we amend our dividend reinvestment plan, the amended plan must also provide that all material information regarding your distributions and the effect of reinvesting such distributions, including tax consequences thereof, will be provided to you at least annually.

Fees and Commissions and Use of Proceeds

No selling commissions or dealer manager fees will be payable on shares sold under the dividend reinvestment plan. We expect to use the net proceeds from the sale of shares under our dividend reinvestment plan for general corporate purposes, including, but not limited to, the following:

— the repurchase of shares under our share redemption program;

— reserves required by any financings of our investments;

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— acquisition of assets, which would include payment of acquisition fees to our advisor (see “Management Compensation”);

— the repayment of debt; or

— expenses relating to our investments, such as making capital improvements on real property we acquire.

We cannot predict with any certainty how much, if any, dividend reinvestment plan proceeds will be available for specific purposes.

Voting

You may vote all shares, including fractional shares, that you acquire through the dividend reinvestment plan.

Tax Consequences of Participation

If you elect to participate in the dividend reinvestment plan and are subject to federal income taxation, you will incur a tax liability for distributions allocated to you even though you have elected not to receive the distributions in cash but rather to have the distributions withheld and reinvested pursuant to the dividend reinvestment plan. Specifically, you will be treated as if you have received the distribution from us in cash and then applied such distribution to the purchase of additional shares. In addition, to the extent you purchase shares through our dividend reinvestment plan at a discount to their fair market value, you will be treated for tax purposes as receiving an additional distribution equal to the amount of the discount.

At least until we establish an estimated value per share not based on the last price paid to acquire a share in this offering or a follow-on public or private offering, we expect that (i) we will sell shares under the dividend reinvestment plan at $9.50 per share, (ii) no secondary trading market for our shares will develop and (iii) our advisor will estimate the fair market value of a share to be $10.00. Therefore, at least until we establish an estimated value per share not based on the last price paid to acquire a share in this offering or a follow-on public or private offering, participants in our dividend reinvestment plan will be treated as having received a distribution of $10.00 for each $9.50 reinvested by them under our dividend reinvestment plan. You will be taxed on the amount of such distribution as a dividend to the extent such distribution is from current or accumulated earnings and profits, unless we have designated all or a portion of the distribution as a capital gain distribution. See “Federal Income Tax Considerations — Taxation of Stockholders.” We will withhold 28% of the amount of dividends or distributions paid if you fail to furnish a valid taxpayer identification number, fail to properly report interest or distributions or fail to certify that you are not subject to withholding.

Termination of Participation

Once enrolled, you may continue to purchase shares under our dividend reinvestment plan until we have sold all of the shares registered in this offering, have terminated this offering or have terminated the dividend reinvestment plan. You may terminate your participation in the dividend reinvestment plan at any time by providing us with written notice. For your termination to be effective for a particular distribution, we must have received your notice of termination at least ten business days prior to the last day of the fiscal period to which the distribution relates. Any transfer of your shares will effect a termination of the participation of those shares in the dividend reinvestment plan. We will terminate your

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participation in the dividend reinvestment plan to the extent that a reinvestment of your distributions would cause you to violate the ownership limit contained in our charter, unless you have obtained an exemption from the ownership limit from our board of directors.

Amendment or Termination of Plan

We may amend or terminate the dividend reinvestment plan for any reason at any time upon ten days’ written notice to the participants. We may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to the participants.

Share Redemption Program

Our board of directors has adopted a share redemption program that may enable you to sell your shares of common stock to us in limited circumstances. In its sole discretion, our board of directors could choose to terminate the program or to amend its provisions without stockholder approval. Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” (as defined below) or “determination of incompetence” (as defined below), the prices at which we will redeem shares are as follows:

— The lower of $9.25 or 92.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least one year;

— The lower of $9.50 or 95.0% of the price paid to acquire the shares from us for stockholders who have held their shares for at least two years;

— The lower of $9.75 or 97.5% of the price paid to acquire the shares from us for stockholders who have held their shares for at least three years; and

— The lower of $10.00 or 100% of the price paid to acquire the shares from us for stockholders who have held their shares for at least four years.

Notwithstanding the above, once we establish an estimated value per share of our common stock that is not based on the price to acquire a share in our primary offering or a follow-on public or private offering, the redemption price per share for all stockholders would be equal to the estimated value per share, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share upon completion of our offering stage. We will consider our offering stage complete when we are no longer offering equity securities – whether through this offering or follow-on public or private offerings – and have not done so for 18 months. We would report this redemption price to you in our annual report and the three quarterly reports that we publicly file with the SEC. (For purposes of this definition, we will not consider “equity offerings” to include offerings on behalf of selling stockholders or offerings related to a dividend reinvestment plan, employee benefit plan or the redemption of interests in the Operating Partnership).

There are several limitations on our ability to redeem shares under the program:

— Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence,” we may not redeem shares unless the stockholder has held the shares for one year.

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— Our share redemption program limits the number of shares we may redeem to those that we could purchase with the net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year.

— During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.

— We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

We will redeem shares on the last business day of each month. The program administrator must receive your written request for redemption at least five business days before that date in order for us to repurchase your shares that month. If we could not repurchase all shares presented for redemption in any month, we would attempt to honor redemption requests on a pro rata basis. We will deviate from pro rata purchases in two minor ways: (i) if a pro rata redemption would result in you owning less than half of the minimum purchase amount described below under “Plan of Distribution — Minimum Purchase Requirements,” then we will redeem all of your shares; and (ii) if a pro rata redemption would result in you owning more than half but less than all of the minimum purchase amount, then we will not redeem any shares that would reduce your holdings below the minimum purchase amount. In the event that you were redeeming all of your shares, there would be no holding period requirement for shares purchased pursuant to our dividend reinvestment plan.

If we did not completely satisfy a stockholder’s redemption request at month-end because the program administrator did not receive the request in time or because of the restrictions on the number of shares we could redeem under the program, we would treat the unsatisfied portion of the redemption request as a request for redemption at the next redemption date funds are available for redemption unless the stockholder withdrew his or her request before the next date for redemptions. Any stockholder could withdraw a redemption request upon written notice to the program administrator if such notice were received by us at least five business days before the date for redemptions.

In several respects we would treat redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” differently from other redemptions:

— there is no one-year holding requirement;

— until we establish an estimated value per share, which we expect to be upon the completion of our offering stage (as described above), the redemption price is the amount paid to acquire the shares from us; and

— once we have established an estimated value per share, the redemption price would be the estimated value of the shares, as determined by our advisor or another firm chosen for that purpose.

In order for a disability to entitle a stockholder to the special redemption terms described above (a “qualifying disability”), (1) the stockholder would have to receive a determination of disability based upon a physical or mental condition or impairment arising after the date the stockholder acquired the shares to be redeemed, and (2) such determination of disability would have to be made by the governmental agency responsible for reviewing the disability retirement benefits that the stockholder

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could be eligible to receive (the “applicable governmental agency”). The “applicable governmental agencies” would be limited to the following: (i) if the stockholder paid Social Security taxes and, therefore, could be eligible to receive Social Security disability benefits, then the applicable governmental agency would be the Social Security Administration or the agency charged with responsibility for administering Social Security disability benefits at that time if other than the Social Security Administration; (ii) if the stockholder did not pay Social Security benefits and, therefore, could not be eligible to receive Social Security disability benefits, but the stockholder could be eligible to receive disability benefits under the Civil Service Retirement System (“CSRS”), then the applicable governmental agency would be the U.S. Office of Personnel Management or the agency charged with responsibility for administering CSRS benefits at that time if other than the Office of Personnel Management; or (iii) if the stockholder did not pay Social Security taxes and therefore could not be eligible to receive Social Security benefits but suffered a disability that resulted in the stockholder’s discharge from military service under conditions that were other than dishonorable and, therefore, could be eligible to receive military disability benefits, then the applicable governmental agency would be the Department of Veterans Affairs or the agency charged with the responsibility for administering military disability benefits at that time if other than the Department of Veterans Affairs.

Disability determinations by governmental agencies for purposes other than those listed above, including but not limited to worker’s compensation insurance, administration or enforcement of the Rehabilitation Act or Americans with Disabilities Act, or waiver of insurance premiums would not entitle a stockholder to the special redemption terms described above. Redemption requests following an award by the applicable governmental agency of disability benefits would have to be accompanied by: (1) the investor’s initial application for disability benefits and (2) a Social Security Administration Notice of Award, a U.S. Office of Personnel Management determination of disability under CSRS, a Department of Veterans Affairs record of disability-related discharge or such other documentation issued by the applicable governmental agency that we would deem acceptable and would demonstrate an award of the disability benefits.

We understand that the following disabilities do not entitle a worker to Social Security disability benefits:

— disabilities occurring after the legal retirement age; and

— disabilities that do not render a worker incapable of performing substantial gainful activity.

Therefore, such disabilities would not qualify for the special redemption terms, except in the limited circumstances when the investor would be awarded disability benefits by the other “applicable governmental agencies” described above.

In order for a determination of incompetence or incapacitation (a “determination of incompetence”) to entitle a stockholder to the special redemption terms, a state or federal court located in the United States must declare, determine or find the stockholder to be (i) mentally incompetent to enter into a contract, to prepare a will or to make medical decisions or (ii) mentally incapacitated. In both cases such determination must be made by the court after the date the stockholder acquired the shares to be redeemed. A determination of incompetence or incapacitation by any other person or entity, or for any purpose other than those listed above, will not entitle a stockholder to the special redemption terms. Redemption requests following a “determination of incompetence” must be accompanied by the court order, determination or certificate declaring the stockholder incompetent or incapacitated.

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Our board of directors may amend, suspend or terminate the program upon 30 days’ notice. We may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to the stockholders. During this offering, we would also include this information in a prospectus supplement or post-effective amendment to the registration statement, as required under federal securities laws.

Our share redemption program only provides stockholders a limited ability to redeem shares for cash until a secondary market develops for our shares or until our shares are listed on a stock exchange, at which time the program would terminate. No such market presently exists nor are the shares currently listed on an exchange, and we cannot assure you that any market for your shares will ever develop or that we will list the share on a stock exchange. Shares redeemed under the share redemption program will become unissued shares and will not be resold unless such sales are pursuant to transactions that are registered or exempt from registration under applicable securities laws.

Qualifying stockholders who desire to redeem their shares would have to give written notice to us by completing a redemption request form and returning it as follows:

— Regular mail: KBS Legacy Partners Apartment REIT, Inc., c/o DST Systems, Inc., PO Box 219015, Kansas City, MO 64121-9015.

— Overnight mail: KBS Legacy Partners Apartment REIT, Inc., c/o DST Systems, Inc., 430 W. 7th Street, Kansas City, MO 64105.

Redemption request forms are available by contacting your financial advisor or by calling (866) 527-4264.

Registrar and Transfer Agent

Prior to the commencement of this offering, we expect to engage DST Systems, Inc. to serve as the registrar and transfer agent for our common stock.

Restrictions on Roll-Up Transactions

A Roll-up Transaction is a transaction involving the acquisition, merger, conversion or consolidation, directly or indirectly, of us and the issuance of securities of an entity that is created or would survive after the successful completion of a Roll-up Transaction, which we refer to as a Roll-up Entity. This term does not include:

— a transaction involving our securities that have been for at least 12 months listed on a national securities exchange; or

— a transaction involving only our conversion into a trust or association if, as a consequence of the transaction, there will be no significant adverse change in the voting rights of our common stockholders, the term of our existence, the compensation to our advisor or our investment objectives.

In connection with any proposed Roll-up Transaction, an appraisal of all our assets will be obtained from a competent independent appraiser. Our assets will be appraised on a consistent basis, and the appraisal will be based on an evaluation of all relevant information and will indicate the value of our assets as of a date immediately preceding the announcement of the proposed Roll-up Transaction. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal will be filed with the SEC and, if applicable, the states in which registration of such securities is sought, as an exhibit to the registration statement for the offering. The appraisal will assume an orderly liquidation of assets over a 12-month period. The terms of the engagement of the independent appraiser will clearly state that the engagement is for our benefit and the benefit of our stockholders. A summary of the appraisal, indicating all material assumptions underlying the appraisal, will be included in a report to our stockholders in connection with any proposed Roll-up Transaction.

In connection with a proposed Roll-up Transaction, the person sponsoring the Roll-up Transaction must offer to our common stockholders who vote “no” on the proposal the choice of:

(1)   accepting the securities of the Roll-up Entity offered in the proposed Roll-up Transaction; or

(2)   one of the following:

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(A)	remaining as common stockholders of us and preserving their interests in us on the same terms and conditions as existed previously; or
(B)	receiving cash in an amount equal to the stockholders’ pro rata share of the appraised value of our net assets.

We are prohibited from participating in any proposed Roll-up Transaction:

— that would result in our common stockholders having democracy rights in a Roll-up Entity that are less than those provided in our charter and bylaws, with respect to the election and removal of directors and the other voting rights of our common stockholders, annual reports, annual and special meetings of stockholders, the amendment of our charter and our dissolution;

— that includes provisions that would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-up Entity, except to the minimum extent necessary to preserve the tax status of the Roll-up Entity, or that would limit the ability of an investor to exercise the voting rights of its securities of the Roll-up Entity on the basis of the number of shares of common stock that such investor had held in us;

— in which investors’ rights of access to the records of the Roll-up Entity would be less than those provided in our charter and described in the section of this prospectus entitled “Description of Shares — Meetings and Special Voting Requirements;” or

— in which any of the costs of the Roll-up Transaction would be borne by us if the Roll-up Transaction would not be approved by our common stockholders.

THE OPERATING PARTNERSHIP AGREEMENT

General

KBS Legacy Partners Limited Partnership, which we refer to as the Operating Partnership, is a newly formed Delaware limited partnership. We expect to own substantially all of our assets and conduct our operations through the Operating Partnership. We are the sole general partner of the Operating Partnership and, as of the date of this prospectus, our wholly owned subsidiary, KBS Legacy Partners Holdings LLC, is the sole limited partner of the Operating Partnership. As the sole general partner, we have the exclusive power to manage and conduct the business of the Operating Partnership.

As we accept subscriptions for shares in this offering, we will transfer substantially all of the net proceeds of the offering to our Operating Partnership as a capital contribution in exchange for units of limited partnership interest that will be held by our wholly owned subsidiary, KBS Legacy Partners Holdings; however, we will be deemed to have made capital contributions in the amount of the gross offering proceeds received from investors. The Operating Partnership will be deemed to have simultaneously paid the selling commissions and other costs associated with the offering.

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As a result of this structure, we are considered an UPREIT, or an umbrella partnership real estate investment trust. An UPREIT is a structure that REITs often use to acquire real property from sellers on a tax-deferred basis because the sellers can generally accept partnership units and defer taxable gain otherwise required to be recognized by them upon the disposition of their properties. Such sellers may also desire to achieve diversity in their investment and other benefits afforded to stockholders in a REIT. For purposes of satisfying the asset and income tests for qualification as a REIT, the REIT’s proportionate share of the assets and income of the Operating Partnership will be deemed to be assets and income of the REIT.

If we ever decide to acquire properties in exchange for units of limited partnership interest in the Operating Partnership, we expect to amend and restate the partnership agreement to provide substantially as set forth below.

Capital Contributions

We would expect the partnership agreement to require us to contribute the proceeds of any offering of our shares of stock to the Operating Partnership as an additional capital contribution. If we did contribute additional capital to the Operating Partnership, we would receive additional partnership units and our percentage interest in the Operating Partnership would be increased on a proportionate basis based upon the amount of such additional capital contributions and the value of the Operating Partnership at the time of such contributions. We also expect that the partnership agreement would allow us to cause the Operating Partnership to issue partnership interests for less than their fair market value if we conclude in good faith that such issuance is in the best interest of the Operating Partnership and us. The Operating Partnership would also be able to issue preferred partnership interests in connection with acquisitions of property or otherwise. These preferred partnership interests could have priority over common partnership interests with respect to distributions from the Operating Partnership, including priority over the partnership interests that we would own as a limited partner. If the Operating Partnership would require additional funds at any time in excess of capital contributions made by us or from borrowing, we could borrow funds from a financial institution or other lender and lend such funds to the Operating Partnership on the same terms and conditions as are applicable to our borrowing of such funds.

Operations

We would expect the partnership agreement to provide that, so long as we remain qualified as a REIT, the Operating Partnership would be operated in a manner that would enable us to satisfy the requirements for being classified as a REIT for tax purposes. We would also have the power to take actions to ensure that the Operating Partnership would not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code. Classification as a publicly traded partnership could result in the Operating Partnership being taxed as a corporation, rather than as a partnership.

Distributions and Allocations of Profits and Losses

The partnership agreement would provide that the Operating Partnership would distribute cash flow from operations to its partners in accordance with their respective percentage interests on at least a monthly basis in amounts that we determine. The effect of these distributions would be that a holder of one unit of limited partnership interest in our Operating Partnership would receive the same amount of annual cash flow distributions as the amount of annual distributions paid to the holder of one of our shares of common stock.

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Similarly, the partnership agreement would provide that the Operating Partnership would allocate taxable income to its partners in accordance with their respective percentage interests. Subject to compliance with the provisions of Sections 704(b) and 704(c) of the Internal Revenue Code and the corresponding Treasury regulations, the effect of these allocations would be that a holder of one unit of limited partnership interest in the Operating Partnership would be allocated taxable income for each taxable year in an amount equal to the amount of taxable income to be recognized by a holder of one of our shares of common stock. Losses, if any, would generally be allocated among the partners in accordance with their respective percentage interests in the Operating Partnership. Losses could not be passed through to our stockholders.

Upon liquidation of the Operating Partnership, after payment of, or adequate provision for, debts and obligations of the Operating Partnership, including partner loans, any remaining assets of the Operating Partnership would be distributed to its partners in accordance with their respective positive capital account balances.

Rights, Obligations and Powers of the General Partner

We would expect to be the sole general partner of the Operating Partnership. As sole general partner, we generally would have complete and exclusive discretion to manage and control the Operating Partnership’s business and to make all decisions affecting its assets. Under an amended and restated partnership agreement, we would also expect to have the authority to:

— acquire, purchase, own, operate, lease and dispose of any real property and any other assets;

— construct buildings and make other improvements on owned or leased properties;

— authorize, issue, sell or redeem any debt or other securities;

— borrow or loan money;

— make or revoke any tax election;

— maintain insurance coverage in amounts and types as we determine is necessary;

— retain employees or other service providers;

— form or acquire interests in joint ventures; and

— merge, consolidate or combine the Operating Partnership with another entity.

Under an amended and restated partnership agreement, we expect that the Operating Partnership would continue to pay all of the administrative and operating costs and expenses it incurs in acquiring and operating real properties. The Operating Partnership would also pay all of our administrative costs and expenses and such expenses would be treated as expenses of the Operating Partnership. Such expenses would include:

— all expenses relating to our organization and continuity of existence;

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— all expenses relating to the public offering and registration of our securities;

— all expenses associated with the preparation and filing of our periodic reports under federal, state or local laws or regulations;

— all expenses associated with our compliance with applicable laws, rules and regulations; and

— all of our other operating or administrative costs incurred in the ordinary course of business.

The only costs and expenses we could incur that the Operating Partnership would not reimburse would be costs and expenses relating to properties we may own outside of the Operating Partnership. We would pay the expenses relating to such properties directly.

Exchange Rights

We expect that an amended and restated partnership agreement would also provide for exchange rights. We expect the limited partners of the Operating Partnership would have the right to cause the Operating Partnership to redeem their units of limited partnership interest for cash equal to the value of an equivalent number of our shares, or, at our option, we could purchase their units of limited partnership interest for cash or by issuing one share of our common stock for each unit redeemed. Limited partners, however, would not be able to exercise this exchange right if and to the extent that the delivery of our shares upon such exercise would:

— result in any person owning shares in excess of the ownership limit in our charter (unless exempted by our board of directors);

— result in our shares being owned by fewer than 100 persons;

— result in our shares being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code; or

— cause us to own 10% or more of the ownership interests in a tenant within the meaning of Section 856(d)(2)(B) of the Internal Revenue Code.

Furthermore, limited partners could exercise their exchange rights only after their units of limited partnership interest had been outstanding for one year. A limited partner could not deliver more than two exchange notices each calendar year and would not be able to exercise an exchange right for less than 1,000 units of limited partnership interest, unless such limited partner held less than 1,000 units. In that case, he would be required to exercise his exchange right for all of his units.

Change in General Partner

We expect that we generally would not be able to withdraw as the general partner of the Operating Partnership or transfer our general partnership interest in the Operating Partnership (unless we transferred our interest to a wholly owned subsidiary). The principal exception to this would be if we merged with another entity and (1) the holders of a majority of partnership units (including those we held) approved the transaction; (2) the limited partners received or had the right to receive an amount of cash, securities or other property equal in value to the amount they would have received if they had exercised their exchange rights immediately before such transaction; (3) we were the surviving entity and our

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stockholders did not receive cash, securities or other property in the transaction; or (4) the successor entity contributed substantially all of its assets to the Operating Partnership in return for an interest in the Operating Partnership and agreed to assume all obligations of the general partner of the Operating Partnership. If we voluntarily sought protection under bankruptcy or state insolvency laws, or if we were involuntarily placed under such protection for more than 90 days, we would be deemed to be automatically removed as the general partner. Otherwise, the limited partners would not have the right to remove us as general partner.

Transferability of Interests

With certain exceptions, the limited partners would not be able to transfer their interests in the Operating Partnership, in whole or in part, without our written consent as the general partner.

Amendment of Limited Partnership Agreement

We expect amendments to the amended and restated partnership agreement would require the consent of the holders of a majority of the partnership units including the partnership units we and our affiliates held. Additionally, we, as general partner, would be required to approve any amendment. We expect that certain amendments would have to be approved by a majority of the units held by third-party limited partners.

PLAN OF DISTRIBUTION

General

We are publicly offering a minimum of 250,000 shares and a maximum of 280,000,000 shares of our common stock on a “best efforts” basis through KBS Capital Markets Group, our dealer manager. Because this is a “best efforts” offering, KBS Capital Markets Group must use only its best efforts to sell the shares and has no firm commitment or obligation to purchase any of our shares. We are offering up to 200,000,000 shares of common stock in our primary offering at $10 per share, with discounts available for certain categories of purchasers as described below.

We are also offering up to 80,000,000 shares pursuant to our dividend reinvestment plan at a purchase price initially equal to $9.50 per share. Once we establish an estimated value per share that is not based on the price to acquire a share in the primary offering or a follow-on public or private offering, shares issued pursuant to our dividend reinvestment plan will be priced at the estimated value per share of our common stock, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share not based on the price to acquire a share in the primary offering or a follow-on public or private offering upon the completion of our offering stage. We will consider our offering stage complete when we are no longer offering equity securities – whether through this offering or follow-on public or private offerings – and have not done so for 18 months. (For purposes of this definition, we will not consider “equity offerings” to include offerings on behalf of selling stockholders or offerings related to any dividend reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership.)

We expect to sell the 200,000,000 shares offered in our primary offering over a two-year period, or by January     , 2012. If we have not sold all of the shares within two years, we may continue the primary offering for an additional year until January     , 2013. Under rules promulgated by the SEC, should we determine to register a follow-on offering, we may extend this offering up to an additional 180 days beyond January     , 2013. If we decide to continue our primary offering beyond two years from the date of this prospectus, we will provide that information in a prospectus supplement.

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Our dealer manager, KBS Capital Markets Group, has a limited operating history. KBS Capital Markets Group registered as a broker-dealer with the SEC in October 2004, and this offering will be the fourth offering conducted by our dealer manager. The principal business of KBS Capital Markets Group is participating in and facilitating the distribution of securities of KBS-sponsored programs. KBS Capital Markets Group is indirectly owned and controlled by our KBS sponsors. For additional information about our dealer manager, including information related to its affiliation with us and our advisor, see “Management — Other Affiliates — Dealer Manager,” and “Conflicts of Interest — Affiliated Dealer Manager” and “— Certain Conflict Resolution Measures.”

Compensation of Dealer Manager and Participating Broker-Dealers

Except as provided below, KBS Capital Markets Group will receive selling commissions of 6.5% of the gross offering proceeds for shares sold in our primary offering. The dealer manager will receive 3.0% of the gross offering proceeds as compensation for acting as the dealer manager, except that a reduced dealer manager fee will be paid with respect to certain volume discount sales. We will not pay any selling commissions or dealer manager fees for shares sold under our dividend reinvestment plan. We will also reimburse the dealer manager for specified out-of-pocket offering-related costs as described below.

We expect the dealer manager to authorize other broker-dealers that are members of FINRA, which we refer to as participating broker-dealers, to sell our shares. Except as provided below, our dealer manager will reallow all of its selling commissions attributable to a participating broker-dealer.

We may also sell shares at a discount to the primary offering price of $10.00 per share through the following distribution channels in the event that the investor:

— pays a broker a single fee, e.g., a percentage of assets under management, for investment advisory and broker services, which is frequently referred to as a “wrap fee”;

— has engaged the services of a registered investment advisor with whom the investor has agreed to pay compensation for investment advisory services or other financial or investment advice (other than a registered investment advisor that is also registered as a broker-dealer who does not have a fixed or “wrap fee” feature or other asset fee arrangement with the investor); or

— is investing through a bank acting as trustee or fiduciary.

If an investor purchases shares through one of these channels in our primary offering, we will sell the shares at a 6.5% discount, or at $9.35 per share, reflecting that selling commissions will not be paid in connection with such purchases. We will receive substantially the same net proceeds for sales of shares through these channels. Neither the Dealer Manager nor its affiliates will compensate any person engaged as an investment advisor by a potential investor as an inducement for such investment advisor to advise favorably for an investment in us.

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If an investor purchases shares in the offering net of commissions through a registered investment advisor with whom the investor has agreed to pay compensation for investment advisory services or other financial or investment advice and if in connection with such purchase the investor must also pay a broker-dealer for custodial or other services relating to holding the shares in the investor’s account, we will reduce the aggregate purchase price of the investor’s shares by the amount of the annual custodial or other fees paid to the broker-dealer in an amount up to $250. Each investor will receive only one reduction in purchase price for such fees and this reduction in the purchase price of our shares is only available for the investor’s initial investment in our common stock. The investor must include the “Request for Broker-Dealer Custodial Fee Reimbursement Form” with his or her subscription agreement to have the purchase price of the investor’s initial investment in shares reduced by the amount of his or her annual custodial fee and the investor must include support for the amount of his or her annual custodial fee with the subscription agreement.

The dealer manager may reallow to any participating broker-dealer up to 1% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee. Our dealer manager may increase the amount of the reallowance in special cases up to a maximum of 2.5% of the gross offering proceeds attributable to that participating broker-dealer. Whether the reallowance to any participating broker-dealer will exceed 1%, and the extent of any excess, will not depend on the actual amount of gross proceeds raised by that broker-dealer. Rather, the dealer manager expects that any decision to reallow more than 1% of gross offering proceeds from the dealer manager fee would be based solely on projected sales volume of at least $200 million on an annualized basis by the participating broker-dealer at the time it enters into a selling agreement and marketing fee agreement with the dealer manager. For volume discount sales of $3,000,000 or more, the dealer manager fee is reduced as set forth below. The amount of the dealer manager fee reallowed to a participating broker-dealer in that instance will be negotiated on a transaction by transaction basis. The marketing fee paid to participating broker-dealers would be paid by the dealer manager out of its dealer manager fee. In addition to selling commissions and marketing fees, and subject to the limits described below, we may reimburse the dealer manager for reimbursements it may make to broker-dealers for bona fide due diligence expenses.

In addition to the compensation described above, we will also reimburse the dealer manager and its affiliates for some of their costs in connection with the offering as described in the table below. This table sets forth the nature and estimated amount of all items viewed as “underwriting compensation” by FINRA, assuming we sell all of the shares offered hereby. To show the maximum amount of dealer manager and participating broker-dealer compensation that we may pay in this offering, this table assumes that all shares are sold through distribution channels associated with the highest possible selling commissions and dealer manager fees.

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Dealer Manager and

Participating Broker-Dealer Compensation

Selling commissions (maximum)	$	130,000,000
Dealer manager fee (maximum) (1)		60,000,000
Expense reimbursements for retail conferences and industry conferences(2)(3)		2,940,850	(4)
Expense reimbursement for bona fide training and education meetings held by us(3) (5)		2,578,500	(4)
Expense reimbursement for technology and other costs (3) (6)		150,000	(4)
Legal fees allocable to the dealer manager(3)		100,000	(4)
Promotional items(3)		175,000	(4)
Total	$	195,944,350

⁽¹⁾ KBS Capital Markets Group may use a portion of the dealer manager fee to provide non-cash incentives for registered representatives of participating broker–dealers and registered persons associated with KBS Capital Markets Group that in no event will exceed the limits set forth in FINRA Rule 2310(c)(2). Such non-cash incentives may include (i) a de minimis amount of gifts (currently $100 per person annually), and (ii) the payment or reimbursement of costs for an occasional meal or ticket to a sporting event or the theater or comparable entertainment which is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target. Such meals, sporting events, theater or comparable entertainment events may be held in connection with retail conferences or other meetings between registered representatives of participating broker-dealers and registered persons associated with KBS Capital Markets Group.

⁽²⁾ These fees consist of reimbursements for attendance and sponsorship fees payable to participating broker-dealers hosting a retail seminar and travel, meals and lodging costs incurred by registered persons associated with KBS Capital Markets Group and officers and employees of our affiliates to attend retail conferences sponsored by participating broker-dealers, other meetings with participating broker-dealers and industry conferences.

⁽³⁾ Subject to the cap on organization and offering expenses described below, we will reimburse KBS Capital Markets Group or its affiliates for these expenses. In some cases, these payments will serve to reimburse KBS Capital Markets Group for amounts it has paid to participating broker-dealers for the items noted.

⁽⁴⁾ Amounts shown are estimates.

⁽⁵⁾ These fees consist of expense reimbursements for actual costs incurred in connection with attending bona fide training and education meetings hosted by us. The expenses consist of (a) the travel, meals and lodging of (i) representatives of participating broker-dealers and (ii) registered persons associated with KBS Capital Markets Group and (b) reimbursement of the portion of a dual employee’s salary paid by KBS Capital Markets Group attributable to time spent planning and coordinating bona fide training and education meetings on our behalf.

⁽⁶⁾ These fees consist of expense reimbursements to participating broker-dealers in special cases for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares by such broker-dealers and the ownership of our shares by such broker-dealers’ customers.

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Subject to the cap on organization and offering expenses described below, we will also reimburse the dealer manager for reimbursements it may make to broker-dealers for bona fide invoiced due diligence expenses or, in certain circumstances, pay bona fide invoiced due diligence expenses directly. We estimate these expenses will be approximately $350,000.

Under the rules of FINRA, total underwriting compensation in this offering, including selling commissions, the dealer manager fee and the dealer manager expense reimbursement (excluding reimbursement for bona fide invoiced due diligence expenses), may not exceed 10% of the gross offering proceeds of our primary offering. In addition to the limits on underwriting compensation, FINRA and many states also limit our total organization and offering expenses to 15% of gross offering proceeds. After the termination of the primary offering and again after termination of the offering under our dividend reinvestment plan, KBS Capital Advisors has agreed to reimburse us to the extent that organization and offering expenses incurred by us exceed 15% of our gross proceeds from the applicable offering. However, we expect our total organization and offering expenses to be approximately 7.67% of our gross offering proceeds (including gross offering proceeds from our dividend reinvestment plan), assuming we raise the maximum offering amount.

To the extent permitted by law and our charter, we will indemnify the participating broker-dealers and the dealer manager against some civil liabilities, including certain liabilities under the Securities Act and liabilities arising from breaches of our representations and warranties contained in the dealer manager agreement. See “Management — Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents.”

The dealer manager has agreed to sell up to 5% of the shares offered hereby in our primary offering to persons to be identified by us at a discount from the public offering price. We intend to use this “friends and family” program to sell shares to our directors, officers, business associates and others to the extent consistent with applicable laws and regulations. We will require all such purchasers to represent that they are purchasing shares for investment only and to enter into one-year lock-up agreements with respect to the purchased shares. The purchase price for such shares will be $9.35 per share, reflecting that selling commissions in the amount of $0.65 per share will not be payable in connection with such sales. The net proceeds to us from such sales made net of commissions will be substantially the same as the net proceeds we receive from other sales of shares. Purchases under this “friends and family” program will not count toward meeting the minimum offering threshold.

We may sell shares to participating broker-dealers, their retirement plans, their representatives and the family members, IRAs and the qualified plans of their representatives at a purchase price of $9.35 per share, reflecting that selling commissions in the amount of $0.65 per share will not be payable in consideration of the services rendered by such broker-dealers and representatives in the offering. For purposes of this discount, we consider a family member to be a spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in law or brother- or sister-in-law. The net proceeds to us from the sales of these shares will be substantially the same as the net proceeds we receive from other sales of shares. Sales of these shares will count toward meeting the minimum offering threshold.

We are offering volume discounts to investors who purchase $1,000,000 or more of shares through the same participating broker-dealer in our primary offering. The net proceeds to us from a sale eligible for a volume discount is the same, but the selling commissions and, in some cases, the dealer manager fees we pay is reduced. Because the dealer manager reallows all selling commissions, the amount of commissions participating broker-dealers receive for such sales is reduced.

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The following table shows the discounted price per share and the reduced selling commissions and dealer manager fees payable for volume sales of our shares.

Dollar Volume Shares Purchased			Sales Commissions (Based on $10.00 Price Per Share)	Dealer Manager Fee (Based on $10.00 Price Per Share)	Price Per Share to Investor
$                0	to	$   999,999	6.5%	3.0%	$10.00
$  1,000,000	to	$1,999,999	5.5%	3.0%	$  9.90
$  2,000,000	to	$2,999,999	4.5%	3.0%	$  9.80
$  3,000,000	to	$3,999,999	3.5%	2.5%	$  9.65
$  4,000,000	to	$9,999,999	2.5%	2.0%	$  9.50
$10,000,000	and above		1.5%	2.0%	$  9.40

We will apply the reduced selling price, selling commission and dealer manager fee to the entire purchase. All commission rates and dealer manager fees are calculated assuming a price per share of $10.00. For example, a purchase of 250,000 shares in a single transaction would result in a purchase price of $2,450,000 ($9.80 per share), selling commissions of $112,500 and dealer manager fees of $75,000.

To qualify for a volume discount as a result of multiple purchases of our shares you must use the same participating broker-dealer and you must mark the “Additional Investment” space on the subscription agreement. We are not responsible for failing to combine purchases if you fail to mark the “Additional Investment” space. Once you qualify for a volume discount, you will be eligible to receive the benefit of such discount for subsequent purchases of shares in our primary offering through the same participating broker-dealer. If a subsequent purchase entitles an investor to an increased reduction in sales commissions and/or the dealer manager fee, the volume discount will apply only to the current and future investments.

To the extent purchased through the same participating broker-dealer, the following persons may combine their purchases as a “single purchaser” for the purpose of qualifying for a volume discount:

— an individual, his or her spouse, their children under the age of 21 and all pension or trust funds established by each such individual;

— a corporation, partnership, association, joint-stock company, trust fund or any organized group of persons, whether incorporated or not;

— an employees’ trust, pension, profit-sharing or other employee benefit plan qualified under Section 401(a) of the Internal Revenue Code; and

— all commingled trust funds maintained by a given bank.

In the event a person wishes to have his or her order combined with others as a “single purchaser,” that person must request such treatment in writing at the time of subscription setting forth the basis for the discount and identifying the orders to be combined. Any request will be subject to our verification that the orders to be combined are made by a single purchaser. If the subscription agreements for the combined orders of a single purchaser are submitted at the same time, then the commissions

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payable and discounted share price will be allocated pro rata among the combined orders on the basis of the respective amounts being combined. Otherwise, the volume discount provisions will apply only to the order that qualifies the single purchaser for the volume discount and the subsequent orders of that single purchaser.

Only shares purchased in our primary offering are eligible for volume discounts. Shares purchased through our dividend reinvestment plan will not be eligible for a volume discount nor will such shares count toward the threshold limits listed above that qualify you for the different discount levels.

Volume discounts for California residents will be available in accordance with the foregoing table of uniform discount levels. However, with respect to California residents, no discounts will be allowed to any group of purchasers and no subscriptions may be aggregated as part of a combined order for purposes of determining the dollar amount of shares purchased.

Subscription Procedures

We will not sell any shares unless we raise a minimum of $2,500,000 by January     , 2011 from persons who are not affiliated with us or our sponsors. Until we have raised this amount, all subscription payments will be placed in an account held by the escrow agent, UMB Bank, N.A, in trust for subscribers’ benefit, pending release to us. You are entitled to receive the interest earned on your subscription payment while it is held in the escrow account. Once we have raised the applicable minimum offering amount and instructed the escrow agent to disburse the funds in the account, funds representing the gross purchase price for the shares will be distributed to us and the escrow agent will disburse directly to you, without reduction for fees, any interest earned on your subscription payment while it was held in the escrow account. If we do not raise at least $2,500,000 by January     , 2011, we will promptly return all funds in the escrow account (including interest), and we will stop offering shares. We will not deduct any fees if we return funds from the escrow account because we are unable to raise the minimum offering amount. Different escrow procedures apply to Pennsylvania and Tennessee investors. Because of the higher minimum offering requirement for Pennsylvania and Tennessee investors, subscription payments made by such investors will not count toward the $2,500,000 minimum offering for all other jurisdictions. See “— Special Notice to Pennsylvania and Tennessee Investors” below.

To purchase shares in this offering, you must complete and sign a subscription agreement (in the form attached to this prospectus as Appendix A) for a specific number of shares and pay for the shares at the time of your subscription. Until such time as we have raised the minimum offering amount, you should make your check payable to “UMB Bank, N.A, as agent for KBS Legacy Partners Apartment REIT, Inc.” Once we have raised $2,500,000, you should make your check payable to “KBS Legacy Partners Apartment REIT, Inc.,” except that Pennsylvania and Tennessee investors should follow the instructions below under “—Special Notice to Pennsylvania and Tennessee Investors.” Subscriptions will be effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part. After we have raised the minimum offering amount, subscription payments will be deposited into a special account in our name until such time as we have accepted or rejected the subscriptions. We will accept or reject subscriptions within 30 days of our receipt of such subscriptions and, if rejected, we will return all funds to the rejected subscribers within ten business days. If accepted, the funds will be transferred into our general account. You will receive a confirmation of your purchase. We generally admit stockholders on a daily basis.

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You are required to represent in the subscription agreement that you have received a copy of the final prospectus. In order to ensure that you have had sufficient time to review the final prospectus, we will not accept your subscription until at least five business days after your receipt of the final prospectus.

Investors who desire to purchase shares in this offering at regular intervals may be able to do so by electing to participate in the automatic investment program by completing an enrollment form that we will provide upon request. Alabama and Ohio investors are not eligible to participate in the automatic investment program. Only investors who have already met the minimum purchase requirement may participate in the automatic investment program. The minimum periodic investment is $100 per month. We will pay dealer manager fees and selling commissions in connection with sales under the automatic investment program to the same extent that we pay those fees and commissions on shares sold in the primary offering outside of the automatic investment program. If you elect to participate in both the automatic investment program and our dividend reinvestment plan, distributions earned from shares purchased pursuant to the automatic investment program will automatically be reinvested pursuant to the dividend reinvestment plan. For a discussion of the dividend reinvestment plan, see “Description of Shares — Dividend Reinvestment Plan.”

You will receive a confirmation of your purchases under the automatic investment program no less than quarterly. The confirmation will disclose the following information:

— the amount invested for your account during the period;

— the date of the investment;

— the number and price of the shares purchased by you; and

— the total number of shares in your account.

To qualify for a volume discount as a result of purchases under the automatic investment program, you must notify us in writing when you initially become eligible to receive a volume discount and at each time your purchase of shares through the program would qualify you for an additional reduction in the price of shares under the volume discount provisions described in this prospectus. For a discussion of volume discounts, see “— Compensation of Dealer Manager and Participating Broker-Dealers.”

You may terminate your participation in the automatic investment program at any time by providing us with written notice. If you elect to participate in the automatic investment program, you must agree that if at any time you fail to meet the applicable investor suitability standards or cannot make the other investor representations or warranties set forth in the then current prospectus or in the subscription agreement, you will promptly notify us in writing of that fact and your participation in the plan will terminate. See the “Suitability Standards” section of this prospectus (immediately following the cover page) and the form of subscription agreement attached hereto as Appendix A.

Suitability Standards

Our sponsor, those selling shares on our behalf and participating broker-dealers and registered investment advisors recommending the purchase of shares in this offering have the responsibility to make every reasonable effort to determine that your purchase of shares in this offering is a suitable and appropriate investment for you based on information provided by you regarding your financial situation

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and investment objectives. In making this determination, these persons have the responsibility to ascertain that you:

— meet the minimum income and net worth standards set forth under “Suitability Standards” immediately following the cover page of this prospectus;

— can reasonably benefit from an investment in our shares based on your overall investment objectives and portfolio structure;

— are able to bear the economic risk of the investment based on your overall financial situation;

— are in a financial position appropriate to enable you to realize to a significant extent the benefits described in this prospectus of an investment in our shares; and

— have apparent understanding of:

— the fundamental risks of the investment;

— the risk that you may lose your entire investment;

— the lack of liquidity of our shares;

— the restrictions on transferability of our shares;

— the background and qualifications of our sponsors and their affiliates; and

— the tax consequences of your investment.

Relevant information for this purpose will include at least your age, investment objectives, investment experience, income, net worth, financial situation and other investments as well as any other pertinent factors. Our sponsor, those selling shares on our behalf and participating broker-dealers and registered investment advisors recommending the purchase of shares in this offering must maintain, for a six-year period, records of the information used to determine that an investment in shares is suitable and appropriate for you.

Until our shares of common stock are listed on a national securities exchange, subsequent purchasers, i.e., potential purchasers of your shares, must also meet the net worth or income standards.

Minimum Purchase Requirements

You must initially invest at least $4,000 in our shares to be eligible to participate in this offering. If you own the minimum investment in shares in KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT or any future KBS-sponsored public program, you may invest less than the minimum amount set forth above, but in no event less than $100. In order to satisfy this minimum purchase requirement, unless otherwise prohibited by state law, a husband and wife may jointly contribute funds from their separate IRAs, provided that each such contribution is made in increments of $100. You should note that an investment in our shares will not, in itself, create a retirement plan and that, in order to create a retirement plan, you must comply with all applicable provisions of the Internal Revenue Code.

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If you have satisfied the applicable minimum purchase requirement, any additional purchase must be in amounts of at least $100. The investment minimum for subsequent purchases does not apply to shares purchased pursuant to our dividend reinvestment plan.

Unless you are transferring all of your shares of common stock, you may not transfer your shares in a manner that causes you or your transferee to own fewer than the number of shares required to meet the minimum purchase requirements, except for the following transfers without consideration: transfers by gift, transfers by inheritance, intrafamily transfers, family dissolutions, transfers to affiliates and transfers by operation of law. These minimum purchase requirements are applicable until our shares of common stock are listed on a national securities exchange, and these requirements may make it more difficult for you to sell your shares.

Special Notice to Pennsylvania and Tennessee Investors

Because the minimum offering of our common stock is less than $133,333,333, we caution you to carefully evaluate our ability to fully accomplish our stated objectives and to inquire as to the current dollar volume of our subscription proceeds. Notwithstanding our $2.5 million minimum offering amount for all other jurisdictions, we will not sell any shares to Pennsylvania investors unless we raise a minimum of $66.7 million in gross offering proceeds (including sales made to residents of other jurisdictions) prior to January     , 2012. In the event we do not raise gross offering proceeds of $66.7 million by January     , 2012, we will promptly return all funds held in escrow for the benefit of Pennsylvania investors (in which case, Pennsylvania investors will not be required to request a refund of their investment). Pending satisfaction of this condition, all Pennsylvania subscription payments will be placed in a segregated account held by the escrow agent, UMB Bank, N.A, in trust for Pennsylvania subscribers’ benefit, pending release to us. Purchases by persons affiliated with us or our advisor will not count toward satisfaction of the Pennsylvania minimum.

If we have not reached this $66.7 million threshold within 120 days of the date that we first accept a subscription payment from a Pennsylvania investor, we will, within ten days of the end of that 120-day period, notify Pennsylvania investors in writing of their right to receive refunds, with interest. If you request a refund within ten days of receiving that notice, we will arrange for the escrow agent to promptly return to you by check your subscription amount with interest. Amounts held in the Pennsylvania escrow account from Pennsylvania investors not requesting a refund will continue to be held for subsequent 120-day periods until we raise at least $66.7 million or until the end of the subsequent escrow periods. At the end of each subsequent escrow period, we will again notify you of your right to receive a refund of your subscription amount with interest. Until we have raised $66.7 million, Pennsylvania investors should make their checks payable to “UMB Bank, N.A, as agent for KBS Legacy Partners Apartment REIT, Inc.” Once we have reached the Pennsylvania minimum, Pennsylvania investors should make their checks payable to “KBS Legacy Partners Apartment REIT, Inc.”

In addition, we will not sell any shares to Tennessee investors unless we raise a minimum of $10 million in gross offering proceeds (including sales made to residents of other jurisdictions) by January     , 2012. Pending satisfaction of this condition, all subscription payments by Tennessee investors will be placed in a segregated account held by the escrow agent, UMB Bank, N.A., in trust for Tennessee subscribers’ benefit, pending release to us. In the event we do not raise gross offering proceeds of $10 million by January     , 2012, we will promptly return all funds held in escrow for the benefit of Tennessee investors. Purchases by persons affiliated with us or our sponsors will not count toward the Tennessee minimum. Until we have raised $10 million, Tennessee investors should make their checks payable to “UMB Bank, N.A., as agent for KBS Legacy Partners Apartment REIT, Inc.” Once we have reached the Tennessee minimum, Tennessee investors should make their checks payable to “KBS Legacy Partners Apartment REIT, Inc.”

Investments by Qualified Accounts

Funds from qualified accounts will be accepted if received in installments that together meet the minimum or subsequent investment amount, as applicable, so long as the total subscription amount was indicated on the subscription agreement and all funds are received within a 90-day period.

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Investments through IRA Accounts

If you would like to purchase shares through an IRA account, Sterling Trust Company and Community National Bank have agreed to act as IRA custodians for purchasers of our common stock as described below; however, investors in our shares may use any IRA custodian of their choice.

If you would like to establish a new IRA account with Sterling Trust Company for an investment in our shares, we will pay the fees related to the establishment of the investor account with Sterling Trust Company and the first-year annual IRA maintenance fee. Thereafter, investors will be responsible for the annual IRA maintenance fees charged by Sterling Trust Company.

If you would like to establish a new IRA account with Community National Bank for an investment in our shares, we will pay the first calendar year base fee for investors that establish new accounts with Community National Bank. Community National Bank does not charge a separate set up fee. After we pay the first calendar year base fee, investors will be responsible for the annual IRA maintenance fees charged by Community National Bank, charged at the beginning of each calendar year.

Further information about custodial services is available through your broker or through our dealer manager at www.kbs-cmg.com.

SUPPLEMENTAL SALES MATERIAL

In addition to this prospectus, we may utilize additional sales materials in connection with the offering of the shares, although only when accompanied by or preceded by the delivery of this prospectus. The supplemental sales material will not contain all of the information material to an investment decision and should only be reviewed after reading this prospectus. These supplemental sales materials may include:

— investor sales promotion brochures;

— cover letters transmitting the prospectus;

— brochures containing a summary description of the offering;

— fact sheets describing the general nature of KBS Legacy Partners Apartment REIT and our investment objectives;

— asset flyers describing our recent acquisitions;

— broker updates;

— online investor presentations;

— web site material;

— electronic media presentations; and

— client seminars and seminar advertisements and invitations.

All of the foregoing material will be prepared by our advisor or its affiliates with the exception of the third-party article reprints. All sales materials will comply with applicable state laws and regulations. In certain jurisdictions, some or all of such sales material may not be available. In addition, the sales material may contain certain quotes from various publications without obtaining the consent of the author or the publication for use of the quoted material in the sales material.

We are offering shares only by means of this prospectus. Although the information contained in our supplemental sales materials will not conflict with any of the information contained in this prospectus, the supplemental materials do not purport to be complete and should not be considered a part of or as incorporated by reference in this prospectus or the registration statement of which this prospectus is a part.

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LEGAL MATTERS

The validity of the shares of our common stock being offered hereby has been passed upon for us by DLA Piper LLP (US), Raleigh, North Carolina. DLA Piper LLP (US) has also reviewed the statements relating to certain federal income tax matters that are likely to be material to U.S. holders of our common stock under the caption “Federal Income Tax Considerations” and has passed upon our qualification as a REIT for federal income tax purposes.

EXPERTS

The consolidated balance sheet of KBS Legacy Partners Apartment REIT, Inc. (f.k.a. KBS Legacy Apartment Community REIT, Inc.) at August 10, 2009, appearing in this prospectus and registration statement has been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and is included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-11 with the SEC with respect to the shares of our common stock to be issued in this offering. This prospectus is a part of that registration statement and, as permitted by SEC rules, does not include all of the information you can find in the registration statement or the exhibits to the registration statement. For additional information relating to us, we refer you to the registration statement and the exhibits to the registration statement. Statements contained in this prospectus as to the contents of any contract or document are necessarily summaries of such contract or document and in each instance, if we have filed the contract or document as an exhibit to the registration statement, we refer you to the copy of the contract or document filed as an exhibit to the registration statement.

After commencement of this offering, we will file annual, quarterly and current reports, proxy statements and other information with the SEC. We intend to furnish our stockholders with annual reports containing consolidated financial statements certified by an independent public accounting firm. The registration statement is, and any of these future filings with the SEC will be, available to the public over the Internet at the SEC’s web site at http://www.sec.gov. You may read and copy any filed document at the SEC’s public reference room in Washington, D.C. at 100 F. Street, N.E., Room 1580, Washington, D.C. Please call the SEC at (800) SEC-0330 for further information about the public reference room.

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INDEX TO CONSOLIDATED BALANCE SHEETS AND PRIOR PERFORMANCE TABLES

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Notes to Consolidated Balance Sheets	F-4
Prior Performance Tables	F-17

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholder of

KBS Legacy Partners Apartment REIT, Inc. (f.k.a. KBS Legacy Apartment Community REIT, Inc.)

We have audited the accompanying consolidated balance sheet of KBS Legacy Partners Apartment REIT, Inc. (f.k.a. KBS Legacy Apartment Community REIT, Inc.) (the “Company”) as of August 10, 2009. The consolidated balance sheet is the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated balance sheet based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal controls over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated balance sheet referred to above presents fairly, in all material respects, the financial position of KBS Legacy Partners Apartment REIT, Inc. (f.k.a. KBS Legacy Apartment Community REIT, Inc.) at August 10, 2009 in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Irvine, California

August 19, 2009

F-2

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2009		August 10, 2009
	(unaudited)
Assets
Cash and cash equivalents	$	200,000	$	200,000
Total assets	$	200,000	$	200,000
Liabilities and stockholder’s equity
Total liabilities	$	-	$	-
Commitments and contingencies
Stockholder’s equity
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding		-		-
Common Stock, $.01 par value; 1,000,000,000 shares authorized, 20,000 shares issued and outstanding		200		200
Additional paid-in capital		199,800		199,800
Accumulated deficit		-		-
Total stockholder’s equity		200,000		200,000
Total liabilities and stockholder’s equity	$	200,000	$	200,000

See accompanying notes to consolidated balance sheets.

F-3

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2009

(unaudited)

1. ORGANIZATION

KBS Legacy Partners Apartment REIT, Inc. (f.k.a KBS Legacy Apartment Community REIT, Inc.) (the “Company”) was formed on July 31, 2009 as a Maryland corporation that intends to qualify as a real estate investment trust (“REIT”) commencing with its taxable year ending December 31, 2010. Substantially all of the Company’s business is expected to be conducted through KBS Legacy Partners Limited Partnership (f.k.a. KBS Legacy Limited Partnership) (the “Operating Partnership”), a Delaware limited partnership formed on August 4, 2009. The Company is the sole general partner of and owns a 0.1% partnership interest in the Operating Partnership. KBS Legacy Partners Holdings LLC (f.k.a. KBS Legacy Holdings LLC) (“REIT Holdings”), the limited partner of the operating partnership formed on August 4, 2009, owns the remaining 99.9% interest in the Operating Partnership and is its sole limited partner. The Company is the sole member and manager of REIT Holdings.

Subject to certain restrictions and limitations, the business of the Company will be externally managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an Advisory Agreement the Company anticipates executing with the Advisor.

On August 7, 2009, the Company issued 20,000 shares of its common stock to KBS-Legacy Apartment Community REIT Venture, LLC, an affiliate of the Company, at a purchase price of $10.00 per share. As of August 10, 2009 and September 30, 2009, the 20,000 shares of common stock owned by KBS-Legacy Apartment Community REIT Venture, LLC were the only issued and outstanding shares of the Company.

The Company expects to invest in and manage a diverse portfolio of high quality apartment communities located throughout the United States. The Company expects that its portfolio will include “core” apartment buildings that are already well positioned and producing rental income, as well as more opportunity oriented properties at various phases of leasing, development, redevelopment or repositioning. The Company may make its investments through the acquisition of individual assets or by acquiring portfolios of assets, other REITs or real estate companies.

In its initial public offering, the Company intends to offer a minimum of 250,000 shares (the “Minimum Number of Shares”) and a maximum of 280,000,000 shares of common stock for sale to the public (the “Offering”), of which 80,000,000 shares are being offered pursuant to the Company’s dividend reinvestment plan. The Company intends to retain KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Company, to serve as the dealer manager of the Offering. The Dealer Manager will be responsible for marketing the Company’s shares being offered pursuant to the Offering. As described above, the Company intends to use substantially all of the net proceeds from the Offering to invest in a diverse portfolio of apartment communities and real estate-related investments as described above.

As of September 30, 2009, neither the Company nor the Operating Partnership had acquired or contracted to make any investments. Also as of September 30, 2009, the Advisor had not identified any assets in which there is a reasonable probability that the Company or the Operating Partnership will invest.

F-4

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The consolidated balance sheets include the accounts of the Company, REIT Holdings and the Operating Partnership. All significant intercompany balances and transactions are eliminated in consolidation.

The accompanying consolidated balance sheets have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC.

Effective September 15, 2009, the ASC was established as the single source of authoritative nongovernmental GAAP. Prior to the issuance of the ASC, all GAAP pronouncements were issued in separate topical pronouncements in the form of statements, staff positions or Emerging Issues Task Force Abstracts, and were referred to as such. While the ASC does not change GAAP, it introduces a new structure and supersedes all previously issued non-SEC accounting and reporting standards. In addition to the ASC, the Company is still required to follow SEC rules and regulations relating to the preparation of financial statements. The Company’s accounting policies are consistent with the guidance set forth in the ASC.

Use of Estimates

The preparation of the consolidated balance sheets in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated balance sheets and accompanying notes. Actual results could materially differ from those estimates.

Revenue Recognition

The Company expects to lease apartment units under operating leases with terms generally of one year or less. Generally, credit investigations will be performed for prospective residents and security deposits are obtained. Rental revenue, net of concessions, will be recognized on a straight-line basis over the term of the lease.

The Company will recognize gains on sales of real estate either in total or deferred for a period of time, depending on whether a sale has been consummated, the extent of the buyer’s investment in the property being sold, whether the receivable of the Company is subject to future subordination, and the degree of the Company’s continuing involvement with the property after the sale. If the criteria for profit recognition under the full-accrual method are not met, the Company will defer gain recognition and account for the continued operations of the property by applying the percentage-of-completion, reduced profit, deposit, installment or cost recovery method, as appropriate, until the appropriate criteria are met.

Other income, including interest earned on the Company’s cash, will be recognized as it is earned.

Real Estate

Depreciation and Amortization

Investments in real estate properties will be carried at cost and depreciated using the straight-line method over the estimated useful lives. Third party acquisitions costs will generally be expensed as incurred. Repair and maintenance costs will be charged to expense as incurred and significant replacements and betterments will be capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate property. The Company will consider the period of future benefit of an asset to determine its appropriate useful life. Costs directly associated with the development of land and those incurred during construction will be capitalized as part of the investment basis. Expenditures for tenant improvements and construction allowances related to a tenant’s space will be capitalized and amortized over the shorter of the tenant’s lease term or expected useful life. The Company anticipates the estimated useful lives of its assets by class to be generally as follows:

Buildings	40 years
Building improvements	20-40 years
Tenant improvements	Shorter of lease term or expected useful life
Tenant origination and absorption costs	Remaining term of related lease
Furniture, fixtures and equipment	5-12 years

F-5

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

Development Costs

The Company will capitalize development and construction costs (including interest and other financing fees, property taxes, and other direct and indirect development costs) beginning when active development commences and ending when apartment units are available for occupancy and all infrastructure is substantially complete.

Real Estate Acquisition Valuation

The Company will record the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination. All assets acquired and liabilities assumed in a business combination will be measured at their acquisition-date fair values. Acquisition costs will generally be expensed as incurred and restructuring costs that do not meet the definition of a liability at the acquisition date will be expensed in periods subsequent to the acquisition date. In addition, changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period will be recorded to income tax expense.

Intangible assets include the value of in-place leases, which represents the estimated value of the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. Acquired in-place lease value will be amortized to expense over the average remaining non-cancelable terms of the respective in-place leases.

The Company will assess the acquisition-date fair values of all tangible assets, identifiable intangibles and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

The Company will record above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining average non-cancelable term of the leases. The Company will amortize any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease.

The Company will estimate the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease-up periods, considering current market conditions. In estimating carrying costs, management will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods.

The Company will amortize the value of in-place leases to depreciation and amortization expense over the remaining average non-cancelable term of the leases.

Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities will require the Company to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions would result in an incorrect valuation of the Company’s acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of the Company’s net income.

F-6

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

Impairment of Real Estate and Related Intangible Assets and Liabilities

The Company will monitor events and changes in circumstances that could indicate that the carrying amounts of its real estate and related intangible assets and liabilities may not be recoverable or realized. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company will assess the recoverability by estimating whether the Company will recover the carrying value of the real estate and related intangible assets and liabilities through its undiscounted future cash flows and its eventual disposition. If, based on this analysis, the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities.

Cash and Cash Equivalents

The Company considers all short-term (with an original maturity of three months or less), highly-liquid investments utilized as part of the Company’s cash-management activities to be cash equivalents. Cash equivalents may include cash and short-term investments.

The Company’s cash and cash equivalents balance exceeds federally insurable limits as of September 30, 2009. The Company monitors the cash balances in its operating accounts and adjusts the cash balances as appropriate; however, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts. The Company has a corporate banking relationship with Wells Fargo Bank, N.A. in which it deposits all funds. There are no restrictions on the use of the Company’s cash as of August 10, 2009 and September 30, 2009.

Deferred Financing Costs

The Company will capitalize deferred financing costs such as commitment fees, legal fees and other third party costs associated with obtaining commitments for financing that result in a closing of such financing. The Company will amortize these costs over the terms of the respective financing agreements using the interest method. The Company will expense unamortized deferred financing costs when the associated debt is refinanced or repaid before maturity unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Costs incurred in seeking financing transactions that do not close will be expensed in the period in which it is determined that the financing will not close.

Derivative Instruments

In the normal course of business, the Company may enter into certain types of derivative instruments, such as interest rate cap and floor agreements or interest rate swaps, to hedge its exposure to cash flow variability caused by changing interest rates on its variable rate real estate loans receivable and notes payable. The change in fair value of the effective portion of a derivative instrument that is designated as a cash flow hedge will be recorded to accumulated comprehensive income (loss) within stockholders’ equity. The amounts to be paid or received on these instruments will be recognized on an accrual basis and amortized as adjustments to interest income for derivatives designated as hedges of investments and interest expense for derivatives designated as hedges of liabilities during the period the hedged transaction occurs. The change in fair value of derivative instruments that are not designated as hedges or that do not meet the hedge accounting criteria will be recorded to earnings.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other financial instruments and balances at fair value on a non-recurring basis (e.g., carrying value long-lived assets). Fair value, as defined under GAAP, is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements will be classified and disclosed in one of the following three categories:

F-7

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company will utilize quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company will use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates may not be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

The Company considers the following factors to be indicators of an inactive market: (i) there are few recent transactions, (ii) price quotations are not based on current information, (iii) price quotations vary substantially either over time or among market makers (for example, some brokered markets), (iv) indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability, (v) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) for observed transactions or quoted prices when compared with the Company’s estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability, (vi) there is a wide bid-ask spread or significant increase in the bid-ask spread, (vii) there is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities, and (viii) little information is released publicly (for example, a principal-to-principal market).

The Company considers the following factors to be indicators of non-orderly transactions: (i) there was not adequate exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities under current market conditions, (ii) there was a usual and customary marketing period, but the seller marketed the asset or liability to a single market participant, (iii) the seller is in or near bankruptcy or receivership (that is, distressed), or the seller was required to sell to meet regulatory or legal requirements (that is, forced), and (iv) the transaction price is an outlier when compared with other recent transactions for the same or similar assets or liabilities.

In August 2009, the FASB issued Accounting Standards Update No. 2009-05, Fair Value Measurements and Disclosures (Topic 820), Measuring Liabilities at Fair Value. This update provides amendments to the ASC for the fair value measurement of liabilities. In circumstances in which quoted price in an active market for the identical liability is not available, the reporting entity is required to measure fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The amendments in this update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. These amendments to the ASC are effective upon issuance and did not have a significant impact on the financial statements of the Company.

F-8

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

At September 30, 2009, the Company’s cash and cash equivalents balance was $0.2 million, which approximates the fair value due to the short-term nature of these items.

Rents and Other Receivables

The Company will periodically evaluate the collectibility of amounts due from tenants and will maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. The Company will write off the balance of amounts due from tenants when the Company deems the amounts to be uncollectible.

Redeemable Common Stock

The Company has adopted a share redemption program that may enable stockholders to sell their shares to the Company in limited circumstances.

There are several limitations on the Company’s ability to redeem shares under the share redemption program:

• Unless the shares are being redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined under the share redemption program), the Company may not redeem shares until the stockholder has held his shares for one year.

• The share redemption program limits the number of shares the Company may redeem to those that the Company could purchase with the net proceeds from the issuance of shares under the dividend reinvestment plan during the prior calendar year.

• During any calendar year, the Company may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.

• The Company has no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.

Pursuant to the program, the Company would redeem shares at prices determined as follows:

• The lower of $9.25 or 92.5% of the price paid to acquire the shares from the Company for stockholders who have held their shares for at least one year;

• The lower of $9.50 or 95.0% of the price paid to acquire the shares from the Company for stockholders who have held their shares for at least two years;

• The lower of $9.75 or 97.5% of the price paid to acquire the shares from the Company for stockholders who have held their shares for at least three years;

• The lower of $10.00 or 100% of the price paid to acquire the shares from the Company for stockholders who have held their shares for at least four years.

Notwithstanding the above, the redemption price for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” will initially be the amount paid to acquire the shares from the Company. Furthermore, once the Company establishes an estimated value per share of its common stock, the redemption price per share for all stockholders would be equal to the estimated value per share, as determined by its advisor or another firm chosen for that purpose. The Company expects to establish an estimated value per share after the completion of its offering stage. The Company will consider its offering stage complete when it is no longer offering equity securities – whether through the primary offering or a follow-on public or private offering – and has not done so for 18 months.

The Company’s board of directors may amend, suspend or terminate the share redemption program with 30 days’ notice to its stockholders. The Company may provide this notice by including such information in a Current Report on Form 8-K or in the Company’s annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to its stockholders.

F-9

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

The Company will record amounts that are redeemable under the share redemption plan as redeemable common stock in the consolidated balance sheets since the shares are mandatorily redeemable at the option of the holder and therefore outside the control of the Company. The maximum amount redeemable under the Company’s share redemption plan is limited to the number of shares the Company could redeem with the amount of the net proceeds from the sale of shares under the dividend reinvestment plan in the prior year. However, since the amounts that can be redeemed will be determinable and only contingent on an event that is likely to occur (e.g., the passage of time), the Company will present the net proceeds from the current year and prior year dividend reinvestment plan as redeemable in its consolidated balance sheets.

The Company will classify as liabilities financial instruments that represent a mandatory obligation of the Company to redeem shares. The Company’s redeemable common shares are contingently redeemable at the option of the holder. When the Company determines it has a mandatory obligation to repurchase shares under the share redemption program, it will reclassify such obligations from temporary equity to a liability based upon their respective settlement values. As of August 10, 2009 and September 30, 2009, no shares had been tendered for redemption or redeemed by the Company.

Organization, Offering and Related Costs

Organization and offering costs (other than selling commissions and the dealer manager fee) of the Company are initially being paid by the Advisor, the Dealer Manager or their affiliates on behalf of the Company. These other organization and offering costs include all expenses to be paid by the Company in connection with the Offering, including but not limited to (i) legal, accounting, printing, mailing and filing fees; (ii) charges of the escrow holder and transfer agent; (iii) charges of the Advisor for administrative services related to the issuance of shares in the Offering; (iv) reimbursement of the bona fide diligence expenses of broker-dealers; (v) reimbursement to the Advisor for costs in connection with preparing supplemental sales materials; (vi) the cost of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of registered representatives of broker-dealers); (vii) reimbursement to the Dealer Manager for attendance and sponsorship fees and travel, meal and lodging costs for registered persons associated with the Dealer Manager and officers and employees of the Company’s affiliates to attend retail seminars conducted by broker-dealers; and (viii) in special cases, reimbursement to participating broker-dealers for technology costs associated with the Offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the shares in the Offering by such broker-dealers and the ownership of the shares by such broker-dealers’ customers. The Company anticipates that, pursuant to the Advisory Agreement and the Dealer Manager Agreement, the Company will be obligated to reimburse the Advisor, the Dealer Manager or their affiliates, as applicable, for organization and offering costs paid by them on behalf of the Company, provided that the Advisor would be obligated to reimburse the Company to the extent selling commissions, the dealer manager fee and other organization and offering costs incurred by the Company in the Offering exceed 15% of gross offering proceeds.

In the event the Minimum Number of Shares of the Company’s common stock is not sold to the public, the Company will terminate the Offering and will have no obligation to reimburse the Advisor, the Dealer Manager or their affiliates for any organization and offering costs. As of August 10, 2009 and September 30, 2009, the Advisor has incurred organization and offering costs on behalf of the Company of approximately $0.3 million and $1.0 million, respectively. These costs are not recorded in the financial statements of the Company as of August 10, 2009 and September 30, 2009 because such costs are not a liability of the Company until the Advisory Agreement is executed and the Minimum Number of Shares of the Company’s common stock is issued, and such costs will only become a liability of the Company to the extent selling commissions, the dealer manager fee and other organization and offering costs do not exceed 15% of the gross proceeds of the Offering. When recorded by the Company, organization costs will be expensed as incurred, and offering costs, which include selling commissions and dealer manager fees, will be deferred and charged to stockholders’ equity as such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from the gross proceeds of the Offering.

F-10

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

Independent Director Compensation

The Company will pay each of its independent directors an annual retainer of $40,000. In addition, the independent directors will be paid for attending meetings as follows: (i) $2,500 for each board meeting attended, (ii) $2,500 for each committee meeting attended (except that the committee chairman is paid $3,000 for each meeting attended), (iii) $2,000 for each teleconference board meeting attended, and (iv) $2,000 for each teleconference committee meeting attended (except that the committee chairman is paid $3,000 for each teleconference committee meeting attended). All directors will also receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors. No independent director fees or director reimbursements are payable unless the Company raises the minimum offering amount of $2,500,000; until the Company raises the minimum offering amount, fees and other amounts payable to the board of directors will accrue without interest. Director compensation is an operating expense of the Company that is subject to the operating expense reimbursement obligation of the Advisor discussed in Note 4.

Income Taxes

The Company intends to elect to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and intends to operate as such beginning with its taxable year ending December 31, 2010. The Company expects to have little or no taxable income prior to electing REIT status. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company intends to organize and operate in such a manner as to qualify for treatment as a REIT.

F-11

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

3. STOCKHOLDER’S EQUITY

General

Under the Articles of Incorporation of the Company, the total number of shares of capital stock authorized for issuance is 1,010,000,000 shares, consisting of 1,000,000,000 shares of common stock and 10,000,000 shares of preferred stock, each as defined by the Company’s Articles of Incorporation.

The shares of common stock have a par value of $0.01 per share and entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights. As of August 10, 2009 and September 30, 2009, the Company had issued 20,000 shares of common stock.

The Company is authorized to issue one or more classes or series of preferred stock. Prior to the issuance of such shares, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares. As of August 10, 2009 and September 30, 2009, no shares of the Company’s preferred stock were issued and outstanding.

Dividend Reinvestment Plan

The Company has adopted a dividend reinvestment plan (the “DRP”) through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares in additional shares of the Company’s common stock in lieu of receiving cash distributions. The initial purchase price per share under the DRP will be $9.50. Once the Company establishes an estimated value per share, shares issued pursuant to the dividend reinvestment plan will be priced at the estimated value per share of the Company’s common stock, as determined by the Advisor or another firm chosen for that purpose. The Company expects to establish an estimated value per share after the completion of its offering stage. The offering stage will be considered complete when the Company is no longer offering equity securities – whether through the Offering or follow-on public or private offerings – and has not done so for 18 months. No selling commissions or dealer manager fees will be paid on shares sold under the DRP. The board of directors of the Company may amend or terminate the DRP for any reason upon 10 days’ notice to participants.

F-12

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

4. RELATED-PARTY TRANSACTIONS

The Company anticipates executing the Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager. These agreements will entitle the Advisor and the Dealer Manager to specified fees upon the provision of certain services with regard to the Offering and the investment of funds in real estate-related investments, among other services, as well as reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manager on behalf of the Company (as discussed in Note 2) and certain costs incurred by the Advisor in providing services to the Company. The fees and reimbursement obligations are as follows:

Form of Compensation	Amounts
Selling Commission	The Company will pay the Dealer Manager up to 6.5% of the gross offering proceeds before reallowance of commissions earned by participating broker-dealers. The Dealer Manager will reallow 100% of commissions earned to participating broker-dealers. No sales commission will be paid on shares sold through the dividend reinvestment plan. Assuming all shares in the primary offering are sold at the highest possible selling commissions (with no discounts to any categories of purchasers), estimated selling commissions are approximately $162,500 if the Company sells the minimum of 250,000 shares and approximately $130,000,000 if the Company sells the maximum of 280,000,000 shares.
Dealer Manager Fee	The Company will pay the Dealer Manager up to 3.0% of gross offering proceeds. No dealer manager fee is payable on shares sold under the dividend reinvestment plan. The Dealer Manager may reallow to any participating broker-dealer up to 1.0% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee and in special cases the dealer manager may increase the reallowance. A reduced dealer manager fee is payable with respect to certain volume discount sales. The estimated dealer manager fee is approximately $75,000 if the Company sells the minimum of 250,000 shares and approximately $60,000,000 if the Company sells the maximum of 280,000,000 shares.
Reimbursement of Organization and Offering Expenses	The Company will reimburse the Advisor or its affiliates for organization and offering expenses (as discussed in Note 2) incurred by the Advisor or its affiliates on behalf of the Company to the extent that reimbursement would not cause selling commissions, the dealer manager fee and the other organization and offering expenses borne by the Company to exceed 15.0% of gross offering proceeds as of the date of reimbursement. The Company estimates organization and offering costs of approximately $137,500 if the Company sells the minimum of 250,000 shares and approximately $21,690,423 if the Company sells the maximum of 280,000,000 shares.
Acquisition Advisory Fee	The Company will pay the Advisor 1.0% of the cost of investments acquired, or the amount funded to acquire or originate loans, including acquisition and origination expenses and any debt attributable to such investments and budgeted capital improvement costs.
Development Fees	In the event the Company engages an affiliate of one of the sponsors to provide development services with respect to a particular property, it will pay a development fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project.

F-13

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

Form of Compensation	Amounts
Construction Fees	In the event the Company engages an affiliate of one of the sponsors to provide construction services with respect to a particular property, it will pay a construction fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project.
Acquisition Expenses	The Company will reimburse the Advisor or its affiliates for customary acquisition and origination expenses (including expenses relating to potential investments that do not close), such as legal fees and expenses (including fees of in-house counsel that are not employees or affiliates of the advisor), costs of due diligence, accounting fees and expenses and other closing costs and miscellaneous expenses relating to the acquisition or origination of real estate-related loans, real estate-related debt securities and other real estate-related investments.
Asset Management Fee (1)	The Company will pay the Advisor or its affiliates a monthly fee equal to one-twelfth of 1.0% of the sum of the cost of all real estate investments made and of any investments in joint ventures, including acquisition expenses, any debt attributable to such investments and budgeted capital improvement costs. In the case of investments made through joint ventures, the asset management fee will be determined based on the Company’s proportionate share of the underlying investment.
Reimbursement of Operating Expenses (1)	The Company will reimburse the expenses incurred by the Advisor or its affiliates in connection with their provision of services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities and IT costs. Though the Advisor may seek reimbursement for employee costs under the Advisory Agreement, the Advisor does not intend to do so at this time. If the Advisor does decide to seek reimbursement for employee costs, such costs may include the Company’s proportionate share of the salaries of persons involved in the preparation of documents to meet SEC reporting requirements. The Company will not reimburse the Advisor or its affiliates for employee costs in connection with services for which the Advisor or its affiliates receive acquisition and origination fees or disposition fees or for the salaries and benefits the Advisor or its affiliates may pay to the Company’s executive officers.
Disposition Fee (1)	For substantial assistance in connection with the sale of investments, the Company will pay the Advisor or its affiliate a disposition fee of 1.0% of the contract sales price of each real property or other investments sold; provided, however, that if in connection with such disposition commissions are paid to third parties unaffiliated with the Advisor, the fee paid to the Advisor or its affiliate may not exceed the commissions paid to such unaffiliated third parties, and provided further that the disposition fees paid to the Advisor, its affiliates and unaffiliated third parties may not exceed 6.0% of the contract sales price. The Company does not intend to sell assets to affiliates. However, if the Company does sell an asset to an affiliate, its organizational documents would not prohibit it from paying the Advisor a disposition fee. Before the Company sold an asset to an affiliate, the Company’s Articles of Incorporation would require that the Company’s conflicts committee conclude, by a majority vote, that the transaction is fair and reasonable to the Company and on terms and conditions no less favorable to the Company than those available from third parties.

F-14

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

Form of Compensation	Amounts
Subordinated Participation in Net Cash Flows (1)	After investors receive a return of their net capital contributions and a 8.0% per year cumulative, noncompounded return, the Advisor is entitled to receive 15.0% of the net cash flows produced by the Company, whether from continuing operations, net sale proceeds or otherwise.
Subordinated Performance Fee due upon termination of the advisory agreement	Upon termination of the advisory agreement, KBS Capital Advisors may be entitled to receive a subordinated termination fee from the Company in the form of a promissory note that becomes due only upon the sale, exchange or other disposition of one or more of the Company’s assets, and the fee would be payable solely from the proceeds from the sale, exchange or other disposition of an asset and future asset sales, exchanges or dispositions. The amount of the fee would be 15% of the amount, if any, by which (i) the hypothetical liquidation proceeds plus distributions paid exceed (ii) the amount necessary to provide investors with a return of their net capital contributions and an 8.0% per year cumulative, non-compounded return through the termination date. The amount due under the promissory note would not be adjusted upwards or downwards to reflect any difference in the appraised value of the Company’s portfolio at termination and the amount ultimately realized by the Company. The fee would be reduced by the amount of any prior payment to the advisor of a subordinated participation in net cash flows.
Subordinated Incentive Listing Fee	Upon listing the Company’s common stock on a national securities exchange, the Advisor or its affiliates will receive 15.0% of the amount by which (1) the market value of the Company’s outstanding stock plus distributions paid by the Company prior to listing exceeds (2) the sum of invested capital and the amount of cash flow necessary to generate a 8.0% per year cumulative, noncompounded return to stockholders.

⁽¹⁾ Commencing on the earlier of four fiscal quarters after (i) the Company makes its first investment or (ii) six months after commencement of the Company’s initial public offering, the Advisor will reimburse the Company at the end of any fiscal quarter for total operating expenses that in the four consecutive fiscal quarters then ended exceed the greater of 2% of its average invested assets or 25% of its net income, unless the conflicts committee of the Company’s board of directors has determined that such excess expenses were justified based on unusual and non-recurring factors.

“Average invested assets” means the average monthly book value of the Company’s assets during the 12-month period before deducting depreciation, bad debts or other non-cash reserves.

“Total operating expenses” means all expenses paid or incurred by the Company, as determined under GAAP, that are in any way related to the Company’s operation, including advisory fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of the Company’s stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain on the sale of the Company’s assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that the Company does not close), disposition fees on the sale of real property and other expenses connected with the acquisition, disposition and ownership of real estate, such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property. To the extent the Advisor receives the fee described above at “Subordinated Participation in Net Cash Flows” and such fee is derived from cash flows other than net sales proceeds, that fee will count against the limit on “total operating expenses.” To the extent the fee described above at “Disposition Fee” is paid upon the sale of any assets other than real property, that fee will count against the limit on “total operating expenses.”

The Advisory Agreement will have a one-year term. The Company may terminate the Advisory Agreement on 60 days’ written notice. The Advisor in its sole discretion may defer any fee payable to it under the Advisory Agreement. All or any portion of such fee not taken may be deferred without interest and paid when the Advisor determines.

F-15

KBS LEGACY PARTNERS APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED BALANCE SHEETS (CONTINUED)

SEPTEMBER 30, 2009

(unaudited)

Conflicts of Interest

Some of the Company’s executive officers and directors and the key real estate professionals assembled by the Advisor are also executive officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in the Advisor, the Dealer Manager and other KBS-affiliated entities. Through KBS-affiliated entities, some of these persons also serve as the investment advisers to institutional investors in real estate and real estate-related assets and, through KBS Capital Advisors, these persons serve as the advisor to KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust II, Inc. and KBS Strategic Opportunity REIT, Inc. As a result, they owe fiduciary duties to each of these entities, their members and limited partners and these investors, which fiduciary duties may from time to time conflict with the fiduciary duties that they owe to the Company and its stockholders.

Similarly, some of the Company’s executive officers and directors and the key real estate professionals assembled by Legacy Partners Residential Realty LLC and its affiliated Legacy residential related entities (“Legacy Residential”) are also executive officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in other Legacy Residential-affiliated entities. Legacy Partners Residential Realty LLC is the Advisor’s joint venture partner in KBS-Legacy Apartment Community REIT Venture, LLC. Through Legacy Residential-affiliated entities, some of these persons also serve as sub-advisors to institutional investors in real estate and real estate-related assets. As a result, they owe fiduciary duties to each of these entities, their members and limited partners and these investors, which fiduciary duties may from time to time conflict with the fiduciary duties that they owe to the Company and its stockholders.

Some of the material conflicts that the Advisor, the Dealer Manager, Legacy Residential or their affiliates will face are 1) the allocation of the time of key executive officers, directors, and other real estate professionals among the Company, other KBS- and Legacy Residential–sponsored programs and KBS-and Legacy Residential–advised investors, and the activities in which they are involved; 2) the fees received by the Advisor, Legacy Residential and their affiliates in connection with transactions involving the purchase, origination, management and sale of investments regardless of the quality of the asset acquired or the service provided the Company; and 3) the fees received by the Advisor, the Dealer Manager and their affiliates in connection with the Company’s Offering.

5. ECONOMIC DEPENDENCY

The Company will be dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common and preferred stock available for issue; the identification, evaluation, negotiation, origination, acquisition and disposition of investments; management of the daily operations of the Company’s investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

6. SUBSEQUENT EVENTS

The Company evaluates subsequent events up until the date the consolidated balance sheet is issued. The accompanying consolidated balance sheet was issued on December 1, 2009.

F-16

PRIOR PERFORMANCE TABLES – LEGACY SPONSORS

(UNAUDITED)

Since 1968, Mr. Butcher has been involved in entities that have acquired/developed 655 real estate assets on behalf of private funds and sub-advisory accounts with over 68,000 residential units exceeding $5.3 billion in cost and 68 million square feet of office and industrial space exceeding $8.7 billion in cost. These entities have sold 547 real estate assets with nearly 57,000 residential units exceeding $3.32 billion in cost and over 54 million square feet of office and industrial space exceeding $4.4 billion in cost. These entities have been a conduit for leading institutional investors and high net worth individuals to invest in real estate assets throughout the western U.S. As an owner, manager and operator of real estate assets, the Legacy Residential and Legacy Commercial entities offer investors a trusted, highly-experienced advisor or sub-advisor with regards to locating, acquiring/developing, financing, managing, and selling high quality real estate assets. We have omitted from the discussion and tables below information regarding the prior performance of entities for which an institutional investor engaged a Legacy Residential or Legacy Commercial affiliate if the investor had the power to reject the real estate acquisitions proposed by the Legacy Residential or Legacy Commercial affiliate manager. Such entities are not considered “funds” or “programs” as those terms are used in this prospectus.

During the ten-year period ending December 31, 2008, our Legacy sponsors through the Legacy Residential and Legacy Commercial affiliated entities have managed four private real estate funds, including one multifamily residential real estate fund, Legacy Partners Affordable Housing Fund, LLC, and three commercial real estate funds, Legacy Partners Realty Fund I, LLC, Legacy Partners Realty Fund II, LLC, and Legacy Partners Realty Fund III, LLC. The multifamily residential fund is a single-client fund pursuant to which certain of our Legacy sponsors advise and invest on behalf of the State of California Public Employees’ Retirement System. The commercial funds are multi-investor, commingled funds. All of these private funds are limited liability companies for which affiliates of our Legacy sponsors act as a manager. In all cases, affiliates of our Legacy sponsors have responsibility for acquiring, investing, managing, developing and selling the real estate and real estate-related assets of each of the funds.

Each of these funds has investment objectives that are similar to ours. Like ours, their primary investment objectives are to provide investors with attractive and stable returns and to preserve and return their capital contributions and, like us, it will seek to realize growth in the value of its investments by timing asset sales to maximize asset value.

The Legacy Partners Affordable Housing Fund is focused on the renovation or development of multifamily housing with an affordable housing component of 15% - 20%. It was initially focused exclusively on acquisitions/development of multifamily housing in urban areas of California with committed equity of $63.2 million, including a 5% co-investment of equity from Legacy Partners 1002 LLC, an affiliate of our Legacy sponsors. The scope of the program was subsequently expanded to include urban areas of Colorado and Texas, and the equity commitment was increased to $269.5 million, including Legacy Partners 1002’s 5% co-investment. Legacy Partners Realty Funds I, II and III are focused primarily on the acquisition, value-enhancement, management, and sale of predominantly office properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. The funds employ leverage up to 65% of the value of the program’s assets as part of its strategy and generate competitive internal rates of return, net of management fees and incentives paid to the sponsor, over an eight to ten-year period.

The tables presented in this section provide summary unaudited information related to the historical experience of Legacy Partners Affordable Housing Fund and Legacy Partners Realty Funds I, II and III. By purchasing shares in this offering, you will not acquire any ownership interest in any funds to which the information in this section relates and you should not assume that you will experience returns, if any, comparable to those experienced by the investors in the real estate funds discussed. Further, the private funds discussed in this

F-17

section were conducted through privately-held entities that were subject neither to the up-front commissions, fees and expenses associated with this offering nor all of the laws and regulations that will apply to us as a publicly offered REIT.

The information in this section should be read together with the summary information in this prospectus under “Prior Performance Summary.” The following tables are included in this section:

— Table I – Experience in Raising and Investing Funds;

— Table II – Compensation to Sponsor;

— Table III – Operating Results of Prior Programs; and

— Table V – Sales or Disposals of Properties.

Table IV (Results of Completed Programs) has been omitted since none of the prior programs sponsored by our Legacy sponsors and their affiliates have completed their operations and sold all of their properties during the five years ended December 31, 2008.

For information regarding the acquisitions of Legacy Partners Affordable Housing Fund and Legacy Partners Realty Funds I, II and III during the three years ending December 31, 2008, see Table VI contained in Part II of the registration statement, which is not a part of this prospectus. We will provide a copy of Table VI to you upon written request and without charge.

F-18

TABLE I – LEGACY SPONSORS

EXPERIENCE IN RAISING AND INVESTING FUNDS

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Table I provides a summary of the experience of our Legacy sponsors and their affiliates in raising and investing funds for programs that have had offerings close during the three years ended December 31, 2008. Information is provided as to the manner in which the proceeds of the offerings have been applied. Each of the programs presented have investment objectives similar to ours. All percentage amounts except “Percent leveraged” represent percentages of the dollar amount raised for each program.

	Legacy Partners Affordable Housing Fund (1)			Legacy Partners Realty Fund I (2)			Legacy Partners Realty Fund II (3)			Legacy Partners Realty Fund III (4)
Dollar amount offered	$	269,473,684		$	331,578,947		$	456,842,105		$	475,000,000
Dollar amount raised	$	97,493,973	(5)	$	331,578,947	(6)	$	455,196,145	(7)	$	208,000,000	(8)
Percentage amount raised		36.3%			100%			99.6%			46.1%
Percentage available for investment before offering expenses and reserves		100.0%			100.0%			100.0%			100.0%
Less offering expenses:
Selling commissions and dealer manager fees		0.0%			0.0%			0.0%			0.0%
Organizational and offering expenses		0.0%			0.2%			0.1%			0.2%
Reserves		0.0%			5.0%			5.0%			5.0%
Percentage available for investment after offering expenses and reserves		100.0%			94.8%			94.9%			94.8%
Acquisition costs:
Prepaid items and fees related to purchase of property		0.0%			1.7%			0.6%			0.3%
Acquisition/Development Costs		394.1%	(9)		236.5%	(10)		280.0%	(11)		305.8%	(12)
Acquisition fees		1.6%	(13)		0.0%			0.0%			0.0%
Other costs		6.4%	(14)		36.0%	(14)		39.8%	(14)		32.8%	(14)
Total acquisition costs		402.1%			274.2%			320.4%			338.9%
Percent leveraged		75.1%	(15)		68.9%	(16)		75.1%	(16)		70.4%	(16)
Date offering began		(17)			(18)			(19)			(20)
Length of offering (in months)		(17)			(18)			(19)			(20)
Months to invest 90% of amount available for investment		(17)			(18)			(19)			(20)

F-19

TABLE I – LEGACY SPONSORS

EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

(1) This program represents a single-client acquisition and development fund whereby dollars are committed as assets are identified pursuant to an operating agreement between a Legacy Residential affiliate and an institutional investor. Under the operating agreement, when the Legacy Residential affiliate as manager for the company identifies properties for acquisition or development, the Legacy Residential affiliate invests funds on behalf of the institutional investor, oversees acquisition, development and management of the assets in the portfolio and ultimately sells the assets on behalf of the investor.

(2) This program is focused on the acquisition, value-enhancement, management and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas.

(3) This program is focused on the acquisition, value-enhancement, management and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas.

(4) This program is focused on the acquisition, value-enhancement, management and sale of office, research and development, and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas.

(5) Represents amount of funds called and invested to date pursuant to the operating agreement, including $11,850,000 that was returned to investors as the result of an asset sale in 2006. Funds are called and invested during the course of development of the portfolio assets. Under the operating agreement, the full amount of $269,473,684 offered had been committed at the time the offering closed on December 31, 2008, with $268,563,951 allocated to specific assets. Of the amount offered, $256,000,000 represents the investment commitment of the single institutional investor and $13,473,684 represents a 5% co-investment by a Legacy Residential affiliate.

(6) Of this amount, $190,000,000 represents the investment commitment of a REIT; $125,000,000 represents other institutional investors; and $16,578,947 represents a 5% co-investment by Legacy Partners Realty Fund I. Under the operating agreement, the full amount of $331,578,947 offered had been committed as of July 25, 2005, and fully funded as of December 31, 2008.

(7) Of the $456,842,105 offered, $258,000,000 represents the investment commitment of a REIT; $176,000,000 represents other institutional investors; and $22,842,105 represents a 5% co-investment by Legacy Partners Realty Fund II. Under the operating agreement, the full amount of $456,842,105 offered had been committed as of October 18, 2006, with $455,196,145 funded as of December 31, 2008.

(8) Of the $451,147,610 offered, $363,000,000 represents the investment commitment of a REIT; $65,500,000 represents other institutional investors; $90,230 from the Managing Member; and $22,557,380 represents a 5% co-investment by Legacy Partners Realty Fund III. The Fund’s final equity close occurred on September 12, 2008 and the full amount of $451,147,610 had been committed as of December 31, 2008, with $208,000,000 funded as of that date.

(9) Reflects Acquisition/Development Costs of $384,202,937 over outstanding equity of $97,493,973. Included in the percentage is $49,474,734 of cost and $11,850,000 of original investment for a development project that closed in 2004 and sold in 2006. As of December 31, 2008, the total construction cost of the project was not determined and agreed upon by the members, therefore no cost overrun amounts were included in Acquisition/Development Costs. In August 2009, the members of the Fund reached an agreement and, in addition to utilizing held sale proceeds, the Legacy Residential affiliate re-contributed its developer fee of $2,149,000 and both members funded their respective share of the remaining $6,699,810 of cost overruns.

(10) Reflects total acquisition costs of $784,104,989 over outstanding equity of $331,578,947.

(11) Reflects total acquisition costs of $1,274,147,988 over outstanding equity of $455,196,145.

(12) Reflects total acquisition costs of $636,141,000 over outstanding equity of $208,000,000.

(13) Represents acquisition fees as a percentage of dollar amount funded.

(14) Other costs include legal fees, due diligence costs, title and closing costs, lease up deficits and costs incurred after acquisition but anticipated in the original offering.

F-20

TABLE I – LEGACY SPONSORS

EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

(15) “Percent Leveraged” represents total mortgage financing at December 31, 2008 divided by total Acquisition/Development costs for the portfolio assets, including cost of sold asset and debt thereon.

(16) “Percent Leveraged” represents total financing outstanding at December 31, 2008 divided by total acquisition costs of properties acquired, including those acquired through joint venture.

(17) This program represents a single-client development fund whereby dollars are funded only as assets are identified and developed pursuant to an operating agreement between a Legacy Residential affiliate and an institutional investor. Legacy Partners Affordable Housing Fund was formed in December 2002 and made its first development investment in April, 2003. The fund has made a total of three separate development investments and one acquisition investment through December 2008.

(18) This program is focused on the acquisition, value-enhancement, management and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. Capital for this program is committed by the investors when the operating agreement is executed. Capital is called as necessary, as determined by a Legacy Commercial affiliate, who calls for committed capital from the investors, invests funds, manages the assets in the portfolio, and ultimately sells the assets on behalf of the fund. Legacy Partners Realty Fund I made its first investment in December, 2004 and, as of December 31, 2008, had acquired 32 office and land properties with 5.9 million square feet of space, totaling $909.4 million in cost and sold 6 properties and 4 partial properties for $191.9 million.

(19) This program is focused on the acquisition, value-enhancement, management and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. Capital for this program is committed by the investors when the operating agreement is executed. Capital is called as necessary, as determined by a Legacy Commercial affiliate, who calls for committed capital from the investors, invests funds, manages the assets in the portfolio, and ultimately sells the assets on behalf of the fund. Legacy Partners Realty Fund II made its first investment in May, 2006 and, as of December 31, 2008, had acquired 28 office, industrial and land properties with 5.9 million square feet of space, totaling $1.5 billion in cost.

(20) This program is focused on the acquisition, value-enhancement, management and sale of office, research and development, and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. Capital for this program is committed by the investors when the operating agreement is executed. Capital is called as necessary, as determined by a Legacy Commercial affiliate, who calls for committed capital from the investors, invests funds, manages the assets in the portfolio, and ultimately sells the assets on behalf of the fund. Legacy Partners Realty Fund III made its first investment in August, 2007 and, as of December 31, 2008, had acquired 10 office and land properties with 2.6 million square feet of space and totaling $705 million in cost.

F-21

TABLE II – LEGACY SPONSORS

COMPENSATION TO SPONSOR

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Table II summarizes the amount and type of compensation paid to affiliates of our Legacy sponsors during the three years ended December 31, 2008 in connection with 1) each program sponsored by an affiliate of our Legacy sponsors that had offerings close during this period and 2) all other programs that have made payments to affiliates of our Legacy sponsors during this period. All of the programs represented in the table below have or had investment objectives similar to ours. All figures are as of December 31, 2008.

			Legacy Partners Affordable Housing Fund (1)			Legacy Partners Realty Fund I (2)			Legacy Partners Realty Fund II (3)			Legacy Partners Realty Fund III (4)
Date offering commenced				Dec-02			Dec-03			Feb-06			May-07
Dollar amount raised			$	268,563,951		$	331,578,947		$	456,842,105		$	451,147,610
Amount paid to sponsor from proceeds of offering:
Underwriting fees			$	-		$	-		$	-		$	-
Acquisition fees:
- real estate commissions				-			-			-			-
- advisory fees				-			-			-			-
- other	(5	)		1,550,000			-			-			-
Developer fees	(6	)		6,706,237			-			-			-
Contractor/Construction Management fees	(7	)		1,651,169			-			-			-
Loan servicing fees	(8	)		3,231			-			-			-
Reimbursements	(9	)		130,168			-			-			-
Other	(10	)		1,712,838			-			-			-
Dollar amount of cash (used by) generated from operations before deducting payments to sponsors	(11	)	$	(3,852,882	)	$	(7,075,621	)(12)	$	(17,105,563	)(12)	$	9,464,285	(12)
Amount paid to sponsor from operations:
Property management fees	(13	)	$	-		$	8,071,149		$	7,426,428		$	1,663,335
Partnership and asset management fees	(14	)		-			11,814,410			17,867,430			6,495,903
Loan servicing fees				-			-			-			-
Developer fees	(15	)		-			1,227,275			2,618,127			1,973,665
Contractor/Construction Management Fees	(16	)		-			11,418,730			11,602,595			6,243,914
Leasing Commissions	(17	)		-			4,821,721			2,874,051			494,877
Reimbursements				-			-			-			-
Dollar amount of property sales and refinancing before deducting payments to sponsors
- cash	(18	)	$	63,930,873	(19)	$	184,404,694	(19)	$	-		$	3,764,644	(19)
- notes				-			-			-			-
Amounts paid to sponsor from property sales and refinancing:
- Real estate commissions			$	-		$	-		$	-		$	-
- Disposition fees	(20	)		472,500			-			-			-
- Incentive fees	(21	)		2,777,021			-			-			-
- Other				-			-			-			-

F-22

TABLE II – LEGACY SPONSORS

COMPENSATION TO SPONSOR (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

(1) This program represents a single-client acquisition and development fund whereby dollars are committed as assets are identified pursuant to an operating agreement between a Legacy Residential affiliate and an institutional investor. Under the operating agreement, when the Legacy Residential affiliate as manager for the company identifies properties for acquisition or development, the Legacy Residential affiliate invests funds on behalf of the institutional investor, oversees acquisition, development and management of the assets in the portfolio and ultimately sells the assets on behalf of the investor. Legacy Partners Affordable Housing Fund made it’s first development investment in April, 2003. The fund has made a total of three separate development investments and one acquisition investment through December 2008.

(2) This program is focused on the acquisition, value-enhancement, management and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. As of December 31, 2008 Legacy Partners Realty Fund I had acquired 32 office and land properties with 5.9 million square feet of space totaling $909.4 million in cost and sold 6 properties and 4 partial properties for $191.9 million.

(3) This program is focused on the acquisition, value-enhancement, management and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. As of December 31, 2008 Legacy Partners Realty Fund II had acquired 28 office, industrial and land properties with 5.9 million square feet of space and totaling $1.5 billion in cost.

(4) This program is focused on the acquisition, value-enhancement, management and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. As of December 31, 2008 Legacy Partners Realty Fund III had acquired 10 office and land properties with 2.6 million square feet of space and totaling $705 million in cost.

(5) One of the properties in the Affordable Housing Fund paid acquisition fees to a Legacy Residential affiliate, in an amount equal to 1% of the agreed upon acquisition cost, for services rendered in locating, assessing and closing on the asset. Per the terms of the operating agreement with an institutional investor, the acquisition fees are paid from proceeds of the offering.

(6) Three of the four properties in the Affordable Housing fund paid developer fees to a Legacy Residential affiliate in an amount equal to 3% of the agreed upon development cost of a project. Per the terms of the operating agreement with an institutional investor, the developer fees are paid from proceeds of the offering.   In August 2009, as a result of an agreement with the institutional investor, the Legacy Residential affiliate re-contributed developer fees of $2,149,000 to partially fund a construction cost overrun.

(7) One of the properties in the Affordable Housing Fund paid contractor fees to a Legacy Residential affiliate in an amount not to exceed 5% of the agreed upon construction cost of the project for serving as general contractor for the project. Two of the properties in the Affordable Housing Fund paid construction management fees to a Legacy Residential affiliate in an amount equal to 0.5% of total construction contract cost, capped at a defined amount, for supervising the construction of the projects. Per the terms of the operating agreement with an institutional investor, the contractor fees are paid from proceeds of the offering.

(8) Per the terms of the operating agreement with an institutional investor, either member is entitled to a credit enhancement fee for guaranteeing the financing for the investments. The fee is equal to 1% per annum of the average outstanding principal borrowing and is payable from the proceeds of the offering. Amount excludes reimbursement of an overpayment of fees for a prior year.

(9) An affiliate of Legacy Residential is reimbursed for certain accounting services. During the development phase of a project, the fee is paid from offering.

(10) Includes Asset management fees of $1,585,469, property management fees of $32,191 and reimbursements of $95,178 that were funded from proceeds of offering, per terms of business plan for the property.

(11) Cash deficits from operations (GAAP basis) includes interest expense in excess of interest income on borrowings that were loaned to an external entity, as provided in the business plan with the institutional investor. Additionally, in 2008, cash deficits from operations (GAAP basis), included the write off of a project pursued by the Fund, but abandoned as a result of deteriorating market conditions. Both the interest arbitrage and the abandoned development costs were funded by debt or proceeds of offering.

(12) Legacy Partners Realty Funds I, II, and III are value-added funds for which temporary operating deficits are anticipated. Value-added funds have a moderate risk profile because assets within these funds typically require some form of renovation or are operating at occupancy levels that are below par when compared to competing properties in the area. As a result, these assets often have operating deficits after acquisition until renovations are completed and the asset is otherwise repositioned through management change, rebranding (e.g., name change, image enhancement, etc.) or the use of other leasing strategies that bring occupancy levels up to par. These operating deficits vary in duration depending on the magnitude of the renovations required and the local market conditions, but typically range from 18 months to 36 months. Operating deficits are funded by loan or offering proceeds, as provided in the operating agreement for each Fund.

F-23

TABLE II – LEGACY SPONSORS

COMPENSATION TO SPONSOR (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

(13) Fees are paid to a Legacy Residential affiliate for providing property management services and are paid from operating cash flow, if available, from loan reserves held by property to fund operating deficits during asset repositioning, or from offering proceeds specifically raised to cover operating deficits during repositioning.

(14) Fees are paid to a Legacy Residential affiliate for providing asset management and disposition services and are paid from operating cash flow, if available, from loan reserves held by property to fund operating deficits during asset repositioning, or from offering proceeds specifically raised to cover operating deficits during repositioning.

(15) Fees are paid to a Legacy Residential affiliate for providing development services and are paid from operating cash flow, if available, from loan reserves held by property to fund operating deficits during asset repositioning, or from offering proceeds specifically raised to cover operating deficits during repositioning.

(16) Fees are paid to a Legacy Residential affiliate for providing contractor, construction management, and space planning services. The fees are paid from operating cash flow, if available, from loan reserves held by property to fund operating deficits during asset repositioning, or from offering proceeds specifically raised to cover operating deficits during repositioning.

(17) Fees are paid to a Legacy Residential affiliate for providing leasing services and are paid from operating cash flow, if available, from loan reserves held by property to fund operating deficits during asset repositioning, or from offering proceeds specifically raised to cover operating deficits during repositioning.

(18) Gross sale proceeds, net of closing costs and other selling expenses and before repayment of Mortgage. Proceeds were reduced by $3,123,934 for costs incurred in the year following sale.

(19) Gross sale proceeds net of closing costs and other selling expenses paid outside of escrow and before payoff of Mortgage.

(20) One of the properties in the Affordable Housing Fund was sold in 2006 and a disposition fee was paid to a Legacy Residential affiliate, in an amount equal to 0.5% of the gross sales price, subject to limitations. Per the terms of the operating agreement with an institutional investor, the disposition fee is paid from proceeds of sale.

(21) After return of invested capital and preferred return, as defined in the operating agreement, a Legacy Residential affiliate is entitled to a share of the remaining sale proceeds equal to 14.5% to 28.75%.

F-24

TABLE III – LEGACY SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

The following tables summarize the operating results of programs sponsored by our Legacy sponsors and their affiliates that have had offerings close during the five years ended December 31, 2008. For these programs, the tables shows: the income or loss of such programs (based upon U.S. generally accepted accounting principles (“GAAP”)); the cash they generated from operations, sales and refinancings; and information regarding cash distributions. Each of these private programs has investment objectives similar to ours. All figures are as of December 31 of the year indicated, except as otherwise noted.

			Legacy Partners Affordable Housing Fund
			2006			2007			2008
Gross revenues			$	408,437		$	5,126,660		$	9,200,804
Profit (loss) on sale of properties	(1	)		-			-			-
Less: Operating expenses	(2	)		(47,782	)		(1,943,017	)		(4,045,137	)
Interest expense				(115,957	)		(2,140,300	)		(1,547,728	)
Depreciation				-			-			(2,559,642	)
Unrealized gain (loss)	(3	)		-			-			(4,246,097	)
Net income (loss)—GAAP basis			$	244,698		$	1,043,343		$	(3,197,800	)
Taxable income:
From operations			$	(10,546	)	$	(1,028,884	)	$	(2,205,596	)
From gain (loss) on sale	(1	)		17,457,364			(3,123,934	)		1,535
Cash generated (deficiency) from operations				(90,904	)		(1,422,166	)		(4,052,650	)
Cash generated (deficiency) from sales	(1	)		66,582,307			(3,123,934	)		-
Cash generated from refinancing				-			-			-
Total cash generated from operations, sales and refinancing				66,491,403			(4,546,100	)		(4,052,650	)
Less: Cash distributed to investors
- From operating cash flow				-			-			-
- From sales and refinancing	(1	)		(25,942,811	)(4)		(647,997	)		-
Cash generated (deficiency) after cash distributions				40,548,592			(5,194,097	)		(4,052,650	)
Special items (not including sales and refinancing)
Cash used in investing activities				(125,169,286	)		(225,355,445	)		(68,557,506	)
Cash from financing activities				86,568,084			228,963,233			73,749,029
Cash generated (deficiency) after cash distributions and special items			$	1,947,390		$	(1,586,309	)	$	1,138,873
Tax and Distribution Data per $1,000 Invested
Federal Income Tax Results:
Ordinary income (loss)
- from operations	(5	)	$	(1	)	$	(22	)	$	(29	)
- from recapture				-			-			-
Capital gain (loss)				925			(67	)		-
Cash distributed to investors
Source (on GAAP basis)
- from investment income				746			-			-
- from return of capital				628	(4)		14			-
Total distribution on GAAP basis			$	1,374		$	14		$	-
Source (on cash basis)
- from sales			$	1,374		$	-		$	-
- from refinancing				-	(4)		14			-
- from operations				-			-			-
Total distributions on cash basis			$	1,374		$	14		$	-
Amounts (in percentage terms) remaining in program properties as of December 31, 2008	(6	)		64%			75%			88%

F-25

TABLE III – LEGACY SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

(1) In 2006, one of the Fund’s development properties was sold prior to completion and, as a result, cash was generated and, for tax purposes, gain recognized from sale in 2006. Distribution of sale proceeds was made to members in 2006, after holding back $3 million in reserves. The Fund guaranteed completion of construction, and subsequent expenditures in 2007 reduced Cash Generated from Sale and Taxable Income from Gain on Sale. Final construction costs were not determined and agreed upon by members as of December 31, 2008; therefore, the gain on sale was deferred for GAAP purposes. In August 2009, the members of the Fund reached an agreement and, in addition to utilizing held sale proceeds, the Legacy Residential affiliate re-contributed its developer fee of $2,149,000 and both members funded their respective share of the remaining $6,699,810 of cost overruns. A reduction to Taxable Income from Gain on Sale will be recognized in 2009 along with the full amount of GAAP gain.

(2) Operating expenses include the write off of a project pursued by the Fund and abandoned and interest expense in excess of interest income on borrowings loaned to an external party. The abandoned development costs and the net interest expense were funded by debt or proceeds of offering.

(3) Unrealized gain (loss) resulted from loss on derivatives.

(4) Distribution represents amount of excess contribution refunded upon funding of construction loan.

(5) Tax and distribution data per $1,000 invested calculated based on weighted-average capital invested.

(6) Calculated as original total acquisition cost of investments held at December 31, 2008 divided by original total acquisition cost of all investments made.

F-26

TABLE III – LEGACY SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

			Legacy Partners Realty Fund I									Legacy Partners Realty Fund II									Legacy Partners Realty Fund III
			2006			2007			2008			2006			2007			2008			2007			2008
Gross revenues			$	68,543,017		$	78,737,732		$	79,579,639		$	19,260,855		$	76,047,453		$	96,708,469		$	3,100,475		$	41,271,412
Profit (loss) on sale of properties				-			27,062,937			34,300,680			-			-			-			-			401,419
Less: Operating expenses	(1	)		(47,620,222	)		(52,773,707	)		(49,200,250	)		(15,057,404	)		(50,546,383	)		(68,483,612	)		(5,175,374	)		(31,146,264	)
Interest expense				(41,954,932	)		(47,114,225	)		(37,495,726	)		(15,345,047	)		(63,745,747	)		(64,394,170	)		(5,381,792	)		(30,470,757	)
Depreciation				(27,998,613	)		(31,766,449	)		(29,461,014	)		(9,798,418	)		(40,555,180	)		(50,045,186	)		(4,876,687	)		(36,168,430	)
Unrealized gain (loss) - Impairment & Interest rate derivatives	(2	)		(1,667,369	)		(6,940,947	)		(5,787,987	)		(607,933	)		(3,834,487	)		(59,836,645	)		(80,094	)		(3,397,542	)
Net income (loss) - GAAP basis			$	(50,698,119	)	$	(32,794,659	)	$	(8,064,658	)	$	(21,547,947	)	$	(82,634,344	)	$	(146,051,144	)	$	(12,413,472	)	$	(59,510,162	)
Taxable income:
From operations			$	(28,420,950	)	$	(31,350,060	)	$	(20,791,622	)	$	(12,177,933	)	$	(48,709,615	)	$	(51,439,366	)	$	(5,882,569	)	$	(19,353,663	)
From gain (loss) on sale				-			27,282,325			29,512,662			-			-			-			-			135,311
Cash generated (deficiency) from operations				(9,209,709	)		(21,375,474	)		(1,197,718	)		(6,652,207	)		(9,578,013	)		(29,043,252	)		(14,648,648	)		15,458,818
Cash generated (deficiency) from sales				-			90,760,194			93,644,500			-			-			-			-			3,764,644
Cash generated from refinancing				-			-			-			-			-			-			-			-
Total cash generated from operations, sales & refinancing				(9,209,709	)		69,384,720			92,446,782			(6,652,207	)		(9,578,013	)		(29,043,252	)		(14,648,648	)		19,223,462
Less: Cash distributed to investors
- From operating cash flow				-			-			-			-			-			-			-			-
- From sales and refinancing	(3	)		-			(36,000,000	)		-			-			-			-			-			-
Cash generated (deficiency) after cash distributions				(9,209,709	)		33,384,720			92,446,782			(6,652,207	)		(9,578,013	)		(29,043,252	)		(14,648,648	)		19,223,462
Special items (not including sales and refinancing)
Cash used in investing activities				(476,854,285	)		(40,134,843	)		(80,354,856	)		(551,966,553	)		(812,919,480	)		(60,569,241	)		(313,692,475	)		(533,793,419	)
Cash from financing activities				492,225,054			17,734,451			19,765,185			586,126,352			826,641,155			100,826,108			345,505,175			512,861,640
Cash generated (deficiency) after cash distributions and special items			$	6,161,060		$	10,984,328		$	31,857,111		$	27,507,592		$	4,143,662		$	11,213,615		$	17,164,052		$	(1,708,317	)

F-27

TABLE III – LEGACY SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

			Legacy Partners Realty Fund I									Legacy Partners Realty Fund II									Legacy Partners Realty Fund III
			2006			2007			2008			2006			2007			2008			2007		2008
Tax and Distribution Data per $1,000 Invested	(4	)
Federal Income Tax Results:
Ordinary income (loss)
- from operations			$	(127	)	$	(109	)	$	(72	)	$	(171	)	$	(195	)	$	(127	)	$	N/A	$	(186	)
- from recapture				-			-			-			-			-			-			-		-
Capital gain (loss)				-			95			102			-			-			-			-		1
Cash distributed to investors
Source (on GAAP basis)
- from investment income				-			-			-			-			-			-			-		-
- from return of capital				-			(112	)		-			-			-			-			-		-
Total distribution on GAAP basis			$	-		$	(112	)	$	-		$	-		$	-		$	-		$	-	$	-
Source (on cash basis)
- from sales				-			(112	)		-			-			-			-			-		-
- from refinancing				-			-			-			-			-			-			-		-
- from operations				-			-			-			-			-			-			-		-
Total distributions on cash basis			$	-		$	(112	)	$	-		$	-		$	-		$	-		$	-	$	-
Amounts (in percentage terms) remaining in program properties as of December 31, 2008	(5	)		100%			93%			87%			44%			100%			100%			41%		100%

(1)   Operating expenses include general and administrative expenses and certain fees paid to Legacy Residential affiliates. Cash deficits are funded by specified loan or equity proceeds.

(2)   Unrealized gain (loss) resulted from loss on derivatives.

(3)   Of the amount distributed to investors, $1.8M was paid to a Legacy Residential affiliate, as return of original investment.

(4)   Tax and distribution data per $1,000 invested calculated based on weighted-average capital invested.

(5)   Calculated as original total acquisition cost of investments made divided by original total acquisition cost of all investments held as of December 31, 2008.

F-28

TABLE V – LEGACY SPONSORS

SALES OR DISPOSALS OF PROPERTIES

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

This table presents summary information with respect to the results of sales or disposals of properties by programs sponsored by our Legacy sponsors and their affiliates during the three years ended December 31, 2008. The table includes information about the sales proceeds received, the cash invested in the properties, the taxable gain or loss from the sales and the cash flow from the operation of the properties. Each of the programs represented in the table have investment objectives similar to ours.

				Selling Price, Net of Closing Costs and GAAP Adjustments									Cost of Properties Including Closing and Soft Costs
Property		Date Acquired	Date of   Sale	Cash Received Net of Closing       Costs			Mortgage Balance at Time of Sale		Purchase Money Mortgage Taken Back by     Sale	Adjustments Resulting from Application of GAAP	Total		Original Mortgage Financing	Total Acquisition Costs, Capital Improvements Closing and Soft Costs (1)	Total	Excess (Deficiency) of Property Operating Cash Receipts Over Cash Expenditures	Taxable Gain (Loss)	Capital Gain (Loss)	Ordinary Gain (Loss)
Legacy Partners Affordable Housing Fund
Main & Jamboree	(2)	Jul-04	Mar-06	$	28,957,573	(3)	$	37,624,734	-	-	$	66,582,307	-	$  52,248,877	$  52,248,877	$      25,364	$14,334,965	$14,144,998	$189,967
Legacy Partners Realty Fund I
1320 Bordeaux		Jan-06	Feb-07		6,082,179			4,690,000	-	-		10,772,179	-	6,698,282	6,698,282	(79,667)	4,527,297	4,527,297	-
Bayside Centre (101 Lincoln)		Jan-05	Mar-07		14,431,557			13,862,312	-	-		28,293,869	-	20,059,150	20,059,150	(1,678,337)	8,052,944	8,052,944	-
El Segundo - 550 Continental		Dec-04	May-07		12,118,155			8,587,960	-	-		20,706,115	-	16,864,722	16,864,722	(18,271)	4,721,893	4,721,893	-
Von Karman		Apr-05	May-07		10,947,673			10,128,665	-	-		21,076,338	-	14,045,161	14,045,161	(1,496,853)	6,079,451	6,079,451	-
Concourse		Apr-05	Dec-07		5,525,299			4,386,394	-	-		9,911,693	-	6,027,430	6,027,430	(1,987,437)	3,900,740	3,900,740	-
Lawrence Court		May-05	Mar-08		10,828,061			11,702,480	-	-		22,530,541	-	14,461,954	14,461,954	(1,205,855)	6,530,004	6,530,004	-
Atria West		Oct-05	Apr-08		25,319,892			19,000,000	-	-		44,319,892	-	22,719,345	22,719,345	(5,244,904)	20,504,452	20,504,452	-
Marina Village/860 Atlantic (partial sale)	(4)	Feb-06	Aug-08		3,163,008			3,699,800	-	-		6,862,808	-	3,804,802	3,804,802	(511,009)	509,652	509,652	-
Marina Village/1005 Atlantic (partial sale)	(4)	Feb-06	Nov-08		2,735,666			3,297,600	-	301,921		6,335,187	-	5,084,797	5,084,797	(683,138)	681,107	681,107	-
Bayside Pky/46800 Bayside Pky (partial sale)		Mar-06	Dec-08		2,018,866			11,400,000	-	177,207		13,596,073	-	11,361,917	11,361,917	(456,446)	1,287,447	1,287,447	-
Legacy Partners Realty Fund III
America Center II (partial sale)	(5)	Dec-07	Dec-08		588,759			3,175,885	-	-		3,764,644	-	3,074,588	3,074,588	(126,296)	135,311	135,311	-

(1)   Acquisition costs include acquisition fees paid to Legacy Residential affiliates. Soft costs include legal fees, environmental studies, title and closing costs related to the acquisition and closing of the asset.

(2)   Gain from sale deferred, for GAAP purposes, until final cost determination can be agreed upon by members.

(3)   Includes $3 million of sales proceeds, held back from distribution and ultimately spent in 2007. Subsequent expenditures are included in Total Acquisition Costs and reduce the amount of Capital Gain.

(4)   Fund owned interest via joint venture and held a 30.56% interest. Sales price and cost amounts are presented at 100%.

(5)   Fund owned interest via joint venture and held a 25% interest. Sales price and cost amounts are presented at 100%.

F-29

PRIOR PERFORMANCE TABLES – KBS SPONSORS

(UNAUDITED)

In January 2006, our KBS sponsors, Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., teamed to launch the initial public offering of their first public non-traded REIT, KBS Real Estate Investment Trust, Inc., which we refer to as KBS REIT I, and they are currently sponsoring the initial public offerings of KBS Real Estate Investment Trust II, Inc., which we refer to as KBS REIT II, and KBS Strategic Opportunity REIT. Our advisor, KBS Capital Advisors LLC, is also the external advisor to KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT. KBS REIT I launched its initial public offering on January 27, 2006 and ceased offering shares in its primary offering on May 30, 2008. KBS REIT II launched its initial public offering on April 22, 2008. KBS Strategic Opportunity REIT launched its initial public offering on November 20, 2009.

Since 1992, two of our KBS sponsors, Messrs. Bren and Schreiber, have partnered to acquire, manage, develop and sell high-quality U.S. commercial real estate assets as well as real estate-related investments on behalf of institutional investors. Since the formation of the first investment advisor affiliated with Messrs. Bren and Schreiber in 1992, investment advisors affiliated with Messrs. Bren and Schreiber have sponsored 14 private real estate funds that have raised over $2.0 billion of equity from institutional investors (as of December 31, 2008). Together, Messrs. Bren and Schreiber founded KBS Realty Advisors LLC, a registered investment advisor with the Securities and Exchange Commission and a nationally recognized real estate investment advisor. We refer to the investment advisors affiliated with Messrs. Bren and Schreiber as KBS investment advisors.

During the ten-year period ending December 31, 2008, KBS investment advisors have managed 14 private real estate funds, six of which were multi-investor, commingled funds and eight of which were single-client, separate accounts. All of these private funds were limited partnerships for which affiliates of Messrs. Bren and Schreiber act or acted as a general partner. In all cases, Messrs. Bren and Schreiber, through their control of the general partner entities, had sole responsibility for acquiring, investing, managing, developing and selling the real estate and real estate-related assets of each of the funds. Six of the 14 private funds managed by KBS investment advisors during the ten-year period ending December 31, 2008 used private REITs to structure the ownership of some of their investments.

Despite their general focus on the commercial and industrial sectors rather than the multifamily residential sector, KBS REIT I, KBS REIT II and each of the private funds managed by KBS investment advisors during the ten-year period ending December 31, 2008 have or had (four of the funds have been fully liquidated) investment objectives that are similar to ours. Like ours, their primary investment objectives are to provide investors with attractive and stable returns and to preserve and return their capital contributions and, like us, they seek to realize growth in the value of their investments by timing asset sales to maximize asset value.

KBS REIT I, KBS REIT II and each of the private funds have focused upon acquiring a diverse portfolio of real estate-related investments. The KBS investment advisors of the private funds typically diversified the portfolios of the funds by property type and geographic region as well as investment size and investment risk. In constructing the portfolios for 12 of the 14 private funds, the KBS investment advisor specialized in acquiring a mix of value-added, enhanced-return and core real estate assets, focusing primarily on value-added and enhanced-return properties. Value-added and enhanced-return assets are assets that are undervalued or that could be repositioned to enhance their value. For two of the 14 private funds, the KBS investment advisor focused on the acquisition of core real estate assets. KBS REIT I has targeted approximately 70% core investments (which are generally existing properties with at least 80% occupancy and minimal near-term lease rollover) and approximately 30% enhanced-return properties (which are higher-yield and higher-risk investments than core properties, such as properties with moderate vacancies or near-term lease rollovers, poorly managed and positioned properties, properties owned by distressed sellers and built-to-suit properties) and real estate-related assets. Real estate-related assets include mortgage loans, mezzanine debt, mortgage-backed securities and other similar structured finance investments. Like KBS REIT I, KBS REIT II will seek to diversify its assets by investment risk by making investments in core properties and other real estate-related assets. KBS REIT II intends to allocate between 60% and 70% of its portfolio to investments in core properties and between 30% and 40% of its portfolio to other real estate-related investments such as mortgage, mezzanine, bridge and other loans; debt and derivative securities related to real estate assets, including mortgage-backed securities; and the equity securities of other REITs and real estate companies.

The tables presented in this section provide summary unaudited information related to the historical experience of KBS REIT I, KBS REIT II and the private real estate funds sponsored by KBS investment advisors. By purchasing shares in this offering, you will not acquire any ownership interest in any funds to which the information in this section relates and you

F-30

should not assume that you will experience returns, if any, comparable to those experienced by the investors in the real estate funds discussed. Further, the private funds discussed in this section were conducted through privately-held entities that were subject neither to the up-front commissions, fees and expenses associated with this offering nor all of the laws and regulations that will apply to us as a publicly offered REIT.

The information in this section should be read together with the summary information in this prospectus under “Prior Performance Summary.” The following tables are included in this section:

— Table I – Experience in Raising and Investing Funds;

— Table II – Compensation to Sponsor;

— Table III – Operating Results of Prior Programs;

— Table IV – Results of Completed Programs; and

— Table V – Sales or Disposals of Properties.

For information regarding the acquisitions of KBS REIT I, KBS REIT II and the private funds sponsored by KBS investment advisors during the three years ending December 31, 2008, see Table VI contained in Part II of the registration statement, which is not a part of this prospectus. We will provide a copy of Table VI to you upon written request and without charge.

F-31

TABLE I – KBS SPONSORS

EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Table I provides a summary of the experience of KBS investment advisors in raising and investing funds for programs that have had offerings close during the three years ended December 31, 2008. Information is provided as to the manner in which the proceeds of the offerings have been applied. Each of the programs presented have investment objectives similar to ours. All percentage amounts except “Percent leveraged” represent percentages of the dollar amount raised for each program.

	SEPARATE ACCOUNT 6/05		SEPARATE ACCOUNT 8/05		SEPARATE ACCOUNT 5/06		SEPARATE ACCOUNT 10/06		SEPARATE ACCOUNT 01/07		KBS REIT I
Dollar amount offered	$	50,043,000	$	49,180,000	$	50,012,000	$	47,974,000	$	12,750,000	$	2,000,000,000
Dollar amount raised	$	50,043,000	$	49,180,000	$	50,012,000	$	47,974,000	$	12,750,000	$	1,703,298,000
Percentage amount raised		100.0%		100.0%		100.0%		100.0%		100.0%		85.2%
Percentage available for investment before offering expenses and reserves		100.0%		100.0%		100.0%		100.0%		100.0%		100.0%
Less offering expenses:
Selling commissions and dealer manager fees		-		-		-		-		-		9.1%
Organizational and offering expenses		-		-		-		-		-		1.0%
Reserves		-		-		-		-		-		-
Percentage available for investment after offering expenses and reserves		100.0%		100.0%		100.0%		100.0%		100.0%		89.9%
Acquisition costs:
Prepaid items and fees related to purchase of property		-		-		-		-		-		-
Purchase price (cash down payment) (1)		251.1%		245.9%		253.5%		239.1%		204.4%		176.2%
Acquisition fees (2)		2.5%		2.5%		2.5%		2.4%		2.0%		1.3%
Other capitalized costs (3)		1.2%		1.5%		2.1%		0.9%		1.2%		0.9%
Total acquisition costs (includes mortgage financing) (4)		254.8%		249.9%		258.1%		242.4%		207.6%		178.4%
Percent leveraged (5)		60.8%		62.0%		64.4%		64.2%		55.1%		49.4%
Date offering began		(6)		(7)		(8)		(9)		(10)		01/27/2006(11)
Length of offering (in months)		(6)		(7)		(8)		(9)		(10)		28(11)
Months to invest 90% of amount available for investment		(6)		(7)		(8)		(9)		(10)		31(11)

⁽¹⁾ “Purchase price (cash down payment)” includes both debt- and equity-financed payments. See the “Percent leveraged” line for the approximate percentage of the purchase price financed with mortgage or other debt.

⁽²⁾ Represents acquisition fees as if they were calculated as a percentage of dollar amount raised. Acquisition fees of these programs are calculated as a percentage of purchase price (including leverage used to fund the acquisition) plus other capitalized costs and are paid to the KBS sponsor.

⁽³⁾ Other capitalized costs include legal fees, outside broker fees, environmental studies, title and other closing costs.

⁽⁴⁾ Total acquisition costs include the cash down payment, acquisition fees, other capitalized costs and mortgage financing.

⁽⁵⁾ “Percent leveraged” represents financing outstanding as of December 31, 2008 divided by total acquisition cost for properties acquired.

⁽⁶⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 6/05 made its first investment in June 2005. The program has made a total of five separate investments through December 2008.

⁽⁷⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 8/05 made its first investment in October 2005. The program has made a total of five separate investments through December 2008.

F-32

TABLE I – KBS SPONSORS

EXPERIENCE IN RAISING AND INVESTING FUNDS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

⁽⁸⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 5/06 made its first investment in September 2006. The program has made a total of five separate investments through December 2008.

⁽⁹⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 10/06 made its first investment in November 2006. The program has made a total of four separate investments through December 2008.

⁽¹⁰⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 01/07 made its first investment in March 2008. The program has made one investment through December 2008.

⁽¹¹⁾ KBS REIT I is a publicly-registered, non-traded REIT. KBS REIT I launched its initial public offering on January 27, 2006. On July 5, 2006, KBS REIT I broke escrow in its initial public offering and then commenced real estate operations. KBS REIT I ceased offering shares of common stock in its primary offering on May 30, 2008 and has now terminated its primary offering upon the completion of review of subscriptions submitted in accordance with its processing procedures. KBS REIT I continues to issue shares under its dividend reinvestment plan; proceeds from the dividend reinvestment plan are omitted from Table I. As of December 31, 2008, KBS REIT I owned 64 real estate properties, one master lease, 21 real estate loans receivable, and two investments in securities directly or indirectly backed by commercial mortgage-backed securities.

F-33

TABLE II – KBS SPONSORS

COMPENSATION TO SPONSOR

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Table II summarizes the amount and type of compensation paid to KBS affiliates during the three years ended December 31, 2008 in connection with 1) each program sponsored by a KBS investment advisor that had offerings close during this period and 2) all other programs that have made payments to KBS affiliates during this period. All of the programs represented in the table below have or had investment objectives similar to ours. All figures are as of December 31, 2008.

	Commingled Account 12/96		Commingled Account 6/98		Commingled Account 6/99		Separate Account 10/97		Separate Account 12/98		Separate Account 6/05		Separate Account 8/05		Separate Account 5/06		Separate Account 10/06		Separate Account 01/07		KBS REIT I			KBS REIT II
Date offering commenced		(1)		(2)		(3)		(4)		(5)		(6)		(7)		(8)		(9)		(10)		Jan-06(11)			Apr-08(12)
Dollar amount raised	$	266,125,050	$	216,650,000	$	187,000,000	$	153,016,700	$	210,967,612	$	50,043,000	$	49,180,000	$	50,012,000	$	47,974,000	$	12,750,000	$	1,774,585,000		$	314,217,000
Amount paid to sponsor from proceeds of offering:
Underwriting fees	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	44,263,000	(17)	$	7,291,000	(17)
Acquisition fees:
- real estate commissions		-		-		-		-		-		-		-		-		-		-		-			-
- advisory fees (13)		-		-		-		-		-		185,000		395,000		1,298,000		1,198,000		262,000		21,700,000			3,832,000
- other		-		-		-		-		-		-		-		-		-		-		-			-
Other		-		-		-		-		-		-		-		-		-		-		-			-
Dollar amount of cash generated from operations before deducting payments to sponsors	$	22,514,000	$	20,781,000	$	21,397,000	$	6,732,000	$	10,257,000	$	13,637,000	$	11,983,000	$	12,958,000	$	10,273,000	$	424,000	$	179,614,000		$	5,727,000
Amount paid to sponsor from operations:
Property management fees (14)	$	3,567,000	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-		$	-
Partnership and asset management fees		1,719,000		1,810,000		1,771,000		1,224,000		2,445,000		3,529,000		3,352,000		2,411,000		2,097,000		146,000		20,128,000	(18)		857,000
Reimbursements		-		-		-		-		-		-		-		-		-		-		-			-
Leasing commissions (14)		1,978,000		-		-		-		-		-		-		-		-		-		-			-
Construction management fees (14)		24,000		-		-		-		-		-		-		-		-		-		-			-
Loan servicing fees		-		-		-		-		-		-		-		-		-		-		-			-
Dollar amount of property sales and refinancing before deducting payments to sponsors (15)
- cash	$	57,222,000	$	166,628,000	$	143,018,000	$	111,797,000	$	73,325,000	$	7,444,000	$	5,638,000	$	-	$	1,811,000	$	-	$	-		$	-
- notes		-		-		-		-		-		-		-		-		-		-		-			-
Amounts paid to sponsor from property sales and refinancing:
- Real estate commissions (14)	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-		$	-
- Disposition fees		-		600,000		514,000		-		-		-		-		-		-		-		-			-
- Incentive fees (16)		-		-		68,000		-		-		-		-		-		-		-		-			-
- Other		-		-		-		-		-		-		-		-		-		-		-			-

F-34

TABLE II – KBS SPONSORS

COMPENSATION TO SPONSOR (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

⁽¹⁾ This program made payments to KBS affiliates during the three years ended December 31, 2008; however, it did not close any offerings during this period. Commingled Account 12/96 represents a multi-investor commingled fund that makes investments through a limited partnership for which an affiliate of Messrs. Bren and Schreiber acts as the general partner. This program made its first investment in December 1996.

⁽²⁾ This program made payments to KBS affiliates during the three years ended December 31, 2008; however, it did not close any offerings during this period. Commingled Account 6/98 represents a multi-investor commingled fund that makes investments through a limited partnership for which an affiliate of Messrs. Bren and Schreiber acts as the general partner. This program made its first investment in June 1998.

⁽³⁾ This program made payments to KBS affiliates during the three years ended December 31, 2008; however, it did not close any offerings during this period. Commingled Account 6/99 represents a multi-investor commingled fund that makes investments through a limited partnership for which an affiliate of Messrs. Bren and Schreiber acts as the general partner. The account made its first investment in June 1999.

⁽⁴⁾ This program made payments to KBS affiliates during the three years ended December 31, 2008; however, it did not close any offerings during this period. Separate Account 10/97 represents a single-client account that made investments through a limited partnership for which an affiliate of Messrs. Bren and Schreiber acts as the general partner. This program made its first investment in October 1997.

⁽⁵⁾ This program made payments to KBS affiliates during the three years ended December 31, 2008; however, it did not close any offerings during this period. Separate Account 12/98 represents a single-client account that made investments through a limited partnership for which an affiliate of Messrs. Bren and Schreiber acts as the general partner. This program made its first investment in December 1998.

⁽⁶⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 6/05 made its first investment in June 2005. The program has made a total of five separate investments through December 2008. For more information about this program’s experience in raising capital, see Table I.

⁽⁷⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 8/05 made its first investment in October 2005. The program has made a total of five separate investments through December 2008. For more information about this program’s experience in raising capital, see Table I.

⁽⁸⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 5/06 made its first investment in September 2006. The program has made a total of five separate investments through December 2008. For more information about this program’s experience in raising capital, see Table I.

⁽⁹⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 10/06 made its first investment in November 2006. The program has made a total of four separate investments through December 2008. For more information about this program’s experience in raising capital, see Table I.

⁽¹⁰⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 01/07 made its first investment in March 2008. The program has made one investment through December 2008. For more information about this program’s experience in raising capital, see Table I.

⁽¹¹⁾ KBS REIT I is a publicly registered, non-traded REIT. KBS REIT I launched its initial public offering on January 27, 2006. On July 5, 2006, KBS REIT I broke escrow in its initial public offering and then commenced real estate operations. KBS REIT I ceased offering shares of common stock in its primary offering on May 30, 2008 and has now terminated its primary offering upon the completion of review of subscriptions submitted in accordance with its processing procedures. KBS REIT I continues to issue shares under its dividend reinvestment plan; proceeds from the dividend reinvestment plan are included in “Dollar amount raised” in this table, but are omitted from Table I. As of December 31, 2008, KBS REIT I owned 64 real estate properties, one master lease, 21 real estate loans receivable, and two

F-35

TABLE II – KBS SPONSORS

COMPENSATION TO SPONSOR (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

investments in securities directly or indirectly backed by commercial mortgage-backed securities. For more information about this program’s experience in raising capital, see Table I.

⁽¹²⁾ KBS REIT II is a publicly registered, non-traded REIT. KBS REIT II launched its initial public offering on April 22, 2008. On June 24, 2008, KBS REIT II broke escrow in its initial public offering and then commenced real estate operations. From commencement of its offering through December 31, 2008, KBS REIT II had sold 31,495,364 shares in its ongoing initial public offering for gross offering proceeds of $314.2 million, including 202,284 shares issued through its dividend reinvestment plan for gross offering proceeds of $1.9 million. As of December 31, 2008, KBS REIT II owned four real estate properties and one real estate loan.

⁽¹³⁾ Advisory fees are acquisition fees that are calculated as a percentage of purchase price plus other capitalized costs and are paid to the KBS sponsor. Separate Account 06/05, Separate Account 08/05, Separate Account 05/06, Separate Account 10/06 and Separate Account 01/07 also pay fees on amounts subsequently funded for capital improvements, tenant improvement costs and allowance and leasing costs, and these fees are included under advisory fees for these funds.

⁽¹⁴⁾ Fees paid to parties affiliated with the general partner of the program.

⁽¹⁵⁾ Dollar amount of property sales and refinancing represents capital from property sales and refinancings that were used to make distributions to investors.

⁽¹⁶⁾ Only one of the private funds represented in this table, Commingled Account 6/99, paid incentive fees during the three years ended December 31, 2008. Two of the 10 private funds listed in this table, Commingled Account 6/98 and Commingled Account 6/99, pay incentive fees based on gains from the sale of assets. The incentive fees for the remaining eight private funds represented in this table (Commingled Account 12/96, Separate Account 10/97, Separate Account 12/98, Separate Account 6/05, Separate Account 8/05, Separate Account 5/06, Separate Account 10/06 and Separate Account 01/07) are back-end fees based on participation interests in the net cash flows of the funds’ assets after achieving a stipulated return for the investors. These back-end incentive fees will be paid during the final liquidation stage of the funds. Four of the private funds presented in this table (Commingled Account 12/96, Commingled Account 6/98, Commingled Account 6/99 and Separate Account 10/97) are in their liquidation stage. KBS REIT I and KBS REIT II may pay subordinated incentive fees based on participation in the net cash flows of the fund (whether from continuing operations, net sale proceeds or otherwise), after achieving a stipulated return for investors. Upon listing of the shares of KBS REIT I or KBS REIT II, such listed program may pay a subordinated incentive fee to its external advisor if investors have received a stipulated return. However, any portion of a subordinated participation in net cash flows paid by KBS REIT I or KBS REIT II would offset the amount otherwise due pursuant to the subordinated incentive listing fee.

⁽¹⁷⁾ Underwriting fees include (i) dealer manager fees paid to the KBS-affiliated dealer manager that are not reallowed to participating broker-dealers as a marketing fee, (ii) the reimbursed portion of a dual employee’s salary paid by the KBS-affiliated dealer manager attributable to time spent planning and coordinating training and education meetings on behalf of the respective program, (iii) the reimbursed travel, meal and lodging costs of wholesalers and other registered persons of the KBS-affiliated dealer manager attending retail conferences and training and education meetings, (iv) reimbursed costs for promotional items for broker-dealers paid for by the KBS-affiliated dealer manager, (v) reimbursed legal fees paid for by the KBS-affiliated dealer manager and (vi) reimbursed attendance and sponsorship fees incurred by employees of the KBS-affiliated dealer manager and its affiliates to attend retail conferences sponsored by participating broker-dealers and other meetings with participating broker-dealers.

⁽¹⁸⁾ As of December 31, 2008, this program had incurred but unpaid performance fees totaling $2.8 million.

F-36

TABLE III – KBS SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

This table summarizes the operating results of programs sponsored by KBS investment advisors that have had offerings close during the five years ended December 31, 2008. For these programs, this table shows: the income or loss of such programs (based upon U.S. generally accepted accounting principles (“GAAP”)); the cash they generated from operations, sales and refinancings; and information regarding cash distributions. Each of these private programs has investment objectives similar to ours. All figures are as of December 31 of the year indicated, except as otherwise noted.

F-37

TABLE III – KBS SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

	Separate Account 5/06									Separate Account 10/06
	2006			2007			2008			2006			2007			2008
Gross revenues	$	2,526,000		$	16,480,000		$	16,447,000		$	354,000		$	13,628,000		$	14,723,000
Profit (loss) on sale of properties		-			-			-			-			-			-
Less: Operating expenses (1)		(1,503,000	)		(7,855,000	)		(7,907,000	)		(428,000	)		(7,653,000	)		(8,070,000	)
Interest expense		(878,000	)		(4,810,000	)		(4,824,000	)		(122,000	)		(4,146,000	)		(4,383,000	)
Depreciation (2)		-			-			-			-			-			-
Unrealized gain (loss) (2)		-			4,905,000			(2,756,000	)		-			5,327,000			971,000
Net income (loss) - GAAP basis (2)	$	145,000		$	8,720,000		$	960,000		$	(196,000	)	$	7,156,000		$	3,241,000
Taxable income:
From operations	$	97,000		$	1,539,000		$	1,155,000		$	(183,000	)	$	(207,000	)	$	123,000
From gain (loss) on sale		-			-			-			-			-			-
Cash generated (deficiency) from operations		855,000			5,816,000			3,876,000			1,769,000			3,681,000			2,726,000
Cash generated (deficiency) from sales		-			-			-			-			-			-
Cash generated from refinancing		-			-			-			-			-			-
Total cash generated from operations, sales and refinancing		855,000			5,816,000			3,876,000			1,769,000			3,681,000			2,726,000
Less: Cash distributions to investors
- From operating cash flow		(640,000	)		(3,525,000	)		(3,560,000	)		(100,000	)		(3,135,000	)		(3,355,000	)
- From sales and refinancing		-			-			-			-			-			-
Cash generated (deficiency) after cash distributions		215,000			2,291,000			316,000			1,669,000			546,000			(629,000	)
Less: Special items (not including sales and refinancing)		-			-			-			-			-			-
Cash generated (deficiency) after cash distributions and special items	$	215,000		$	2,291,000		$	316,000		$	1,669,000		$	546,000		$	(629,000	)
Tax and Distribution Data per $1,000 Invested (3)
Federal Income Tax Results:
Ordinary income (loss)
- from operations	$	11		$	31		$	23		$	(127	)	$	(5	)	$	3
- from recapture		-			-			-			-			-			-
Capital gain (loss)		-			-			-			-			-			-
Cash distributions to investors
Source (on GAAP basis)
- from investment income		70			71			71			70			71			71
- from return of capital		-			-			-			-			-			-
Total distribution on GAAP basis	$	70		$	71		$	71		$	70		$	71		$	71
Source (on cash basis)
- from sales	$	-		$	-		$	-		$	-		$	-		$	-
- from refinancing		-			-			-			-			-			-
- from operations		70			71			71			70			71			71
Total distributions on cash basis	$	70		$	71		$	71		$	70		$	71		$	71
Amounts (in percentage terms) remaining in program properties as of December 31, 2008 (4)		100%			100%			100%			100%			100%			100%

⁽¹⁾ Operating expenses include all general and administrative expenses.

⁽²⁾ The accompanying financial information has been prepared in conformity with accounting principles generally accepted in the United States for investment companies. Accordingly, the real estate investments are reflected at their estimated current values as determined by the general partner, using current appraisals or market information and the general partner’s good faith estimate of value. All other assets and liabilities are generally valued based on the actual costs or liabilities incurred, which management believes approximates current value.

The major differences between GAAP basis net income for investment companies and taxable income are the following:

• GAAP basis income for investment companies does not include depreciation expense while taxable income includes depreciation expense.

• GAAP basis income for investment companies includes the changes in market value of real estate investments as unrealized gain or loss in the income statement. There is no such adjustment for the calculation of taxable income.

⁽³⁾ Tax and distribution data per $1,000 invested calculated based on weighted-average capital invested.

⁽⁴⁾ Calculated as original total acquisition cost of investments made divided by original total acquisition cost of all investments held as of December 31, 2008.

F-38

TABLE III – KBS SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

	Separate Account 01/07
	2008
Gross revenues	$	1,442,000
Profit (loss) on sale of properties		-
Less: Operating expenses(1)		(996,000)
Interest expense		(608,000)
Depreciation(2)		-
Unrealized gain (loss)(2)		(998,000)
Net income (loss) - GAAP basis(2)	$	(1,160,000)
Taxable income:
From operations	$	(491,000)
From gain (loss) on sale		-
Cash generated (deficiency) from operations		278,000
Cash generated (deficiency) from sales		-
Cash generated from refinancing		-
Total cash generated from operations, sales and refinancing		278,000
Less: Cash distributions to investors
- From operating cash flow		(695,000)
- From sales and refinancing		-
Cash generated (deficiency) after cash distributions		(417,000)
Less: Special items (not including sales and refinancing)		-
Cash generated (deficiency) after cash distributions and special items	$	(417,000)
Tax and Distribution Data per $1,000 Invested (3)
Federal Income Tax Results:
Ordinary income (loss)
- from operations	$	(50)
- from recapture		-
Capital gain (loss)		-
Cash distributions to investors
Source (on GAAP basis)
- from investment income		71
- from return of capital		-
Total distribution on GAAP basis	$	71
Source (on cash basis)
- from sales	$	-
- from refinancing		-
- from operations		71
Total distributions on cash basis	$	71
Amounts (in percentage terms) remaining in program properties as of December 31, 2008 (4)		100%

⁽¹⁾ Operating expenses include all general and administrative expenses.

⁽²⁾ The accompanying financial information has been prepared in conformity with accounting principles generally accepted in the United States for investment companies. Accordingly, the real estate investments are reflected at their estimated current values as determined by the general partner, using current appraisals or market information and the general partner’s good faith estimate of value. All other assets and liabilities are generally valued based on the actual costs or liabilities incurred, which management believes approximates current value.

The major differences between GAAP basis net income for investment companies and taxable income are the following:

— GAAP basis income for investment companies does not include depreciation expense while taxable income includes depreciation expense.

— GAAP basis income for investment companies includes the changes in market value of real estate investments as unrealized gain or loss in the income statement. There is no such adjustment for the calculation of taxable income.

⁽³⁾ Tax and distribution data per $1,000 invested calculated based on weighted-average capital invested.

F-39

TABLE III – KBS SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

⁽⁴⁾ Calculated as original total acquisition cost of investments made divided by original total acquisition cost of all investments held as of December 31, 2008.

F-40

TABLE III – KBS SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

	Separate Account 6/05												Separate Account 8/05
	2005			2006			2007			2008			2005			2006			2007			2008
Gross revenues	$	4,045,000		$	12,215,000		$	13,348,000		$	14,945,000		$	1,110,000		$	10,653,000		$	13,149,000		$	12,932,000
Profit (loss) on sale of properties		-			-			-			-			-			-			-			-
Less: Operating expenses (1)		(2,098,000	)		(5,128,000	)		(5,407,000	)		(5,625,000	)		(599,000	)		(5,228,000	)		(4,965,000	)		(5,210,000	)
Interest expense		(1,524,000	)		(4,856,000	)		(5,349,000	)		(5,394,000	)		(454,000	)		(4,342,000	)		(5,489,000	)		(5,504,000	)
Depreciation (2)		-			-			-			-			-			-			-			-
Unrealized gain (loss) (2)		-			2,038,000			5,361,000			(3,752,000	)		-			6,381,000			2,111,000			(444,000	)
Net income (loss) - GAAP basis (2)	$	423,000		$	4,269,000		$	7,953,000		$	174,000		$	57,000		$	7,464,000		$	4,806,000		$	1,774,000
Taxable income:
From operations	$	482,000		$	(61,000	)	$	82,000		$	1,135,000		$	23,000		$	(879,000	)	$	225,000		$	(246,000	)
From gain (loss) on sale		-			-			-			-			-			-			-			-
Cash generated (deficiency) from operations		2,337,000			3,316,000			3,063,000			3,729,000			1,601,000			3,433,000			2,681,000			2,517,000
Cash generated (deficiency) from sales		-			-			-			-			-			-			-			-
Cash generated from refinancing		-			-			-			-			-			-			-			-
Total cash generated from operations, sales and refinancing		2,337,000			3,316,000			3,063,000			3,729,000			1,601,000			3,433,000			2,681,000			2,517,000
Less: Cash distributions to investors
- From operating cash flow		(1,505,000	)		(3,560,000	)		(3,559,000	)		(3,560,000	)		(470,000	)		(3,190,000	)		(3,500,000	)		(3,500,000	)
- From sales and refinancing		-			-			-			-			-			-			-			-
Cash generated (deficiency) after cash distributions		832,000			(244,000	)		(496,000	)		169,000			1,131,000			243,000			(819,000	)		(983,000	)
Less: Special items (not including sales and refinancing)		-			-			-			-			-			-			-			-
Cash generated (deficiency) after cash distributions and special items	$	832,000		$	(244,000	)	$	(496,000	)	$	169,000		$	1,131,000		$	243,000		$	(819,000	)	$	(983,000	)
Tax and Distribution Data per $1,000 Invested (3)
Federal Income Tax Results:
Ordinary income (loss)
- from operations	$	23		$	(1	)	$	2		$	23		$	3		$	(20	)	$	5		$	(5	)
- from recapture		-			-			-			-			-			-			-			-
Capital gain (loss)		-			-			-			-			-			-			-			-
Cash distributions to investors
Source (on GAAP basis)
- from investment income		72			71			71			71			70			71			71			71
- from return of capital		-			-			-			-			-			-			-			-
Total distribution on GAAP basis	$	72		$	71		$	71		$	71		$	70		$	71		$	71		$	71
Source (on cash basis)
- from sales	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
- from refinancing		-			-			-			-			-			-			-			-
- from operations		72			71			71			71			70			71			71			71
Total distributions on cash basis	$	72		$	71		$	71		$	71		$	70		$	71		$	71		$	71
Amounts (in percentage terms) remaining invested in program properties as of December 31, 2008 (4)		100%			100%			100%			100%			100%			100%			100%			100%

⁽¹⁾ Operating expenses include all general and administrative expenses.

⁽²⁾ The accompanying financial information has been prepared in conformity with accounting principles generally accepted in the United States for investment companies. Accordingly, the real estate investments are reflected at their estimated current values as determined by the general partner, using current appraisals or market information and the general partner’s good faith estimate of value. All other assets and liabilities are generally valued based on the actual costs or liabilities incurred, which management believes approximates current value.

The major differences between GAAP basis net income for investment companies and taxable income are the following:

— GAAP basis income for investment companies does not include depreciation expense while taxable income includes depreciation expense.

— GAAP basis income for investment companies includes the changes in market value of real estate investments as unrealized gain or loss in the income statement. There is no such adjustment for the calculation of taxable income.

⁽³⁾ Tax and distribution data per $1,000 invested calculated based on weighted-average capital invested.

⁽⁴⁾ Calculated as original total acquisition cost of investments made divided by original total acquisition cost of all investments held as of December 31, 2008.

F-41

TABLE III – KBS SPONSORS

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

	KBS REIT I
	2006			2007			2008
Gross revenues	$	6,248,000		$	100,302,000		$	282,641,000
Profit (loss) on sale of properties		-			-			-
Less: Operating expenses (1)		(3,455,000	)		(32,465,000	)		(86,767,000	)
Interest expense		(2,826,000	)		(33,368,000	)		(68,303,000	)
Depreciation		(2,538,000	)		(42,916,000	)		(97,021,000	)
Loss on derivative instruments		-			(1,524,000	)		(303,000	)
Provision for loan losses		-			-			(104,000,000	)
Other-than-temporary impairment of marketable real estate securities		-			-			(50,079,000	)
Minority interest in net loss of consolidated entity		-			2,773,000			3,205,000
Net income (loss) - GAAP basis	$	(2,571,000	)	$	(7,198,000	)	$	(120,627,000	)
Taxable income:
From operations	$	(970,000	)	$	15,774,000		$	(66,297,000	)
From gain (loss) on sale		-			-			-
Cash generated (deficiency) from operations		326,000			43,982,000			115,178,000
Cash generated (deficiency) from sales		-			-			-
Cash generated from refinancing		-			-			-
Total cash generated from operations, sales and refinancing		326,000			43,982,000			115,178,000
Less: Cash distributions to investors
- From operating cash flow		(386,000	)		(32,162,000	)		(104,264,000	)
- From sales and refinancing		-			-			-
- Other (2)		(900,000	)		(700,000	)		-
Cash generated (deficiency) after cash distributions		(960,000	)		11,120,000			10,914,000
Less: Special items (not including sales and refinancing)		-			-			-
Cash generated (deficiency) after cash distributions and special items	$	(960,000	)	$	11,120,000		$	10,914,000
Tax and Distribution Data per $1,000 Invested (3)
Federal Income Tax Results:
Ordinary income (loss)
-from operations	$	(52	)	$	34		$	44
-from recapture		-			-			-
Capital gain (loss)		-			-			-
Cash distributions to investors
Source (on GAAP basis)
- from investment income		-			36			44
- from return of capital		69			34			26
Total distribution on GAAP basis	$	69		$	70		$	70
Source (on cash basis)
- from sales	$	-		$	-		$	-
- from refinancing		-			-			-
- from other (2)		48			2			-
- from operations		21			68			70
Total distributions on cash basis	$	69		$	70		$	70
Amounts (in percentage terms) remaining in program properties as of December 31, 2008 (4)		100%			100%			100%

⁽¹⁾ Operating expenses include all general and administrative expenses.

⁽²⁾ Represents advances made by the advisor of KBS REIT I to pay dividends.

⁽³⁾ Tax and distribution data per $1,000 invested calculated based on weighted-average capital invested.

⁽⁴⁾ Calculated as original total acquisition cost of investments made divided by original total acquisition cost of all investments held as of December 31, 2008.

F-42

TABLE IV – KBS SPONSORS

RESULTS OF COMPLETED PROGRAMS

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Table IV summarizes the results of the program sponsored by a KBS investment advisor that has completed its operations and sold all of its properties during the five years ended December 31, 2008. The program represented in the table below had investment objectives that were similar to ours.

	Commingled Account 5/95 (1)
Dollar amount raised	$	273,100,000(1)
Number of properties purchased/developed		32
Date of closing of offering		(1	)
Date of first sale of property		11/95
Date of final sale of property		9/05
Tax and distribution data per $1,000 invested through
Federal income tax results:
Ordinary income (loss):
- from operations	$	295
- from recapture		-
Capital gain		230
Deferred gain:
Capital		-
Ordinary		-
Cash distributions to investors
Source (on GAAP basis)
- from investment income		519
- from return of capital		1,000
Total distribution on GAAP basis	$	1,519
Source (on cash basis)
- from sales	$	1,188
- from refinancing		-
- from operations		331
	$	1,519

⁽¹⁾ This program was a multi-investor, commingled fund that made investments through a limited partnership for which an affiliate of Messrs. Bren and Schreiber served as the general partner. The investors in this partnership contributed a total of $273,100,000 between April 1995 and May 1998.

F-43

TABLE V – KBS SPONSORS

SALES OR DISPOSALS OF PROPERTIES

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Table V presents summary information with respect to the results of sales or disposals of properties by programs sponsored by KBS investment advisors during the three years ended December 31, 2008. The table includes information about the sales proceeds received, the cash invested in the properties, the taxable gain or loss from the sales and the cash flow from the operation of the properties. Each of the programs represented in the table have or had investment objectives similar to ours.

F-44

TABLE V – KBS SPONSORS

SALES OR DISPOSALS OF PROPERTIES (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

			Selling Price, Net of Closing Costs and GAAP Adjustments										Cost of Properties Including Closing and Soft Costs
Property	Date Acquired	Date of Sale	Cash Received Net of Closing Costs		Mortgage Balance at Time of Sale		Purchase Money Mortgage Taken Back by Sale		Adjustments Resulting from Application of GAAP		Total (1)		Original Mortgage Financing		Total Acquisition Costs, Capital Improvements Closing and Soft Costs(2)		Total		Excess (Deficiency) of Property Operating Cash Receipts Over Cash Expenditures(3)
Separate Account 12/98
4 & 6 Omni Way	7/00	12/06	$	16,407,366	$	-	$	-	$	-	$	16,407,366	$	5,746,021	$	14,614,236	$	20,360,257	$	6,786,081
1010 Lamar	12/98	11/07		39,456,358		-		-		-		39,456,358		-		33,892,540		33,892,540		3,407,239
Commingled Account 12/96
Kirkwood Atrium	8/97	12/07	$	22,254,714	$	-	$	-	$	-	$	22,254,714	$	-	$	21,543,253	$	21,543,253	$	9,845,880
Boulder Tower	5/97	12/07		31,376,678		-		-		-		31,376,678		-		31,289,749		31,289,749		18,780,130
Interchange Business Center	8/97	6/08		3,332,649		-		-		-		3,332,649		-		4,452,054		4,452,054		1,145,948
Bammel Land NWC & SWC	8/97	7/08		107,166		-		-		-		107,166		-		419,123		419,123		(291,255	)
Commingled Account 6/98
Briarwood One	6/98	7/06	$	7,142,746	$	-	$	-	$	-	$	7,142,746	$	-	$	8,727,826	$	8,727,826	$	5,005,375
World Houston Plaza	9/98	12/06		29,066,087		-		-		-		29,066,087		-		37,906,474		37,906,474		21,003,075
Camelwest Plaza (Partial Sale of Land)	7/98	12/06		13,258		-		-		-		13,258		-		13,258		13,258		-
2400 N. Central (Partial Sale of Land)	7/98	12/06		33,989		-		-		-		33,989		-		33,989		33,989		-
725 Concord	8/98	2/07		17,855,792		-		-		-		17,855,792		-		16,184,402		16,184,402		9,237,455
702 E. Osborn	7/98	3/07		3,276,065		-		-		-		3,276,065		-		4,520,933		4,520,933		621,893
4141 Rockside	11/98	4/07		6,735,329		-		-		-		6,735,329		-		9,011,927		9,011,927		3,010,563
6161 Oaktree	11/98	4/07		5,293,419		-		-		-		5,293,419		-		9,011,716		9,011,716		2,531,272
Wells Fargo Bank Tower	8/98	6/07		8,686,198		-		-		-		8,686,198		-		14,537,983		14,537,983		4,641,566
Fairmount Place	7/98	8/07		9,378,362		-		-		-		9,378,362		-		9,537,574		9,537,574		3,396,914
2400 N. Central	7/98	8/07		5,833,884		-		-		-		5,833,884		-		7,142,484		7,142,484		1,150,763
2810 Parham	9/98	11/07		15,309,241		-		-		-		15,309,241		-		15,943,101		15,943,101		6,420,623
Bridgewood I	6/98	12/07		8,651,332		-		-		-		8,651,332		-		12,851,145		12,851,145		2,766,070
Bridgewood II	6/98	12/07		10,037,948		-		-		-		10,037,948		-		14,724,169		14,724,169		4,081,739
Mesa Executive Park (Phoenix)	7/98	7/08		6,899,415		-		-		-		6,899,415		-		12,427,575		12,427,575		5,336,154
Camelwest Plaza (Phoenix)	7/98	7/08		9,038,695		-		-		-		9,038,695		-		21,155,705		21,155,705		7,942,093
Scottsdale Financial Center I (Phoenix)	7/98	8/08		18,540,448		-		-		-		18,540,448		-		21,334,261		21,334,261		12,252,184
Paragon Plaza (Phoenix)	7/98	9/08		4,272,563		-		-		-		4,272,563		-		9,389,304		9,389,304		3,629,108
Commingled Account 6/99
2 Elizabeth	5/01	10/06	$	11,732,202	$	-	$	-	$	-	$	11,732,202	$	-	$	11,986,569	$	11,986,569	$	6,954,639
Northridge Pavilion	12/99	11/06		10,217,767		-		-		-		10,217,767		-		11,825,301		11,825,301		5,228,537
The Escalade	2/00	12/06		18,426,440		-		-		-		18,426,440		-		15,787,480		15,787,480		7,728,302
Enterprise Center	10/99	12/06		9,002,202		-		-		-		9,002,202		-		11,150,102		11,150,102		4,181,769
Baytech Center	10/99	2/07		11,640,758		-		-		-		11,640,758		-		9,229,500		9,229,500		4,216,068
Montlimar Place	10/99	4/07		18,001,260		-		-		-		18,001,260		-		18,118,239		18,118,239		8,031,026
Financial Plaza	12/99	4/07		16,501,781		-		-		-		16,501,781		-		18,847,245		18,847,245		5,303,751
3535 Travis Place	10/99	9/07		16,711,575		-		-		-		16,711,575		-		14,765,964		14,765,964		3,810,524
32 Nagog Condo Interest	9/99	11/07		316,542		-		-		-		316,542		-		113,502		113,502		1,044,963
205 W. Wacker	9/99	7/08		29,885,478		-		-		-		29,885,478		-		33,542,481		33,542,481		12,030,365
Separate Account 10/97
Eaton Center	12/97	6/07	$	34,873,850	$	29,405,000	$	-	$	-	$	64,278,850	$	-	$	70,921,107	$	70,921,107	$	43,251,227
340/350 N. Sam Houston	1/98	10/07		6,171,131		-		-		-		6,171,131		-		13,920,506		13,920,506		3,293,537
650 N. Sam Houston	1/98	12/07		13,058,208		-		-		-		13,058,208		-		12,867,155		12,867,155		5,020,261
Cypress Tower	12/97	3/08		17,001,847		-		-		-		17,001,847		-		18,128,596		18,128,596		8,134,592

F-45

TABLE V – KBS SPONSORS

SALES OR DISPOSALS OF PROPERTIES (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

⁽¹⁾ See also the table immediately below that sets forth the allocation of taxable gain (loss) associated with individual property sales between capital gain (loss) and ordinary gain (loss).

⁽²⁾ Acquisition costs include acquisition fees paid to sponsor. Soft costs include legal fees, environmental studies, title and closing costs related to the acquisition and closing of the asset. Amounts shown do not include pro rata share of program offering costs nor do they include any program administration costs not related to the operation of the property.

⁽³⁾ Does not include any program administration costs not related to the operation of the property.

*This table does not include an interest in a mezzanine loan acquired by KBS REIT I on September 24, 2007 that was paid down in full by the borrower of the loan on November 19, 2007, prior to the stated maturity date.

F-46

TABLE V – KBS SPONSORS

SALES OR DISPOSALS OF PROPERTIES (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

This table sets forth the allocation of taxable gain (loss) associated with individual property sales between capital gain (loss) and ordinary gain (loss) for properties sold by programs sponsored by KBS investment advisors during the three years ended December 31, 2008.

F-47

TABLE V – KBS SPONSORS

SALES OR DISPOSALS OF PROPERTIES (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Property	Taxable Gain (Loss)			Capital Gain (Loss)			Ordinary Gain (Loss)
Separate Account 12/98
4 & 6 Omni Way	$	(1,539,549	)	$	(1,539,549	)	$	-
1010 Lamar		11,701,036			11,701,036			-
Commingled Account 12/96
Kirkwood Atrium	$	5,676,673		$	5,676,673		$	-
Boulder Tower		6,737,388			6,737,388			-
Interchange Business Center		166,888			166,888			-
Bammel Land NWC & SWC		311,958			311,958			-
Commingled Account 6/98
Briarwood One	$	(117,791	)	$	(117,791	)	$	-
World Houston Plaza		(882,008	)		(882,008	)		-
Camelwest Plaza (Partial Sale of Land)		-			-			-
2400 N. Central (Partial Sale of Land)		-			-			-
725 Concord		4,062,524			4,062,524			-
702 E. Osborn		(456,284	)		(456,284	)		-
4141 Rockside		(671,420	)		(671,420	)		-
6161 Oaktree		(2,177,945	)		(2,177,945	)		-
Wells Fargo Bank Tower		(3,163,591	)		(3,163,591	)		-
Fairmont Place		1,746,670			1,746,670			-
2400 N. Central (Partial Sale of Land)		(207,461	)		(207,461	)		-
2810 Parham		2,674,203			2,674,203			-
Bridgewood I		(1,886,845	)		(1,886,845	)		-
Bridgewood II		(1,942,590	)		(1,942,590	)		-
Mesa Executive Park (Phoenix)		(3,142,272	)		(3,142,272	)		-
Camelwest Plaza (Phoenix)		(7,708,517	)		(7,708,517	)		-
Scottsdale Financial Center I (Phoenix)		1,623,264			1,623,264			-
Paragon Plaza (Phoenix)		(3,252,219	)		3,252,219			-
Commingled Account 6/99
2 Elizabeth	$	1,148,892		$	1,148,892		$	-
Northridge Pavilion		423,652			423,652			-
The Escalade		5,410,889			5,410,889			-
Enterprise Center		(364,081	)		(364,081	)		-
Baytech Center		3,874,019			3,874,019			-
Montlimar Place		2,902,418			2,902,418			-
Financial Plaza		829,147			829,147			-
3535 Travis Place		4,597,485			4,597,485			-
32 Nagog Condo Interest		227,114			227,114			-
205 W. Wacker		2,667,925			2,667,925			-
Separate Account 10/97
Eaton Center	$	8,293,580		$	8,293,580		$	-
340/350 N. Sam Houston		(5,113,156	)		(5,113,156	)		-
650 N. Sam Houston		2,795,943			2,795,943			-
Cypress Tower		1,916,097			1,916,097			-

F-48

APPENDIX A

Please follow these instructions carefully. Failure to do so could result in the rejection of your subscription.

  1.       INVESTMENT

PLEASE NOTE: We do not accept money orders, traveler’s checks, starter checks, foreign checks, counter checks, third-party checks or cash.

A minimum initial investment of $4,000 is required. All investments in KBS REIT products apply to the $4,000 minimum. This does not affect the suitability standards applicable to investors in this offering. In no event shall any investment be less than $100.

Until we have raised the minimum offering amount, you should make your check payable to “UMB Bank, N.A., as escrow agent for KBS Legacy Partners Apartment REIT, Inc.” Once we have raised $2,500,000 in the offering from persons who are not affiliated with us or our sponsors, you should make your check payable to “KBS Legacy Partners Apartment REIT, Inc.” except that Pennsylvania and Tennessee investors should follow the instructions in the final prospectus of KBS Legacy Partners Apartment REIT, Inc., as amended and supplemented as of the date hereof (the “Prospectus”), under “Plan of Distribution—Special Notice to Pennsylvania and Tennessee investors.” If you would like to purchase shares in this offering at regular intervals you may be able to do so by electing to participate in the automatic investment program by completing an enrollment form that we will provide upon request. Alabama and Ohio investors are not eligible to participate in the automatic investment program.

  2.       INVESTMENT TYPE

Please check the appropriate box to indicate the account type of the subscription.

  3.       INVESTOR INFORMATION

PLEASE NOTE: You must include a permanent street address even if your mailing address is a P.O. Box. If the investment is to be held by joint owners, you must provide the requested investor information for each joint owner.

Enter the name(s), mailing address and telephone numbers of the registered owner of the investment. Partnerships, corporations and other organizations should include the name of an individual to whom correspondence should be addressed. Non-resident aliens must also supply IRS Form W-8BEN.

  4.       INVESTMENT TITLE

PLEASE NOTE: All investors must complete the space provided for taxpayer identification number or social security number. By signing in Section 8, you are certifying that this number is correct.

Please print the exact name(s) in which shares are to be registered. Include the trust/entity name, if applicable. If the investor is an IRA or qualified plan, include the names and taxpayer identification numbers of both the investor and the custodian or trustee.

  5.       CUSTODIAN/TRUSTEE INFORMATION

If you want to purchase shares through an IRA but need an IRA account, Sterling Trust Company and Community National Bank agreed to serve as IRA custodian for such purpose. KBS Legacy Partners Apartment REIT will pay the fees related to the establishment of investor accounts with Sterling Trust Company and Community National Bank, and we will also pay the first year annual IRA maintenance fees. Thereafter, investors will be responsible for the annual IRA maintenance fees. Further information about custodial services is available through your broker or our Dealer-Manager at www.kbs-cmg.com.

Complete this section if the registered owner of the investment will be a Custodian Plan or Trust.

  6.       DISTRIBUTION INFORMATION

PLEASE NOTE: If you elect to participate in the Dividend Reinvestment Plan, you must agree that if at any time you fail to meet the minimum income and net worth standards or cannot make the other investor representations or warranties set forth in the Prospectus or the Subscription Agreement relating to such investment, you will promptly notify KBS Legacy Partners Apartment REIT in writing of that fact.

Complete this section to enroll in the Dividend Reinvestment Plan, to elect to receive distributions by direct deposit and/or to elect to receive distributions by check. If you elect direct deposit, you must attach a voided check with this completed subscription agreement. You can choose to have all or a portion of your distributions reinvested through the Dividend Reinvestment Plan. You must indicate the percentage of your distribution to be applied to each option selected and the sum of the allocations must equal 100%. If you do not complete this section, distributions will be paid to the registered owner at the address in Section 3. IRA accounts may not direct distributions without the custodian’s approval.

KBS Legacy Partners Apartment REIT, Inc.

A-1

  7.       BROKER-DEALER AND REGISTERED REPRESENTATIVE INFORMATION

PLEASE NOTE: The Broker-Dealer or Registered Investment Adviser must complete this section to complete the subscription. All fields are mandatory.

  8.       SUBSCRIBER SIGNATURES

Please separately initial each of the representations in paragraphs (a) through (e). If you are a Kansas resident you must also initial the representation in paragraph (f). If you are an Iowa resident you must also initial the representation in paragraph (g). Except in the case of fiduciary accounts, you may not grant any person a power of attorney to make such representations on your behalf.

Please refer to the Prospectus under “Suitability Standards” to verify that you meet the minimum suitability standards that are imposed by the state of your primary residence.

By signing this Subscription Agreement, you agree to provide this information and confirm that this information is true and correct. If we are unable to verify your identity or that of another person authorized to act on your behalf or if we believe we have identified potential criminal activity, we reserve the right to take action as we deem appropriate, including refusing to open or closing your account.

  9.       FINANCIAL REPRESENTATIVE SIGNATURES

Please Note: The Broker-Dealer or Registered Investment Advisor must sign this section to complete the subscription.

Required Representations: By signing Section 9, the registered representative of the Broker-Dealer or Registered Investment Advisor confirms on behalf of the Broker-Dealer that he or she:

• has reasonable grounds to believe that the information and representations concerning the investor identified herein are true, correct and complete in all respects;

• has discussed the investor’s prospective purchase of shares with such investor;

• has advised such investor of all pertinent facts with regard to the lack of liquidity and marketability of the shares and other fundamental risks related to the investment in the shares, the restrictions on transfer of the shares and the risk that the investor could lose his or her entire investment in the shares;

• has delivered to the investor the Prospectus required to be delivered in connection with this subscription;

• has reasonable grounds to believe that the investor is purchasing these shares for the account referenced in Section 4; and

• has reasonable grounds to believe that the purchase of shares is a suitable investment for such investor, that such investor meets the suitability standards applicable to the investor set forth in the Prospectus and that such investor is in a financial position to enable the investor to realize the benefits of such an investment and to suffer any loss that may occur with respect thereto.

In addition, the registered representative of the Broker-Dealer or Registered Investment Advisor represents that he or she and the Broker-Dealer, (1) are duly licensed and may lawfully offer and sell the shares in the state where the investment was made and in the state designated as the investor’s legal residence in Section 3; and (2) agree to maintain records of the information used to determine that an investment in shares is suitable and appropriate for the investor for a period of six years.

PLEASE NOTE: Only original, completed copies of the Subscription Agreement can be accepted. We cannot accept photocopied or otherwise duplicated Subscription Agreements.

The Subscription Agreement, together with a check for the full purchase price, should be delivered or mailed to:

KBS Legacy Partners Apartment REIT, Inc.

660 Newport Center Drive, Suite 1250

Newport Beach, CA 92660

(866) 584-1381

Once the applicable minimum offering amount has been raised (see Section 1), Subscription Agreements may also be mailed to the address above and payment wired to:

BANK NAME and BANK ADDRESS

ABA# XXXXXX

KBS Capital Advisors LLC, as Trustee for

KBS Legacy Partners Apartment REIT, Account#: XXXXXX

KBS Legacy Partners Apartment REIT, Inc.

10/09 A-2 4002-A

  5.       CUSTODIAN/TRUSTEE INFORMATION

Trustee Name  

Trustee Address 1  

Trustee Address 2  

Trustee City   State   Zip Code  

Trustee Telephone No.   

Trustee Tax Identification Number   

Investor’s Account Number with Trustee   

  6.       DISTRIBUTION INFORMATION (CHOOSE ONE OR MORE OF THE FOLLOWING OPTIONS)

If you select more than one option you must indicate the percentage of your distribution to be applied to each option and the sum of the allocations must equal 100%. % of
distribution

¨  I prefer to participate in the Dividend Reinvestment Plan, as described in the Prospectus.

¨  Send distributions via check to investor’s home address (or for Qualified Plans to the address listed in

      Section 5).

¨  Send distributions via check to alternate payee listed here (not available for qualified plans without custodial

      approval).

    Name        

    Address    

    City           State   Zip Code  

    Account No.   

¨   Direct Deposit (Attach Voided Check) I authorize KBS Legacy Partners Apartment REIT, Inc. or its agent (collectively, KBS) to deposit my distributions in the checking or savings account identified below. This authority will remain in force until I notify KBS in writing to cancel it. In the event that KBS deposits funds erroneously into my account, KBS is authorized to debit my account for an amount not to exceed the amount % of
distribution

of the erroneous deposit ...........................................................................................................................................

    Financial Institution Name           ¨  Checking      ¨  Savings

    ABA/Routing Number   

    Account Number   

  7.       BROKER-DEALER AND REGISTERED REPRESENTATIVE INFORMATION

Broker-Dealer Name   

Representative Name    Rep No.   

Representative’s Company Name   

Representative’s Address   

Rep’s City   State   Zip Code  

Rep’s Phone No.   Fax No.   

Rep’s Email Address   

¨   REGISTERED INVESTMENT ADVISER (RIA): All sales of shares of common stock must be made through a Broker-Dealer. If a RIA has introduced a sale, the sale must be conducted through (i) the RIA in its capacity as a Registered Representative, if applicable; (ii) a Registered Representative of a Broker-Dealer that is affiliated with the RIA, if applicable; or (iii) if neither (i) or (ii) is applicable, an unaffiliated Broker-Dealer.

KBS Legacy Partners Apartment REIT, Inc.

A-4

 8.        SUBSCRIBER SIGNATURES

TAXPAYER IDENTIFICATION NUMBER CONFIRMATION (REQUIRED): The investor signing below, under penalties of perjury, certifies that (i) the number shown on this Subscription Agreement is his or her correct Taxpayer Identification Number (or he or she is waiting for a number to be issued to him or her ), (ii) he or she is not subject to backup withholding either because he or she has not been notified by the Internal Revenue Service (“IRS”) that he or she is subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified him or her that he or she is no longer subject to backup withholding and (iii) he or she is a U.S. Citizen unless otherwise indicated in Section 3. NOTE: CLAUSE (ii) IN THIS CERTIFICATION SHOULD BE CROSSED OUT IF THE WITHHOLDING BOX HAS BEEN CHECKED IN THE INVESTOR INFORMATION SECTION.

Please separately initial each of the representations below. Except in the case of fiduciary accounts, you may not grant any person a power of attorney to make such representations on your behalf. In order to induce KBS Legacy Partners Apartment REIT, Inc. to accept this subscription, I hereby represent and warrant to you as follows:

		OWNER	JOINT OWNER
(a)	I have received the final Prospectus of KBS Legacy Partners Apartment REIT, Inc. at least five business days before signing the Subscription Agreement.	Initials	Initials
(b)	I have (i) a minimum net worth (exclusive of home, home furnishings and personal automobiles) of at least $250,000 or (ii) a minimum net worth (as previously described) of at least $70,000 and a minimum annual gross income of at least $70,000, and, if applicable, I meet the higher net worth and gross income requirements imposed by my state of primary residence as set forth in the Prospectus under “Suitability Standards.” I will not purchase additional shares unless I meet the applicable suitability requirements set forth in the Prospectus at the time of purchase.	Initials	Initials
(c)	I acknowledge that there is no public market for the shares and, thus, my investment in shares is not liquid.	Initials	Initials
(d)	I am purchasing the shares for the account referenced in Section 4.	Initials	Initials
(e)	I acknowledge that I will not be admitted as a stockholder until my investment has been accepted. The acceptance process includes, but is not limited to, reviewing the Subscription Agreement for completeness and signatures, conducting an Anti-Money Laundering check as required by the USA Patriot Act and payment of the full purchase price of the shares.	Initials	Initials
(f)	If I am a Kansas resident, I acknowledge that it is recommended by the office of the Kansas Securities Commissioner that Kansas investors not invest, in the aggregate, more than 10% of their liquid net worth in this and similar direct participation investments. Liquid net worth is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.	Initials	Initials
(g)	If I am an Iowa resident, I have (i) a net worth of at least $350,000 or (ii) a gross annual income of at least $70,000 and a net worth of at least $100,000. I have a liquid net worth of at least ten times my investment in KBS Legacy Partners Apartment REIT, Inc.	Initials	Initials

The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding.

Signature of Investor	Date	Signature of Joint Investor or, for Qualified Plans, of Trustee/Custodian	Date

Investors will receive confirmations of their purchases upon acceptance of their subscriptions.

KBS Legacy Partners Apartment REIT, Inc.

A-5

  9.      FINANCIAL REPRESENTATIVE SIGNATURES

The investor’s Financial Advisor must sign below to complete the order. The Financial Advisor hereby warrants that he is duly licensed and may lawfully sell shares of common stock in the state designated as the investor’s legal residence. The Financial Advisor agrees to maintain records of the information used to determine that an investment in shares is suitable and appropriate for the investor for a period of six years. The undersigned confirm by their signatures that they (i) have reasonable grounds to believe that the information and representations concerning the investor identified herein are true, correct and complete in all respects; (ii) have discussed such investor’s prospective purchase of shares with such investor; (iii) have advised such investor of all pertinent facts with regard to the liquidity and marketability of the shares and other fundamental risks related to the investment in the shares; (iv) have delivered the Prospectus to such investor; (v) have reasonable grounds to believe that the investor is purchasing these shares for his or her own account; and (vi) have reasonable grounds to believe that the purchase of shares is a suitable investment for such investor, that such investor meets the suitability standards applicable to such investor set forth in the Prospectus, and that such investor is in a financial position to enable such investor to realize the benefits of such an investment and to suffer any loss that may occur with respect thereto.

I understand this subscription agreement is for KBS Legacy Partners Apartment REIT, Inc.

Signature of Financial Representative	Date	Branch Manager Signature (If required by Broker/Dealer)	Date

PLEASE NOTE: Only original, completed copies of the Subscription Agreement can be accepted. We cannot accept photocopied or otherwise duplicated Subscription Agreements. Until we have raised the minimum offering amount, you should make your check payable to “UMB Bank, N.A., as escrow agent for KBS Legacy Partners Apartment REIT, Inc.” Once we have raised $2,500,000 in the offering from persons who are not affiliated with us or our sponsors, you should make your check payable to “KBS Legacy Partners Apartment REIT, Inc.” except that Pennsylvania and Tennessee investors should follow the instructions in the Prospectus under “Plan of Distribution—Special Notice to Pennsylvania and Tennessee investors.”

The Subscription Agreement, together with a check for the full purchase price, should be delivered or mailed to:

KBS Legacy Partners Apartment REIT, Inc.

660 Newport Center Drive, Suite 1250

Newport Beach, CA 92660

(866) 584-1381

Once the applicable minimum offering amount has been raised (see above), Subscription Agreements may also be mailed to the address above and payment wired to:

BANK NAME and BANK ADDRESS

ABA# XXXXXX

Account name:

KBS Capital Advisors LLC, as Trustee for

KBS Legacy Partners Apartment REIT, Inc. Account #: XXXXXX

***** FOR OFFICE USE ONLY *****

Check #   Complied by   W/S  

Batch #   Input by   Region  

Subscription #   Proofed by   Territory  

KBS Legacy Partners Apartment REIT, Inc.

10/09 A-6 4001-A

APPENDIX B

KBS LEGACY PARTNERS APARTMENT REIT, INC.

FORM OF AMENDED AND RESTATED DIVIDEND REINVESTMENT PLAN

KBS Legacy Partners Apartment REIT, Inc., a Maryland corporation (the “Company”), has adopted an Amended and Restated Dividend Reinvestment Plan (the “DRP”), the terms and conditions of which are set forth below. Capitalized terms shall have the same meaning as set forth in the Company’s charter unless otherwise defined herein.

1.        Number of Shares Issuable.  The number of shares of Common Stock authorized for issuance under the DRP is 80,000,000.

2.        Participants.  “Participants” are holders of the Company’s shares of Common Stock who elect to participate in the DRP.

3.        Distribution Reinvestment.  The Company will apply that portion (as designated by a Participant) of the dividends and other distributions (“Distributions”) declared and paid in respect of a Participant’s shares of Common Stock to the purchase of additional shares of Common Stock for such Participant. Such shares will be sold through the broker-dealer and/or dealer manager through whom the Company sold the underlying shares to which the Distributions relate unless the Participant makes a new election through a different distribution channel. The Company will not pay selling commissions on shares of Common Stock purchased in the DRP.

4.        Procedures for Participation.  Qualifying stockholders may elect to become a Participant by completing and executing the Subscription Agreement, an enrollment form or any other Company-approved authorization form as may be available from the dealer manager or participating broker-dealers. To increase their participation, Participants must complete a new enrollment form and make the election through the dealer manager or the Participant’s broker-dealer, as applicable. Participation in the DRP will begin with the next Distribution payable after receipt of a Participant’s subscription, enrollment or authorization. Shares will be purchased under the DRP on the date that the Company makes a Distribution. Distributions will be paid monthly as authorized and declared by the Company’s board of directors.

5.        Purchase of Shares.  Until the Company establishes an estimated value per share of Common Stock that is not based on the price to acquire a share of Common Stock in the Company’s primary offering or a follow-on public or private offering, Participants will acquire Common Stock at a price of $9.50 per share. Once the Company establishes an estimated value per share of Common Stock that is not based on the price to acquire a share of Common Stock in the Company’s primary offering or a follow-on public or private offering, Participants will acquire Common Stock at a price equal to the estimated value of the Company’s Common Stock, as estimated by the Company’s advisor or other firm chosen by the board of directors for that purpose. The Company expects to establish an estimated value per share of Common Stock that is not based on the price to acquire a share of Common Stock in the Company’s primary offering or a follow-on public or private offering after the completion of the Company’s offering stage. The Company’s offering stage will be complete when the Company is no longer offering equity securities – whether through its initial public offering or follow-on public or private offerings – and has not done so for 18 months. For the purpose of determining when the Company’s offering stage is complete, equity offerings do not include offerings on behalf of selling stockholders or offerings related to any dividend reinvestment plan, employee benefit plan or the redemption of interests in KBS Legacy Partners Limited

B-1

Partnership, the Company’s operating partnership. Participants in the DRP may purchase fractional shares so that 100% of the Distributions will be used to acquire shares. However, a Participant will not be able to acquire shares under the DRP to the extent such purchase would cause it to exceed limits set forth in the Company’s charter, as amended.

6.        Taxation of Distributions.  The reinvestment of Distributions in the DRP does not relieve Participants of any taxes that may be payable as a result of those Distributions and their reinvestment pursuant to the terms of this DRP.

7.        Share Certificates.  The shares issuable under the DRP shall be uncertificated until the board of directors determines otherwise.

8.        Voting of DRP Shares.  In connection with any matter requiring the vote of the Company’s stockholders, each Participant will be entitled to vote all shares acquired by the Participant through the DRP.

9.        Reports.  Within 90 days after the end of the calendar year, the Company shall provide each Participant with (i) an individualized report on the Participant’s investment, including the purchase date(s), purchase price and number of shares owned, as well as the amount of Distributions received during the prior year; and (ii) all material information regarding the DRP and the effect of reinvesting dividends, including the tax consequences thereof. The Company shall provide such information reasonably requested by the dealer manager or a participating broker-dealer, in order for the dealer manager or participating broker-dealer to meet its obligations to deliver written notification to Participants of the information required by Rule 10b-10(b) promulgated under the Securities Exchange Act of 1934. In the event that the DRP is amended in accordance with Section 11 hereof, the DRP, as amended, must provide that all material information regarding Distributions and the effect of reinvesting such Distributions, including tax consequences thereof, shall be provided to Participants at least annually.

10.        Termination by Participant.  A Participant may terminate participation in the DRP at any time by delivering to the Company a written notice. To be effective for any Distribution, such notice must be received by the Company at least ten business days prior to the last day of the month to which the Distribution relates. Any transfer of shares by a Participant will terminate participation in the DRP with respect to the transferred shares. Upon termination of DRP participation, Distributions will be distributed to the stockholder in cash.

11.        Amendment or Termination of DRP by the Company.  The Company may amend or terminate the DRP for any reason upon ten days’ written notice to the Participants. The Company may provide notice by including such information (a) in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the Securities and Exchange Commission or (b) in a separate mailing to the participants.

12.        Liability of the Company.  The Company shall not be liable for any act done in good faith, or for any good faith omission to act.

13.        Governing Law.  The DRP shall be governed by the laws of the State of Maryland.

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Until                      all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as soliciting dealers.

We have not authorized any dealer, salesperson or other individual to give any information or to make any representations that are not contained in this prospectus. If any such information or statements are given or made, you should not rely upon such information or representation. This prospectus does not constitute an offer to sell any securities other than those to which this prospectus relates, or an offer to sell, or a solicitation of an offer to buy, to any person in any jurisdiction where such an offer or solicitation would be unlawful. This prospectus speaks as of the date set forth below. You should not assume that the delivery of this prospectus or that any sale made pursuant to this prospectus implies that the information contained in this prospectus will remain fully accurate and correct as of any time subsequent to the date of this prospectus.

TABLE OF CONTENTS

	Page
Suitability Standards	i
Prospectus Summary	1
Risk Factors	29
Cautionary Note Regarding Forward-Looking Statements	54
Estimated Use of Proceeds	55
Management	57
Management Compensation	76
Stock Ownership	81
Conflicts of Interest	81
Investment Objectives and Criteria	91
Plan of Operation	106
Prior Performance Summary	112
Federal Income Tax Considerations	127
ERISA Considerations	147
Description of Shares	152
The Operating Partnership Agreement	168
Plan of Distribution	172
Supplemental Sales Material	182
Legal Matters	183
Experts	183
Where You Can Find More Information	183
Index to Balance Sheet and Prior Performance Tables	F-1
Appendix A — Form of Subscription Agreement with Instructions	A-1
Appendix B — Form of Amended and Restated Dividend Reinvestment Plan	B-1

Our shares are not FDIC insured, may lose value and are not bank guaranteed. See “Risk Factors” beginning on page 29, to read about risks you should consider before buying shares of our common stock.

KBS LEGACY PARTNERS APARTMENT REIT, INC.

Maximum Offering of

280,000,000 Shares

of Common Stock

Minimum Offering of

250,000 Shares

of Common Stock

PROSPECTUS

KBS CAPITAL MARKETS

GROUP LLC

                    , 2010

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 31.  Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses payable by KBS Legacy Partners Apartment REIT, Inc. (the “Company”) in connection with the distribution of the securities being registered other than selling commissions and the dealer manager fee.

Item	Amount
SEC registration fee	$	154,008
FINRA filing fee		75,500
Legal fees and expenses		2,500,000
Expense reimbursements for retail conferences, bona fide training and education meetings and industry conferences		5,519,350
Blue sky fees and expenses		121,565
Accounting fees and expenses		1,700,000
Sales and advertising expenses		1,300,000
Issuer costs regarding bona fide training and education meetings and retail seminars		425,000
Printing		4,000,000
Postage and delivery of materials		1,900,000
Transfer agent, escrow fees and administrative services related to the issuance of shares in the offering		2,720,000
Due diligence expenses (retailing)		350,000
Legal fees — underwriter portion		100,000
Telephone		100,000
Promotional items		175,000
Expense reimbursement for broker-dealer technology and other costs		150,000
Miscellaneous expenses		400,000
Total		21,690,423

Item 32.   Sales to Special Parties

The Company’s directors and officers and (to the extent consistent with applicable laws and regulations) the employees of KBS Capital Advisors LLC, Legacy Partners Residential Realty LLC and affiliated entities, business associates and others purchasing pursuant to the Company’s “friends and family” program, participating broker-dealers, their retirement plans, their representatives and the family members, IRAs and the qualified plans of their representatives will be allowed to purchase shares in the Company’s primary offering at a discount from the public offering price. The purchase price for such shares will be $9.35 per share, reflecting the fact that selling commissions in the amount of $0.65 per share will not be payable in connection with such sales. The net proceeds to the Company from such sales made net of commissions will be substantially the same as the net proceeds the Company receives from other sales of share in the primary offering.

Item 33.  Recent Sales of Unregistered Securities

In connection with its organization, on August 7, 2009, the Company issued 20,000 shares of its common stock to KBS-Legacy Apartment Community REIT Venture, LLC at a purchase price of $10.00 per share for an aggregate purchase price of $200,000. The Company issued these shares in a private transaction exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933.

Item 34.  Indemnification of Directors and Officers

Subject to the significant conditions set forth below, the Company has included in its charter a provision limiting the liability of its directors and officers to the Company and its stockholders for money damages. In addition to the limitations set forth below, under Maryland law such exculpation is not permitted for any liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment as being material to the cause of action.

II-1

Subject to the significant conditions set forth below, the charter also provides that the Company shall indemnify a director, officer or the advisor or any of its affiliates against any and all losses or liabilities reasonably incurred by them (other than when sued by or in right of the Company) in connection with or by reason of any act or omission performed or omitted to be performed on behalf of the Company in such capacity.

Under the Company’s charter, the Company shall not indemnify a director, the advisor or any of the advisor’s affiliates (each an “Indemnitee”) for any liability or loss suffered by an Indemnitee, nor shall it exculpate an Indemnitee, unless all of the following conditions are met: (i) an Indemnitee has determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company; (ii) the Indemnitee was acting on behalf of or performing services for the Company; (iii) such liability or loss was not the result of (A) negligence or misconduct by the Indemnitee, excluding an Independent Director, or (B) gross negligence or willful misconduct by an Independent Director; and (iv) such indemnification or agreement to hold harmless is recoverable only out of the Company’s net assets and not from its common stockholders. Notwithstanding the foregoing, an Indemnitee shall not be indemnified by the Company for any losses, liability or expenses arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular Indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular Indemnitee; and (iii) a court of competent jurisdiction approves a settlement of the claims against a particular Indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission (the “SEC”) and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.

The charter provides that the advancement of Company funds to an Indemnitee for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought is permissible only if (in addition to the procedures required by Maryland law) all of the following conditions are satisfied: (i) the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company; (ii) the legal action is initiated by a third party who is not a common stockholder or the legal action is initiated by a common stockholder acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; and (iii) the Indemnitee undertakes to repay the advanced funds to the Company, together with the applicable legal rate of interest thereon, if the Indemnitee is found not to be entitled to indemnification.

It is the position of the SEC that indemnification of directors and officers for liabilities arising under the Securities Act is against public policy and is unenforceable pursuant to Section 14 of the Securities Act.

The Company will also purchase and maintain insurance on behalf of all of its directors and executive officers against liability asserted against or incurred by them in their official capacities with the Company, whether or not the Company is required or has the power to indemnify them against the same liability.

Item 35.  Treatment of Proceeds from Stock Being Registered

Not applicable.

II-2

Item 36.  Financial Statements and Exhibits

(a) Financial Statements. See Index to Consolidated Balance Sheet and Prior Performance Tables.

(b) Exhibits. The following exhibits are filed as part of this registration statement:

Ex.	Description
1.1	Form of Dealer Manager Agreement with Selected Dealer Agreement
3.1	Articles of Amendment and Restatement as adopted on January 8, 2010
3.2	Amended and Restated Bylaws
4.1	Form of Subscription Agreement, included as Appendix A to prospectus
4.2	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates), incorporated by reference to Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11 (No. 333-161449) filed October 2, 2009
4.3	Form of Amended and Restated Dividend Reinvestment Plan, included as Appendix B to prospectus
4.4	Share Redemption Program, incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-161449) filed August 19, 2009
4.5	Form of Escrow Agreement
5.1	Opinion of DLA Piper LLP (US) re legality, incorporated by reference to Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-161449) filed November 5, 2009
8.1	Opinion of DLA Piper LLP (US) re tax matters, incorporated by reference to Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-161449) filed November 5, 2009
10.1	Form of Advisory Agreement
21.1	Subsidiaries of the Company
23.1	Consent of DLA Piper LLP (US) (included in Exhibit 5.1)
23.2	Consent of Ernst & Young LLP
24.1	Power of Attorney of C. Preston Butcher, Peter M. Bren, David E. Snyder and Stacie K. Yamane, incorporated by reference to the signature page to the Company’s Registration Statement on Form S-11 (No. 333-161449) filed August 19, 2009
24.2	Power of Attorney of Gary Kachadurian, Michael L. Meyer and Ronald E. Zuzack included on the signature page to this Pre-effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-161449).

Item 37.  Undertakings

(a)        The Registrant undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the “Act”); (ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement.

(b)        The Registrant undertakes (i) that, for the purpose of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof, (ii) that all post-effective amendments will comply with the applicable forms, rules and regulations of the SEC in effect at the time such post-effective amendments are filed, and (iii) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(c)        The Registrant undertakes that, for the purpose of determining liability under the Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

II-3

(d)        For the purpose of determining liability of the Registrant under the Act to any purchaser in the initial distribution of the securities, the Registrant undertakes that in a primary offering of securities pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) any preliminary prospectus or prospectus of the Registrant relating to the offering required to be filed pursuant to Rule 424, (ii) any free writing prospectus relating to the offering prepared by or on behalf of the Registrant or used or referred to by the Registrant, (iii) the portion of any other free writing prospectus relating to the offering containing material information about the Registrant or its securities provided by or on behalf of the Registrant, and (iv) any other communication that is an offer in the offering made by the Registrant to the purchaser.

(e)        The Registrant undertakes to send to each stockholder, at least on an annual basis, a detailed statement of any transaction with the Advisor or its affiliates, and of fees, commissions, compensation and other benefits paid or accrued to the Advisor or its affiliates for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed.

(f)        The Registrant undertakes to file a sticker supplement pursuant to Rule 424(c) under the Act during the distribution period describing each significant property not identified in the prospectus at such time as there arises a reasonable probability that such property will be acquired and to consolidate all such stickers into a post-effective amendment filed at least once every three months with the information contained in such amendment provided simultaneously to the existing stockholders. Each sticker supplement will disclose all compensation and fees received by the Advisor and its affiliates in connection with any such acquisition. The post-effective amendment shall include audited financial statements meeting the requirements of Rule 3-14 of Regulation S-X only for the significant properties acquired during the distribution period if such financial statements have been filed or would be due under Items 2.01 and 9.01 of Form 8-K.

(g)        The Registrant undertakes to file, after the end of the distribution period, a current report on Form 8-K containing the financial statements and any additional information required by Rule 3-14 of Regulation S-X, to reflect each commitment (i.e., the signing of a binding purchase agreement) made after the end of the distribution period involving the use of 10% or more (on a cumulative basis) of the net proceeds of the offering and to provide the information contained in such report to the stockholders at least once each quarter after the distribution period of the offering has ended.

(h)        The Registrant undertakes to provide to the stockholders the financial statements required by Form 10-K for the first full fiscal year of operations.

(i)        Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(j)        The Registrant undertakes to provide to the dealer manager at the closings specified in the dealer manager agreement the following: (i) if the securities are certificated, certificates in such denominations and registered in such names as required by the dealer manager to permit prompt delivery to each purchaser or (ii) if the securities are not certificated, a written statement of the information required on certificates that is required to be delivered to stockholders to permit prompt delivery to each purchaser.

II-4

TABLE VI – LEGACY SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Table VI presents information concerning the acquisition of properties during the three years ended December 31, 2008 by programs sponsored by our Legacy sponsors. Each of the programs below have investment objectives similar to those of the Company.

Property and Location		Type of Property	Units/ Gross Leaseable Area (sq ft)	Closing date	Mortgage Financing		Cash Investment (Equity)		Development/ Acquisition Cost, Plus Acquisition Fee (1)		Other Cash Expenditures (2)			Total Cost of Property (3)
Legacy Partners Affordable Housing Fund (4)
Memorial, Houston, TX		Apt-Dev	330	Apr-07	$	28,229,711	$	15,187,000	$	43,416,711	$	-		$	43,416,711
Mission Pointe, Sunnyvale, CA		Apt-Acq	617	Nov-08		137,297,323		29,143,022		160,190,000		6,250,345			166,440,345
Hollywood & Vine, Hollywood, CA		Apt-Dev	375	Mar-07		91,357,541		39,615,000		130,972,541		-			130,972,541
Mayfair, Denver, CO	(5)	Apt-Dev	n/a	n/a		n/a		1,698,951		1,698,951		-			1,698,951
Legacy Partners Realty Fund I (6)
1320 Bordeaux, Sunnyvale, CA	(7)	Office/R&D	56,720	Jan-06		4,690,000		2,008,282		5,950,000		748,282			6,698,282
Evergreen Office Park, Bellevue, WA	(8)	Office	85,716	Jan-06		13,395,500		6,335,232		16,350,000		3,380,732			19,730,732
Marina Village, Alameda, CA	(9) (13)	Office/R&D	1,160,677	Feb-06		151,157,630		55,700,000		179,000,000		27,857,630			206,857,630
Marina Village Land, Alameda, CA	(13)	Land	N/A	Feb-06		-		9,100,000		8,000,000		1,100,000			9,100,000
Interlocken, Broomfield, CO		Office	150,656	Mar-06		17,733,922		6,380,714		23,162,000		952,636			24,114,636
Bayside Parkway, Fremont, CA	(9)	Office/R&D	313,490	Mar-06		44,000,000		6,495,215		60,000,000		(9,504,785	)		50,495,215
Legacy Alameda Ctr, Alameda, CA		Office/R&D	155,512	Apr-06		19,842,622		8,680,216		20,694,900		7,827,938			28,522,838
Legacy Centre DTC, Greenwood Village, CO		Office	216,392	Apr-06		27,965,554		10,331,051		32,576,200		5,720,405			38,296,605
Automation Parkway, San Jose, CA		Office/R&D	270,081	Apr-06		36,500,000		12,053,300		50,950,000		(2,396,700	)		48,553,300
Legacy I-90, Bellevue, WA	(13)	Office	87,516	May-06		19,007,547		9,723,349		22,460,000		6,270,896			28,730,896
Southcenter, Tukwila, WA		Office	63,602	Aug-06		6,405,138		7,817,000		12,620,400		1,601,738			14,222,138
Legacy Partners Realty Fund II (10)
Heritage Corporate Center, Santa Fe Springs, CA		Office/R&D	720,301	May-06		67,081,783		20,990,000		84,250,000		3,821,783			88,071,783
Legacy Wateridge, San Diego, CA		Office	128,296	May-06		26,840,953		10,033,000		32,750,000		4,123,953			36,873,953
600 B Street, San Diego, CA		Office	338,905	Jul-06		79,600,000		32,185,000		95,500,000		16,285,000			111,785,000
6300 Wilshire Boulevard, Los Angeles, CA		Office	400,401	Jul-06		104,500,000		38,550,000		132,000,000		11,050,000			143,050,000
116 Inverness, Englewood, CA	(8)	Office	213,534	Jul-06		27,142,924		7,091,951		27,012,000		7,222,875			34,234,875
Seattle Tower, Seattle, WA		Office	161,412	Aug-06		14,757,307		23,510,000		36,090,000		2,177,307			38,267,307
Legacy Airport Plaza, Long Beach, CA	(8)	Office	128,325	Aug-06		20,242,000		6,067,677		23,050,000		3,259,677			26,309,677
Queen Anne Square, Seattle, WA		Office	152,047	Oct-06		19,671,937		20,556,000		32,300,000		7,927,937			40,227,937
1660 Wynkoop, Denver, CO	(8)	Office	65,716	Dec-06		12,758,763		4,235,243		13,900,000		3,094,006			16,994,006
160 Spear Street, San Francisco, CA		Office	288,308	Dec-06		71,953,217		28,378,360		86,127,878		14,203,699			100,331,577
Crown Pointe, Kirkland, WA	(8)	Office	125,648	Jan-07		29,973,733		10,132,391		35,871,000		4,235,124			40,106,124

II-5

TABLE VI – LEGACY SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Property and Location			Type of Property	Units/ Gross Leaseable Area (sq ft)	Closing date	Mortgage Financing		Cash Investment (Equity)		Development/ Acquisition Cost, Plus Acquisition Fee (1)		Other Cash Expenditures (2)			Total Cost of Property (3)
Legacy Partners Realty Fund II (continued)
One World Trade Center, Long Beach, CA	(11	) (13)	Office	573,300	Mar-07	$	82,520,455	$	63,352,632	$	148,900,000	$	(3,026,913	)	$	145,873,087
Redmond Land, Redmond, WA	(12	) (13)	Land	99,180	Mar-07		19,388,211		10,190,000		6,550,000		23,028,211			29,578,211
Crow Canyon, San Ramon, CA	(11	)	Office	96,775	Apr-07		11,482,254		6,263,000		17,900,000		(154,746	)		17,745,254
4 Hutton Center, Orange County, CA	(11	)	Office	215,909	Apr-07		29,157,545		37,337,000		64,125,000		2,369,545			66,494,545
San Mateo Plaza, San Mateo, CA			Office	140,694	Apr-07		38,910,000		14,781,147		48,500,000		5,191,147			53,691,147
6400 Brisa Street, San Jose, CA			Industrial	173,659	Apr-07		8,437,500		2,975,853		11,250,000		163,353			11,413,353
Almaden Plaza, San Jose, CA	(13	)	Office	414,705	Apr-07		101,094,736		37,727,436		123,000,000		15,822,172			138,822,172
Almaden Land, San Jose, CA	(13	)	Land	N/A	Apr-07		-		2,021,855		2,000,000		21,855			2,021,855
West Willows, Redmond, WA			Office	159,573	May-07		13,449,095		12,470,000		21,501,000		4,418,095			25,919,095
Seattle PI, Seattle, WA			Office	100,056	Jun-07		32,123,834		12,214,332		40,022,400		4,315,766			44,338,166
Quadrant Willow E, Redmond, WA			Office	59,007	Jun-07		13,193,570		4,701,258		14,000,000		3,894,828			17,894,828
Quadrant Willow C, Redmond, WA			Office	69,092	Jun-07		15,661,630		5,203,238		16,617,000		4,247,868			20,864,868
Hacienda Terrace, Pleasanton, CA			Office	298,766	Jul-07		68,171,651		25,988,000		86,000,000		8,159,651			94,159,651
Stanford Place III, Denver, CO			Office	365,487	Jul-07		55,925,000		20,807,032		73,100,000		3,632,032			76,732,032
Koll Center Parkway, Pleasanton, CA	(8	)	Office	38,989	Jul-07		5,678,494		4,868,241		9,350,000		1,196,735			10,546,735
Glendale City Center, Glendale, CA	(13	)	Office	406,096	Jul-07		120,865,962		44,500,000		147,900,000		17,465,962			165,365,962
Legacy 101 Orchard, San Jose, CA			Land	N/A	Sep-07		28,900,000		51,882,882		37,948,620		42,834,262			80,782,882
Eden Shores I&II, Hayward, CA	(13	)	Land Dev	N/A	Sep-06		27,450,537		21,000,000		39,739,000		8,711,537			48,450,537
Legacy Partners Realty Fund III (14)
Legacy Plaza San Ramon, San Ramon, CA			Office	311,028	Aug-07		66,521,892		26,988,000		86,000,000		7,509,892			93,509,892
Legacy Cascades, Centennial, CO	(15	)	Office	335,343	Aug-07		49,027,336		18,392,000		60,082,000		7,337,336			67,419,336
Legacy America Center I, San Jose, CA	(13	) (16)	Office Dev	410,382	Dec-07		61,315,493		50,653,502		36,721,080		75,247,915			111,968,995
Legacy America Center II, San Jose, CA	(13	) (17)	Land	N/A	Dec-07		11,677,406		16,912,797		26,778,920		1,811,283			28,590,203
Legacy Prentice Point, Greenwood Village, CO			Office	202,500	Dec-07		27,725,221		14,465,611		38,600,000		3,590,832			42,190,832
Legacy Marina Business Center, Los Angeles, CA			Office	148,133	Dec-07		31,083,143		22,361,538		50,750,000		2,694,681			53,444,681
East Hamilton, Campbell, CA	(13	)	Office	352,797	Feb-08		77,399,378		53,627,585		126,350,000		4,676,963			131,026,963
800 Corporate Point , Culver City, CA	(18	)	Office	241,556	Feb-08		72,893,190		44,480,000		99,000,000		18,373,190			117,373,190
Ygnacio Center, Walnut Creek, CA			Office	517,721	Mar-08		132,700,000		46,300,000		174,250,000		4,750,000			179,000,000
70 South Lake, Pasadena, CA			Office	104,466	Mar-08		25,900,000		12,460,000		36,450,000		1,910,000			38,360,000

II-6

TABLE VI – LEGACY SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

(1) Development cost represents cost incurred through December 31, 2008, including developer, contractor, and other fees paid to Legacy Residential affiliates. Acquisition cost includes original purchase price and acquisition fees. For more information of fees paid to Legacy Residential affiliates, see Table II.

(2) Other cash expenditures include legal fees, due diligence costs, title and closing costs, and costs incurred after acquisition, but anticipated in the original offering. In addition, operating cash flow (deficit) is included to the extent anticipated in original offering.

(3) Total cost of property includes the original development or acquisition cost, acquisition fees, and other cash expenditures.

(4) This program represents a single-client acquisition and development fund whereby dollars are committed as assets are identified pursuant to an operating agreement between a Legacy Residential affiliate and an institutional investor. Under the operating agreement, when the Legacy Residential affiliate manager for the company identifies properties for acquisition or development, the Legacy Residential affiliate invests funds on behalf of the institutional investor, oversees acquisition, development and management of the assets in the portfolio and ultimately sells the assets on behalf of the investor. Legacy Partners Affordable Housing Fund made it’s first development investment in April, 2003. The fund has made a total of three separate development investments and one acquisition investment through December 2008.

(5) Fund incurred pursuit costs, including land deposits and due diligence costs, for a parcel of land in Denver, CO, in anticipation of constructing a 240 unit apartment complex. Due to changing market conditions and difficulty in financial markets, the Fund elected to abandon the project as of December, 2008.

(6) This program is focused on the acquisition, value-enhancement, management and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. As of December 31, 2008 Legacy Partners Realty Fund I had acquired 32 office and land properties totaling $909.4 million in cost and sold 6 properties and 4 partial properties for $191.9 million.

(7) Property was sold in February, 2007. See Table V for additional information.

(8) The original purchase of the property was funded with equity, with mortgage financing placed within six months of acquisition.

(9) Partial sale of building occurred in 2008. Amounts for sold building are included in Gross Leaseable Area, Mortgage Financing and Total Cost of Property. See Table V for more information.

(10) This program focused on the acquisition, value-enhancement, management and sale of office and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. As of December 31, 2008 Legacy Partners Realty Fund II had acquired 28 office, industrial and land properties with 5.9 million square feet of space and totaling $1.5 billion in cost.

(11) Face value of loan reduced by loan assumption discount.

(12) The original purchase of the property was funded with equity and in June, 2007 a construction loan was obtained . The amount of Mortgage Financing represents the construction loan outstanding at December 31, 2008.

(13) Investment is held through a joint venture with institutional investors. Amounts reflect 100% interest.

(14) This program is focused on the acquisition, value-enhancement, management and sale of office, research and development and industrial properties in the San Francisco Bay Area, Southern California, and the Seattle and Denver metropolitan areas. As of December 31, 2008 Legacy Partners Realty Fund III had acquired 10 office and land properties with 2.6 million square feet of space and totaling $705.0 million in cost.

(15) Mortgage Financing reflects outstanding loan balance immediately prior to purchase of the loan, at a discount, in November, 2008. The loan was subsequently refinanced in January, 2009.

(16) Property was originally acquired with equity with construction loan financing subsequently placed on the properties. Mortgage Financing represents loan balance at December 31, 2008.

(17) Property was originally acquired with equity with construction loan financing subsequently placed on the property. A partial sale of the property occurred in 2008. Amounts for sold building are included in Gross Leasable Area, Mortgage Financing and Total Cost of Property. See Table V for additional information.

(18) The total loan commitment for the project was $100.65 million at acquisition with a rehab hold back of $30.21 million. Mortgage Financing represents outstanding loan balance at December 31, 2008.

II-7

TABLE VI – KBS SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Table VI presents information concerning the acquisition of properties during the three years ended December 31, 2008 by KBS Real Estate Investment Trust, Inc. (“KBS REIT I”), KBS Real Estate Investment Trust II, Inc. (“KBS REIT II”) and the private programs sponsored by KBS investment advisors. KBS REIT I and KBS REIT II are publicly registered, non-traded REITs sponsored by the Company’s sponsors, Messrs. Bren, Hall, McMillan and Schreiber. KBS investment advisors are investment advisors affiliated with Messrs. Bren and Schreiber. Each of the programs below have investment objectives similar to those of the Company.

Property and Location	Type of   Property	Gross Leaseable Area (sq. ft.)	Date of Purchase	Original Mortgage        Financing		Cash Down Payment (equity)			Contract Purchase Price Plus Acquisition Fees (1)		Other Cash Expenditures Expensed		Other Cash Expenditures Capitalized (2)		Total Cost of Property (3)
Separate Account 6/05(4)
Acques/DeGuigne Business Park
Sunnyvale, CA	Office	93,385	09/08/06	$	14,500,000	$	867,625		$	15,251,000	$	-	$	116,625	$	15,367,625
Separate Account 8/05(5)
Clay Crossing Business Center
Houston, TX	Industrial	222,750	06/07/06	$	24,293,000	$	(320,783	)	$	23,836,000	$	-	$	136,217	$	23,972,217
Rancho Cordova Rancho
Cordova, CA	Office	75,626	11/22/06		8,400,000		4,510,665			12,801,750		-		108,915		12,910,665
Separate Account 5/06(6)
Colonnade One
Raleigh, NC	Office	126,926	09/29/06	$	17,920,000	$	9,942,518		$	27,376,000	$	-	$	486,518	$	27,862,518
Fountainhead One
San Antonio, TX	Office	174,108	10/11/06		15,470,000		8,528,509			23,861,250		-		137,259		23,998,509
Parkside Tower
Salt Lake City, UT	Office	190,320	09/06/06		19,825,000		10,866,254			30,502,000		-		189,254		30,691,254
370 San Aleso Avenue
Sunnyvale, CA	Office	53,150	12/22/06		10,562,500		5,947,415			16,412,500		-		97,415		16,509,915
625 Mt. Auburn
Cambridge, MA	Office	137,047	01/11/07		19,400,000		10,652,521			29,896,000		-		156,521		30,052,521
Separate Account 10/06 (7)
City View
San Antonio, TX	Office	216,858	11/30/06	$	21,255,000	$	11,820,794		$	33,027,000	$	-	$	48,794	$	33,075,794
Ten West Corporate
Center Houston, TX	Office	199,001	12/28/06		22,165,000		12,307,772			34,340,000		-		132,772		34,472,772
555 Washington
Miami Beach, FL	Office	64,617	01/10/07		19,500,000		10,907,339			30,300,000		-		107,339		30,407,339
Parkwood Place
Plano, TX	Office	98,750	02/13/07		11,700,000		6,606,722			18,180,000		-		126,722		18,306,722
Separate Account 01/07 (8)
Crossroads Distribution Center
Charlotte, NC	Industrial	496,347	03/28/08	$	14,602,500	$	11,875,602		$	26,318,891	$	-	$	159,211	$	26,478,102

II-8

TABLE VI – KBS SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Property and Location	Type of   Property	Gross Leaseable Area (sq. ft.)	Date of   Purchase	Original Mortgage        Financing		Cash Down Payment (equity)			Contract Purchase Price Plus Acquisition Fees (1)		Other Cash Expenditures Expensed		Other Cash Expenditures Capitalized (2)			Total Cost of Property (3)
KBS REIT I (9)
Sabal Pavilion Building (10)
Tampa, FL	Office	120,500	07/07/2006	$	25,170,137	$	(427,167	)	$	24,434,191	$	-	$	308,779		$	24,742,970
Tribeca Mezzanine Loan (11)
New York, NY	Mezzanine Debt	N/A	07/18/2006		12,950,000		3,180,809			15,994,179		-		136,630			16,130,809
Plaza in Clayton (12)
St. Louis, MO	Office	325,172	09/27/2006		84,500,000		9,751,321			93,982,568		-		268,753			94,251,321
Southpark Commerce Center II Buildings (13)
Austin, TX	Industrial/ Flex	372,125	11/21/2006		23,200,000		5,562,066			28,614,110		-		147,956			28,762,066
825 University Avenue Building (14)
Norwood, MA	Research	166,574	12/05/2006		24,600,000		4,569,695			29,017,144		-		152,551			29,169,695
Midland Industrial Building (15)
McDonough, GA	Industrial	785,790	12/22/2006		32,750,000		4,778,371			37,379,368		-		149,003			37,528,371
Sandmar Mezzanine Loan
Southeast Retail Portfolio	Mezzanine Debt	N/A	01/09/2007		-		8,100,778			8,060,182		-		40,596			8,100,778
Crescent Green Buildings (16)
Cary, NC	Office	248,832	01/31/2007		40,800,000		7,868,529			48,502,297		-		166,232			48,668,529
625 Second Street
San Francisco, CA	Office	134,847	01/31/2007		33,700,000		17,822,848			51,383,545		-		139,303			51,522,848
Sabal VI Building (17)
Tampa, FL	Office	96,346	03/05/2007		14,040,000		2,699,837			16,624,614		-		115,223			16,739,837
Park Central Mezzanine Loan
New York, NY	Mezzanine Debt	N/A	03/23/2007		-		15,157,054			15,112,645		-		44,409			15,157,054
The Offices at Kensington
Sugar Land, TX	Office	170,436	03/29/2007		18,500,000		9,644,446			28,209,512		-		(65,066	)		28,144,446
Second Tribeca Mezzanine Loan
New York, NY	Mezzanine Debt	N/A	05/03/2007		-		31,500,918			31,458,564		-		42,354			31,500,918
Royal Ridge Building
Alpharetta, GA	Office	160,539	06/21/2007		-		33,382,665			33,248,506		-		134,159			33,382,665
9815 Goethe Road Building
Sacramento, CA	Office	80,000	06/26/2007		-		15,970,645			15,868,888		-		101,757			15,970,645
Bridgeway Technology Center
Newark, CA	Research	187,268	06/27/2007		-		50,388,745			50,265,102		-		123,643			50,388,745
Tribeca Senior Mortgage Participation (18)
New York, NY	Mortgage Debt	N/A	06/28/2007		-		26,045,084			25,988,955		-		56,129			26,045,084

II-9

TABLE VI – KBS SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Property and Location	Type of        Property	Gross Leaseable Area (sq. ft.)	Date of Purchase	Original Mortgage        Financing		Cash Down Payment (equity)		Contract Purchase Price Plus Acquisition Fees (1)		Other Cash Expenditures Expensed		Other Cash Expenditures Capitalized (2)			Total Cost of Property (3)
KBS REIT I (9)
Opus National Portfolio
MN, TX, OH, IN, GA, MI	Industrial	2,315,848	07/25/2007	$	-	$	125,708,945	$	125,435,800	$	-	$	273,145		$	125,708,945
200 Professional Drive Loan Origination (19)
Gaithersburg, MD	Mortgage Debt	N/A	07/31/2007		-		9,135,325		9,124,003		-		11,322			9,135,325
Lawrence Village Plaza Loan Origination (20)
New Castle, PA	Mortgage Debt	N/A	08/06/2007		-		6,367,211		6,357,585		-		9,626			6,367,211
11 South LaSalle Loan Origination (21)
Chicago, IL	Mortgage Debt	N/A	08/08/2007		-		30,992,223		30,991,594		-		629			30,992,223
National Industrial Portfolio (22)
CO, CT, MA, NH, NY, PA, TX	Industrial	10,924,318	08/08/2007		431,000,000		94,734,090		518,994,138		-		6,739,952			525,734,090
Plano Corporate Center I & II
Plano, TX	Office	308,038	08/28/2007		30,591,000		15,605,472		46,093,894		-		102,578			46,196,472
2200 West Loop South Building
Houston, TX	Office	196,217	09/05/2007		17,426,000		18,090,314		35,364,389		-		151,925			35,516,314
One Madison Mezzanine Loan (23)
New York, NY	Mezzanine Debt	N/A	09/24/2007		-		21,174,500		21,157,500		-		17,000			21,174,500
San Diego Office Portfolio B-Note
San Diego, CA	B-Note	N/A	10/26/2007		-		13,581,263		13,500,500		-		80,763			13,581,263
Petra Subordinated Debt	Subordinated Debt	N/A	10/26/2007		-		50,379,568		50,375,000		-		4,568			50,379,568
ADP Plaza
Portland, OR	Office	180,772	11/07/2007		20,900,000		12,550,846		33,349,014		-		101,832			33,450,846
Woodfield Preserve Office Center
Schaumburg, IL	Office	647,196	11/13/2007		68,400,000		68,140,801		136,816,433		-		(275,632	)		136,540,801
Nashville Flex Portfolio
Nashville, TN	Industrial	550,289	11/15/2007		32,430,000		22,267,806		53,907,180		-		790,626			54,697,806
4929 Wilshire B-Note
Los Angeles, CA	B-Note	N/A	11/19/2007		-		2,598,953		2,559,347		-		39,606			2,598,953
Patrick Henry Corporate Center
Newport News, VA	Office	98,883	11/29/2007		11,100,000		7,854,387		18,691,100		-		263,287			18,954,387
South Towne Corporate Center I&II
Sandy, UT	Office	269,233	11/30/2007		25,200,000		25,107,283		50,124,496		-		182,787			50,307,283
Artisan Multifamily Portfolio Mezzanine Loan
Las Vegas, NV	Mezzanine Debt	N/A	12/11/2007		-		20,183,326		20,119,330		-		63,996			20,183,326

II-10

TABLE VI – KBS SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Property and Location	Type of     Property	Gross Leaseable Area (sq. ft.)	Date of Purchase	Original Mortgage        Financing		Cash Down Payment (equity)		Contract Purchase Price Plus Acquisition Fees (1)		Other Cash Expenditures Expensed		Other Cash Expenditures Capitalized (2)		Total Cost of Property (3)
KBS REIT I (9)
Arden Portfolio M3-(A) Mezzanine Loan
Southern California	Mezzanine Debt	N/A	01/30/2008	$	36,167,167	$	24,689,955	$	60,731,643	$	-	$	125,479	$	60,857,122
Arden Portfolio M2-(B) Mezzanine Loan
Southern California	Mezzanine Debt	N/A	01/30/2008		50,232,427		34,242,609		84,349,557		-		125,479		84,475,036
Rivertech I and II (24)
Billerica, MA	Office	285,772	02/20/2008		27,300,000		18,458,439		45,540,496		-		217,943		45,758,439
San Antonio Business Park Mortgage Loan
San Antonio, Texas	Mortgage Debt	N/A	03/28/2008		-		24,040,552		23,957,411		-		83,141		24,040,552
Suwanee Pointe
Suwanee, GA	Industrial	205,645	05/22/2008		-		18,073,278		17,934,541		-		138,737		18,073,278
2600 Michelson Mezzanine Loan
Irvine, CA	Mezzanine Debt	N/A	06/02/2008		-		8,618,799		8,560,147		-		58,652		8,618,799
Millennium I Building (25)
Addison, TX	Office	353,461	06/05/2008		36,000,000		36,573,852		72,540,252		-		33,600		72,573,852
Tysons Dulles Plaza (26)
McLean, VA	Office	487,775	06/06/2008		77,721,069		77,016,715		153,901,845		-		835,939		154,737,784
18301 Von Karman Mortgage and Mezzanine Loans	Mortgage &
Irvine, CA	Mezzanine Debt	N/A	06/12/2008		-		62,416,334		62,339,883		-		76,451		62,416,334
Greak Oaks Center
Alpharetta, GA	Office	235,224	07/18/2008		19,349,000		14,804,813		33,983,474		-		170,339		34,153,813
University Park Buildings
Sacramento, CA	Office	127,085	07/31/2008		-		24,144,037		24,029,680		-		114,357		24,144,037
Meridian Tower
Tulsa, OK	Office	205,659	08/18/2008		-		17,696,619		17,581,712		-		114,907		17,696,619
GKK Mezzanine Loan
National	Mezzanine Debt	N/A	08/22/2008		297,623,400		202,743,766		499,763,818		-		603,348		500,367,166
55 East Montroe Mezzanine Loan Origination
Chicago, IL	Mezzanine Debt	N/A	08/27/2008		-		55,425,610		55,412,598		-		13,012		55,425,610
North Creek Parkway Center
Bothell, WA	Office	205,707	08/28/2008		-		41,553,139		41,423,279		-		129,860		41,553,139
Five Tower Bridge Building
West Conshohocken, PA	Office	223,726	10/14/2008		41,000,000		33,549,767		73,554,888		-		994,879		74,549,767
City Gate Plaza
Sacramento, CA	Office	105,003	11/25/2008		-		20,859,908		20,755,260		-		104,648		20,859,908

II-11

TABLE VI – KBS SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Property and Location	Type of   Property	Gross Leaseable Area (sq. ft.)	Date of Purchase	Original Mortgage        Financing		Cash Down Payment (equity)		Contract Purchase Price Plus Acquisition Fees (1)		Other Cash Expenditures Expensed		Other Cash Expenditures Capitalized (2)		Total Cost of Property (3)
KBS REIT II (27)
Mountain View Corporate Center
Basking Ridge, NJ	Office	134,991	07/30/2008	$	9,500,000	$	21,235,714	$	30,228,802	$	-	$	506,912	$	30,735,714
100 & 200 Campus Drive Buildings
Florham Park, NJ	Office	559,384	09/09/2008		118,326,200		66,356,177		182,074,807		-		2,607,570		184,682,377
300-600 Campus Drive Buildings
Florham Park, NJ	Office	564,304	10/10/2008		140,850,000		45,054,953		183,083,908		-		2,821,045		185,904,953
350 E. Plumeria Building
San Jose, CA	Office	142,700	12/18/2008		-		36,111,401		36,043,819		-		67,582		36,111,401
Northern Trust Building A-Note
San Diego, CA	A-Note	N/A	12/31/2008		-		58,145,984		58,003,319		-		142,665		58,145,984

II-12

TABLE VI – KBS SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

⁽¹⁾ Acquisition fees are calculated as a percentage of purchase price plus other capitalized costs and are paid to the KBS sponsor.

⁽²⁾ Other cash expenditures capitalized include legal fees, outside broker fees, environmental studies, title and other closing costs.

⁽³⁾ Total cost of property includes the cash down payment, acquisition fees, other cash expenditures capitalized and mortgage financing.

⁽⁴⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 6/05 made its first investment in June 2005. The program has made a total of five separate investments through December 2008.

⁽⁵⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 8/05 made its first investment in October 2005. The program has made a total of five separate investments through December 2008.

⁽⁶⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 5/06 made its first investment in September 2006. The program has made a total of five separate investments through December 2008.

⁽⁷⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 10/06 made its first investment in November 2006. The program has made a total of four separate investments through December 2008.

⁽⁸⁾ This program represents a single-client account whereby dollars are raised only as assets are identified pursuant to a partnership agreement between a KBS affiliate and an institutional investor. Under the partnership agreement, when the KBS investment advisor for the partnership identifies properties for investment, the KBS investment advisor invests funds on behalf of the investor, manages the assets in the investor’s portfolio and ultimately sells the assets on behalf of the investor. Separate Account 01/07 made its first investment in March 2008. The program has made a total of one investment through December 2008.

⁽⁹⁾ KBS REIT I is a publicly registered, non-traded REIT. KBS REIT I launched its initial public offering on January 27, 2006. On July 5, 2006, KBS REIT I broke escrow in its initial public offering and then commenced real estate operations. KBS REIT I ceased offering shares in its initial public offering on May 30, 2008.

⁽¹⁰⁾ “Original Mortgage Financing” includes the Sabal Pavilion Building Mezzanine Loan in the amount of $4,898,000 that was repaid in full on October 5, 2006 and a note payable to an affiliate of approximately $5,572,137 that was repaid in full on October 27, 2006.

⁽¹¹⁾ “Original Mortgage Financing” includes amount drawn under the Tribeca Mezzanine Debt Repurchase Agreement at the time of acquisition of the Tribeca Mezzanine Debt in the amount of $7,122,231 that was repaid in full on December 27, 2006 and a note payable to an affiliate of approximately $2,875,000 that was repaid in full on October 27, 2006. “Contract purchase price plus acquisition fees” reflects the original purchase price of $12,949,511, acquisition fees paid of $98,179 on the initial purchase price and subsequent loan draws of $2,946,489. As of December 31, 2008, the loan commitment was fully funded.

⁽¹²⁾ “Original Mortgage Financing” includes the Plaza in Clayton Mezzanine Loan in the amount of $22,300,000 that was repaid in full on January 22, 2007.

⁽¹³⁾ “Original Mortgage Financing” includes the Southpark Commerce Center II Buildings Mezzanine Loan in the amount of $5,200,000 that was repaid in full on February 6, 2007.

⁽¹⁴⁾ “Original Mortgage Financing” includes the 825 University Avenue Building Mezzanine Loan in the amount of $5,600,000 that was repaid in full on February 6, 2007.

⁽¹⁵⁾ “Original Mortgage Financing” includes the Midland Industrial Buildings Mezzanine Loan in the amount of $8,700,000 that was repaid in full on March 30, 2007. Principal paydown of $7,000,000 was made on February 5, 2007 while the remaining balance of $1,700,000 was paid off on March 30, 2007.

II-13

TABLE VI – KBS SPONSORS

ACQUISITIONS OF PROPERTIES BY PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

⁽¹⁶⁾ “Original Mortgage Financing” includes the Crescent Green Buildings Mezzanine Loan in the amount of $8,400,000 that was repaid in full on March 31, 2007.

⁽¹⁷⁾ “Original Mortgage Financing” includes the Sabal VI Building Mezzanine Loan in the amount of $3,000,000 that was repaid in full on February 22, 2008.

⁽¹⁸⁾ “Contract purchase price plus acquisition fees” reflects the original purchase price of $23,534,715, acquisition fees paid of $176,925 and subsequent loan draws of $2,277,315. As of December 31, 2008, the loan commitment was fully funded.

⁽¹⁹⁾ “Contract purchase price plus acquisition fees” reflects the original purchase price of $7,397,280, acquisition fees paid of $55,564 and subsequent loan draws of $1,671,159. As of December 31, 2008, the remaining unfunded loan commitment totaled $1,474,313.

⁽²⁰⁾ “Contract purchase price plus acquisition fees” reflects the original purchase price of $6,159,435, acquisition fees paid of $46,268 and subsequent loan draws of $151,882. As of December 31, 2008, the remaining unfunded loan commitment totaled $1,966,435.

⁽²¹⁾ “Contract purchase price plus acquisition fees” reflects the original purchase price of $21,500,000, acquisition fees paid of $161,330 and subsequent loan draws of $9,330,264. As of December 31, 2008, the remaining unfunded loan commitment totaled $12,469,736.

⁽²²⁾ KBS REIT I holds its investment in the National Industrial Portfolio through a consolidated joint venture in which KBS REIT I owns an 80% membership interest.

⁽²³⁾ The borrower under the One Madison Park Mezzanine Loan paid off the loan in full on November 19, 2007, prior to the stated maturity date.

⁽²⁴⁾ “Original Mortgage Financing” represents the principal amount due under a nine-month secured bridge loan. KBS REIT I paid off the principal and interest due under the nine-month secured bridge loan with proceeds from a secured mortgage loan facility.

⁽²⁵⁾ “Original Mortgage Financing” represents the principal amount due under a six-month bridge loan that was repaid in full on February 5, 2009.

⁽²⁶⁾ “Original Mortgage Financing” represents the principal amount due under a six-month secured bridge loan, which was refinanced on September 4, 2008 with a 66-month fixed rate mortgage loan.

^{( 27)} KBS REIT II is a publicly registered, non-traded REIT. KBS REIT II launched its initial public offering on April 22, 2008. On June 24, 2008, KBS REIT II broke escrow in its initial public offering and then commenced real estate operations.

II-14

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-11 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newport Beach, State of California, on January 11, 2010.

KBS LEGACY PARTNERS APARTMENT REIT, INC.
By:	/s/ David E. Snyder
	David E. Snyder
	Chief Financial Officer, Treasurer and Secretary

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Name	Title	Date
* C. Preston Butcher	Chief Executive Officer, Chairman of the Board and Director	January 11, 2010
* Peter M. Bren	President and Director	January 11, 2010
/s/ David E. Snyder David E. Snyder	Chief Financial Officer, Treasurer and Secretary	January 11, 2010
* Stacie K. Yamane	Chief Accounting Officer	January 11, 2010

*By:	/s/ David E. Snyder
	David E. Snyder
	Attorney-in-fact

We, the undersigned directors of KBS Legacy Partners Apartment REIT, Inc., hereby severally constitute C. Preston Butcher and David E. Snyder, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the registration statement filed herewith and any and all amendments to said registration statement, including any registration statement filed pursuant to Rule 462(b), and generally to do all such things in our names and in our capacities as officers and directors to enable KBS Legacy Partners Apartment REIT, Inc. to comply with the provisions of the Securities Act of 1933, and all requirements of the SEC, hereby ratifying and confirming our signature as they may be signed by our said attorneys, or any of them, to said registration statement and any and all amendments thereto.

/s/ Gary T. Kachadurian Gary T. Kachadurian	Director	January 11, 2010
/s/ Michael L. Meyer Michael L. Meyer	Director	January 11, 2010
/s/ Ronald E. Zuzack Ronald E. Zuzack	Director	January 11, 2010

EX-1.1

EXHIBIT 1.1

FORM OF

KBS LEGACY PARTNERS APARTMENT REIT, INC.

Up to 280,000,000 Shares of Common Stock

DEALER MANAGER AGREEMENT

                     , 2010

KBS Capital Markets Group LLC

660 Newport Center Drive, Suite 1200

Newport Beach, California 92660

Ladies and Gentlemen:

KBS Legacy Partners Apartment REIT, Inc., a Maryland corporation (the “Company”), has registered for public sale 280,000,000 shares of its common stock, $.01 par value per share (the “Shares”), of which 80,000,000 Shares are intended to be offered pursuant to the Company’s dividend reinvestment plan (the “DRP”). The Company desires for KBS Capital Markets Group LLC (the “Dealer Manager”) to act as its agent in connection with the offer and sale of the Shares to the public (the “Offering”).

It is anticipated that the Dealer Manager will enter into Selected Dealer Agreements (in the form attached to this Agreement as Exhibit A) with other broker-dealers participating in the Offering (each participating broker-dealer being referred to herein as a “Dealer”). The Company shall have the right to approve any material modifications or addendums to the form of the Selected Dealer Agreement.

Except as described in the Prospectus (as defined below) or in Section 5.3 hereof, the Shares are to be sold at a per Share cash price as follows:

Distribution Channel	Primary Offering Shares	DRP Shares
Sales through a Dealer earning transaction-based compensation	$  10.00	$  9.50
Sales through all other distribution channels as discussed in the Prospectus	$    9.35	$  9.50

In connection with the sale of Shares, the Company hereby agrees with you, the Dealer Manager, as follows:

1. Representations and Warranties of the Company.  As an inducement to the Dealer Manager to enter into this Agreement, the Company represents and warrants to the Dealer Manager and to each Dealer that:

1.1. The Company has prepared and filed with the Securities and Exchange Commission (the “SEC”) a registration statement (Registration No. 333-161449) that has become effective for the registration of the Shares under the Securities Act of 1933, as amended (the “Securities Act”), and the applicable rules and regulations (the “Rules and Regulations”) of the SEC promulgated thereunder. Copies of such registration statement as initially filed and each amendment thereto have been or will be delivered to the Dealer Manager. The registration statement and the prospectus contained therein, as finally amended at the effective date of the registration statement (the “Effective Date”), are respectively hereinafter referred to as the “Registration Statement” and the “Prospectus,” except that if the Company files a prospectus or prospectus supplement pursuant to Rule 424(b) under the Securities Act, or if the Company files a post-effective amendment to the Registration Statement, the term “Prospectus” includes the prospectus filed pursuant to Rule 424(b) or the prospectus included in such post-effective amendment. The term “Preliminary Prospectus” as used herein shall mean a preliminary prospectus related to the Shares as contemplated by Rule 430 or Rule 430A of the Rules and Regulations included at any time as part of the registration statement.

1.2. On the Effective Date, on the date of the Prospectus and on the date any post-effective amendment to the Registration Statement becomes effective or any amendment or supplement to the Prospectus is filed with the SEC, the Registration Statement and the Prospectus, as applicable, including the financial statements contained therein, complied or will comply with the Securities Act and the Rules and Regulations. On the Effective Date, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. On the date of the Prospectus, as amended or supplemented, as applicable, the Prospectus did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding anything contained herein to the contrary, the Company’s representations in this Section 1.2 will not extend to such statements contained in or omitted from the Registration Statement or the Prospectus, as amended or supplemented, that are primarily within the knowledge of the Dealer Manager or any of the Dealers and are based upon information furnished by the Dealer Manager in writing to the Company specifically for inclusion therein.

2

1.3. No order preventing or suspending the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for that purpose are pending, threatened or, to the knowledge of the Company, contemplated by the SEC; and, to the knowledge of the Company, no order suspending the Offering in any jurisdiction has been issued and no proceedings for that purpose have been instituted or threatened or are contemplated.

1.4. The Company intends to use the funds received from the sale of the Shares as set forth in the Prospectus.

1.5. The Company has full legal right, power and authority to enter into this Agreement and to perform the transactions contemplated hereby, except to the extent that the enforceability of the indemnity provisions contained in Section 6 of this Agreement may be limited under applicable securities laws and to the extent that the enforceability of this Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws that affect creditors’ rights generally or by equitable principles relating to the availability of remedies.

1.6. The execution and delivery of this Agreement, the consummation of the transactions contemplated herein and compliance with the terms of this Agreement by the Company will not conflict with or constitute a default or violation under any charter, bylaw, contract, indenture, mortgage, deed of trust, lease, rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company, except to the extent that the enforceability of the indemnity provisions contained in Section 6 of this Agreement may be limited under applicable securities law and to the extent that the enforceability of this Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws that affect creditors’ rights generally or by equitable principles relating to the availability of remedies.

1.7. No consent, approval, authorization or other order of any governmental authority is required in connection with the execution or delivery by the Company of this Agreement or the issuance and sale by the Company of the Shares, except as may be required under the Securities Act and the Rules and Regulations thereunder, by the Financial Industry Regulatory Authority (“FINRA”) or under applicable state securities laws.

1.8. The Shares have been duly authorized and, when issued and sold as contemplated by the Prospectus and upon payment therefor as provided in the Prospectus and this Agreement, the Shares will be validly issued, fully paid and nonassessable and will conform to the description thereof contained in the Prospectus.

3

2. Representations and Warranties of the Dealer Manager.  As an inducement to the Company to enter into this Agreement, the Dealer Manager represents and warrants to the Company that:

2.1. The Dealer Manager is a member in good standing of FINRA and a broker-dealer registered as such under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Dealer Manager and its employees and representatives have all required licenses and registrations to act under this Agreement.

2.2. The Dealer Manager represents and warrants to the Company and each person that signs the Registration Statement that the information under the caption “Plan of Distribution” in the Prospectus, as amended and supplemented, and all other information furnished and to be furnished to the Company by the Dealer Manager in writing expressly for use in the Registration Statement, any Preliminary Prospectus or the Prospectus, does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

3. Covenants of the Company.  The Company covenants and agrees with the Dealer Manager that:

3.1. It will, at no expense to the Dealer Manager, furnish the Dealer Manager with such number of printed copies of the Registration Statement, including all amendments and exhibits thereto, as the Dealer Manager may reasonably request. It will similarly furnish to the Dealer Manager and others designated by the Dealer Manager as many copies as the Dealer Manager may reasonably request in connection with the offering of the Shares of: (a) the Prospectus, including any amendments and supplements thereto and (b) this Agreement.

3.2. The Company will prepare and file with the appropriate regulatory authorities, on behalf of and at no expense to the Dealer Manager, the printed sales literature or other materials authorized by the Company to be used in the Offering (“Authorized Sales Materials”). In addition, the Company will furnish the Dealer Manager and others designated by the Dealer Manager, at no expense to the Dealer Manager, with such number of printed copies of Authorized Sales Materials as the Dealer Manager may reasonably request.

3.3. The Company will furnish such information and execute and file such documents as may be necessary for it to qualify the Shares for offer and sale under the securities laws of such jurisdictions as the Dealer Manager may reasonably designate and will file and make in each year such statements and reports as may be required. The Company will furnish to

4

the Dealer Manager upon request a copy of such papers filed by the Company in connection with any such qualification.

3.4. It will: (a) file every amendment or supplement to the Registration Statement or the Prospectus that may be required by the SEC or any state securities administration and (b) if at any time the SEC shall issue any stop order suspending the effectiveness of the Registration Statement or any state securities administration shall issue any order or take other action to suspend or enjoin the sale of the Shares, it will promptly notify the Dealer Manager.

3.5. If at any time when a Prospectus is required to be delivered under the Securities Act and the Rules and Regulations thereunder any event occurs as a result of which, in the opinion of either the Company or the Dealer Manager, the Prospectus would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in view of the circumstances under which they were made, not misleading, the Company will promptly notify the Dealer Manager thereof (unless the information shall have been received from the Dealer Manager) and will prepare an amendment or supplement to the Prospectus that will correct such statement or omission.

3.6. It will comply with all requirements imposed upon it by the Securities Act and the Exchange Act, by the rules and regulations of the SEC promulgated thereunder and by all securities laws and regulations of those states in which an exemption has been obtained or qualification of the Shares has been effected, to permit the continuance of offers and sales of the Shares in accordance with the provisions hereof and of the Prospectus.

3.7. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including (a) the preparation, filing and printing of the Registration Statement as originally filed and of each amendment thereto, (b) the preparation, printing and delivery to the Dealer Manager of this Agreement, the Selected Dealer Agreement and such other documents as may be required in connection with the offer, sale, issuance and delivery of the Shares, (c) the fees and disbursements of the Company’s counsel, accountants and other advisors, (d) the fees and expenses related to the review of the terms and fairness of the Offering by FINRA, (e) the fees and expenses related to the registration and qualification of the Shares under federal and state securities laws, including the fees and disbursements of counsel in connection with the preparation of any Blue Sky survey and any supplement thereto, (f) the printing and delivery to the Dealer Manager of copies of any Preliminary Prospectus and the Prospectus, including any amendments and supplements thereto, (g) the fees and expenses of any registrar or transfer agent in connection with the Shares and (h) the costs and expenses of the Company relating to the preparation and printing of any Authorized Sales

5

Materials and Company-approved investor presentations undertaken in connection with the marketing of the Shares, including, without limitation, expenses associated with the production of slides and graphics, fees and expenses of any consultants engaged in connection with presentations with the prior approval of the Company and travel and lodging expenses of the representatives of the Company and any such consultants.

4. Covenants of the Dealer Manager.  The Dealer Manager covenants and agrees with the Company that:

4.1. In connection with the Dealer Manager’s participation in the offer and sale of Shares (including, without limitation, any resales and transfers of Shares), the Dealer Manager will comply, and in its agreements with Dealers will require that the Dealers comply, with all requirements and obligations imposed upon any of them by (a) the Securities Act, the Exchange Act and the rules and regulations of the SEC promulgated under both such acts, including the obligation to deliver a copy of the Prospectus as amended or supplemented; (b) all applicable state securities laws and regulations as from time to time in effect; (c) the applicable rules of FINRA, including, but not in any way limited to, Rules 2440, 2730, 2740 and 2750 of the NASD Conduct Rules and FINRA Rule 2310; (d) all applicable rules and regulations relating to the suitability of the investors, including, without limitation, the provisions of Articles III.C and III.E of the Statement of Policy regarding Real Estate Investment Trusts of the North American Securities Administrators Association, Inc. (“NASAA Guidelines”); (e) any other state and federal laws and regulations applicable to the Offering, the sale of Shares or the activities of the Dealer Manager pursuant to this Agreement, including without limitation the privacy standards and requirements of state and federal laws, including the Gramm-Leach-Bliley Act of 1999, and the laws governing money laundering abatement and anti-terrorist financing efforts, including the applicable rules of the SEC and FINRA, the Bank Secrecy Act, as amended, the USA Patriot Act of 2001 and regulations administered by the Office of Foreign Asset Control at the Department of the Treasury; and (f) this Agreement and the Prospectus as amended and supplemented.

4.2. The Dealer Manager will not offer the Shares, and in its agreements with Dealers will require that the Dealers not offer Shares, in any jurisdiction unless and until (a) the Dealer Manager has been advised by the Company in writing that the Shares are either registered in accordance with, or exempt from, the securities laws of such jurisdiction and (b) the Dealer Manager and any Dealer offering Shares in such jurisdiction have all required licenses and registrations to offer Shares in that jurisdiction.

4.3. The Dealer Manager will make, and in its agreements with Dealers will require that Dealers make, no representations concerning the Offering

6

except as set forth in the Prospectus as amended and supplemented and in the Authorized Sales Materials.

4.4. The Dealer Manager will offer Shares, and in its agreements with Dealers will require that the Dealers offer Shares, only to persons who meet the financial qualification and suitability standards set forth in the Prospectus as amended and supplemented or in any suitability letter or memorandum sent to the Dealer Manager by the Company. The Dealer Manager further agrees that the Company, in its sole and absolute discretion, may accept or reject any subscription, in whole or in part, for any reason whatsoever and no commission will be paid to the Dealer Manager with respect to the portion of any subscription that is rejected.

The Dealer Manager shall maintain, or in its agreements with Dealers shall require the Dealers to maintain, for at least six years, a record of the information obtained to determine that an investor meets the financial qualification and suitability standards imposed on the offer and sale of the Shares (both at the time of the initial subscription and at the time of any additional subscriptions).

In making these determinations as to financial qualification and suitability, the Dealer Manager may rely on representations from (i) investment advisers who are not affiliated with a Dealer or (ii) banks acting as trustees or fiduciaries. With respect to the Dealer Manager’s obligation to maintain records of an investor’s financial qualification and suitability, the Company agrees that the Dealer Manager can satisfy its obligations by contractually requiring such information to be maintained by the investment advisers or banks discussed in the preceding sentence.

4.5. Except for Authorized Sales Materials, the Company has not authorized the use of any supplemental literature or sales material in connection with the Offering and the Dealer Manager agrees not to use any such material that has not been authorized by the Company. The Dealer Manager further agrees (a) not to deliver any Authorized Sales Materials to any person unless it is accompanied or preceded by the Prospectus as amended and supplemented, (b) not to show or give to any investor or prospective investor or reproduce any material or writing that is supplied to it by the Company and marked “broker-dealer use only” or otherwise bearing a legend denoting that it is not to be used in connection with the sale of Shares to members of the public and (c) not to show or give to any investor or prospective investor in a particular jurisdiction any material or writing that is supplied to it by the Company if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction.

4.6. The Dealer Manager agrees to be bound by the terms of the Escrow Agreement dated                          , 2010, among UMB Bank, N.A., as

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escrow agent, the Dealer Manager and the Company, copies of which are attached hereto as Exhibit B and the Dealer Manager further agrees that it will not represent or imply that UMB Bank, N.A., as the escrow agent identified in the Prospectus, has investigated the desirability or advisability of an investment in the Company or has approved, endorsed or passed upon the merits of the Shares or of the Company, nor will the Dealer Manager use the name of said escrow agent in any manner whatsoever in connection with the offer or sale of the Shares other than by acknowledgment that it has agreed to serve as escrow agent.

4.7. The Dealer Manager will provide the Company with such information relating to the offer and sale of the Shares by it as the Company may from time to time reasonably request or as may be requested to enable the Company to prepare such reports of sale as may be required to be filed under applicable federal or state securities laws.

4.8. The Dealer Manager will permit a Dealer to participate in the Offering only if such Dealer is a member of FINRA.

5. Obligations and Compensation of Dealer Manager.

5.1. The Company hereby appoints the Dealer Manager as its agent and principal distributor during the Offering Period (as defined in Section 5.2) for the purpose of finding, on a best-efforts basis, purchasers for the Shares for cash through the distribution channels contemplated herein. The Dealer Manager may also arrange for the sale of Shares for cash directly to clients and customers identified by the Company on the terms and conditions stated herein and in the Prospectus. The Dealer Manager hereby accepts such agency and distributorship and agrees to use its best efforts to find purchasers for the Shares on said terms and conditions.

5.2. The “Offering Period” shall mean that period during which Shares may be offered for sale, commencing on the Effective Date of the Registration Statement (but in no event prior to the Effective Date of the Registration Statement), during which period offers and sales of the Shares shall occur continuously in the jurisdictions in which the Shares are registered or qualified or exempt from registration (as confirmed in writing by the Company to the Dealer Manager) unless and until the Offering is terminated, provided that the Dealer Manager and the Dealers will suspend or terminate offering Shares upon request of the Company at any time and will resume offering Shares upon subsequent request of the Company. The Offering Period shall in all events terminate upon the sale of all of the Shares. Upon termination of the Offering Period, the Dealer Manager’s agency and this Agreement shall terminate without obligation on the part of the Dealer Manager or the Company except as set forth in this Agreement.

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5.3. Except as may be provided in the “Plan of Distribution” section of the Prospectus, which may be amended and supplemented from time to time, as compensation for the services rendered by the Dealer Manager, the Company agrees that it will pay to the Dealer Manager selling commissions plus a dealer manager fee as follows:

	Selling Commissions
Distribution Channel	Primary     Offering     Shares	DRP Shares
Sales through a Dealer earning transaction-based compensation	6.5%*	0.0%*
Sales through all other distribution channels as described in the Prospectus	0.0%	0.0%

*  Except as set forth herein or in the “Plan of Distribution” section of the Prospectus (as amended and supplemented), the Dealer Manager will reallow all of its selling commissions attributable to a Dealer.

	Dealer Manager Fee
Distribution Channel	Primary     Offering     Shares	DRP Shares
Sales through a Dealer earning transaction-based compensation	3.0%*	0.0%
Sales through all other distribution channels as described in the Prospectus	3.0%*	0.0%

*  Upon the terms set forth herein or in the Prospectus (as amended and supplemented), the Dealer Manager may agree to reallow to any Dealer a portion of its dealer manager fee pursuant to a separate marketing fee agreement.

Upon the terms set forth in the Prospectus, reduced selling commissions and dealer manager fees will be paid to the Dealer Manager and reduced per share selling prices shall be recovered on large transactions in accordance with the following table, which may be amended and supplemented by the Prospectus:

Dollar Volume Shares Purchased	Sales Commissions (Based on $10.00 Price Per Share)	Dealer Manager Fee (Based on $10.00 Price Per Share)	Price Per Share to         Investor
$                0      to      $   999,999	6.5%	3.0%	$10.00
$  1,000,000      to      $1,999,999	5.5%	3.0%	$  9.90
$  2,000,000      to      $2,999,999	4.5%	3.0%	$  9.80
$  3,000,000      to      $3,999,999	3.5%	2.5%	$  9.65
$  4,000,000      to      $9,999,999	2.5%	2.0%	$  9.50
$10,000,000 and above	1.5%	2.0%	$  9.40

The reduced selling price, selling commission and dealer manager fee will apply to the entire purchase. All commission rates and dealer manager

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fees are calculated assuming a price per share of $10.00. For example, a purchase of 250,000 shares in a single transaction would result in a purchase price of $2,450,000 ($9.80 per share), selling commissions of $112,500 and dealer manager fees of $75,000.

The Company will also reimburse the Dealer Manager for all items of underwriter compensation referenced in the Prospectus to the extent the Prospectus indicates that they will be paid by the Company, provided that the Company’s reimbursement payments shall not cause (i) total underwriting compensation to exceed 10% of gross proceeds from the Offering (excluding proceeds from the offering of Shares pursuant to the DRP), or (ii) total organization and offering expenses to exceed 15% of gross proceeds from the Offering. In accordance with FINRA Rule 2310, the Company shall also pay directly or reimburse the Dealer Manager for bona fide invoiced due diligence expenses of the Dealers and non-participating broker-dealers, subject to the cap on organization and offering expenses described above.

As described in the Prospectus, the Dealer Manager agrees to sell up to 5% of the Shares in the primary offering to persons identified by the Company pursuant to the Company’s “friends and family” program. The purchase price for Shares under this program will be $9.35 per share, reflecting that selling commissions will not be payable in connection with such sales. The Dealer Manager agrees to work together with the Company to implement this program and to execute sales under the program according to the procedures agreed upon by the Dealer Manager and the Company.

In addition, as described in the Prospectus, the Dealer Manager may sell shares to Dealers, their retirement plans, their representatives and the family members, IRAs and the qualified plans of their representatives at a purchase price of $9.35 per share, reflecting that selling commissions in the amount of $0.65 per share will not be payable in consideration of the services rendered by such Dealers and representatives in the Offering. For purposes of this discount, a family member includes such person’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in law or brother- or sister-in-law.

Notwithstanding the foregoing, no commissions, payments or amounts whatsoever will be paid to the Dealer Manager under this Section 5.3 unless or until the Company raises $2.5 million in the Offering from persons not affiliated with the Company or its sponsor (the “Minimum Offering”). Until the Minimum Offering is reached, investments will be held in escrow. Until $66.7 million (the “Pennsylvania Minimum”) has been raised in the Offering from persons not affiliated with the Company or its sponsor, investments from Pennsylvania investors will be held in a separate escrow and no commissions, payments or amounts whatsoever

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will be paid thereon to the Dealer Manager under this Section 5.3 unless and until the Pennsylvania Minimum has been reached, and then only with respect to such investments from Pennsylvania investors as are released to the Company from such escrow. Until $10 million (the “Tennessee Minimum”) has been raised in the Offering from persons not affiliated with the Company or its sponsor, investments from Tennessee investors will be held in a separate escrow and no commissions, payments or amounts whatsoever will be paid thereon to the Dealer Manager under this Section 5.3 unless and until the Tennessee Minimum has been reached, and then only with respect to such investments from Tennessee investors as are released to the Company from such escrow. If the Minimum Offering is not reached within the time period specified in the Prospectus, investments will be returned to the investors in accordance with the Prospectus. If the Pennsylvania Minimum is not obtained within the time period specified in the Prospectus, the investments from Pennsylvania investors will be returned or held for subsequent escrow periods in accordance with the Prospectus. If the Tennessee Minimum is not obtained within the time period specified in the Prospectus, the investments from Tennessee investors will be returned to Tennessee investors in accordance with the Prospectus.

The Company will not be liable or responsible to any Dealer for direct payment of commissions to such Dealer; it is the sole and exclusive responsibility of the Dealer Manager for payment of commissions to Dealers. Notwithstanding the above, at its discretion, the Company may act as agent of the Dealer Manager by making direct payment of commissions to such Dealers without incurring any liability therefor.

6. Indemnification.

6.1. To the extent permitted by the Company’s charter and the provisions of Article II.G of the NASAA Guidelines, and subject to the limitations below, the Company will indemnify and hold harmless the Dealers and the Dealer Manager, their officers and directors and each person, if any, who controls such Dealer or Dealer Manager within the meaning of Section 15 of the Securities Act (the “Indemnified Persons”) from and against any losses, claims, damages or liabilities (“Losses”), joint or several, to which such Indemnified Persons may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions in respect thereof) arise out of or are based upon (a) any untrue statement or alleged untrue statement of a material fact contained (i) in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or (ii) in any blue sky application or other document executed by the Company or on its behalf specifically for the purpose of qualifying any or all of the Shares for sale under the securities laws of any jurisdiction or based upon written information furnished by the Company under the securities laws thereof (any such application, document or information being hereinafter called a “Blue Sky Application”) or (iii) in any Authorized Sales Materials, or (b) the omission or alleged omission to state in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in any Blue Sky Application or Authorized Sales Materials a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company will reimburse each Indemnified

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Person for any legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending such Loss.

Notwithstanding the foregoing provisions of this Section 6.1, the Company will not be liable in any such case to the extent that any such Loss or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished (x) to the Company by the Dealer Manager or (y) to the Company or the Dealer Manager by or on behalf of any Dealer specifically for use in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them, any Blue Sky Application or any Authorized Sales Materials, and, further, the Company will not be liable in any such case if it is determined that such Dealer or the Dealer Manager was at fault in connection with the Loss, expense or action.

The foregoing indemnity agreement of this Section 6.1 is subject to the further condition that, insofar as it relates to any untrue statement, alleged untrue statement, omission or alleged omission made in the Prospectus (or amendment or supplement thereto) that was eliminated or remedied in any subsequent amendment or supplement thereto, such indemnity agreement shall not inure to the benefit of an Indemnified Party from whom the person asserting any Losses purchased the Shares that are the subject thereof, if a copy of the Prospectus as so amended or supplemented was not sent or given to such person at or prior to the time the subscription of such person was accepted by the Company, but only if a copy of the Prospectus as so amended or supplemented had been supplied to the Dealer Manager or the Dealer prior to such acceptance.

6.2. The Dealer Manager will indemnify and hold harmless the Company, its officers and directors (including any person named in the Registration Statement, with his consent, as about to become a director), each other person who has signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act (the “Company Indemnified Persons”), from and against any Losses to which any of the Company Indemnified Persons may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions in respect thereof) arise out of or are based upon (a) any untrue statement or alleged untrue statement of a material fact contained (i) in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in any Blue Sky Application or Authorized Sales Materials; or (b) the omission or alleged omission to state in the Registration

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Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in any Blue Sky Application or Authorized Sales Materials a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that clauses (a) and (b) apply, to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Dealer Manager specifically for use with reference to the Dealer Manager in the preparation of the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in preparation of any Blue Sky Application or Authorized Sales Materials; or (c) any use of sales literature not authorized or approved by the Company or any use of “broker-dealer use only” materials with members of the public by the Dealer Manager in the offer and sale of the Shares or any use of sales literature in a particular jurisdiction if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction; or (d) any untrue statement made by the Dealer Manager or its representatives or agents or omission to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offer and sale of the Shares; or (e) any material violation of this Agreement; or (f) any failure to comply with applicable laws governing privacy issues, money laundering abatement and anti-terrorist financing efforts, including applicable rules of the SEC, FINRA and the USA PATRIOT Act of 2001; or (g) any other failure to comply with applicable rules of FINRA or federal or state securities laws and the rules and regulations promulgated thereunder. The Dealer Manager will reimburse the aforesaid parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending such Loss, expense or action. This indemnity agreement will be in addition to any liability that the Dealer Manager may otherwise have.

6.3. Each Dealer severally will indemnify and hold harmless the Company, the Dealer Manager, each of their officers and directors (including any person named in the Registration Statement, with his consent, as about to become a director), each other person who has signed the Registration Statement and each person, if any, who controls the Company or the Dealer Manager within the meaning of Section 15 of the Securities Act (the “Dealer Indemnified Persons”) from and against any Losses to which a Dealer Indemnified Person may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Losses (or actions in respect thereof) arise out of or are based upon (a) any untrue statement or alleged untrue statement of a material fact contained (i) in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective

13

amendment or supplement to any of them or in any Blue Sky Application or Authorized Sales Materials; or (b) the omission or alleged omission to state in the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in any Blue Sky Application or Authorized Sales Materials a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that clauses (a) and (b) apply, to the extent, but only to the extent, that such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company or the Dealer Manager by or on behalf of the Dealer specifically for use with reference to the Dealer in the preparation of the Registration Statement, the Prospectus, any Preliminary Prospectus used prior to the effective date of the Registration Statement or any post-effective amendment or supplement to any of them or in preparation of any Blue Sky Application or Authorized Sales Materials; or (c) any use of sales literature not authorized or approved by the Company or any use of “broker-dealer use only” materials with members of the public by the Dealer in the offer and sale of the Shares or any use of sales literature in a particular jurisdiction if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction; or (d) any untrue statement made by the Dealer or its representatives or agents or omission to state a fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offer and sale of the Shares; or (e) any material violation of this Agreement or the Selected Dealer Agreement entered into between the Dealer Manager and the Dealer; or (f) any failure to comply with applicable laws governing privacy issues, money laundering abatement and anti-terrorist financing efforts, including applicable rules of the SEC, FINRA and the USA PATRIOT Act of 2001; or (g) any other failure to comply with applicable rules of FINRA or federal or state securities laws and the rules and regulations promulgated thereunder. Each such Dealer will reimburse each Dealer Indemnified Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss, expense or action. This indemnity agreement will be in addition to any liability that such Dealer may otherwise have.

6.4. Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6, notify in writing the indemnifying party of the commencement thereof. The failure of an indemnified party to so notify the indemnifying party will relieve the indemnifying party from any liability under this Section 6 as to the particular item for which indemnification is then being sought, but not from any other liability that it may have to any indemnified party. In case any such action is brought

14

against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled, to the extent it may wish, jointly with any other indemnifying party similarly notified, to participate in the defense thereof, with separate counsel. Such participation shall not relieve such indemnifying party of the obligation to reimburse the indemnified party for reasonable legal and other expenses (subject to Section 6.5) incurred by such indemnified party in defending itself, except for such expenses incurred after the indemnifying party has deposited funds sufficient to effect the settlement, with prejudice, of the claim in respect of which indemnity is sought. Any such indemnifying party shall not be liable to any such indemnified party on account of any settlement of any claim or action effected without the consent of such indemnifying party. Any indemnified party shall not be bound to perform or refrain from performing any act pursuant to the terms of any settlement of any claim or action effected without the consent of such indemnified party.

6.5. The indemnifying party shall pay all legal fees and expenses of the indemnified party in the defense of such claims or actions; provided, however, that the indemnifying party shall not be obliged to pay legal expenses and fees to more than one law firm in connection with the defense of similar claims arising out of the same alleged acts or omissions giving rise to such claims notwithstanding that such actions or claims are alleged or brought by one or more parties against more than one indemnified party. If such claims or actions are alleged or brought against more than one indemnified party, then the indemnifying party shall only be obliged to reimburse the expenses and fees of the one law firm that has been selected by a majority of the indemnified parties against which such action is finally brought; and in the event a majority of such indemnified parties are unable to agree on which law firm for which expenses or fees will be reimbursable by the indemnifying party, then payment shall be made to the first law firm of record representing an indemnified party against the action or claim. Such law firm shall be paid only to the extent of services performed by such law firm and no reimbursement shall be payable to such law firm on account of legal services performed by another law firm.

7. Survival of Provisions.

7.1. The respective agreements, representations and warranties of the Company and the Dealer Manager set forth in this Agreement shall remain operative and in full force and effect regardless of (a) any investigation made by or on behalf of the Dealer Manager or any Dealer or any person controlling the Dealer Manager or any Dealer or by or on behalf of the Company or any person controlling the Company and (b) the acceptance of any payment for the Shares.

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7.2. The respective agreements and obligations of the Company and the Dealer Manager set forth in Sections 3.7, 4.1, 4.4, 4.6, 4.7, 5.3, 6 through 10 and 12 through 13 of this Agreement shall remain operative and in full force and effect regardless of (a) any investigation made by or on behalf of the Dealer Manager or any Dealer or any person controlling the Dealer Manager or any Dealer or by or on behalf of the Company or any person controlling the Company, (b) the acceptance of any payment for the Shares and (c) the termination of this Agreement.

8. Applicable Law and Invalid Provision.

8.1. This Agreement shall be construed under the laws of the State of California; provided, however, that causes of action for violations of federal or state securities laws shall not be governed by this Section 8.1.

8.2. The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision was omitted.

9. Counterparts. This Agreement may be executed in any number of counterparts. Each counterpart, when executed and delivered, shall be an original contract, but all counterparts, when taken together, shall constitute one and the same agreement.

10. Successors and Assigns.

10.1. This Agreement shall inure to the benefit of and be binding upon the Dealer Manager and the Company and their respective successors and permitted assigns. This Agreement shall inure to the benefit of the Dealers to the extent set forth in Sections 1, 3 and 6 hereof. Nothing in this Agreement is intended or shall be construed to give to any other person any right, remedy or claim, except as otherwise specifically provided herein.

10.2. No party shall assign this Agreement or any right, interest or benefit under this Agreement without the prior written consent of the other party.

11. Amendments. This Agreement may be amended by the written agreement of the Dealer Manager and the Company.

12. Term. Any party to this Agreement shall have the right to terminate this Agreement on 60 days’ written notice or immediately upon notice to the other party in the event that such other party shall have failed to comply with any material provision hereof. If not sooner terminated, the Dealer Manager’s agency and this Agreement shall terminate upon termination of the Offering Period without obligation on the part of the Dealer Manager or the Company, except as set forth in this Agreement. Upon termination of this Agreement, (a) the

16

Company shall pay to the Dealer Manager all accrued amounts payable under Section 5 hereof at such time as such amounts become payable and (b) the Dealer Manager shall promptly deliver to the Company all records and documents in its possession that relate to the Offering and that are not designated as “dealer” copies.

13. Customer Complaints. Each party hereby agrees to promptly provide to the other party copies of any written or otherwise documented complaints from customers of the Dealer Manager or any Dealer received by such party relating in any way to the Offering (including, but not limited to, the manner in which the Shares are offered by the Dealer Manager or the Dealer).

14. No Partnership. Nothing in this Agreement shall be construed or interpreted to constitute the Dealer Manager as in association with or in partnership with the Company; instead, this Agreement shall only constitute the Dealer Manager as a dealer authorized by the Company to sell and to manage the sale by others of the Shares according to the terms set forth in the Registration Statement and the Prospectus as amended or supplemented and in this Agreement.

15. Submission of Orders.

15.1. Those persons who purchase Shares will be instructed by the Dealer Manager or the Dealer to make their checks payable to “UMB Bank, N.A., as escrow agent for KBS Legacy Partners Apartment REIT, Inc.” or, after the Minimum Offering has been achieved, to the Company, except with respect to Pennsylvania and Tennessee investors. Checks from Pennsylvania and Tennessee investors must be made payable to “UMB Bank, N.A., as escrow agent for KBS Legacy Partners Apartment REIT, Inc.” until the Pennsylvania Minimum and Tennessee Minimum, respectively, have been achieved. The Dealer Manager, any agent of the Dealer Manager and any Dealer receiving a check not conforming to the foregoing instructions shall return such check directly to such subscriber not later than the end of the next business day following its receipt. Checks received by the Dealer Manager, any agent of the Dealer Manager or a Dealer that conform to the foregoing instructions shall be transmitted for deposit pursuant to one of the methods described in this Section 15.

15.2. Where, pursuant to a Dealer’s internal supervisory procedures, internal supervisory review is conducted at the same location at which subscription documents and checks are received from subscribers, checks will be transmitted by the end of the next business day following receipt by the Dealer for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Minimum Offering has been achieved, to the Company or its agent, except for investments from Pennsylvania and Tennessee investors. The Dealer will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer

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Manager is acting as processing broker-dealer or, after the Pennsylvania Minimum has been achieved, to the Company or its agent. The Dealer will transmit checks from Tennessee investors for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Tennessee Minimum has been achieved, to the Company or its agent.

15.3. Where, pursuant to a Dealer’s internal supervisory procedures, final internal supervisory review is conducted at a different location, checks will be transmitted by the end of the next business day following receipt by the Dealer to the office of the Dealer conducting such final internal supervisory review (the “Final Review Office”). The Final Review Office will in turn by the end of the next business day following receipt by the Final Review Office, transmit such checks for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Minimum Offering has been achieved, to the Company or its agent, except for investments from Pennsylvania and Tennessee investors. The Final Review Office will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Pennsylvania Minimum has been achieved, to the Company or its agent. The Final Review Office will transmit checks from Tennessee investors for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Tennessee Minimum has been achieved, to the Company or its agent.

15.4. Where the Dealer Manager (or its agent) receives investor proceeds, checks will be transmitted by the Dealer Manager (or its agent) for deposit to the escrow agent for the Company or, after the Minimum Offering has been achieved, to the Company or its agent (except for investments from Pennsylvania and Tennessee investors) as soon as practicable but in any event by the end of the second business day following receipt by the Dealer Manager (or its agent). The Dealer Manager (or its agent) will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or, after the Pennsylvania Minimum has been achieved, to the Company or its agent. The Dealer Manager (or its agent) will transmit checks from Tennessee investors for deposit to the escrow agent for the Company or, after the Tennessee Minimum has been achieved, to the Company or its agent. Checks of rejected potential investors will be promptly returned to such potential investors.

15.5. Notwithstanding the above, the Dealer Manager may authorize certain Dealers that are “$250,000 broker-dealers” to instruct their customers to make their checks for Shares subscribed for payable directly to the Dealer or authorize a debit from the customer’s account maintained with the Dealer for the amount of shares subscribed for by the customer. In such case, the Dealer will collect the proceeds of the subscribers’ checks and debits and wire funds to the escrow agent or, if instructed by the Dealer Manager, issue a check for the aggregate amount of the subscription proceeds made payable to the order of the escrow agent, or if instructed by the Dealer Manager, made payable to “KBS Legacy Partners Apartment REIT, Inc.” The procedures for the transmittal of checks and wiring of funds of $250,000 broker-dealers will be set forth in the agreements between the $250,000 broker-dealer and the Dealer Manager.

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[signature page follows]

If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter and your acceptance shall constitute a binding agreement between us as of the date first above written.

Very truly yours,
KBS LEGACY PARTNERS APARTMENT REIT, INC.
By:
	Name:
	Title:

Accepted and agreed as of the date first above written.
KBS CAPITAL MARKETS GROUP LLC
By:
	Name:
	Title:

19

EXHIBIT A

KBS LEGACY PARTNERS APARTMENT REIT, INC.

Up to 280,000,000 Shares of Common Stock

FORM OF SELECTED DEALER AGREEMENT

Ladies and Gentlemen:

KBS Capital Markets Group LLC, as the dealer manager (the “Dealer Manager”) for KBS Legacy Partners Apartment REIT, Inc. (the “Company”), a Maryland corporation, invites you (the “Dealer”) to participate in the distribution of up to 280,000,000 shares of the Company’s common stock (the “Shares”) subject to the following terms. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Dealer Manager Agreement between the Dealer Manager and the Company, dated                     , 2010, in the form attached hereto as Exhibit A (the “Dealer Manager Agreement”).

I. Dealer Manager Agreement

By your acceptance of this Agreement, you will become one of the Dealers referred to in the Dealer Manager Agreement and will be entitled and subject to the provisions contained in such Dealer Manager Agreement related to the Dealers, including the representations and warranties of the Company contained in Section 1 of the Dealer Manager Agreement and the indemnification provisions contained in Section 6 of the Dealer Manager Agreement, including specifically the provisions of such Dealer Manager Agreement (Section 6.3) wherein each Dealer severally agrees to indemnify and hold harmless the Company, the Dealer Manager and each their officers and directors (including any person named in the Registration Statement, with his consent, as about to become a director), each person who signed the Registration Statement and each person, if any, who controls the Company and the Dealer Manager within the meaning of Section 15 the Securities Act of 1933, as amended (the “Securities Act”). The indemnification agreements contained in Section 6 of the Dealer Manager Agreement shall survive the termination of this Agreement and the Dealer Manager Agreement.

II. Submission of Orders

Those persons who purchase Shares will be instructed by the Dealer to make their checks payable to “UMB Bank, N.A. as escrow agent for KBS Legacy Partners Apartment REIT, Inc.” or, after the Minimum Offering has been achieved, to the Company, except with respect to Pennsylvania and Tennessee investors. Checks from Pennsylvania and Tennessee investors must be made payable to “UMB Bank, N.A., as escrow agent for KBS Legacy Partners Apartment REIT, Inc.” until the Pennsylvania Minimum and Tennessee Minimum, respectively, have been achieved. The Dealer will return any check it receives not conforming to the foregoing instructions directly to such subscriber not later than the end of the next business day following its

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receipt. Checks received by the Dealer that conform to the foregoing instructions shall be transmitted for deposit pursuant to one of the following methods:

Where, pursuant to the Dealer’s internal supervisory procedures, internal supervisory review is conducted at the same location at which subscription documents and checks are received from subscribers, checks will be transmitted by the end of the next business day following receipt by the Dealer for deposit to an escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Minimum Offering has been achieved, to the Company or its agent, except for investments from Pennsylvania and Tennessee investors. The Dealer will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Pennsylvania Minimum has been achieved, to the Company or its agent. The Dealer will transmit checks from Tennessee investors for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Tennessee Minimum has been achieved, to the Company or its agent.

Where, pursuant to the Dealer’s internal supervisory procedures, final internal supervisory review is conducted at a different location, checks will be transmitted by the end of the next business day following receipt by the Dealer to the office of the Dealer conducting such final internal supervisory review (the “Final Review Office”). The Final Review Office will in turn by the end of the next business day following receipt by the Final Review Office transmit such checks for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Minimum Offering has been achieved, to the Company or its agent, except for investments from Pennsylvania and Tennessee investors. The Final Review Office will transmit checks from Pennsylvania investors for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Pennsylvania Minimum has been achieved, to the Company or its agent. The Final Review Office will transmit checks from Tennessee investors for deposit to the escrow agent for the Company or to the Dealer Manager (or an agent of the Dealer Manager) if the Dealer Manager is acting as processing broker-dealer or, after the Tennessee Minimum has been achieved, to the Company or its agent.

III. Pricing

Except as otherwise provided in the “Plan of Distribution” section of the Prospectus (as amended and supplemented), the Shares are to be sold at a per Share cash price as follows:

Distribution Channel	Primary     Offering     Shares	DRP Shares
Sales through a Dealer earning transaction-based compensation	$  10.00	$  9.50
Sales through all other distribution channels as described in the Prospectus	$    9.35	$  9.50

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Upon the terms set forth in the Prospectus, pursuant to the Company’s volume discount program, Shares shall be sold at reduced prices in accordance with the following table, which may be amended and supplemented by the Prospectus:

Dollar Volume Shares Purchased			Price Per Share to Investor
$                0	to	$   999,999	$10.00
$  1,000,000	to	$1,999,999	$  9.90
$  2,000,000	to	$2,999,999	$  9.80
$  3,000,000	to	$3,999,999	$  9.65
$  4,000,000	to	$9,999,999	$  9.50
$10,000,000	and above		$  9.40

The reduced selling price (and the applicable selling commission and dealer manager fee under the volume discount program) will apply to the entire purchase. For example, a purchase of 250,000 shares in a single transaction would result in a purchase price of $2,450,000 ($9.80 per share).

In addition, as described in the Prospectus, the Dealer Manager may sell shares to the Dealer, its retirement plans, its representatives and the family members, IRAs and the qualified plans of its representatives at a purchase price of $9.35 per share, reflecting that selling commissions in the amount of $0.65 per share will not be payable in consideration of the services rendered by the Dealer and its representatives in the Offering. For purposes of this discount, a family member includes such person’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in law or brother- or sister-in-law.

IV. Dealer’s Commissions

Except for discounts described in or as otherwise provided in the “Plan of Distribution” section of the Prospectus (as amended and supplemented), the Dealer’s selling commission applicable to the public offering price of the Shares sold by the Dealer, which it is authorized to sell hereunder, is as follows:

	Selling Commissions
Distribution Channel	Primary Offering Shares	DRP
Sales through a Dealer earning transaction-based compensation	6.5%	0.0%
Sales through all other distribution channels as discussed in the Prospectus	0.0%	0.0%

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The preceding commission (for the Dealer distribution channel) shall be adjusted for sales under the volume discount program in accordance with the following table, which may be amended and supplemented by the Prospectus:

Dollar Volume Shares Purchased			Sales Commissions (Based on $10.00 Price Per Share)	Dealer Manager Fee (Based on $10.00 Price Per Share)
$                0	to	$   999,999	6.5%	3.0%
$  1,000,000	to	$1,999,999	5.5%	3.0%
$  2,000,000	to	$2,999,999	4.5%	3.0%
$  3,000,000	to	$3,999,999	3.5%	2.5%
$  4,000,000	to	$9,999,999	2.5%	2.0%
$10,000,000	and above		1.5%	2.0%

The reduced selling commission and dealer manager fee will apply to the entire purchase. All commission rates and dealer manager fees are calculated assuming a price per share of $10.00. For example, a purchase of 250,000 shares in a single transaction would result in selling commissions of $112,500 and dealer manager fees of $75,000.

All selling commissions shall be based on Shares sold by Dealer and accepted and confirmed by the Company, which commission will be paid by the Dealer Manager. For these purposes, a “sale of Shares” shall occur if and only if a transaction has closed with a subscriber for Shares pursuant to all applicable offering and subscription documents, payment for the Shares has been received in full in the manner provided in Section II hereof, the Company has accepted the subscription agreement of such subscriber and the Company has thereafter distributed the commission to the Dealer Manager in connection with such transaction. The Dealer affirms that the Dealer Manager’s liability for commissions payable is limited solely to the proceeds of commissions receivable from the Company and the Dealer hereby waives any and all rights to receive payment of commissions due until such time as the Dealer Manager is in receipt of the commission from the Company.

In addition, upon the terms set forth herein or in the Prospectus (as amended and supplemented), the Dealer Manager may agree to reallow to any Dealer a portion of its dealer manager fee pursuant to a separate marketing fee agreement. For volume discount sales of $3,000,000 or more, the dealer manager fee is reduced as set forth above. The amount of the dealer manager fee reallowed to a Dealer in that instance will be negotiated on a transaction by transaction basis. The Dealer Manager or, in certain cases at the option of the Company, the Company, will pay or reimburse bona fide invoiced due diligence expenses of Dealer unless such payment would cause the aggregate of such reimbursements to Dealer and other broker-dealers, together with all other organization and offering expenses, to exceed 15% of gross proceeds from the Offering.

The parties hereby agree that the foregoing commission is not in excess of the usual and customary distributors’ or sellers’ commission received in the sale of securities similar to the Shares, that Dealer’s interest in the Offering is limited to such commission from the Dealer Manager and Dealer’s indemnity referred to in Section 6 of the Dealer

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Manager Agreement and that the Company is not liable or responsible for the direct payment of such commission to the Dealer.

V. Payment

Payment of selling commissions or any reallowance of a portion of the dealer manager fee will be made by the Dealer Manager (or by the Company as provided in the Dealer Manager Agreement) to the Dealer within 30 days of the receipt by the Dealer Manager of the gross commission payments from the Company. Dealer acknowledges that, if the Company pays selling commissions to the Dealer Manager, the Company is relieved of any obligation for selling commissions to the Dealer. The Company may rely on and use the preceding acknowledgment as a defense against any claim by the Dealer for selling commissions the Company pays to Dealer Manager but that Dealer Manager fails to remit to the Dealer.

VI. Right to Reject Orders or Cancel Sales

All orders, whether initial or additional, are subject to acceptance by and shall only become effective upon confirmation by the Company. The Dealer agrees that the Company, in its sole and absolute discretion, may accept or reject any subscription, in whole or in part, for any reason whatsoever, and no commission will be paid to the Dealer with respect to the portion of any subscription that is rejected. Orders not accompanied by a Subscription Agreement with the signature page and the required check in payment for the Shares may be rejected. Issuance and delivery of the Shares will be made only after actual receipt of payment therefor. If any check is not paid upon presentment, or if the Company is not in actual receipt of clearinghouse funds or cash, certified or cashier’s check or the equivalent in payment for the Shares, the Company reserves the right to cancel the sale without notice. In the event an order is rejected, canceled or rescinded for any reason, the Dealer agrees to return to the Dealer Manager any commission theretofore paid with respect to such order within 30 days thereafter and, failing to do so, the Dealer Manager shall have the right to offset amounts owed against future commissions due and otherwise payable to the Dealer.

VII. Covenants of the Dealer

Dealer covenants and agrees with the Dealer Manager and the Company that:

7.1 Dealer will use its best efforts to sell the Shares for cash on the terms and conditions set forth in this Agreement and the Prospectus as amended and supplemented.

7.2 In connection with the Dealer’s participation in the offer and sale of Shares (including, without limitation, all initial and additional subscriptions for Shares and any resales and transfers of Shares), the Dealer will comply with all requirements and obligations imposed upon it by (a) the Securities Act, the Securities Exchange Act of 1934, as

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amended (the “Exchange Act”), and the rules and regulations of the SEC promulgated under both such acts; (b) all applicable state securities laws and regulations as from time to time in effect; (c) the applicable rules of FINRA, including, but not in any way limited to, Rule 2730, Rule 2740, Rule 2420, Rule 2440 and Rule 2750 of the NASD Conduct Rules and FINRA Rule 2310; (d) all applicable rules and regulations relating to the suitability of investors, including, without limitation, the provisions of Articles III.C. and III.E of the Statement of Policy regarding Real Estate Investment Trusts of the North American Securities Administrators Association, Inc. (the “NASAA Guidelines”); (e) any other state and federal laws and regulations applicable to the Offering, the sale of Shares or the activities of the Dealer pursuant to this Agreement, including without limitation the privacy standards and requirements of state and federal laws, including the Gramm-Leach-Bliley Act of 1999, and the laws governing money laundering abatement and anti-terrorist financing efforts, including the applicable rules of the SEC and FINRA, the Bank Secrecy Act, as amended, the USA Patriot Act of 2001, and regulations administered by the Office of Foreign Asset Control at the Department of the Treasury; and (f) this Agreement and the Prospectus as amended and supplemented.

7.3 The Dealer will not offer Shares in any jurisdiction unless and until (a) the Dealer has been advised in writing by the Company or the Dealer Manager that the Shares are either registered in accordance with, or exempt from, the securities laws of such jurisdiction and (b) the Dealer has all required licenses and registrations to offer shares in that jurisdiction.

7.4 The Dealer will offer Shares (both at the time of an initial subscription and at the time of any additional subscription) only to persons who meet the financial qualifications and suitability standards set forth in the Prospectus as amended or supplemented or in any suitability letter or memorandum sent to the Dealer by the Company or the Dealer Manager. Nothing contained in this section shall be construed to relieve the Dealer of the Dealer’s suitability obligations under Rule 2310 of the NASD Conduct Rules (or applicable successor FINRA rule).

7.5 The Dealer agrees to comply with the record-keeping requirements imposed by (a) federal and state securities laws and the rules and regulations thereunder, (b) the applicable rules of FINRA and (c) the NASAA Guidelines, including the requirement to maintain records (the “Suitability Records”) of the information used to determine that an investment in Shares is suitable and appropriate for each subscriber for a period of six years from the date of the sale of the Shares. The Dealer further agrees to make the Suitability Records available to the Dealer Manager and the Company upon request and to make them available to representatives of the SEC and FINRA and applicable state securities administrators upon the Dealer’s receipt of a subpoena or other appropriate document request from such agency.

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7.6 The Dealer will provide the Dealer Manager with such information relating to the offer and sale of the Shares by it as the Dealer Manager may from time to time reasonably request or as may be requested to enable the Dealer Manager or the Company, as the case may be, to prepare such reports of sale as may be required to be filed under applicable federal or state securities laws and the rules and regulations thereunder.

7.7 The Dealer agrees to be bound by the terms of the Escrow Agreement dated                      , 2010, among UMB Bank, N.A., as escrow agent, the Dealer Manager and the Company, copies of which are attached hereto as Exhibit B and the Dealer further agrees that it will not represent or imply that UMB Bank, N.A., as the escrow agent identified in the Prospectus, has investigated the desirability or advisability of an investment in the Company or has approved, endorsed or passed upon the merits of the Shares or of the Company, nor will the Dealer use the name of said escrow agent in any manner whatsoever in connection with the offer or sale of the Shares other than by acknowledgment that it has agreed to serve as escrow agent.

VIII. Prospectus and Sales Literature

Dealer is not authorized or permitted to give, and will not give, any information or make any representation (written or oral) concerning the Shares except as set forth in the Prospectus as amended and supplemented or in the Authorized Sales Materials. The Dealer Manager will supply Dealer with reasonable quantities of the Prospectus, including amendments of and supplements to the Prospectus, and any Authorized Sales Materials, for delivery to investors, and Dealer will deliver a copy of the Prospectus, including any amendments and supplements thereto, as required by the Securities Act, the Exchange Act and the rules and regulations promulgated under both. The Dealer agrees that (a) it will deliver a copy of the Prospectus as amended and supplemented to each investor to whom an offer is made prior to or simultaneously with the first solicitation of an offer to sell the Shares to an investor and (b) it will not send or give any Authorized Sales Materials to an investor unless the Authorized Sales Materials are accompanied by or preceded by the Prospectus as amended and supplemented.

Except for the Authorized Sales Materials, the Company has not authorized the use of any supplemental literature or sales materials in connection with the Offering and the Dealer agrees not to use any material unless it has been authorized by the Company and provided to the Dealer by the Dealer Manager. Dealer agrees that it will not show or give to any investor or prospective investor or reproduce any material or writing that is supplied to it by the Dealer Manager and marked “broker-dealer use only” or otherwise bearing a legend denoting that it is not to be used in connection with the sale of Shares to members of the public. Dealer agrees that it will not show or give to any investor or prospective investor in a particular jurisdiction any material or writing that is supplied to it by the Dealer Manager if such material bears a legend denoting that it is not to be used in connection with the sale of Shares to members of the public in such jurisdiction. Dealer agrees that it will not use in connection with the offer or sale of Shares any

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material or writing that relates to another company supplied to it by the Company or the Dealer Manager bearing a legend that states that such material may not be used in connection with the offer or sale of any securities of the Company.

Dealer agrees to furnish a copy of the Prospectus (as amended and supplemented) required for compliance with the provisions of federal and state securities laws and the rules and regulations thereunder, including Rule 15c2-8 under Exchange Act. Regardless of the termination of this Agreement, Dealer will deliver a Prospectus (as amended and supplemented) in transactions in the Shares for a period of 90 days from the effective date of the Registration Statement or such other period as may be required by the Exchange Act or the rules and regulations thereunder.

IX. License and Association Membership

Dealer represents and warrants to the Company and the Dealer Manager that it is a properly registered or licensed broker-dealer, duly authorized to offer and sell Shares under federal securities laws and regulations and the securities laws and regulations of all states where it offers or sells Shares and that it is a member of FINRA in good standing. This Agreement shall automatically terminate if the Dealer ceases to be a member of FINRA in good standing or is subject to a FINRA suspension or if the Dealer’s registration or license under the Exchange Act or any state securities laws or regulations is terminated or suspended; the Dealer agrees to notify the Dealer Manager immediately if any of these events occur.

X. Anti-Money Laundering Compliance Programs

Dealer’s acceptance of this Agreement constitutes a representation to the Company and the Dealer Manager that the Dealer has established and implemented an anti-money laundering and customer identification compliance program (“AML Program”) in accordance with applicable laws and regulations, including federal and state securities laws, applicable rules of FINRA, and the Bank Secrecy Act, Title 31 U.S.C. Sections 5311-5355, as amended by the USA Patriot Act of 2001, and related regulations (31 C.F.R. Part 103), and will continue to maintain its AML Program consistent with applicable laws and regulations during the term of this Agreement.

In accordance with these applicable laws and regulations and its AML Program, Dealer agrees to verify the identity of its new customers; to maintain customer records; to check the names of new customers against government watch lists, including the Office of Foreign Asset Control’s (“OFAC”) list of Specially Designated Nationals and Blocked Persons. Additionally, Dealer will monitor account activity to identify patterns of unusual size or volume, geographic factors and any other “red flags” described in the USA Patriot Act as potential signals of money laundering or terrorist financing. Dealer will submit to the Financial Crimes Enforcement Network any required suspicious activity reports about such activity and further will disclose such activity to applicable federal and state law enforcement when required by law. Upon request by the Dealer Manager at any time, the Dealer hereby agrees to furnish (a) a copy of its AML Program

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to the Dealer Manager for review, and (b) a copy of the findings and any remedial actions taken in connection with Dealer’s most recent independent testing of its AML Program.

XI. Effectiveness, Termination and Amendment

This Agreement shall become effective upon the execution hereof by the Dealer and the receipt of this executed Agreement by the Dealer Manager. Dealer will immediately suspend or terminate its offer and sale of Shares upon the request of the Company or the Dealer Manager at any time and will resume its offer and sale of Shares hereunder upon subsequent request of the Company or the Dealer Manager. In addition to termination pursuant to Section IX, any party may terminate this Agreement by written notice, which termination shall be effective 48 hours after such notice is given. Upon the sale of all of the Shares or the termination of the Dealer Manager Agreement, this Agreement shall terminate without obligation on the part of the Dealer or the Dealer Manager, except as set forth in this Agreement. The indemnification agreements contained in Section 6 of the Dealer Manager Agreement shall survive the termination of this Agreement and the Dealer Manager Agreement, and the respective agreements and obligations of the Dealer Manager and the Dealer set forth in Sections IV, V, VI, 7.2, 7.5, 7.6, VIII and XI through XXI of this Agreement shall remain operative and in full force and effect regardless of the termination of this Agreement.

This Agreement may be amended at any time by the Dealer Manager by written notice to the Dealer. Any such amendment shall be deemed accepted by the Dealer upon the Dealer placing an order for the sale of Shares after it has received such notice.

XII. Privacy Laws

The Dealer Manager and Dealer (each referred to individually in this section as a “party”) agree as follows:

12.1 Each party agrees to abide by and comply in all respects with (a) the privacy standards and requirements of the Gramm-Leach-Bliley Act of 1999 (“GLBA”) and applicable regulations promulgated thereunder, (b) the privacy standards and requirements of any other applicable federal or state law, including the Fair Credit Reporting Act (“FCRA”) and (c) its own internal privacy policies and procedures, each as may be amended from time to time.

12.2 Dealer shall not disclose nonpublic personal information (as defined under the GLBA) of all customers who have opted out of such disclosures, except to service providers (when necessary and as permitted under the GLBA) or as otherwise required by applicable law;

12.3 Except as expressly permitted under the FCRA, Dealer shall not disclose any information that would be considered a “consumer report” under the FCRA; and

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12.4 Dealer shall be responsible for determining which customers have opted out of the disclosure of nonpublic personal information by periodically reviewing and, if necessary, retrieving a list of such customers (the “List”) to identify customers that have exercised their opt-out rights. In the event either party expects to use or disclose nonpublic personal information of any customer for purposes other than servicing the customer, or as otherwise required by applicable law, that party must first consult the List to determine whether the affected customer has exercised his or her opt-out rights. Each party understands that it is prohibited from using or disclosing any nonpublic personal information of any customer that is identified on the List as having opted out of such disclosures.

XIII. Customer Complaints

Each party agrees to promptly provide to the other party copies of any written or otherwise documented complaints from customers of the Dealer received by such party relating in any way to the Offering (including, but not limited to, the manner in which the Shares are offered by the Dealer).

XIV. Notice

All notices to the Dealer Manager shall be in writing addressed to the Dealer Manager at the address set forth below. All notices to Dealer shall be in writing addressed to the Dealer at the address specified by the Dealer at the end of this Agreement. Notices addressed to the intended recipient as described above will be duly given (a) when personally delivered or by commercial messenger, (b) one business day following deposit with a recognized overnight courier service, provided such deposit occurs prior to the deadline imposed by such service for overnight delivery; or (c) when transmitted, if sent by facsimile copy, provided confirmation of receipt is received by sender and such notice is sent by an additional method provided hereunder.

To the Dealer Manager:

KBS Capital Markets Group LLC

660 Newport Center Drive, Suite 1200

Newport Beach, California 92660

XV. Confirmation

The Dealer Manager hereby acknowledges that the Dealer Manager has assumed the duty to confirm on behalf of the Dealers all orders for purchases of Shares accepted by the Company. Such confirmations will comply with the rules of the SEC and FINRA and will comply with the applicable laws of such other jurisdictions to the extent that the Dealer Manager is advised of such laws in writing by the Dealer.

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XVI. Entire Agreement

This Agreement and the exhibits hereto are the entire agreement of the parties and supersede all prior agreements, if any, relating to the subject matter hereof between the parties hereto.

XVII. Successors and Assigns

No party shall assign this Agreement or any right, interest or benefit under this Agreement without the prior written consent of the other party. This Agreement shall be binding upon the Dealer Manager and the Dealer and their respective successors and permitted assigns.

XVIII. Arbitration, Attorney’s Fees, Jury Trial and Applicable Law

In the event of a dispute concerning any provision of this Agreement (including any provisions of the Dealer Manager Agreement incorporated into this Agreement), either party may require the dispute to be submitted to binding arbitration, conducted on a confidential basis, under the then current commercial arbitration rules of FINRA or the American Arbitration Association (at the discretion of the party requesting arbitration) in accordance with the terms of this Agreement (including the governing law provisions of this section) and pursuant to the Federal Arbitration Act (9 U.S.C. §§ 1 – 16). The parties will request that the arbitrator or arbitration panel (“Arbitrator”) issue written findings of fact and conclusions of law. The Arbitrator shall not be empowered to make any award or render any judgment for punitive damages, and the Arbitrator shall be required to follow applicable law in construing this Agreement, making awards, and rendering judgments. The decision of the arbitration panel shall be final and binding, and judgment upon any arbitration award may be entered by any court having jurisdiction. All arbitration hearings will be held at the Los Angeles FINRA District Office or at another mutually agreed upon site. The parties may agree on a single arbitrator, or, if the parties cannot so agree, each party will have the right to choose one arbitrator, and the selected arbitrators will choose a third arbitrator. Each arbitrator must have experience and education that qualify him or her to competently address the specific issues to be designated for arbitration. Notwithstanding the preceding, no party will be prevented from immediately seeking provisional remedies in courts of competent jurisdiction, including but not limited to, temporary restraining orders and preliminary injunctions, but such remedies will not be sought as a means to avoid or stay arbitration. Except as provided otherwise in Section 6 of the Dealer Manager Agreement, in any action or arbitration to enforce the provisions of this Agreement or to secure damages for its breach, the prevailing party shall recover its costs and reasonable attorney’s fees. Each party to this Agreement hereby waives a trial by jury in any legal action or proceeding relating to this Agreement. This Agreement shall be construed under the laws of the State of California; provided, however, that the governing law for causes of action for violations of federal or state securities law shall be governed by the applicable federal or state securities law.

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XIX. Severability

The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision was omitted.

XX. Counterparts

This Agreement may be executed in any number of counterparts. Each counterpart, when executed and delivered, shall be an original contract, but all counterparts, when taken together, shall constitute one and the same agreement.

XXI. No Partnership

Nothing in this Agreement shall be construed or interpreted to constitute the Dealer as an employee, agent or representative of, or in association with or in partnership with, the Dealer Manager, the Company or the other Dealers; instead, this Agreement shall only constitute the Dealer as a dealer authorized by the Dealer Manager to sell the Shares according to the terms set forth in the Registration Statement and the Prospectus as amended and supplemented and in this Agreement.

[signature page follows]

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		THE DEALER MANAGER:
Attest:		KBS CAPITAL MARKETS GROUP LLC
By:		By:
	Name:		Name:
	Title:		Title:

We have read the foregoing Agreement and we hereby accept and agree to the terms and conditions set forth therein. We hereby represent that the list below of jurisdictions in which we are registered or licensed as a broker or dealer and are fully authorized to sell securities is true and correct, and we agree to advise you of any change in such list during the term of this Agreement.

1.	Identity of Dealer:
	Name:______________________________________________________________________________________________
	Type of entity:_______________________________________________________________________________________
	(corporation, partnership or proprietorship)
	Organized in the State of:______________________________________________________________________________
	(State)
	Licensed as broker-dealer in the following States:___________________________________________________________
	___________________________________________________________________________________________________
	Tax I.D. #:___________________________________________________________________________________________

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2.	Person to receive notice pursuant to Section XIV:
	Name:______________________________________________________________________________________________
	Company:___________________________________________________________________________________________
	Address:____________________________________________________________________________________________
	City, State and Zip Code:_______________________________________________________________________________
	Telephone No.: (___)__________________________________________________________________________________
	Telefax No.:     (___)__________________________________________________________________________________
	E-mail Address:______________________________________________________________________________________
	AGREED TO AND ACCEPTED BY THE DEALER:
		(Dealer’s Firm Name)
	By:
		Authorized Signature
	Title:

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EX-3.1

EXHIBIT 3.1

ARTICLES OF AMENDMENT AND RESTATEMENT

OF

KBS LEGACY APARTMENT COMMUNITY REIT, INC.

FIRST:     KBS Legacy Apartment Community REIT, Inc., a Maryland corporation, desires to amend and restate its charter as currently in effect and as hereinafter amended.

SECOND:    The following provisions are all the provisions of the charter currently in effect and as hereinafter amended:

ARTICLE I

NAME

The name of the corporation is KBS Legacy Partners Apartment REIT, Inc. (the “Corporation”).

ARTICLE II

PURPOSE

Except as provided below, the purposes for which the Corporation is formed are to engage in any lawful act or activity (including, without limitation or obligation, qualifying as a real estate investment trust under Sections 856 through 860, or any successor sections, of the Internal Revenue Code of 1986, as amended (the “Code”)), for which corporations may be organized under the Maryland General Corporation Law, as amended (the “MGCL”), and the general laws of the State of Maryland as now or hereafter in force. Notwithstanding the foregoing, for so long as the Corporation is externally advised by the Advisor (as defined below), it shall not be a proper purpose of the Corporation to purchase real estate or any significant asset related to real estate unless the Advisor has recommended that the Corporation purchase such asset.

ARTICLE III

PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT

The name and address of the resident agent for service of process of the Corporation in the State of Maryland is The Corporation Trust Incorporated, 351 West Camden Street, Baltimore, MD 21201. The address of the Corporation’s principal office in the State of Maryland is 351 West Camden Street, Baltimore, MD 21201. The Corporation may have such other offices and places of business within or outside the State of Maryland as the board may from time to time determine.

ARTICLE IV

DEFINITIONS

As used herein, the following terms shall have the following meanings unless the context otherwise requires:

Acquisition Expenses.  Expenses including but not limited to legal fees and expenses, travel and communications expenses, cost of appraisals, nonrefundable option payments on property not acquired, accounting fees and expenses, title insurance and miscellaneous expenses related to selecting and acquiring properties, or making or investing in loans, whether or not the acquisition or investment is made.

Acquisition Fees.  The total of all fees and commissions, excluding Acquisition Expenses, paid by any party to any party in connection with making or investing in loans or the purchase, development or construction of property by the Corporation. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, Development Fee, Construction Fee, nonrecurring management fee, origination fees, loan fees or points or any fee of a similar nature, however designated. Excluded shall be Development Fees and Construction Fees paid to any Person not affiliated with the Sponsor in connection with the actual development and construction of a project.

Advisor.  The Person responsible for directing or performing the day-to-day business affairs of the Corporation, including a Person to which an Advisor subcontracts substantially all such functions.

Advisory Agreement.  The agreement between the Corporation and the Advisor pursuant to which the Advisor will direct or perform the day-to-day business affairs of the Corporation.

Affiliate.  An Affiliate of another Person includes any of the following:

(a)        any Person directly or indirectly owning, controlling or holding, with power to vote, 10% or more of the outstanding voting securities of such other Person;

(b)        any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with power to vote, by such other Person;

(c)        any Person directly or indirectly controlling, controlled by or under common control with such other Person;

(d)        any executive officer, director, trustee or general partner of such other Person; and

(e)        any legal entity for which such Person acts as an executive officer, director, trustee or general partner.

Average Invested Assets.  For a specified period, the average of the aggregate book value of the assets of the Corporation invested, directly or indirectly in equity interests in and

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loans secured by real estate, before deducting depreciation, bad debts or other non-cash reserves, computed by taking the average of such values at the end of each month during such period.

Business Day.  Any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.

Capital Stock.  All classes or series of stock of the Corporation, including, without limitation, Common Stock and Preferred Stock.

Code.  The term shall have the meaning as provided in Article II herein.

Common Stock.  The term shall have the meaning as provided in Section 5.1 herein.

Common Stockholders.  The registered holders of Common Stock.

Conflicts Committee.  The term shall have the meaning as provided in Section 10.1.

Corporation.  The term shall have the meaning as provided in Article I herein.

Competitive Real Estate Commission.  A real estate or brokerage commission paid for the purchase or sale of a property that is reasonable, customary and competitive in light of the size, type and location of the property.

Construction Fee.  A fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitation on a property.

Contract Purchase Price.  The amount actually paid or allocated in respect of the purchase, development, construction or improvement of an asset exclusive of Acquisition Fees and Acquisition Expenses.

Development Fee.  A fee for the packaging of the Corporation’s property, including the negotiation and approval of plans and any assistance in obtaining zoning and necessary variances and financing for a specific property, either initially or at a later date.

Director(s).  The members of the board of directors which manages the Corporation.

FINRA.  The Financial Industry Regulatory Authority or any successor organization.

Independent Directors.  The Directors of the Corporation who are not associated and have not been associated within the last two years, directly or indirectly, with the Sponsor or Advisor of the Corporation.

(a)        A Director shall be deemed to be associated with the Sponsor or Advisor if he or she:

(i)        owns an interest in the Sponsor, Advisor or any of their Affiliates;

(ii)       is employed by the Sponsor, Advisor or any of their Affiliates;

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(iii)        is an officer or director of the Sponsor, Advisor or any of their Affiliates;

(iv)        performs services, other than as a Director, for the Corporation;

(v)         is a director for more than three REITs organized by the Sponsor or advised by the Advisor; or

(vi)        has any material business or professional relationship with the Sponsor, Advisor or any of their Affiliates.

(b)        For purposes of determining whether or not a business or professional relationship is material pursuant to (a)(vi) above, the annual gross revenue derived by the prospective Director from the Sponsor, Advisor and their Affiliates shall be deemed material per se if it exceeds 5% of the prospective Director’s:

(i)         annual gross revenue, derived from all sources, during either of the last two years; or

(ii)        net worth, on a fair market value basis.

(c)        An indirect relationship shall include circumstances in which a Director’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law or brother- or sister-in-law is or has been associated with the Sponsor, Advisor any of their Affiliates or the Corporation.

Independent Expert.  A Person (selected by the Conflicts Committee) with no material current or prior business or personal relationship with the Advisor or a Director who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Corporation.

Initial Investment.  An investment of $200,000 by the Advisor or an Affiliate thereof to acquire an equity interest in the Corporation.

Initial Public Offering.  The initial public offering of Common Stock registered on Registration Statement
No. 333-161449 on Form S-11.

Leverage.  The aggregate amount of indebtedness of the Corporation for money borrowed (including purchase money mortgage loans) outstanding at any time, both secured and unsecured.

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Listed.  Approved for trading on any securities exchange registered as a national securities exchange under Section 6 of the Securities Exchange Act of 1934. The term “Listing” shall have the correlative meaning.

MGCL.  The term shall have the meaning as provided in Article II herein.

NASAA REIT Guidelines.  The Statement of Policy Regarding Real Estate Investment Trusts as revised and adopted by the North American Securities Administrators Association on May 7, 2007.

Net Assets.  The total assets of the Corporation (other than intangibles) at cost, before deducting depreciation or other non-cash reserves, less total liabilities, calculated quarterly by the Corporation on a basis consistently applied.

Net Income.  For any period, total revenues applicable to such period less the expenses applicable to such period other than additions to reserves for depreciation or bad debts or other similar non-cash reserves. If the Advisor receives an incentive fee, Net Income, for purposes of calculating Total Operating Expenses in Section 8.8, shall exclude the gain from the sale of the Corporation’s assets.

Organization and Offering Expenses.  All expenses incurred by and to be paid from the assets of the Corporation in connection with preparing the Corporation for registration of and subsequently offering and distributing its shares to the public, including, but not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); any expense allowance granted by the Corporation to the underwriter or any reimbursement of expenses of the underwriter by the Corporation; expenses for printing, engraving and mailing; compensation of employees while engaged in sales activity; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants’ and attorneys’ fees.

Person.  An individual, corporation, association, business trust, estate, trust, partnership, limited liability company or other legal entity.

Preferred Stock.  The term shall have the meaning as provided in Section 5.1 herein.

Prospectus.  The term shall have the meaning as defined in Section 2(10) of the Securities Act of 1933, as amended (the “Securities Act”), including a preliminary prospectus, an offering circular as described in Rule 253 of the General Rules and Regulations under the Securities Act or, in the case of an intrastate offering, any document by whatever name known utilized for the purpose of offering and selling securities to the public.

REIT.  Real estate investment trust under Sections 856 through 860 of the Code.

Roll-Up Entity.  A partnership, real estate investment trust, corporation, trust or similar entity that would be created or would survive after the successful completion of a proposed Roll-Up Transaction.

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Roll-Up Transaction.  A transaction involving the acquisition, merger, conversion or consolidation, either directly or indirectly, of the Corporation and the issuance of securities of a Roll-Up Entity to the Common Stockholders.

Such term does not include:

(a)        a transaction involving securities of the Corporation that have been Listed for at least 12 months; or

(b)        a transaction involving the conversion to corporate, trust or association form of only the Corporation, if, as a consequence of the transaction, there will be no significant adverse change in any of the following:

(i)        the voting rights of Common Stockholders;

(ii)       the term of existence of the Corporation;

(iii)      Sponsor or Advisor compensation; or

(iv)      the Corporation’s investment objectives.

SDAT.  The State Department of Assessments and Taxation of Maryland.

Sponsor.  Any Person directly or indirectly instrumental in organizing, wholly or in part, the Corporation or any Person who will control, manage or participate in the management of the Corporation, and any Affiliate of such Person. Not included is any Person whose only relationship with the Corporation is as that of an independent property manager of the Corporation’s assets and whose only compensation is as such. Sponsor does not include wholly independent third parties such as attorneys, accountants and underwriters whose only compensation is for professional services. A Person may also be deemed a Sponsor of the Corporation (as to be determined by the Conflicts Committee) by:

(a)        taking the initiative, directly or indirectly, in founding or organizing the business or enterprise of the Corporation, either alone or in conjunction with one or more other Persons;

(b)        receiving a material participation in the Corporation in connection with the founding or organizing of the business of the Corporation, in consideration of services or property, or both services and property;

(c)        having a substantial number of relationships and contacts with the Corporation;

(d)        possessing significant rights to control the Corporation’s properties;

(e)        receiving fees for providing services to the Corporation which are paid on a basis that is not customary in the industry; or

(f)        providing goods or services to the Corporation on a basis which was not negotiated at arms length with the Corporation.

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Total Operating Expenses.  All expenses paid or incurred by the Corporation, as determined under generally accepted accounting principles, that are in any way related to the operation of the Corporation or to Corporation business, including advisory fees, but excluding (a) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of the Capital Stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) incentive fees paid in compliance with Section 8.6, notwithstanding the next succeeding clause (f); and (f) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of property and other expenses connected with the acquisition, disposition and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

Unimproved Real Property.  The real property of the Corporation that has the following three characteristics:

(a)        such property was not acquired for the purpose of producing rental or other operating income;

(b)        there is no development or construction in progress on such land; and

(c)        no development or construction on such land is planned in good faith to commence on such land within one year.

ARTICLE V

STOCK

Section 5.1.  Authorized Shares.    The Corporation has authority to issue 1,000,000,000 shares of common stock, $0.01 par value per share (“Common Stock”), and 10,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”). The aggregate par value of all authorized shares of Capital Stock having par value is $10,100,000. The board of directors, with the approval of a majority of the Directors and without any action by the stockholders of the Corporation, may amend the charter from time to time to increase or decrease the aggregate number of shares of Capital Stock or the number of shares of Capital Stock of any class or series that the Corporation has the authority to issue. The Corporation will not issue shares of Capital Stock that are non-voting.

Section 5.2.  Common Stock.    Subject to the provisions of Article VI, each share of Common Stock shall entitle the holder thereof to one vote. Each share of Common Stock shall entitle the holder thereof to vote for members of the board of directors. The board of directors may classify any unissued shares of Common Stock and reclassify any unissued shares of Common Stock from time to time in one or more classes or series of Capital Stock.

Section 5.3.  Preferred Stock.    The board of directors may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time in one or more series of Capital Stock. A majority of our Independent Directors who do not have an interest in the transaction must approve any issuance of preferred stock.

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Section 5.4.  Classified or Reclassified Shares.    Prior to the issuance of classified or reclassified shares of any class or series, the board of directors by resolution shall: (a) designate that class or series to distinguish it from all other classes and series of Capital Stock of the Corporation; (b) specify the number of shares to be included in the class or series; (c) set or change, subject to the provisions of Article VI and subject to the express terms of any class or series of Capital Stock of the Corporation outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Corporation to file articles supplementary with the SDAT. Any of the terms of any class or series of Capital Stock set or changed pursuant to clause (c) of this Section 5.4 may be made dependent upon facts or events ascertainable outside the charter (including determinations by the board of directors or other facts or events within the control of the Corporation) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate upon the terms of such class or series of Capital Stock is clearly and expressly set forth in the articles supplementary filed with the SDAT.

Section 5.5.  Charter and Bylaws.    All Persons who shall acquire Capital Stock in the Corporation shall acquire the same subject to the provisions of the charter and the bylaws.

Section 5.6.  No Preemptive Rights.    No holder of shares of Capital Stock of any class shall have any preemptive right to subscribe to or purchase any additional shares of any class, or any bonds or convertible securities of any nature; provided, however, that the board of directors may, in authorizing the issuance of shares of Capital Stock of any class, confer any preemptive right that the board of directors may deem advisable in connection with such issuance.

Section 5.7.  Issuance of Shares Without Certificates.    The board of directors may authorize the issuance of shares of Capital Stock without certificates. The Corporation shall continue to treat the holder of uncertificated Capital Stock registered on its stock ledger as the owner of the shares noted therein until the new owner delivers a properly executed form provided by the Corporation for that purpose. With respect to any shares of Capital Stock that are issued without certificates, information regarding restrictions on the transferability of such shares that would otherwise be required by the MGCL to appear on the share certificates will instead be furnished to stockholders upon request and without charge.

Section 5.8.  Suitability and Minimum Investment of Stockholders.    Until the Common Stock is Listed, the following provisions shall apply to purchases of shares of Common Stock:

(a)        To purchase Common Stock, the purchaser must represent to the Corporation:

(i)        that such purchaser (or, in the case of sales to fiduciary accounts, that the beneficiary, the fiduciary account or the grantor or donor who directly or indirectly supplies the funds to purchase the shares if the grantor or donor is the fiduciary) has a minimum annual gross income of $70,000 and a net worth (excluding home, home furnishings and automobiles) of not less than $70,000; or

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(ii)        that such purchaser (or, in the case of sales to fiduciary accounts, that the beneficiary, the fiduciary account or the grantor or donor who directly or indirectly supplies the funds to purchase the shares if the grantor or donor is the fiduciary) has a net worth (excluding home, home furnishings and automobiles) of not less than $250,000.

(b)        The Sponsor, each Person selling shares on behalf of the Sponsor or the Corporation, and each broker or dealer or registered investment adviser recommending the purchase of shares to a customer shall make every reasonable effort to determine that the purchase of shares is a suitable and appropriate investment for each Common Stockholder. In making this determination, the Sponsor, each Person selling shares on behalf of the Sponsor or the Corporation, or each broker or dealer or registered investment adviser recommending the purchase of shares to a customer shall ascertain that the prospective Common Stockholder:

(i)        meets the minimum income and net worth standards set forth in Section 5.8(a);

(ii)       can reasonably benefit from the Corporation based on the prospective stockholder’s overall investment objectives and portfolio structure;

(iii)       is able to bear the economic risk of the investment based on the prospective stockholder’s overall financial situation; and

(iv)       has apparent understanding of (1) the fundamental risks of the investment; (2) the risk that the stockholder may lose the entire investment; (3) the lack of liquidity of the shares; (4) the restrictions on transferability of the shares; and (5) the tax consequences of the investment.

(c)        The Sponsor, each Person selling shares on behalf of the Sponsor or the Corporation, or each broker or dealer or registered investment adviser recommending the purchase of shares to a customer shall make this determination on the basis of information it has obtained from a prospective stockholder, including information indirectly obtained from a prospective stockholder through such stockholder’s investment adviser, financial advisor or bank acting as a fiduciary. Relevant information for this purpose will include at least the age, investment objectives, investment experience, income, net worth, financial situation and other investments of the prospective stockholder, as well as any other pertinent factors. The Sponsor, each Person selling shares on behalf of the Sponsor or the Corporation, or each broker or dealer or registered investment adviser recommending the purchase of shares to a customer shall cause to be maintained for at least six years records of the information used to determine that an investment in shares is suitable and appropriate for a Common Stockholder.

(d)        The Sponsor and each Person selling shares on behalf of the Sponsor or the Corporation may each rely upon (i) the Person directly recommending the purchase of shares to a customer if that Person is a FINRA member broker or dealer that has entered into a selling agreement with the Sponsor or the Corporation or their Affiliates or (ii) a registered investment adviser that has entered into an agreement with the Sponsor or the Corporation or their Affiliates

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to make suitability determinations with respect to the customers of the registered investment adviser who may purchase shares.

(e)        Each purchase of shares of Common Stock shall comply with the requirements regarding minimum initial and subsequent cash investment amounts set forth in any then effective registration statement of the Corporation as such registration statement has been amended or supplemented as of the date of such purchase or any higher or lower applicable state requirements with respect to minimum initial and subsequent cash investment amounts in effect as of the date of the purchase.

Section 5.9.  Dividend Reinvestment Plans.    The board may establish, from time to time, a dividend reinvestment plan or plans. Under any dividend reinvestment plan, (a) all material information regarding dividends to the Common Stockholders and the effect of reinvesting such dividends, including the tax consequences thereof, shall be provided to the Common Stockholders not less often than annually, and (b) each Common Stockholder participating in such plan shall have a reasonable opportunity to withdraw from the plan not less often than annually after receipt of the information required in clause (a) above.

Section 5.10.  Distributions.

(a)        Only the board of directors may authorize payments to stockholders in connection with their stock. The decision to authorize a distribution, like all other board decisions, shall be made in good faith, in a manner reasonably believed to be in the best interest of the Corporation and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Until the board of directors determines that it is no longer in the best interest of the Corporation to qualify as a REIT, the board of directors are to authorize dividends to the extent necessary to preserve the status of the Corporation as a REIT.

(b)        Distributions in kind shall not be permitted, except for distributions of readily marketable securities, distributions of beneficial interests in a liquidating trust established for the dissolution of the Corporation and the liquidation of its assets in accordance with the terms of the charter or distributions that meet all of the following conditions: (i) the board of directors advises each Common Stockholder of the risks associated with direct ownership of the property, (ii) the board of directors offers each Common Stockholder the election of receiving such in-kind distributions, and (iii) in-kind distributions are made only to those Common Stockholders who accept such offer.

(c)        To the extent that the Corporation incurs any tax pursuant to Section 860E(e)(6) of the Code as the result of any “excess inclusion” income (within the meaning of Section 860E of the Code) of the Corporation that is allocable to a stockholder that is a “disqualified organization” (as defined in Section 860E(e)(5) of the Code), the board of directors may, in its sole discretion, cause the Corporation to allocate such tax solely to the stock held by such disqualified organization in the manner described in Treasury Regulation Section 1.860E-2(b)(4), by reducing from one or more distributions paid to such stockholder the amount of the tax incurred by the Corporation pursuant to Section 860E(e)(6) as a result of such stockholder’s stock ownership.

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Section 5.11.  Actions Required if Common Stock Not Listed.    If by January 31, 2020 the shares of Common Stock are not Listed, then the board of directors must adopt a resolution that declares a proposed liquidation is advisable on substantially the terms and conditions set forth in the resolution and direct that the proposed liquidation be submitted for consideration at either an annual or special meeting of the stockholders; provided, however, that such board action may be postponed if the Conflicts Committee determines by a majority vote that a liquidation is not then in the best interest of the Corporation’s stockholders. If such board action is so postponed, the Conflicts Committee shall revisit the issue of liquidation at least annually and further postponement of such board action would only be permitted if the Conflicts Committee again determined by a majority vote that a liquidation would not then be in the best interest of the Corporation’s stockholders.

ARTICLE VI

RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES

Section 6.1.  Definitions.    As used in this Article VI, the following terms shall have the following meanings:

Aggregate Stock Ownership Limit.  9.8% in value of the aggregate of the outstanding shares of Capital Stock. The value of the outstanding shares of Capital Stock shall be determined by the board of directors in good faith, which determination shall be conclusive for all purposes hereof.

Beneficial Ownership.  Ownership of Capital Stock by a Person, whether the interest in the shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficial Owner,” “Beneficially Owns,” “Beneficially Owning” and “Beneficially Owned” shall have the correlative meanings.

Charitable Beneficiary.  One or more beneficiaries of the Trust as determined pursuant to Section 6.3.6, provided that each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

Common Stock Ownership Limit.  9.8% (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of Common Stock of the Corporation. The number and value of outstanding shares of Common Stock of the Corporation shall be determined by the board of directors in good faith, which determination shall be conclusive for all purposes hereof.

Constructive Ownership.  Ownership of Capital Stock by a Person, whether the interest in the shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Owns,” “Constructively Owning” and “Constructively Owned” shall have the correlative meanings.

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Excepted Holder.  A stockholder of the Corporation for whom an Excepted Holder Limit is created by this charter or by the board of directors pursuant to Section 6.2.7.

Excepted Holder Limit.  The percentage limit established by the board of directors pursuant to Section 6.2.7 provided that the affected Excepted Holder agrees to comply with the requirements established by the board of directors pursuant to Section 6.2.7, and subject to adjustment pursuant to Section 6.2.8.

Initial Date.  The date upon which the charter containing this Article VI is filed with the SDAT.

Market Price.  With respect to any class or series of outstanding shares of Capital Stock, the Closing Price for such Capital Stock on such date. The “Closing Price” on any date shall mean the last sale price for such Capital Stock, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Capital Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the principal national securities exchange on which such Capital Stock is listed or admitted to trading or, if such Capital Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by FINRA’s OTC Bulletin Board service or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if such Capital Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Capital Stock selected by the board of directors or, in the event that no trading price is available for such Capital Stock, the fair market value of the Capital Stock, as determined in good faith by the board of directors.

Prohibited Owner.  With respect to any purported Transfer, any Person who but for the provisions of Section 6.2.1 would Beneficially Own or Constructively Own shares of Capital Stock and, if appropriate in the context, shall also mean any Person who would have been the record owner of the shares that the Prohibited Owner would have so owned.

Restriction Termination Date.  The first day on which the Corporation determines pursuant to Section 7.7 of the charter that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify as a REIT or that compliance with the restrictions and limitations on Beneficial Ownership, Constructive Ownership and Transfers of shares of Capital Stock set forth herein is no longer required in order for the Corporation to qualify as a REIT.

Transfer.  Any issuance, sale, transfer, gift, assignment, devise or other disposition as well as any other event that causes any Person to acquire Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions or cause any such events, of Capital Stock or the right to vote or receive distributions on Capital Stock, including (a) the granting or exercise of any option (or any disposition of any option), (b) any disposition of any securities or rights convertible into or exchangeable for Capital Stock or any interest in Capital Stock or any exercise of any such conversion or exchange right and (c) Transfers of interests in other entities that result in changes in Beneficial Ownership or Constructive Ownership of Capital Stock; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or

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Beneficially Owned and whether by operation of law or otherwise. The terms “Transferring” and “Transferred” shall have the correlative meanings.

Trust.  Any trust provided for in Section 6.3.1.

Trustee.  The Person unaffiliated with the Corporation and a Prohibited Owner that is appointed by the Corporation to serve as trustee of the Trust.

Section 6.2.  Capital Stock.

Section 6.2.1.  Ownership Limitations.    Prior to the Restriction Termination Date:

(a)        Basic Restrictions.

(i)        (1) No Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own shares of Capital Stock in excess of the Aggregate Stock Ownership Limit, (2) no Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own shares of Common Stock in excess of the Common Stock Ownership Limit and (3) no Excepted Holder shall Beneficially Own or Constructively Own shares of Capital Stock in excess of the Excepted Holder Limit for such Excepted Holder.

(ii)        No Person shall Beneficially Own or Constructively Own shares of Capital Stock to the extent that such Beneficial Ownership or Constructive Ownership of Capital Stock would result in the Corporation (1) being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or (2) otherwise failing to qualify as a REIT (including, but not limited to, Beneficial Ownership or Constructive Ownership that would result in the Corporation owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code); provided, however, that this Section 6.2.1(a)(ii)(1) shall not apply to the Corporation’s first taxable year for which a REIT election is made.

(iii)        Notwithstanding any other provisions contained herein, any Transfer of shares of Capital Stock (whether or not such Transfer is the result of a transaction entered into through the facilities of any national securities exchange or automated inter-dealer quotation system) that, if effective, would result in the Capital Stock being Beneficially Owned by less than 100 Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such shares of Capital Stock; provided, however, that (1) this Section 6.2.1(a)(iii) shall not apply to a Transfer of shares of Capital Stock occurring in the Corporation’s first taxable year for which a REIT election is made and (2) the board of directors may waive this Section 6.2.1(a)(iii) if, in the opinion of the board of directors, such Transfer would not adversely affect the Corporation’s ability to qualify as a REIT.

(b)        Transfer in Trust. If any Transfer of shares of Capital Stock (whether or not such Transfer is the result of a transaction entered into through the facilities of any national securities

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exchange or automated inter-dealer quotation system) occurs that, if effective, would result in any Person Beneficially Owning or Constructively Owning shares of Capital Stock in violation of Section 6.2.1(a)(i) or Section 6.2.1(a)(ii),

(i)        then that number of shares of Capital Stock the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Section 6.2.1(a)(i) or Section 6.2.1(a)(ii) (rounded to the nearest whole share) shall be automatically transferred to a Trust for the benefit of a Charitable Beneficiary, as described in Section 6.3, effective as of the close of business on the Business Day prior to the date of such Transfer and such Person shall acquire no rights in such shares; provided, however,

(ii)        if the transfer to the Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 6.2.1(a)(i) or Section 6.2.1(a)(ii), then the Transfer of that number of shares of Capital Stock that otherwise would cause any Person to violate Section 6.2.1(a)(i) or Section 6.2.1(a)(ii) shall be void ab initio and the intended transferee shall acquire no rights in such shares of Capital Stock.

Section 6.2.2.  Remedies for Breach.    If the board of directors shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 6.2.1(a) or that a Person intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of any shares of Capital Stock in violation of Section 6.2.1(a) (whether or not such violation is intended), the board of directors or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Corporation to redeem shares, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfers or attempted Transfers or other events in violation of Section 6.2.1(a) shall automatically result in the transfer to the Trust described above and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the board of directors.

Section 6.2.3.  Notice of Restricted Transfer.    Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of shares of Capital Stock that will or may violate Section 6.2.1(a) or any Person who would have owned shares of Capital Stock that resulted in a transfer to the Trust pursuant to the provisions of Section 6.2.1(b) shall immediately give written notice to the Corporation of such event or, in the case of such a proposed or attempted transaction, give at least 15 days prior written notice and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer on the Corporation’s status as a REIT.

Section 6.2.4.  Owners Required to Provide Information.    Prior to the Restriction Termination Date:

(a)        every owner of 5% or more (or such higher percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding shares of Capital Stock,

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within 30 days after the end of each taxable year, shall give written notice to the Corporation stating the name and address of such owner, the number of shares of Capital Stock and other shares of the Capital Stock Beneficially Owned and a description of the manner in which such shares are held. Each such owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporation’s status as a REIT and to ensure compliance with the Aggregate Stock Ownership Limit.

(b)        each Person who is a Beneficial Owner or Constructive Owner of Capital Stock and each Person (including the stockholder of record) who is holding Capital Stock for a Beneficial Owner or Constructive Owner shall provide to the Corporation such information as the Corporation may request, in good faith, in order to determine the Corporation’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance.

Section 6.2.5.  Remedies Not Limited.    Subject to Section 7.7, nothing contained in this Section 6.2 shall limit the authority of the board of directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders in preserving the Corporation’s status as a REIT.

Section 6.2.6.  Ambiguity.    In the case of an ambiguity in the application of any of the provisions of this Section 6.2, Section 6.3 or any definition contained in Section 6.1, the board of directors shall have the power to determine the application of the provisions of this Section 6.2 or Section 6.3 with respect to any situation based on the facts known to it. In the event Section 6.2 or Section 6.3 requires an action by the board of directors and the charter fails to provide specific guidance with respect to such action, the board of directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Sections 6.1, 6.2 or 6.3.

Section 6.2.7.  Exceptions.

(a)        Subject to Section 6.2.1(a)(ii), the board of directors, in its sole discretion, may exempt a Person from the Aggregate Stock Ownership Limit and the Common Stock Ownership Limit, as the case may be, and may establish or increase an Excepted Holder Limit for such Person if:

(i)        the board of directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that no Person’s Beneficial Ownership or Constructive Ownership of such shares of Capital Stock will violate Section 6.2.1(a)(ii);

(ii)        such Person does not and represents that it will not own, actually or Constructively, an interest in a tenant of the Corporation (or a tenant of any entity owned or controlled by the Corporation) that would cause the Corporation to own, actually or Constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the board of directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain this fact (for this

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purpose, a tenant from whom the Corporation (or an entity owned or controlled by the Corporation) derives (and is expected to continue to derive) a sufficiently small amount of revenue such that, in the opinion of the board of directors, rent from such tenant would not adversely affect the Corporation’s ability to qualify as a REIT shall not be treated as a tenant of the Corporation); and

(iii)        such Person agrees that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in Sections 6.2.1 through 6.2.6) will result in such shares of Capital Stock being automatically transferred to a Trust in accordance with Section 6.2.1(b) and Section 6.3.

(b)        Prior to granting any exception pursuant to Section 6.2.7(a), the board of directors may require a ruling from the Internal Revenue Service or an opinion of counsel, in either case, in form and substance satisfactory to the board of directors in its sole discretion, as it may deem necessary or advisable in order to determine or ensure the Corporation’s status as a REIT. Notwithstanding the receipt of any ruling or opinion, the board of directors may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.

(c)        Subject to Section 6.2.1(a)(ii), an underwriter which participates in a public offering or a private placement of Capital Stock (or securities convertible into or exchangeable for Capital Stock) may Beneficially Own or Constructively Own shares of Capital Stock (or securities convertible into or exchangeable for Capital Stock) in excess of the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit or both such limits, but only to the extent necessary to facilitate such public offering or private placement.

(d)        The board of directors may only reduce the Excepted Holder Limit for an Excepted Holder: (i) with the written consent of such Excepted Holder at any time or (ii) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted Holder Limit shall be reduced to a percentage that is less than the Common Stock Ownership Limit.

Section 6.2.8.  Increase in Aggregate Stock Ownership Limit and Common Stock Ownership Limit.    The board of directors may from time to time increase the Common Stock Ownership Limit and the Aggregate Stock Ownership Limit.

Section 6.2.9.  Legend.    Each certificate for shares of Capital Stock shall bear substantially the following legend:

The shares represented by this certificate are subject to restrictions on Beneficial Ownership, Constructive Ownership and Transfer for the purpose of the Corporation’s maintenance of its status as a Real Estate Investment Trust under the Internal Revenue Code of 1986, as amended (the “Code”). Subject to certain further restrictions and except as expressly provided in the Corporation’s charter: (a) no Person may Beneficially Own or Constructively Own shares of the Corporation’s Common Stock in excess of 9.8% (in value or number of shares) of

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the outstanding shares of Common Stock of the Corporation unless such Person is an Excepted Holder (in which case the Excepted Holder Limit for such Excepted Holder shall be applicable); (b) no Person may Beneficially Own or Constructively Own shares of Capital Stock of the Corporation in excess of 9.8% of the value of the total outstanding shares of Capital Stock of the Corporation, unless such Person is an Excepted Holder (in which case the Excepted Holder Limit for such Excepted Holder shall be applicable); (c) no Person may Beneficially Own or Constructively Own Capital Stock that would result in the Corporation being “closely held” under Section 856(h) of the Code or otherwise cause the Corporation to fail to qualify as a REIT; and (d) other than as provided in the Corporation’s charter, no Person may Transfer shares of Capital Stock if such Transfer would result in the Capital Stock of the Corporation being owned by fewer than 100 Persons. Any Person who Beneficially Owns or Constructively Owns or attempts to Beneficially Own or Constructively Own shares of Capital Stock that causes or will cause a Person to Beneficially Own or Constructively Own shares of Capital Stock in excess or in violation of the above limitations must immediately notify the Corporation or, in the case of a proposed or attempted transaction, give at least 15 days prior written notice and provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such Transfer on the Corporation’s status as a REIT. If any of the restrictions on Transfer or ownership are violated, the shares of Capital Stock represented hereby will be automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries or, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio.

Until the Common Stock is Listed, to purchase Common Stock, the purchaser must represent to the Corporation: (i) that such purchaser (or, in the case of sales to fiduciary accounts, that the beneficiary, fiduciary account or grantor or donor who directly or indirectly supplies the funds to purchase the shares if the grantor or donor is the fiduciary) has a minimum annual gross income of $70,000 and a net worth (excluding home, home furnishings and automobiles) of not less than $70,000; (ii) that such purchaser (or, in the case of sales to fiduciary accounts, that the beneficiary, fiduciary account or grantor or donor who directly or indirectly supplies the funds to purchase the shares if the grantor or donor is the fiduciary) has a net worth (excluding home, home furnishings and automobiles) of not less than $250,000; and/ or (iii) that the purchaser (or, in the case of sales to fiduciary accounts, that the beneficiary, fiduciary account or grantor or donor who directly or indirectly supplies the funds to purchase the shares if the grantor or donor is the fiduciary) meets the more stringent suitability standards of such person’s jurisdiction as set forth in any then effective registration statement of the Corporation as such registration statement has been amended or supplemented as of the date of such purchase. Until the Common Stock is Listed, unless a stockholder is transferring all of his shares of Common Stock, each issuance or transfer of shares of Common Stock for value shall comply with the requirements regarding minimum initial and subsequent cash investment amounts set forth in any then effective registration statement of the Corporation as such registration

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statement has been amended or supplemented as of the date of such issuance or transfer for value or any higher or lower applicable state requirements with respect to minimum initial and subsequent cash investment amounts in effect as of the date of the issuance or transfer.

All capitalized terms in this legend have the meanings defined in the charter of the Corporation, as the same may be amended from time to time, a copy of which, including the restrictions on Transfer and ownership, will be furnished to each holder of Capital Stock of the Corporation on request and without charge.

Instead of the foregoing legend, the certificate may state that the Corporation will furnish a full statement about certain restrictions on transferability to a stockholder on request and without charge. Such statement shall also be sent on request and without charge to stockholders who are issued shares without a certificate.

Section 6.3.  Transfer of Capital Stock in Trust.

Section 6.3.1.  Ownership in Trust.    Upon any purported Transfer or other event described in Section 6.2.1(b) that would result in a transfer of shares of Capital Stock to a Trust, such shares of Capital Stock shall be deemed to have been transferred to the Trustee as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Trust pursuant to Section 6.2.1(b). The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation and any Prohibited Owner. Each Charitable Beneficiary shall be designated by the Corporation as provided in Section 6.3.6.

Section 6.3.2.  Status of Shares Held by the Trustee.    Shares of Capital Stock held by the Trustee shall be issued and outstanding shares of Capital Stock of the Corporation. The Prohibited Owner shall have no rights in the shares held by the Trustee. The Prohibited Owner shall not benefit economically from ownership of any shares held in trust by the Trustee and shall have no rights to dividends or other distributions attributable to the shares held in the Trust.

Section 6.3.3.  Distributions and Voting Rights.    The Trustee shall have all voting rights and rights to distributions with respect to shares of Capital Stock held in the Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any distribution paid prior to the discovery by the Corporation that the shares of Capital Stock have been transferred to the Trustee shall be paid by the recipient of such distribution to the Trustee upon demand, and any distribution authorized but unpaid shall be paid when due to the Trustee. Any distribution so paid to the Trustee shall be held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no voting rights with respect to shares held in the Trust, and, subject to Maryland law, effective as of the date that the shares of Capital Stock have been transferred to the Trustee, the Trustee shall have the authority with respect to the shares held in the Trust (at the Trustee’s sole discretion) (a) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Corporation that the shares of Capital Stock have been transferred to the Trustee and (b) to recast such vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Corporation has already

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taken irreversible corporate action, then the Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Article VI, until the Corporation has received notification that shares of Capital Stock have been transferred into a Trust, the Corporation shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of stockholders.

Section 6.3.4.  Sale of Shares by Trustee.    Within 20 days of receiving notice from the Corporation that shares of Capital Stock have been transferred to the Trust, the Trustee of the Trust shall sell the shares held in the Trust to a Person, designated by the Trustee, whose ownership of the shares will not violate the ownership limitations set forth in Section 6.2.1(a). Upon such sale, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 6.3.4. The Prohibited Owner shall receive the lesser of (a) the price paid by the Prohibited Owner for the shares or, if the Prohibited Owner did not give value for the shares in connection with the event causing the shares to be held in the Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Trust or (b) the price per share received by the Trustee from the sale or other disposition of the shares held in the Trust. Any net sale proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Trustee, such shares are sold by a Prohibited Owner, then (i) such shares shall be deemed to have been sold on behalf of the Trust and (ii) to the extent that the Prohibited Owner received an amount for such shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 6.3.4, such excess shall be paid to the Trustee upon demand.

Section 6.3.5.  Purchase Right in Stock Transferred to the Trustee.    Shares of Capital Stock transferred to the Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (a) the price per share in the transaction that resulted in such transfer to the Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) or (b) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer until the Trustee has sold the shares held in the Trust pursuant to Section 6.3.4. Upon such a sale to the Corporation, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.

Section 6.3.6.  Designation of Charitable Beneficiaries.    By written notice to the Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust such that (a) the shares of Capital Stock held in the Trust would not violate the restrictions set forth in Section 6.2.1(a) in the hands of such Charitable Beneficiary and (b) each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

Section 6.4.  Settlement.    Nothing in this Article VI shall preclude the settlement of any transaction entered into through the facilities of any national securities exchange or automated

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inter-dealer quotation system. The fact that the settlement of any transaction is so permitted shall not negate the effect of any other provision of this Article VI and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VI.

Section 6.5.  Enforcement.    The Corporation is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VI.

Section 6.6.  Non-Waiver.    No delay or failure on the part of the Corporation or the board of directors in exercising any right hereunder shall operate as a waiver of any right of the Corporation or the board of directors, as the case may be, except to the extent specifically waived in writing.

ARTICLE VII

BOARD OF DIRECTORS

Section 7.1.  Number of Directors.    The number of Directors of the Corporation shall be five, which number may be increased or decreased from time to time pursuant to the bylaws but shall never be less than three. A majority of the seats on the board of directors will be for Independent Directors. The Conflicts Committee shall nominate all individuals for the Independent Director positions. No reduction in the number of Directors shall cause the removal of any Director from office prior to the expiration of his term, except as may otherwise be provided in the terms of any Preferred Stock issued by the Corporation. The names of the Directors who shall serve on the board until the next annual meeting of the stockholders and until their successors are duly elected and qualified are:

Peter M. Bren

C. Preston Butcher

Gary T. Kachadurian

Michael L. Meyer

Ronald E. Zuzack

Section 7.2.  Term of Directors.    Each Director shall hold office for one year, until the next annual meeting of stockholders and until his successor is duly elected and qualified. Directors may be elected to an unlimited number of successive terms.

Section 7.3.  Experience.    Each Director who is not an Independent Director shall have at least three years of relevant experience demonstrating the knowledge and experience required to successfully acquire and manage the type of assets being acquired by the Corporation. At least one of the Independent Directors shall have three years of relevant real estate experience.

Section 7.4.  Committees.    The board may establish such committees as it deems appropriate, provided that the majority of the members of each committee are Independent Directors.

Section 7.5.  Fiduciary Obligations.    The Directors are fiduciaries of the Corporation and its stockholders. The Directors have a fiduciary duty to the stockholders to supervise the relationship between the Corporation and the Advisor.

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Section 7.6.   Ratification of Charter.    At or before the first meeting of the board of directors following the date of this amendment and restatement of the charter, the board of directors and the Conflicts Committee shall each review and ratify the charter by majority vote.

Section 7.7.   REIT Qualification.    If the Corporation elects to qualify for federal income tax treatment as a REIT, the board of directors shall use its reasonable best efforts to take such actions as are necessary or appropriate to preserve the status of the Corporation as a REIT; however, if the board of directors determines that it is no longer in the best interests of the Corporation to continue to be qualified as a REIT, the board of directors may revoke or otherwise terminate the Corporation’s REIT election pursuant to Section 856(g) of the Code. The board of directors also may determine that compliance with any restriction or limitation on ownership and transfers of Capital Stock set forth in Article VI is no longer required for REIT qualification.

Section 7.8.   Determinations by the Board.    The determination as to any of the following matters, made in good faith by or pursuant to the direction of the board of directors or the Conflicts Committee consistent with the charter and in the absence of actual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a court, shall be final and conclusive and shall be binding upon the Corporation and every holder of shares of its Capital Stock:

(a) the amount of the net income of the Corporation for any period and the amount of assets at any time legally available for the payment of dividends, redemption of its Capital Stock or the payment of other distributions on its Capital Stock;

(b) the amount of paid-in surplus, net assets, other surplus, annual or other net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets;

(c) the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged);

(d) the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Corporation;

(e) the application of any provision of this charter in the case of any ambiguity, including, without limitation: (i) any provision of the definitions of any of the following: Affiliate, Independent Director and Sponsor, (ii) which amounts paid to the Advisor or its Affiliates are property-level expenses connected with the ownership of real estate interests, loans or other property, which expenses are excluded from the definition of Total Operating Expenses, and (iii) whether expenses qualify as Organization and Offering Expenses;

(f) whether substantial justification exists to invest in or make a mortgage loan contemplated by Section 9.11(b) because of the presence of other underwriting criteria; and

(g) any matters relating to the acquisition, holding and disposition of any assets by the Corporation.

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Section 7.9.   Compensation of Directors.    The Conflicts Committee shall determine the compensation of the Independent Directors.

ARTICLE VIII

ADVISOR

Section 8.1.   Appointment and Initial Investment of Advisor.    The board of directors may appoint an Advisor to direct and/or perform the day-to-day business affairs of the Corporation. The board of directors may exercise broad discretion in allowing the Advisor to administer and regulate the operations of the Corporation, to act as agent for the Corporation, to execute documents on behalf of the Corporation and to make executive decisions that conform to general policies and principles established by the board of directors. The term of retention of any Advisor shall not exceed one year, although there is no limit to the number of times that a particular Advisor may be retained. Before the Initial Public Offering of the Corporation, the Advisor shall have made the Initial Investment. The Advisor or any such Affiliate may not sell the equity interest acquired with its Initial Investment while the Advisor remains an Advisor but may transfer the interest in the Corporation acquired with its Initial Investment to its Affiliates.

Section 8.2.   Supervision of Advisor.    The board of directors shall evaluate the performance of the Advisor before entering into or renewing an Advisory Agreement, and the criteria used in such evaluation shall be reflected in the minutes of the meetings of the board of directors. The Conflicts Committee shall determine at least annually whether the total fees and expenses incurred by the Corporation are reasonable in light of the investment performance of the Corporation, its Net Assets, its Net Income and the fees and expenses of other comparable unaffiliated REITs. The Conflicts Committee shall determine from time to time and at least annually that the compensation to be paid to the Advisor and its Affiliates is reasonable in relation to the nature and quality of services performed and that such compensation is within the limits prescribed by the charter. Each such determination shall be reflected in the minutes of the meetings of the board. The Conflicts Committee shall also supervise the performance of the Advisor and its Affiliates and the compensation paid to them by the Corporation to determine that the provisions of the Advisory Agreement are being met. Each such determination shall be based on factors such as (a) the amount of the fees and any other compensation, including stock-based compensation, paid to the Advisor and its Affiliates in relation to the size, composition and performance of the Corporation’s portfolio; (b) the success of the Advisor in generating opportunities that meet the investment objectives of the Corporation; (c) rates charged to other REITs and to investors other than REITs by advisors performing the same or similar services; (d) additional revenues realized by the Advisor and its Affiliates through their relationship with the Corporation, including loan administration, underwriting or broker commissions, servicing, engineering, inspection and other fees, whether paid by the Corporation or by others with whom the Corporation does business; (e) the quality and extent of service and advice furnished by the Advisor and its Affiliates; (f) the performance of the Corporation’s portfolio, including income, conservation or appreciation of capital, frequency of problem investments and competence in dealing with distress situations; and (g) the quality of the Corporation’s portfolio relative to the investments generated by the Advisor and its Affiliates for their own account. The Conflicts Committee may also consider all other factors that it deems relevant, and its findings on each of the factors considered shall be recorded in the minutes of the board of directors. The

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Corporation may not enter into, renew or amend the Advisory Agreement without the approval (by majority vote) of the Conflicts Committee. The board shall determine whether any successor Advisor possesses sufficient qualifications to perform the advisory function for the Corporation and whether the compensation provided for in its contract with the Corporation is justified.

Section 8.3.   Fiduciary Obligations.    The Advisor is a fiduciary of the Corporation and its stockholders.

Section 8.4.   Termination.    Either the Conflicts Committee (by majority vote) or the Advisor may terminate the Advisory Agreement on 60 days written notice without cause or penalty, and, in such event, the Advisor will cooperate with the Corporation and the board of directors in making an orderly transition of the advisory function.

Section 8.5.   Disposition Fee on Sale of Property.    If the Advisor or a Director or Sponsor or any Affiliate thereof provides a substantial amount of the services in the effort to sell the property of the Corporation, that Person may receive: (i) if a brokerage commission is paid to a Person other than an Affiliate of the Sponsor, an amount up to one-half of the total brokerage commissions paid but in no event an amount that exceeds 3% of the sales price of such property or properties or (ii) if no brokerage commission is paid to a Person other than an Affiliate of the Sponsor, an amount up to 3% of the sales price of such property or properties. In either case, however, the amount paid when added to all other commissions paid to unaffiliated parties in connection with such sale shall not exceed the lesser of the Competitive Real Estate Commission or an amount equal to 6% of the sales price of such property or properties.

Section 8.6.   Incentive Fees.    An interest in the gain from the sale of assets of the Corporation, for which full consideration is not paid in cash or property of equivalent value, may be paid to the Advisor or an entity affiliated with the Advisor provided that (a) the interest in the gain must be reasonable, and (b) if multiple Advisors are involved, incentive fees must be distributed by a proportional method reasonably designed to reflect the value added to the Corporation’s assets by each respective Advisor and its Affiliates. Such an interest in gain from the sale of assets of the Corporation shall be considered presumptively reasonable if it does not exceed 15% of the balance of such net proceeds remaining after payment to Common Stockholders, in the aggregate, of an amount equal to 100% of the original issue price of the Common Stock, plus an amount equal to 6% of the original issue price of the Common Stock per annum cumulative. Distribution of incentive fees to the Advisor or an entity affiliated with the Advisor in proportion to the length of time served as Advisor while such property was held by the Corporation or in proportion to the fair market value of the asset at the time of the Advisor’s termination and the fair market value of the asset upon its disposition by the Corporation shall be considered reasonable methods by which to apportion incentive fees. For purposes of this Section, the original issue price of the Common Stock shall be reduced by prior cash distributions to Common Stockholders of net proceeds from the sale of assets of the Corporation.

Section 8.7.   Acquisition Fees.    The Corporation shall not purchase a property or invest in or make a mortgage loan if the combined Acquisition Fees and Acquisition Expenses incurred in connection therewith are not reasonable or exceed 6% of the Contract Purchase Price or, in the case of a mortgage loan, 6% of the funds advanced unless a majority of the Corporation’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction approves

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the Acquisition Fees and Acquisition Expenses and determines the transaction to be commercially competitive, fair and reasonable to the Corporation.

Section 8.8.   Reimbursement for Total Operating Expenses.    Commencing upon the earlier to occur of four fiscal quarters after (a) the Corporation’s acquisition of its first real estate asset or (b) six months after commencement of the Initial Public Offering, the Conflicts Committee shall have the responsibility of limiting Total Operating Expenses to amounts that do not exceed the greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for the four consecutive fiscal quarters then ended unless it has made a finding that, based on unusual and non-recurring factors that it deems sufficient, a higher level of expenses (an “Excess Amount”) is justified. Any such finding and the reasons in support thereof shall be reflected in the minutes of the meetings. After the end of any fiscal quarter of the Corporation for which there is an Excess Amount for the 12 months then ended, such fact shall be disclosed in writing and sent to the Common Stockholders within 60 days of such quarter-end (or shall be disclosed to the Common Stockholders in the next quarterly report of the Corporation or by filing a Current Report on Form 8-K with the U.S. Securities and Exchange Commission within 60 days of such quarter end), together with an explanation of the factors the Conflicts Committee considered in determining that such Excess Amount was justified. In the event that the Conflicts Committee does not determine that excess expenses are justified, the Advisor shall reimburse the Corporation at the end of the 12-month period the amount by which the aggregate annual expenses paid or incurred by the Corporation exceeded the 2%/25% Guidelines.

ARTICLE IX

INVESTMENT OBJECTIVES AND LIMITATIONS

Section 9.1.   Investment Objectives.    The board of directors shall establish written policies on investments and borrowing and shall monitor the administrative procedures, investment operations and performance of the Corporation and the Advisor to assure that such policies are carried out. The board of directors will review our investment policies at least annually to determine whether our policies are in the best interests of the Common Stockholders. The determination of the board of directors must be approved by a majority of the Directors (including a majority of the Conflicts Committee) and the board of directors must include the basis for its determination in its minutes and in an annual report delivered to the Common Stockholders.

Section 9.2.   Limitations on Acquisitions.

(a)         The consideration paid for any real property acquired by the Corporation will ordinarily be based on the fair market value of such property as determined by a majority of the members of the board of directors, or the approval of a majority of a committee of the board, provided that the members of the committee approving the transaction would also constitute a majority of the board. In all cases in which a majority of the members of the Conflicts Committee (by majority vote) so determine, and in all cases in which real property is acquired from the Advisor, a Sponsor, a Director or an Affiliate thereof, such fair market value shall be as determined by an Independent Expert.

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(b)         The Corporation may not purchase or lease properties in which the Advisor, a Sponsor, a Director or an Affiliate thereof has an interest without a determination by a majority of the Corporation’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction that such transaction is fair and reasonable to the Corporation and at a price to the Corporation no greater than the cost of the property to the Affiliated seller or lessor unless there is substantial justification for the excess amount. Notwithstanding the preceding sentence, in no event may the Corporation acquire any such property at an amount in excess of its current appraised value as determined by an Independent Expert.

Section 9.3.   Limitations on Sales to, and Joint Ventures with, Affiliates.    The Corporation shall not transfer or lease assets to a Sponsor, the Advisor, a Director or an Affiliate thereof unless approved by a majority of the Corporation’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction as being fair and reasonable to the Corporation. The Corporation may invest in a joint venture with a Sponsor, the Advisor, a Director or an Affiliate thereof; provided, however, that the Corporation may only so invest if a majority of the Corporation’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction approves such investment as being fair and reasonable to the Corporation and on substantially the same terms and conditions as those received by the other joint venturers.

Section 9.4.   Limitations on Other Transactions Involving Affiliates.    A majority of the Corporation’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction must conclude that all other transactions between the Corporation and a Sponsor, the Advisor, a Director or an Affiliate thereof are fair and reasonable to the Corporation and on terms and conditions not less favorable to the Corporation than those available from unaffiliated third parties.

Section 9.5.   Limitations on the Issuance of Options and Warrants.    Until the Common Stock of the Corporation is Listed, the Corporation shall not issue options or warrants to purchase Common Stock to the Advisor, a Director, the Sponsors or any Affiliate thereof, except on the same terms as such options or warrants are sold to the general public. The Corporation may issue options or warrants to persons other than the Advisor, a Director, the Sponsors or any Affiliate thereof prior to Listing the Common Stock, but not at exercise prices less than the fair market value of the underlying securities on the date of grant and not for consideration (which may include services) that in the judgment of the Conflicts Committee has a market value less than the value of such option or warrant on the date of grant. Options or warrants issuable to the Advisor, a Director, the Sponsors or any Affiliate thereof shall not exceed an amount equal to 10% of the outstanding shares of Common Stock on the date of grant.

Section 9.6.   Limitations on the Repurchase of Common Stock.    The Corporation may voluntarily repurchase shares of Common Stock from its stockholders; provided, however, that such repurchase does not impair the capital or operations of the Corporation. The Corporation has adopted an excess share provision that provides for mandatory redemption of its common stock. The Corporation may not pay a fee to the Advisor, a Sponsor, a Director or an Affiliate thereof in connection with the Corporation’s repurchase of shares of Common Stock.

Section 9.7.   Limitations on Loans.    The Corporation will not make any loans to a Sponsor, the Advisor, a Director or an Affiliate thereof except as provided in Section 9.11 or to

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wholly owned subsidiaries (directly or indirectly) of the Corporation. The Corporation will not borrow from such parties unless a majority of the Corporation’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction approves the transaction as being fair, competitive and commercially reasonable and no less favorable to the Corporation than comparable loans between unaffiliated parties. These restrictions on loans apply to advances of cash that are commonly viewed as loans, as determined by the Conflicts Committee. By way of example only, the prohibition on loans would not restrict advances of cash for legal expenses or other costs incurred as a result of any legal action for which indemnification is being sought nor would the prohibition limit the Corporation’s ability to advance reimbursable expenses incurred by Directors or officers or the Advisor or its Affiliates.

Section 9.8.   Limitations on Leverage.    The aggregate borrowings of the Corporation, secured and unsecured, shall be reviewed by the board of directors at least quarterly. The maximum amount of such borrowings in relation to the Net Assets shall not exceed 300% in the absence of a satisfactory showing that a higher level of borrowings is appropriate. Any excess in borrowings over such 300% level shall be approved by the Conflicts Committee (by majority vote) and disclosed to the Common Stockholders in the next quarterly report of the Corporation, along with justification for such excess.

Section 9.9.   Limitations on Investments in Equity Securities.    The Corporation may not invest in equity securities unless a majority of the Corporation’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction approves such investment as being fair, competitive and commercially reasonable; provided, that an investment in equity securities of a “publicly traded entity” that is otherwise approved by a majority of the Corporation’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction shall be deemed fair, competitive and commercially reasonable if such investment is made through a trade effected on a recognized securities market. This provision is not intended to limit (a) real estate acquisitions effected through the purchase of all of the equity securities of an existing entity, or (b) the investment in wholly owned subsidiaries of the Corporation. For the purpose of this section, a “publicly traded entity” shall mean any entity having securities listed on a national securities exchange or included for quotation on an inter-dealer quotation system.

Section 9.10.   Limitations on Investments in Commodities Contracts.    The Corporation may not invest in commodities or commodity futures contracts, except for futures contracts used solely for the purpose of hedging in connection with the ordinary business of investing in real estate assets and mortgages.

Section 9.11.   Limitations Regarding Mortgage Loans.    The Corporation may not make or invest in mortgage loans unless an appraisal is obtained concerning the underlying property, except for those mortgage loans insured or guaranteed by a government or government agency. Such an appraisal concerning the underlying property must be obtained from an Independent Expert in all cases in which (i) the Conflicts Committee (by majority vote) deems it to be necessary, or (ii) the transaction is with the Advisor, a Director, a Sponsor or an Affiliate thereof. The Corporation shall keep the appraisal for at least five years and make it available for inspection and duplication by any Common Stockholder. In addition, a mortgagee’s or owner’s title insurance policy or commitment as to the priority of the mortgage or the condition of the title must be obtained. Further, the Advisor and the board of directors shall observe the following policies in connection with investing in or making mortgage loans:

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(a)         The Corporation shall not invest in real estate contracts of sale, otherwise known as land sale contracts, unless such contracts of sale are in recordable form and appropriately recorded in the chain of title.

(b)         The Corporation shall not make or invest in mortgage loans, including construction loans, on any one property if the aggregate amount of all mortgage loans outstanding on the property, including the loans of the Corporation, would exceed an amount equal to 85% of the appraised value of the property as determined by appraisal unless the board determines that a substantial justification exists because of the presence of other underwriting criteria. For purposes of this subsection, the “aggregate amount of all mortgage loans outstanding on the property, including the loans of the Corporation,” shall include all interest (excluding contingent participation in income and/or appreciation in value of the mortgaged property), the current payment of which may be deferred pursuant to the terms of such loans, to the extent that deferred interest on each loan exceeds 5% per annum of the principal balance of the loan.

(c)         The Corporation may not make or invest in any mortgage loans that are subordinate to any mortgage or equity interest of the Advisor, a Sponsor, a Director or an Affiliate of the Corporation.

Section 9.12.   Limitations on Investments in Unimproved Real Property.    The Corporation may not make direct or indirect investments in Unimproved Real Property or mortgage loans on Unimproved Real Property in excess of 10% of the Corporation’s total assets.

Section 9.13.   Limitations on Issuances of Securities.    The Corporation may not (a) issue equity securities on a deferred payment basis or other similar arrangement; (b) issue debt securities in the absence of adequate cash flow to cover debt service unless the historical debt service coverage (in the most recently completed fiscal year) as adjusted for known charges is sufficient to service that higher level of debt as determined by the board of directors or a duly authorized executive officer of the Corporation; (c) issue equity securities that are assessable after receipt by the Corporation of the consideration for which the board of directors authorized their issuance; or (d) issue equity securities redeemable solely at the option of the holder, which restriction has no affect on the Corporation’s ability to implement a share repurchase program. The Corporation may issue shares of Preferred Stock with voting rights; provided that, when a privately issued share of Preferred Stock is entitled to vote on a matter with the holders of shares of Common Stock, the relationship between the number of votes per such share of Preferred Stock and the consideration paid to the Corporation for such share shall not exceed the relationship between the number of votes per any publicly offered share of Common Stock and the book value per outstanding share of Common Stock. Nothing in this Section 9.13 is intended to prevent the Corporation from issuing equity securities pursuant to a plan whereby the commissions on the sales of such securities are in whole or in part deferred and paid by the purchaser thereof out of future distributions on such securities or otherwise.

Section 9.14.   Limitations on Roll-Up Transactions.

(a)         In connection with any proposed Roll-Up Transaction, an appraisal of all of the Corporation’s assets shall be obtained from a competent Independent Expert. If the appraisal will

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be included in a Prospectus used to offer the securities of a Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange Commission and, if applicable, the states in which registration of such securities is sought, as an exhibit to the registration statement for the offering. The Corporation’s assets shall be appraised on a consistent basis. The appraisal shall be based on the evaluation of all relevant information and shall indicate the value of the assets as of a date immediately prior to the announcement of the proposed Roll-Up Transaction. The appraisal shall assume an orderly liquidation of the assets over a 12-month period. The terms of the engagement of the Independent Expert shall clearly state that the engagement is for the benefit of the Corporation and its stockholders. A summary of the appraisal, indicating all material assumptions underlying the appraisal, shall be included in a report to stockholders in connection with a proposed Roll-Up Transaction. In connection with a proposed Roll-Up Transaction, the Person sponsoring the Roll-Up Transaction shall offer to each Common Stockholder who votes against the proposed Roll-Up Transaction the choice of:

(i)         accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up Transaction; or

(ii)        one of the following:

(1)         remaining as a Common Stockholder of the Corporation and preserving its interests therein on the same terms and conditions as existed previously; or

(2)         receiving cash in an amount equal to the stockholder’s pro rata share of the appraised value of the Net Assets of the Corporation.

(b)        The Corporation is prohibited from participating in any proposed Roll-Up Transaction:

(i)          that would result in the Common Stockholders having democracy rights in a Roll-Up Entity that are less than the rights set forth in Sections 11.1, 11.4, 11.5, 11.6, 11.7, 11.8 and 11.10 hereof;

(ii)         that includes provisions that would operate as a material impediment to, or frustration of, the accumulation of shares by any purchaser of the securities of the Roll-Up Entity (except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity), or that would limit the ability of an investor to exercise the voting rights of its securities of the Roll-Up Entity on the basis of the number of shares of Common Stock held by that investor;

(iii)        in which investors’ rights of access to the records of the Roll-Up Entity will be less than those described in Section 11.7 and Section 11.8 hereof; or

(iv)        in which any of the costs of the Roll-Up Transaction would be borne by the Corporation if the Roll-Up Transaction is not approved by the Common Stockholders.

Section 9.15.   Limitations on Underwriting.    The Corporation may not engage in underwriting or the agency distribution of securities issued by others.

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ARTICLE X

CONFLICTS OF INTEREST

Section 10.1.   Conflicts Committee.

(a)         During any time that the Corporation is advised by the Advisor, there shall be a committee (the “Conflicts Committee”) of the board of directors composed of all of the Independent Directors. The Conflicts Committee is authorized to select and retain its own legal and financial advisors. In addition to those other powers delegated to the Conflicts Committee by this charter or by the board of directors, the Conflicts Committee may act on any matter that may be delegated to a committee under the MGCL. If a matter cannot be delegated to a committee under the MGCL but the Conflicts Committee has determined that the matter at issue is such that the exercise of independent judgment by the Directors who are not Independent Directors could reasonably be compromised, both the board of directors and the Conflicts Committee must approve the matter. Any board action regarding Organization and Offering Expenses or the selection of an Independent Expert or the matters covered in any of Sections 5.9, 7.6, 8.1, 8.2, 8.4, 8.5, 8.6, 8.7, 8.8, 9.1, 9.8, 10.1, 11.1, 12.2 and 12.3 shall require the approval of a majority of the Conflicts Committee.

(b)         The Conflicts Committee may create a subcommittee of the Conflicts Committee and delegate to the subcommittee any of the powers of the Conflicts Committee. The members of any such subcommittee shall serve at the pleasure of the Conflicts Committee.

Section 10.2.   Voting by Conflicts Committee.    For an action to be taken by the Conflicts Committee or a subcommittee thereof, the matter must be approved by a majority of the Independent Directors present for the purposes of determining a quorum at a meeting at which a quorum is present or such higher threshold as required by the charter. If any such Independent Director has an interest in the matter at issue other than in his or her role as a Director, the matter must also be approved by a majority of those Independent Directors present at the meeting who have no other interest in the matter.

ARTICLE XI

STOCKHOLDERS

Section 11.1.   Meetings of Stockholders.    There shall be an annual meeting of the stockholders, to be held at such time and place as shall be determined by or in the manner prescribed in the bylaws, at which the Directors shall be elected and any other proper business may be conducted. The annual meeting will be held on a date that is a reasonable period of time following the distribution of the Corporation’s annual report to Common Stockholders but not less than 30 days after delivery of such report; the board of directors and the Conflicts Committee shall take reasonable efforts to ensure that this requirement is met. A majority of the shares of Common Stock present in person or by proxy at an annual meeting of stockholders at which a quorum is present may, without the necessity for concurrence by the board, vote to elect the Directors. The presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting constitutes a quorum. Special meetings of stockholders may be called in the manner provided in the bylaws, including by the president or

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by a majority of the Directors or a majority of the Independent Directors, and shall be called by an officer of the Corporation upon written request of Common Stockholders holding in the aggregate not less than 10% of the outstanding shares of Common Stock entitled to be cast on any issue proposed to be considered at any such special meeting. Upon receipt of a written request stating the purpose of such special meeting, the Advisor shall provide all stockholders within 10 days of receipt of said request notice, whether in person or by mail, of a special meeting and the purpose of such special meeting to be held on a date not less than 15 days nor more than 60 days after the delivery of such notice. If the meeting is called by written request of stockholders as described in this Section 11.1, the special meeting shall be held at the time and place specified in the stockholder request; provided, however, that if none is so specified, at such time and place convenient to the stockholders.

Section 11.2.   Extraordinary Actions.    Notwithstanding any provision of law permitting or requiring any action to be taken or approved by the affirmative vote of the holders of shares entitled to cast a greater number of votes, any such action shall be effective and valid if taken or approved by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter.

Section 11.3.   Unsolicited Takeover Statute.    Until the Common Stock of the Corporation is Listed, the Corporation may not take advantage of any of the permissive provisions of Title 3, Subtitle 8 of the MGCL, as amended from time to time or any successor statute thereto.

Section 11.4.   Voting Rights of Stockholders.    The concurrence of the board shall not be required in order for the Common Stockholders to remove Directors or to amend the charter or dissolve the Corporation. Without the approval of a majority of the shares of Common Stock entitled to vote on the matter, the board of directors may not (a) amend the charter to adversely affect the rights, preferences and privileges of the Common Stockholders; (b) amend charter provisions relating to Director qualifications, fiduciary duties, liability and indemnification, conflicts of interest, investment policies or investment restrictions; (c) liquidate or dissolve the Corporation other than before the initial investment in property; (d) sell all or substantially all of the Corporation’s assets other than in the ordinary course of the Corporation’s business; or (e) cause the merger or other reorganization of the Corporation.

Section 11.5.   Voting Limitations on Shares Held by the Advisor, Directors and Affiliates.    With respect to shares of Common Stock owned by the Advisor, a Director, or any Affiliate thereof, none of the Advisor, the Director, or any Affiliate thereof, may vote or consent on matters submitted to the Common Stockholders regarding (a) the removal of such Advisor, Director or any of their respective Affiliates or (b) any transaction between the Corporation and any such Advisor, Director or any of their respective Affiliates. To the extent permitted by the MGCL, in determining the requisite percentage in interest of shares of Common Stock necessary to approve a matter on which the Advisor, a Director and any of their respective Affiliates may not vote or consent, any shares owned by any of them shall not be included.

Section 11.6.   Right of Inspection.    Any Common Stockholder and any designated representative thereof shall be permitted access to the records of the Corporation to which it is entitled under applicable law at all reasonable times and may inspect and copy any such records

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for a reasonable charge. Inspection of the Corporation’s books and records by the office or agency administering the securities laws of a jurisdiction shall be permitted upon reasonable notice and during normal business hours.

Section 11.7.   Access to Stockholder List.

(a)         An alphabetical list of the names, addresses and telephone numbers of the Common Stockholders of the Corporation, along with the number of shares of Common Stock held by each of them (the “Stockholder List”), shall be maintained as part of the books and records of the Corporation and shall be available for inspection by any Common Stockholder or the stockholder’s designated agent at the home office of the Corporation upon the request of the Common Stockholder. The Stockholder List shall be updated at least quarterly to reflect changes in the information contained therein. A copy of such list shall be mailed to any Common Stockholder so requesting within 10 days of receipt by the Corporation of the request. The copy of the Stockholder List shall be printed in alphabetical order, on white paper and in a readily readable type size (in no event smaller than 10-point type). The Corporation may impose a reasonable charge for expenses incurred in reproduction pursuant to the stockholder request. A Common Stockholder may request a copy of the Stockholder List in connection with matters relating to stockholders’ voting rights, the exercise of stockholder rights under federal proxy laws or for any other proper purpose.

(b)         If the Advisor or the board neglects or refuses to exhibit, produce or mail a copy of the Stockholder List as requested, the Advisor and/ or the board, as the case may be, shall be liable to any Common Stockholder requesting the list for the costs, including reasonable attorneys’ fees, incurred by that stockholder for compelling the production of the Stockholder List and for actual damages suffered by any Common Stockholder by reason of such refusal or neglect. It shall be a defense that the actual purpose and reason for the requests for inspection or for a copy of the Stockholder List is not for a proper purpose but is instead for the purpose of securing such list of stockholders or other information for the purpose of selling such list or copies thereof, or using the same for a commercial purpose other than in the interest of the applicant as a stockholder relative to the affairs of the Corporation. The Corporation may require the stockholder requesting the Stockholder List to represent that the list is not requested for a commercial purpose unrelated to the stockholder’s interest in the Corporation. The remedies provided hereunder to stockholders requesting copies of the Stockholder List are in addition to, and shall not in any way limit, other remedies available to stockholders under federal law or the laws of any state.

Section 11.8.   Reports.    The Corporation shall cause to be prepared and mailed or delivered to each Common Stockholder as of a record date after the end of the fiscal year and each holder of other publicly held securities of the Corporation within 120 days after the end of the fiscal year to which it relates an annual report for each fiscal year ending after the Initial Public Offering of its securities that shall include: (a) financial statements prepared in accordance with generally accepted accounting principles that are audited and reported on by

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independent certified public accountants; (b) the ratio of the costs of raising capital during the period to the capital raised; (c) the aggregate amount of advisory fees and the aggregate amount of other fees paid to the Advisor and any Affiliate of the Advisor by the Corporation, including fees or charges paid to the Advisor and any Affiliate of the Advisor by third parties doing business with the Corporation; (d) the Total Operating Expenses of the Corporation, stated as a percentage of Average Invested Assets and as a percentage of its Net Income; (e) a report from the Conflicts Committee that the policies being followed by the Corporation are in the best interests of its Common Stockholders and the basis for such determination; and (f) separately stated, full disclosure of all material terms, factors and circumstances surrounding any and all transactions involving the Corporation and the Advisor, Sponsor, a Director or any Affiliate thereof occurring in the year for which the annual report is made, and the Conflicts Committee shall be specifically charged with a duty to examine and comment in the report on the fairness of such transactions. Alternatively, such information may be provided in a proxy statement delivered with the annual report. The board of directors, including the Independent Directors, shall take reasonable steps to ensure that the requirements of this Section 11.8 are met. The annual report may be delivered by any reasonable means, including through an electronic medium. Electronic delivery of the annual report or proxy statement shall comply with any then-applicable rules of the U.S. Securities and Exchange Commission.

Section 11.9.   Rights of Objecting Stockholders.    Holders of shares of Capital Stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL unless the board, upon the affirmative vote of a majority of the entire board, shall determine that such rights shall apply, with respect to all or any classes or series of Capital Stock, to a particular transaction or all transactions occurring after the date of such approval in connection with which holders of such shares of Capital Stock would otherwise be entitled to exercise such rights.

Section 11.10.   Liability of Stockholders.    The shares of Common Stock of the Corporation shall be non-assessable by the Corporation upon receipt by the Corporation of the consideration for which the board of directors authorized their issuance.

Section 11.11.   Tender Offers.    If any stockholder of the Corporation makes a tender offer, including, without limitation, a “mini-tender” offer, such stockholder must comply with all of the provisions set forth in Regulation 14D of the Securities Exchange Act of 1934, as amended, including, without limitation, disclosure and notice requirements, which would be applicable if the tender offer was for more than 5% of the outstanding securities of the Corporation, provided, however, that such documents are not required to be filed with the Securities and Exchange Commission. In addition, any such stockholder must provide notice to the Corporation at least 10 Business Days prior to initiating any such tender offer. If any stockholder initiates a tender offer without complying with the provisions set forth above (a “Non-Compliant Tender Offer”), the Corporation, in its sole discretion, shall have the right to redeem such non-compliant stockholder’s shares of Capital Stock and any shares of Capital Stock acquired in such tender offer (collectively, the “Tendered Shares”) at the lesser of (a) with respect to Common Stock, the price then being paid per share of Common Stock purchased in the Corporation’s latest offering of Common Stock at full purchase price (not discounted for commission reductions nor for reductions in sale price permitted pursuant to the distribution reinvestment plan), (b) the fair market value of the shares as determined by an independent

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valuation obtained by the Corporation or (c) the lowest tender offer price offered in such Non-Compliant Tender Offer. The Corporation may purchase such Tendered Shares upon delivery of the purchase price to the stockholder initiating such Non-Compliant Tender Offer, and, upon such delivery, the Corporation may instruct any transfer agent to transfer such purchased shares to the Corporation. In addition, any stockholder who makes a Non-Compliant Tender Offer shall be responsible for all expenses incurred by the Corporation in connection with the enforcement of the provisions of this Section 11.11, including, without limitation, expenses incurred in connection with the review of all documents related to such tender offer and expenses incurred in connection with any purchase of Tendered Shares by the Corporation. The Corporation maintains the right to offset any such expenses against the dollar amount to be paid by the Corporation for the purchase of Tendered Shares pursuant to this Section 11.11. In addition to the remedies provided herein, the Corporation may seek injunctive relief, including, without limitation, a temporary or permanent restraining order, in connection with any Non-Compliant Tender Offer.

ARTICLE XII

LIABILITY OF DIRECTORS,

OFFICERS, ADVISORS AND OTHER AGENTS

Section 12.1.   Limitation of Director and Officer Liability.    Except as prohibited by the restrictions provided in Section 12.3, no Director or officer of the Corporation shall be liable to the Corporation or its stockholders for money damages. Neither the amendment nor repeal of this Section 12.1, nor the adoption or amendment of any other provision of the charter or bylaws inconsistent with this Section 12.1, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption.

Section 12.2.   Indemnification.

(a)         Except as prohibited by the restrictions provided in Section 12.2(b), Section 12.3 and Section 12.4, the Corporation shall indemnify and pay or reimburse reasonable expenses in advance of the final disposition of a proceeding to (i) any individual who is a present or former Director or officer of the Corporation; (ii) any individual who, while a Director of the Corporation and at the request of the Corporation, serves or has served as a Director, officer, partner or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his service in such capacity; or (iii) the Advisor or any of its Affiliates acting as an agent of the Corporation. Except as provided in Section 12.2(b), Section 12.3 and Section 12.4, the Corporation shall have the power with the approval of the board of directors to provide such indemnification and advancement of expenses to any employee or agent of the Corporation or any employee of the Advisor or any of the Advisor’s Affiliates acting as an agent of the Corporation.

(b)         Notwithstanding the foregoing, the Corporation shall not indemnify the Directors or the Advisors or its Affiliates or any Person acting as a broker-dealer for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such

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party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which securities of the Corporation were offered or sold as to indemnification for violations of securities laws.

(c)         No amendment of the charter or repeal of any of its provisions shall limit or eliminate the right of indemnification or advancement of expenses provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal.

Section 12.3.   Limitation on Indemnification.    Notwithstanding the foregoing, the Corporation shall not provide for indemnification of the Directors or the Advisor or its Affiliates for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Corporation, unless all of the following conditions are met:

(a)         The Directors or the Advisor or its Affiliates have determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Corporation;

(b)         The Directors or the Advisor or its Affiliates were acting on behalf of or performing services for the Corporation;

(c)         Such liability or loss was not the result of:

(i)        negligence or misconduct by the Directors (excluding the Independent Directors) or the Advisor or its Affiliates; or

(ii)       gross negligence or willful misconduct by the Independent Directors; and

(d)         Such indemnification or agreement to hold harmless is recoverable only out of the Corporation’s Net Assets and not from its Common Stockholders.

Section 12.4.   Limitation on Payment of Expenses.    The Corporation shall pay or reimburse reasonable legal expenses and other costs incurred by the Directors or the Advisors or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the MGCL) all of the following are satisfied:

(a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Corporation;

(b) the legal proceeding was initiated by a third party who is not a Common Stockholder or, if by a Common Stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement; and

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(c) the Directors or the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by the Corporation, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification.

ARTICLE XIII

AMENDMENT

Subject to Section 11.4, the Corporation reserves the right from time to time to make any amendment to the charter, now or hereafter authorized by law, including any amendment altering the terms or contract rights, as expressly set forth in the charter, of any shares of outstanding Capital Stock.

ARTICLE XIV

GOVERNING LAW

The rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the laws of the State of Maryland without regard to conflicts of laws provisions thereof; provided that the foregoing choice of law shall not restrict the application of any state’s securities laws to the sale of securities to its residents or within such state.

THIRD:    The amendment and restatement of the charter of the Corporation as hereinabove set forth has been duly advised by the board of directors and approved by the stockholder of the Corporation as required by law.

FOURTH:    The current address of the principal office of the Corporation is as set forth in Article III of the foregoing amendment and restatement of the charter.

FIFTH:    The name and address of the Corporation’s current resident agent are as set forth in Article III of the foregoing amendment and restatement of the charter.

SIXTH:    The number of Directors of the Corporation and the names of those currently in office are as set forth in Section 7.1 of the foregoing amendment and restatement of the charter.

SEVENTH:    The undersigned Chief Executive Officer acknowledges the foregoing amendment and restatement of the charter to be the corporate act of the Corporation and as to all matters and facts required to be verified under oath, the undersigned Chief Executive Officer acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.

[signatures on following page]

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IN WITNESS WHEREOF, KBS Legacy Partners Apartment REIT, Inc., has caused the foregoing amendment and restatement of the charter to be signed in its name and on its behalf by its Chief Executive Officer and attested to by its Secretary on this 8^th day of January, 2010.

KBS LEGACY PARTNERS APARTMENT REIT, INC.
(f/k/a KBS Legacy Apartment Community REIT, Inc.)
By:	/s/ C. Preston Butcher	(SEAL)
	C. Preston Butcher
	Chief Executive Officer
ATTEST
By:	/s/ David E. Snyder
	David E. Snyder
	Secretary

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EX-3.2

EXHIBIT 3.2

AMENDED AND RESTATED BYLAWS

OF

KBS LEGACY PARTNERS APARTMENT REIT, INC.

ARTICLE I

OFFICES

Section 1.01.    PRINCIPAL OFFICES.    The principal office of KBS Legacy Partners Apartment REIT, Inc. (the “Corporation”) shall be located at such place or places as the board of directors may designate from time to time.

Section 1.02.    ADDITIONAL OFFICES.    The Corporation may have additional offices at such places as the board of directors may from time to time determine or otherwise as the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 2.01.    PLACE.    All meetings of stockholders shall be held at a principal office of the Corporation or at such other place as shall be stated in the notice of the meeting.

Section 2.02.    ANNUAL MEETING.    An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on a date and at the time set by the board of directors.

Section 2.03.    SPECIAL MEETINGS.    Special meetings of the stockholders may be called by: (i) the president; (ii) the chief executive officer; (iii) the board of directors, (iv) a majority of the Independent Directors, as defined in the Corporation’s articles of amendment and restatement (the “Charter”); or (v) upon the written request to the secretary of the Corporation, the holders of not less than ten percent (10%) of all the shares of common stock entitled to cast votes at such meeting whereby such written request states the purpose of the meeting and the matters proposed to be acted upon at such meeting. In the event of a stockholders’ meeting called in accordance with subsection (v) above, the secretary of the Corporation shall, within ten days of his or her receipt of the written request required in such subsection, notify, in the manner proscribed herein, each stockholder entitled to vote at meeting of the stockholders. Notwithstanding anything to the contrary herein, such meeting shall be held not less than 15 days nor more than 60 days after the secretary’s delivery of such notice. Subject to the foregoing sentence, such meeting shall be held at the time and place specified in the stockholder request; provided, however, that if none is so specified, at such time and place convenient to the stockholders. Unless requested by the stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting, a special meeting need not be called to consider any matter which is substantially the same as a matter voted on at any special meeting of the stockholders held during the proceeding twelve months.

Section 2.04.    NOTICE FOR MEETINGS.    Except as provided otherwise in Section 2.03 of this Article II, the secretary shall, not less than ten nor more than 90 days before each meeting of stockholders, give to each stockholder entitled to vote at the meeting and each other stockholder entitled to notice of the meeting, written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise required by the Maryland General Corporation Law (the “MGCL”), the purpose of the meeting. Notice shall be deemed delivered to a stockholder upon being: (i) personally delivered to the stockholder; (ii) left at the stockholder’s residence or usual place of business; (iii) mailed to the stockholder at the stockholder’s address as it appears on the records of the Corporation, in which case such notice shall be deemed to be given when deposited in the United States mail with postage prepaid thereon; or (iv) transmitted to the stockholder by electronic mail to any electronic mail address of the stockholder or by any other electronic means.

Section 2.05.    SCOPE OF NOTICE.    Any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except as otherwise set forth in Section 2.12(a) of this Article II and except for such business as is required by the MGCL or any other relevant statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice.

Section 2.06.    ORGANIZATION AND CONDUCT.    Every meeting of stockholders shall be conducted by an individual appointed by the board of directors to be chairman of the meeting or, in the absence of such appointment, by the chairman of the board or, in the case of a vacancy in the office or absence of the chairman of the board, by one of the following officers present at the meeting: the vice chairman of the board, if there be one, the president, the vice presidents in their order of rank and seniority, or, in the absence of such officers, a chairman chosen by the stockholders by the vote of a majority of the votes cast by stockholders present in person or by proxy. The secretary, or, in the secretary’s absence, an assistant secretary, or in the absence of both the secretary and assistant secretaries, a person appointed by the board of directors or, in the absence of such appointment, a person appointed by the chairman of the meeting shall act as secretary. In the event that the secretary presides at a meeting of the stockholders, an assistant secretary, or, in the absence of an assistant secretary, a person appointed by the secretary shall record the minutes of the meeting. The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) maintaining order and security at the meeting; (f) removing any stockholder who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; and (g) recessing or adjourning the meeting to a later date and time and place announced at the meeting. Unless otherwise determined by the chairman

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of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.07.    QUORUM; ADJOURNMENT.    At any meeting of the stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum except as otherwise provided by law, the Charter or these bylaws. If a quorum shall not be present at any meeting of the stockholders, the stockholders entitled to vote at such meeting, present in person or by proxy, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally noticed.

The stockholders present either in person or by proxy, at a meeting which has been duly called and convened, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Section 2.08.    VOTING.    A majority of the shares of common stock present in person or by proxy at an annual meeting at which a quorum is present may, without the necessity for concurrence by the board of directors, vote to elect a director. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. Except as otherwise required by law, the Charter or these bylaws, a majority of the votes cast at a meeting of the stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting. Unless otherwise provided in the Charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of the stockholders.

Section 2.09.    PROXIES.    A stockholder may cast the votes entitled to be cast by the shares of stock owned of record by the stockholder in person or by proxy executed by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by law. Such proxy or evidence of authorization of such proxy shall be filed with the secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.

Section 2.10.    VOTING OF STOCK BY CERTAIN HOLDERS.    Stock registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president, a vice president, a general partner, or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or other fiduciary may vote stock registered in his name as such fiduciary, either in person or by proxy.

Shares of the Corporation’s stock owned directly or indirectly by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares

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entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case, subject to the terms of the Charter, they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

The board of directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the board of directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification.

Section 2.11.    INSPECTORS.

(a)        The board of directors or the chairman of the meeting may, but need not, appoint one or more individual inspectors or one or more entities that designate individuals as inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the board of directors in advance of the meeting or at the meeting by the chairman of the meeting.

(b)        The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine and report the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. Each such report shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 2.12.    NOMINATIONS AND STOCKHOLDER BUSINESS.

(a)        Annual Meetings of Stockholders.

(1)        Nominations of persons for election to the board of directors and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders (A) pursuant to the Corporation’s notice of such meeting; (B) by or at the direction of the board of directors; or (C) by any stockholder of the Corporation who (i) was

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a stockholder of record both at the time of giving of notice provided for in this Section 2.12(a) and at the time of the annual meeting in question; (ii) is entitled to vote at such meeting; and (iii) has complied with the notice procedures set forth in this Section 2.12(a) as to such business or nomination; (clause (C) shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and included in the Corporation’s notice of the meeting) before an annual meeting of stockholders).

(2)        Without qualification, for any nominations or other business to be properly brought at an annual meeting by a stockholder pursuant to this paragraph (a)(2) or paragraph (a)(1) of this Section 2.12, the stockholder must give timely notice thereof in writing to the secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the secretary at the principal executive office of the Corporation not less than 90 days prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting; provided, however, that in the event that the date of the date of mailing of the notice for the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of the 90th day prior to the date of mailing of the notice for such annual meeting or, if the first public announcement of the date of such annual meeting is made less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of mailing of the notice for such meeting is first made. In no event shall the postponement or adjournment of an annual meeting, or the announcement thereof, commence a new time period for the giving of a stockholder’s notice as described above. To be in proper form, a stockholder’s notice (whether given pursuant to this Section 2.12(a)(2) or Section 2.12(b)) must: (a) set forth, as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director (i) the name, age, business address, and residence address of such person; the number of shares of each class or series of stock of the Corporation that are, directly or indirectly, owned beneficially or of record by such person; and all other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, on whose behalf the nomination is made, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; (b) with respect to each nominee for election or

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re-election to the board of directors, include a completed and signed questionnaire, representation and agreement required by Section 2.13; (c) if the notice relates to any business other than a nomination of a director or directors that the stockholder proposes to bring before the meeting, set forth (i) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such stockholder and beneficial owner, if any, on whose behalf the proposal is made, in such business and (ii) a description of all agreements, arrangements and understandings between such stockholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder; and (d) set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (i) the name and address of such stockholder as they appear on the Corporation’s books, and of such beneficial owner, if any; (ii) (A) the number of shares of each class or series of stock of the Corporation that are, directly or indirectly, owned beneficially or of record by such stockholder and such beneficial owner, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by such stockholder and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder has a right to vote any shares of any security of the Corporation, (D) any short interest in any security of the Corporation (for purposes of this Section 2.12 a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (E) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder that are separated or separable from the underlying shares of the Corporation, (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (G) any performance-related fees (other than an asset-based fee) that such stockholder is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such stockholder’s immediate family sharing the same household (which information shall be supplemented by such stockholder and beneficial owner, if any, not later than 10 days after the record date for the meeting to disclose such ownership as of the record date), and (iii) any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. In addition, the Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an

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independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.

(3)        Notwithstanding anything in the second sentence of paragraph (a)(2) of this Section 2.12 to the contrary, in the event that the number of directors to be elected to the board of directors is increased and there is no public announcement naming all of the nominees for directors or specifying the size of the increased board of directors made by the Corporation at least 100 days prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting, a stockholder’s notice required by this Section 2.12(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive offices of the Corporation no later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

(b)        Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of said meeting. Nominations of persons for election to the board of directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of said meeting (i) by or at the direction of the board of directors or (ii) provided the board of directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who (A) is a stockholder of record both at the time of giving of notice provided for in this Section 2.12(b) and at the time of the special meeting; (B) is entitled to vote at the meeting; and (C) complied with the notice procedures set forth in this Section 2.12(b). In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the board of directors, any such stockholder may nominate a person or persons (as the case may be) for election to such position as specified in the Corporation’s notice of meeting, if the stockholder’s notice containing the information required by paragraph (a)(2) of this Section 2.12 with respect to any nomination (including the completed and signed questionnaire, representation and agreement required by Section 2.13) shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 90th day prior to such special meeting or, if the first public announcement of the date of such special meeting is made less than 100 days prior to the date of such special meeting, the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the board of directors to be elected at such meeting. In no event shall the postponement or adjournment of a special meeting, or the announcement thereof, commence a new time period for the giving of a stockholder’s notice as described above.

(c)        General.

(1)        Only such persons who are nominated in accordance with the procedures set forth in this Section 2.12 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.12. The presiding officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in

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accordance with the procedures set forth in this Section 2.12, and, if any proposed nomination or business is not in compliance with this Section 2.12, to declare that such defective nomination or proposal, if any, be disregarded.

(2)        For purposes of this Section 2.12, (i) the “date of mailing of the notice” shall mean the date of the proxy statement for the solicitation of proxies for election of directors and (ii) “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(3)        Notwithstanding the foregoing provisions of this Section 2.12, a stockholder shall also comply with all applicable requirements of state law and the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.12; provided, however, that any references in this Section 2.12 to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Section 2.12(a)(1)(C) or Section 2.12(b). Nothing in this Section 2.12 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 2.13.    SUBMISSION OF QUESTIONNAIRE. REPRESENTATION AND AGREEMENT.    To be eligible to be a nominee for election or re-election as a director of the Corporation pursuant to Section 2.12(a)(1)(C), a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 2.12) to the secretary of the Corporation at the principal executive office of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the secretary upon written request) and a written representation and agreement (in the form provided by the secretary upon written request) that such person (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (C) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

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Section 2.14.    VOTING BY BALLOT.    Voting on any question or in any election may be viva voce unless the presiding officer shall order, or any stockholder shall demand, that voting be by ballot.

Section 2.15.    EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE.    Notwithstanding any other provision of the Charter or these bylaws or any contrary provision of law, the Maryland Control Share Acquisition Statute, found in Title 3, Subtitle 7 of the MGCL, as amended from time to time, or any successor statute thereto, shall not apply to any acquisition of shares of stock of the Corporation by any person. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.

ARTICLE III

DIRECTORS

Section 3.01.    GENERAL POWERS.    The business and affairs of the Corporation shall be managed under the direction of its board of directors.

Section 3.02.    NUMBER, TENURE AND QUALIFICATIONS.    At any regular meeting or at any special meeting called for that purpose, a majority of the members then serving on the board of directors may establish, increase, or decrease the number of directors, provided that, except as otherwise provided in the Charter, the number thereof shall never be less than the minimum number required by the MGCL or the Charter (whichever is greater), nor more than the maximum number of directors set forth in the Charter, and further provided that, except as may be provided in the terms of any preferred stock issued by the Corporation, the tenure of office of a director shall not be affected by any decrease in the number of directors.

Section 3.03.    ANNUAL AND REGULAR MEETINGS.    An annual meeting of the board of directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this bylaw being necessary. In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors. The board of directors may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the board of directors without other notice than such resolution.

Section 3.04.    SPECIAL MEETINGS.    Special meetings of the board of directors may be called by or at the request of the chairman of the board, president or by a majority of the board of directors. The person or persons authorized to call special meetings of the board of directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the board of directors called by them. The board of directors may provide, by resolution, the time and place for the holding of special meetings of the board of directors without other notice than such resolution.

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Section 3.05.    NOTICE.    Notice of any special meeting of the board of directors shall be delivered personally, or by telephone, electronic mail, facsimile transmission, United States mail, or courier to each director at his business or residence address. Notice by personal delivery, telephone, electronic mail, or facsimile transmission shall be given at least two days prior to the meeting. Notice by United States mail shall be given at least five days prior to the meeting and shall be deemed to be given when deposited in the United States mail properly addressed, with postage prepaid thereon. Telephone notice shall be deemed to be given when the director or his agent is personally given such notice in a telephone call to which he or his agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the board of directors need be stated in the notice, unless specifically required by statute or these bylaws.

Section 3.06.    QUORUM.    A majority of the directors then serving shall constitute a quorum for transaction of business at any meeting of the board of directors, provided that if less than a majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that, if pursuant to the Charter or these bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group. The directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.

Section 3.07.    VOTING.    The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the board of directors, unless the concurrence of a greater proportion is required for such action by the MGCL or the Charter. If enough directors have withdrawn from a meeting to leave less than a quorum but the meeting is not adjourned, the action of the majority of the directors still present at such meeting shall be the action of the board of directors, unless the concurrence of a greater proportion is required for such action by the MGCL or the Charter.

Section 3.08.    ORGANIZATION.    At each meeting of the board of directors, the chairman of the board or, in the absence of the chairman, the vice chairman of the board, if any, shall act as chairman. In the absence of both the chairman and vice chairman of the board, the chief executive officer or in the absence of the chief executive officer, the president or in the absence of the president, a director chosen by a majority of the directors present, shall act as chairman. The secretary or, in his or her absence, an assistant secretary of the Corporation, or in the absence of the secretary and all assistant secretaries, a person appointed by the chairman, shall act as secretary of the meeting.

Section 3.09.    ACTION BY WRITTEN CONSENT OR BY ELECTRONIC TRANSMISSION; INFORMAL ACTION.    Any action required or permitted to be taken at any meeting of the board of directors may be taken without a meeting, if a consent to such action is

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given in writing or by electronic transmission by each director, and such consent is filed in paper or electronic form with the minutes of proceedings of the board of directors.

Section 3.10.    TELEPHONE MEETINGS.    Directors may participate in a meeting of the board of directors by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 3.11.    REMOVAL.    At any meeting of stockholders called expressly, but not necessarily solely, for that purpose, any director or the entire board of directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote on the election of directors.

Section 3.12.    VACANCIES.    If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these bylaws or the powers of the remaining directors hereunder (even if fewer than the statutory minimum remain). A successor to fill a vacancy on the board of directors that results from the removal of a director may be elected by either (a) the stockholders or (b) a majority of the remaining directors, even if such majority is less than a quorum. Any vacancy on the board of directors for any other cause shall be filled by a majority of the remaining directors, even if such majority is less than a quorum. The Conflicts Committee (as defined and created by the Charter) shall nominate replacements for vacancies among the Independent Directors positions. Any individual so elected as a director shall hold office until the next annual meeting of stockholders and until his or her successor is elected and qualifies.

Section 3.13.    COMPENSATION.    The directors may, in the discretion of the entire board of directors, receive annual or monthly salary for their services as directors, fixed sums per meeting and/or per visit to real property or other facilities owned or leased by the Corporation, and/or for any service or activity performed or engaged in as directors on behalf of the Corporation. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the board of directors or of any committee thereof and for their reasonable out-of-pocket expenses, if any, in connection with each such meeting, property visit, and/or other service or activity they performed or engaged in as directors on behalf of the Corporation. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

Section 3.14.    LOSS OF DEPOSITS.    No director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom monies or stock have been deposited.

Section 3.15.    SURETY BONDS.    Unless required by law, no director shall be obligated to give any bond or surety or other security for the performance of any of his duties.

Section 3.16.    CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.    The directors shall have no responsibility to devote their full time to the affairs of the Corporation. For so long as the Corporation is externally advised, no officer or employee of the

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Corporation who is affiliated with the advisor shall be expected to devote his full time to the efforts of the Corporation unless he agrees in writing to do so. Any director or officer of the Corporation, in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to, or in competition with those of or relating to the Corporation, subject to the provisions of the Charter.

ARTICLE IV

COMMITTEES

Section 4.01.    NUMBER, TENURE AND QUALIFICATIONS.    The board of directors may designate an Executive Committee, an Audit Committee, a Compensation Committee and other committees composed of at least one director.

Section 4.02.    COMPOSITION.    Except as provided in the Charter, such committees shall serve at the pleasure of the board of directors. The members of the Conflicts Committee, Audit Committee and Compensation Committee shall at all times consist solely of Independent Directors, and the majority of the members of all committees shall be Independent Directors.

Section 4.03.    MEETINGS.    Notice of committee meetings shall be given in the same manner as notice for special or regular meetings of the board of directors. Proper notice of any meeting of the board of directors shall also constitute notice of a meeting of the Conflicts Committee that may be held contemporaneously and/or immediately following the board meeting. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. Except as provided in these bylaws, the act of a majority of the committee members present at a meeting shall be the act of such committee. The board of directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee may fix the time and place of its meeting unless the board shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings.

Section 4.04.    TELEPHONE MEETINGS.    Members of a committee of the board of directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 4.05.    ACTION BY WRITTEN CONSENT OR BY ELECTRONIC TRANSMISSION; INFORMAL ACTION.    Any action required or permitted to be taken at any meeting of a committee of the board of directors may be taken without a meeting, if a consent to such action is given in writing or by electronic transmission by each member of the committee and such consent is filed in paper or electronic form with the minutes of proceedings of such committee.

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Section 4.07.    VACANCIES.    Subject to the provisions hereof, and the Charter, the board of directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee.

ARTICLE V

OFFICERS

Section 5.01.    GENERAL PROVISIONS.    The officers of the Corporation shall include a president, a secretary and a treasurer and may include a chairman of the board, a vice chairman of the board, one or more vice presidents, a chief operating officer, a chief financial officer, one or more assistant secretaries and one or more assistant treasurers. In addition, the board of directors may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of stockholders, except that the president may appoint one or more vice presidents, assistant secretaries and assistant treasurers. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor is elected and qualifies or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices, except president and vice president, may be held by the same person. In its discretion, the board of directors may leave unfilled any office except that of president, treasurer and secretary. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.

Section 5.02.    REMOVAL AND RESIGNATION.    Any officer or agent of the Corporation may be removed by the board of directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the board of directors, the chairman of the board, the president or the secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 5.03.    VACANCIES.    A vacancy in any office may be filled by the board of directors for the balance of the term.

Section 5.04.    CHIEF EXECUTIVE OFFICER.    The board of directors may designate a chief executive officer. In the absence of such designation, the president shall be the chief executive officer of the Corporation. The chief executive officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the board of directors, and for the management of the business and affairs of the Corporation.

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Section 5.05.    CHIEF OPERATING OFFICER.    The board of directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as set forth by the board of directors or the chief executive officer.

Section 5.06.    CHIEF FINANCIAL OFFICER.    The board of directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as set forth by the board of directors or the chief executive officer.

Section 5.07.    CHAIRMAN OF THE BOARD.    The board of directors shall designate a chairman of the board. The chairman of the board shall preside over the meetings of the board of directors and of the stockholders at which he shall be present. The chairman of the board shall perform such other duties as may be assigned to him or them by the board of directors.

Section 5.08.    PRESIDENT.    In the absence of a chief executive officer, the president shall in general supervise and control all of the business and affairs of the Corporation. In the absence of a designation of a chief operating officer by the board of directors, the president shall be the chief operating officer. He may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time.

Section 5.09.    VICE PRESIDENTS.    In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to him by the president or by the board of directors. The board of directors may designate one or more vice presidents as executive vice president or as vice president for particular areas of responsibility.

Section 5.10.    SECRETARY.    The secretary shall (a) keep the minutes of the proceedings of the stockholders, the board of directors and committees of the board of directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the share transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him by the chief executive officer, the president or by the board of directors.

Section 5.11.    TREASURER.    The treasurer shall have the custody of the funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be

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designated by the board of directors. In the absence of a designation of a chief financial officer by the board of directors, the treasurer shall be the chief financial officer of the Corporation.

The treasurer shall disburse the funds of the Corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and board of directors, at the regular meetings of the board of directors or whenever it may so require, an account of all his transactions as treasurer and of the financial condition of the Corporation.

If required by the board of directors, the treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his possession or under his control belonging to the Corporation.

Section 5.12.    ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.    The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the president or the board of directors. The assistant treasurers shall, if required by the board of directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the board of directors.

Section 5.13.    SALARIES.    The salaries and other compensation of the officers shall be fixed from time to time by the board of directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he is also a director.

ARTICLE VI

CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 6.01.    CONTRACTS.    The board of directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the directors or by an authorized person shall be valid and binding upon the board of directors and upon the Corporation when authorized or ratified by action of the board of directors.

Section 6.02.    CHECKS AND DRAFTS.    All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the board of directors.

Section 6.03.    DEPOSITS.    All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the board of directors may designate.

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ARTICLE VII

STOCK

Section 7.01.    CERTIFICATES.    If the board of directors authorizes the issuance of certificates, each certificate shall be signed by the chief executive officer, the president, the chief operating officer or a vice president and countersigned by the secretary or an assistant secretary or the treasurer or an assistant treasurer and may be sealed with the seal, if any, of the Corporation. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Corporation shall, from time to time, issue several classes of stock, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are preferred or limited as to their dividends, which are restricted as to their transferability or voting powers, or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Corporation, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. If the Corporation has authority to issue stock of more than one class, the certificate shall contain on the face or back a full statement or summary of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class of stock and, if the Corporation is authorized to issue any preferred or special class in series, the differences in the relative rights and preferences between the shares of each series to the extent they have been set and the authority of the board of directors to set the relative rights and preferences of subsequent series. In lieu of such statement or summary, the certificate may state that the Corporation will furnish a full statement of such information to any stockholder upon request and without charge. If any class of stock is restricted by the Corporation as to transferability, the certificate shall contain a full statement of the restriction or state that the Corporation will furnish information about the restrictions to the stockholder on request and without charge. Notwithstanding anything herein to the contrary, nothing in this Article VII shall be interpreted to limit the authority of the board of directors to issue some or all of the shares of any or all of its classes or series without certificates.

Section 7.02.    TRANSFERS; REGISTERED STOCKHOLDERS.    Transfers of shares of any class of stock will be subject in all respects to the Charter and all of the terms and conditions contained therein. The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland.

Section 7.03.    LOST, STOLEN, OR DESTROYED CERTIFICATES.    The Corporation shall issue a new certificate in place of any certificate for shares previously issued if the registered owner of the certificate satisfies the following requirements:

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(a)    Claim.    The registered owner makes proof in affidavit form that a previously issued certificate for shares has been lost, destroyed, or stolen;

(b)    Timely Request.    The registered owner requests the issuance of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;

(c)    Bond.    The registered owner gives a bond in such form, and with such surety or sureties, with fixed or open penalty, as the board of directors may direct, in its discretion, to indemnify the Corporation (and its transfer agent and registrar, if any) against any claim that may be made on account of the alleged loss, destruction, or theft of the certificate; and

(d)    Other Requirements.    The registered owner satisfies any other reasonable requirements imposed by the board of directors.

When a certificate has been lost, destroyed or stolen and the stockholder of record fails to notify the Corporation within a reasonable time after he has notice of it, if the Corporation registers a transfer of the shares represented by the certificate before receiving such notification, the stockholder of record is precluded from making any claim against the Corporation for the transfer or for a new certificate.

Section 7.04.    CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.    The board of directors may (i) set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose, (such record date, in any case, may not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken); or (ii) in lieu of fixing a record date, direct that the stock transfer books be closed for a period not greater than 20 days. In the case of a meeting of the stockholders, the record date or the date set for the closing of the stock transfer books shall be at least ten days before the date of such meeting.

If no record date is fixed and stock transfer books are not closed for the determination of stockholders, (i) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be the later of (a) the close of business on the day on which the notice of meeting is mailed or (b) the 30th day before the meeting; and (ii) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the board of directors declaring the dividend or allotment of rights is adopted, provided that the payment or allotment may not be made more than 60 days after the date on which such resolution is adopted.

When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer

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books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein.

Section 7.05.    STOCK LEDGER.    The Corporation shall maintain at one or more of its principal offices or at the office of its counsel, accountants, or transfer agent, an original or duplicate share ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder.

Section 7.06.    FRACTIONAL STOCK; ISSUANCE OF UNITS.    The board of directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Charter or these bylaws, the board of directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the board of directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.

ARTICLE VIII

ACCOUNTING YEAR

The board of directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 9.01.    AUTHORIZATION.    Dividends and other distributions upon the stock of the Corporation may be authorized by the board of directors, subject to the provisions of law and the Charter. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the Charter.

Section 9.02.    CONTINGENCIES.    Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the board of directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing any property of the Corporation or for such other purpose as the board of directors shall determine to be in the best interest of the Corporation, and the board of directors may modify or abolish any such reserve.

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ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the Charter, the board of directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

SEAL

Section 11.01.    SEAL.    The board of directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words “Maryland 2009 Corporate Seal.” The board of directors may authorize one or more duplicate seals and provide for the custody thereof.

Section 11.02.    AFFIXING SEAL.    Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place “[SEAL]” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

ARTICLE XII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the Charter or these bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE XIII

AMENDMENT OF BYLAWS

These bylaws may be amended or repealed and new bylaws may be adopted by the board of directors or the stockholders. No bylaw adopted, amended or repealed by the stockholders shall be readopted, amended or repealed by the board of directors.

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EX-4.5

Exhibit 4.5

FORM OF ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this “Agreement”) made and entered into as of this              day of                         , 20__ by and among KBS Capital Markets Group, LLC, a California limited liability company (the “Dealer Manager”), KBS Legacy Partners Apartment REIT, Inc., a Maryland corporation (the “Company”), and UMB Bank, N.A., as escrow agent, a national banking association organized and existing under the laws of the United States of America (the “Escrow Agent”).

RECITALS

WHEREAS, the Company proposes to offer and sell shares of common stock (the “Shares”), on a best-efforts basis, for at least $2.5 million and up to $2.0 billion of gross offering proceeds (excluding the shares of its common stock to be offered and sold pursuant to the Company’s distribution reinvestment plan), at an initial purchase price of $10.00 per share (the “Offering”) to investors pursuant to the Company’s Registration statement on Form S-11 (File No. 333-161449), as amended from time to time (the “Offering Document”).

WHEREAS, the Dealer Manager will be engaged by the Company to offer and sell the Shares on a best efforts basis through a network of participating broker-dealers (the “Dealers”).

WHEREAS, the Company has agreed that the subscription price paid by subscribers for shares will be refunded to such subscribers if at least $2.5 million of gross offering proceeds from persons who are not affiliated with the Company, KBS Capital Advisors, LLC (the “Advisor”) or Legacy Partners Residential Realty LLC (such amount, the “Minimum Offering”) has not been raised within one year from the date the Offering Document becomes effective with the Securities and Exchange Commission (the “Closing Date”).

WHEREAS, the Dealer Manager and the Company desire to establish an escrow account (the “Escrow Account”) as further described herein in which funds received from subscribers will, except as otherwise specified herein, be deposited and the Company desires that the Escrow Agent act as escrow agent to the Escrow Account and Escrow Agent is willing to act in such capacity.

WHEREAS, deposits received from residents of the State of Pennsylvania (the “Pennsylvania Subscribers”) and deposits received from residents of the State of Tennessee (the “Tennessee Subscribers”) will remain in the Escrow Account until the conditions of Sections 3 and 4, respectively have been met.

WHEREAS, the Escrow Agent has engaged DST Systems (the “Processing Agent”), to receive, examine for “good order” and facilitate subscriptions into the Escrow Account as further described herein and to act as record keeper, maintaining on behalf of the Escrow Agent the ownership records for the Escrow Account. In so acting DST shall be acting solely in the capacity of agent for the Escrow Agent and not in any capacity on behalf of the Company or the Dealer Manager, nor shall they have any interest other than that provided in this Agreement in assets in Processing Agent’s possession as the agent of the Escrow Agent.

WHEREAS, in order to subscribe for Shares during the Escrow Period (as defined below), a subscriber must deliver the full amount of its subscription: (i) by check, draft or money order made payable to the order of UMB Bank, N.A., as Escrow Agent for KBS Legacy Partners Apartment REIT, Inc., in U.S. dollars or (ii) by draft, wire transfer of immediately available funds or Automated ClearingHouse (ACH) in U.S. dollars transmitted directly to the Escrow Account.

AGREEMENT

NOW, THEREFORE, the Dealer Manager, the Company and Escrow Agent agree to the terms of this Agreement as follows:

1. Establishment of Escrow Account; Escrow Period. On or prior to the commencement of the offering of Shares pursuant to the Offering Document, the Company shall establish the Escrow Account with the Escrow Agent, which shall be entitled “UMB Bank, N.A., as Escrow Agent for KBS Legacy Partners Apartment REIT, Inc.” This Agreement shall be effective on the date on which the Offering Document becomes effective. Except as otherwise set forth herein for the Pennsylvania Subscribers and the Tennessee Subscribers, the “Escrow Period” shall commence upon the effectiveness of this Agreement and shall continue until the earlier of (i) the date upon which the Escrow Agent receives confirmation from the Company and the Dealer Manager that the Company has raised the Minimum Offering, (ii) the Closing Date, or (iii) the termination of the Offering by the Company prior to the receipt of the Minimum Offering.

2. Operation of the Escrow.

(a) Deposits in the Escrow Account. During the Escrow Period, persons subscribing to purchase Shares will be instructed by the Company, the Dealer Manager and the Dealers to make checks for subscriptions payable to the order of “UMB Bank, N.A., as Escrow Agent for KBS Legacy Partners Apartment REIT, Inc.” Completed subscription agreements and checks or money orders in payment for the purchase price shall be remitted to the P.O. Box designated for the receipt of such agreements and funds, and drafts, wires, or Automated ClearingHouse (ACH) payments shall be transmitted directly to the Escrow Account. To the extent that subscription agreements and payments are remitted by the Company or the Dealer Manager, the Company or the Dealer Manager, as applicable, will furnish to the Escrow Agent a list detailing information regarding such subscriptions as set forth in Exhibit B. The Processing Agent will promptly deliver all monies received in good order from subscribers (or from the Dealer Manager or Dealers transmitting moneys and subscriptions from subscribers) for the payment of Shares to the Escrow Agent for deposit in the Escrow Account. The Escrow Agent hereby agrees to maintain the funds contributed by the Pennsylvania Subscribers and the Tennessee Subscribers, in a manner in which they may be separately accounted for so that the requirements of Sections 3 and 4 of this Agreement can be met. Deposits shall be held in the Escrow Account until such funds are disbursed in accordance with this Section 2. Prior to disbursement of the funds deposited in the Escrow Account, such funds shall not be subject to claims by creditors of the Company or any of its affiliates. If any of the instruments of payment are returned to the Escrow Agent for nonpayment prior to receipt of the Break Escrow Affidavit (as described below), the Escrow Agent shall promptly notify the Processing Agent and the Company in writing via mail, email or facsimile of such

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nonpayment, and the Escrow Agent is authorized to debit the Escrow Account, as applicable in the amount of such returned payment as well as any interest earned on the amount of such payment and the Processing Agent shall delete the appropriate account from the records maintained by the Processing Agent. The Processing Agent will maintain a written account of each sale, which account shall set forth, among other things, the following information: (i) the subscriber’s name and address, (ii) the number of Shares purchased by such subscriber, and (iii) the amount paid by such subscriber for such Shares. During the Escrow Period neither the Company nor the Dealer Manager will be entitled to any principal funds received into the Escrow Account.

(b) Distribution of the Escrowed Funds. If at any time on or prior to the Closing Date, the Minimum Offering has been raised, then upon the happening of such event, the funds in the Escrow Account shall remain in the Escrow Account until the Escrow Agent receives written direction provided by the Company and the Dealer Manager instructing the Escrow Agent to deliver the principal amount of such escrowed funds as the Company shall direct (other than any funds received from Pennsylvania Subscribers and Tennessee Subscribers which cannot be released until the conditions of Sections 3 and 4, respectively, have been met); provided, however, that the Escrow Agent shall not disburse the funds of a subscriber, the subscription of which has been rejected or rescinded, if the Escrow Agent has been notified by the Company of such rejection or rescission. An affidavit or certification from an officer of the Company and an officer of the Dealer Manager to the Escrow Agent and Processing Agent stating that at least the Minimum Offering has been timely raised, shall constitute sufficient evidence for the purpose of this Agreement that such event has occurred (the “Break Escrow Affidavit”). The Affidavit shall indicate (i) the date on which the Minimum Offering was raised and (ii) the actual total number of Shares sold as of such date. Thereafter, the Escrow Agent shall distribute directly to the subscribers any interest earned on such subscriber’s subscription payments while such payments were held in the Escrow Account.

(c) If the Escrow Agent has not received a Break Escrow Affidavit on or prior to the Closing Date, the Processing Agent shall provide the Escrow Agent the information needed to return the principal amount of the funds in the Escrow Account, together with any interest thereon, to each respective subscriber, and the Escrow Agent shall promptly create and dispatch checks and wires drawn on the Escrow Account to return the principal amount of the funds in the Escrow Account, together with any interest thereon, without deduction, penalty or expense, to the respective subscribers, and the Escrow Agent shall notify the Company and the Dealer Manager of its distribution of the funds. The subscription payments returned to each subscriber (including those, if any, returned to Pennsylvania Subscribers and Tennessee Subscribers pursuant to Sections 3 and 4, respectively,) shall be free and clear of any and all claims of the Company or any of its creditors.

3. Distribution of the Funds from Pennsylvania Subscribers.

(a) Notwithstanding anything to the contrary herein, disbursements of funds contributed by Pennsylvania Subscribers may only be distributed in compliance with the provisions of this Section 3. Irrespective of any disbursement of funds from the Escrow Account pursuant to Section 2 hereof, the Escrow Agent will continue to place deposits from the Pennsylvania Subscribers into the Escrow Account, until such time as the Company notifies the Escrow

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Agent in writing that total subscriptions (including amounts in the Escrow Account previously disbursed as directed by the Company and the amounts then held in the Escrow Account) equal or exceed $66,700,000, whereupon the Escrow Agent shall (i) disburse to the Company, at the Company’s request, the principal amount of the funds from the Pennsylvania Subscribers received by the Escrow Agent for accepted subscriptions and (ii) disburse directly to the Pennsylvania Subscribers any interest earned on such Pennsylvania Subscribers’ subscription payments while such payments were held in the Escrow Account. However, the Escrow Agent shall not disburse to the Company those funds of a subscriber, the subscription of which has been rejected or rescinded, if the Escrow Agent has been notified by the Company of such rejection or rescission.

(b) If the Company has not received total subscriptions of at least $66,700,000 within 120 days of the date the Company first receives a subscription from a Pennsylvania Subscriber (the “Initial Escrow Period”), the Company shall notify each Pennsylvania Subscriber by certified mail or any other means (whereby receipt of delivery is obtained) of the right of Pennsylvania Subscribers to have their investment returned to them. If, pursuant to such notice, a Pennsylvania Subscriber requests the return of his or her subscription funds within ten (10) days after receipt of the notification (the “Request Period”), the Escrow Agent shall promptly refund, with a pro rata share of any interest earned thereon and without deduction, directly to each Pennsylvania Subscriber the funds deposited in the Escrow Account on behalf of the Pennsylvania Subscriber.

(c) The funds of Pennsylvania Subscribers who do not request the return of their funds within the Request Period shall remain in the Escrow Account for successive 120-day escrow periods (each a “Successive Escrow Period”), each commencing automatically upon the termination of the prior Successive Escrow Period, and the Company and Escrow Agent shall follow the notification and payment procedure set forth in Section 3(b) above with respect to the Initial Escrow Period for each Successive Escrow Period, until the occurrence of the earliest of (i) the termination of the offering by the Company prior to the receipt of $66,700,000 of total subscriptions, (ii) the receipt and acceptance by the Company of total subscriptions that equal or exceed $66,700,000 and the disbursement of the Escrow Account on the terms specified in this Section 3, or (iii) all funds held in the Escrow Account that were contributed by Pennsylvania Subscribers having been returned to the Pennsylvania Subscribers in accordance with the provisions hereof.

(d) If the Company has not received total subscriptions of at least $66,700,000 within 365 days after the Closing Date, all funds in the Escrow Account that were contributed by Pennsylvania Subscribers will be promptly returned in full to such Pennsylvania Subscribers, together with their pro rata share of any interest earned thereon pursuant to instructions made by the Company, upon which the Escrow Agent may conclusively rely.

4. Distribution of the Funds from Tennessee Subscribers.

(a) Notwithstanding anything to the contrary herein, disbursements of funds contributed by Tennessee Subscribers may only be distributed in compliance with the provisions of this Section 4. Irrespective of any disbursement of funds from the Escrow Account pursuant to Section 2 hereof, the Escrow Agent will continue to place deposits from the Tennessee Subscribers into the Escrow Account, until such time as the Company notifies the Escrow Agent in writing that total subscriptions (including amounts in the Escrow Account previously disbursed as directed by the Company and the amounts then held in the Escrow Account) equal or exceed $10,000,000, whereupon the Escrow Agent shall (i) disburse to the Company, at the Company’s request, the principal amount of the funds from the Tennessee Subscribers received by the Escrow Agent for accepted subscriptions and (ii) disburse directly to the Tennessee Subscribers any interest earned on such Tennessee Subscribers’ subscription payments while such payments were held in the Escrow Account. However, the Escrow Agent shall not disburse those funds of a subscriber, the subscription of which has been rejected or rescinded, if the Escrow Agent has been notified by the Company of such rejection or rescission.

(b) If the Company has not received total subscriptions of at least $10,000,000 within 365 days after the Closing Date, all funds in the Escrow Account that were contributed by Tennessee Subscribers will be promptly returned in full to such Tennessee Subscribers, together with their pro rata share of any interest earned thereon pursuant to instructions made by the Company upon which the Escrow Agent may conclusively rely.

5. Escrowed Funds. Upon receipt of the funds received from subscribers to the Offering, the Escrow Agent shall hold such funds in escrow pursuant to the terms of this Agreement. All such funds held in the Escrow Account shall be invested and reinvested in bank accounts or bank money market accounts permitted under Rule 15c2-4 of the Securities Exchange Act of 1934, as

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amended, at the direction of the Company. All funds in the Escrow Account shall at all times be placed in interest-bearing accounts.

The Escrow Agent shall be entitled to sell or redeem any such investment as necessary to make any distributions required under this Agreement and shall not be liable or responsible for any loss resulting from any such sale or redemption.

Income, if any, resulting from the investment of the funds received from subscribers to the Offering shall be distributed according to this Agreement.

The Escrow Agent shall provide to the Company monthly statements (or more frequently as reasonably requested by the Company) on the account balance of the Escrow Account and the activity in the account since the last report.

6. Duties of the Escrow Agent. The Escrow Agent shall have no duties or responsibilities other than those expressly set forth in this Agreement, and no implied duties or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent is not a party to, or bound by, any other agreement among the other parties hereto, and the Escrow Agent’s duties shall be determined solely by reference to this Agreement. The Escrow Agent shall have no duty to enforce any obligation of any person, other than as provided herein. The Escrow Agent shall be under no liability to anyone by reason of any failure on the part of any party hereto or any maker, endorser or other signatory of any document or any other person to perform such person’s obligations under any such document.

7. Liability of the Escrow Agent and the Processing Agent; Indemnification. The Escrow Agent acts hereunder as a depository only. The Escrow Agent is not responsible or liable in any manner for the sufficiency, correctness, genuineness or validity of this Escrow Agreement or with respect to the form of execution of the same. Each of the Escrow Agent and the Processing Agent shall not be liable for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in good faith, and in the exercise of its own best judgment, and may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel chosen by the Escrow Agent or the Processing Agent), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which is believed by the Escrow Agent or the Processing Agent to be genuine and to be signed or presented by the proper person(s). Each of the Escrow Agent and the Processing Agent shall not be held liable for any error in judgment made in good faith by an officer or employee of either unless it shall be proved that the Escrow Agent or the Processing Agent, as appropriate, was grossly negligent or reckless in ascertaining the pertinent facts or acted intentionally in bad faith. The Escrow Agent shall not be bound by any notice of demand, or any waiver, modification, termination or rescission of this Agreement or any of the terms hereof, unless evidenced by a writing delivered to the Escrow Agent signed by the proper party or parties and, if the duties or rights of the Escrow Agent are affected, unless it shall give its prior written consent thereto.

Either of the Escrow Agent and the Processing Agent may consult legal counsel and shall exercise reasonable care in the selection of such counsel, in the event of any dispute or question as to the construction of any provisions hereof or its duties hereunder, and it shall incur no

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liability and shall be fully protected in acting in accordance with the reasonable opinion or instructions of such counsel.

Each of the Escrow Agent and the Processing Agent shall not be responsible, may conclusively rely upon and shall be protected, indemnified and held harmless by the Company, for the sufficiency or accuracy of the form of, or the execution, validity, value or genuineness of any document or property received, held or delivered by it hereunder, or of the signature or endorsement thereon, or for any description therein; nor shall the Escrow Agent or the Processing Agent be responsible or liable in any respect on account of the identity, authority or rights of the persons executing or delivering or purporting to execute or deliver any document, property or this Agreement.

In the event that either the Escrow Agent or the Processing Agent shall become involved in any arbitration or litigation relating to the funds received from subscribers to the Offering, each is authorized to comply with any decision reached through such arbitration or litigation.

The Company, hereby agrees to indemnify both the Escrow Agent and the Processing Agent for, and to hold it harmless against any loss, liability or expense incurred in connection herewith without gross negligence, recklessness or willful misconduct on the part of either of the Escrow Agent or the Processing Agent, including without limitation legal or other fees arising out of or in connection with its entering into this Agreement and carrying out its duties hereunder, including without limitation the costs and expenses of defending itself against any claim of liability in the premises or any action for interpleader. Neither the Escrow Agent, nor the Processing Agent, shall be under any obligation to institute or defend any action, suit, or legal proceeding in connection herewith, unless first indemnified and held harmless to its satisfaction in accordance with the foregoing, except that neither shall be indemnified against any loss, liability or expense arising out of its own gross negligence, recklessness or willful misconduct. Such indemnity shall survive the termination or discharge of this Agreement or resignation of the Escrow Agent.

8. The Escrow Agent’s Fee. Escrow Agent shall be entitled to fees and expenses for its regular services as Escrow Agent as set forth in Exhibit A. Additionally, Escrow Agent is entitled to reasonable fees for extraordinary services and reimbursement of any reasonable out of pocket and extraordinary costs and expenses related to its obligations as Escrow Agent under this Agreement, including, but not limited to, reasonable attorneys’ fees. All of the Escrow Agent’s compensation, costs and expenses shall be paid by the Company.

9. Security Interests. No party to this Escrow Agreement shall grant a security interest in any monies or other property deposited with the Escrow Agent under this Escrow Agreement, or otherwise create a lien, encumbrance or other claim against such monies or borrow against the same.

10. Dispute. In the event of any disagreement between the undersigned or the person or persons named in instructions given pursuant to this Agreement, or any other person, resulting in adverse claims and demands being made in connection with or for any papers, money or property involved herein, or affected hereby, the Escrow Agent shall be entitled to refuse to comply with any demand or claim, as long as such disagreement shall continue, and in so refusing to make any delivery or other disposition of any money, papers or property involved or affected hereby, the Escrow Agent shall not be or become liable to the undersigned or to any person named in

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such instructions for its refusal to comply with such conflicting or adverse demands, and the Escrow Agent shall be entitled to refuse and refrain to act until: (a) The rights of the adverse claimants shall have been fully and finally adjudicated in a court of competent jurisdiction over the parties and money, papers and property involved herein or affected hereby, or (b) All differences shall have been adjusted by agreement and the Escrow Agent shall have been notified thereof in writing, signed by all the interested parties.

11. Resignation of Escrow Agent. Escrow Agent may resign or be removed, at any time, for any reason, by written notice of its resignation or removal to the proper parties at their respective addresses as set forth herein, at least 60 days before the date specified for such resignation or removal to take effect; upon the effective date of such resignation or removal:

(a) All cash and other payments and all other property then held by the Escrow Agent hereunder shall be delivered by it to such successor escrow agent as may be designated in writing by the Company, whereupon the Escrow Agent’s obligations hereunder shall cease and terminate; or

(b) If no such successor escrow agent has been designated by such date, all obligations of the Escrow Agent hereunder shall, nevertheless, cease and terminate, and the Escrow Agent’s sole responsibility thereafter shall be to keep all property then held by it and to deliver the same to a person designated in writing by the Company or in accordance with the directions of a final order or judgment of a court of competent jurisdiction; and

(c) Further, if no such successor escrow agent has been designated by such date, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor agent; further the Escrow Agent may pay into such court all monies and property deposited with Escrow Agent under this Agreement.

12. Notices. All notices, demands and requests required or permitted to be given under the provisions hereof must be in writing and shall be deemed to have been sufficiently given, upon receipt, if (i) personally delivered, (ii) sent by telecopy and confirmed by phone or (iii) mailed by registered or certified mail, with return receipt requested, delivered to the addresses set forth below, or to such other address as a party shall have designated by notice in writing to the other parties in the manner provided by this paragraph:

(1) If to Company:	KBS Legacy Partners Apartment REIT, Inc.
	620 Newport Center Drive, Suite 1300
	Newport Beach, CA 92660
	Telephone: (949) 417-6500
	Facsimile: (949) 417-6520
	Company Wire Instructions:
	To be provided by the Company
(2) If to the Escrow Agent:	UMB Bank, N.A.
	1010 Grand Blvd., 4th Floor
	Mail Stop: 1020409

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	Kansas City, Missouri 64106
	Attention: Lara Stevens,
	Corporate Trust
	Telephone: (816) 860-3017
	Facsimile: (816) 860-3029
	Escrow Agent Wiring Instructions:
	UMB Bank, N.A.
	ABA Routing Number: 101000695
	Account Number: To be provided by UMB Bank, N.A.
	Account Name: UMB Bank, N.A., as Escrow Agent for KBS Legacy Partners Apartment REIT, Inc.
	Checks Payable Information:
	UMB Bank, N.A., as Escrow Agent for KBS Legacy Partners Apartment REIT, Inc.
	Attention: Lara Stevens, Corporate Trust 1010 Grand Boulevard, 4th Floor M/S 1020409 Kansas City, Missouri 64106
(3) If to Dealer Manager:	KBS Capital Markets Group, LLC
	660 Newport Center Drive, Suite 1200
	Newport Beach, CA 92660
	Attention: Hans Henselman, Chief Compliance Officer
	Telephone: (949) 717-6247
	Facsimile: (949) 717-6201

13. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Missouri without regard to the principles of conflicts of law.

14. Binding Effect; Benefit. This Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of the parties hereto.

15. Modification. This Agreement may be amended, modified or terminated at any time by a writing executed by the Dealer Manager, the Company and the Escrow Agent.

16. Assignability. This Agreement shall not be assigned by the Escrow Agent without the Company’s prior written consent.

17. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Copies, telecopies, facsimiles, electronic files and other reproductions of original executed documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action or suit in the appropriate court of law.

18. Headings. The section headings contained in this Agreement are inserted for convenience only, and shall not affect in any way, the meaning or interpretation of this Agreement.

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19. Severability. This Agreement constitutes the entire agreement among the parties and supersedes all prior and contemporaneous agreements and undertakings of the parties in connection herewith. No failure or delay of the Escrow Agent in exercising any right, power or remedy may be, or may be deemed to be, a waiver thereof; nor may any single or partial exercise of any right, power or remedy preclude any other or further exercise of any right, power or remedy. In the event that any one or more of the provisions contained in this Agreement, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement.

20. Earnings Allocation; Tax Matters; Patriot Act Compliance; OFAC Search Duties. The Company or its agent shall be responsible for all tax reporting under this Escrow Agreement. The Company shall provide to Escrow Agent upon the execution of this Agreement any documentation requested and any information reasonably requested by the Escrow Agent to comply with the USA Patriot Act of 2001, as amended from time to time. The Escrow Agent, or its agent, shall complete an OFAC search, in compliance with its policy and procedures, of each subscription check and shall inform the Company if a subscription check fails the OFAC search. The Dealer Manager shall provide a copy of each subscription check in order that the Escrow Agent, or its agent, may perform such OFAC search.

21. Miscellaneous. This Agreement shall not be construed against the party preparing it, and shall be construed without regard to the identity of the person who drafted it or the party who caused it to be drafted and shall be construed as if all parties had jointly prepared this Agreement and it shall be deemed their joint work product, and each and every provision of this Agreement shall be construed as though all of the parties hereto participated equally in the drafting hereof; and any uncertainty or ambiguity shall not be interpreted against any one party. As a result of the foregoing, any rule of construction that a document is to be construed against the drafting party shall not be applicable.

22. Third Party Beneficiaries. The Processing Agent shall be a third party beneficiary under this Agreement, entitled to enforce any rights, duties or obligations owed to it under this Agreement notwithstanding the terms of any other agreements between the Processing Agent and any Party hereto.

23. Termination of the Escrow Agreement. This Agreement, except for Sections 7 and 11 hereof, which shall continue in effect, shall terminate upon written notice from the Company to the Escrow Agent. Unless otherwise provided, final termination of this Agreement shall occur on the date that all funds held in the Escrow Account are distributed either (a) to the Company or to subscribers and the Company has informed the Escrow Agent in writing to close the Escrow Account or (b) to a successor escrow agent upon written instructions from the Company.

24. Relationship of Parties. The Dealer Manager and the Company are unaffiliated with the Escrow Agent, and this Agreement does not create any partnership or joint venture among either the Dealer Manager or the Company and the Escrow Agent.

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[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by their duly authorized representatives as of the date first written hereinabove.

DEALER MANAGER:

KBS CAPITAL MARKETS GROUP, LLC

By:

Name:

Title:

COMPANY:

KBS LEGACY PARTNERS APARTMENT REIT, INC.

By:

Name:

Title:

ESCROW AGENT:

UMB BANK, N.A.

By:

Name:

Title:

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EXHIBIT A

ESCROW FEES AND EXPENSES

Acceptance Fee
Review escrow agreement and establish account	$	[3,000	]
Annual Fee
Maintain account	$	[3,000	]
Transaction Fees
(a) per outgoing wire transfer	$	35.00
(b) per Form 1099 (Int., B or Misc.)	$	10.00	*
(c) per investment purchase, sale or settlement	$	35.00	**

* Not anticipated to be charged

** Excludes money market mutual fund transactions

Fees specified are for the regular, routine services contemplated by the Escrow Agreement, and any additional or extraordinary services, including, but not limited to disbursements involving a dispute or arbitration, or administration while a dispute, controversy or adverse claim is in existence, will be charged based upon time required at the then standard hourly rate. In addition to the specified fees, all expenses related to the administration of the Escrow Agreement (other than normal overhead expenses of the regular staff) such as, but not limited to, travel, postage, shipping, courier, telephone, facsimile, supplies, legal fees, accounting fees, etc., will be reimbursable. Acceptance and first year annual fees will be payable at the initiation of the escrow and annual fees will be payable in advance thereafter. Other fees and expenses will be billed as incurred.

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EXHIBIT B

Form of Subscriber List

Pursuant to the Escrow Agreement dated as of                      , 20    , by and among KBS Legacy Partners Apartment REIT, Inc. (the “Company”), UMB Bank, N.A., as escrow agent (the “Escrow Agent”), and KBS Capital Markets Group LLC (the “Dealer Manager”), the Dealer Manager hereby notifies the Escrow Agent that, as of the date set forth below, the following Subscribers have submitted subscription funds for the purchase of shares of common stock of the Company (the “Shares”), such subscription funds have been deposited with Escrow Agent in accordance with the Escrow Agreement:

1. Name of Subscriber

Address

Tax Identification Number

Number of Shares subscribed for

Amount of money paid and deposited with Escrow Agent

2. Name of Subscriber

Address

Tax Identification Number

Number of Shares subscribed for

Amount of money paid and deposited with Escrow Agent

… Name of Subscriber

Address

Tax Identification Number

Number of Shares subscribed for

Amount of money paid and deposited with Escrow Agent

________________________

By:

Name:

Title:

Date: _______________________ ____, 20___

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EX-10.1

EXHIBIT 10.1

FORM OF ADVISORY AGREEMENT

between

KBS LEGACY PARTNERS APARTMENT REIT, INC.

and

KBS CAPITAL ADVISORS LLC

____________, 2010

TABLE OF CONTENTS

	Page
ARTICLE 1 – DEFINITIONS	1
ARTICLE 2 – APPOINTMENT	8
ARTICLE 3 – DUTIES OF THE ADVISOR	8
3.01 Organizational and Offering Services	9
3.02 Acquisition Services	9
3.03 Asset Management Services	9
3.04 Stockholder Services	12
3.05 Other Services	12
ARTICLE 4 – AUTHORITY OF ADVISOR	12
4.01 General	12
4.02 Powers of the Advisor	13
4.03 Approval by the Board	13
4.04 Modification or Revocation of Authority of Advisor	13
ARTICLE 5 – BANK ACCOUNTS	13
ARTICLE 6 – RECORDS AND FINANCIAL STATEMENTS	13
ARTICLE 7 – LIMITATION ON ACTIVITIES	14
ARTICLE 8 – FEES	14
8.01 Acquisition Advisory Fees	14
8.02 Development and Construction Fees	15
8.03 Asset Management Fees	15
8.04 Disposition Fees	16
8.05 Subscription Processing Fee	16
8.06 Property Management Fee	16
8.07 Subordinated Share of Cash Flows	17
8.08 Subordinated Incentive Fee	17
8.09 Changes to Fee Structure	18
ARTICLE 9 – EXPENSES	18
9.01 General	18
9.02 Timing of and Limitations on Reimbursements	19
ARTICLE 10 – VOTING AGREEMENT	20
ARTICLE 11 – RELATIONSHIP OF ADVISOR AND COMPANY; OTHER ACTIVITIES OF THE ADVISOR	20
11.01 Relationship	20
11.02 Time Commitment	21
11.03 Investment Opportunities and Allocation	21
ARTICLE 12 – THE KBS NAME	21
ARTICLE 13 – TERM AND TERMINATION OF THE AGREEMENT	22
13.01 Term	22
13.02 Termination by Either Party	22
13.03 Payments on Termination and Survival of Certain Rights and Obligations	22
ARTICLE 14 – ASSIGNMENT	23

i

ARTICLE 15 – INDEMNIFICATION AND LIMITATION OF LIABILITY	23
15.01 Indemnification	23
15.02 Limitation on Indemnification	23
15.03 Limitation on Payment of Expenses	24
ARTICLE 16 – MISCELLANEOUS	24
16.01 Notices	24
16.02 Modification	24
16.03 Severability	24
16.04 Construction	25
16.05 Entire Agreement	25
16.06 Waiver	25
16.07 Gender	25
16.08 Titles Not to Affect Interpretation	25
16.09 Counterparts	25

ii

ADVISORY AGREEMENT

This Advisory Agreement, dated as of ___________, 2010 (the “Agreement”), is between KBS Legacy Partners Apartment REIT, Inc., a Maryland corporation (the “Company”), and KBS Capital Advisors LLC, a Delaware limited liability company (the “Advisor”).

W I T N E S S E T H

WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the board of directors of the Company (the “Board”), all as provided herein; and

WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

The following defined terms used in this Agreement shall have the meanings specified below:

“Acquisition Advisory Fees” shall have the meaning set forth in Section 8.01.

“Acquisition Expenses” means any and all expenses, excluding the fee payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Advisor or any Affiliate of either in connection with the selection, acquisition or development of any property or other potential investment, whether or not acquired, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, nonrefundable option payments on properties or other investments not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to selection and acquisition of properties, whether or not acquired.

“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Property or other Permitted Investment or the purchase, development or construction of any Property by the Company. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, Development Fee, Construction Fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be Development Fees and Construction Fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property.

1

“Advisor” means (i) KBS Capital Advisors LLC, a Delaware limited liability company, or (ii) any successor advisor to the Company.

“Affiliate or Affiliated” An Affiliate of another Person includes any of the following: (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (ii) any Person directly or indirectly owning, controlling, or holding with the power to vote 10% or more of the outstanding voting securities of such other Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; and (v) any executive officer, director, trustee, or general partner of such other Person. An entity shall not be deemed to control or be under common control with an Advisor-sponsored program unless (i) the entity owns 10% or more of the voting equity interests of such program or (ii) a majority of the board of directors (or equivalent governing body) of such program is composed of Affiliates of the entity.

“Appraised Value” means the value according to an appraisal made by an Independent Appraiser.

“Asset Management Fee” shall have the meaning set forth in Section 8.03.

“Average Invested Assets” means, for a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Properties and other Permitted Investments secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period.

“Board” means the board of directors of the Company, as of any particular time.

“Bylaws” means the bylaws of the Company, as amended from time to time.

“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties or other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith).

“Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith including, without limitation, Disposition Fees and (ii) from the prepayment, maturity, workout or other settlement of any other Permitted Investment or portion thereof after deduction of all expenses incurred in connection therewith. In the case of a transaction described in clause (i) (C) of the definition of “Sale” and (i)(B) of the definition of “Settlement,” Cash from Sales and Settlements means the proceeds of any such transaction actually distributed to the Company from the Joint Venture or partnership. Cash from Sales and Settlements shall not include Cash from Financings.

“Cash from Sales, Settlements and Financings” means the total sum of Cash from Sales and Settlements and Cash from Financings.

2

“Charter” means the articles of incorporation of the Company, as amended from time to time.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“Company” means KBS Legacy Partners Apartment REIT, Inc., a corporation organized under the laws of the State of Maryland.

“Competitive Real Estate Commission” means a real estate or brokerage commission for the purchase or sale of property that is reasonable, customary, and competitive in light of the size, type, and location of the property.

“Conflicts Committee” shall have the meaning set forth in the Company’s Charter.

“Construction Fee” means a fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitation on a Property, either initially or at a later date payable pursuant to Section 8.02.

“Contract Sales Price” means the total gross consideration received by the Company for the sale of a Property or other Permitted Investment.

“Cost of Real Estate Investments” means the sum of (i) with respect to Properties wholly owned, directly or indirectly, by the Company, the amount actually paid or allocated to fund the acquisition, development, construction or improvement of Properties, including expenses related thereto (but excluding any Acquisition Fees related thereto), plus the amount of any outstanding debt attributable to such Properties and the budgeted capital improvement costs, and (ii) in the case of Properties owned by any Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or a partner, the portion of the amount actually paid or allocated to fund the acquisition, development, construction or improvement of Properties, including expenses related thereto (but excluding any Acquisition Fees related thereto), plus the amount of any outstanding debt associated with such Properties that is attributable to the Company’s investment in the Joint Venture or partnership and the budgeted capital improvement costs.

“Cost of other Permitted Investments” means the sum of the cost of all Permitted Investments held, directly or indirectly, by the Company, calculated each month on an ongoing basis, and calculated as follows for each investment: the lesser of (i) the amount actually paid or allocated to acquire or fund the Permitted Investment, including expenses related thereto (but excluding any Acquisition Fees related thereto) and the amount of any debt associated with or used to acquire or fund such investment and (ii) the outstanding principal amount of such Permitted Investment, including expenses related to the acquisition or funding of such investment (but excluding any Acquisition Fees related thereto), as of the time of calculation. With respect to any Permitted Investment held by the Company through a Joint Venture or partnership of which it is, directly or indirectly, a co-venturer or partner, such amount shall be the Company’s proportionate share thereof.

3

“Dealer Manager” means (i) KBS Capital Markets Group LLC, a Delaware limited liability company, or (ii) any successor dealer manager to the Company.

“Development Fee” means a fee for the packaging of a Property, including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the Property, either initially or at a later date payable pursuant to Section 8.02.

“Director” means a member of the board of directors of the Company.

“Disposition Fee” shall have the meaning set forth in Section 8.04.

“Distributions” means any distributions of money or other property by the Company to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.

“GAAP” means accounting principals generally accepted in the United States.

“Gross Proceeds” means the aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Organization and Offering Expenses.

“Independent Appraiser” means a person or entity with no material current or prior business or personal relationship with the Advisor or the Directors, who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Company, and who is a qualified appraiser of real estate as determined by the Board. Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers (M.A.I.) or the Society of Real Estate Appraisers (S.R.E.A.) shall be conclusive evidence of such qualification.

“Initial Public Offering” means the initial public offering of Shares registered on Registration Statement No. 333-161449 on Form S-11.

“Invested Capital” means the amount calculated by multiplying the total number of Shares purchased by Stockholders by the issue price, reduced by any amounts paid by the Company to repurchase Shares pursuant to the Company’s plan for redemption of Shares.

“Joint Venture” means any joint venture, limited liability company or other Affiliate of the Company that owns, in whole or in part, on behalf of the Company any Properties or other Permitted Investments.

“Listed” or “Listing” shall have the meaning set forth in the Company’s Charter.

“Market Value” shall have the meaning set forth in Section 8.08.

“NASAA Guidelines” means the NASAA Statement of Policy Regarding Real Estate Investment Trusts as in effect on the date hereof.

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“Net Income” means, for any period, the total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets.

“Offering” means any offering of Shares that is registered with the SEC, excluding Shares offered under any employee benefit plan.

“Operating Cash Flow” means Operating Revenue Cash Flows minus the sum of (i) Operating Expenses, (ii) all principal and interest payments on indebtedness and other sums paid to lenders, (iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (iv) taxes, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, mortgage loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and bad loan reserves, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, mortgage loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

“Operating Revenue Cash Flows” means the Company’s cash flow from ownership and/or operation of (i) Properties, (ii) Permitted Investments, (iv) short-term investments, and (v) interests in Properties and Permitted Investments owned by any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner.

“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with or preparing the Company for registration of and subsequently offering and distributing its Shares to the public, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); any expense allowance granted by the Company to the underwriter or any reimbursement of expenses of the underwriter by the Company; expenses for printing, engraving and mailing; compensation of employees while

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engaged in sales activity; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants’ and attorneys’ fees.

“Partnership” means KBS Legacy Partners Limited Partnership, a Delaware limited partnership formed to own and operate Properties and other Permitted Investments on behalf of the Company.

“Permitted Investments” means all investments (other than Properties and short-term investments acquired for purposes of cash management) in which the Company may acquire an interest, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, pursuant to the Charter, Bylaws and the investment objectives and policies adopted by the Board from time to time, including, without limitation, mortgage loans and other types of debt financing investments.

“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

“Property” or “Properties” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership in which the Company is, directly or indirectly, a co-venturer or partner.

“Property Manager” means an entity that has been retained to perform and carry out at one or more of the Properties property management services.

“Registration Statement” means the registration statement filed by the Company with the SEC on Form S-11 (Reg. No. 333-161449), as amended from time to time, in connection with the Initial Public Offering.

“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.

“Sale” means (i) any transaction or series of transactions whereby: (A) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, including any event with respect to any Property or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards; (B) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Partnership in any Joint Venture or any partnership in which it is, directly or indirectly, a co-venturer or partner; or (C) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a co-venturer or partner, sells, grants, transfers, conveys, or relinquishes its ownership

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of any Property or other Permitted Investment or portion thereof, including any event with respect to any Property or other Permitted Investment that gives rise to insurance claims or condemnation awards, but (ii) not including any transaction or series of transactions specified in clause (i) (A), (i) (B), or (i) (C) above in which the proceeds of such transaction or series of transactions are reinvested in one or more Properties or other Permitted Investments within 180 days thereafter.

“SEC” means the United States Securities and Exchange Commission.

“Settlement” means (i) the prepayment, maturity, workout or other settlement of any Permitted Investment or portion thereof owned, directly or indirectly, by (A) the Company or the Partnership or (B) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner, but (ii) not including any transaction or series of transactions specified in clause (i) (A) or (i) (B) above in which the proceeds of such prepayment, maturity, workout or other settlement are reinvested in one or more Properties or other Permitted Investments within 180 days thereafter.

“Shares” means shares of common stock of the Company, par value $.01 per share.

“Stockholders” means the registered holders of the Shares.

“Stockholders’ 8% Return” means, as of any date, an aggregate amount equal to a 8% cumulative, non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis based on a three hundred sixty-five day year). For purposes of calculating the Stockholders’ 8% Return, Invested Capital shall be determined for each day during the period for which the Stockholders’ 8% Return is being calculated and shall be calculated net of (1) Distributions of Operating Cash Flow to the extent such Distributions of Operating Cash Flow provide a cumulative, non-compounded, annual return in excess of 8%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year and (2) Distributions of Cash from Sales, Settlements and Financings, except to the extent such Distributions would be required to supplement Distributions of Operating Cash Flow in order to achieve a cumulative, non-compounded, annual return of 8%, as such amounts are computed on a daily basis based on a three hundred sixty-five day year.

“Subordinated Incentive Fee” means the fee payable to the Advisor under certain circumstances if the Shares are Listed, as calculated in Section 8.08.

“Subordinated Performance Fee Due Upon Termination” means a fee payable in the form of an interest bearing promissory note (the “Performance Fee Note”) in a principal amount equal to (1) 15% of the amount, if any, by which (a) the Appraised Value of the Company’s Properties at the Termination Date, less amounts of all indebtedness secured by the Company’s Properties, plus the fair market value of all other Permitted Investments of the Company at the Termination Date, less amounts of indebtedness related to such Permitted Investments, plus total Distributions (excluding any stock dividend) through the Termination Date exceeds (b) the sum of Invested Capital plus total Distributions required to be made to the stockholders in order to pay the Stockholders’ 8% Return from inception through the Termination Date less (2) any prior payment to the Advisor of a Subordinated Share of Cash Flows. Interest on the Performance Fee

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Note will accrue beginning on the Termination Date at a rate deemed fair and reasonable by the Conflicts Committee. The Company shall repay the Performance Fee Note at such time as the Company completes the first Sale or Settlement after the Termination Date using Cash from Sales and Settlements. If the Cash from Sales and Settlements from the first Sale or Settlement after the Termination Date is insufficient to pay the Performance Fee Note in full, including accrued interest, then the Performance Fee Note shall be paid in part from the Cash from Sales and Settlements from the first Sale or Settlement, and in part from the Cash from Sales and Settlements from each successive Sale or Settlement until the Performance Fee Note is repaid in full, with interest. If the Performance Fee Note has not been paid in full within five years from the Termination Date, then the Advisor, its successors or assigns, may elect to convert the balance of the fee, including accrued but unpaid interest, into Shares at a price per Share equal to the average closing price of the Shares over the ten trading days immediately preceding the date of such election if the Shares are Listed at such time. If the Shares are not Listed at such time, the Advisor, its successors or assigns, may elect to convert the balance of the fee, including accrued but unpaid interest, into Shares at a price per Share equal to the fair market value for the Shares as determined by the Board based upon the Appraised Value of Company’s Properties on the date of election plus the fair market value of all other Permitted Investments of the Company on the date of election.

“Subordinated Share of Cash Flows” has the meaning set forth in Section 8.07.

“Subscription Processing Fee” has the meaning set forth in Section 8.05.

“Termination Date” means the date of termination of the Agreement determined in accordance with Article 13 hereof.

“2%/25% Guidelines” means the requirement pursuant to the NASAA Guidelines that, in any period of four consecutive fiscal quarters, total Operating Expenses not exceed the greater of 2% of the Company’s Average Invested Assets during such 12-month period or 25% of the Company’s Net Income over the same 12-month period.

ARTICLE 2

APPOINTMENT

The Company hereby appoints the Advisor to serve as its advisor and asset manager on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

ARTICLE 3

DUTIES OF THE ADVISOR

The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets. The Advisor undertakes to use its best efforts to present to the Company potential investment opportunities, to make investment decisions on behalf of the Company subject to the limitations in the Company’s Charter, the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a

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continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:

3.01 Organizational and Offering Services.  The Advisor shall perform all services related to the organization of the Company or any Offering or private sale of the Company’s securities, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.

3.02 Acquisition Services.

(i)   Serve as the Company’s investment and financial advisor and provide relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;

(ii)   Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Properties and other Permitted Investments will be made; (c) acquire and dispose of Properties and other Permitted Investments on behalf of the Company; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Properties and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Properties and other Permitted Investments;

(iii)   Perform due diligence on prospective investments and create due diligence reports summarizing the results of such work;

(iv)   With respect to prospective investments presented to the Board, prepare reports regarding such prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;

(v)   Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company;

(vi)   Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments; and

(vii)   Negotiate and execute approved investments and other transactions, including prepayments, maturities, workouts and other settlements of Permitted Investments.

3.03 Asset Management Services.

(i)   Real Estate and Related Services:

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(a)   Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;

(b)   Negotiate and service the Company’s and the Properties’ debt facilities and other financings;

(c)   Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of the Properties and other Permitted Investments;

(d)   Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Properties and other Permitted Investments;

(e)   Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Properties and other Permitted Investments on an overall portfolio basis;

(f)   Consult with the Company’s officers and the Board and assist the Board in the formulation and implementation of the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and with respect to any borrowings proposed to be undertaken by the Company;

(g)   Oversee the performance by the Property Managers of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;

(h)   Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties and to evaluate the performance of the Property Managers;

(i)   Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget;

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(j)   Coordinate and manage relationships between the Company and any co-venturers or partners; and

(k)   Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, sale and refinancing opportunities that are presented to the Board.

(ii) Accounting and Other Administrative Services:

(a)   Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;

(b)   From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;

(c)   Make reports to the Conflicts Committee each quarter of the investments that have been made by other programs sponsored by the Advisor or any of its Affiliates, including KBS Realty Advisors LLC, as well as any investments that have been made by the Advisor or any of its Affiliates directly;

(d)   Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;

(e)   Provide financial and operational planning services;

(f)   Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the SEC, the Internal Revenue Service and any other regulatory agency;

(g)   Maintain and preserve all appropriate books and records of the Company;

(h)   Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters;

(i)   Provide the Company with all necessary cash management services;

(j)   Manage and coordinate with the transfer agent the monthly dividend process and payments to Stockholders;

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(k)  Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining adequate insurance coverage based upon risk management determinations;

(l)  Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters, including but not limited to compliance with the Sarbanes-Oxley Act of 2002;

(m)  Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto;

(n)  Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law, including federal and state securities laws and the Sarbanes-Oxley Act of 2002;

(o)  Notify the Board of all proposed material transactions before they are completed; and

(p)  Do all things necessary to assure its ability to render the services described in this Agreement.

3.04 Stockholder Services.

(i)  Manage services for and communications with Stockholders, including answering phone calls, preparing and sending written and electronic reports and other communications;

(ii)  Oversee the performance of the transfer agent and registrar;

(iii)  Establish technology infrastructure to assist in providing Stockholder support and service; and

(iv)  Consistent with Section 3.01, the Advisor shall perform the various subscription processing services reasonably necessary for the admission of new Stockholders.

3.05 Other Services.  Except as provided in Article 7, the Advisor shall perform any other services reasonably requested by the Company (acting through the Conflicts Committee).

ARTICLE 4

AUTHORITY OF ADVISOR

4.01 General.  All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of

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the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.

4.02 Powers of the Advisor.  Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.

4.03 Approval by the Board.  Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees thereof if the Charter or Maryland General Corporation Law require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.

4.04 Modification or Revocation of Authority of Advisor.  The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.

ARTICLE 5

BANK ACCOUNTS

The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.

ARTICLE 6

RECORDS AND FINANCIAL STATEMENTS

The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations in accordance with

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GAAP, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees or reimbursements paid under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.

ARTICLE 7

LIMITATION ON ACTIVITIES

Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Charter or Bylaws. In the event an action that would violate (i) through (v) of the preceding sentence but such action has been ordered by the Board, the Advisor shall notify the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board. In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given.

ARTICLE 8

FEES

8.01 Acquisition Advisory Fees.  As compensation for the investigation, selection and acquisition (by purchase, contribution, investment or exchange) of Properties and other Permitted Investments, the Company shall pay a fee to the Advisor (an “Acquisition Advisory Fee”) for each such investment. With respect to the acquisition of a Property or other Permitted Investment to be wholly owned, directly or indirectly, by the Company, the Acquisition Advisory Fee payable to the Advisor shall equal 1.0% of the sum of the amount actually paid or allocated to fund the acquisition, development, construction or improvement of the Property or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property or other Permitted Investment and the amount of any debt associated with, or used to fund the investment in, such Property or other Permitted Investment plus budgeted capital improvement costs. With respect to the acquisition of a Property or other Permitted Investment through any Joint Venture or any partnership in which the Company or the Partnership is, directly or

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indirectly, a co-venturer or partner, the Acquisition Advisory Fee payable to the Advisor shall equal 1.0% of the portion of the amount actually paid or allocated to fund the acquisition, development, construction or improvement of the Property or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property or other Permitted Investment, plus the amount of any debt associated with, or used to fund the investment in, such Property or other Permitted Investment that is attributable to the Company’s investment in such Joint Venture or partnership plus budgeted capital improvement costs. Notwithstanding anything herein to the contrary, the payment of Acquisition Advisory Fees by the Company shall be subject to the limitations on Acquisition Fees contained in (and defined in) the Company’s Charter. The Advisor shall submit an invoice to the Company on or about the closing or closings of each acquisition, accompanied by a computation of the Acquisition Fee. Generally, the Acquisition Advisory Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. However, the Acquisition Advisory Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Acquisition Advisory Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.02 Development and Construction Fees.  If the Advisor or an Affiliate provides development services and/or construction services with respect to a Property, the Company shall pay the Advisor Development Fees and/or Construction Fees, as applicable, in amounts that are usual and customary for comparable services rendered to similar projects in the geographic market; provided, however, that the Conflict Committee must determine that such Development Fees and Construction Fees are fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties. Development Fees and Construction Fees will include the reimbursement of the specified cost incurred by the Advisor of engaging third parties for such services. However, the Development Fee and/or Construction Fee, as applicable, may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Development Fees and/or Construction Fees, as applicable, not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine. Notwithstanding the above, the Advisor may engage (on behalf of the Company) third parties to provide development or construction services pursuant to its authority under Article 4 and pay such third parties all applicable Development Fees or Construction Fees. Notwithstanding anything herein to the contrary, the payment of Development Fees and Construction Fees by the Company shall be subject to the limitations on Acquisition Fees contained in (and defined in) the Company’s Charter.

8.03 Asset Management Fees.  The Company shall pay the Advisor as compensation for the services described in Section 3.03 hereof a monthly fee (the “Asset Management Fee”) in an amount equal to one-twelfth of 1.0% of the sum of the Cost of Real Estate Investments and the Cost of other Permitted Investments. The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the Asset Management Fee for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. However, the Asset Management Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Asset Management Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

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8.04 Disposition Fees.  If the Advisor or any of its Affiliates provide a substantial amount of services (as determined by the Conflicts Committee) in connection with a Sale, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”) equal to 1.0% of the Contract Sales Price; provided, however, that no Disposition Fee shall be payable to the Advisor for any Sale if such Sale involves the Company selling all or substantially all of its assets in one or more transactions designed to effectuate a business combination transaction (as opposed to a Company liquidation, in which case the Disposition Fee would be payable if the Advisor or an Affiliate provides a substantial amount of services as provided above). The payment of any Disposition Fees by the Company shall be subject to the limitations contained in the Company’s Charter. Any Disposition Fee payable under this Section 8.04 may be paid in addition to commissions paid to non-Affiliates, provided that the total commissions (including such Disposition Fee) paid to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6% of the aggregate Contract Sales Price of each Property or other Permitted Investment or (ii) the Competitive Real Estate Commission for each Property or other Permitted Investment. The Advisor shall submit an invoice to the Company on or about the closing or closings of each disposition, accompanied by a computation of the Disposition Fee. Generally, the Disposition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. However, the Disposition Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Disposition Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.05 Subscription Processing Fee.  The Company shall pay the Advisor as compensation for the services described in Section 3.04(iv) hereof a monthly fee (the “Subscription Processing Fee”) in an amount equal to $35 per subscription agreement for Shares received and processed by the Advisor. The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the total amount of the Subscription Processing Fee for the applicable period. Generally, the Subscription Processing Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. However, the Subscription Processing Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Subscription Processing Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine. The Subscription Processing Fee is an Organization and Offering Expense of the Company and is subject to the limitations on Organization and Offering Expenses in Article 9 hereof.

8.06 Property Management Fees.  If the Company retains the Advisor or its Affiliates to manage any of its Properties, the Company will pay the Advisor or its Affiliates in amounts that are usual and customary for comparable services rendered to similar Properties in the geographic market; provided, however, that the Conflict Committee must determine that such Property Management Fees are fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties. Property Management Fees will include the reimbursement of the specified cost incurred by the Advisor of engaging third parties for such services. However, the Property Management Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Property Management Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine. Notwithstanding the above, the Advisor may engage (on behalf of the Company) third parties to provide property management

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services pursuant to its authority under Article 4 and pay such third parties all applicable Property Management Fees.

8.07 Subordinated Share of Cash Flows.  The Subordinated Share of Cash Flows shall be payable to the Advisor in an amount equal to 15% of Operating Cash Flow and Cash from Sales, Settlements and Financings remaining after the Stockholders have received Distributions of Operating Cash Flow and of Cash from Sales, Settlements and Financings such that the owners of all outstanding Shares have received Distributions in an aggregate amount equal to the sum of:

a.  the Stockholders’ 8% Return and

b.  Invested Capital.

When determining whether the above threshold has been met:

(A) Any stock dividend shall not be included as a Distribution; and

(B) Distributions paid on Shares redeemed by the Company (and thus no longer included in the determination of Invested Capital), shall not be included as a Distribution.

Following Listing, no Subordinated Share of Cash Flows will be paid to the Advisor.

If the Subordinated Share of Cash Flows is payable to the Advisor, the Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the total amount of the Subordinated Share of Cash Flows for the applicable period. Generally, the Subordinated Share of Cash Flows payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. However, the Subordinated Share of Cash Flows may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Subordinated Share of Cash Flows not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.08 Subordinated Incentive Fee.  Upon Listing, the Advisor shall be entitled to the Subordinated Incentive Fee in an amount equal to 15% of the amount by which (i) the market value of the outstanding Shares of the Company, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 days during which the Shares are traded, with such period beginning 180 days after Listing (the “Market Value”), plus the total of all Distributions paid to Stockholders (excluding any stock dividends) from the Company’s inception until the date that Market Value is determined, exceeds (ii) the sum of (A) 100% of Invested Capital and (B) the total Distributions required to be paid to the Stockholders in order to pay the Stockholders’ 8% Return from inception through the date Market Value is determined. The Company shall have the option to pay such fee in the form of cash, Shares, a promissory note or any combination of the foregoing. The Subordinated Incentive Fee will be reduced by the amount of any prior payment to the Advisor of a Subordinated Share of Cash Flows. In the event the Subordinated Incentive Fee is paid to the Advisor following Listing, no other performance fee will be paid to the Advisor. In addition, the Subordinated Incentive Fee

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may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor. All or any portion of the Subordinated Incentive Fee not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.

8.09 Changes to Fee Structure.  In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity.

ARTICLE 9

EXPENSES

9.01 General.  In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly or reimburse the Advisor for all of the expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement, including, but not limited to:

(i)  All Organization and Offering Expenses; provided, however, that the Company shall not reimburse the Advisor to the extent such reimbursement would cause the total amount spent by the Company on Organization and Offering Expenses to exceed 15% of the Gross Proceeds raised as of the date of the reimbursement and provided further that within 60 days after the end of the month in which an Offering terminates, the Advisor shall reimburse the Company to the extent the Company incurred Organization and Offering Expenses exceeding 15% of the Gross Proceeds raised in the completed Offering; the Company shall not reimburse the Advisor for any Organization and Offering Expenses that are not fair and commercially reasonable to the Company, and the Advisor shall reimburse the Company for any Organization and Offering Expenses that are not fair and commercially reasonable to the Company;

(ii)  Acquisition Fees and Acquisition Expenses incurred in connection with the selection and acquisition of Properties and other Permitted Investments, including such expenses incurred related to assets pursued or considered but not ultimately acquired by the Company, provided that, notwithstanding anything herein to the contrary, the payment of Acquisition Fees and Acquisition Expenses by the Company shall be subject to the limitations contained in the Company’s Charter;

(iii)  The actual out-of-pocket cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor;

(iv)  Interest and other costs for borrowed money, including discounts, points and other similar fees;

(v)  Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;

(vi)  Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and Directors;

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(vii)  Expenses of managing, improving, developing, operating and selling Properties and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to such Properties and other Permitted Investments, including but not limited to prepayments, maturities, workouts and other settlements of other Permitted Investments;

(viii)  All out-of-pocket expenses in connection with payments to the Board and meetings of the Board and Stockholders;

(ix)  Personnel and related employment costs incurred by the Advisor or its Affiliates in performing the services described in Article 3 hereof, including but not limited to reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services, provided that, other than reimbursement of travel and communications expenses, no reimbursement shall be made for costs of such employees of the Advisor or its Affiliates to the extent that such employees perform services for which the Advisor receives Acquisition Fees or Disposition Fees;

(x)  Out-of-pocket expenses of providing services for and maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

(xi)  Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board, the Conflicts Committee or any other committee of the Board;

(xii)  Out-of-pocket costs for the Company to comply with all applicable laws, regulations and ordinances;

(xiii)  Expenses connected with payments of Distributions made or caused to be made by the Company to the Stockholders;

(xiv)  Expenses of organizing, redomesticating, merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and

(xv)  All other out-of-pocket costs incurred by the Advisor in performing its duties hereunder.

9.02 Timing of and Additional Limitations on Reimbursements.

(i)  Expenses incurred by the Advisor on behalf of the Company and reimbursable pursuant to this Article 9 shall be reimbursed no less than monthly to the Advisor. The Advisor shall prepare a statement documenting the expenses of the Company during each quarter and shall deliver such statement to the Company within 45 days after the end of each quarter.

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(ii)  Notwithstanding anything else in this Article 9 to the contrary, the expenses enumerated in this Article 9 shall not become reimbursable to the Advisor unless and until the Company has raised $2.5 million in the Initial Public Offering.

(iii)  Commencing upon the earlier to occur of four fiscal quarters after (i) the Company’s making of its first investment or (ii) six months after commencement of the Initial Public Offering, the following limitation on Operating Expenses shall apply: The Company shall not reimburse the Advisor at the end of any fiscal quarter for Operating Expenses that in the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such year unless the Conflicts Committee determines that such excess was justified, based on unusual and nonrecurring factors that the Conflicts Committee deems sufficient. If the Conflicts Committee does not approve such excess as being so justified, any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. If the Conflicts Committee determines such excess was justified, then, within 60 days after the end of any fiscal quarter of the Company for which total reimbursed Operating Expenses for the Expense Year exceed the 2%/25% Guidelines, the Advisor, at the direction of the Conflicts Committee, shall cause such fact to be disclosed to the Stockholders in writing (or the Company shall disclose such fact to the Stockholders in the next quarterly report of the Company or by filing a Current Report on Form 8-K with the SEC within 60 days of such quarter end), together with an explanation of the factors the Conflicts Committee considered in determining that such excess expenses were justified. The Company will ensure that such determination will be reflected in the minutes of the meetings of the Board. All figures used in the foregoing computation shall be determined in accordance with GAAP applied on a consistent basis.

ARTICLE 10

VOTING AGREEMENT

The Advisor agrees that, with respect to any Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters submitted to the stockholders of the Company regarding (i) the removal of the Advisor, a director or any of their Affiliates or (ii) any transaction between the Company and the Advisor, a director or any of their Affiliates. This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company.

ARTICLE 11

RELATIONSHIP OF ADVISOR AND COMPANY;

OTHER ACTIVITIES OF THE ADVISOR

11.01 Relationship.  The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers. Nothing herein contained shall prevent the Advisor from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other

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REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director, officer, employee or equityholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Advisor shall promptly disclose to the Conflicts Committee the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person. Notwithstanding the foregoing, the Advisor shall promptly provide notice to the Conflicts Committee if the Advisor and Legacy Partners Residential Realty, LLC propose, after the date of this Agreement, to create any additional exclusion from the restrictions on competing business activities set forth in Section 8.1(a) of the operating agreement of KBS-Legacy Apartment Community REIT Venture, LLC. Such notice shall include a detailed description of the proposed exclusion and the basis for the determination by the Advisor and Legacy Partners Residential Realty, LLC that the excluded activity is not competitive with the Company or its investments. Within a reasonable time following its receipt of such notice, the Conflicts Committee shall approve or reject (by majority vote) the proposed exclusion.

11.02 Time Commitment.  The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.

11.03 Investment Opportunities and Allocation.  The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company that is consistent with the investment policies and objectives of the Company.

ARTICLE 12

THE KBS NAME

The Advisor and its Affiliates have a proprietary interest in the name “KBS.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “KBS” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “KBS” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “KBS” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any its Affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “KBS.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “KBS” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.

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ARTICLE 13

TERM AND TERMINATION OF THE AGREEMENT

13.01 Term.  This Agreement shall have an initial term of one year from the date hereof and may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. The Company’s board of directors will evaluate the performance of the Advisor annually before renewing this Agreement, and each such renewal shall be for a term of no more than one year. Any such renewal must be approved by a majority of the Company’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction.

13.02 Termination by Either Party.  This Agreement may be terminated upon 60 days written notice without cause or penalty by either the Company (acting through the Conflicts Committee) or the Advisor. The provisions of Articles 1, 10, 12, 13, 15 and 16 shall survive termination of this Agreement.

13.03 Payments on Termination and Survival of Certain Rights and Obligations.  Payments to the Advisor pursuant to this Section 13.03 shall be subject to the 2%/25% Guidelines to the extent applicable.

(i)  After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination (A) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement and (B) the Subordinated Performance Fee Due Upon Termination, provided that no Subordinated Performance Fee Due Upon Termination will be paid if the Company has paid or is obligated to pay the Subordinated Incentive Fee.

(ii)  The Advisor shall promptly upon termination:

(a)  pay over to the Company all money collected pursuant to this Agreement, if any, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;

(b)  deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

(c)  deliver to the Board all assets and documents of the Company then in the custody of the Advisor; and

(d)  cooperate with the Company to provide an orderly transition of advisory functions.

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ARTICLE 14

ASSIGNMENT

This Agreement may be assigned by the Advisor to an Affiliate with the consent of a majority of the Company’s board of directors (including a majority of the Conflicts Committee) not otherwise interested in the transaction. The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board or the Conflicts Committee. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.

ARTICLE 15

INDEMNIFICATION AND LIMITATION OF LIABILITY

15.01 Indemnification.  Except as prohibited by the restrictions provided in this Section 15.01, Section 15.02 and Section 15.03, the Company shall indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, equity holders, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance. Any indemnification of the Advisor may be made only out of the net assets of the Company and not from Stockholders.

Notwithstanding the foregoing, the Company shall not indemnify the Advisors or its Affiliates for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.

15.02 Limitation on Indemnification.  Notwithstanding the foregoing, the Company shall not provide for indemnification of the Advisor or its Affiliates for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Company, unless all of the following conditions are met:

(i)  The Advisor or its Affiliates have determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company.

(ii)  The Advisor or its Affiliates were acting on behalf of or performing services for the Company.

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(iii)  Such liability or loss was not the result of negligence or misconduct by the Advisor or its Affiliates.

15.03 Limitation on Payment of Expenses.  The Company shall pay or reimburse reasonable legal expenses and other costs incurred by the Advisors or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the Maryland General Corporation Law, as amended from time to time) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company, (b) the legal proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (c) the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by the Company, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification.

ARTICLE 16

MISCELLANEOUS

16.01 Notices.  Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

To the Company or the Board:

KBS Legacy Partners Apartment REIT, Inc.

620 Newport Center Drive, Suite 1300

Newport Beach, California 92660

To the Advisor:

KBS Capital Advisors LLC

620 Newport Center Drive, Suite 1300

Newport Beach, California 92660

Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.01.

16.02 Modification.  This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns.

16.03 Severability.  The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

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16.04 Construction.  The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.

16.05 Entire Agreement.  This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.

16.06 Waiver.  Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

16.07 Gender.  Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

16.08 Titles Not to Affect Interpretation.  The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

16.09 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

[The remainder of this page is intentionally left blank.

Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

KBS LEGACY PARTNERS APARTMENT REIT, INC.
By:
	C. Preston Butcher Chief Executive Officer

KBS CAPITAL ADVISORS LLC
By:	PBren Investments, L.P., a Manager
	By:	PBren Investments, LLC, as general partner
		By:
			Peter M. Bren, Manager
By:	Schreiber Real Estate Investments, L.P., a Manager
	By:	Schreiber Investments, LLC, as general partner
		By:
			Charles J. Schreiber, Jr., Manager

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EX-21.1

Exhibit 21.1

Direct and Indirect Subsidiaries of KBS Legacy Partners Apartment REIT, Inc.

KBS Legacy Partners Limited Partnership

KBS Legacy Partners Holdings LLC

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated August 19, 2009 with respect to the Consolidated Balance Sheet included in Amendment No. 4 to the Registration Statement (Form S-11 No. 333-161449) and related Prospectus of KBS Legacy Partners Apartment REIT, Inc. (f.k.a. KBS Legacy Apartment Community REIT, Inc.) for the registration of 280,000,000 shares of its common stock.

/s/ Ernst & Young LLP

Irvine, California

January 7, 2010

CORRESP

	DLA Piper LLP (US) 4141 Parklake Avenue, Suite 300 Raleigh, North Carolina 27612-2350 www.dlapiper.com
	Robert H. Bergdolt robert.bergdolt@dlapiper.com T 919.786.2002 F 919.786.2200