POS AM

As filed with the Securities and Exchange Commission on February 2, 2017

Registration No. 333-192331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

POST-EFFECTIVE AMENDMENT NO. 8 TO

FORM S-11

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

______________________________________________________

KBS Strategic Opportunity REIT II, Inc.

(Exact name of registrant as specified in its charter)

800 Newport Center Drive, Suite 700

Newport Beach, California 92660

(949) 417-6500

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

______________________________________________________

Keith D. Hall

Chief Executive Officer

KBS Strategic Opportunity REIT II, Inc.

800 Newport Center Drive, Suite 700

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.

Laura K. Sirianni, Esq.

DLA Piper LLP (US)

4141 Parklake Avenue, Suite 300

Raleigh, North Carolina 27612-2350

(919) 786-2000

______________________________________________________

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 of 1933, 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)

______________________________________________________

Explanatory Note

This Post-Effective Amendment No. 8 consists of the following:

1.    The Registrant’s final prospectus dated February 17, 2016.

2.    Supplement no. 5 dated April 26, 2016 and Supplement no. 23 dated February 2, 2017 to the Registrant’s prospectus dated February 17, 2016, included herewith, which will be delivered as unattached documents along with the prospectus.

3.    Part II, included herewith.

4.    Signature, included herewith.

	KBS STRATEGIC OPPORTUNITY REIT II, INC.
	Maximum Offering of up to
	180,000,000 Shares of Common Stock

KBS Strategic Opportunity REIT II, Inc. is a Maryland corporation that has elected to be taxed as a real estate investment trust beginning with the taxable year that ended December 31, 2014. We expect to use substantially all of the net proceeds from this offering to invest in and manage a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. We intend to acquire distressed debt, to originate and acquire mortgage, mezzanine, bridge and other real estate-related loans, to invest in various types of opportunistic real estate and to invest in real estate-related debt securities such as residential and commercial mortgage-backed securities and collateralized debt obligations. In addition, we may acquire equity securities of companies that make similar investments. We may make our investments through loan origination and the acquisition of individual assets or by acquiring portfolios of assets, mortgage REITs or companies with investment objectives similar to ours. We expect our investments to be in real estate and real estate-related assets located in the United States and Europe. As of February 17, 2016, we owned two hotel properties, one office building, and had originated a first mortgage loan.

We are offering up to $1,000,000,000 in shares of our common stock in the primary offering, consisting of two classes of shares: Class A shares at a price of $10.00 per share and Class T shares at a price of $9.59 per share. Both classes of shares have discounts available to certain categories of purchasers. We are also offering up to 76,366,006 in shares of our common stock pursuant to our dividend reinvestment plan: Class A shares at a price of $9.50 per share and Class T shares at a price of $9.12 per share. The amount of selling commissions differs among Class A shares and Class T shares, and there is an ongoing stockholder servicing fee with respect to Class T shares sold in the primary offering. We are offering to sell any combination of Class A and Class T shares in our primary offering and dividend reinvestment plan offering but in no event may we sell more than 180,000,000 of shares of our common stock pursuant to this offering. We reserve the right to reallocate shares between the primary offering and our dividend reinvestment plan offering. Based on our current estimates, as of the date of this prospectus, we have allocated 103,633,994 and 76,366,006 shares of our common stock to our primary and dividend reinvestment plan offerings, respectively. Our board of directors may adjust the offering prices of the primary offering shares or dividend reinvestment plan shares during the course of this offering by filing a post-effective amendment to this registration statement.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 32 to read about risks you should consider before buying shares of our common stock. These risks include the following:

• If we do not raise significant proceeds in this offering, we may not be able to invest in a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments and the value of your investment may vary more widely with the performance of specific assets.

• No public market currently exists for our shares, and at this time we have no plans to list our shares on an exchange. Our charter does not require our directors to provide our stockholders with a liquidity event by a specified date or at all. If you are able to sell your shares, you would likely have to sell them at a substantial loss.

• There are restrictions on the ownership and transferability of our shares of common stock. See “Description of Shares - Restriction on Ownership of Shares.”

• We set the $10.00 primary offering price of our Class A shares arbitrarily, and based on that price, set the primary offering price of our Class T shares to account for differing selling commissions. The offering prices are unrelated to the value of our assets or to our expected operating income.

• We depend on our advisor to conduct our operations.

• We have a limited operating history and very few assets. Other than as described in a supplement to this prospectus, we have not identified any additional investments to acquire.

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

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

• We may fund distributions from any source, including, without limitation, from offering proceeds or borrowings. If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investment in properties and other assets, the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

• We may incur debt causing our total liabilities to exceed 75% of the cost of our tangible assets with the approval of the conflicts committee. Higher debt levels increase the risk of your investment.

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

• We expect to make foreign investments and will be susceptible to changes in currency exchange rates, adverse political or economic developments, lack of uniform accounting standards and changes in foreign laws.

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(1)(2)		Selling Commissions(2)(3)		Dealer Manager Fee(2)(3)		Net Proceeds(3)(4)
Maximum Primary Offering	$	1,000,000,000	$	35,250,000	$	20,598,000	$	944,152,000
Class A Shares, Per Share	$	10.00	$	0.650	$	0.240	$	9.11
Class T Shares, Per Share	$	9.59	$	0.288	$	0.192	$	9.11
Dividend Reinvestment Plan	$	700,661,946	$	0.00	$	0.00	$	700,661,946
Class A Shares, Per Share	$	9.50	$	0.00	$	0.00	$	9.50
Class T Shares, Per Share	$	9.12	$	0.00	$	0.00	$	9.12
Total Maximum	$	1,700,661,946	$	35,250,000	$	20,598,000	$	1,644,813,946

(1) Volume and other discounts are available for certain categories of purchasers. Reductions in commissions and fees will result in corresponding reductions in the purchase price.

(2) The maximum offering price, selling commissions and dealer manager fee assume that 15% and 85% of the gross proceeds raised in the primary offering is from the sale of Class A and Class T shares of common stock, respectively. As we are registering any combination of the two classes of shares, this allocation is management’s best estimate based on the recommendation of our dealer manager and its perceived demand in the market for each respective class of shares. Further, based on our current estimates we have allocated 103,633,994 and 76,366,006 shares of our common stock to our primary and dividend reinvestment plan offerings, respectively.

(3) In addition to the selling commissions and dealer manager fee, we will pay additional underwriting compensation in the form of a stockholder servicing fee on the shares of Class T common stock sold in our primary offering. This fee is subject to certain limits and conditions, and with respect to a particular Class T share, will accrue until the fourth anniversary of the issuance of the share in an annual amount equal to 1.0% of the purchase price per share (ignoring any discounts that may be available to certain categories of purchasers).

(4) There will also be additional items of value paid from offering proceeds in connection with this offering that are viewed by FINRA as underwriting compensation. Payment of this additional underwriting compensation will reduce the proceeds to us. See “Plan of Distribution.”

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. Benefit Plan investors subscribing to purchase Class T shares should follow the escrow procedures under “Plan of Distribution - Special Notice to Benefit Plan Investors.”

We currently expect to offer shares of common stock in our primary offering until approximately 90 days (as determined by our Chief Executive Officer) after we have announced that we have raised $650 million in our primary public offering. In no event may the primary offering continue beyond the time period permitted by the rules promulgated by the SEC, which rules provide that absent the filing of a registration statement for a follow-on offering, this primary offering shall terminate after a three-year period. If we decide to revise the threshold upon which we will terminate this primary offering, we will provide that information in a prospectus supplement. We may continue to offer shares under our dividend reinvestment plan after the primary offering terminates until we have sold up to 76,366,006 shares of Class A and Class T common stock through the reinvestment of distributions. In some states, we will need to renew the registration statement or file a new registration statement to continue this primary offering beyond the one-year registration period allowed in some states. We may terminate the primary offering or the dividend reinvestment plan offering at any time, and we will provide that information in a prospectus supplement.

The date of this prospectus is February 17, 2016.

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

• Kansas and Maine – It is recommended by the office of the Kansas Securities Commissioner and the Maine Office of Securities that Kansas and Maine investors, respectively, not invest, in the aggregate, more than 10% of their liquid net worth in this and similar direct participation investments.

• Massachusetts – Investors must have either (a) a net worth of at least $300,000 or (b) a gross annual income of at least $90,000 and a net worth of at least $90,000. In addition, shares will only be sold to Massachusetts residents that have a liquid net worth of at least ten times their investment in us and other illiquid direct participation programs.

• California – Investors must have either (a) a net worth of at least $350,000 or (b) a gross annual income of at least $85,000 and a net worth of at least $250,000. In addition, shares will only be sold to California residents that have a 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 and our affiliates.

• New Jersey – Investors must have either (a) a minimum liquid net worth of $350,000 or (b) a minimum gross annual income of not less than $85,000 and a minimum liquid net worth of at least $100,000. In addition, a New Jersey investor’s investment in us, our affiliates, and other non-publicly traded direct investment programs (including real estate investment trusts, business development companies, oil and gas programs, equipment leasing programs and commodity pools, but excluding unregistered, federally and state exempt private offerings) may not exceed ten percent (10%) of his or her liquid net worth.

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

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

• New Mexico and Ohio – Investors must have a liquid net worth of at least ten times their investment in us, our affiliates and any other non-traded real estate investment programs.

• North Dakota – Investors must have a net worth of at least ten times their investment in us.

• Nebraska – Investors must have a net worth of at least ten times their aggregate investment in us and in the securities of other non-publicly traded real estate investment trusts.

• Kentucky – Investors must have a liquid net worth of at least ten times their investment in us and other same-sponsored non-publicly traded real estate investment trusts.

In addition, because the minimum offering amount was less than $100,000,000, 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.

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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. Liquid net worth is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable investments. 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 advisers 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		32
	Risk Related to an Investment in Us	32
	Risks Related to Conflicts of Interest	39
	Risks Related to This Offering and Our Corporate Structure	42
	Risks Related to Our Investments	48
	Risks Related to Our Financing Strategy	63
	Federal Income Tax Risks	64
	Retirement Plan Risks	73
CAUTIONARY NOTE REGARDING FOWARD-LOOKING STATEMENTS		75
ESTIMATED USE OF PROCEEDS		76
MANAGEMENT		78
	Board of Directors	78
	Committees of the Board of Directors	79
	Executive Officers and Directors	79
	Compensation of Directors	83
	Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents	84
	The Advisor	84
	The Advisory Agreement	87
	Our Strategic Relationship with STAM	89
	Initial Investment by Our Advisor	90
	Other Affiliates	90
	Management Decisions	93
MANAGEMENT COMPENSATION		94
STOCK OWNERSHIP		104
CONFLICTS OF INTEREST		105
	Our Affiliates’ Interests in Other KBS Real Estate Programs	105
	Receipt of Fees and Other Compensation by KBS Capital Advisors and its Affiliates	107
	Our Board of Director’s Loyalties to KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Growth & Income REIT and Possibly to Future KBS-Sponsored Programs	107
	Fiduciary Duties Owned by Some of Our Affiliates to Our Advisor and Our Advisor’s Affiliates	108
	Affiliated Dealer Manager	108
	Certain Conflict Resolution Measures	108
INVESTMENT OBJECTIVES AND CRITERIA		114
	General	114
	Investment Policies	115
	Investment Decisions and Asset Management: The KBS Approach	121
	Joint Venture Investments	122
	Financing Strategy and Policies	123
	Operating Policies	124
	Disposition Policies	125
	Charter-imposed Investment Limitations	125
	Investment Limitations under the Investment Company Act of 1940	126
FEDERAL INCOME TAX CONSIDERATIONS		128
	Taxation of KBS Strategic Opportunity REIT II, Inc.	128
	Taxation of Stockholders	142
	Foreign Investments	147
	Backup Withholding and Information Reporting	147
	Other Tax Considerations	147

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ERISA CONSIDERATIONS		148
	Prohibited Transactions	149
	Plan Asset Considerations	149
	Other Prohibited Transactions	150
	Annual Valuation	151
DESCRIPTION OF SHARES		153
	Common Stock	153
	Preferred Stock	155
	Meetings and Special Voting Requirements	155
	Advance Notice for Stockholder Nominations for Directors and Proposals of New Business	156
	Restriction on Ownership of Shares	156
	Distributions	158
	Inspections of Books and Records	160
	Business Combinations	160
	Control Share Acquisitions	161
	Subtitle 8	162
	Tender Offers by Stockholders	162
	Dividend Reinvestment Plan	162
	Share Redemption Program	164
	Registrar and Transfer Agent	167
	Restrictions on Roll-Up Transactions	167
THE OPERATING PARTNERSHIP AGREEMENT		169
	General	169
	Capital Contributions	169
	Operations	169
	Distributions and Allocations of Profits and Losses	170
	Rights, Obligations and Powers of the General Partner	170
	Exchange Rights	171
	Change in General Partner	171
	Transferability of Interests	171
	Amendment of Limited Partnership Agreement	171
PLAN OF DISTRIBUTION		172
	General	172
	Compensation of Dealer Manager and Participating Broker-Dealers	172
	Subscription Procedures	179
	Special Notice to Benefit Plan Investors	179
	Suitability Standards	180
	Minimum Purchase Requirements	180
	Investments by Qualified Accounts	181
	Investments through IRA Accounts	182
SUPPLEMENTAL SALES MATERIAL		183
LEGAL MATTERS		183
WHERE YOU CAN FIND MORE INFORMATION		183
	Appendix A – Form of Subscription Agreement with Instructions	A-1
	Appendix B – Third Amended and Restated Dividend Reinvestment Plan	B-1

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PROSPECTUS SUMMARY

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 information incorporated by reference herein, including the financial statements, before making a decision to invest in our common stock.

What is KBS Strategic Opportunity REIT II, Inc.?

KBS Strategic Opportunity REIT II, Inc. is a Maryland corporation that has elected to be taxed as a real estate investment trust, or REIT, beginning with the taxable year that ended December 31, 2014. We expect to use substantially all of the net proceeds from this offering to invest in and manage a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. We intend to acquire distressed debt, to originate and acquire mortgage, mezzanine, bridge and other real estate-related loans, to invest in various types of opportunistic real estate and to invest in real estate-related debt securities such as residential and commercial mortgage-backed securities and collateralized debt obligations. We consider opportunistic real estate to be properties with significant possibilities for short-term capital appreciation, such as non-stabilized properties, properties with moderate vacancies or near-term lease rollovers, poorly managed and positioned properties, properties owned by distressed sellers and built-to-suit properties. These properties may include, but are not limited to, office, industrial and retail properties, hospitality properties and undeveloped residential lots. In addition, we may acquire equity and preferred equity securities of companies that make similar investments such as other real estate operating companies. We expect our investments to be in real estate and real estate-related assets located in the United States and Europe. We may make our investments through loan origination and the acquisition of individual assets or by acquiring portfolios of assets, mortgage REITs or companies with investment objectives similar to ours. We plan to diversify our portfolio by investment type, investment size and investment risk with the goal of attaining a portfolio of assets that provide opportunities for capital appreciation as well as potential for cash distributions through increased cash flow from operations and targeted asset sales. We intend to structure, underwrite and originate many of the debt products in which we invest. Except with respect to unimproved or non-income producing property, we are not limited in the percentage of net proceeds of this offering that we may allocate to a specific asset type. The number and mix of investments we make will depend upon real estate and market conditions and other circumstances existing at the time we make our investments and the amount of proceeds we raise in this offering.

We were incorporated in the State of Maryland on February 6, 2013. As of February 17, 2016, we owned two hotel properties, one office building, and had originated a first mortgage loan. Because we have a limited portfolio of investments and, except as described in a supplement to this prospectus, we have not yet identified any additional assets to acquire, we are considered to be a blind pool. We are an “emerging growth company” under federal securities laws.

We plan to own substantially all of our assets and conduct our operations through KBS Strategic Opportunity Limited Partnership II, 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 Strategic Opportunity Holdings II LLC, is the sole limited partner of the Operating Partnership. Except where the context suggests otherwise, the terms “we,” “us,” “our” and “our company” refer to KBS Strategic Opportunity REIT II, Inc., together with its subsidiaries, including the Operating Partnership and its subsidiaries, and all assets held through such subsidiaries.

Our external advisor, KBS Capital Advisors LLC, a registered investment adviser with the Securities and Exchange Commission (the “SEC”), conducts our operations and manages our portfolio of investments. We have no paid employees.

Our office is located at 800 Newport Center Drive, Suite 700, Newport Beach, California 92660. Our telephone number is (949) 417-6500. Our fax number is (949) 417-6501, and our web site address is www.kbssorii.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 and real estate-related investments;

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• allows individual investors to invest in a professionally managed, large-scale, diversified portfolio of real estate-related investments;

• 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

• 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?

We are focused on acquiring an investment portfolio with a total return profile that is composed of investments that provide capital appreciation potential and current operating income. To that end, our primary investment objectives are:

• to preserve and return your capital contribution;

• to realize growth in the value of our investments; and

• to provide increasing cash distributions to you through increased cash flow from operations or targeted asset sales.

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 or upon maturity or payoff of our debt investments. Alternatively, while the sale of your shares may be difficult for the reasons discussed below, 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. No public trading market for our shares currently exists, and you may not sell your shares unless the buyer meets the applicable suitability and minimum purchase standards.

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 32, 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:

• There is no assurance that we will raise significant proceeds in this offering. If we do not raise significant proceeds in this offering, we may not be able to invest in a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments and the value of your investment may vary more widely with the performance of specific assets and cause our general and administrative expenses to constitute a greater percentage of our revenue, increasing the risk that you will lose money in your investment.

• No public market currently exists for our shares, and at this time we have no plans to list our shares on an exchange. Our charter does not require our directors to provide our stockholders with a liquidity event by a specified date or at all. If you are able to sell your shares, you would likely have to sell them at a substantial loss. In addition, there are restrictions on the ownership and transferability of our shares of common stock. See “Description of Shares – Restriction on Ownership of 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 offering price.

• We set the $10.00 primary offering price of our Class A shares arbitrarily, and based on that price, set the $9.59 primary offering price for our Class T shares to account for differing sales commissions. These prices may not be indicative of the prices at which our shares would trade if they were listed on an exchange or actively traded, and the prices bear no relationship to the value of our assets or to our expected operating

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income. Our board of directors may adjust the offering prices of the primary offering shares or dividend reinvestment plan shares during the course of this offering by filing a post-effective amendment.

• We depend on our advisor to select investments and conduct our operations.

• We have a limited operating history and, as of February 17, 2016, we owned two hotel properties, one office building, and had originated a first mortgage loan. Other than as described in a supplement to this prospectus, we have not yet identified any additional real estate assets to originate or acquire with proceeds from this offering; we are considered a blind pool; and you will not have an opportunity to evaluate our investments before we make them, making an investment in us more speculative.

• Except with respect to unimproved or non-income producing property, we are not limited in the percentage of net proceeds of this offering that we may allocate to a specific real estate asset type. Thus, we may make all of our investments in investments which present an increased risk of loss. In addition, 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, our affiliated directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager and/or other KBS-affiliated entities. As a result, all of our executive officers, our affiliated directors and other key real estate and debt finance professionals and our advisor and its affiliates face conflicts of interest, including significant conflicts created by our advisor’s compensation arrangements with us and other KBS-sponsored programs and KBS-advised investors and conflicts in allocating time among us and these other programs and investors. Furthermore, these individuals 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. These conflicts could result in action or inaction that is not in the best interests of our stockholders.

• Our advisor and its affiliates receive fees in connection with transactions involving the origination, acquisition and management of our investments. These fees 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 and increase your risk of loss.

• We pay substantial fees to and reimburse expenses of our advisor, its affiliates and participating broker-dealers, which payments increase the risk that you will not earn a profit on your investment.

• We have issued and may continue to issue stock dividends which will dilute the returns per share for investors who purchase shares in this offering after we have issued a stock dividend.

• Our distribution policy is not to use the proceeds of this offering to make distributions. However, we may pay distributions from any source, including, without limitation, from offering proceeds or borrowings (which may constitute a return of capital). If we pay distributions from sources other than our cash flow from operations, we will have less funds available for investment in properties and other assets, the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

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

• Our policies do not limit us from incurring debt until our total liabilities would exceed 75% of the cost 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, and to the extent financing in excess of this limit is available on attractive terms, our conflicts committee may approve debt such that our total liabilities would exceed 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.

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

• We expect to focus our investments in real estate-related loans and real estate-related debt securities in distressed debt, which involves more risk than in performing debt.

• Our opportunistic property-acquisition strategy involves a higher risk of loss than would a strategy of investing in stabilized properties.

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• We depend on tenants for the revenue generated by our real estate investments and, accordingly, the revenue generated by our real estate investments is dependent upon the success and economic viability of our tenants. Revenues from our property investments could decrease due to a reduction in tenants (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, limiting our ability to pay distributions to our stockholders.

• We expect to make foreign investments and will be susceptible to risks associated with such investments, including changes in currency exchange rates, adverse political or economic developments, lack of uniform accounting standards and changes in foreign laws.

Have you conducted prior offerings for your shares?

Yes. Immediately prior to commencement of this offering, we offered up to $105,000,000 of shares of our common stock for sale in a best efforts private placement offering to accredited investors only pursuant to a confidential private placement memorandum, which we refer to as the “private offering.” Shares in the private offering were sold at a purchase price of either $9.20 or $9.40 per share based on the amount of gross proceeds we had raised in the offering, with discounts available to certain categories of purchasers. We ceased offering shares in our private offering on August 11, 2014 and raised approximately $32.2 million related to the sale of 3,619,851 shares of common stock in the primary portion of the private offering.

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. Our board of directors is composed of five members, three of whom are independent of KBS Capital Advisors and its affiliates. Our charter requires that a majority of our directors be independent of KBS Capital Advisors 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 KBS Capital Advisors and must approve other matters set forth in our charter. Our directors are elected annually by the stockholders.

Who is your advisor and what will the advisor do?

KBS Capital Advisors is our advisor. As our advisor, KBS Capital Advisors manages our day-to-day operations and our portfolio of real estate-related investments on our behalf, all subject to the supervision of our board of directors. Our sponsors, Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., and their team of real estate and debt finance professionals acting through KBS Capital Advisors make most of the decisions regarding the selection, negotiation, financing and disposition of investments. KBS Capital Advisors also has the authority to make all of the decisions regarding our investments, subject to the limitations in our charter and the direction and oversight of our board of directors. KBS Capital Advisors also provides asset-management, marketing, investor-relations and other administrative services on our behalf with the goal of maximizing our operating cash flow.

We have formed a strategic relationship with STAM Europe (“STAM”), a commercial real estate investment and asset management firm headquartered in Paris, France to support us and our advisor in connection with any investments we make in Europe. Our advisor has entered a sub-advisory agreement with STAM, pursuant to which STAM will provide real estate acquisition and portfolio management services to our advisor in connection with any investments we make in Europe. For investments in Europe we make directly and our ownership interest is 100%, our advisor will compensate STAM for its services in sourcing and managing these investments from the fees it earns from us under the advisory agreement with us and we will pay STAM no additional compensation. We, along with our advisor, expect to enter a letter agreement with STAM that sets forth general compensation terms with respect to investments we make through STAM, other than through our direct investment in value-added real estate and distressed debt in Europe (which are governed by the sub-advisory agreement between STAM and our advisor). We can give no assurances as to the number, if any, of investments we may make in Europe.

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What is the experience of your sponsors and the real estate and debt finance professionals of your advisor?

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 sponsors. All four of our sponsors actively participate in the management and operations of our advisor, and our advisor has three managers: an entity owned and controlled by Mr. Bren; an entity owned and controlled by Messrs. Hall and McMillan; and an entity owned and controlled by Mr. Schreiber.

Our sponsors work together at KBS Capital Advisors with their team of key real estate and debt finance professionals. These senior real estate and debt finance professionals have been through multiple real estate cycles in their careers and have the expertise gained through hands-on experience in acquisitions, originations, asset management, dispositions, development, leasing and property and portfolio management. Together with our four sponsors, Geoffrey Hawkins, Brian Ragsdale, Jeffrey Waldvogel and Jim Chiboucas comprise the investment committee of KBS Capital Advisors that is responsible for our investment decisions related to our investments in the United States. Our advisor has established a separate investment committee to consider our investments in Europe. Our advisor’s European investment committee is comprised of Peter McMillan, Keith Hall, Jeffrey Waldvogel, Brian Ragsdale, James Rodgers, Geoffrey Hawkins, Jim Chiboucas, and Antoine de Broglie, as well as two additional individuals to be named by STAM. Subject to any limitations in our charter and the oversight of our board of directors, the investment committees of KBS Capital Advisors evaluate and approve our investments and financings. Mr. Chiboucas is a member of the investment committees for the limited purpose of approving potential investments from a legal and regulatory compliance standpoint.

On January 27, 2006, our four sponsors launched the initial public offering of KBS Real Estate Investment Trust, Inc., which we refer to as “KBS REIT I.” KBS REIT I accepted gross offering proceeds of approximately $1.7 billion in its primary initial public offering and accepted aggregate gross offering proceeds of $233.7 million from shares issued pursuant to its dividend reinvestment plan. KBS REIT I ceased offering shares in its primary initial public offering on May 30, 2008 and terminated its dividend reinvestment plan effective April 10, 2012. As of December 31, 2014, KBS REIT I had used $85.4 million to fund share redemptions pursuant to its share redemption program.

On April 22, 2008, our four sponsors launched the initial public offering of KBS Real Estate Investment Trust II, Inc., which we refer to as “KBS REIT II.” KBS REIT II accepted aggregate gross offering proceeds of approximately $1.8 billion in its primary initial public offering and accepted $298.2 million from shares issued pursuant to its dividend reinvestment plan. KBS REIT II ceased offering shares in its primary initial public offering on December 31, 2010 and terminated its dividend reinvestment plan effective May 29, 2014. As of December 31, 2014, KBS REIT II had used $229.5 million to fund share redemptions pursuant to its share redemption program.

On November 20, 2009, our four sponsors launched the initial public offering of KBS Strategic Opportunity REIT, Inc., which we refer to as “KBS Strategic Opportunity REIT.” KBS Strategic Opportunity REIT accepted aggregate gross offering proceeds of approximately $561.7 million in its primary initial public offering and, as of December 31, 2014, had accepted $39.2 million from shares issued pursuant to its dividend reinvestment plan. KBS Strategic Opportunity REIT ceased offering shares in its primary initial public offering on November 14, 2012. As of December 31, 2014, KBS Strategic Opportunity REIT had used $8.3 million to fund share redemptions pursuant to its share redemption program.

On March 12, 2010, together with Legacy Partners Residential Realty LLC and certain of its affiliates, our four sponsors launched the initial public offering of KBS Legacy Partners Apartment REIT, Inc., which we refer to as “KBS Legacy Partners Apartment REIT.” KBS Legacy Partners Apartment REIT ceased offering shares of common stock in its primary initial public offering on March 12, 2013. On March 13, 2013, KBS Legacy Partners Apartment REIT commenced a follow-on public offering. KBS Legacy Partners Apartment REIT ceased offering shares of common stock in its follow-on public offering, effective as of March 31, 2014. KBS Legacy Partners Apartment REIT accepted aggregate gross offering proceeds of approximately $204.4 million in its public offerings including $12.9 million from shares issued pursuant to its dividend reinvestment plan. As of December 31, 2014, KBS Legacy Partners Apartment REIT had used $4.2 million to fund share redemptions pursuant to its share redemption program.

On October 26, 2010, our four sponsors launched the initial public offering of KBS Real Estate Investment Trust III, which we refer to as KBS REIT III. As of December 31, 2014, KBS REIT III had accepted aggregate gross offering proceeds of $1.2 billion, including $47.7 million from shares sold pursuant to its dividend reinvestment plan. As of December 31, 2014, KBS REIT III had used $7.2 million to fund share redemptions pursuant to its share redemption program. KBS REIT III ceased offering shares in its primary initial public offering on May 29, 2015.

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Our four sponsors are also sponsoring KBS Growth & Income REIT, Inc., which we refer to as “KBS Growth & Income REIT.” KBS Growth & Income REIT is currently conducting a private offering to accredited investors only and has filed a registration statement with the SEC for an initial public offering.

Our advisor, KBS Capital Advisors, is the external advisor of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT. Some or all of our sponsors are directors and/or executive officers of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, and KBS Growth & Income REIT. Through their affiliations with us, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, and KBS Legacy Partners Apartment REIT and KBS Capital Advisors, as of December 31, 2014, our sponsors had overseen the investment in and management of approximately $11.9 billion of real estate and real estate-related investments on behalf of the investors in us, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT.

Since 1992, Messrs. Bren and Schreiber have teamed to invest in, manage, develop and sell high-quality U.S. commercial real estate and real estate-related investments on behalf of institutional investors. Together, they founded KBS Realty Advisors LLC, a registered investment adviser with the SEC, and a nationally recognized real estate investment advisor. When we refer to a “KBS-sponsored program,” we are referring to the private entities sponsored by an investment advisor affiliated with Messrs. Bren and Schreiber and to the non-traded REITs, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Growth & Income REIT and our company, that are currently being sponsored by Messrs. Bren, Hall, McMillan and Schreiber. As noted above, our sponsors are sponsoring KBS Legacy Partners Apartment REIT together with Legacy Partners Residential Realty LLC and certain of its affiliates. 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 investment advice. These investment advisors are also affiliated with our advisor.

Messrs. Bren and Schreiber each has been involved in real estate development, management, acquisition, disposition and financing for more than 40 years. Over that time, Messrs. Bren and Schreiber have developed extensive experience investing in and managing a broad range of real estate asset classes. Since 1992, the experience of the investment advisors affiliated with Messrs. Bren and Schreiber includes (as of December 31, 2014) sponsoring 14 private real estate programs that had invested over $4.2 billion (including equity, debt and investment of income and sales proceeds) in 301 real estate assets. In addition to their experience with these 14 private KBS-sponsored programs, investment advisors affiliated with Messrs. Bren and Schreiber have also been engaged by four other KBS-advised investors to recommend real estate acquisitions and manage some of their investments. The investment proceeds of these KBS-advised investors were not commingled. The investments made on behalf of these four KBS-advised investors were made pursuant to management agreements or partnership agreements that permitted the KBS-advised investors to reject acquisitions recommended by the KBS-affiliated investment advisor. Because the KBS-advised investors were not as passive as those in the 14 private KBS-sponsored programs described above or as those who invest in this offering, we have not described the real estate assets acquired or managed for these four KBS-advised investors. The amounts paid for the assets acquired and/or managed and for subsequent capital expenditures for these four KBS-advised investors totaled over $4.1 billion.

Each of Messrs. Hall and McMillan has over 20 years of experience in real estate-related investments. Mr. McMillan is a Partner and co-owner of Temescal Canyon Partners LP, an investment advisor formed in 2013 to manage a multi-strategy hedge fund on behalf of investors. Mr. McMillan is also a co-founder and the Managing Partner of Willowbrook Capital Group, LLC which, from August 2003 until December 2012, was an asset management company. Before forming Willowbrook with Mr. Hall, Mr. McMillan served as 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 the distribution strategy and business development for the Principal Transaction Group’s $18 billion real estate securities portfolio. Before joining CS First Boston 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 commercial mortgage-backed securities. During the 1980s, Mr. Hall was 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.

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Will you use leverage?

Yes. We expect that once we have fully invested the proceeds of this offering, our debt financing and other liabilities will be 60% or less of the cost of our tangible assets (before deducting depreciation or other non-cash reserves), although it may exceed this level during our offering stage. This is our target leverage as established by our board of directors. Our charter limits our total liabilities to 75% of the cost of our tangible assets (before deducting depreciation or other non-cash reserves); 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 on attractive terms, our conflicts committee may approve debt such that our total liabilities would exceed this limit. There is no limitation on the amount we may borrow for the purchase of any single asset.

We intend to target a leverage ratio of 60% and do not intend to exceed the leverage limit in our charter. 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, and could also be accompanied by restrictive covenants. High levels of debt could also increase the risk of being unable to refinance when loans become due, or of being unable to refinance on favorable terms, and the risk of loss with respect to assets pledged as collateral for loans.

What conflicts of interest does your advisor face?

KBS Capital Advisors and its affiliates experience conflicts of interest in connection with the management of our business. Messrs. Bren, Hall, McMillan and Schreiber, who indirectly own and control KBS Capital Advisors, are our sponsors, and Messrs. Hall and McMillan are two of our executive officers and directors. KBS Capital Advisors is also the external advisor to KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT. Messrs. Bren, Hall, McMillan and Schreiber are executive officers of KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT, and Messrs. McMillan and Schreiber are also directors of KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT. Messrs. Hall and McMillan are also executive officers and directors of KBS Strategic Opportunity REIT. In addition, Messrs. Bren and McMillan are executive officers of KBS Legacy Partners Apartment REIT, and Mr. Bren is a director of KBS Legacy Partners Apartment REIT. Messrs. Bren and Schreiber are also key real estate and debt finance professionals at KBS Realty Advisors and its affiliates, the advisors to the private KBS-sponsored programs and the investment advisors to KBS-advised investors in real estate and real estate-related assets. In addition, Geoffrey Hawkins and Brian Ragsdale play a key role at KBS Capital Advisors in identifying, structuring and managing the debt-related investments for KBS REIT I, KBS REIT II, KBS REIT III, KBS Growth & Income REIT, and KBS Strategic Opportunity REIT. Some of the material conflicts that KBS Capital Advisors and its affiliates face include the following:

• Our sponsors and their team of real estate and debt finance professionals must determine which investment opportunities to recommend to us and the other KBS-sponsored programs that are raising funds for investment for whom KBS serves as an advisor as well as any programs KBS affiliates may sponsor in the future;

• Our sponsors and their team of professionals at KBS Capital Advisors and its affiliates (including our dealer manager, KBS Capital Markets Group) have to allocate their time between us and other programs and activities in which they are involved;

• KBS Capital Advisors and its 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;

• KBS Capital Advisors and its affiliates, including our dealer manager, KBS Capital Markets Group, receive fees in connection with our 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 cause or penalty upon 60 days’ written notice and, upon termination of the advisory agreement, KBS Capital Advisors may be entitled to a

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termination fee if (based upon an independent appraised value of the portfolio) it 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 an interest-bearing promissory note that becomes due only upon the sale of one or more assets or upon maturity or payoff of our debt investments, and the fee is payable solely from the proceeds from the sale, maturity or payoff of an asset and future asset sales, maturities or payoffs;

• KBS Capital Advisors and its affiliates may structure the terms of joint ventures between us and other KBS-sponsored programs or KBS-advised entities.

Will your directors face any conflicts of interest?

Four of our directors, including two of our independent directors, Messrs. Meyer and Petak, are also directors of KBS Strategic Opportunity REIT. Mr. Meyer is also a director of KBS Legacy Partners Apartment REIT. One of our affiliated directors is also a director of KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT. The loyalties of our directors serving on the boards of directors of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT, or possibly on the board of directors of future KBS-sponsored programs, may influence the judgment of our board when considering issues for us that also may affect other KBS-sponsored programs, such as the following:

• The conflicts committee of our board must evaluate the performance of KBS Capital Advisors with respect to whether KBS Capital Advisors is presenting to us our fair share of investment opportunities. If our advisor is not presenting a sufficient number of investment opportunities to us because it is presenting many opportunities to other KBS-sponsored programs or if our advisor is giving preferential treatment to other KBS-sponsored programs in this regard, our conflicts committee may not be well suited to enforce our rights under the terms of the advisory agreement or to seek a new advisor.

• We could enter into transactions with other KBS-sponsored programs, such as property sales, acquisitions or financing arrangements. Such transactions might entitle KBS Capital Advisors or its affiliates to fees and other compensation from both parties to the transaction. Decisions of our board and the conflicts committee regarding the terms of those transactions may be influenced by our board’s and the conflicts committee’s loyalties to such other KBS-sponsored programs.

• A decision of our board or the conflicts committee regarding the timing of a debt or equity offering could be influenced by concerns that the offering would compete with an offering of other KBS-sponsored programs.

• A decision of our board or the conflicts committee regarding the timing of property sales could be influenced by concerns that the sales would compete with those of other KBS-sponsored programs.

• A decision of our board or the conflicts committee regarding whether and when we seek to list our shares of common stock on a national securities exchange could be influenced by concerns that such listing could adversely affect the sales efforts for other KBS-sponsored programs, depending on the price at which our shares trade.

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Who owns and controls the advisor?

The following chart shows the ownership structure of KBS Capital Advisors and entities affiliated with KBS Capital Advisors that perform services for us:

__________________

⁽¹⁾ Peter McMillan III is our President and the chairman of our board of directors.

⁽²⁾ Keith D. Hall is our Chief Executive Officer and a director.

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

⁽⁴⁾ Other than de minimis amounts owned by family members or trusts, Mr. Schreiber indirectly owns and controls Schreiber Real Estate Investments, L.P.

⁽⁵⁾ We are the sole member and manager of KBS Strategic Opportunity Holdings II LLC. KBS Strategic Opportunity Holdings II LLC is the sole limited partner of, and owns a 99.9% partnership interest in, KBS Strategic Opportunity Limited Partnership II. We are the sole general partner of, and own the remaining 0.1% partnership interest in, KBS Strategic Opportunity Limited Partnership II.

As of the date of this prospectus, Messrs. Bren, Hall, McMillan and Schreiber have not received any compensation from us for services provided in their capacity as principals of KBS Capital Advisors or its affiliates. In connection with this offering, we pay or reimburse our advisor and its affiliates for the services described below.

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What are the fees that you pay to the advisor and its affiliates and your directors?

KBS Capital Advisors and/or its affiliates receive compensation and reimbursement for services related to this offering and the investment, management and disposition 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. Compensation to be paid to KBS Capital Advisors and KBS Capital Markets Group may be increased without stockholder approval.

The amount of selling commissions differs among Class A shares and Class T shares, and there is an ongoing stockholder servicing fee with respect to Class T shares sold in the primary offering. Both classes of shares have discounts available to certain categories of purchasers. The table below assumes that (a) 15% of the proceeds raised in the primary offering are from the sale of Class A shares and 85% of the proceeds raised in the primary offering are from the sale of Class T shares, (b) we do not further reallocate shares being offered between our primary offering and dividend reinvestment plan, (c) based on this allocation we sell all shares at the highest possible selling commissions and dealer manager fees (with no discounts to any categories of purchasers), and (d) solely with respect to the estimated stockholder servicing fee, 4% of the proceeds raised in the primary offering are from the sale of Class A shares through distribution channels that do not pay selling commissions of 6.5%. No selling commissions or dealer manager fees are payable on shares sold through our dividend reinvestment plan. No stockholder servicing fee will be paid with respect to Class T shares purchased through the dividend reinvestment plan or issued pursuant to a stock dividend; however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to all the Class T shares as a class expense. The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the net asset value (“NAV”) of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares.

Effective February 17, 2016, in connection with adding a Class T share to our offering, we amended and restated our advisory and dealer manager agreements to revise certain fees payable to our advisor and dealer manager and to limit the organization and other offering expenses that we are obligated to pay in connection with this offering. Specifically, the acquisition fee that is payable to our advisor increased from 1.5% to 2.6%. Our acquisition fee reflects the increased level of due diligence required to evaluate and acquire the types of opportunistic investments that we intend to acquire as part of our investment strategy, and as a result, the fee is at the higher end of the prevailing acquisition fee range for non-traded REITs.

The descriptions of the fees and expenses presented in the table below reflect the terms of our advisory and dealer manager agreements in effect as of the date of this prospectus.  Our estimates of the compensation and fees that we pay to our advisor and the dealer manager are based on a weighted average (determined from the approximate amount of primary offering proceeds raised on or prior to February 16, 2016) of the fees in effect prior the amendment and restatement of our advisory and dealer manager agreements and the terms of these agreements as currently in effect.  The limit adopted with respect to our obligation to pay organization and other offering expenses in connection with this primary offering will apply to all organization and other offering expenses incurred, regardless of when incurred. For a description of how these estimates were calculated, please see our estimated use of proceeds table.

Type of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering ($1,000,000,000 in shares)
		Organization and Offering Stage
Selling Commissions	KBS Capital Markets Group	Up to 6.5% of the price per share of Class A common stock sold and up to 3.0% of the price per share of Class T common stock sold; no selling commissions are payable on shares of common stock sold under our dividend reinvestment plan; all selling commissions are reallowed to participating broker dealers.	$35,250,000

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Type of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering ($1,000,000,000 in shares)
		Organization and Offering Stage
Dealer Manager Fee	KBS Capital Markets Group	Up to 2.0% of the price per share of Class A and Class T common stock sold. Our dealer manager may generally reallow to any participating broker dealer up to 1.0% of the gross primary offering proceeds attributable to that participating broker dealer as a marketing fee; in select cases up to 1.5% of the gross primary offering proceeds may be reallowed; this reallow will be based upon such factors as the projected sales volume by such participating broker-dealer, access to conferences and meetings and the general level of assistance of such participating broker-dealer in marketing this offering; no dealer manager fee is payable on shares of common stock sold under our dividend reinvestment plan.	$20,598,000
Organization and Other Offering Expenses	KBS Capital Advisors and KBS Capital Markets Group	We reimburse our advisor and dealer manager for commercially reasonable organization and other offering expenses they incur on our behalf in connection with this offering; however, no reimbursements made by us to our advisor or our dealer manager may cause total organization and offering expenses incurred by us (including selling commissions, dealer manager fees, the stockholder servicing fee and all other items of organization and offering expenses) to exceed 15% of the aggregate gross proceeds from this primary offering and the offering under our dividend reinvestment plan as of the date of reimbursement. We also pay organization and other offering expenses directly. At the termination of our primary offering, our advisor and its affiliates will reimburse us to the extent that the organization and other offering expenses paid directly or reimbursed by us in connection with this primary offering, regardless of when incurred, exceed 1.0% of gross primary offering proceeds. Our advisor and its affiliates will be responsible for any organization and other offering expenses related to the primary offering to the extent they exceed 1.0% of gross primary offering proceeds as of the termination of the primary offering. Prior to the termination of the primary offering, at which time the advisor will reimburse us as described above, we will be responsible for the payment of all organization and other offering expenses we incur directly and the reimbursement of organization and other offering expenses our advisor and dealer manager incur on our behalf in connection with this offering subject to the 15% limit on reimbursements discussed above.  Organization and other offering expenses include all expenses to be paid or reimbursed by us in connection with this offering, excluding selling commissions, the dealer manager fee and the ongoing stockholder servicing fee with respect to Class T shares sold in the primary offering. Organization and other offering expenses include 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 this 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	$10,000,000

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Type of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering ($1,000,000,000 in shares)
		held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees payable to participating broker-dealers hosting retail seminars 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, legal fees of our dealer manager, and promotional items. We will not reimburse our dealer manager for wholesaling compensation expenses.
		Acquisition and Development Stage
Acquisition and Origination Fees	KBS Capital Advisors	2.6% of the cost of investments acquired or originated by us, or the amount to be funded by us to acquire or originate loans, including acquisition and origination expenses and any debt attributable to such investments plus significant capital expenditures related to the development, construction or improvement of the investment budgeted as of the date of acquisition. Under our charter, a majority of the independent directors would have to approve any increase in the acquisition and origination fee payable to our advisor. Acquisition fees that are calculated based on capital expenditures budgeted as of the date of acquisition shall be paid at the time funds are disbursed pursuant to a final approved budget upon receipt of an invoice by us. Our charter limits our ability to make an investment if the total of all acquisition and origination 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 a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction approves the fees and expenses and finds the transaction to be commercially competitive, fair and reasonable to us.	$23,045,362 (maximum offering and no debt)/ $55,070,034 (maximum offering and leverage such that our total liabilities do not exceed 60% of the cost of our tangible assets, which is our target leverage).
Acquisition and Origination Expenses	KBS Capital Advisors	Reimbursement of customary acquisition and origination 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 (including, as necessary, updated appraisals, surveys and environmental site assessments), travel and communication expenses, accounting fees and expenses and other closing costs and miscellaneous expenses relating to the acquisition or origination of real estate properties and real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. We estimate that these expenses will average approximately 0.6% of the purchase prices of our investments, excluding fees and expenses associated with such investments.	$5,419,125 (maximum offering and no debt)/ $12,954,413 (maximum offering and leverage such that our total liabilities do not exceed 60% of the cost of our tangible assets, which is our target leverage).

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Type of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering ($1,000,000,000 in shares)
		Operational Stage
Stockholder Servicing Fee	KBS Capital Markets Group	An annual fee of 1.0% of the purchase price per share (ignoring any discounts that may be available to certain categories of purchasers) of Class T common stock sold in the primary offering for services rendered to Class T stockholders by the broker dealer of record after the initial sale of the Class T share. For a description of the services required from the broker dealer of record, see the “Plan of Distribution” section of this prospectus. Except as described in the “Plan of Distribution” section of this prospectus, the stockholder servicing fee will accrue daily and be paid monthly in arrears and our dealer manager will reallow all of the stockholder servicing fee to such broker dealer of record. The stockholder servicing fee with respect to a Class T share will cease accruing upon the occurrence of any of the following events: (i) the date at which aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the primary offering in which the Class T share was sold, as calculated by us with the assistance of the dealer manager after the termination of the primary offering in which the Class T share was sold, (ii) with respect to a particular Class T share, on the fourth anniversary of the issuance of the share, (iii) a listing of our common stock on a national securities exchange, (iv) a merger or other extraordinary transaction, and (v) the date the Class T share associated with the stockholder servicing fee is no longer outstanding such as upon its redemption or our dissolution. Underwriting compensation includes selling commissions, dealer manager fees, and stockholder servicing fees being paid in connection with an offering as well as other items of value paid in connection with an offering, including amounts not paid directly or reimbursed by us, that are viewed by FINRA as underwriting compensation. No stockholder servicing fee is payable on shares of Class T common stock sold under our dividend reinvestment plan or issued as a stock dividend.	$34,000,000
Asset Management Fees	KBS Capital Advisors	A monthly fee equal to the lesser of one-twelfth of (i) 1.0% of the cost of our investments and (ii) 2.0% of the sum of the cost of our investments, less any debt secured by or attributable to the investments. The cost of our real property investments will be calculated as the amount paid or allocated to acquire the real property, including the cost of any subsequent development, construction or improvements to the property and including fees and expenses related thereto (but excluding acquisition fees paid or payable to our advisor). The cost of our loans and any investments other than real property will be calculated as the lesser of (x) the amount actually paid or allocated to acquire or fund the loan or other investment, including fees and expenses related thereto (but excluding acquisition fees paid or payable to our advisor), and (y) the outstanding principal amount of such loan or other investment, including fees and	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.

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Type of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering ($1,000,000,000 in shares)
		expenses related to the acquisition or funding of such investment (but excluding acquisition fees paid or payable to our advisor), as of the time of calculation. In the case of investments made through joint ventures, the asset management fee will be determined based on our proportionate share of the underlying investment.
Other Operating Expenses	KBS Capital Advisors and KBS Capital Markets Group	We reimburse the expenses incurred by our advisor in connection with its provision of services to us, including our allocable share of the advisor’s overhead, such as rent, employee costs, utilities and IT costs. Our advisor may seek reimbursement for employee costs under the advisory agreement. At this time we only expect to reimburse our advisor for our allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to us; however, in the future, our advisor may seek reimbursement for additional employee costs. If our advisor were to seek reimbursement for additional 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 do not reimburse our advisor or its affiliates for employee costs in connection with services for which our advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries and benefits our advisor or its affiliates may pay to our executive officers. We reimburse our dealer manager for certain fees and expenses it incurs for administering our participation in the DTCC Alternative Investment Product Platform, or the AIP Platform, with respect to certain accounts of our investors serviced through the AIP Platform. Additionally, we, together with KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Growth & Income REIT, KBS Capital Markets Group, KBS Capital Advisors and other KBS-affiliated entities, have entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of coverage are shared. The cost of these lower tiers is allocated by our advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. Our advisor’s and our dealer manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance.	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	Independent Directors	We pay each of our independent directors an annual retainer of $40,000. We 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 is paid $3,000 for each meeting attended), (iii) $2,000 for each teleconference board meeting attended,	Actual amounts are dependent upon the total number of board and committee meetings that each independent

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Type of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering ($1,000,000,000 in shares)
		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 receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors.	director attends; we cannot determine these amounts at the present time
		Operational and Liquidation Stage
Subordinated Participation in Net Cash Flows	KBS Capital Advisors	After our common stockholders have received, together as a collective group, aggregate distributions (regardless of the source used to fund such distributions and including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their gross investment amount, which is the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by the total number of shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased) multiplied by the weighted average issue price of the shares sold in the primary offering, and (ii) a 7.0% per year cumulative, noncompounded return on such gross investment amount, KBS Capital Advisors is entitled to receive 15% of our net cash flows, whether from continuing operations, net sales proceeds, net financing proceeds, or otherwise. Net sales proceeds means the net cash proceeds realized by us after deduction of all expenses incurred (i) in connection with a disposition of our assets, or (ii) from the prepayment, maturity, workout or other settlement of any loan or other investment. Net financing proceeds means the net cash proceeds realized from the financing of our assets or refinancing of our debt. The 7.0% per year cumulative, noncompounded return on gross investment amount is calculated on a daily basis. In making this calculation, gross investment amount is determined for each day during the period for which the 7.0% per year cumulative, noncompounded return is being calculated, including a daily adjustment to reflect shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased). In addition, gross investment amount is reduced by the following: (i) distributions from net sales proceeds, (ii) distributions from net financing proceeds, and (iii) distributions paid from operating cash flow in excess of a cumulative, noncompounded, annual return of 7.0%. Gross investment amount is only reduced as described above; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes. The 7.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder but rather is based on total distributions paid on all outstanding shares relative to total gross investment amount invested by all stockholders. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for KBS Capital Advisors to participate in our net cash flows. In fact, if KBS Capital Advisors is entitled to participate in our net cash flows, the returns of our	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	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering ($1,000,000,000 in shares)
		stockholders will differ, and some may be less than a 7.0% per year cumulative, noncompounded return. This fee is payable only while we are not listed on an exchange. In addition, before we will be able to pay distributions to our stockholders equal to a return of their gross investment amount plus a 7% cumulative, non-compounded, annual return on such gross investment amount, we will need to sell a portion of our assets.  Thus, the sale of one or more assets will be a practical prerequisite for our advisor to receive this fee and we will likely be in our liquidation stage if the advisor is eligible to begin earning this fee.
		Liquidation/Listing Stage
Disposition Fees	KBS Capital Advisors or its affiliates	For substantial assistance in connection with the sale of investments, we will pay our advisor or its affiliates a percentage of the contract sales price of each loan, debt-related security, real property or other investment sold (including residential or commercial mortgage-backed securities or collateralized debt obligations issued by a subsidiary of ours as part of a securitization transaction) as a disposition fee. For dispositions with a contract sales price less than or equal to $50 million, the disposition fee will equal 1.5% of the contract sales price. For dispositions with a contract sales price greater than $50 million, the disposition fee will equal the sum of $750,000 (which amount is 1.5% of $50 million), plus 1.0% of the amount of the contract sales price in excess of $50 million. The disposition fee is determined on a per transaction basis and is not cumulative. If, in connection with such disposition, commissions are paid to third parties unaffiliated with our advisor, the fee paid to our advisor and its affiliates may not exceed the commissions paid to such unaffiliated third parties, and provided further that the disposition fees paid to our advisor, its affiliates and unaffiliated third parties may not exceed 6.0% of the contract sales price. The conflicts committee will determine whether the advisor or its affiliates has provided substantial assistance to us in connection with the sale of an asset. We will not pay a disposition fee upon the maturity, prepayment or workout of a loan or other debt-related investment, provided that if we negotiate a discounted payoff with the borrower we will pay a disposition fee and if we take ownership of a property as a result of a workout or foreclosure of a loan, we will pay a disposition fee upon the sale of such property. 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 a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction conclude that the transaction is fair and reasonable to us. Although we are most likely to pay disposition fees to our advisor or an affiliate	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	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering ($1,000,000,000 in shares)
		during our liquidation stage, these fees may also be incurred during our operational stage.
Subordinated Incentive Fee	KBS Capital Advisors	Upon a merger or listing of our common stock on a national securities exchange, we will pay our advisor an incentive fee. Upon a listing this fee will equal 15% of the amount by which (i) the market value of our outstanding stock plus the total of all distributions paid by us to stockholders from inception until the date market value is determined (regardless of the source used to fund such distributions and including distributions that may constitute a return of capital for federal income tax purposes and excluding any stock dividend) exceeds (ii) the sum of our stockholders’ gross investment amount, which is the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by the total number of shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased) multiplied by the weighted average issue price of the shares sold in the primary offering, and the amount of cash flow necessary to generate a 7.0% per year cumulative, noncompounded return on our stockholders’ gross investment amount from our inception through the date the market value is determined. Upon a merger this fee will equal 15% of the amount by which (i) the merger consideration amount plus the total of all distributions paid or declared by us to stockholders from inception until the closing of the merger (regardless of the source used to fund such distributions and including distributions that may constitute a return of capital for federal income tax purposes and excluding any stock dividend) exceeds (ii) the sum of our stockholders’ gross investment amount, which is the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by the total number of shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased) multiplied by the weighted average issue price of the shares sold in the primary offering, and the amount necessary to generate a 7.0% per year cumulative, noncompounded return on our stockholders’ gross investment amount from our inception through the closing of the merger. If our advisor receives a subordinated incentive fee, the fee will not be separately reduced by the prior payment to our advisor of a participation in our net cash flows as the calculation of the subordinated incentive fee takes into account any prior payment to our advisor of this participation. In addition, if KBS Capital Advisors is entitled to receive the subordinated incentive fee upon a listing, KBS Capital Advisors will no longer participate in our net cash flows as described above. The 7.0% per year cumulative, noncompounded return on gross investment amount is calculated on a daily basis. In making this calculation, gross investment amount is determined for each day during the period for	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	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering ($1,000,000,000 in shares)
		which the 7.0% per year cumulative, noncompounded return is being calculated, including a daily adjustment to reflect shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased). In addition, gross investment amount is reduced by the following: (i) distributions from net sales proceeds, (ii) distributions from net financing proceeds, and (iii) distributions paid from operating cash flow in excess of a cumulative, noncompounded, annual return of 7.0%. Gross investment amount is only reduced as described above; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes. The 7.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder but rather is based on total distributions paid on all outstanding shares relative to total gross investment amount invested by all stockholders. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for KBS Capital Advisors to participate in our net cash flows. In fact, if KBS Capital Advisors is entitled to participate in our net cash flows, the returns of our stockholders will differ, and some may be less than a 7.0% per year cumulative, noncompounded return.

How many investments do you currently own?

As of February 17, 2016 we owned two hotel properties, one office building, and had originated a first mortgage loan. Because we have a limited portfolio of investments and, except as described in a supplement to this prospectus, we have not yet identified any additional assets to acquire, we are considered to be a blind pool. As significant investments become probable, we will supplement this prospectus to provide information regarding the likely investment. We will also supplement this prospectus to provide information regarding material changes to our portfolio, including the closing of significant asset originations or acquisitions.

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

Our board of directors has authorized stock dividends and a cash distribution on our shares of outstanding Class A common stock, which, as of the date of each declaration, was the only class of common stock issued and outstanding. On each of March 24, April 7, August 6, and November 10 of 2015, our board of directors authorized a quarterly stock dividend of 0.01 shares of Class A common stock (or 1% of a share of Class A common stock) on each outstanding share of Class A common stock issuable to all of our Class A common stockholders of record as of the close of business on each of March 25, June 24, September 22, and December 16 of 2015, respectively. We issued these quarterly stock dividends on March 27, June 29, September 29, and December 22 of 2015.

On December 10, 2015, our board of directors declared a stock dividend of 0.06 shares of Class A common stock (or 6% of a share of Class A common stock) on each outstanding share of Class A common stock to stockholders of record as of the close of business on December 16, 2015. We issued this stock dividend on December 21, 2015.

On December 10, 2015, our board of directors also declared a cash distribution in the amount of $0.12 per share of Class A common stock to stockholders of record as of the close of business on December 16, 2015. We paid this distribution on December 18, 2015. The distribution amount was generally determined based on both our estimated undistributed taxable income and the results of operations. The distribution was paid in cash or, for investors enrolled in our dividend reinvestment plan, reinvested in additional shares. Until our board of directors determine we have

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sufficient cash flow from operations to authorize regular, monthly cash distributions based on daily record dates, we expect our board of directors will declare distributions from time to time based on our income, cash flow and investing and financing activities. As such, we can give no assurances as to the timing, amount or notice with respect to any future cash distribution declarations.

During our offering stage, we currently expect our board of directors to declare stock dividends on a set quarterly basis based on quarterly record dates. Especially during the early stages of our operations and until our cash flows stabilize, our board of directors believes the declaration of stock dividends is in our best interest because it will allow us to focus on our investment strategy of investing in opportunistic real estate investments that may generate limited cash flow but have the potential for appreciation. These stock dividends may reflect in part an increase or anticipated increase in portfolio value to the extent our board of directors believes assets in our portfolio have appreciated or will appreciate in value after acquisition or after we have taken control of the assets. In addition, these stock dividends may reflect in part cash flow from operations. However, we can provide no assurances that our stock dividends will reflect appreciation in our portfolio or cash flow from operations. Unless our assets appreciate in an amount sufficient to offset the dilutive effect of any stock dividends, the return per share for later investors purchasing our stock will be below the return per share of earlier investors. With respect to any non-performing assets that we acquire, we believe that within a relatively short time after acquisition or taking control of such investments via foreclosure or deed-in-lieu proceedings, we will often experience an increase in their value. For example, in most instances, we bring financial stability to the property, which reduces uncertainty in the market and alleviates concerns regarding the property’s management, ownership and future. We also may have more capital available for investment in these properties than their prior owners and operators were willing to invest, and as such, we are able to invest in tenant improvements and capital expenditures with respect to such properties, which enables us to attract substantially increased interest from brokers and tenants.

We expect that once our board of directors determines we have sufficient cash flow from operations, our board of director will authorize and declare cash distributions based on daily record dates and pay these distributions on a monthly basis. We expect that we will fund these cash distributions from interest income on our debt investments, rental and other income on our real property investments and to the extent we acquire investments with short maturities or investments that are close to maturity, we may fund distributions with the proceeds received at the maturity, payoff or settlement of those investments. We may also utilize strategic refinancings to fund cash distributions for investments that have appreciated in value after our acquisition. Generally, our distribution policy is not to pay cash distributions from sources other than cash flow from operations, investment activities and strategic financings. However, we may fund cash distributions from any source and there are no limits to the amount of distributions that we may pay from any source, including proceeds from this offering or the proceeds from the issuance of securities in the future, other third party borrowings, advances from our advisor or sponsors or from our advisor’s deferral of its fees under the advisory agreement. Distributions paid from sources other than current or accumulated earnings and profits may constitute a return of capital. From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. In these situations we may make distributions in excess of our cash flow from operations, investment activities and strategic financings to satisfy the REIT distribution requirement described above. In such an event, we would look first to other third party borrowings to fund these distributions.

Upon completion of our offering stage, we expect to fund cash distributions from interest and rental and other income on investments, the maturity, payoff or settlement of investments and from strategic sales of loans, debt securities, properties and other assets as well as the strategic use of debt financing as described above. We do not expect to make significant asset sales (and related cash distributions from net sales proceeds) during our offering stage because, as a REIT, we will generally have to hold our assets for two years in order to meet the safe harbor to avoid a 100% prohibited transactions tax, unless such assets are held through a taxable REIT subsidiary (“TRS”) or other taxable corporation. At such time as we have assets that we have held for at least two years, we anticipate that we may authorize and declare distributions based on gains on asset sales monthly, to the extent we close on the sale of one or more assets and the board of directors does not determine to reinvest the proceeds of such sales.

Cash distributions on Class T shares will be lower than cash distributions on Class A shares because of the ongoing stockholder servicing fee to be paid with respect to Class T shares sold in the primary offering. We will not pay the stockholder servicing fee on Class T shares issued as a stock dividend or purchased in our dividend reinvestment plan offering; however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to all the Class T shares as a class expense. The stockholder servicing fee therefore will impact the

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distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares.

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 U.S. generally accepted accounting principles (“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 Strategic Opportunity REIT II, Inc. - Annual Distribution Requirements.” In general, we anticipate making distributions to our stockholders of at least 100% of our REIT taxable income so that none of our income is subject to federal income tax. 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 Strategic Opportunity REIT II, Inc.?

Yes. Our stockholders 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 upon request. Stockholders of either class of our shares may elect to have all or a portion of their dividends and other distributions, exclusive of dividends and other distributions that our board of directors designates as ineligible for reinvestment through the plan, reinvested in additional shares of our common stock in lieu of receiving cash distributions. Purchases pursuant to our dividend reinvestment plan will be in the same class of shares as the shares for which such stockholder received the distributions that are being reinvested. Until we announce an estimated NAV per share, participants in our dividend reinvestment plan will acquire shares of our common stock at a price per share equal to 95% of the then-current offering price for shares purchased in the primary portion of an offering (ignoring any discounts that may be available to certain categories of purchasers). These dividend reinvestment plan offering prices are initially $9.50 per Class A share and $9.12 per Class T share.

Once we establish an estimated NAV per share, shares issued pursuant to our dividend reinvestment plan will be priced at 95% of the estimated NAV per share of our common stock, as determined by our board of directors. We expect to establish an estimated NAV per share no later than June 6, 2017, which date is 150 days following the second anniversary of the date we broke escrow in this offering. Our board of directors may adjust the offering prices of the primary offering shares or dividend reinvestment plan shares during the course of the offering by filing a post-effective amendment.

No selling commissions or dealer manager fees are payable on shares sold under our dividend reinvestment plan. In addition, no stockholder servicing fee is payable with respect to Class T shares purchased through the dividend reinvestment plan or issued pursuant to a stock dividend; however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to the Class T shares as a class expense. The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares.

We may amend or terminate our dividend reinvestment plan for any reason at any time upon ten days’ notice to the participants. We may provide notice by including such information (i) in a Current Report on Form 8‑K or in our annual or quarterly reports, all publicly filed with the SEC or (ii) in a separate mailing to the participants.

Will the cash 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. However, if we recognize a long-term capital gain upon the sale of one of our assets, a portion of our dividends may be designated and treated in your hands as a long-term capital gain. Participants in our dividend reinvestment plan will also be treated for tax purposes as having received an additional distribution to the extent that they

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purchase shares under the dividend reinvestment plan at a discount to fair market value, if any. 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 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. However, because each investor’s tax considerations are different, we suggest that you consult with your tax advisor.

Will the stock dividends I receive be taxable?

We believe that any stock dividends should be tax-free transactions for U.S. federal income tax purposes under Section 305(a) of the Internal Revenue Code of 1986, as amended, and the adjusted tax basis of each share of “old” and “new” common stock should be computed by dividing the adjusted tax basis of the old common stock by the total number of shares, old and new. The holding period of the common stock received in such non-taxable distribution is expected to begin on the date the taxpayer acquired the common stock which is the date that each dividend is issued. Stockholders should consult their own tax advisors regarding the tax consequences of any stock dividends.

Will you register as an investment company?

We intend to conduct our operations so that neither we nor any of our subsidiaries will be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Under the relevant provisions of Section 3(a)(1) of the Investment Company Act, an investment company is any issuer that:

• pursuant to Section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or

• pursuant to Section 3(a)(1)(C) is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies).

We believe that neither we nor our Operating Partnership will be required to register as an investment company based on the following analyses. With respect to the 40% test, most of the entities through which we and our Operating Partnership own our assets will be majority-owned subsidiaries that will not themselves be investment companies and will not be relying on the exceptions from the definition of investment company under Section 3(c)(1) or Section 3(c)(7).

With respect to the primarily engaged test, we and our Operating Partnership will be holding companies and do not intend to invest or trade in securities ourselves. Rather, through the majority-owned subsidiaries of our Operating Partnership, we and our Operating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real estate and real estate-related assets.

If any of the subsidiaries of our Operating Partnership fail to meet the 40% test, we believe they will usually, if not always, be able to rely on Section 3(c)(5)(C) of the Investment Company Act for an exception from the definition of an investment company. (Otherwise, they should be able to rely on the exceptions for private investment companies pursuant to Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act.) As reflected in no-action letters, the SEC staff’s position on Section 3(c)(5)(C) generally requires that an issuer maintain at least 55% of its assets in “mortgages and other liens on and interests in real estate,” or qualifying assets; at least 80% of its assets in qualifying assets plus real estate-related assets; and no more than 20% of the value of its assets in other than qualifying assets and real estate-related assets, which we refer to as miscellaneous assets. To constitute a qualifying asset under this 55% requirement, a real estate interest must meet various criteria based on no-action letters. We expect that any of the subsidiaries of our Operating Partnership relying on Section 3(c)(5)(C) will invest at least 55% of its assets in qualifying assets, and approximately an additional 25% of its assets in other types of real estate-related assets. If any subsidiary relies on Section 3(a)(5)(C), we expect to rely on guidance published by the SEC staff or on our analyses of guidance

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published with respect to types of assets to determine which assets are qualifying real estate assets and real estate-related assets. For more information related to compliance with the Investment Company Act, see “Investment Objectives and Criteria - Investment Limitations Under the Investment Company Act of 1940.”

What is the impact of being an “emerging growth company”?

We do not believe that being an “emerging growth company,” as defined by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), will have a significant impact on our business or this offering. We have elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. This election is irrevocable. Also, because we are not a large accelerated filer or an accelerated filer under Section 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), and will not be for so long as our shares of common stock are not traded on a securities exchange, we are not subject to auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. In addition, so long as we are externally managed by our advisor, we do not expect to be required to seek stockholder approval of executive compensation and “golden parachute” compensation arrangements pursuant to Section 14A(a) and (b) of the Exchange Act. We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30.

How will you use the proceeds raised in this offering?

The following table sets forth information about how we intend to use the proceeds raised in our primary offering assuming that we sell up to $1,000,000,000 of shares of common stock in the primary offering. Many of the amounts set forth below represent management’s best estimate since they cannot be precisely calculated at this time. The following table assumes that (a) 15% of the proceeds raised in the primary offering are from the sale of Class A shares and 85% of the proceeds raised in the primary offering are from the sale of Class T shares, (b) we do not further reallocate shares being offered between our primary offering and dividend reinvestment plan, and (c) based on this allocation we sell all shares at the highest possible selling commissions and dealer manager fees (with no discounts to any categories of purchasers).

We estimate that we will use $9.01 per Class A and Class T share to acquire real estate and real estate-related investments, to maintain a working capital reserve, to pay acquisition and origination expenses and, upon the acquisition or origination of real estate investments, to pay a fee to our advisor for its services in connection with the selection and acquisition or origination of such real estate investments. We will use the remainder of the gross proceeds from the primary offering to pay selling commissions, the dealer manager fee and organization and other offering expenses (as described below).

We may fund distributions from any source, including, without limitation, offering proceeds or borrowings (which may constitute a return of capital). However, our distribution policy is generally not to use proceeds from an offering to pay distributions, though our board of directors may authorize such distributions under our organizational documents. If we pay distributions from sources other than our cash flow from operations, we will have less funds available to make real estate investments, the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

The following table presents information regarding the use of proceeds if we raise the maximum offering amount in this primary offering.

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	Maximum Primary Offering(1)
	$150,000,000 in Class A Shares ($10.00 per share)		$850,000,000 in Class T Shares ($9.59 per share)
	$	% of Offering Proceeds	$	% of Offering Proceeds
Gross Offering Proceeds	150,000,000	15.00	850,000,000	85.00
Less Offering Expenses:
Selling Commissions(2)	9,750,000	6.50	25,500,000	3.00
Dealer Manager Fee(2)	3,598,000	2.40(3)	17,000,000	2.00
Organization and Other Offering Expenses(4)	1,500,000	1.00	8,500,000	1.00
Amount Available for Investment/ Net Investment Amount	135,152,000	90.10	799,000,000	94.00
Acquisition and Origination    Fees(5)	2,851,649	1.90	20,193,713	2.38
Acquisition and Origination    Expenses	786,831	0.53	4,632,294	0.55
Initial Working Capital     Reserve	375,000	0.25	2,125,000	0.25
Targeted Investment Capital	131,138,520	87.42	772,048,993	90.83

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⁽¹⁾ As we are registering any combination of the two classes of shares, this allocation is management’s best estimate based on the recommendation of our dealer manager and its perceived demand in the market for each respective class of shares. If the demand for the Class A and Class T shares varies materially from our assumptions as of the date of this prospectus, we will provide an updated estimated use of proceeds table to reflect a revised allocation between the Class A and Class T shares in this offering.

⁽²⁾ Except as described in the “Plan of Distribution” section of this prospectus, an annual stockholder servicing fee of 1.0% of the purchase price per share (ignoring any discounts that may be available to certain categories of purchasers) for the Class T shares sold in the primary offering will be paid to our dealer manager and will accrue daily and be paid monthly in arrears. Our dealer manager will reallow all of the stockholder servicing fee paid to it. The stockholder servicing fee is an ongoing fee that is not paid at the time of purchase and is not intended to be a principal use of offering proceeds; it is therefore not included in the table above.

⁽³⁾ Effective for subscriptions admitted after February 16, 2016, we reduced the dealer manager fee payable in this offering from 3% of gross offering proceeds to 2% of gross offering proceeds. Prior to the reduction in the dealer manager fee, we had raised approximately $59.8 million in gross offering proceeds. The amount of dealer manager fees shown reflects a weighted average fee assuming we paid the maximum possible amount in dealer manager fees of $1.79 million with respect to the approximately $59.8 million of Class A shares sold in the primary offering prior to the reduction in the dealer manager fee.

⁽⁴⁾ Organization and other offering expenses includes all expenses to be paid or reimbursed by us in connection with this offering, excluding selling commissions, the dealer manager fee and the ongoing stockholder servicing fee with respect to Class T shares sold in the primary offering. Organization and other offering expenses include 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 this 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 payable to participating broker-dealers hosting retail seminars 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, legal fees of our dealer manager, and promotional items.

We will not reimburse our dealer manager for wholesaling compensation expenses. Our advisor and its affiliates have agreed to reimburse us at the termination of our primary offering to the extent that organization and other offering expenses borne by us in connection with this primary offering, regardless of when incurred, exceed 1.0% of gross primary offering proceeds.

⁽⁵⁾ Effective February 17, 2016, we increased the acquisition and origination fees payable with respect to investments acquired or originated with proceeds raised in this offering after February 16, 2016, from 1.5% to 2.6%. The amount of acquisition and origination fees shown reflects a weighted average fee based on the 1.5% acquisition and origination fee in effect for investments made with the approximately $59.8 million in gross proceeds raised on or prior to February 16, 2016 when the acquisition and origination fee was increased.

This table excludes debt proceeds. To the extent we fund our investments with debt, as we expect, the targeted investment capital and the amount of acquisition and origination fees and acquisition and origination expenses will be proportionately greater. If we raise the maximum offering amount and our assumptions with respect to the amount of fees paid remain unchanged and our debt financing and other liabilities are equal to our maximum target leverage such that our total liabilities do not exceed 60% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves), then we estimate that acquisition and origination fees would be $55,070,034 and acquisition and origination expenses would be $12,954,413.

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; reserves required by any financings of our investments; future funding obligations under any real estate loan receivable we acquire; the acquisition or origination of assets, which would include payment of acquisition and origination fees to our advisor; the repayment of debt; and expenses relating to our investments, such as purchasing a loan senior to ours to protect our junior position in the event of a default by the borrower on the senior loan, making protective advances to preserve collateral securing a loan, or making capital and tenant improvements or paying leasing costs and commissions related to real property.

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What kind of offering is this?

We are offering, on a best efforts basis, up to $1,000,000,000 in shares of our common stock in the primary offering, consisting of two classes of shares: Class A shares at a price of $10.00 per share and Class T shares at a price of $9.59 per share. Both classes of shares have discounts available to certain categories of purchasers. We are also offering up to 76,366,006 shares of our common stock pursuant to our dividend reinvestment plan: Class A shares at a price of $9.50 per share and Class T shares at a price of $9.12 per share. The amount of selling commissions differs among Class A shares and Class T shares, and there is an ongoing stockholder servicing fee with respect to Class T shares sold in the primary offering. We are offering to sell any combination of Class A and Class T shares in our primary offering and dividend reinvestment plan offering but in no event may we sell more than 180,000,000 of shares of our common stock pursuant to this offering. We reserve the right to reallocate shares between the primary offering and our dividend reinvestment plan offering, and to reallocate shares among classes of common stock, if we elect to offer additional classes in the future. Our board of directors may adjust the offering prices of the primary offering shares or dividend reinvestment plan shares during the course of the offering by filing a post-effective amendment. Based on our current estimates, as of the date of this prospectus, we have allocated 103,633,994 and 76,366,006 shares of our common stock to our primary and dividend reinvestment plan offerings, respectively.

How does a “best efforts” offering work?

When shares are offered on a “best efforts” basis, the dealer manager is 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 sell substantially less than the all of the shares that we are offering.

How long will this offering last?

We currently expect to offer shares of common stock in our primary offering until approximately 90 days (as determined by our Chief Executive Officer) after we have announced that we have raised $650 million in our primary public offering. This offering period is based on a number of considerations, including our goal of raising sufficient proceeds to acquire a diverse portfolio of real estate investments prior to seeking a liquidity event, the expected pace of sales of our common stock, the anticipated composition of our portfolio and the current conditions of the commercial real estate and publicly-traded stock markets. We will continue to monitor these factors during the course of this offering, and may adjust our anticipated offering termination date as necessary should these factors change. In no event may the primary offering continue beyond the time period permitted by the rules promulgated by the SEC, which rules provide that absent the filing of a registration statement for a follow-on offering, this primary offering shall terminate after a three-year period. If we decide to revise the threshold upon which we will terminate this primary offering, we will provide that information in a prospectus supplement. We may continue to offer shares under our dividend reinvestment plan after the primary offering terminates until we have sold up to 76,366,006 shares of our common stock through the reinvestment of distributions. In some states, we will need to renew the registration statement or file a new registration statement to continue the primary offering beyond the one-year registration period allowed in such states. We may terminate this offering at any time.

If our board of directors determines that it is in our best interest, we may conduct a public offering upon the termination of this offering; however, we do not currently intend to commence any such follow-on public offering. Our charter does not restrict our ability to conduct offerings in the future.

Why are we offering two classes of our common stock?

The two classes of common stock offered in this offering are meant to provide broker dealers participating in this offering with more flexibility to facilitate investment in us and are offered partially in response to recent changes to the applicable FINRA and NASD Conduct Rules regarding the reporting of our estimated values per share.  In addition, we believe offering Class A and Class T shares of our common stock provides investors with more flexibility in making their investment in us.  Investors can choose to purchase shares of either or both classes of common stock in the primary offering. Each share of our common stock, regardless of class, will be entitled to one vote per share on matters presented to the common stockholders for approval.

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How should you determine which class of common stock to invest in and what are the differences among the classes?

When selecting between our Class A and Class T shares, you should consult with your financial advisor and consider the following: whether you would prefer an investment with higher upfront fees and commissions and likely higher current distributions (Class A shares) versus an investment with lower upfront fees and commissions but likely lower current distributions due to the ongoing stockholder servicing fee (Class T shares). In addition, for the same investment amount, you will receive more Class T shares than you would if you purchased Class A shares, due to the differences in the purchase prices. Furthermore, you should consider whether you qualify for any volume or other discounts. Finally, some financial advisors may only sell one class of our shares. Please see the more detailed description of our classes of shares in the section entitled "Description of Shares" in this prospectus.

The amount of selling commissions differs among Class A shares and Class T shares, and there is an ongoing stockholder servicing fee with respect to Class T shares sold in the primary offering. The following table summarizes the fees related to each class of our common stock sold in our primary offering and indicates the maximum fees payable on a hypothetical investment of $10,000 in each class of shares.

	Class A Shares			1,000 Class A Shares		Class T Shares			1,042.753 Class T Shares
Price Per Share/ Amount Invested	$	10.00		$	10,000	$	9.59		$	10,000
Selling Commissions(1)		6.5	%	$	650		3.0	%	$	300
Dealer Manager Fees(1)		2.0	%	$	200		2.0	%	$	200
Annual Stockholder Servicing Fee		None		$	0		1.0%(2)		$	400	(3)

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⁽¹⁾ The selling commissions and dealer manager fees associated with each class of shares of our common stock may be reduced for certain categories of purchasers. See “Plan of Distribution.”

⁽²⁾ Except as described in the “Plan of Distribution” section of this prospectus, an annual stockholder servicing fee of 1.0% of the purchase price per share (ignoring any discounts that may be available to certain categories of purchasers) for the Class T shares sold in the primary offering will be paid to our dealer manager and will accrue daily and be paid monthly in arrears. The stockholder servicing fee will cease accruing with respect to a Class T share upon the occurrence of the following events: (i) the date at which aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the primary offering in which the Class T share was sold, as calculated by us with the assistance of the dealer manager after the termination of the primary offering in which the Class T share was sold, (ii) with respect to a particular Class T share, on the fourth anniversary of the issuance of the share, (iii) a listing of our common stock on a national securities exchange, (iv) a merger or other extraordinary transaction, and (v) the date the Class T share associated with the stockholder servicing fee is no longer outstanding such as upon its redemption or our dissolution.

⁽³⁾ See the discussion below for the assumptions used in determining the amount payable in stockholder servicing fees.

The stockholder servicing fee is only paid on Class T shares purchased in the primary offering; no stockholder servicing fee is paid on Class T shares purchased through the dividend reinvestment plan or issued pursuant to a stock dividend. The stockholder servicing fee is a class-specific expense, however, that will be allocated to all the Class T stockholders. The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares. The payment of the ongoing stockholder servicing fee with respect to Class T shares sold in the primary offering will result in the payment of lower distributions on Class T shares relative to the distributions paid on Class A shares because the amount of the ongoing stockholder servicing fee will reduce the amount available for distribution to Class T stockholders. Distribution amounts paid on Class A and Class T shares will only vary due to the stockholder servicing fee; there are no additional class-specific expenses that will affect relative distribution amounts. In addition, as a result of the allocation of the stockholder servicing fees to the Class T shares, each share class could have a different NAV per share if distributions are not adjusted to take account of such fee.

Assuming that (a) the gross offering price of our Class T shares in the primary offering remains constant at $9.59, (b) 85% of the gross primary offering proceeds raised are from the sale of Class T shares, (c) 4% of the proceeds raised in the primary offering are from the sale of Class A shares through distribution channels that do not pay selling commissions of 6.5%, and (d) none of the Class T shares purchased in the primary offering are redeemed and no extraordinary or other transaction affecting whether the share is outstanding occurs prior to the four year anniversary of the issuance of the T share, and because the stockholder servicing fee on a particular Class T share will cease to accrue on the fourth anniversary of the issuance of the share, we expect that with respect to a one-time $10,000 investment in

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Class T shares, approximately $400 in servicing fees will be paid over 4.0 years and $500 in selling commissions and dealer manager fees will be paid at the time of the investment for a total of $900 in selling commissions, dealer manager fees and stockholder servicing fees, or 9.0% of the price per share of Class T common stock. For further clarity, with respect to any Class T share purchased in the primary offering at $9.59, under the same assumptions, we would pay approximately $0.3836 in servicing fees over 4.0 years and $0.4795 in selling commissions and dealer manager fees at the time of the investment for a total of $0.8631 in selling commissions, dealer manager fees and stockholder servicing fees, or 9.0% of the purchase price per share of Class T common stock. The selling commissions and dealer manager fees would be paid at the time of the investment from the offering proceeds we receive from the investor. The stockholder servicing fee is an ongoing fee that is not paid at the time of purchase and is not intended to be paid from the offering proceeds we receive from an individual investor; rather, it is an on-going class-specific expense that is allocated to all the Class T stockholders for services provided by the broker dealer of record, see the “Plan of Distribution” section of this prospectus for a discussion of the stockholder services. Notwithstanding the foregoing, the stockholder servicing fee will also cease to accrue with respect to Class T shares upon the date at which aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the primary offering in which the Class T share was sold, as calculated by us with the assistance of the dealer manager after the termination of the primary offering in which the Class T share was sold. Underwriting compensation includes selling commissions, dealer manager fees, and stockholder servicing fees being paid in connection with an offering as well as other items of value paid in connection with an offering, including amounts not paid or reimbursed by us, that are viewed by FINRA as underwriting compensation.  See the “Plan of Distribution” for a discussion of the underwriting compensation expected to be paid in connection with this offering.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of us, or any liquidating distribution of our assets, then such assets, or the proceeds therefrom, will be distributed between the holders of Class A shares and Class T shares ratably in proportion to the respective NAV for each class until the NAV for each class has been paid. We will calculate the NAV per share as a whole for all Class A shares and Class T shares and then will determine any differences attributable to each class. As noted above, except in the unlikely event that the stockholder servicing fees payable on Class T shares sold in the primary offering exceed the amount otherwise available for distribution to Class A stockholders in a particular period, we expect the NAV per share of each Class A share and Class T share to be the same. Each holder of shares of a particular class of common stock will be entitled to receive, ratably with each other holder of shares of such class, that portion of such aggregate assets available for distribution as the number of outstanding shares of such class held by such holder bears to the total number of outstanding shares of such class then outstanding. In the event that we have not previously calculated an NAV for our Class A and Class T shares prior to a liquidation, we will calculate the NAV for our Class A and Class T shares in connection with such a liquidation specifically to facilitate the equitable distribution of assets or proceeds to the share classes.

How did you determine the offering prices of the Class A and Class T shares?

We set the $10.00 primary offering price of our Class A shares arbitrarily, and based on that price, set the $9.59 primary offering price of our Class T shares to account for differing sales commissions. These prices are unrelated to the value of our assets and to our expected operating income.

We set the initial offering price of the shares sold through the dividend reinvestment plan at a level equal to 95% of the primary offering price of each respective class of shares (ignoring any discounts that may be available to certain categories of purchasers). No selling commissions or dealer manager fees will be paid with respect to shares purchased through the dividend reinvestment plan. In addition, no stockholder servicing fee will be paid with respect to Class T shares purchased through the dividend reinvestment plan or issued pursuant to a stock dividend; however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to all the Class T shares as a class expense. The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares.

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 may buy shares in this offering provided that they have either (i) a net worth of at least $70,000 and an annual gross income of at least $70,000 or (ii) a net worth of at

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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 suitability standards are more stringent for investors in Alabama, California, Iowa, Kansas, Kentucky, Maine, Massachusetts, Michigan, Nebraska, New Jersey, New Mexico, North Dakota, 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 REIT investment focused on real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments, seek to receive some 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 applicable to this offering in shares of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Growth & Income 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: transfer by gift, transfer by inheritance, intrafamily transfer, 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.

We may make some investments that generate “excess inclusion income” which, when passed through to our tax-exempt stockholders, can be taxed as unrelated business taxable income (UBTI) or, in certain circumstances, can result in a tax being imposed on us. Although we do not expect the amount of such income to be significant, there can be no assurance in this regard.

As a result of plan asset considerations related to ERISA, we expect that all subscription payments for the purchase of Class T shares received from Benefit Plan investors initially will be placed in an account held by the escrow agent, UMB Bank, N.A., in trust for Benefit Plan investors’ benefit pending release to us. 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 Subtitle B of Title I 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. Once we have received

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subscriptions for Class T shares which would result in ownership of the Class T shares by 100 or more persons who are independent of us and one another we will request that our escrow agent release to us any funds received from Benefit Plan investors for the purchase of Class T shares.

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, (i) whether the investment is in accordance with the documents and instruments governing your IRA, plan or other account, (ii) whether the investment satisfies the fiduciary requirements associated with your IRA, plan or other account, (iii) whether the investment will generate UBTI to your IRA, plan or other account, (iv) whether there is sufficient liquidity for such investment under your IRA, plan or other account, (v) the need to value the assets of your IRA, plan or other account annually or more frequently, and (vi) 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 class and number of shares and pay for the shares at the time of your subscription.

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

At the time you purchase the shares, they will not be listed for trading on any national securities exchange or over-the-counter market. In fact, we do not expect any public market to develop for the shares. 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, and 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. However, our share redemption program includes numerous restrictions that limit our stockholders’ ability to sell their shares. If and when we do have funds available for redemption under our share redemption program, unless the shares are being redeemed in connection with a stockholder’s death, qualifying disability or determination of incompetence (“Special Redemption”), the prices at which we will redeem shares are as follows.

Until we announce an estimated NAV per share of our common stock, the price at which we will redeem the shares is as follows:

• For those shares held by the redeeming stockholder for at least one year, 92.5% of the price paid to acquire the shares from us;

• For those shares held by the redeeming stockholder for at least two years, 95.0% of the price paid to acquire the shares from us;

• For those shares held by the redeeming stockholder for at least three years, 97.5% of the price paid to acquire the shares from us; and

• For those shares held by the redeeming stockholder for at least four years, 100% of the price paid to acquire the shares from us.

Notwithstanding the foregoing, stock dividends will initially be redeemed at the “net investment amount” per share, which will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. For each class of shares, this amount will initially equal $9.01 per share for redemptions of shares received as a result of a stock dividend.

After we establish an estimated NAV per share of our common stock, the price at which we will redeem the shares is as follows:

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• For those shares held by the redeeming stockholder for at least one year, 92.5% of our most recent estimated NAV per share as of the applicable redemption date;

• For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent estimated NAV per share as of the applicable redemption date;

• For those shares held by the redeeming stockholder for at least three years, 97.5% of our most recent estimated NAV per share as of the applicable redemption date; and

• For those shares held by the redeeming stockholder for at least four years, 100% of our most recent estimated NAV per share as of the applicable redemption date.

For purposes of determining the time period a redeeming stockholder has held each share submitted for redemption, the time period begins as of the date the stockholder acquired the shares; provided further, that shares purchased by the redeeming stockholder pursuant to our dividend reinvestment plan or received as a stock dividend will be deemed to have been acquired on the same date as the initial share to which the dividend reinvestment plan shares or stock dividend shares relate. The date of the share’s original issuance by us is not determinative. In addition, as described above, the shares owned by a stockholder may be redeemed at different prices depending on how long the stockholder has held each share submitted for redemption.

We expect to establish an estimated NAV per share no later than June 6, 2017, which date is 150 days following the second anniversary of the date we broke escrow in this offering.

The terms of our share redemption program are more generous with respect to redemptions sought in connection with a Special Redemption:

• There is no one-year holding requirement;

• Additional funds in an amount of up to $500,000 are available for redemption;

• Until we announce an estimated NAV per share, the redemption price is the amount paid to acquire the shares from us; provided that, stock dividends will initially be redeemed at the “net investment amount” per share, which will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. For each class of shares, this amount will initially equal $9.01 per share for redemptions of shares received as a result of a stock dividend; and

• Once we have announced an estimated NAV per share, the redemption price for all shares would be the estimated NAV of the shares, as determined by our board of directors.

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. Notwithstanding the foregoing, the share redemption program provides up to $500,000 in additional funds to redeem a qualifying stockholder’s shares if the shares are being redeemed in connection with a Special Redemption. For purposes of determining the amount of funds available for redemption under the share redemption program, redemptions for a Special Redemption are to be made first from this $500,000. This restriction may significantly limit your ability to have your shares redeemed pursuant to our share redemption program because initial distributions have been in the form of stock dividends and, particularly during our offering stage, we do not expect to have cash flow sufficient to pay significant cash distributions, which would in turn severely limit redemptions during the next 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, provided that we may increase or decrease the funding available for the redemption of shares pursuant to our share redemption program upon ten business days’ notice to our stockholders.

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When will the company seek to provide a liquidity event for its stockholders?

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 within ten years from commencement of this offering, our charter requires that we either:

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

• postpone the decision of whether to liquidate the company, if a majority of the conflicts committee determines that liquidation is not then in the best interests of the 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 would not require the conflicts committee to revisit the issue of liquidation, 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 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 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 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; 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.kbssorii.com.

To assist the FINRA members and their associated persons that participate in this offering in meeting their customer account statement reporting obligations pursuant to FINRA and NASD Conduct Rules, we will disclose in each annual report distributed to stockholders a per share estimated value of our shares, the method by which it was developed, and the date of the data used to develop the estimated value. In addition, 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.

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We intend to report the net investment amount of our shares as our estimated value per share, which net investment amount will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. This estimated per share value will be accompanied by any disclosures required under the FINRA and NASD Conduct Rules. No later than 150 days after the second anniversary of the date on which we broke escrow in our initial public offering, we will provide an estimated NAV per share that we will use as our estimated value per share. This value will be based on valuations of our assets and liabilities performed at least annually, by, or with the material assistance or confirmation of, a third-party valuation expert or service and will comply with the Practice Guideline 2013-01, Valuations of Publicly Registered, Non-Listed REITs issued by the Investment Program in April 2013 (the “IPA Valuation Guidelines”).

In connection with determining an estimated NAV per share, we will obtain independent third-party appraisals for our real estate investments and certain real-estate related investments as appropriate. With respect to our cash, real estate loans receivable, other assets, mortgage debt and other liabilities, we will obtain valuations from our advisor as we expect these will equal GAAP fair value as reported in our publicly filed financial statements. These valuations will be reviewed by the independent third-party engaged to assist in the determination of our estimated NAV per share. We will value our other assets in a manner we deem most suitable under the circumstances consistent with the IPA Valuation Guidelines. Once we announce an estimated NAV per share we generally expect to update the estimated NAV per share in December of each year.

Until we report an estimated NAV per share, this initial reported value will likely differ from the price at which a stockholder could resell his or her shares primarily because (i) there is no public trading market for the shares at this time; (ii) when derived from the primary offering price, the estimated value will not reflect, and will not be derived from, the fair market value of our assets nor will it represent the amount of net proceeds that would result from an immediate liquidation of our assets, (iii) the purchase prices at which shares of our Class A common stock were sold prior to commencement of this offering were significantly below the purchase prices for shares in this offering and we paid significant organization and offering expenses in connection with our private offering; (iv) the estimated value does not take into account how market fluctuations affect the value of our investments; and (v) 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 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

800 Newport Center Drive, Suite 700

Newport Beach, California 92660

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

Fax: (949) 417-6501

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, as supplemented, before purchasing our common stock. The risks discussed in this prospectus, as supplemented, 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 risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.

Risks Related to an Investment in Us

If we do not raise significant proceeds in this offering, we will be limited in the number and type of investments we make and the value of our stockholders’ investment in us will fluctuate with the performance of the specific assets we acquire.

Our common stock is being offered 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 our shares. As a result, there is no assurance that we will raise significant proceeds in this offering, 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. If we are unable to raise substantial proceeds, 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 market in that area. Our stockholders’ 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 regardless of whether we are able to raise substantial funds in this offering. Our inability to raise substantial proceeds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and cash flow and limiting our ability to pay distributions to our stockholders.

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 offering price.

No public market currently exists for our shares, and at this time we have no plans to list our shares on an exchange. Our charter does not require our directors to provide our stockholders with a liquidity event by a specified date or at all. Until our shares are listed, if ever, you may not sell your shares unless the buyer meets the applicable suitability and minimum purchase standards. 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, provided that we may increase or decrease the funding available for the redemption of shares pursuant to our share redemption program upon ten business days’ notice to our stockholders. Further, the share redemption program includes numerous restrictions that will severely 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, and the ability of our advisor to source loan origination opportunities for us. With respect to any investments we may make in Europe, we must also depend upon the performance of STAM, the third party with whom our advisor has entered into a sub-advisory agreement. Competition from competing entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of counterparties in transactions. We will also depend upon the performance of third-party loan servicers and property managers in connection with managing our 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. Except for investments that may be described in supplements to this prospectus, you will have no opportunity to evaluate the economic merits or the terms of our investments. You must rely entirely on the management abilities of KBS Capital Advisors, the loan servicers and property managers KBS Capital Advisors

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selects and the oversight of our board of directors. We can give you 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 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. 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.

Disruptions in the financial markets and uncertain economic conditions could continue to adversely impact the commercial mortgage market as well as the market for real estate-related debt investments generally, which could hinder our ability to implement our business strategy and generate returns to you.

The returns available to investors generated by real estate-related investments are determined by: (i) the supply and demand for such investments; (ii) the terms we are able to negotiate for our investments; (iii) the performance of the assets underlying the investments; and (iv) the existence of a market for such investments, which includes the ability to sell or finance such investments.

During periods of volatility, the number of investors participating in the market may change at an accelerated pace. As liquidity or “demand” increases, the returns available to investors on new investments will decrease. Conversely, a lack of liquidity will cause the returns available to investors on new investments to increase.

The Federal Reserve has maintained an accommodative monetary policy since the beginning of the 2008 financial crisis. Through a variety of monetary tools and programs, the Federal Reserve injected trillions of U.S. dollars into the global financial markets. The U.S. quantitative easing (“QE”) program focused on the purchase of U.S. treasury bonds and mortgage backed securities. Currently it is unclear what the final cost or impact of this program will be. In October of 2014, the Federal Reserve concluded the current phase of QE. While it is unclear whether such an increase will happen in 2015 or 2016, it now appears likely that an increase is in the Federal Reserve's plans.

In the United States, recent economic data has been mixed. Slow and steady growth in the labor markets has driven unemployment to 5.0% as of October 2015. The labor force participation rate continues to be low and personal income growth has remained muted. Consumer spending in the United States has increased, and is being driven by lower debt service burdens, record high stock market valuations, rebounding home prices and a dramatic decrease in the cost of gasoline. Consumer confidence levels are starting to reach levels last seen in the mid-2000’s. U.S. gross domestic product (“U.S. GDP”) has continued to grow at a moderate annualized rate. On an annual basis, U.S. GDP growth in 2014 was 2.4%, which was an improvement over 2013’s growth rate of 1.5%. In the first quarter of 2015, growth was well below expectations at 0.6%. The second quarter of 2015 rebounded strongly with 3.9%, and the third quarter of 2015 has come in at an initial level of 1.5%. The muted third quarter growth is being explained as the result of a strong dollar and a decrease in demand for U.S. exports. Throughout 2015 corporate revenues and earnings have experienced a reduced level of growth.

The U.S. dollar has remained a safe haven currency and the U.S. commercial real estate market has benefited from an inflow of foreign capital. Initially, gateway markets such as New York City and San Francisco benefited from a high demand for commercial properties. In 2014, the commercial real estate market recovery spread to secondary and tertiary markets, and most asset classes. The U.S. commercial real estate market has gained favor as an alternative investment class and capital flows continue to improve. In 2015, commercial property values have continued to rise and the U.S. commercial real estate market is currently on pace to set a record in transaction volume. However, the recovery in commercial real estate is expected to remain uneven across geographies and among property types.

Disruptions in the financial markets and uncertain economic conditions could adversely affect market rental rates, commercial real estate values and our ability to secure debt financing, service future debt obligations, or pay distributions to our stockholders.

Currently, both the investing and leasing environments are highly competitive. While there has been an increase in the amount of capital flowing into the U.S. real estate markets, which resulted in an increase in real estate values in certain markets, the uncertainty regarding the economic environment has made businesses reluctant to make long-term commitments or changes in their business plans. Possible future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows. Historically low interest rates could help offset some of the impact of these potential decreases in operating cash flow for properties financed with variable rate mortgages; however, interest rates likely will not remain at these historically low levels for the remaining life of many of our investments. Recently, interest rates have become more volatile as the global capital markets react to increasing economic and geopolitical risks.

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After several years of improving market conditions, the recovery in the U.S. residential real estate market has slowed. The initial recovery was driven by low interest rates, pent-up demand from the consumer sector and institutional investors in the form of buy-to-rent portfolios. In 2015, investor demand for homes has slowed and the housing market appears to be heading into a consolidation phase as several institutional investors seek an exit to repay investors. All cash purchases of homes, an indicator of institutional investor activity, has dropped dramatically. New home construction numbers have been driven largely by the construction of multifamily projects.

From a global standpoint, the U.S. economy is considered to be a bright spot. Recently the International Monetary Fund (“IMF”) lowered its global growth forecast from 3.7% to 3.3%. Lower than expected growth in the European Union (“EU”) and Chinese economies are the primary factors in the forecast change. Geopolitical events in the Ukraine and Middle East and the recent outbreak of the Ebola virus in Africa, and its possible spread to the rest of the world, have all been impediments to global economic growth.

Overall, despite indications of recovery in the United States, uncertainties abound. China’s export-based economy has slowed and the Japanese government continues to experiment with QE. The EU is faced with the economic collapse of Greece, another recession and military conflict in the Ukraine. In the United States, the Federal Reserve completed the latest phase of QE in 2014 and is now faced with the impact of a strong dollar and the anticipation of increasing interest rates. In the short-term, we anticipate that market conditions will continue to remain strong and volatile. When combined with a challenging global macro-economic environment, these conditions may interfere with the implementation of our business strategy and/or force us to modify it.

We have relied on debt financing to finance our real estate properties and we may have difficulty refinancing some of our debt obligations prior to or at maturity or we may not be able to refinance these obligations at terms as favorable as the terms of our existing indebtedness and we also may be unable to obtain additional debt financing on attractive terms or at all. If we are not able to refinance our existing indebtedness on attractive terms at the various maturity dates, we may be forced to dispose of some of our assets. Recent financial market conditions have improved from the bottom of the economic cycle, but material risks are still present. Market conditions can change quickly, which could negatively impact the value of our assets.

Disruptions in the financial markets and continued uncertain economic conditions could adversely affect the values of our investments. Lending activity only recently increased; however, it remains uncertain whether the capital markets can sustain the current transaction levels. Any disruption to the debt and capital markets could result in fewer buyers seeking to acquire commercial properties and possible increases in capitalization rates and lower property values. Furthermore, declining economic conditions could negatively impact commercial real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio and in the collateral securing our loan investments, which could have the following negative effects on us:

• the values of our investments in commercial properties could decrease below the amounts paid for such investments;

• the value of collateral securing our loan investments could decrease below the outstanding principal amounts of such loans;

• revenues from our properties could decrease due to fewer tenants and/or lower rental rates, making it more difficult for us to pay distributions or meet our debt service obligations on debt financing; and/or

• revenues generated by the properties and other assets underlying our loan investments could decrease, making it more difficult for the borrowers to meet their payment obligations to us, which could in turn make it more difficult for us to pay distributions or meet our debt service obligations on debt financing.

All of these factors could reduce our stockholders’ return 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 your investment.

We rely upon our sponsors and the other real estate and debt finance professionals at our advisor, including Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., to identify suitable investments. The private KBS-sponsored programs, especially those that are currently raising offering proceeds, as well as the KBS-advised investors, also rely upon Messrs. Bren and Schreiber for investment opportunities. In addition, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT, which are also externally advised by our advisor, rely upon Messrs. Bren, Hall, McMillan and Schreiber to identify potential investments and actively manage their assets. To the extent that our sponsors and the other real

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estate and debt finance professionals at our advisor 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 size of this offering and the competition from other entities that may be better positioned to acquire the types of investments we desire to make 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.

To the extent we incur expenses in connection with the identification, evaluation, and negotiation of potential investments that we ultimately do not acquire or originate, we will have fewer funds available for investment and your overall return may be reduced.

Our advisor follows a tightly managed process to examine all elements of our potential investments, the objective of which is to identify suitable acquisition and origination targets that meet our investment and underwriting criteria. The pursuit of investments may pose certain risks to us. We may not be able to identify acquisition or origination candidates that fit our criteria. Even if we are able to identify such candidates, we may not be able to acquire or originate them on terms satisfactory to us. Our advisor will incur expenses on our behalf and will dedicate attention and resources associated with the evaluation and negotiation of acquisition and origination opportunities, whether or not we ultimately consummate these transactions. For example, before we make any investment, our advisor may engage third parties to perform appraisals, surveys, property condition reports, environmental site assessments and other analyses with respect to a potential investment. In addition, our advisor may incur legal and other professional costs on our behalf in connection with the negotiation of potential investments. We will be responsible for reimbursing our advisor for the third party costs associated with the pursuit of an investment target, regardless of whether we ultimately acquire or originate the investment. To the extent we incur expenses in connection with the identification, evaluation, and negotiation of potential investments that we ultimately do not acquire or originate, for whatever reason, we will have fewer funds available for investment and your overall return may be reduced.

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.

We will seek to invest substantially all of the net proceeds from the primary offering after the payment of fees and expenses, in real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. However, because you will be unable to evaluate the economic merit of assets 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 mortgagor or tenant creditworthiness and you will not have the opportunity to evaluate potential borrowers, tenants or managers. These factors increase the risk that your investment may not generate returns comparable to our competitors.

We have a limited operating history which makes our future performance difficult to predict.

We have a limited operating history. We were incorporated in the State of Maryland on February 6, 2013 and commenced a private placement offering in July 2013. We terminated offering shares in our private offering immediately prior to commencement of this offering in August 2014. As of February 17, 2016, we owned two hotel properties, one office building, and one first mortgage loan. We cannot assure you that we will be able to operate our business successfully or implement our operating policies and strategies described in this prospectus. We can provide no assurance that our performance will replicate the past performance of other KBS-sponsored programs. Our investment returns could be substantially lower than the returns achieved by other KBS-sponsored programs. The results of our operations depend on several factors, including the availability of opportunities for the acquisition of target assets, the level and volatility of interest rates, the availability of short and long-term financing, and conditions in the financial markets and economic conditions.

Because we depend upon our advisor and its affiliates to conduct our operations, adverse changes in the financial health of our advisor or its affiliates could cause our operations to suffer.

We depend on KBS Capital Advisors, its affiliates and the key real estate and debt finance professionals at KBS Capital Advisors to manage our operations and our portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. Our advisor depends upon the fees and other compensation that it receives from us and other KBS-sponsored public programs in connection with the origination, purchase, management and sale of assets to conduct its operations. Any adverse changes in the financial condition of KBS Capital Advisors or its affiliates or our relationship with KBS Capital Advisors or its affiliates could hinder their ability to successfully manage our operations and our portfolio of investments.

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Our ability to implement our investment strategy is dependent, in part, upon the ability of KBS Capital Markets Group, our dealer manager, 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. 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. Some or all of the broker dealers in this network have a choice of numerous competing real estate investment trust offerings, many with similar investment objectives, to recommend to their clients, which may make selling our shares to their clients more difficult. If KBS Capital Markets Group is not successful in growing, 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, you could lose all or a part of your investment.

Investors in this offering will experience immediate dilution of their investment in us primarily because we paid upfront fees in connection with the sale of our shares, we sold shares of our Class A common stock in our private offering at purchase prices that were significantly below the $10.00 purchase price for Class A shares in this offering, and we incurred significant organization and other offering expenses in connection with our private offering.

Stockholders who purchase shares in this offering will incur immediate dilution of their investment in us. This is primarily because of the upfront fees, including selling commissions, dealer manager fees and organization and other offering expenses, paid in connection with this offering that are not available for investment in real estate. In addition, immediately prior to commencement of this offering, we sold shares of our Class A common stock at purchase prices between $9.20 and $9.40, which are substantially below the purchase price of our Class A common stock in this offering, and we paid significant organization and offering expenses in connection with our private offering. To date, we have only made a limited number of investments that may not be sufficient to offset the dilutive effect of the incurrence of significant organization and other offering expenses in this and our private offering and the sale of Class A shares in our private offering at a purchase price of less than the purchase price in this offering; therefore, the current value per share for investors purchasing our stock in this offering will likely be below the current offering price.

Because the offering price in this offering exceeds our net tangible book value per share, investors in this offering will experience immediate dilution in the net tangible book value of their shares.

We are currently offering shares of our Class A common stock and our Class T common stock in this initial public offering at $10.00 and $9.59 per share, respectively, with discounts available to certain categories of purchasers. Our current offering price exceeds our net tangible book value per share. Our net tangible book value per share is a rough approximation of value calculated as total book value of assets minus total book value of liabilities, divided by the total number of shares of common stock outstanding. Net tangible book value is used generally as a conservative measure of net worth that we do not believe reflects our estimated value per share. It is not intended to reflect the value of our assets upon an orderly liquidation of the company in accordance with our investment objectives. However, net tangible book value does reflect certain dilution in value of our common stock from the issue price in this offering as a result of (i) the substantial fees paid in connection with this offering and our now terminated private offering, including selling commissions and marketing fees re-allowed by our dealer manager to participating broker-dealers, (ii) the fees and expenses paid to our advisor and its affiliates in connection with the selection, acquisition, management and sale of our investments, (iii) general and administrative expenses, (iv) accumulated depreciation and amortization of real estate investments, and (v) the issuance of shares in our now-terminated private offering at a purchase price of less than $10.00.

As of December 31, 2014, our net tangible book value per share of Class A common stock, which was the only class of common stock outstanding, was $7.87. To the extent we are able to raise additional proceeds in this offering, some of the expenses that cause dilution of the net tangible book value per share are expected to decrease on a per share basis, resulting in increases in the net tangible book value per share. This increase would be partially offset by increases in depreciation and amortization expenses related to our real estate investments.

The return per share for investors in this offering will be diluted if we issue stock dividends prior to their investment in us.

Our investment objectives include investing in assets with potential for long term appreciation; however, they may have reduced operating cash flows initially. As a result, we may issue stock dividends to supplement our payment of cash distributions, especially in the early stages of our operations before our value-creating investments have stabilized and started generating stable cash flows from operations. While our objective is to acquire assets that appreciate in value, there can be no assurance that assets we acquire will appreciate in value. Furthermore, we do not currently intend to change our offering price during the term of this offering. Therefore, investors who purchase our

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shares early in this offering, as compared with later investors, will receive more shares for the same cash investment as a result of any stock dividends not received by later investors. Because they would own more shares, upon a sale or liquidation of the company, these early investors will receive more sales proceeds or liquidating distributions relative to their gross investment amount compared to later investors.

If we are incorrect in our assessment of asset appreciation or anticipated asset appreciation that has been used to justify a cash distribution or stock dividend, the return for later investors purchasing our stock after payment of these cash distributions or stock dividends will be lower than the return for earlier investors.

We do not currently intend to change our offering price during the term of this offering. However, under our distribution policy, to the extent that we believe assets in our portfolio have appreciated in value after acquisition or will appreciate in value, we may determine to issue a stock dividend or use the proceeds from real estate financings to fund cash distributions to our stockholders. Therefore, investors who purchase our shares early in this offering, as compared with later investors, may receive more distributions for the same cash investment as a result of any distributions that are made based on our assessment of asset appreciation or anticipated asset appreciation. Furthermore, if we are incorrect in our assessment of asset appreciation that is used to justify a cash or stock dividend, the return for later investors purchasing our stock may be further reduced relative to the return for earlier investors.

If we pay cash distributions from sources other than our cash flow from operations, we will have less funds available for investments and your overall return may be reduced.

Generally, our distribution policy is not to pay cash distributions from sources other than cash flow from operations, investment activities and strategic financings. However, we may fund cash distributions from any source and there are no limits to the amount of distributions that we may pay from any source, including proceeds from this offering or the proceeds from the issuance of securities in the future, other third party borrowings, advances from our advisor or sponsors or from our advisor’s deferral of its fees under the advisory agreement. Distributions paid from sources other than current or accumulated earnings and profits may constitute a return of capital. From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. In these situations we may make distributions in excess of our cash flow from operations, investment activities and strategic financings to satisfy the REIT distribution requirement. In such an event, we would look first to other third party borrowings to fund these distributions. If we fund distributions from financings, the net proceeds from this offering or sources other than our cash flow from operations, we will have less funds available for investment in real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments and your overall return may be reduced.

The loss of or the inability to obtain key real estate and debt finance professionals at our advisor and key employees at our dealer manager could delay or hinder implementation of our investment strategies, which could limit our ability to make distributions and decrease the value of your investment.

Our success depends to a significant degree upon the contributions of Peter M. Bren, Keith D. Hall, Peter McMillan III, and Charles J. Schreiber, Jr., each of whom would be difficult to replace. Neither we nor our affiliates have employment agreements with Messrs. Bren, Hall, McMillan or Schreiber. Messrs. Bren, Hall, McMillan and Schreiber 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. If we lose or are unable to obtain the services of highly skilled professionals our ability to implement our investment strategies could be delayed or hindered, and the value of your investment may decline. Furthermore, if some or all of the key real estate and debt finance professionals at KBS Capital Advisors are internalized by KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT or KBS Growth & Income REIT, KBS Capital Advisors may need to replace such professionals, or we may need to find employees or an advisor to replace the management services KBS Capital Advisors provides to us. In such event our operating performance and the return on your investment could suffer.

Our rights and the rights of our stockholders to recover claims against our independent directors are limited, which could reduce your and our recovery against our independent directors 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

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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, you and we may have more limited rights against our independent directors than might otherwise exist under common law, which could reduce your 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 you.

We have limited experience with European investments.

Neither we nor our advisor or any of its affiliates has substantial experience investing in real estate-related assets located in Europe. With respect to any investments we may make in Europe, we will be largely dependent upon the acquisition and portfolio management performance of STAM, the third party with whom our advisor has entered into a sub-advisory agreement. Although we expect to acquire real estate-related assets located in the United States, we may also acquire real estate assets located in Europe and may make or purchase mortgage, bridge, mezzanine or other loans made by a buyer located in Europe or secured by property located in Europe. We may not have the expertise necessary to maximize the return on our European investments.

Your investment may be subject to additional risks if we make international investments.

We may purchase real estate assets located in Europe and may make or purchase mortgage, bridge, mezzanine or other loans or participations in mortgage, bridge, mezzanine or other loans made by a borrower located in Europe or secured by property located in Europe. These investments may be affected by factors peculiar to the laws of the jurisdiction in which the borrower or the property is located. These laws may expose us to risks that are different from and in addition to those commonly found in the United States. Foreign investments could be subject to the following risks:

• governmental laws, rules and policies including laws relating to the foreign ownership of real property or mortgages and laws relating to the ability of foreign persons or corporations to remove profits earned from activities within the country to the person’s or corporation’s country of origin;

• variations in currency exchange rates;

• adverse market conditions caused by inflation or other changes in national or local economic conditions;

• changes in relative interest rates;

• changes in the availability, cost and terms of mortgage funds resulting from varying national economic policies;

• changes in real estate and other tax rates, the tax treatment of transaction structures and other changes in operating expenses in a particular country where we have an investment;

• our REIT tax status not being respected under foreign laws, in which case any income or gains from foreign sources would likely be subject to foreign taxes, withholding taxes, transfer taxes, and value added taxes;

• lack of uniform accounting standards (including availability of information in accordance with U.S. generally accepted accounting principles);

• changes in land use and zoning laws;

• more stringent environmental laws or changes in such laws;

• changes in the social stability or other political, economic or diplomatic developments in or affecting a country where we have an investment;

• we, our sponsor and its affiliates have relatively less experience with respect to investing in real property or other investments in Europe as compared to domestic investments; and

• legal and logistical barriers to enforcing our contractual rights.

Any of these risks could have an adverse effect on our business, results of operations and ability to pay distributions to our stockholders.

We have no target investment allocation and we may change our targeted investments without stockholder consent.

Except with respect to unimproved or non-income producing property, we are not limited in the percentage of net proceeds of this offering that we may allocate to a specific real estate asset type. Thus, we may make all of our investments in investments which present an increased risk of loss. In addition, 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, our targeted investments described in this prospectus. In

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particular, we may not make investments in Europe if our advisor determines that the returns associated with such investments do not justify the costs associated with such investments. 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 you.

Risks Related to Conflicts of Interest

KBS Capital Advisors and its affiliates, including all of our executive officers and our affiliated directors and other key real estate and debt finance 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.

All of our executive officers and our affiliated directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager and other affiliated KBS entities. KBS Capital Advisors and its affiliates receive substantial fees from us. These fees could influence our advisor’s advice to us as well as the judgment of affiliates of KBS Capital Advisors. 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;

• 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 origination fees and asset management fees;

• sales of investments, which entitle KBS Capital Advisors to disposition fees and possible subordinated incentive fees;

• acquisitions of investments and originations of loans, which entitle KBS Capital Advisors to acquisition and origination fees based on the cost of the investment 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 investments and to originate loans, which borrowings increase the acquisition and origination 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 fee; and

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

The fees our advisor receives in connection with transactions involving the acquisition or origination of an asset 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 and increase your risk of loss.

KBS Capital Advisors faces conflicts of interest relating to the origination and acquisition of investments and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could limit our ability to make distributions and reduce your overall investment return.

We rely on our sponsors and other key real estate and debt finance professionals at our advisor, including Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., to identify suitable investment opportunities for us. KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT are also advised by KBS Capital Advisors and rely on our sponsors and many of the same real estate and debt finance professionals as will future KBS-sponsored programs advised by our advisor. Messrs. Bren and Schreiber and several of the other key real estate and debt finance professionals at KBS Capital Advisors are also the key real estate and debt finance professionals at KBS Realty Advisors and its affiliates, the advisors to the private KBS-sponsored programs and the investment advisors to KBS-advised investors in real estate and real estate-related assets. As such, the other KBS-sponsored programs that are currently raising funds for investment rely on many of the same real estate and debt finance professionals. Many investment opportunities that are suitable for us may also be suitable for other KBS-sponsored programs and KBS-advised investors. When these real estate and debt finance professionals direct an investment opportunity to any KBS-sponsored program or KBS-advised 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. For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the corporation for us to purchase any

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significant asset unless the advisor has recommended the investment to us. Thus, the real estate and debt finance professionals of KBS Capital Advisors could direct attractive investment opportunities to other entities or investors. Such events could result in us investing in assets that provide less attractive returns, reducing the level of distributions we may be able to pay to you.

Further, existing and future KBS-sponsored programs and KBS-advised investors and Messrs. Bren, Hall, McMillan and Schreiber generally are not and will not be prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, origination or sale of real estate-related investments. For a detailed description of the conflicts of interest that our advisor faces, see “Conflicts of Interest.”

KBS Capital Advisors will face conflicts of interest relating to joint ventures that we may form with affiliates of KBS Capital Advisors, which conflicts could result in a disproportionate benefit to the other venture partners at our expense.

If approved by a majority of our independent directors, we may enter into joint venture agreements with other KBS-sponsored programs or affiliated entities for the acquisition, development or improvement of properties or other investments. KBS Capital Advisors, our advisor, and KBS Realty Advisors and its affiliates, the advisors to the other KBS-sponsored programs and the investment advisers to institutional investors in real estate and real estate-related assets, have some of the same executive officers, directors and other key real estate and debt finance professionals; and these persons will face conflicts of interest in determining which KBS program or investor should enter into any particular joint venture agreement. These persons may also face a conflict in structuring the terms of the relationship between our interests and the interests of the KBS-affiliated co-venturer and in managing the joint venture. Any joint venture agreement or transaction between us and a KBS-affiliated co-venturer will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers. The KBS-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.

KBS Capital Advisors, the real estate and debt finance professionals assembled by our advisor, their affiliates and our officers face competing demands on their time and this may cause our operations and your investment to suffer.

We rely on KBS Capital Advisors and the real estate and debt finance professionals our advisor has assembled, including Messrs. Bren, Hall, McMillan, Schreiber and Waldvogel and Ms. Yamane, for the day-to-day operation of our business. Messrs. Bren, Hall, McMillan, Schreiber and Waldvogel and Ms. Yamane are also executive officers of KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT; Messrs. Hall, McMillan and Waldvogel and Ms. Yamane are executive officers of KBS Strategic Opportunity REIT; and Messrs. Bren, McMillan and Waldvogel and Ms. Yamane are executive officers of KBS Legacy Partners Apartment REIT. In addition, Messrs. Bren and Schreiber are executive officers of KBS Realty Advisors and its affiliates, the advisors of the private KBS-sponsored programs and the investment advisors to KBS-advised investors in real estate and real estate-related assets. As a result of their interests in other KBS-sponsored programs, their obligations to other KBS-advised 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, Hall, McMillan, Schreiber and Waldvogel and Ms. Yamane face conflicts of interest in allocating their time among us, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Growth & Income REIT, KBS Capital Advisors and other KBS-sponsored programs and other KBS-affiliated investors, as well as other business activities in which they are involved. In addition, KBS Capital Advisors and KBS Realty Advisors and its affiliates share many of the same key real estate and debt finance professionals. 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. Furthermore, some or all of these individuals 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. If these events occur, the returns on our investments, and the value of your investment, may decline.

All of our executive officers and our affiliated directors and the key real estate and debt finance professionals assembled by our advisor face conflicts of interest related to their positions and/or interests in KBS Capital Advisors and its affiliates, including our dealer manager, which could hinder our ability to implement our business strategy and to generate returns to you.

All of our executive officers and our affiliated directors and other key real estate and debt finance 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, our dealer manager and other affiliated KBS entities. Through KBS-affiliated entities, some of these persons also serve as the investment advisors to KBS-advised investors in real estate and real

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estate-related assets and through KBS Capital Advisors and its affiliates these persons serve as the advisor to KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Growth & Income REIT and other KBS-sponsored programs. 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 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. Further, Messrs. Bren, Hall, McMillan and Schreiber and existing and future KBS-sponsored programs and KBS-advised investors are not prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, development, ownership, leasing or sale of real estate investments. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to you and to maintain or increase the value of our assets.

Because other real estate programs offered through our dealer manager are conducting offerings concurrently with our offering, our dealer manager may 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 dealer manager, KBS Capital Markets Group, also acts as the dealer manager for the private offering of KBS Growth & Income REIT and is expected to be engaged to act as the dealer manager for its proposed public offering. KBS Growth & Income REIT will be raising capital in its private offering and is expected to be raising capital in its initial public offering concurrently with our offering. In addition, future KBS-sponsored programs may seek to raise capital through public offerings conducted concurrently with our offering. As a result, 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 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 may 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 board of directors’ loyalties to KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth and Income REIT and possibly to future KBS-sponsored programs could influence its judgment, resulting in actions that may not be in our stockholders’ best interest or that result in a disproportionate benefit to another KBS-sponsored program at our expense.

Four of our directors, including two of our independent directors, Messrs. Meyer and Petak, are also directors of KBS Strategic Opportunity REIT. Mr. Meyer is also a director of KBS Legacy Partners Apartment REIT. One of our affiliated directors is also a director of KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT. The loyalties of our directors serving on the boards of directors of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth and Income REIT, or possibly on the board of directors of future KBS-sponsored programs, may influence the judgment of our board when considering issues for us that also may affect other KBS-sponsored programs, such as the following:

• The conflicts committee of our board must evaluate the performance of KBS Capital Advisors with respect to whether KBS Capital Advisors is presenting to us our fair share of investment opportunities. If our advisor is not presenting a sufficient number of investment opportunities to us because it is presenting many opportunities to other KBS-sponsored programs or if our advisor is giving preferential treatment to other KBS-sponsored programs in this regard, our conflicts committee may not be well suited to enforce our rights under the terms of the advisory agreement or to seek a new advisor.

• We could enter into transactions with other KBS-sponsored programs, such as property sales, acquisitions or financing arrangements. Such transactions might entitle KBS Capital Advisors or its affiliates to fees and other compensation from both parties to the transaction. For example, acquisitions from other KBS-sponsored programs might entitle KBS Capital Advisors or its affiliates to disposition fees and possible subordinated incentive fees in connection with its services for the seller in addition to acquisition or origination fees and other fees that we might pay to KBS Capital Advisors in connection with such transaction. Similarly, property sales to other KBS-sponsored programs might entitle KBS Capital Advisors or its affiliates to acquisition or origination fees in connection with its services to the purchaser in addition to disposition and other fees that we might pay to KBS Capital Advisors in connection with such transaction. Decisions of our board and the conflicts committee regarding the terms of those transactions

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may be influenced by our board’s and the conflicts committee’s loyalties to such other KBS-sponsored programs.

• A decision of our board or the conflicts committee regarding the timing of a debt or equity offering could be influenced by concerns that the offering would compete with an offering of other KBS-sponsored programs.

• A decision of our board or the conflicts committee regarding the timing of property sales could be influenced by concerns that the sales would compete with those of other KBS-sponsored programs.

• A decision of our board or the conflicts committee regarding whether and when we seek to list our shares of common stock on a national securities exchange could be influenced by concerns that such listing could adversely affect the sales efforts for other KBS-sponsored programs, depending on the price at which our shares trade.

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.

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we or our subsidiaries become an unregistered investment company, we could not continue our business.

Neither we nor any of our subsidiaries intend to register as investment companies under the Investment Company Act. If we or our subsidiaries were obligated to register as investment companies, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

• limitations on capital structure;

• restrictions on specified investments;

• prohibitions on transactions with affiliates; and

• compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

Under the relevant provisions of Section 3(a)(1) of the Investment Company Act, an investment company is any issuer that:

• pursuant to Section 3(a)(1)(A) is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or

• pursuant to Section 3(a)(1)(C) is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and

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are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies).

We believe that neither we nor our Operating Partnership will be required to register as an investment company based on the following analyses. With respect to the 40% test, most of the entities through which we and our Operating Partnership own our assets will be majority-owned subsidiaries that will not themselves be investment companies and will not be relying on the exceptions from the definition of investment company under Section 3(c)(1) or Section 3(c)(7).

With respect to the primarily engaged test, we and our Operating Partnership will be holding companies and do not intend to invest or trade in securities ourselves. Rather, through the majority-owned subsidiaries of our Operating Partnership, we and our Operating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real estate and real estate-related assets.

If any of the subsidiaries of our Operating Partnership fail to meet the 40% test, we believe they will usually, if not always, be able to rely on Section 3(c)(5)(C) of the Investment Company Act for an exception from the definition of an investment company. (Otherwise, they should be able to rely on the exceptions for private investment companies pursuant to Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act.) As reflected in no-action letters, the SEC staff’s position on Section 3(c)(5)(C) generally requires that an issuer maintain at least 55% of its assets in “mortgages and other liens on and interests in real estate,” or qualifying assets; at least 80% of its assets in qualifying assets plus real estate-related assets; and no more than 20% of the value of its assets in other than qualifying assets and real estate-related assets, which we refer to as miscellaneous assets. To constitute a qualifying asset under this 55% requirement, a real estate interest must meet various criteria based on no-action letters. We expect that any of the subsidiaries of our Operating Partnership relying on Section 3(c)(5)(C) will invest at least 55% of its assets in qualifying assets, and approximately an additional 25% of its assets in other types of real estate-related assets. If any subsidiary relies on Section 3(a)(5)(C), we expect to rely on guidance published by the SEC staff or on our analyses of guidance published with respect to types of assets to determine which assets are qualifying real estate assets and real estate-related assets. For more information related to compliance with the Investment Company Act, see “Investment Objectives and Criteria-Investment Limitations Under the Investment Company Act of 1940.”

Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exception from the definition of an investment company under the Investment Company Act.

If the market value or income potential of our qualifying real estate assets changes as compared to the market value or income potential of our non-qualifying assets, or if the market value or income potential of our assets that are considered “real estate-related assets” under the Investment Company Act or REIT qualification tests changes as compared to the market value or income potential of our assets that are not considered “real estate-related assets” under the Investment Company Act or REIT qualification tests, whether as a result of increased interest rates, prepayment rates or other factors, we may need to modify our investment portfolio in order to maintain our REIT qualification or exception from the definition of an investment company. If the decline in asset values or income occurs quickly, this may be especially difficult, if not impossible, to accomplish. This difficulty may be exacerbated by the illiquid nature of many of the assets that we may own. We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.

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 you face as a stockholder.

Because our charter does not require our listing or liquidation by a specified date, or at all, you should only purchase our shares as a long-term investment and be prepared to hold them for an indefinite period of time.

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 within ten years from commencement of this offering, our charter requires that we either seek stockholder approval of the liquidation of the company; or postpone the decision of whether to liquidate the company, if a majority of the conflicts committee determines that liquidation is not then in the best interests of the 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

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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 would not require the conflicts committee to revisit the issue of liquidation, and we could continue to operate as before. Because our charter does not require our listing or liquidation by a specified date, or at all, you should only purchase our shares as a long-term investment and be prepared to hold them for an indefinite period of time.

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 full 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 program, except for redemptions sought upon a Special Redemption. We limit the number of shares redeemed pursuant to the share redemption program as follows: (i) 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 (ii) during each calendar year, redemptions will be 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. In particular, the limitation on redemptions to the amount of net proceeds from the sale of shares under our dividend reinvestment plan during the prior calendar year may significantly limit your ability to have your shares redeemed pursuant to our share redemption program because initial distributions have been in the form of stock dividends and we expect our initial cash distributions to be declared when our board of directors determines we have sufficient cash flow or appreciation in asset values. Particularly during our offering stage, we do not expect to have sufficient cash flow to pay significant cash distributions, which would in turn severely limit redemptions during the next calendar year. Our board is free to amend, suspend or terminate the share redemption program upon 30 days’ notice, provided that we may increase or decrease the funding available for the redemption of shares pursuant to our share redemption program upon ten business days’ notice to our stockholders. Unless the shares are being redeemed in connection with a Special Redemption, and until such time as we establish an estimated NAV per share, the prices at which we will redeem shares are as follows:

• For those shares held by the redeeming stockholder for at least one year, 92.5% of the price paid to acquire the shares from us;

• For those shares held by the redeeming stockholder for at least two years, 95.0% of the price paid to acquire the shares from us;

• For those shares held by the redeeming stockholder for at least three years, 97.5% of the price paid to acquire the shares from us; and

• For those shares held by the redeeming stockholder for at least four years, 100% of the price paid to acquire the shares from us.

Notwithstanding the foregoing, stock dividends will be redeemed at the “net investment amount” per share, which will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. For each class of shares, this amount will initially equal $9.01 per share for redemptions of shares received as a result of a stock dividend.

Once we establish an estimated NAV per share of our common stock, and unless the shares are being redeemed in connection with a Special Redemption, the price at which we will redeem the shares is as follows:

• For those shares held by the redeeming stockholder for at least one year, 92.5% of our most recent estimated NAV per share as of the applicable redemption date;

• For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent estimated NAV per share as of the applicable redemption date;

• For those shares held by the redeeming stockholder for at least three years, 97.5% of our most recent estimated NAV per share as of the applicable redemption date; and

• For those shares held by the redeeming stockholder for at least four years, 100% of our most recent estimated NAV per share as of the applicable redemption date.

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For purposes of determining the time period a redeeming stockholder has held each share, the time period begins as of the date the stockholder acquired the shares; provided, that shares purchased by the redeeming stockholder pursuant to our dividend reinvestment plan or shares received as a stock dividend will be deemed to have been acquired on the same date as the initial share to which the dividend reinvestment plan shares or stock dividend shares relate. The date of the share’s original issuance by us is not determinative. In addition, as described above, the shares owned by a stockholder may be redeemed at different prices depending on how long the stockholder has held each share submitted for redemption.

In March 2009, in order to preserve capital and value for all stockholders during the economic crisis, KBS REIT I amended its share redemption program to limit redemptions (other than redemptions sought upon a Special Redemption) during any calendar year to the amount of the net proceeds from the sale of shares under its dividend reinvestment plan from the prior calendar year less amounts KBS REIT I deemed necessary from such proceeds to fund current and future funding obligations and needs of the company. Pursuant to this limitation, KBS REIT I suspended ordinary redemptions for the remainder of 2009 and from 2010 through March 2012. KBS REIT I provided notice of this amendment in its Annual Report on Form 10-K filed on March 27, 2009, and the amendment was effective upon 30 days’ notice. The amendment became effective before the April 30, 2009 redemption date. As a result, investors did not have a final opportunity to submit redemptions. In March 2012, KBS REIT I amended and restated its share redemption program to provide only for redemptions sought upon a Special Redemption (each as defined in the share redemption program). These redemptions will be limited to an annual amount determined by KBS REIT I’s board of directors which may be reviewed and adjusted from time to time during the year.

On January 24, 2014, in consideration of the cash requirements necessary to effectively manage KBS Legacy Partners Apartment REIT’s assets, KBS Legacy Partners Apartment REIT amended and restated its share redemption program to limit redemptions to $2.0 million of shares in the aggregate during any calendar year. Additionally, during any calendar year, once KBS Legacy Partners Apartment REIT has redeemed $1.5 million of shares under its share redemption program, including redemptions in connection with a Special Redemption, the remaining $0.5 million of the $2.0 million annual limit shall be reserved exclusively for shares being redeemed in connection with a Special Redemption. KBS Legacy Partners Apartment REIT provided notice of this amendment and restatement of its share redemption program in its Current Report on Form 8-K filed on January 28, 2014 and the amended and restated share redemption program became effective for redemptions under the program on or after February 27, 2014. Because of these limitations in the dollar value of shares that may be redeemed under its share redemption program, KBS Legacy Partners Apartment REIT exhausted funds available for all redemptions, other than special redemptions, for 2014 in August 2014. The $2.0 million annual limitation was reset beginning January 1, 2015 and the outstanding unfulfilled redemption requests as of December 31, 2014 were fulfilled in January 2015. Because of limitations on the dollar value of shares that may be redeemed under its share redemption program as described above, KBS Legacy Partners Apartment REIT exhausted funds available for all redemptions other than Special Redemptions for the remainder of 2015 in March 2015.

On May 15, 2014, KBS REIT II amended and restated its share redemption program to provide only for redemptions in connection with a Special Redemption. These redemptions are limited to an annual amount determined by KBS REIT II’s board of directors which may be reviewed and adjusted from time to time during the year. KBS REIT II provided notice of this amendment and restatement of its share redemption program in its Current Report on Form 8-K filed on May 19, 2014 and its amended and restated share redemption program became effective for redemptions under the program on June 18, 2014.

We expect to establish an estimated NAV per share no later than June 6, 2017, which date is150 days after the second anniversary of the date on which we broke escrow in this offering. The restrictions of our share redemption program will severely limit your ability to sell your shares should you require liquidity and will limit your ability to recover the value you invest in us.

The offering price of shares of our common stock to be sold in the primary offering was not established on an independent basis and bears no relationship to the net value of our assets. The offering price is likely to be higher than the amount our stockholders would receive per share if we were to liquidate at this time primarily because of the upfront fees paid in connection with the sale of our shares, the purchase prices at which shares of our Class A common stock were sold in our private offering prior to commencement of this offering were significantly below the purchase prices for shares in this offering and the significant organization and other offering expenses paid in connection with our private offering. We will use our “amount available for investment/net investment amount,” which value is the offering price of our shares reduced by certain upfront expenses, as the estimated value of our shares until we provide an estimated NAV based on

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the value of our assets. Even when we begin to use a NAV per share method 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 set the $10.00 primary offering price of our Class A shares arbitrarily, and based on that price, set the primary offering price of our Class T share to account for differing selling commissions. The primary offering 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 is likely to be higher than the proceeds that our stockholders would receive upon liquidation or a resale of their shares if they were to be listed on an exchange or actively traded by broker-dealers, primarily because of the upfront fees paid in connection with the sale of our shares, the purchase prices at which shares of our Class A common stock were sold in our private offering prior to commencement of this offering were significantly below the purchase prices for shares in this offering and the significant organization and other offering expenses paid in connection with our private offering.

To assist FINRA members and their associated persons that participate in this offering of common stock in meeting their customer account statement reporting obligations pursuant to applicable FINRA and NASD Conduct Rules, we will disclose in each annual report distributed to stockholders a per share estimated value of our shares, the method by which it was developed, and the date of the estimated valuation.

Initially we will report the net investment amount of our shares as our estimated value per share, which net investment amount will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. This amount is 90.15% of the $10.00 primary offering price of our Class A shares of common stock and 94.0% of the $9.59 primary offering price of our Class T shares of common stock. For each class of shares, this amount will equal $9.01, which is the purchase price of our primary offering shares, less the associated selling commission, dealer manager fee, and estimated organization and other offering expenses as shown in our estimated use of proceeds table. This amount does not take into account the stockholder servicing fee that we pay with respect to Class T shares sold in the primary offering. This estimated per share value will be accompanied by any disclosures required under the FINRA and NASD Conduct Rules. No later than 150 days after the second anniversary of the date on which we commence this offering, we will provide an estimated NAV per share that we will use as our estimated value per share. This value will be based on valuations of our assets and liabilities performed at least annually, by, or with the material assistance or confirmation of, a third-party valuation expert or service and will comply with the IPA Valuation Guidelines. Once we announce an estimated NAV per share we generally expect to update the estimated NAV per share in December of each year.

Until we report an estimated NAV per share, this initial reported value will likely differ from the price at which a stockholder could resell his or her shares primarily because (i) there is no public trading market for the shares at this time; (ii) when derived from the primary offering price, the estimated value will not reflect, and will not be derived from, the fair market value of our assets nor will it represent the amount of net proceeds that would result from an immediate liquidation of our assets, (iii) the purchase prices at which shares of our Class A common stock were sold prior to commencement of this offering were significantly below the purchase prices for shares in this offering and we paid significant organization and offering expenses in connection with our private offering; (iv) the estimated value does not take into account how market fluctuations affect the value of our investments; and (v) the estimated value does not take into account how developments related to individual assets may have increased or decreased the value of our portfolio.

Even when determining the estimated value of our shares by estimating an NAV per share, we 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.

The actual value of shares that we repurchase under our share redemption program may be substantially less than what we pay.

Under our share redemption program, shares may be repurchased at varying prices depending on (a) the number of years the shares have been held, (b) the purchase price paid for the shares (c) whether the redemptions are sought upon a Special Redemption and (d) whether we have announced an estimated value per share of our common stock. The current maximum price that may be paid under the program is $10.00 per share of Class A common stock and $9.59 per share of Class T common stock, which are the current offering prices for our Class A and Class T shares of common stock in the primary offering (ignoring purchase price discounts for certain categories of purchasers). Although these values represent the most recent prices at which most investors are willing to purchase shares in this primary offering, these values are likely to differ from the price at which a stockholder could resell his or her shares for the reasons discussed in the risk factor above. Thus, when we repurchase shares of our Class A common stock at $10.00 per share

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and Class T common stock at $9.59 per share, the actual value of the respective shares that we repurchase is likely to be less and the repurchase is likely to be dilutive to our remaining stockholders. Moreover, until we announce an estimated NAV per share of our common stock, shares received as a stock dividend will be redeemed at the per share value we report on an account statement or $9.01, even though we received no consideration for the shares. Even at lower repurchase prices, the actual value of the shares may be substantially less than what we pay and the repurchase may be dilutive to our remaining stockholders.

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 the prospectus cannot be considered to be an independent review. Therefore, you 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.

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

Potential investors in this offering 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, with 500,000,000 shares being designated as Class A common stock and 500,000,000 shares being designated as Class T 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 (i) sell additional shares in this or future offerings, including through the dividend reinvestment plan, (ii)  issue shares to our advisor, or its successors or assigns, in payment of an outstanding fee obligation or (iii) 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, 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 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 reduces cash available for investment and distribution and increases the risk that you will not be able to recover the amount of your investment in our shares.

KBS Capital Advisors and its affiliates perform services for us in connection with the selection, acquisition, origination, management, and administration of our investments. We pay them substantial fees for these services, which will result in immediate dilution to the value of your investment and reduce the amount of cash available for investment or distribution to stockholders. Compensation to be paid to our advisor may be increased without stockholder approval, which would further dilute your investment and reduce the amount of cash available for investment or distribution to stockholders. We estimate that we will use $9.01 per Class A and Class T share to acquire real estate and real estate-related investments, to maintain a working capital reserve, to pay acquisition and origination expenses and, upon the acquisition or origination of real estate investments, to pay a fee to our advisor for its services in connection with the selection and acquisition or origination of such real estate investments. We will use the remainder of the gross proceeds from the primary offering to pay selling commissions, the dealer manager fee and up to 1.0% of the organization and other offering expenses as described in footnote 4 to our estimated use of proceeds table.

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.”

Failure to procure adequate capital and funding would negatively impact our results and may, in turn, negatively affect our ability to make distributions to our stockholders.

We will depend upon the availability of adequate funding and capital for our operations. The failure to secure acceptable financing could reduce our taxable income, as our investments would no longer generate the same level of net interest income due to the lack of funding or increase in funding costs. A reduction in our net income could reduce our liquidity and our ability to make distributions to our stockholders. We cannot assure you that any, or sufficient, funding or capital will be available to us in the future on terms that are acceptable to us. Therefore, in the event that we cannot obtain sufficient funding on acceptable terms, there may be a negative impact on our ability to make distributions.

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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 four sponsors, through their ownership interest in KBS Capital Advisors, have only invested $200,000 in us through the purchase of 21,739 shares of our Class A common stock at $9.20 per share. In addition, Messrs. Hall and McMillan, through their ownership interest in Willowbrook Capital Group LLC have invested $2,000,000 in us through the purchase of 240,211 shares of our Class A common stock at $8.33 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 of directors 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.”

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 10 business days before initiating the tender offer. If the offering stockholder does not comply with these requirements, all tendering stockholders will have the ability to rescind the tender of their shares. 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.

Risks Related to Our Investments

Our investments will be subject to the risks typically associated with real estate.

We intend to invest in a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments, including direct investments in opportunistic real estate. Each of these investments will be subject to the risks typically associated with real estate. Our loans held for investment will generally be directly or indirectly secured by a lien on real property (or the equity interests in an entity that owns real property) that, upon the occurrence of a default on the loan, could result in our acquiring ownership of the property. We will not know whether the values of the properties ultimately securing our loans will remain at the levels existing on the dates of origination or acquisition of those loans. If the values of the underlying properties drop, our risk will increase because of the lower value of the security associated with such loans. In this manner, real estate values could impact the values of our loan investments. Our investments in residential and commercial mortgage-backed securities, collateralized debt obligations and other real estate-related investments may be similarly affected by real estate property values. The value of real estate may be adversely affected by a number of risks, including:

• natural disasters such as hurricanes, earthquakes and floods;

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• acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001;

• adverse changes in national and local economic and real estate conditions;

• an oversupply of (or a reduction in demand for) space in the areas where particular properties are located and the attractiveness of particular properties to prospective tenants;

• changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance therewith and the potential for liability under applicable laws;

• costs of remediation and liabilities associated with environmental conditions affecting properties; and

• the potential for uninsured or underinsured property losses.

The value of each property is affected significantly by its ability to generate cash flow and net income, which in turn depends on the amount of rental or other income that can be generated net of expenses required to be incurred with respect to the property. Many expenditures associated with properties (such as operating expenses and capital expenditures) cannot be reduced when there is a reduction in income from the properties. These factors may have a material adverse effect on the ability of our borrowers to pay their loans and our tenants to pay their rent, as well as on the value that we can realize from other real estate-related assets we originate, own or acquire.

Any investments in real estate-related loans and real estate-related debt securities in distressed debt will involve more risk than in performing debt.

Distressed debt may include sub- and non-performing real estate loans acquired from financial institutions and performing loans acquired from distressed sellers.

Traditional performance metrics of real estate-related loans are generally not meaningful for non-performing real estate-related loans. Similarly, non-performing loans do not have a consistent stream of loan servicing or interest payments to provide a useful measure of revenue. In addition, for non-performing loans, often there is no expectation that the face amount of the note will be paid in full. Appraisals may provide a sense of the value of the investment, but any appraisal of the property or underlying property will be based on numerous estimates, judgments and assumptions that significantly affect the appraised value of the underlying property. Properties securing non-performing loan investments are typically non-stabilized or otherwise not performing optimally. An appraisal of such a property involves a high degree of subjectivity due to high vacancy levels and uncertainties with respect to future market rental rates and timing of lease-up and stabilization. Accordingly, different assumptions may materially change the appraised value of the property. In addition, the value of the property will change over time.

In addition, we may pursue more than one strategy to create value in a non-performing loan. These strategies may include negotiating with the borrower for a reduced payoff, restructuring the terms of the loan or enforcing our rights as lender under the loan and foreclosing on the collateral securing the loan.

The factors described above make it challenging to evaluate non-performing loans and make investments in such loans riskier than investments in performing debt.

Our opportunistic property-acquisition strategy involves a higher risk of loss than would a strategy of investing in other properties.

We expect that our portfolio will consist of direct investments in opportunistic real estate, excluding real property that we take title to (i) as part of a portfolio of debt investments, (ii) through a loan workout, foreclosure or similar circumstances or (iii) through convertible debt investments. We consider opportunistic or enhanced-return properties to be properties with significant possibilities for short-term capital appreciation, such as non-stabilized properties, properties with moderate vacancies or near-term lease rollovers, poorly managed and positioned properties, properties owned by distressed sellers and built-to-suit properties. These properties may include, but are not limited to, office, industrial and retail properties, hospitality properties and undeveloped residential lots.

Traditional performance metrics of real estate assets may not be meaningful for opportunistic real estate. Non-stabilized properties, for example, do not have stabilized occupancy rates to provide a useful measure of revenue. Appraisals may provide a sense of the value of the investment, but any appraisal of the property will be based on numerous estimates, judgments and assumptions that significantly affect the appraised value of the underlying property. Further, an appraisal of a non-stabilized property, in particular, involves a high degree of subjectivity due to high vacancy levels and uncertainties with respect to future market rental rates and timing of lease-up and stabilization. Accordingly, different assumptions may materially change the appraised value of the property. In addition, the value of the property will change over time.

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In addition, we may pursue more than one strategy to create value in an opportunistic real estate investment. These strategies may include development, redevelopment, or lease-up of such property. Our ability to generate a return on these investments will depend on numerous factors, some or all of which may be out of our control, such as (i) our ability to correctly price an asset that is not generating an optimal level of revenue or otherwise performing under its potential, (ii) our ability to choose and execute on a successful value-creating strategy, (iii) our ability to avoid delays, regulatory hurdles, and other potential impediments, (iv) local market conditions, and (v) competition for similar properties in the same market. The factors described above make it challenging to evaluate opportunistic real estate investments and make investments in such properties riskier than investments in other properties.

We are dependent on the third-party manager of the hotels we acquire.

We currently own two hotel properties. In order to qualify as a REIT, we are not able to operate any hotel properties or participate in the decisions affecting the daily operations of our hotels. We will lease any hotels we acquire to a TRS in which we may own up to a 100% interest. Our TRS will enter into management agreements with eligible independent contractors that are not our subsidiaries or otherwise controlled by us to manage the hotels. Thus, independent hotel operators, under management agreements with our TRS, will control the daily operations of our hotels.

We depend on these independent management companies to adequately operate our hotels as provided in the management agreements. We will not have the authority to require any hotel to be operated in a particular manner or to govern any particular aspect of the daily operations of any hotel (for instance, setting room rates). Thus, even if we believe our hotels are being operated inefficiently or in a manner that does not result in satisfactory occupancy rates, revenue per available room and average daily rates, we may not be able to force the management company to change its method of operation of our hotels. We can only seek redress if a management company violates the terms of the applicable management agreement with the TRS, and then only to the extent of the remedies provided for under the terms of the management agreement. In the event that we need to replace our management company, we may be required by the terms of the management agreement to pay substantial termination fees and may experience significant disruptions at the affected hotel.

We may have to make significant capital expenditures to maintain any hotels we may acquire.

Hotels have an ongoing need for renovations and other capital improvements, including replacements of furniture, fixtures and equipment. Generally, we will be responsible for the costs of these capital improvements, which gives rise to the following risks:

• cost overruns and delays;

• renovations can be disruptive to operations and can displace revenue at the hotels, including revenue lost while rooms under renovation are out of service;

• the cost of funding renovations and the possibility that financing for these renovations may not be available on attractive terms; and

• the risk that the return on our investment in these capital improvements will not be what we expect.

If we have insufficient cash flow from operations to fund needed capital expenditures, then we will need to obtain financing or use proceeds from this offering to fund future capital improvements.

General economic conditions and discretionary consumer spending may affect the hotels we acquire and lower the return on your investment.

The operations of our hotels will depend upon a number of factors relating to discretionary consumer spending. Unfavorable local, regional or national economic developments or uncertainties regarding future economic prospects as a result of terrorist attacks, military activity or natural disasters could reduce consumer spending in the markets in which we own hotels and adversely affect the operation of any hotels we may acquire. Consumer spending on luxury goods, travel and other leisure may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in expenditures on luxury goods, travel and other leisure activities. Certain of the classes of properties that we may acquire may be unable to maintain their profitability during periods of adverse economic conditions or low consumer confidence, which could in turn affect the ability of operators to make scheduled rent payments to us.

Seasonal revenue variations in any hotels we may acquire will require the operators of such assets to manage cash flow properly over time to meet their non-seasonal scheduled rent payments to us.

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Certain of the hotels we may acquire may be seasonal in nature. For example, the typical beach season begins in early May and runs through August, during which time beach resorts generate the vast majority of their annual revenues. Revenues and profits at beach resorts and their related properties are substantially lower and historically result in losses during the winter months due to the weather. As a result of the seasonal nature of certain industries that may be conducted on properties we acquire, these businesses will experience seasonal variations in revenues that may require our operators to supplement revenue at their properties in order to be able to make scheduled rent payments to us. The failure of an operator or a tenant to manage its cash flow properly may result in such operator or tenant having insufficient cash on hand to make its scheduled payments to us during seasonally slow periods, which may adversely affect our cash available for distribution to stockholders.

Adverse weather conditions may affect operations of the hotels we may acquire or reduce our operators’ ability to make scheduled rent payments to us, which could reduce our cash flow from such investments.

Adverse weather conditions may influence revenues at the hotels we may acquire. These adverse weather conditions include heavy snowfall (or lack thereof), hurricanes, tropical storms, high winds, heat waves, frosts, drought (or merely reduced rainfall levels), excessive rain and floods. For example, adverse weather could reduce the number of people that visit hotels we acquire. Certain properties may be susceptible to damage from weather conditions such as hurricanes, which damage (including but not limited to property damage and loss of revenue) is not generally insurable at commercially reasonable rates. Poor weather conditions could also disrupt operations at hotels we acquire and may adversely affect both the value of our investment in a hotel and the ability of our tenants and operators to make their scheduled rent payments to us.

We may not have control over properties under construction.

We may acquire hotels under development, as well as hotels that require extensive renovation. If we acquire a hotel for development or renovation, we may be subject to the risk that we cannot control construction costs and the timing of completion of construction or a developer’s ability to build in conformity with plans, specifications and timetables.

We are subject to the risk of increased hotel operating expenses.

We are subject to the risk of increased hotel operating expenses, including, but not limited to, the following cost elements:

• wage and benefit costs;

• repair and maintenance expenses;

• employee liabilities;

• energy costs;

• property taxes;

• insurance costs;

• other operating expenses; and

• the risk that the return on our investment in these capital improvements will not be what we expect.

Any increases in one or more of these operating expenses could have a significant adverse impact on our results of operations, cash flows and financial position.

We are subject to the risk of potentially significant tax penalties in case our leases with our TRS do not qualify for tax purposes as arm’s length.

Any TRSs we form will incur taxes or accrue tax benefits consistent with a “C” corporation. If the leases between us and any of our TRSs were deemed by the IRS to not reflect arm’s length transactions for tax purposes, we may be subject to severe tax penalties as the lessor that will increase our lodging operating expenses and adversely impact our profitability and cash flows.

There may be operational limitations associated with management and franchise agreements affecting any hotels we may acquire and these limitations may prevent us from using these properties to their best advantage for our stockholders.

Our TRSs will lease and hold some of the hotels we may acquire and may enter into franchise or license agreements with nationally recognized hotel brands. These franchise agreements may contain specific standards for, and restrictions and limitations on, the operation and maintenance of any hotels we may acquire in order to maintain uniformity within the franchiser system. We expect that franchisors will periodically inspect our properties to ensure that

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we maintain their standards. We do not know whether those limitations may restrict our business plans tailored to each property and to each market.

The standards are subject to change over time, in some cases at the direction of the franchisor, and may restrict our TRS’s ability, as franchisee, to make improvements or modifications to a property without the consent of the franchisor. Conversely, as a condition to the maintenance of a franchise license, a franchisor could also require us to make capital expenditures, even if we do not believe the capital improvements are necessary, desirable, or likely to result in an acceptable return on our investment. Action or inaction on our part or by our TRS could result in a breach of those standards or other terms and conditions of the franchise agreements and could result in the loss or termination of a franchise license.

In connection with terminating or changing the franchise affiliation of a property, we may be required to incur significant expenses or capital expenditures. Moreover, the loss of a franchise license could have a material adverse effect upon the operations or the underlying value of the property covered by the franchise because of the loss of associated name recognition, marketing support and centralized reservation systems provided by the franchisor. A loss of a franchise license for one or more lodging properties could materially and adversely affect our results of operations, financial condition and cash flows, including our ability to service debt and make distributions to our stockholders.

The mortgage loans in which we invest and the mortgage loans underlying the mortgage securities in which we invest are subject to delinquency, foreclosure and loss, which could result in losses to us.

Commercial real estate loans are secured by multifamily or commercial properties and are subject to risks of delinquency and foreclosure. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired. Net operating income of an income-producing property can be affected by, among other things: tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable types of properties, changes in laws that increase operating expenses or limit rents that may be charged, any need to address environmental contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values, declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, changes in governmental rules, regulations and fiscal policies, including environmental legislation, natural disasters, terrorism, social unrest and civil disturbances. We intend to invest in commercial mortgage loans directly and through CMBS.

Residential mortgage loans are secured by single-family residential property and are subject to risks of delinquency, foreclosure and loss. The ability of a borrower to repay a loan secured by a residential property is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, natural disasters, terrorism, social unrest and civil disturbances, may impair borrowers’ abilities to repay their loans. Though we do not intend to invest directly in residential mortgage loans, we may invest in pools of residential mortgage loans or residential mortgage-backed securities (“RMBS”).

In the event of any default under a mortgage loan held directly by us, we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our cash flow from operations. Foreclosure of a mortgage loan can be an expensive and lengthy process that could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan. In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.

CMBS evidence interests in or are secured by a single commercial mortgage loan or a pool of commercial real estate loans and RMBS evidence interests in or are secured by pools of residential mortgage loans. Accordingly, the residential and commercial mortgage-backed securities we invest in are subject to all of the risks of the underlying mortgage loans.

The B-Notes in which we may invest may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us.

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We may invest in B-Notes. A B-Note is a mortgage loan typically (i) secured by a first mortgage on a single large commercial property or group of related properties and (ii) subordinated to an A-Note secured by the same first mortgage on the same collateral. As a result, if a borrower defaults, there may not be sufficient funds remaining for B-Note holders after payment to the A-Note holders. Since each transaction is privately negotiated, B-Notes can vary in their structural characteristics and risks. For example, the rights of holders of B-Notes to control the process following a borrower default may be limited in certain investments. We cannot predict the terms of each B-Note investment. Further, B-Notes typically are secured by a single property, and so reflect the increased risks associated with a single property compared to a pool of properties.

The mezzanine loans which we may originate or in which we may invest would involve greater risks of loss than senior loans secured by the same properties.

We may originate or invest in mezzanine loans that take the form of subordinated loans secured by a pledge of the ownership interests of the entity owning the real property or an entity that owns (directly or indirectly) the interest in the entity owning the real property. These types of investments may involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some or all of our investment. In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal.

Bridge loans may involve a greater risk of loss than conventional mortgage loans.

We may provide bridge loans secured by first-lien mortgages on properties to borrowers who are typically seeking short-term capital to be used in an acquisition, development or refinancing of real estate. The borrower may have identified an undervalued asset that has been undermanaged or is located in a recovering market. If the market in which the asset is located fails to recover according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management or the value of the asset, the borrower may not receive a sufficient return on the asset to satisfy the bridge loan, and we may not recover some or all of our investment.

In addition, owners usually borrow funds under a conventional mortgage loan to repay a bridge loan. We may, therefore, be dependent on a borrower’s ability to obtain permanent financing to repay our bridge loan, which could depend on market conditions and other factors. Bridge loans are also subject to risks of borrower defaults, bankruptcies, fraud, losses and special hazard losses that are not covered by standard hazard insurance. In the event of any default under bridge loans held by us, we bear the risk of loss of principal and nonpayment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount of the bridge loan. To the extent we suffer such losses with respect to our investments in bridge loans, the value of our company and of our common stock may be adversely affected.

Investment in non-conforming and non-investment grade loans may involve increased risk of loss.

Loans we may acquire or originate may not conform to conventional loan criteria applied by traditional lenders and may not be rated or may be rated as non-investment grade. Non-investment grade ratings for these loans typically result from the overall leverage of the loans, the lack of a strong operating history for the properties underlying the loans, the borrowers’ credit history, the properties’ underlying cash flow or other factors. As a result, non-conforming and non-investment grade loans we acquire or originate may have a higher risk of default and loss than conventional loans. Any loss we incur may reduce distributions to stockholders and adversely affect the value of our common stock.

Our investments in subordinated loans and subordinated residential and commercial mortgage-backed securities may be subject to losses.

We intend to acquire or originate subordinated loans and invest in subordinated residential and commercial mortgage-backed securities. In the event a borrower defaults on a subordinated loan and lacks sufficient assets to satisfy our loan, we may suffer a loss of principal or interest. In the event a borrower declares bankruptcy, we may not have full recourse to the assets of the borrower, or the assets of the borrower may not be sufficient to satisfy the loan. If a borrower defaults on our loan or on debt senior to our loan, or in the event of a borrower bankruptcy, our loan will be satisfied only after the senior debt is paid in full. Where debt senior to our loan exists, the presence of intercreditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through “standstill periods”), and control decisions made in bankruptcy proceedings relating to borrowers.

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In general, losses on a mortgage loan included in a securitization will be borne first by the equity holder of the property, then by a cash reserve fund or letter of credit, if any, and then by the “first loss” subordinated security holder. In the event of default and the exhaustion of any equity support, reserve fund, letter of credit and any classes of securities junior to those in which we invest, we may not be able to recover all of our investment in the securities we purchase. In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related residential and commercial mortgage-backed securities, the securities in which we invest may effectively become the “first loss” position behind the more senior securities, which may result in significant losses to us.

Construction loans involve a high risk of loss if we are unsuccessful in raising the unfunded portion of the loan or if a borrower otherwise fails to complete the construction of a project. Land loans and pre-development loans involve similarly high risks of loss if construction financing cannot be obtained.

We may invest in construction loans. If we are unsuccessful in raising the unfunded portion of a construction loan, there could be adverse consequences associated with the loan, including a loss of the value of the property securing the loan if the construction is not completed and the borrower is unable to raise funds to complete it from other sources; a borrower claim against us for failure to perform under the loan documents; increased costs to the borrower that the borrower is unable to pay; a bankruptcy filing by the borrower; and abandonment by the borrower of the collateral for the loan. Further, other non-cash flowing assets such as land loans and pre-development loans may fail to qualify for construction financing and may need to be liquidated based on the “as-is” value as opposed to a valuation based on the ability to construct certain real property improvements. The occurrence of such events may have a negative impact on our results of operations. Other loan types may also include unfunded future obligations that could present similar risks.

Risks of cost overruns and non-completion of the construction or renovation of the properties underlying loans we make or acquire may materially and adversely affect our investment.

The renovation, refurbishment or expansion by a borrower under a mortgaged or leveraged property involves risks of cost overruns and non-completion. Costs of construction or improvements to bring a property up to standards established for the market position intended for that property may exceed original estimates, possibly making a project uneconomical. Other risks may include environmental risks and the possibility of construction, rehabilitation and subsequent leasing of the property not being completed on schedule. If such construction or renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged impairment of net operating income and may not be able to make payments on our investment.

Investments that are not United States government insured involve risk of loss.

We may originate and acquire uninsured loans and assets as part of our investment strategy. Such loans and assets may include mortgage loans, mezzanine loans and bridge loans. While holding such interests, we are subject to risks of borrower defaults, bankruptcies, fraud, losses and special hazard losses that are not covered by standard hazard insurance. In the event of any default under loans, we bear the risk of loss of principal and nonpayment of interest and fees to the extent of any deficiency between the value of the collateral and the principal amount of the loan. To the extent we suffer such losses with respect to our investments in such loans, the value of our company and the price of our common stock may be adversely affected.

The residential and commercial mortgage-backed securities in which we may invest are subject to the risks of the mortgage securities market as a whole and risks of the securitization process.

The value of residential and commercial mortgage-backed securities may change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities market as a whole. Residential and commercial mortgage-backed securities are also subject to several risks created through the securitization process. Subordinate residential and commercial mortgage-backed securities are paid interest only to the extent that there are funds available to make payments. To the extent the collateral pool includes delinquent loans, there is a risk that the interest payment on subordinate residential and commercial mortgage-backed securities will not be fully paid. Subordinate residential and commercial mortgage-backed securities are also subject to greater credit risk than those residential and commercial mortgage-backed securities that are more highly rated.

We may invest in RMBS backed by non-prime or sub-prime residential mortgage loans that are subject to higher delinquency, foreclosure and loss rates than prime residential mortgage loans, which could result in losses to us.

Non-prime and sub-prime residential mortgage loans are made to borrowers who have poor or limited credit histories and as a result they do not qualify for traditional mortgage products. Because of the poor, or lack of, credit history, non-prime and sub-prime borrowers have materially higher rates of delinquency, foreclosure and loss compared

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to prime credit quality borrowers. There is limited history with respect to the performance of RMBS over multiple economic cycles. Investments in RMBS backed by sub-prime or non-prime residential mortgage loans have higher risk than investments in RMBS backed by prime residential mortgage loans. We may realize credit losses if we invest in RMBS backed by sub-prime and non-prime residential mortgage loans because such RMBS are subject to all of the risks of the underlying sub-prime and non-prime residential mortgage loans.

We may invest in non-agency RMBS and RMBS backed by non-conforming residential mortgage loans.

We may invest in non-agency RMBS. Agency-backed securities include RMBS that represent the entire ownership interest in pools of residential mortgage loans secured by residential real property and are guaranteed as to principal and interest by federally chartered entities such as Fannie Mae and Freddie Mac and, in the case of Ginnie Mae, by the U.S. government. Non-agency RMBS are not guaranteed by Fannie Mae, Freddie Mac, Ginnie Mae, or the U.S. government; rather, their ratings are assigned by nationally recognized rating agencies such as Moody’s and Standard & Poor’s. Non-agency RMBS have a higher risk of loss than agency RMBS. We may realize credit losses on our investment in non-agency RMBS.

We may also invest in RMBS backed by non-conforming residential mortgage loans. We expect that the residential mortgage loans will be non-conforming due to non-credit factors including, but not limited to, the fact that the (i) mortgage loan amounts exceed the maximum amount for such mortgage loan to qualify as a conforming mortgage loan, and (ii) underwriting documentation for the mortgage loan does not meet the criteria for qualification as a conforming mortgage loan. Non-conforming residential mortgage loans may have higher risk of delinquency and foreclosure and losses than conforming mortgage loans. We may realize credit losses on our investment in RMBS backed by non-conforming residential mortgage loans.

The types of structured debt securities and real estate-related loans in which we may invest have caused large financial losses for many investors and we can give no assurances that our investments in such securities will be successful.

We may invest in residential and commercial mortgage-backed securities, collateralized debt obligations and other structured debt securities as well as real estate-related loans. Many of these types of investments became illiquid and considerably less valuable following the subprime mortgage crisis that began in 2008. This reduced liquidity and decrease in value caused financial hardship for many investors in these assets. Many investors did not fully appreciate the risks of such investments. We can give you no assurances that our investments in these assets will be successful.

Changes in interest rates could negatively affect the value of our investments, which could result in reduced earnings or losses and negatively affect the cash available for distribution to our stockholders.

We may invest in fixed-rate residential and commercial mortgage-backed securities and other fixed-rate debt investments. Under a normal yield curve, an investment in these instruments will decline in value if long-term interest rates increase. We will also invest in floating-rate debt investments, for which decreases in interest rates will have a negative effect on value and interest income. Declines in market value may ultimately reduce earnings or result in losses to us, which may negatively affect cash available for distribution to our stockholders.

Prepayments can adversely affect the yields on our investments.

In the case of residential mortgage loans, there are seldom any restrictions on borrowers’ abilities to prepay their loans. Homeowners tend to prepay mortgage loans faster when interest rates decline. Consequently, owners of the loans may reinvest the money received from the prepayments at the lower prevailing interest rates. Conversely, homeowners tend not to prepay mortgage loans when interest rates increase. Consequently, owners of the loans are unable to reinvest money that would have otherwise been received from prepayments at the higher prevailing interest rates. This volatility in prepayment rates may affect our ability to maintain targeted amounts of leverage on our RMBS portfolio and may result in reduced earnings or losses for us and negatively affect the cash available for distribution to our stockholders.

The yield of our other assets may be affected by the rate of prepayments differing from our projections. Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we are unable to invest the proceeds of any prepayments we receive in assets with at least an equivalent yield, the yield on our portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, our anticipated yield may be impacted. Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain investments.

If credit spreads widen before we obtain long-term financing for our assets, the value of our assets may suffer.

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We will price our assets based on our assumptions about future credit spreads for financing of those assets. We expect to obtain longer-term financing for our assets using structured financing techniques in the future. In such financings, interest rates are typically set at a spread over a certain benchmark, such as the yield on United States Treasury obligations, swaps, or LIBOR. If the spread that borrowers will pay over the benchmark widens and the rates we charge on our assets to be securitized are not increased accordingly, our income may be reduced or we may suffer losses.

Hedging against interest rate exposure may adversely affect our earnings, limit our gains or result in losses, which could adversely affect cash available for distribution to our stockholders.

We may enter into interest rate swap agreements or pursue other interest rate hedging strategies. Our hedging activity will vary in scope based on the level of interest rates, the type of portfolio investments held, and other changing market conditions. Interest rate hedging may fail to protect or could adversely affect us because, among other things:

• interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;

• available interest rate hedging products may not correspond directly with the interest rate risk for which protection is sought;

• the duration of the hedge may not match the duration of the related liability or asset;

• the amount of income that a REIT may earn from hedging transactions to offset losses due to fluctuations in interest rates is limited by federal tax provisions governing REITs;

• the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;

• the party owing money in the hedging transaction may default on its obligation to pay; and

• we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money.

Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distribution to our stockholders. Therefore, while we may enter into such transactions to seek to reduce interest rate risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the interest rate risk sought to be hedged. Any such imperfect correlation may prevent us from achieving the intended accounting treatment and may expose us to risk of loss.

Hedging instruments often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities and involve risks and costs.

The cost of using hedging instruments increases as the period covered by the instrument increases and during periods of rising and volatile interest rates. We may increase our hedging activity and thus increase our hedging costs during periods when interest rates are volatile or rising and hedging costs have increased. In addition, hedging instruments involve risk since they often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities. Consequently, there are no requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying derivative transactions may depend on compliance with applicable statutory, commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. The business failure of a hedging counterparty with whom we enter into a hedging transaction will most likely result in a default. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits and force us to cover our resale commitments, if any, at the then current market price. Although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty, and we may not be able to enter into an offsetting contract in order to cover our risk. We cannot be certain that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.

There can be no assurance that the direct or indirect effects of the Dodd-Frank Act and other applicable non-U.S. regulations will not have an adverse effect on our interest rate hedging activities.

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) imposed additional regulations on derivatives markets and transactions. Such regulations and, to the extent we trade with

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counterparties organized in non-US jurisdictions, any applicable regulations in those jurisdictions, are still being implemented, and will affect our interest rate hedging activities. While the full impact of regulation on our interest rate hedging activities cannot be fully assessed until all final rules and regulations are implemented, such regulation may affect our ability to enter into hedging or other risk management transactions, may increase our costs in entering into such transactions, and/or may result in us entering into such transactions on less favorable terms than prior to implementation of such regulation. For example, subject to an exception under the Dodd-Frank Act for end-users of swaps upon which we may seek to rely, we may be required to clear certain interest rate hedging transactions by submitting them to a derivatives clearing organization. In addition, to the extent we are required to clear any such transactions, we will be required to, among other things, post margin in connection with such transactions. The occurrence of any of the foregoing events may have an adverse effect on our business and our stockholders’ return.

Our investments in debt securities and preferred and common equity securities will be subject to the specific risks relating to the particular issuer of the securities and may involve greater risk of loss than secured debt financings.

Our investments in debt securities and preferred and common equity securities will involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer. Issuers that are REITs and other real estate companies are subject to the inherent risks associated with real estate and real estate-related investments discussed in this prospectus. Issuers that are debt finance companies are subject to the inherent risks associated with structured financing investments also discussed in this prospectus. Furthermore, debt securities and preferred and common equity securities may involve greater risk of loss than secured debt financings due to a variety of factors, including that such investments are generally unsecured and may also be subordinated to other obligations of the issuer. As a result, investments in debt securities and preferred and common equity securities are subject to risks of (i) limited liquidity in the secondary trading market, (ii) substantial market price volatility resulting from changes in prevailing interest rates, (iii) subordination to the senior claims of banks and other lenders to the issuer, (iv) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (v) the possibility that earnings of the issuer may be insufficient to meet its debt service and distribution obligations and (vi) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic downturn. These risks may adversely affect the value of outstanding debt securities and preferred and common equity securities and the ability of the issuers thereof to make principal, interest and/or distribution payments to us.

We may make investments in non-U.S. dollar denominated securities, which will be subject to currency rates exposure.

We may purchase real estate-related securities denominated in foreign currencies. A change in foreign currency exchange rates may have an adverse impact on returns on our non-U.S. dollar denominated investments. Although we may hedge our foreign currency risk subject to the REIT income qualification tests, we may not be able to do so successfully and may incur losses on these investments as a result of exchange rate fluctuations.

Investments in properties or other real estate investments outside the United States subject us to foreign currency risks, which may adversely affect distributions and our REIT status.

Revenues generated from any properties or other real estate investments we acquire or ventures we enter into relating to transactions involving assets located in markets outside the United States likely will be denominated in the local currency.  Therefore, any investments we make outside the United States may subject us to foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar.  As a result, changes in exchange rates of any such foreign currency to U.S. dollars may affect our revenues, operating margins and distributions and may also affect the book value of our assets and the amount of stockholders’ equity.

Changes in foreign currency exchange rates used to value a REIT’s foreign assets may be considered changes in the value of the REIT’s assets.  These changes may adversely affect our status as a REIT.  Further, bank accounts in foreign currency which are not considered cash or cash equivalents may adversely affect our status as a REIT.

Inflation in foreign countries, along with government measures to curb inflation, may have an adverse effect on our investments.

Certain countries have in the past experienced extremely high rates of inflation.  Inflation, along with governmental measures to curb inflation, coupled with public speculation about possible future governmental measures to be adopted, has had significant negative effects on these international economies in the past and this could occur again in the future.  The introduction of governmental policies to curb inflation can have an adverse effect on our business.  High inflation in the countries where we purchase real estate or make other investments could increase our expenses and we may not be able to pass these increased costs on to our tenants.

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Concerns regarding the European debt crisis and market perceptions concerning the instability of the euro could adversely affect our business, results of operations and financing.

Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the euro and the suitability of the euro as a single currency given the diverse economic and political circumstances in individual Eurozone countries. These concerns could lead to the re-introduction of individual currencies in one or more Eurozone countries, or, in more extreme circumstances, the possible dissolution of the euro currency entirely. Should the euro dissolve entirely, the legal and contractual consequences for holders of euro-denominated obligations would be determined by laws in effect at such time. These potential developments, or market perceptions concerning these and related issues, could materially adversely affect the value of any euro-denominated assets and obligations we may acquire.

Our dependence on the management of other entities in which we invest may adversely affect our business.

We will not control the management, investment decisions or operations of the companies in which we may invest. Management of those enterprises may decide to change the nature of their assets, or management may otherwise change in a manner that is not satisfactory to us. We will have no ability to affect these management decisions and we may have only limited ability to dispose of our investments.

Many of our investments will be illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions.

Certain of the securities that we may purchase in connection with privately negotiated transactions will not be registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws. Some of the residential and commercial mortgage-backed securities that we may purchase may be traded in private, unregistered transactions and are therefore subject to restrictions on resale or otherwise have no established trading market. The mezzanine and bridge loans we may purchase will be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrower’s default. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited.

Declines in the market values of our investments may adversely affect periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.

We expect that a substantial portion of our assets will be classified for accounting purposes as “available-for-sale.” These investments are carried at estimated fair value and temporary changes in the market values of those assets will be directly charged or credited to stockholders’ equity without impacting net income on the income statement. Moreover, if we determine that a decline in the estimated fair value of an available-for-sale security below its amortized value is other-than-temporary, we will recognize a loss on that security on the income statement, which will reduce our earnings in the period recognized.

A decline in the market value of our assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders.

Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position, which would allow us to satisfy our collateral obligations. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.

Market values of our investments may decline for a number of reasons, such as changes in prevailing interest rates, increases in defaults, increases in voluntary prepayments for those investments that we have that are subject to prepayment risk, widening of credit spreads and downgrades of ratings of the securities by ratings agencies.

Some of our investments will be carried at an estimated fair value and we will be required to disclose the fair value of other investments quarterly. The estimated fair value will be determined by us and, as a result, there may be uncertainty as to the value of these investments.

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Some of our investments will be in the form of securities that are recorded at fair value but that have limited liquidity or are not publicly traded. In addition, we must disclose the fair value of our investments in loans each quarter. Such estimates are inherently uncertain. The fair value of securities and other investments, including loans that have limited liquidity or are not publicly traded, may not be readily determinable. We will estimate the fair value of these investments on a quarterly basis. Because such valuations are inherently uncertain, may fluctuate over short periods of time and may be based on numerous estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. The value of our common stock could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that we ultimately realize upon their disposal.

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

We have significant competition with respect to our acquisition and origination of assets with many other companies, including other REITs, insurance companies, commercial banks, private investment funds, hedge funds, specialty finance companies and other investors, many of which have greater resources than us. We may not be able to compete successfully for investments. In addition, the number of entities and the amount of funds competing for suitable investments may increase. If we pay higher prices for investments or originate loans on more generous terms than our competitors, our returns will be lower and the value of our assets may not increase 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.

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

We have entered into, and may continue to enter into, joint ventures with third parties to make investments. We may also make investments in partnerships or other co-ownership arrangements or participations. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the following risks:

• that our co-venturer or partner in an investment could become insolvent or bankrupt;

• that such co-venturer 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;

• that such co-venturer or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives; or

• that disputes between us and our co-venturer or partner in an investment could result in litigation, thereby increasing our expenses and preventing our executive officers and directors from focusing available time and effort on our ongoing business operations.

Any of the above might subject us to liabilities and thus reduce our returns on our investment with that co-venturer or partner.

Our due diligence may not reveal all of a borrower’s liabilities and may not reveal other weaknesses in its business.

Before making a loan to a borrower or acquiring debt or equity securities of a company, we will assess the strength and skills of such entity’s management and other factors that we believe are material to the performance of the investment. In making the assessment and otherwise conducting customary due diligence, we will rely on the resources available to us and, in some cases, an investigation by third parties. This process is particularly important and subjective with respect to newly organized or private entities because there may be little or no information publicly available about the entities. There can be no assurance that our due diligence processes will uncover all relevant facts or that any investment will be successful.

We will depend on debtors for our revenue, and, accordingly, our revenue and our ability to make distributions to you will be dependent upon the success and economic viability of such debtors.

The success of our investments in real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments materially depend on the financial stability of the debtors underlying such investments. The inability of a single major debtor or a number of smaller debtors to meet their payment obligations could result in reduced revenue or losses.

Delays in liquidating defaulted mortgage loans could reduce our investment returns.

If we make or invest in mortgage loans and there are defaults under those mortgage loans, we may not be able to repossess and sell the underlying properties quickly. Borrowers often resist foreclosure actions by asserting numerous

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claims, counterclaims and defenses, including, without limitation, lender liability claims, in an effort to prolong the foreclosure action. In some states, foreclosure actions can take up to several years or more to litigate. At any time during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure action and further delaying the foreclosure process. Foreclosure litigation tends to create a negative public image of the collateral property and may result in disrupting ongoing leasing and management of the property. Foreclosure actions by senior lenders may substantially affect the amount that we may receive from an investment. These factors could reduce the value of our investment in the defaulted mortgage loans.

Delays in restructuring or liquidating non-performing debt-related securities could reduce the return on your investment.

Debt-related securities may become non-performing after acquisition for a wide variety of reasons. Such non-performing debt-related investments may require a substantial amount of workout negotiations and/or restructuring, which may entail, among other things, a substantial reduction in the interest rate and a substantial write-down of such loan or asset. However, even if a restructuring is successfully accomplished, upon maturity of such debt-related security, the borrower under the security may not be able to negotiate replacement “takeout” financing to repay the principal amount of the securities owed to us. We may find it necessary or desirable to foreclose on some of the collateral securing one or more of our investments. Intercreditor provisions may substantially interfere with our ability to do so. Even if foreclosure is an option, the foreclosure process can be lengthy and expensive as discussed above.

If we foreclose on the collateral that will secure our investments in loans receivable, we may incur significant liabilities for deferred repairs and maintenance, property taxes and other expenses, which would reduce cash available for distribution to stockholders.

Some of the properties we may acquire in foreclosure proceedings may face competition from newer, more updated properties. In addition, the overall condition of these properties may have been neglected prior to the time we would foreclose on them. In order to remain competitive, increase occupancy at these properties and/or make them more attractive to potential tenants and purchasers, we may have to make significant capital improvements and/or incur deferred maintenance costs with respect to these properties. Also, if we acquire properties through foreclosure, we will be responsible for property taxes and other expenses which will require more capital resources than if we held a secured interest in these properties. To the extent we have to make significant capital expenditures with respect to these properties, we will have less cash available to fund distributions and investor returns may be reduced.

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 our stockholders. In addition, because a property’s market value depends principally upon the value of the leases associated with that property, the resale value of a property with high or prolonged vacancies could suffer, which could further reduce our returns. Such a reduction in the resale value of a property could also reduce the value of our stockholders’ investment.

We depend on tenants for revenue, and lease defaults or terminations could reduce our net income and limit our ability to make distributions to our stockholders.

The success of our real estate investments materially depends on the financial stability of our tenants. A default or termination by a significant tenant on its lease payments to us would cause us to lose the revenue associated with such lease and could require us to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure, if the property is subject to a mortgage. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property.

If a tenant defaults on or terminates a significant lease, we may be unable to lease the property for the rent previously received or sell the property without incurring a loss. These events could cause us to reduce the amount of distributions to our stockholders.

Our inability to sell a property at the time and on the terms 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

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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 our shares.

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.

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 note or other property we may accept upon a sale are actually paid, sold, refinanced or otherwise disposed.

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 may 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.

If the properties related to our investments are concentrated by type or geographic area, then we will be exposed to increased risk with respect to those property types or that geographic area.

Our investments may at times be concentrated in certain property types that are subject to a higher risk of foreclosure. In addition, our investments may be secured by properties concentrated in a limited number of geographic locations. Adverse conditions in the areas where the properties securing or otherwise underlying our investments are located (including business layoffs or downsizing, industry slowdowns, changing demographics and other factors) and local real estate conditions (such as oversupply or reduced demand) may have an adverse effect on the value of the properties underlying our investments. A material decline in demand or the ability of tenants to pay rent or of a buyer to consummate a purchase in these geographic areas may result in a material decline in our cash available for distribution.

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

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

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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 distribution.

Our properties may be subject to the Americans with Disabilities Act of 1990, as amended, or the Disabilities Act. 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 distribution to our stockholders.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flow from operations and the return on our stockholders’ 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 uninsured loss, which may reduce the value of our shares. 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 our stockholders.

Terrorist attacks and other acts of violence or war may affect the markets in which we plan to operate, which could delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.

Terrorist attacks or armed conflicts may directly impact the value of our properties through damage, destruction, loss or increased security costs. KBS-sponsored programs and KBS-advised investors have historically owned properties in major metropolitan areas. We expect that we will also invest in such markets. We may not be able to obtain insurance against the risk of terrorism because it may not be available or may not be available on terms that are economically feasible. The terrorism insurance that we obtain may not be sufficient to cover loss for damages to our properties as a result of terrorist attacks. The inability to obtain sufficient terrorism insurance or any terrorism insurance at all could limit our investment options as some mortgage lenders have begun to insist that specific coverage against terrorism be purchased by commercial owners as a condition of providing loans.

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Risks Related to Our Financing Strategy

We expect to use leverage in connection with our investments, which increases the risk of loss associated with our investments.

We expect to finance the acquisition and origination of a portion of our investments with warehouse lines of credit, repurchase agreements, various types of securitizations, mortgages and other borrowings. Although the use of leverage may enhance returns and increase the number of investments that we can make, it may also substantially increase the risk of loss. Our ability to execute this strategy will depend on various conditions in the financing markets that are beyond our control, including liquidity and credit spreads. There can be no assurance that leveraged financing will be available to us on favorable terms or that, among other factors, the terms of such financing will parallel the maturities of the underlying assets acquired. 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 and repurchase facilities may not accommodate long-term financing. This could subject us to more restrictive 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 you, for our operations and for future business opportunities. If alternative financing is not available, we may have to liquidate assets at unfavorable prices to pay off such financing. Our return on our investments and cash available for distribution to our stockholders may be reduced to the extent that changes in market conditions cause the cost of our financing to increase relative to the income that we can derive from the assets we acquire.

Short-term borrowing through repurchase agreements, bank credit facilities and warehouse facilities may put our assets and financial condition at risk. Repurchase agreements economically resemble short-term, variable-rate financing and usually require the maintenance of specific loan-to-collateral value ratios. If the market value of the assets subject to a repurchase agreement decline, we may be required to provide additional collateral or make cash payments to maintain the loan to collateral value ratio. If we are unable to provide such collateral or cash repayments, we may lose our economic interest in the underlying assets. Further, credit facility providers and warehouse facility providers may require us to maintain a certain amount of cash reserves or to set aside unleveraged assets sufficient to maintain a specified liquidity position that would allow us to satisfy our collateral obligations. In addition, such short-term borrowing facilities may limit the length of time that any given asset may be used as eligible collateral. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on assets. In the event that we are unable to meet these collateral obligations, our financial condition could deteriorate rapidly.

We may not be able to acquire eligible investments for a collateralized debt obligation or CDO issuance or may not be able to issue CDO securities on attractive terms, either of which may require us to seek more costly financing for our investments or to liquidate assets.

We may use short-term financing arrangements to finance the acquisition of instruments until a sufficient quantity is accumulated, at which time we may refinance these lines through a securitization, such as a CDO issuance, or other long-term financing. As a result, we are subject to the risk that we will not be able to acquire, during the period that our short-term financing is available, a sufficient amount of eligible assets to maximize the efficiency of a CDO issuance. In addition, conditions in the capital markets may make the issuance of CDOs less attractive to us when we have accumulated a sufficient pool of collateral. If we are unable to issue a CDO to finance these assets, we may be required to seek other forms of potentially less attractive financing or liquidate the assets. In addition, while we generally will retain the equity component, or below investment grade component, of such CDOs and, therefore, still have exposure to any investments included in such securitizations, our inability to enter into securitization transactions will increase our overall exposure to risks associated with ownership of such investments, including the risk of default under warehouse facilities, bank credit facilities and repurchase agreements discussed above.

The use of CDO financings with over-collateralization requirements may have a negative impact on our cash flow.

We expect that the terms of CDOs we may issue will generally provide that the principal amount of assets must exceed the principal balance of the related bonds by a certain amount, commonly referred to as “over-collateralization.” We anticipate that the CDO terms will provide that, if certain delinquencies and/or losses exceed specified levels, which we will establish based on the analysis by the rating agencies (or any financial guaranty insurer) of the characteristics of the assets collateralizing the bonds, the required level of over-collateralization may be increased or may be prevented from decreasing as would otherwise be permitted had losses or delinquencies not exceeded those levels. Other tests (based on delinquency levels or other criteria) may restrict our ability to receive net income from assets collateralizing the obligations. We cannot assure you that the performance tests will be satisfied. In advance of completing negotiations with the rating agencies or other key transaction parties on our future CDO financings, we cannot assure you of the actual terms of the CDO delinquency tests, over-collateralization terms, cash flow release mechanisms or other

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significant factors regarding the calculation of net income to us. Failure to obtain favorable terms with regard to these matters may materially and adversely affect the availability of net income to us. If our assets fail to perform as anticipated, our over-collateralization or other credit enhancement expense associated with our CDO financings will increase.

We may be required to repurchase loans that we have sold or to indemnify holders of CDOs we issue.

If any of the loans we originate or acquire and sell or securitize do not comply with representations and warranties that we make about certain characteristics of the loans, the borrowers and the underlying properties, we may be required to repurchase those loans (including from a trust vehicle used to facilitate a structured financing of the assets through CDOs) or replace them with substitute loans. In addition, in the case of loans that we have sold instead of retained, we may be required to indemnify persons for losses or expenses incurred as a result of a breach of a representation or warranty. Repurchased loans typically require a significant allocation of working capital to be carried on our books, and our ability to borrow against such assets may be limited. Any significant repurchases or indemnification payments could materially and adversely affect our financial condition and operating results.

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 net income 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 real properties. For the mortgage debt we place on properties, we run the risk of being unable to refinance the properties when the loans become 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 more capital by issuing more stock or by borrowing more money.

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.

In a period of rising interest rates, our interest expense could increase while the interest we earn on our fixed-rate assets would not change, which would adversely affect our profitability.

Our operating results will depend in large part on differences between the income from our assets, net of credit losses and financing costs. Income from our assets may respond more slowly to interest rate fluctuations than the cost of our borrowings. Consequently, changes in interest rates, particularly short-term interest rates, may significantly influence our net income. Increases in these rates will tend to decrease our net income and market value of our assets. Interest rate fluctuations resulting in our interest expense exceeding our interest income would result in operating losses for us and may limit our ability to make distributions to our stockholders. 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.

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.

Although we expect that once we have fully invested the proceeds of this offering, our debt financing and other liabilities will be 60% or less of the cost of our tangible assets (before deducting depreciation or other non-cash reserves), our debt financing and other liabilities may exceed this level during our offering stage. Our charter limits our total liabilities to 75% of the cost of our tangible assets (before deducting depreciation or other non-cash reserves), however, we may exceed this limit with the approval of the conflicts committee of our board of directors. See “Investment Objectives and Criteria - Financing Strategy and Policies.” During the early stages of this offering, and to the extent financing in excess of this limit is available on attractive terms, our conflicts committee may approve debt such that our total liabilities would exceed this limit. High debt levels would cause us to incur higher interest charges and higher debt service payments and could 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

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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 have been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code for our taxable years ended December 31, 2014 through December 31, 2015 and our current organization and method of operations will enable us to continue to meet the requirements for qualification and taxation as a REIT. 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, this opinion represents the legal judgment of DLA Piper LLP (US) based on the law in effect as of the date of the opinion. The opinion of DLA Piper LLP (US) will not be 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.

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. 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 in which we lost 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.”

Failure to qualify as a REIT would subject us to federal income tax, which would reduce the cash available for distribution to you.

We believe that we have operated and will continue to operate in a manner that will allow us to qualify as a REIT for federal income tax purposes. However, the federal income tax laws governing REITs are extremely complex, and interpretations of the federal income tax laws governing qualification as a REIT are limited. Qualifying as a REIT requires us to meet various tests regarding the nature of our assets and our income, the ownership of our outstanding stock, and the amount of our distributions on an ongoing basis. Accordingly, we cannot be certain that we will be successful in operating so we can remain qualified as a REIT. Our ability to satisfy the asset tests depends on our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. 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, including the tax treatment of certain investments we may make, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year. If we fail to qualify as a REIT in any calendar year and we do not qualify for certain statutory relief provisions, we would be required to pay federal income tax on our taxable income. We might need to borrow money or sell assets to pay that tax. Our payment of income tax would decrease the amount of our income available for distribution to you. Furthermore, if we fail to maintain our qualification as a REIT and we do not qualify for certain statutory relief provisions, we no longer would be required to distribute substantially all of our REIT taxable income to our stockholders. Unless our failure to qualify as a REIT were excused under federal tax laws, we would be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost.

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, if any. As a result, unless you are a tax-exempt entity, you may have to use funds from 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.”

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

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 the 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.

Our investments in debt instruments may cause us to recognize taxable income for which cash has not been received for federal income tax purposes even though no cash payments have been received on the debt instruments.

It is expected that we may acquire debt instruments in the secondary market for less than their face amount. The amount of such discount will generally be treated as “market discount” for federal income tax purposes. We may acquire distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under the applicable Treasury regulations, the modified debt may be considered to have been reissued to us in a debt-for-debt exchange with the borrower. This deemed reissuance may prevent the modified debt from qualifying as a good REIT asset if the underlying security has declined in value.

In general, we will be required to accrue original issue discount on a debt instrument as taxable income in accordance with applicable federal income tax rules even though no cash payments may be received on such debt instrument.

In the event a borrower with respect to a particular debt instrument encounters financial difficulty rendering it unable to pay stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income. Similarly, we may be required to accrue interest income with respect to subordinate residential and commercial mortgage-backed securities at the stated rate regardless of when their corresponding cash payments are received.

As a result of these factors, there is a significant risk that we may recognize substantial taxable income in excess of cash available for distribution. In that event, we may need to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this taxable income for which cash has not been received is recognized.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order for federal corporate income tax not to apply to earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We also may decide to retain net capital gain we earn from the sale or other disposition of our property and pay U.S. federal income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability unless they file U.S. federal income tax returns and thereon seek a refund of such tax. We also will be subject to corporate tax on any undistributed taxable income. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.

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From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

If our operating partnership fails to maintain its status as a partnership for federal income tax purposes, its income would be subject to taxation and our REIT status would be terminated.

We intend to maintain the status of our operating partnership as a partnership for federal income tax purposes. However, if the IRS were to successfully challenge the status of our operating partnership as a partnership, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that our operating partnership could make to us. This would also result in our losing REIT status and becoming subject to a corporate level tax on our own income. This would substantially reduce our cash available to pay distributions and the return on your investment. In addition, if any of the entities through which our operating partnership owns its properties, in whole or in part, loses its characterization as a partnership for federal income tax purposes, the underlying entity would become subject to taxation as a corporation, thereby reducing distributions to our operating partnership and jeopardizing our ability to maintain REIT status. See the "Federal Income Tax Considerations — Effect of Subsidiary Entities - Ownership of Partnership Interests " section of this prospectus.

Early investors may receive tax benefits from our election to accelerate depreciation expense deductions of certain components of our investments, including land improvements and fixtures, from which later investors may not benefit.

For U.S. federal income tax purposes, distributions received, including distributions that are reinvested pursuant to our dividend reinvestment plan, by our investors generally will be considered ordinary dividends to the extent that the distributions are paid out of our current and accumulated earnings and profits (excluding distributions of amounts either attributable to income subject to corporate-level taxation or designated as a capital gain dividend). However, depreciation expenses, among other deductible items, reduce taxable income and earnings and profits but do not reduce cash available for distribution. To the extent that a portion of any distributions to our investors exceed our current and accumulated earnings and profits, that portion will be considered a return of capital (a non-taxable distribution) for U.S. federal income tax purposes up to the amount of their tax basis in their shares (and any excess over their tax basis in their shares will result in capital gain from the deemed disposition of the investors’ shares). The amount of distributions considered a return of capital for U.S. federal income tax purposes will not be subject to tax immediately but will instead reduce the tax basis of our investors’ investments, generally deferring any tax on that portion of the distribution until they sell their shares or we liquidate. Because we may choose to increase depreciation expense deductions in the earlier years after acquisition of an asset, for U.S. federal income tax purposes, of certain components of our investments, including land improvements and fixtures through the use of cost segregation studies, our early investors may benefit to the extent that increased depreciation causes all or a portion of the distributions they receive to be considered a return of capital for U.S. federal income tax purposes thereby deferring tax on those distributions, while later investors may not benefit to the extent that the depreciation of these components has already been deducted.

If we fail to invest a sufficient amount of the net proceeds from this offering in real estate assets within one year from the receipt of the proceeds, we could fail to qualify as a REIT.

Temporary investment of the net proceeds from this offering in securities that are not treated as real estate assets for REIT qualification purposes and income from these investments generally will allow us to satisfy various REIT income and asset requirements, but only during the one-year period beginning on the date we receive the net proceeds. In order to satisfy these requirements, we may invest in one or more assets on terms and conditions that are not otherwise favorable to us, which ultimately could materially and adversely affect our financial condition and operating results. Alternatively, if we are unable to invest a sufficient amount of the net proceeds from sales of our stock in qualifying real estate assets within the one-year period, we could fail to satisfy one or more of the gross income or asset tests and we could be limited to investing all or a portion of any remaining funds in cash or certain cash equivalents. If we fail to satisfy any such income or asset test, unless we are entitled to relief under certain provisions of the Internal Revenue Code, we could fail to qualify as a REIT.

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

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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. 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 your investment.

Potential characterization of distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.

If (i) all or a portion of our assets are subject to the rules relating to taxable mortgage pools, (ii) we are a “pension-held REIT,” (iii) a tax-exempt stockholder has incurred debt to purchase or hold our common stock, or (iv) the residual Real Estate Mortgage Investment Conduit interests, or REMICs, we buy (if any) generate “excess inclusion income,” then a portion of the distributions to and, in the case of a stockholder described in clause (iii), gains realized on the sale of common stock by such tax-exempt stockholder may be subject to federal income tax as unrelated business taxable income under the Internal Revenue Code. See “Federal Income Tax Considerations—Taxation of KBS Strategic Opportunity REIT II, Inc.—Taxable Mortgage Pools and Excess Inclusion Income.”

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 or financing arrangements.

We may be deemed to be ,or we may make investments in entities that own or are themselves deemed to be, taxable mortgage pools. 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. However, certain categories of stockholders, 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.

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. We intend to structure our securitization and financing arrangements as to not create a taxable mortgage pool. However, if we have borrowings with two or more maturities and (i) those borrowings are secured by mortgages or residential or commercial mortgage-backed securities and (ii) the payments made on the borrowings are related to the payments received on the underlying assets, then the borrowings and the pool of mortgages or residential or commercial mortgage-backed securities to which such borrowings relate may be classified as a taxable mortgage pool under the Internal Revenue Code. If any part of our investments were to be treated as a taxable mortgage pool, then our REIT status would not be impaired, provided we own 100% of such entity, but a portion of the taxable income we recognize may be characterized as “excess inclusion” income and allocated among our stockholders to the extent of and generally in proportion to the distributions we make to each stockholder. Any excess inclusion income would:

• not be allowed to be offset by a stockholder’s net operating losses;

• be subject to a tax as unrelated business income if a stockholder were a tax-exempt stockholder;

• be subject to the application of federal income tax withholding at the maximum rate (without reduction for any otherwise applicable income tax treaty) with respect to amounts allocable to foreign stockholders; and

• be taxable (at the highest corporate tax rate) to us, rather than to you, to the extent the excess inclusion income relates to stock held by disqualified organizations (generally, tax-exempt companies not subject to tax on unrelated business income, including governmental organizations).

The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

The Internal Revenue Service has issued Revenue Procedure 2003-65, which provides a safe harbor pursuant to which a mezzanine loan that is secured by interests in a pass-through entity will be treated by the Internal Revenue Service as a real estate asset for purposes of the REIT tests, and interest derived from such loan will be treated as qualifying mortgage interest for purposes of the REIT 75% income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We intend to make investments in loans secured by interests in pass-through entities in a manner that complies with the various

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requirements applicable to our qualification as a REIT. To the extent, however, that any such loans do not satisfy all of the requirements for reliance on the safe harbor set forth in the Revenue Procedure, there can be no assurance that the Internal Revenue Service will not challenge the tax treatment of such loans, which could jeopardize our ability to qualify as a REIT.

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.

Complying with REIT requirements may force us to liquidate otherwise attractive investments.

To qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and residential and commercial mortgage-backed securities. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% (20% for taxable years after 2017) of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries. See “Federal Income Tax Considerations-Taxation of KBS Strategic Opportunity REIT II, Inc.” If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Liquidation of assets may jeopardize our REIT qualification.

To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

Characterization of any repurchase agreements we enter into to finance our investments as sales for tax purposes rather than as secured lending transactions would adversely affect our ability to qualify as a REIT.

We may enter into repurchase agreements with a variety of counterparties to achieve our desired amount of leverage for the assets in which we invest. When we enter into a repurchase agreement, we generally sell assets to our counterparty to the agreement and receive cash from the counterparty. The counterparty is obligated to resell the assets back to us at the end of the term of the transaction. We believe that for federal income tax purposes we will be treated as the owner of the assets that are the subject of repurchase agreements and that the repurchase agreements will be treated as secured lending transactions notwithstanding that such agreement may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the Internal Revenue Service could successfully assert that we did not own these assets during the term of the repurchase agreements, in which case we could fail to qualify as a REIT if tax ownership of these assets was necessary for us to meet the income and/or asset tests discussed in “Federal Income Tax Considerations-Taxation of KBS Strategic Opportunity REIT II, Inc.”

If certain sale-leaseback transactions are not characterized by the Internal Revenue Service as “true leases,” we may be subject to adverse tax consequences.

We may purchase investments in properties and lease them back to the sellers of these properties. If the Internal Revenue Service does not characterize these leases as “true leases,” we would be not treated as receiving rents from real property with regard to such leases which could affect our ability to satisfy the REIT gross income tests.

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Complying with REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Internal Revenue Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation and/or currency risks will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges (i) interest rate risk on liabilities incurred to carry or acquire real estate (ii) risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests or (iii) to manage risk with respect to the termination of certain prior hedging transactions described in (i) and/or (ii) above, and, in each case, such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute nonqualifying income for purposes of both the REIT 75% and 95% gross income tests. See “Federal Income Tax Considerations—Taxation of KBS Strategic Opportunity REIT II, Inc.—Derivatives and Hedging Transactions.” As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.

Ownership limitations may restrict change of control or business combination opportunities in which you might receive a premium for their shares.

In order for us to qualify as a REIT for each taxable year beginning with the December 31, 2015 taxable year, no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year. “Individuals” for this purpose include natural persons, and some entities such as private foundations. To preserve our REIT qualification, our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value of our capital stock. This ownership limitation could have the effect of discouraging a takeover or other transaction in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.

Our ownership of and relationship with our taxable REIT subsidiaries will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries. A taxable REIT subsidiary may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a taxable REIT subsidiary. A corporation of which a taxable REIT subsidiary directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a taxable REIT subsidiary. Overall, no more than 25% (20% for taxable years after 2017) of the value of a REIT’s assets may consist of stock or securities of one or more taxable REIT subsidiaries. A domestic taxable REIT subsidiary will pay federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the taxable REIT subsidiary rules limit the deductibility of interest paid or accrued by a taxable REIT subsidiary to its parent REIT to assure that the taxable REIT subsidiary is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a taxable REIT subsidiary and its parent REIT that are not conducted on an arm’s-length basis. We cannot assure you that we will be able to comply with the 25% (or 20%, as applicable) value limitation on ownership of taxable REIT subsidiary stock and securities on an ongoing basis so as to maintain REIT status or to avoid application of the 100% excise tax imposed on certain non-arm’s length transactions.

We may be required to pay some taxes due to actions of a taxable REIT subsidiary which would reduce our cash available for distribution to you.

Any net taxable income earned directly by a taxable REIT subsidiary, or through entities that are disregarded for federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to federal and possibly state corporate income tax. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the economic arrangements between the REIT, the REIT's customers, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities follow the federal income tax treatment of REITs. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to you.

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

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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 income test. See “Federal Income Tax Considerations — Taxation of KBS Strategic Opportunity REIT II, Inc. — 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.

If our CDO issuers that are taxable REIT subsidiaries are subject to federal income tax at the entity level, it would greatly reduce the amounts those entities would have available to distribute to us and to pay their creditors.

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 intend that any of our CDO issuers that are taxable REIT subsidiaries will rely on that exemption or otherwise operate in a manner so that they will not be subject to federal income tax on their net income at the entity level. If the Internal Revenue Service were to succeed in challenging that tax treatment, it could greatly reduce the amount that those CDO issuers would have available to distribute to us and to pay to their creditors.

Non-U.S. income or other taxes, and a requirement to withhold any non-U.S. taxes, may apply, and, if so, the amount of net cash from operations payable to you will be reduced.

We intend to acquire real property located outside the U.S. and may invest in stock or other securities of entities owning real property located outside the U.S. As a result, we may be subject to foreign (i.e., non-U.S.) income taxes, stamp taxes, real property conveyance taxes, withholding taxes, and other foreign taxes or similar impositions in connection with our ownership of foreign real property or foreign securities. The country in which the real property is located may impose such taxes regardless of whether we are profitable and in addition to any U.S. income tax or other U.S. taxes imposed on profits from our investments in such real property or securities. If a foreign country imposes income taxes on profits from our investment in foreign real property or foreign securities, you will not be eligible to claim a tax credit on your U.S. federal income tax returns to offset the income taxes paid to the foreign country, and the imposition of any foreign taxes in connection with our ownership and operation of foreign real property or our investment in securities of foreign entities will reduce the amounts distributable to you. Similarly, the imposition of withholding taxes by a foreign country will reduce the amounts distributable to you. We expect the organizational costs associated with non-U.S. investments, including costs to structure the investments so as to minimize the impact of foreign taxes, will be higher than those associated with U.S. investments. Moreover, we may be required to file income tax or other information returns in foreign jurisdictions as a result of our investments made outside of the U.S. Any organizational costs and reporting requirements will increase our administrative expenses and reduce the amount of cash available for distribution to you. You are urged to consult with your own tax advisors with respect to the impact of applicable non-U.S. taxes and tax withholding requirements on an investment in our common stock.

Our foreign investments will be subject to changes in foreign tax or other laws, as well as to changes in U.S. tax laws, and such changes could negatively impact our returns from any particular investment.

We may make investments in real estate located outside of the United States. Such investments will typically be structured to minimize non-U.S. taxes, and generally include the use of holding companies. Our ownership, operation and disposition strategy with respect to non-U.S. investments will take into account foreign tax considerations. For example, it is typically advantageous from a tax perspective in non-U.S. jurisdictions to sell interests in a holding company that owns real estate rather than the real estate itself. Buyers of such entities, however, will often discount their purchase price by evaluating any inherent risks or expected tax liability in such entity. Additionally, the pool of buyers for interests in such holding companies is typically more limited than buyers of direct interests in real estate, and we may be forced to dispose of real estate directly, thus potentially incurring higher foreign taxes and negatively affecting the return on the investment.

We will also capitalize our holding companies with debt and equity to reduce foreign income and withholding taxes as appropriate and with consultation with local counsel in each jurisdiction. Such capitalization structures are complex and potentially subject to challenge by foreign and domestic taxing authorities.

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We may use certain holding structures for our non-U.S. investments to accommodate the needs of one class of investors which reduce the after-tax returns to other classes of investors. For example, if we interpose an entity treated as a corporation for United States tax purposes in our chain of ownership with respect to any particular investment, U.S. tax-exempt investors will generally benefit as such investment will no longer generate unrelated business taxable income. However, if a corporate entity is interposed in a non-U.S. investment holding structure, this would prevent individual investors from claiming a foreign tax credit for any non-U.S. income taxes incurred by the corporate entity or its subsidiaries.

Foreign investments are subject to changes in foreign tax or other laws. Any such law changes may require us to modify or abandon a particular holding structure. Such changes may also lead to higher tax rates on our foreign investments than we anticipated, regardless of structuring modifications. Additionally, U.S. tax laws with respect to foreign investments are subject to change, and such changes could negatively impact our returns from any particular investment.

The ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to U.S. federal income tax and reduce distributions to our stockholders.

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. While we intend to elect and qualify to be taxed as a REIT, we may not elect to be treated as a REIT or may terminate our REIT election if we determine that qualifying as a REIT is no longer in our best interests. If we cease to be a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders and on the market price of our common stock.

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. You are urged to consult with your tax advisor with respect to the impact of recent legislation on your investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares. You also should note that our counsel’s tax opinion is based upon existing law, applicable as of the date of its opinion, all of which will be subject to change, either prospectively or retroactively.

Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interest of our stockholders.

Dividends payable by REITs do not qualify for the reduced tax rates.

In general, the maximum tax rate for dividends payable to domestic stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for this reduced rate. While this tax treatment does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts or estates to perceive investments in REITs to be relatively less attractive than investments in stock of non‑REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

Non-U.S. stockholders will be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax on distributions received from us and upon the disposition of our shares.

Subject to certain exceptions, distributions received from us will be treated as dividends of ordinary income to the extent of our current or accumulated earnings and profits. Such dividends ordinarily will be subject to U.S. withholding tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty, unless the distributions are treated as “effectively connected” with the conduct by the non-U.S. stockholder of a U.S. trade or

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business. Pursuant to the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, capital gain distributions attributable to sales or exchanges of “U.S. real property interests,” or USRPIs, generally will be taxed to a non-U.S. stockholder as if such gain were effectively connected with a U.S. trade or business unless FIRPTA provides an exemption. However, a capital gain dividend will not be treated as effectively connected income if (i) the 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 (ii) the non-U.S. stockholder does not own more than 10% of the class of our stock at any time during the one-year period ending on the date the distribution is received. We do not anticipate that our shares will be “regularly traded” on an established securities market for the foreseeable future, and therefore, this exception is not expected to apply.

Gain recognized by a non-U.S. stockholder upon the sale or exchange of our common stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a USRPI under FIRPTA or a specific FIRPTA exemption applies. Our common stock will not constitute a USRPI so long as we are a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT if at all times during a specified testing period, less than 50% in value of such REIT’s stock is held directly or indirectly by non-U.S. stockholders. We believe, but cannot assure you, that we will be a domestically-controlled qualified investment entity.

Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S. stockholder sells or exchanges our common stock, gain arising from such a sale or exchange would not be subject to U.S. taxation under FIRPTA as a sale of a USRPI if: (a) our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and (b) such non-U.S. stockholder owned, actually and constructively, 10% or less of our common stock at any time during the five-year period ending on the date of the sale. However, it is not anticipated that our common stock will be “regularly traded” on an established market. We encourage you to consult your tax advisor to determine the tax consequences applicable to you if you are a non-U.S. stockholder.

Investments in other REITs and real estate partnerships could subject us to the tax risks associated with the tax status of such entities.

We may invest in the securities of other REITs and real estate partnerships. Such investments are subject to the risk that any such REIT or partnership may fail to satisfy the requirements to qualify as a REIT or a partnership, as the case may be, in any given taxable year. In the case of a REIT, such failure would subject such entity to taxation as a corporation, may require such REIT to incur indebtedness to pay its tax liabilities, may reduce its ability to make distributions to us, and may render it ineligible to elect REIT status prior to the fifth taxable year following the year in which it fails to so qualify. In the case of a partnership, such failure could subject such partnership to an entity level tax and reduce the entity’s ability to make distributions to us. In addition, such failures could, depending on the circumstances, jeopardize our ability to qualify as a REIT.

Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.

Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

Retirement Plan Risks

If the fiduciary of an employee benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or an owner of a retirement arrangement subject to Section 4975 of the Internal Revenue Code (such as an IRA) 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 penalties and other sanctions.

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 and IRA owners investing the assets of such a plan or account in our common stock should satisfy themselves that:

• the investment is consistent with their fiduciary and other 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;

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• 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 in our shares, for which no public market currently exists, is consistent with the liquidity needs 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 comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and

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

With respect to the annual valuation requirements described above, we will provide an estimated value for our stock annually. We can make no claim whether such estimated value will or will not satisfy the applicable annual valuation requirements under ERISA and the Internal Revenue Code. The Department of Labor or the Internal Revenue Service may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our common stock. In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties or other sanctions.

The Department of Labor has recently proposed to amend the regulation defining a fiduciary under ERISA.  The proposed amendment would broaden the definition of fiduciary and make a number of changes to the prohibited transaction exemptions relating to investments by plans and IRAs.  The proposed changes, if finalized, could have a significant effect on investments in our shares by plans and IRAs.  Plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding this development.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties and could subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. In addition, the investment transaction must be undone. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified as a tax-exempt account and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in our common stock.

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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 table sets forth information about how we intend to use the proceeds raised in our primary offering assuming that we sell the maximum of up to $1,000,000,000 in shares of our common stock. Many of the amounts set forth below represent management’s best estimate since they cannot be precisely calculated at this time. The following table assumes that (a) 15% of the proceeds raised in the primary offering are from the sale of Class A shares and 85% of the proceeds raised in the primary offering are from the sale of Class T shares, (b) we do not further reallocate shares being offered between our primary offering and dividend reinvestment plan, and (c) based on this allocation we sell all shares at the highest possible selling commissions and dealer manager fees (with no discounts to any categories of purchasers). Raising less than the maximum offering amount, selling a different percentage of Class A and Class T shares and/or reallocating shares between the primary offering and our dividend reinvestment plan offering will alter the amounts of commissions, fees and expenses set forth below.

The “amount available for investment/net investment amount” per Class A and Class T share will be $9.01. We will use this amount to acquire real estate and real estate-related investments, to maintain a working capital reserve, to pay acquisition and origination expenses and, upon the acquisition or origination of real estate investments, to pay a fee to our advisor for its services in connection with the selection and acquisition or origination of such real estate investments. We will use the remainder of the gross proceeds from the primary offering to pay selling commissions, the dealer manager fee and the organization and other offering expenses as described in footnote 4 to the table below.

We may fund distributions from any source, including, without limitation, offering proceeds or borrowings (which may constitute a return of capital). However, our distribution policy is generally not to use proceeds of an offering to pay distributions. If we pay distributions from sources other than our cash flow from operations, we will have less funds available for the acquisition or origination of real estate investments, the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

The following table presents information regarding the use of proceeds if we raise the maximum offering amount in this primary offering.

	Maximum Primary Offering(1)
	$150,000,000 in Class A Shares ($10.00 per share)			$850,000,000 in Class T Shares ($9.59 per share)
	$	% of Offering Proceeds		$	% of Offering Proceeds
Gross Offering Proceeds	150,000,000	15.00		850,000,000	85.00
Less Offering Expenses:
Selling Commissions(2)	9,750,000	6.50		25,500,000	3.00
Dealer Manager Fee(2)	3,598,000	2.40	(3)	17,000,000	2.00
Organization and Other Offering Expenses(4)	1,500,000	1.00		8,500,000	1.00
Amount Available for Investment/ Net Investment Amount	135,152,000	90.10		799,000,000	94.00
Acquisition and Origination    Fees (5)	2,851,649	1.90		20,193,713	2.38
Acquisition and Origination    Expenses (5)	786,831	0.53		4,632,294	0.55
Initial Working Capital     Reserve (6)	375,000	0.25		2,125,000	0.25
Targeted Investment Capital (7)	131,138,520	87.42		772,048,993	90.83

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⁽¹⁾ As we are registering any combination of the two classes of shares, this allocation is management’s best estimate based on the recommendation of our dealer manager and its perceived demand in the market for each respective class of shares. If the demand for the Class A and Class T shares varies materially from our assumptions as of the date of this prospectus, we will provide an updated estimated use of proceeds table to reflect a revised allocation between the Class A and Class T shares in this offering.

⁽²⁾ Except as described in the “Plan of Distribution” section of the prospectus, an annual stockholder servicing fee of 1.0% of the purchase price per share (ignoring any discounts that may be available to certain categories of purchasers) for the Class T shares sold in the primary offering will be paid to our dealer manager and will accrue daily and be paid monthly in arrears. Our dealer manager will reallow all of the stockholder servicing fee paid to it. The stockholder servicing fee is an ongoing fee that is not paid at the time of purchase and is not intended to be a principal use of offering proceeds; it is therefore not included in the table above.

⁽³⁾ Effective for subscriptions admitted after February 16, 2016, we reduced the dealer manager fee payable in this offering from 3% of gross offering proceeds to 2% of gross offering proceeds. Prior to the reduction in the dealer manager fee, we had raised approximately $59.8 million in gross offering proceeds. The amount of dealer manager fees shown reflects a weighted average fee assuming we paid the maximum possible amount in dealer manager fees of $1.79 million with respect to the approximately $59.8 million of Class A shares sold in the primary offering prior to the reduction in the dealer manager fee.

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⁽⁴⁾ Organization and other offering expenses include all expenses to be paid or reimbursed by us in connection with this primary offering, excluding selling commissions, the dealer manager fee and the ongoing stockholder servicing fee with respect to Class T share sold in the primary offering. Organization and other offering expenses include 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 this 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 payable to participating broker-dealers hosting retail seminars 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, legal fees of our dealer manager, and promotional items. We will not reimburse our dealer manager for wholesaling compensation expenses. Our advisor and its affiliates have agreed to reimburse us at the termination of our primary offering to the extent that organization and other offering expenses borne by us in connection with this primary offering, regardless of when incurred, exceed 1.0% of gross primary offering proceeds.

⁽⁵⁾ On February 17, 2016, we increased the acquisition and origination fees payable with respect to investments acquired or originated with proceeds raised in this offering after February 16, 2016, from 1.5% to 2.6%. The amount of acquisition and origination fees shown reflects a weighted average fee based on the 1.5% acquisition and origination fee in effect for investments made with the approximately $59.8 million in gross proceeds raised on or prior to February 16, 2016 when the acquisition and origination fee was increased. The acquisition and origination fee is a percentage of the cost of investments acquired or originated by us, or the amount to be funded by us to acquire or originate loans, including acquisition and origination expenses and any debt attributable to such investments plus significant capital expenditures related to the development, construction or improvement of the investment budgeted as of the date of acquisition.

We will incur customary acquisition and origination expenses in connection with the acquisition and/or origination (or attempted acquisition and/or origination) of our investments. We have assumed, for purposes of this table that customary acquisition and origination expenses (including expenses relating to potential investments that we do not close) will be an amount equal to 0.6% of the targeted investment capital from this primary offering, excluding fees and expenses associated with such investments. Customary acquisition and origination expenses include legal fees and expenses (including fees of in-house counsel that are not employees or affiliates of the advisor), costs of due diligence, travel and communication expenses, accounting fees and expenses and other closing costs and miscellaneous expenses relating to the acquisition or origination of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments.

This table excludes debt proceeds. To the extent we fund our investments with debt, as we expect, the targeted investment capital and the amount of acquisition and origination fees and acquisition and origination expenses will be proportionately greater. If we raise the maximum offering amount and our assumptions with respect to the amount of fees paid remain unchanged and our debt financing and other liabilities are equal to our maximum target leverage such that our total liabilities do not exceed 60% of the cost of our tangible assets (before deducting depreciation and other non-cash reserves), then we estimate that acquisition and origination fees would be $55,070,034 and acquisition and origination expenses would be $12,954,413.

The estimate of acquisition and origination fees is based on the compensation structure under the advisory agreement in effect until February 16, 2016 and as currently in effect. Compensation to be paid to KBS Capital Advisors may be increased without the approval of our stockholders. Our charter limits our ability to make an investment if the total of all acquisition and origination 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 a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction approves the fees and expenses and finds the transaction to be commercially competitive, fair and reasonable to us.

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-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. To the extent we use the net proceeds from the dividend reinvestment plan to invest in real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments, our advisor or its subsidiary would earn the related acquisition and origination fees and we would incur additional acquisition and origination expenses.

⁽⁶⁾ We may incur expenses relating to our investments, such as purchasing a loan senior to ours to protect our junior position in the event of a default by the borrower on the senior loan, making protective advances to preserve collateral securing a loan, or making capital and tenant improvements or paying leasing costs and commissions related to real property. At the time we make an investment, we will establish estimates of the capital needs of such investment through the anticipated hold period of the investment. Depending on how much we raise in this offering, we expect to use between 0.25% and 1.0% 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.

⁽⁷⁾ Until required in connection with investment in real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments, 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. Targeted investment capital from the primary offering may also include anticipated capital improvement expenditures and tenant leasing costs.

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; reserves required by any financings of our investments; future funding obligations under any real estate loan receivable we acquire; the acquisition or origination of assets, which would include payment of acquisition and origination fees to our advisor; the repayment of debt; and expenses relating to our investments, such as purchasing a loan senior to ours to protect our junior position in the event of a default by the borrower on the senior loan, making protective advances to preserve collateral securing a loan, or making capital and tenant improvements or paying leasing costs and commissions related to real property.

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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-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments, subject to the board’s supervision. Because of the conflicts of interest created by the relationships among us, 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.”

Our board of directors is comprised of five members, three of whom are independent. An “independent director” is a person who is not one of our officers or employees or an officer or employee of KBS Capital Advisors or its 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 will serve 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. Under our charter, a majority of the shares entitled to vote and present in person or by proxy at a meeting of stockholders at which a quorum is present is required for the election of the directors at a meeting of stockholders called for that purpose. This means that, of the shares entitled to vote and present in person or by proxy, a director nominee needs to receive affirmative votes from a majority of such shares in order to be elected to our board of directors. 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. 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 at any meeting of stockholders called expressly for that purpose. The notice of the meeting will indicate that the purpose, or one of the purposes, of the meeting is to determine if the director(s) shall be removed.

Unless otherwise provided by Maryland law, our 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 the 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 our 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.

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 although we expect our conflicts committee would act on these matters.

Our general investment and borrowing policies are set forth in this prospectus. Our directors may establish further written policies on investments and borrowings and will 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.

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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. Currently our board has two committees: the audit committee and the conflicts committee, each of which consist solely of independent directors.

Audit Committee

Our board of directors has established an audit committee that consists solely of independent directors. The audit committee assists 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 also selects the independent public accountants to audit our annual financial statements, review with the independent public accountants the plans and results of the audit engagement and 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, that is, all of our directors who are not affiliated with our advisor. 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. Subject to the limitations in our charter and with stockholder approval, the conflicts committee may also create stock-award plans.

Executive Officers and Directors

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

Name*	Age**	Positions
Keith D. Hall	57	Chief Executive Officer and Director
Peter McMillan III	58	Chairman of the Board, President and Director
Jeffrey K. Waldvogel	38	Chief Financial Officer, Treasurer and Secretary
Stacie K. Yamane	51	Chief Accounting Officer
Michael L. Meyer	77	Independent Director
William M. Petak	54	Independent Director
Laurent Degryse	49	Independent Director

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* The address of each executive officer and director listed is 800 Newport Center Drive, Suite 700, Newport Beach, California 92660.

** As of January 1, 2016.

Keith D. Hall is our Chief Executive Officer and one of our directors, positions he has held since our formation in February 2013. He is also Chief Executive Officer and a director of KBS Strategic Opportunity REIT, positions he has held since December 2008 and October 2008, respectively. He is also an Executive Vice President of KBS REIT I, KBS REIT II, KBS REIT III, and KBS Growth & Income REIT, positions he has held for these entities since June 2005, August 2007, January 2010 and January 2015, respectively. In addition, Mr. Hall is a sponsor of our company, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT, which were formed in 2013, 2005, 2007, 2009, 2008, 2009 and 2015, respectively. Mr. Hall

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owns and controls a 50% interest in GKP Holding LLC. GKP Holding owns a 33 1/3% interest in KBS Holdings LLC, which is the sole owner of our advisor and our dealer manager. All four of our sponsors, Messrs. Bren, Hall, McMillan and Schreiber, actively participate in the management and operations of our advisor. Mr. Hall is also a member of the investment committee formed by our advisor to evaluate and authorize new investment opportunities for us.

Mr. Hall is a co-founder of Willowbrook Capital Group, LLC, which, from August 2003 until December 2012, was an asset management company. Prior to forming Willowbrook in 2000, Mr. Hall was a Managing Director at CS First Boston, where he managed the distribution strategy and business development for the Principal Transaction Group’s $18.0 billion real estate securities portfolio. Mr. Hall’s two primary business unit responsibilities were Mezzanine Lending and Commercial Real Estate Development. Before joining CS First Boston in 1996, he served as a Director in the Real Estate Products Group at Nomura Securities, with responsibility for the company’s $6.0 billion annual pipeline of fixed-income, commercial mortgage-backed securities. During the 1980s, Mr. Hall was 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. Mr. Hall received a Bachelor of Arts Degree with honors in Finance from California State University, Sacramento.

Our board of directors has concluded that Mr. Hall is qualified to serve as one of our directors for reasons including his expertise in the real estate finance markets and his expertise with real estate-related investments. With over 30 years of experience investing in and managing real estate-related investments, Mr. Hall has the depth and breadth of experience to implement our business strategy. As an executive officer and principal of our advisor, Mr. Hall is able to direct our board of directors to the critical issues facing our company.

Peter McMillan III is our President, the Chairman of the Board and one of our directors, positions he has held since our formation in February 2013. He is also President, Chairman of the Board and a director of KBS Strategic Opportunity REIT, positions he has held since December 2008. He is also an Executive Vice President, Treasurer, Secretary and a director of KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT, and an Executive Vice President of KBS Legacy Partners Apartment REIT, positions he has held for these entities since June 2005, August 2007, January 2010, January 2015 and August 2009, respectively. In addition, Mr. McMillan is a sponsor of our company, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT, which were formed in 2013, 2005, 2007, 2009, 2008, 2009 and 2015, respectively. Mr. McMillan owns and controls a 50% interest in GKP Holding LLC. GKP Holding owns a 33 1/3% interest in KBS Holdings LLC, which is the sole owner of our advisor and our dealer manager. All four of our sponsors, Messrs. Bren, Hall, McMillan and Schreiber, actively participate in the management and operations of our advisor. Mr. McMillan is also a member of the investment committee formed by our advisor to evaluate and authorize new investment opportunities for us.

Mr. McMillan is a Partner and co-owner of Temescal Canyon Partners LP, an investment advisor formed in 2013 to manage a multi-strategy hedge fund on behalf of investors. Mr. McMillan is also a co-founder and the Managing Partner of Willowbrook Capital Group, LLC which, from August 2003 until December 2012, was an asset management company. Prior to forming Willowbrook in 2000, Mr. McMillan served as an 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 member of the Board of Trustees of Metropolitan West Funds and TCW Mutual Funds and is a former director of Steinway Musical Instruments, Inc.

Our board of directors has concluded that Mr. McMillan is qualified to serve as one of our directors and the Chairman of the Board for reasons including his expertise in real estate finance and with real estate-related investments. With over 30 years of experience investing in and managing real estate-related debt investments, Mr. McMillan offers insights and perspective with respect to our real estate-related investment portfolio as well as our real estate portfolio. As one of our executive officers and a principal of our advisor, Mr. McMillan is also able to direct our board of directors to the critical issues facing our company. Further, his experiences as a director of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Growth and Income REIT, TCW Mutual Funds and Metropolitan West Funds and as a former director of Steinway Musical Instruments, Inc. provide him with an understanding of the requirements of serving on a public company board and qualify him to serve as the chairman of our board of directors.

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Michael L. Meyer is one of our independent directors and is the chair of the audit committee, positions he has held since April 2014. He is also an independent director and the chairman of the audit committee of KBS Legacy Partners Apartment REIT and KBS Strategic Opportunity REIT, positions he has held for these entities since January 2010 and October 2009, respectively. 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 and/or manager of real estate entities and provides those entities with property acquisition, financing and management services and advice. Since June 2006, Mr. Meyer also has been a principal of TwinRock Partners, LLC (formerly known as AMG Realty Investors, LLC), a commercial and residential 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 and Audit Partner of the E&Y Kenneth Leventhal Real Estate Group of Ernst & Young LLP and its predecessor. Mr. Meyer is a director and member of the audit committee of Opus Bank, positions he has held since September 2010. Additionally, Mr. Meyer previously served as a director and member of the audit committee of City National Bank and City National Corporation, as a director and member of the audit committee of William Lyon Homes, Inc. and as a director and chair of the audit committee of 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 received a Bachelors of Business Administration from the University of Iowa. He is a Certified Public Accountant (inactive California).

Our board of directors has concluded that Mr. Meyer is qualified to serve as one of our independent directors and the chairman of our audit committee for reasons including his expertise with respect to residential and commercial real estate investments and accounting and financial reporting matters. With over 12 years of experience investing in residential and commercial real estate and providing residential and commercial real estate acquisition, financing and management services and advice, Mr. Meyer is well-positioned to advise the board with respect to potential investment opportunities and investment management. In addition, with over 35 years of experience as an independent Certified Public Accountant or auditor for real estate companies, Mr. Meyer provides our board of directors with substantial expertise regarding real estate accounting and financial reporting matters. Further, Mr. Meyer’s experience as a director and chairman of the audit committee of KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, and his prior experience as a director and member of the audit committee of City National Bank and City National Corporation, as a director and member of the audit committee of William Lyon Homes, Inc. and as a director and chair of the audit committee of Paladin Realty Income Properties, Inc. provide him with an understanding of the requirements of serving on a public company board.

William M. Petak is one of our independent directors and is the chair of our conflicts committee, positions he has held since April 2014. He is also an independent director of KBS Strategic Opportunity REIT, a position he has held since October 2009. Since April 2009, Mr. Petak has served as the Managing Principal of CorAmerica Capital LLC, a commercial real estate loan investment manager. CorAmerica Capital was established to acquire discounted performing mortgage and real estate-related assets as well as originate new real estate investments. Mr. Petak has over 30 years of experience in the real estate industry and 20 years of experience investing in real estate-related debt investments. From January 2005 to April 2009, Mr. Petak served as Senior Vice President and Director for AIG Mortgage Capital, LLC, a subsidiary of American International Group, Inc. (AIG). Mr. Petak also served as National Head of Mortgage Lending and Real Estate for the retirement services company, SunAmerica, Inc., from January 1999 to August 2001, and served as Managing Director for AIG Investments, Inc. as well as National Head of Mortgage Lending and Real Estate for both SunAmerica and the life insurance company American General from August 2001 to April 2009. Both SunAmerica and American General were acquired by AIG in 1999 and 2001, respectively, and were managed on a mutually exclusive basis. Mr. Petak joined AIG with the merger of SunAmerica with AIG in 1999. Ultimately, Mr. Petak was responsible for AIG Mortgage Capital’s regulated insurance portfolios’ fixed income real estate investments nationwide. He served on both the Securitized Products Group Committee and Global Asset Allocation Committee for the regulated insurance companies of AIG.

Prior to joining AIG in 1999, Mr. Petak was SunAmerica Investments’ Senior Vice President. Mr. Petak was responsible for SunAmerica’s national mortgage lending and real estate investments as well as its leveraged lease real estate acquisitions. From 1996 to 2007, Mr. Petak served as a Loan Committee member and as a member of the board of directors for GreenPark Financial, one of the nation’s largest Fannie Mae DUS lenders. From 1983 to 1989, he worked

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with Pacific Financial Group, a privately held Beverly Hills real estate investment company, as Vice President of Acquisitions.

Mr. Petak is a graduate of the University of Southern California with a Bachelor of Science in Finance and Business Economics. He is a member of the Mortgage Bankers Association, the Commercial Mortgage Securities Association, the CRE Financial Council, Life Mortgage and Real Estate Officer Council and the President’s Council of the Real Estate Roundtable. Mr. Petak is a founding member of the Richard S. Ziman Center for Real Estate at the UCLA Anderson School of Management. He currently is Chairman Emeritus of the Center and previously served as its Chairman.

Our board of directors has concluded that Mr. Petak is qualified to serve as one of our independent directors for reasons including his expertise in the real estate finance markets. With over 30 years of experience in the real estate industry and 20 years of experience investing in real estate-related debt, Mr. Petak offers insights and perspective with respect to our investment portfolio. Further, as a director of KBS Strategic Opportunity REIT and as a member of the Mortgage Bankers Association, the Commercial Mortgage Securities Association, the CRE Financial Council, Life Mortgage and Real Estate Officer Council, the President’s Council of the Real Estate Roundtable and a founding member, current Chairman Emeritus and past Chairman of the Richard S. Ziman Center for Real Estate at the UCLA Anderson School of Management, Mr. Petak is regularly and actively engaged in both the professional and academic community.

Laurent Degryse is one of our independent directors, a position he has held since April 2014. Mr. Degryse has been involved in the real estate development industry for over 20 years with a focus on real estate activities in Belgium. For the past five years he has been self-employed and engaged in real estate development and venture capital activities. In 2002, Mr. Degryse founded Urbis Development, a real estate development company located in Luxemburg, and served as its Managing Director until, in 2008, it created a joint venture with another real estate company, Herpain SA, and became Herpain Urbis.

Since December 2007 he has also served as the Managing Director of Hunza Ventures and Managing Partner of Hunza Management, affiliated venture capital companies based in Luxemburg that invest in technology and life science projects. In connection with his position at Hunza Ventures, he serves as a member of the supervisory board of Hunza Ventures II SCA SICAR, a fund raised by Hunza Ventures that is investing and raising capital for venture investments; and from December 2007 through June 2012 he served as a member of the supervisory board of Hunza Ventures SCA SPF, a fund that raised and fully invested €15 million in 14 venture investments. Mr. Degryse also manages his own portfolio of investments in Europe, Asia and the United States.

In addition, Mr. Degryse has served as the chairman of the board of SoftKinetic International SA since 2008. He is currently a director of Herpain Urbis Retail (since 2008) and previously served as a director of Herpain Urbis (from 2007 - 2013) and Herpain Enterprise (from 2008 - 2013). Herbain Urbis Retail, Herpain Urbis and Herpain Enterprise are related companies with expertise in real estate development and construction for office, residential and commercial real estate in Belgium. In addition, from March 2007 through March 2012 he served as a member of the supervisory board of Urbis SCA. Mr. Degryse is a member of the board of trustees and member of the finance and the audit committee of MOCA, the Museum of Contemporary Art in Los Angeles, California. Mr. Degryse is a graduate of the Solvay Business School at the University of Brussels, Belgium where he received a Master in Business Engineering.

Our board of directors has concluded that Mr. Degryse is qualified to serve as one of our independent directors for reasons including his expertise in the real estate development business. With over 20 years of experience in the real estate industry, with a particular focus on investments in Belgium, Mr. Degryse offers insights and perspective with respect to our investment portfolio and our focus on European investment opportunities.

Jeffrey K. Waldvogel is our Chief Financial Officer, Treasurer and Secretary, positions he has held since June 2015. He is also the Chief Financial Officer of our advisor, KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT, positions he has held for each of these entities since June 2015. He is also the Chief Financial Officer, Treasurer and Secretary of KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT, positions he has held for each of these entities since June 2015. Mr. Waldvogel is a member of the investment committee formed by KBS Capital Advisors to evaluate and recommend new investment opportunities for us.

Mr. Waldvogel has been employed by an affiliate of KBS Capital Advisors since November 2010. With respect to the KBS-sponsored REITs advised by KBS Capital Advisors, he served as the Director of Finance and Reporting from July 2012 to June 2015 and as the VP Controller Technical Accounting from November 2010 to July 2012. In these roles

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Mr. Waldvogel was responsible for overseeing internal and external financial reporting, valuation analysis, financial analysis, REIT compliance, debt compliance and reporting, and technical accounting.

Mr. Waldvogel was a Senior Manager at Ernst & Young LLP, where he worked from October 2002 to October 2010. In April 2002, Mr. Waldvogel received a Master of Accountancy Degree and Bachelor of Science from Brigham Young University in Provo, Utah. Mr. Waldvogel is a Certified Public Accountant (California).

Stacie K. Yamane is our Chief Accounting Officer, a position she has held since our formation in February 2013. Ms. Yamane is also the Chief Accounting Officer, Portfolio Accounting of our advisor and Chief Accounting Officer of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT, positions she has held for these entities since October 2008, October 2008, October 2008, January 2010, August 2009, August 2009 and January 2015, respectively. From July 2007 until December 2008, Ms. Yamane served as the Chief Financial Officer of KBS REIT II and from July 2007 to October 2008, she served as Controller of KBS REIT II; from October 2004 to October 2008, she served as Fund Controller of our advisor; from June 2005 to December 2008, she served as Chief Financial Officer of KBS REIT I; and from June 2005 to October 2008 she served as Controller of KBS REIT I.

Ms. Yamane also 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 advisors from 1995 to 2004. At KBS Realty Advisors, from 2004 through 2015, Ms. Yamane was responsible for client accounting/reporting for two real estate portfolios. These portfolios consisted of industrial, office and retail properties as well as land parcels. Ms. Yamane worked 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 assisted in the supervision and management of KBS Realty Advisors’ accounting department.

Prior to joining an affiliate of KBS Realty Advisors in 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 in accordance with GAAP, 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 with various KBS-affiliated entities and Kenneth Leventhal & Company give her over 27 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).

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 is 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 is paid $3,000 for each teleconference meeting of the committee.

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.

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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 and its 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 a non-independent director, KBS Capital Advisors 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 common 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, KBS Capital Advisors, its 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 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 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 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 have also purchased 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, an investment adviser registered with the SEC. KBS Capital Advisors is a limited liability company that was formed in the State of Delaware on October 18, 2004. As our advisor, KBS Capital Advisors has contractual and fiduciary responsibilities to us and our stockholders.

Peter M. Bren and Charles J. Schreiber, Jr. indirectly own a controlling interest in and are the managers of KBS Capital Advisors. 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. Hall and McMillan, see “Management - Executive Officers and Directors” and “- Other Affiliates - Our Sponsors.”

Below is a brief description of the background and experience of the key real estate and debt finance professionals, other than Messrs. de Broglie, Hall, McMillan, and Waldvogel who are the members of the investment committees formed by KBS Capital Advisors to evaluate and authorize new investment opportunities in the United States and Europe for us. In addition to Mr. de Broglie, our advisor expects to appoint two additional individuals from

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STAM to its investment committee for European investments. For more information regarding the background and experience of Mr. de Broglie, see “Management - Our Advisor’s Strategic Relationship with STAM.”

Peter M. Bren, 82, is the Chairman and President of our advisor, KBS Capital Advisors, and President of KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT, positions he has held for these entities since October 2004, June 2005, August 2007, January 2010 and January 2015, respectively. Mr. Bren is President and a director of KBS Legacy Partners Apartment REIT, positions he has held since August 2009 and July 2009, respectively. In addition, Mr. Bren is a sponsor of our company, KBS REIT I, KBS REIT II, KBS REIT III, KBS Legacy Partners Apartment REIT, KBS Strategic Opportunity REIT and KBS Growth & Income REIT, which were formed in 2013, 2005, 2007, 2009, 2009, 2008 and 2015, respectively. 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 is the sole owner of our advisor and our dealer manager. All four of our sponsors, Messrs. Bren, Hall, McMillan and Schreiber, actively participate in the management and operations of our advisor.

Mr. Bren is Chairman of the Board and President of KBS Realty Advisors LLC and is a principal of Koll Bren Schreiber Realty Advisors, Inc., each an active and nationally recognized real estate investment advisor. These entities are registered as investment advisers with the SEC. The first investment advisor affiliated with Messrs. Bren and Schreiber was formed in 1992. As of December 31, 2014, KBS Realty Advisors, together with KBS affiliates, including KBS Capital Advisors, had been involved in the investment in or management of approximately $20.3 billion of real estate investments on behalf of institutional investors, including public and private pension plans, endowments and foundations, institutional and sovereign wealth funds, and the investors in us, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT.

Mr. Bren has been involved in real estate development, management, acquisition, disposition and financing for more than 40 years and with the acquisition, origination, management, disposition and financing of real estate-related debt investments for more than 20 years. Prior to taking his current positions as Chairman of the Board and President of KBS Capital Advisors and KBS Realty Advisors, he served as the President of The Bren Company, was a Senior Partner of Lincoln Property Company and was President of Lincoln Property Company, Europe. Mr. Bren is also a founding member of the Richard S. Ziman Center for Real Estate at the UCLA Anderson School of Management. He is also a member of the Real Estate Roundtable in Washington, D.C.

Charles J. Schreiber, Jr., 64, is the Chief Executive Officer of our advisor, a position he has held since October 2004. He is also the Chairman of the Board, Chief Executive Officer and a director of KBS REIT I and KBS Growth & Income REIT, positions he has held since June 2005 and January 2015, respectively. He is also the Chairman of the Board, Chief Executive Officer and a director of KBS REIT II, positions he has held since August 2007, August 2007 and July 2007, respectively. He is also the Chairman of the Board, Chief Executive Officer and a director of KBS REIT III, positions he has held since January 2010, January 2010 and December 2009, respectively. In addition, Mr. Schreiber is a sponsor of our company, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT, which were formed in 2008, 2005, 2007, 2009, 2008, 2009 and 2015, respectively. Other than de minimis amounts owned by family members or family trusts, Mr. Schreiber indirectly owns and controls a 33 1/3% interest in KBS Holdings LLC, which is the sole owner of our advisor and our dealer manager. All four of our sponsors, Messrs. Bren, Hall, McMillan and Schreiber, actively participate in the management and operations of our advisor.

Mr. Schreiber is the Chief Executive Officer of KBS Realty Advisors LLC and is a principal of Koll Bren Schreiber Realty Advisors, Inc., each an active and nationally recognized real estate investment advisor. These entities are registered as investment advisers with the SEC. The first investment advisor affiliated with Messrs. Bren and Schreiber was formed in 1992. As of December 31, 2014, KBS Realty Advisors, together with KBS affiliates, including KBS Capital Advisors, had been involved in the investment in or management of approximately $ 20.3 billion of real estate investments on behalf of institutional investors, including public and private pension plans, endowments and foundations, institutional and sovereign wealth funds, and the investors in us, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT.

Mr. Schreiber has been involved in real estate development, management, acquisition, disposition and financing for more than 40 years and with the acquisition, origination, management, disposition and financing of real estate-related debt investments for more than 20 years. Prior to teaming with Mr. Bren in 1992, he served as the Executive Vice President of Koll Investment Management Services and Executive Vice President of Acquisitions/Dispositions for The Koll Company. During the mid-1970s through the 1980s, he was Founder and President of Pacific Development

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Company and was previously Senior Vice President/Southern California Regional Manager of Ashwill-Burke Commercial Brokerage.

Mr. Schreiber graduated from the University of Southern California with a Bachelor’s Degree in Finance with an emphasis in Real Estate. During his four years at USC, he did graduate work in the then newly-formed Real Estate Department in the USC Graduate School of Business. He is currently an Executive Board Member for the USC Lusk Center for Real Estate at the University of Southern California Marshall School of Business/School of Policy, Planning and Development. Mr. Schreiber also serves as a member of the Executive Committee for the Public Non-Listed REIT Council for the National Association of Real Estate Investment Trusts.

James Chiboucas, 56, 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-affiliated entities 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 real estate investments across the United States, including management of local counsel in each of the jurisdictions involved with acquisitions and dispositions. He is also a member of the investment committee formed by KBS Capital Advisors to evaluate and recommend new investment opportunities for us. Mr. Chiboucas is a member of the investment committee for the limited purpose of approving potential investments from a legal and regulatory compliance standpoint. 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.

Geoffrey Hawkins, 52, has served as Managing Director of KBS Capital Advisors since he joined KBS Capital Advisors in 2006. As Managing Director, Mr. Hawkins oversees acquisition, asset management and disposition activities with respect to commercial mortgage-backed securities and collateralized debt obligations. Mr. Hawkins is the regional manager for mortgage debt originations and distressed opportunities in the Midwest region of the U.S. Mr. Hawkins is also a member of the investment committee formed by KBS Capital Advisors to evaluate and authorize new investment opportunities for us and KBS Strategic Opportunity REIT. From 2002 to 2006, Mr. Hawkins was an Executive Director and Senior Portfolio Manager for Forum Partners, an international commercial real estate private equity group with $1.5 billion in assets as of 2006. At Forum, Mr. Hawkins managed real estate-related investments in the United States, Europe and Asia. He was in charge of the fixed income group, which invested in residential and commercial mortgage backed securities, asset-backed securities and whole loans for its family of funds, which included a mutual fund, an ETF, and several different opportunity funds. From 1992 to 2002, Mr. Hawkins was a Portfolio Manager at the Capital Group Companies. At Capital Group, he was in charge of managing fixed income portfolios in excess of $2 billion, with assets in the structured finance (residential and commercial mortgage-backed securities, asset backed securities and collateralized debt obligations), REIT and specialty finance company sectors in the United States, Europe, Latin American and Asia. Mr. Hawkins managed bond portfolios for subsidiaries of the Capital Group, which included the American Funds, Capital Guardian & Trust Company, and Capital International. From 1991 to 1992, Mr. Hawkins worked for FHLMC (Freddie Mac) as a Senior Financial Analyst in the Structured Finance Group. His responsibilities included the structuring and modeling of collateralized mortgage obligations. From 1988 to 1991, Mr. Hawkins worked as an accountant and then the controller of Highland Management and Development Company, a regional commercial real estate company. Mr. Hawkins has over 24 years’ experience investing in the global commercial real estate and structured finance markets, with more than 20 years of experience specifically related to real estate-related debt investments. Mr. Hawkins holds a BBA in Finance from the University of Iowa and a MBA from DePaul University.

Brian Ragsdale, 55, has served as Executive Vice President, Head of Credit for KBS Capital Advisors since he joined KBS Capital Advisors in 2007. As Executive Vice President, Head of Credit, Brian Ragsdale oversees underwriting, origination, acquisition, asset management and disposition activities with respect to loan investments. Mr. Ragsdale is also a member of the investment committee formed by KBS Capital Advisors to evaluate and authorize new investment opportunities for us and KBS Strategic Opportunity REIT. From 2002 to 2007, Mr. Ragsdale was Vice President, Mortgage Lending and Real Estate at AIG Global Investment Corp. where he was responsible for the supervision of refinance transactions in AIG’s real estate-related loan portfolio consisting of approximately 1500 loans valued at approximately $13 billion. From 2000 to 2002, Mr. Ragsdale was Senior Vice President, Client Portfolio

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Management for Trammell Crow Company, where he was responsible for the development, brokerage and management of portfolios of commercial real estate consisting of approximately 26 locations and totaling more than 7.2 million square feet of office and industrial space. From 1999 to 2000, Mr. Ragsdale was Vice President, Asset and Portfolio Management for PM Realty Advisors where he oversaw a 30-asset, $450 million commercial real estate portfolio owned by a state employee retirement fund. From 1989 to 1999, Mr. Ragsdale worked for Metropolitan Life Insurance Company. At MetLife, Mr. Ragsdale analyzed and negotiated real estate-related debt and equity investment opportunities as an Investment Analyst and then subsequently managed and supervised such investment opportunities as an Investment Manager. From 1995 to 1998, Mr. Ragsdale served as a Senior Committee member of the investment committee responsible for the review and approval of all transactions associated with MetLife’s $20 billion debt and equity real estate portfolio. Mr. Ragsdale has over 21 years’ experience identifying, supervising and managing real estate-related investment opportunities, with 12 years of experience specifically related to real estate-related debt investments. Mr. Ragsdale graduated from the University of Arizona with a BS degree and later received his MBA from Southern Methodist University in Dallas, Texas. He is also the recipient of a Costa School of Real Estate Certificate, Southern Methodist University.

James Rodgers, 35, is the head of acquisitions for us and for KBS Strategic Opportunity REIT. As head of acquisitions he is responsible for originating, underwriting and structuring investments in both debt and equity, and managing the investment team. He is also a member of the European investment committee formed by KBS Capital Advisors to evaluate and authorize new investment opportunities for us in Europe. Prior to joining KBS Capital Advisors, Mr. Rodgers was an investment banker with Merrill Lynch in New York from 2004 to 2007. He began his career in the Asset Backed Securities group, where he structured and originated public securities offerings for Merrill’s large corporate clients. He later transitioned into the Global Structured Finance and Investments division, where he focused on investing the group’s $20 billion balance sheet in structured debt, including secured warehouse loans, portfolio investments, and joint venture partnerships. Mr. Rodgers holds an MBA from UCLA Anderson School of Management, where he focused in real estate and finance. He earned his bachelor’s degree from the University of California, Berkeley.

The Advisory Agreement

Under the terms of the advisory agreement, KBS Capital Advisors will 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 manages our day-to-day operations, retains the loan servicers for our loan investments (subject to the authority of our board of directors and officers) and performs other duties, including, but not limited to, the following:

• finding, presenting and recommending investment opportunities to us consistent with our investment policies and objectives;

• making investment decisions for us, subject to the limitations in our charter and the direction and oversight of our board of directors;

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

• acquiring investments on our behalf in compliance with our investment objectives and policies;

• sourcing and structuring our loan originations;

• arranging for financing and refinancing of investments;

• entering into service contracts for our loans;

• supervising and evaluating each loan servicer’s and property manager’s performance;

• reviewing and analyzing the operating and capital budgets of properties underlying our investments and properties we may acquire;

• entering into leases and service contracts for our real properties;

• assisting us in obtaining insurance;

• generating an annual budget for us;

• 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, financing and refinancing, marketing, servicing and disposition of our investments;

• performing investor-relations services;

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• 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. Compensation to be paid to KBS Capital Advisors may be increased without the approval of our stockholders. We also describe in that section our obligation to reimburse KBS Capital Advisors for commercially reasonable organization and offering expenses, the costs of providing services to us (other than for the employee costs in connection with services for which it earns acquisition and origination fees or disposition fees, though we may reimburse the advisor for travel and communication expenses) and payments made by KBS Capital Advisors for amounts it pays in connection with the selection, acquisition or origination of an investment, whether or not we ultimately acquire or originate the investment.

It is the duty of our board of directors to evaluate the performance of our advisor before renewing the advisory agreement. The criteria used in such evaluation will be reflected in the minutes of the meeting at which the performance and criteria are discussed. Our board of directors will determine that any successor entity possesses sufficient qualifications to perform the advisory functions and that the compensation provided for in the advisory agreement is justified.

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 an interest-bearing promissory note that becomes due only upon the sale of one or more assets or upon maturity or payoff of our debt investments. The fee is payable solely from the proceeds from the sale, maturity or payoff of an asset and future asset sales, maturities or payoffs, 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 exceed (ii) the amount necessary to provide investors with a return of their net capital contributions and a 7.0% per year cumulative, noncompounded 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. 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 do 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.

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Our Strategic Relationship with STAM

We have formed a strategic relationship with STAM, a commercial real estate investment and asset management firm headquartered in Paris, France to support us and our advisor in connection with any investments we make in Europe. Our advisor has entered a sub-advisory agreement with STAM, pursuant to which STAM will provide real estate acquisition and portfolio management services to our advisor in connection with any investments we make in Europe. For investments in Europe we make directly and our ownership interest is 100%, our advisor will compensate STAM for its services in sourcing and managing these investments from the fees it earns from us under the advisory agreement with us and we will pay STAM no additional compensation. We, along with our advisor, expect to enter a letter agreement with STAM that sets forth general compensation terms with respect to investments we make through STAM, other than through our direct investment in value-added real estate and distressed debt in Europe (which are governed by the sub-advisory agreement between STAM and our advisor). We can give no assurances as to the number, if any, of investments we may make in Europe.

STAM is a European real estate investment and fund manager created in 1997 to provide asset management of opportunistic and value-added investments in France for north-American investors. Over the years, its business practice has extended into investment management for a wider range of opportunistic investors, as well as into asset management for core real estate investments. Its real estate experience extends to all asset classes, including office, light industrial, warehouse, logistics, retail, and residential.

In 2005, STAM initiated its fund set-up and management activities and it currently manages two discretionary funds, STAM REI I and STAM REI III, with a combined investment capacity of €1 billion. STAM REI I is a core plus investment fund that was raised between April 2005 and May 2006 from 16 French institutional investors. Its €350 million investment capacity is fully invested, mainly in office buildings in the Paris and Brussels region. STAM REI III is a value-added investment fund that has been entirely raised with 14 investors (British, Irish and Dutch pension funds). It has an investment capacity of over €700 million and focuses on corporate real estate across France. With respect to the allocation of investment opportunities between us and STAM and its affiliates, the sub-advisory agreement between our advisor and STAM provides that any investment opportunity consistent with our investment objectives be presented first to our advisor for its consideration. Only those opportunities which are not presented to or approved by our board of directors or are inconsistent with our investment objectives may be presented to and acquired by STAM and its affiliates.

STAM operates in France, Germany, Italy, Spain and Belgium, with local offices in each of these countries. STAM has significant experience with investments in distressed debt and value-added and opportunistic investments and has implemented a wide range of value creating strategies: lease-up, rent-up, refurbishment or renovation, ground up development, re-development of existing assets, change of use, condominium conversion, and sale and lease back structuring. STAM has in-depth knowledge of and maintains close relations with the main European banking network. In addition, STAM has a significant European asset management platform with a track record in active debt asset management as well as defaulted debt transactions. Unique relative to most of the European banking community, STAM has the benefit of being able to take control of and add value to the underlying real estate in the event of borrower default. This makes STAM an attractive partner to banks, as they are able to outsource the responsibility for asset management to STAM in the event of failure.

Amongst STAM’s clients are Allianz Immobilien GMBH, British Telecom Pension Fund, Caisse d’Epargne, Carval Investors, Cerberus Real Estate Capital Management, CNP, Crédit Agricole, Crédit Suisse, DEGI, Fortis, Groupama, Hermes, MN Services, Royal Mail Pension Fund, Stichting Bedrijfstakpensioenfonds Voor de Metalelektro, Westbrook Partners. Please note that none of the 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 STAM. We included their names only for purposes of your evaluation of the experience and reputation of our advisor’s sub-advisor and their team of real estate and debt finance professionals.

The background and experience of the key personnel at STAM who provide management services to our advisor is summarized below:

Antoine de Broglie, 63, is founder, shareholder and chairman of the management board of STAM. Prior to creating STAM, Mr. de Broglie launched Transinvest in 1992, as one of the first specialized real estate investment banking firms in France. In addition, Mr. de Broglie was Chairman of the French ULI Council from 2004 to 2007.

Bruno Cosse, 52, has served as Chief Financial Officer of STAM since 2002. Prior to joining STAM, Mr. Cosse, was Financial Manager of Thomson CSF Finance, a subsidiary of Thale`s (ex Thomson). As Financial Manager, Mr. Cosse was primarily responsible for back office, financial control and accounting. In 1994, Mr. Cosse joined the

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CDR, the largest real estate defeasance organized in France (Crédit Lyonnais), where he was in charge of the financial control department and was a financial adviser in the asset disposition process. Mr. Cosse holds a diploma from the Institut d’Etudes Politiques de Paris and a MBA from New York University.

Edward Bates is Managing Director of STAM. Prior to joining STAM, Mr. Bates was a Senior Principal and Co-Head of Real Estate at Doughty Hanson & Co. where he was a member of the Investment Committee for both Fund I and II and was involved in fundraising, acquisitions, asset management and dispositions across Europe. He has in-depth experience in the European real estate markets, including residential, office, retail, industrial, logistics and hotel. He has been involved in developing and investing in more than 40 transactions totaling approximately €3 billion. Prior to Doughty Hanson, Mr. Bates spent almost 10 years at Orion Capital Managers and served as an Investment Director. Mr. Bates has 20 years of real estate investment experience in Europe and the USA. He is a member of the Urban Land Institute and a United Kingdom Financial Services Authority approved person.

The agreement with STAM may be terminated by our advisor in the event of (i) any breach by STAM of one of its material obligations under the sub-advisory agreement not cured within 30 days of written notice, (ii) a bankruptcy or commencement of a bankruptcy or similar insolvency proceedings, (iii) a change in control of STAM, (iv) any adverse change in the financial health of STAM which would result in STAM’s inability to comply with its material obligations under the sub-advisory agreement, or (v) the termination or non-renewal of our advisor by us. These agreements may be terminated by STAM in the event of (i) a breach by our advisor or us of one of our material obligations under the sub-advisory or advisory agreement, as applicable, not cured within 30 days of written notice, (ii) any action or inaction by our advisor or us that causes a material adverse change to STAM in the terms of the sub-advisory agreement, (iii) a bankruptcy or commencement of a bankruptcy or similar insolvency proceedings, related to our advisor or us, (iv) our advisor’s unreasonable refusal three times in a row to approve investments proposed by STAM, provided, we have funds available for investment, (v) a change in control in our advisor, or (vi) any adverse change in the financial health of our advisor which would result in our advisor’s inability to comply with its material obligations under the sub-advisory agreement. Our advisor will retain ultimate responsibility for the performance of all matters entrusted to it under the advisory agreement.

Initial Investment by Our Advisor

Our sponsors, through their ownership interest in KBS Capital Advisors, have invested $200,000 in us through the purchase of 21,739 shares of our Class A common stock at $9.20 per share. KBS Capital Advisors is the owner of these 21,739 shares. KBS Capital Advisors may not sell any of these shares during the period it serves as our advisor. Although nothing prohibits KBS Capital Advisors or its affiliates from acquiring additional shares of our common stock, KBS Capital Advisors currently has no options or warrants to acquire any shares. KBS Capital Advisors has agreed to abstain from voting any shares it acquires in any vote for the election of directors or any vote regarding the approval or termination of any contract with KBS Capital Advisors or any of its affiliates. KBS Capital Advisors is indirectly owned and controlled by Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., who are our sponsors.

In the event the advisory agreement is terminated, the shares owned by KBS Capital Advisors would not be automatically redeemed. KBS Capital Advisors would, however, be able to participate in the share redemption program, subject to all of the restrictions of the share redemption program applicable to all other common stockholders.

Other Affiliates

Our 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 sponsors. All four of our sponsors actively participate in the management and operations of our advisor, and our advisor has three managers: an entity owned and controlled by Mr. Bren; an entity owned and controlled by Messrs. Hall and McMillan; and an entity owned and controlled by Mr. Schreiber.

In 2004, Messrs. Bren, Hall, McMillan and Schreiber founded KBS Capital Advisors, our advisor. Our sponsors work together at KBS Capital Advisors with their team of real estate and debt finance professionals. These senior real estate and debt finance professionals have been through multiple financial cycles in their careers and have the expertise gained through hands-on experience in acquisitions, originations, loan workouts, asset management, dispositions, development, leasing and property and portfolio management. Together with our four sponsors, Jeffrey Waldvogel, Geoffrey Hawkins, Brian Ragsdale and Jim Chiboucas comprise the investment committee of KBS Capital Advisors that is responsible for our investment decisions related to our investments in the United States. Our advisor has established a separate investment committee to consider our investments in Europe. Our advisor’s European investment

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committee is comprised of Peter McMillan, Keith Hall, Jeffrey Waldvogel, Brian Ragsdale, James Rodgers, Geoffrey Hawkins, Jim Chiboucas, and Antoine de Broglie, as well as two additional individuals to be named by STAM. Mr. Chiboucas is a member of the investment committees for the limited purpose of approving potential investments from a legal and regulatory compliance standpoint. Subject to any limitations in our charter and the oversight of our board of directors, the investment committees of KBS Capital Advisors evaluate and approve our investments and financings.

The business strategy of our sponsors is threefold: first, identify attractive investment opportunities that meet the investment objectives of their clients; second, aggressively manage each asset acquired; third, execute a well-defined exit strategy for each investment made.

We believe the experience and disciplined investment approach of our sponsors and the team of real estate and debt finance professionals they have assembled will allow us to successfully execute our business model. On January 27, 2006, our sponsors launched the initial public offering of KBS REIT I. KBS REIT I accepted gross offering proceeds of approximately $1.7 billion in its primary initial public offering and accepted aggregate gross offering proceeds of $233.7 million from shares issued pursuant to its dividend reinvestment plan. KBS REIT I ceased offering shares in its primary initial public offering on May 30, 2008 and terminated its dividend reinvestment plan effective April 10, 2012. As of December 31, 2014, KBS REIT I had used $85.4 million to fund share redemptions pursuant to its share redemption program. On April 22, 2008, our sponsors launched the initial public offering of KBS REIT II. KBS REIT II accepted aggregate gross offering proceeds of approximately $1.8 billion in its primary initial public offering and accepted $298.2 million from shares issued pursuant to its dividend reinvestment plan. KBS REIT II ceased offering shares in its primary initial public offering on December 31, 2010 and terminated its dividend reinvestment plan effective May 29, 2014. As of December 31, 2014, KBS REIT II had used $229.5 million to fund share redemptions pursuant to its share redemption program. On November 20, 2009, our sponsors launched the initial public offering of KBS Strategic Opportunity REIT. KBS Strategic Opportunity REIT accepted aggregate gross offering proceeds of approximately $561.7 million in its primary initial public offering and, as of December 31, 2014, had accepted $39.2 million from shares issued pursuant to its dividend reinvestment plan. KBS Strategic Opportunity REIT ceased offering shares in its primary initial public offering on November 14, 2012. As of December 31, 2014, KBS Strategic Opportunity REIT had used $8.3 million to fund share redemptions pursuant to its share redemption program. On March 12, 2010, together with Legacy Partners Residential Realty LLC and certain of its affiliates, our sponsors launched the initial public offering of KBS Legacy Partners Apartment REIT. KBS Legacy Partners Apartment REIT ceased offering shares of common stock in its primary initial public offering on March 12, 2013. On March 13, 2013, KBS Legacy Partners Apartment REIT commenced a follow-on public offering. KBS Legacy Partners Apartment REIT ceased offering shares of common stock in its follow-on public offering, effective as of March 31, 2014. KBS Legacy Partners Apartment REIT accepted aggregate gross offering proceeds of approximately $204.4 million in its primary public offerings and, as of December 31, 2014, had accepted $12.9 million from shares issued pursuant to its dividend reinvestment plan. As of December 31, 2014, KBS Legacy Partners Apartment REIT had used $4.2 million to fund share redemptions pursuant to its share redemption program. On October 26, 2010, our four sponsors launched the initial public offering of KBS Real Estate Investment Trust III, Inc., which we refer to as KBS REIT III. As of December 31, 2014, KBS REIT III had accepted aggregate gross offering proceeds of $1.2 billion, including $47.7 million from shares sold pursuant to its dividend reinvestment plan. As of December 31, 2014, KBS REIT III had used $7.2 million to fund share redemptions pursuant to its share redemption program. KBS REIT III ceased offering shares in its primary initial public offering on May 29, 2015.

Our advisor, KBS Capital Advisors, is the external advisor of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, and KBS Growth & Income REIT. Some or all of our sponsors are directors and/or executive officers of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, and KBS Growth & Income REIT. Through their affiliations with us, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, and KBS Legacy Partners Apartment REIT and KBS Capital Advisors, as of December 31, 2014, our sponsors had overseen the investment in and management of approximately $11.9 billion of real estate and real estate-related investments on behalf of the investors in us, KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT.

Since 1992, Messrs. Bren and Schreiber have teamed to invest in, manage, develop and sell high-quality U.S. commercial real estate and real estate-related investments on behalf of institutional investors. Together, they founded KBS Realty Advisors LLC, a registered investment adviser with the SEC and a nationally recognized real estate investment advisor. When we refer to a “KBS-sponsored program,” we are referring to the private entities sponsored by an investment advisor affiliated with Messrs. Bren and Schreiber and to the non-traded REITs, KBS REIT I, KBS REIT

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II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Growth & Income REIT and our company, that are currently being sponsored by Messrs. Bren, Hall, McMillan and Schreiber. As noted above, our sponsors are sponsoring KBS Legacy Partners Apartment REIT together with Legacy Partners Residential Realty LLC and certain of its affiliates. 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 investment advice. These investment advisors are also affiliated with our advisor.

Messrs. Bren and Schreiber each has been involved in real estate development, management, acquisition, disposition and financing for more than 40 years. Over that time, Messrs. Bren and Schreiber have developed extensive experience investing in and managing a broad range of real estate asset classes. Since 1992, the experience of the investment advisors affiliated with Messrs. Bren and Schreiber includes (as of December 31, 2014) sponsoring 14 private real estate programs that had invested over $4.2 billion (including equity, debt and investment of income and sales proceeds) in 301 real estate assets. In addition to their experience with these 14 private KBS-sponsored programs, investment advisors affiliated with Messrs. Bren and Schreiber have also been engaged by four other KBS-advised investors to recommend real estate acquisitions and manage some of their investments. The investment proceeds of these KBS-advised investors were not commingled. The investments made on behalf of these four KBS-advised investors were made pursuant to management agreements or partnership agreements that permitted the KBS-advised investors to reject acquisitions recommended by the KBS-affiliated investment advisor. Because the KBS-advised investors were not as passive as those in the 14 private KBS-sponsored programs described above or as those who invest in this offering, we have not described the real estate assets acquired or managed for these four KBS-advised investors. The amounts paid for the assets acquired and/or managed and for subsequent capital expenditures for these four KBS-advised investors totaled over $4.1 billion.

Each of Messrs. Hall and McMillan has over 20 years of experience in real estate-related investments. Mr. McMillan is a Partner and co-owner of Temescal Canyon Partners LP, an investment advisor formed in 2013 to manage a multi-strategy hedge fund on behalf of investors. Mr. McMillan is also a co-founder and the Managing Partner of Willowbrook Capital Group, LLC which, from August 2003 until December 2012, was an asset management company. Before forming Willowbrook with Mr. Hall, Mr. McMillan served as 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 the distribution strategy and business development for the Principal Transaction Group’s $18 billion real estate securities portfolio. Before joining CS First Boston 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 commercial mortgage-backed securities. During the 1980s, Mr. Hall was 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.

Dealer Manager

We have retained KBS Capital Markets Group LLC, an affiliate of our advisor, to conduct this offering. KBS Capital Markets Group provides 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 also serves as dealer manager for KBS Growth & Income REIT’s private placement offering and expects to serve as dealer manager for KBS Growth & Income REIT’s proposed initial public offering. KBS Capital Markets Group also currently serves as dealer manager for KBS REIT III’s, KBS Strategic Opportunity REIT’s and KBS Legacy Partners Apartment REIT’s dividend reinvestment plan offerings. Previously it served as dealer manager for KBS REIT I’s, KBS REIT II’s, KBS Strategic Opportunity REIT’s, KBS Legacy Partners Apartment REIT’s and KBS REIT III’s initial public offerings and KBS Legacy Partners Apartment REIT’s follow-on public offering as well as KBS REIT I’s and KBS REIT II’s dividend reinvestment plan offerings. In addition, from time to time, KBS Capital Markets Group serves as the dealer manager for private KBS-sponsored programs.

Our 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 Chief Executive Officer of KBS Capital Markets Group:

Mick Manning was appointed Chief Executive Officer of KBS Capital Markets Group effective May 8, 2015. As Chief Executive Officer, Mr. Manning is responsible for overall firm strategy of KBS Capital Markets Group and provides strategic and tactical guidance to the organization, with particular focus on product development, distribution, sales management, business planning and oversight of the firm's wholesaling operations and activities. Mr. Manning joined KBS Capital Markets Group in January 2006 as one of its original wholesalers and was promoted to national sales manager in June 2009. In January 2015, Mr. Manning was appointed President of KBS Capital Markets Group. Mr. Manning has more than 28 years of experience in the financial services industry, with a diverse background in retail sales and operations, wholesaling and team building. His experience comes from previous leadership roles with MFS/Sun Life, MassMutual, Metlife and Northwestern Mutual Life. Mr. Manning graduated from the University of Colorado, Boulder and holds a Chartered Life Underwriter designation from the American College in Bryn Mawr, Pennsylvania.

Management Decisions

The primary responsibility for the management decisions of our advisor and its affiliates resides with Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr. and the primary responsibility for the selection of investments, the negotiation for these investments and asset-management decisions will reside in the investment committees of our advisor. KBS Capital Advisors also has the authority to make all of the decisions regarding our investments, subject to any limitations in our charter and the direction and oversight of our board of directors.

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MANAGEMENT COMPENSATION

Although we have executive officers who manage our operations, we have no paid employees. Our advisor and the real estate and debt finance professionals at our advisor manage our day‑to‑day affairs and our portfolio of real estate investments, subject to our board of directors’ supervision. The following table summarizes all of the compensation and fees that we pay to our advisor and its affiliates, including amounts to reimburse their costs in providing services, and amounts that we will pay to our independent directors. Compensation to be paid to KBS Capital Advisors and KBS Capital Markets Group may be increased without the approval of our stockholders.

The amount of selling commissions differs among Class A shares and Class T shares, and there is an ongoing stockholder servicing fee with respect to Class T shares sold in the primary offering. Both classes of shares have discounts available to certain categories of purchasers. This table assumes that (a) 15% of the proceeds raised in the primary offering are from the sale of Class A shares and 85% of the proceeds raised in the primary offering are from the sale of Class T shares, (b) we do not further reallocate shares being offered between our primary offering and dividend reinvestment plan, (c) based on this allocation we sell all shares at the highest possible selling commissions and dealer manager fees (with no discounts to any categories of purchasers), and (d) solely with respect to the estimated stockholder servicing fee, 4% of the proceeds raised in the primary offering are from the sale of Class A shares through distribution channels that do not pay selling commissions of 6.5%. As we are registering any combination of the two classes of shares, our allocation between the Class A shares and the Class T shares is management’s best estimate based on the recommendation of our dealer manager and its perceived demand in the market for each respective class of shares. If the demand for the Class A and Class T shares varies materially from our assumptions as of the date of this prospectus, we will provide an updated management compensation table to reflect a revised allocation between the Class A and Class T shares in this offering. No selling commissions or dealer manager fees are payable on shares through our dividend reinvestment plan. In addition, no stockholder servicing fee will be paid with respect to Class T shares purchased through the dividend reinvestment plan or issued pursuant to a stock dividend; however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to all the Class T shares as a class expense. The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares.

Effective February 17, 2016, in connection with adding a Class T share to our offering, we amended and restated our advisory and dealer manager agreements to revise certain fees payable to our advisor and dealer manager and to limit the organization and other offering expenses that we are obligated to pay in connection with this offering. Specifically, the acquisition fee that is payable to our advisor increased from 1.5% to 2.6%. Our acquisition fee reflects the increased level of due diligence required to evaluate and acquire the types of opportunistic investments that we intend to acquire as part of our investment strategy, and as a result, the fee is at the higher end of the prevailing acquisition fee range for non-traded REITs.

The descriptions of the fees and expenses presented in the table below reflect the terms of our advisory and dealer manager agreements in effect as of the date of this prospectus.  Our estimates of the compensation and fees that we pay to our advisor and the dealer manager are based on a weighted average (determined from the primary offering proceeds raised on or prior to February 16, 2016) of the fees in effect prior the amendment and restatement of our advisory and dealer manager agreements and the terms of these agreements as currently in effect.  The limit adopted with respect to our obligation to pay organization and other offering expenses in connection with this primary offering will apply to all organization and other offering expenses incurred, regardless of when incurred. For a description of how these estimates were calculated, please see our estimated use of proceeds table.

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Form of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering $1,000,000 in Shares (1)
		Organization and Offering Stage
Selling Commissions(2)	KBS Capital Markets Group	Up to 6.5% of the price per share of Class A common stock sold and up to 3.0% of the price per share of Class T common stock sold; no selling commissions are payable on shares of common stock sold under our dividend reinvestment plan; all selling commissions are reallowed to participating broker dealers.	$35,250,000
Dealer Manager Fee (2)	KBS Capital Markets Group	Up to 2.0% of the price per share of Class A and Class T common stock sold. Our dealer manager may generally reallow to any participating broker dealer up to 1.0% of the gross primary offering proceeds attributable to that participating broker dealer as a marketing fee; in select cases up to 1.5% of the gross primary offering proceeds may be reallowed; this reallow will be based upon such factors as the projected sales volume by such participating broker-dealer, access to conferences and meetings and the general level of assistance of such participating broker-dealer in marketing this offering; no dealer manager fee is payable on shares of common stock sold under our dividend reinvestment plan.	$20,598,000
Organization and Offering Expenses (3)	KBS Capital Advisors and KBS Capital Markets Group	We reimburse our advisor and dealer manager for commercially reasonable organization and other offering expenses they incur on our behalf in connection with this offering; however, no reimbursements made by us to our advisor or our dealer manager may cause total organization and offering expenses incurred by us (including selling commissions, dealer manager fees, the stockholder servicing fee and all other items of organization and offering expenses) to exceed 15% of the aggregate gross proceeds from this primary offering and the offering under our dividend reinvestment plan as of the date of reimbursement. We also pay organization and other offering expenses directly. At the termination of our primary offering, our advisor and its affiliates will reimburse us to the extent that the organization and other offering expenses paid directly or reimbursed by us in connection with this primary offering, regardless of when incurred, exceed 1.0% of gross primary offering proceeds. Our advisor and its affiliates will be responsible for any organization and other offering expenses related to the primary offering to the extent they exceed 1.0% of gross primary offering proceeds as of the termination of the primary offering. Prior to the termination of the primary offering, at which time the advisor will reimburse us as described above, we will be responsible for the payment of all organization and other offering expenses we incur directly and the reimbursement of organization and other offering expenses our advisor and dealer manager incur on our behalf in connection with this offering subject to the 15% limit on reimbursements discussed above. Organization and other offering expenses include all expenses to be paid or reimbursed by us in connection with this offering, excluding selling commissions, the dealer manager fee and the ongoing stockholder servicing fee with respect to Class T shares sold in the	$10,000,000

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Form of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering $1,000,000 in Shares (1)
		primary offering. Organization and other offering expenses include 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 this 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 payable to participating broker-dealers hosting retail seminars 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, legal fees of our dealer manager, and promotional items. We will not reimburse our dealer manager for wholesaling compensation expenses.
		Acquisition and Development Stage
Acquisition and Origination Fees(4)(5)	KBS Capital Advisors and KBS Capital Markets Group	2.6% of the cost of investments acquired or originated by us, or the amount to be funded by us to acquire or originate loans, including acquisition and origination expenses and any debt attributable to such investments plus significant capital expenditures related to the development, construction or improvement of the investment budgeted as of the date of acquisition. Under our charter, a majority of the independent directors would have to approve any increase in the acquisition and origination fee payable to our advisor. Acquisition fees that are calculated based on capital expenditures budgeted as of the date of acquisition shall be paid at the time funds are disbursed pursuant to a final approved budget upon receipt of an invoice by us. Our charter limits our ability to make an investment if the total of all acquisition and origination 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 a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction approves the fees and expenses and finds the transaction to be commercially competitive, fair and reasonable to us.	$23,045,362 (maximum offering and no debt)/ $55,070,034 (maximum offering and leverage such that our total liabilities do not exceed 60% of the cost of our tangible assets, which is our target leverage).
Acquisition and Origination Expenses	KBS Capital Advisors	Reimbursement of customary acquisition and origination 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 (including, as necessary, updated appraisals, surveys and environmental site assessments), travel and communication expenses, accounting fees and expenses and other closing costs and miscellaneous expenses relating to the acquisition or origination of	$5,419,125 (maximum offering and no debt)/$12,954,413 (maximum offering and leverage such that our total liabilities do not exceed 60% of the cost of our tangible

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Form of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering $1,000,000 in Shares (1)
		real estate properties and real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. We estimate that these expenses will average approximately 0.6% of the purchase prices of our investments, excluding fees and expenses associated with such investments.
		Operational Stage
Stockholder Servicing Fee	KBS Capital Markets Group	An annual fee of 1% of the purchase price per share of Class T common stock sold in the primary offering for services rendered to Class T stockholders by the broker dealer of record after the initial sale of the Class T share. For a description of the services required from the broker dealer of record, see the “Plan of Distribution” section of this prospectus. Except as described in the “Plan of Distribution” section of this prospectus, the stockholder servicing fee will accrue daily and be paid monthly in arrears and our dealer manager will reallow all of the stockholder servicing fee to such broker dealer of record. The stockholder servicing fee with respect to a Class T share will cease accruing upon the occurrence of any of the following events: (i) the date at which aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the primary offering in which the Class T share was sold, as calculated by us with the assistance of the dealer manager after the termination of the primary offering in which the Class T share was sold, (ii) with respect to a particular Class T share, on the fourth anniversary of the issuance of the share, (iii) a listing of our common stock on a national securities exchange, (iv) a merger or other extraordinary transaction, and (v) the date the Class T share associated with the stockholder servicing fee is no longer outstanding such as upon its redemption or our dissolution. Underwriting compensation includes selling commissions, dealer manager fees, and stockholder servicing fees being paid in connection with an offering as well as other items of value paid in connection with an offering, including amounts not paid directly or reimbursed by us, that are viewed by FINRA as underwriting compensation. No stockholder servicing fee is payable on shares of Class T common stock sold under our dividend reinvestment plan or issued as a stock dividend.	$34,000,000
Asset Management Fees (4)(6)	KBS Capital Advisors	A monthly fee equal to the lesser of one-twelfth of (i) 1.0% of the cost of our investments and (ii) 2.0% of the sum of the cost of our investments, less any debt secured by or attributable to the investments. The cost of our real property investments will be calculated as the amount paid or allocated to acquire the real property, including the cost of any subsequent development, construction or improvements to the property and including fees and expenses related thereto (but excluding acquisition fees paid or payable to our advisor). The cost of our loans and any	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.

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Form of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering $1,000,000 in Shares (1)
		investments other than real property will be calculated as the lesser of (x) the amount actually paid or allocated to acquire or fund the loan or other investment, including fees and expenses related thereto (but excluding acquisition fees paid or payable to our advisor), and (y) the outstanding principal amount of such loan or other investment, including fees and expenses related to the acquisition or funding of such investment (but excluding acquisition fees paid or payable to our advisor), as of the time of calculation. In the case of investments made through joint ventures, the asset management fee will be determined based on our proportionate share of the underlying investment.
Other Operating Expenses (6)	KBS Capital Advisors and KBS Capital Markets Group	We reimburse the expenses incurred by our advisor in connection with its provision of services to us, including our allocable share of the advisor’s overhead, such as rent, employee costs, utilities and IT costs. Our advisor may seek reimbursement for employee costs under the advisory agreement. At this time we only expect to reimburse our advisor for our allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to us; however, in the future, our advisor may seek reimbursement for additional employee costs. If our advisor were to seek reimbursement for additional 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 do not reimburse our advisor or its affiliates for employee costs in connection with services for which our advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries and benefits our advisor or its affiliates may pay to our executive officers. We reimburse our dealer manager for certain fees and expenses it incurs for administering our participation in the DTCC Alternative Investment Product Platform, or the AIP Platform, with respect to certain accounts of our investors serviced through the AIP Platform. Additionally, we, together with KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Growth & Income REIT, KBS Capital Markets Group, KBS Capital Advisors and other KBS-affiliated entities, have entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of coverage are shared. The cost of these lower tiers is allocated by our advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. Our advisor’s and our	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.

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Form of Compensation	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering $1,000,000 in Shares (1)
		dealer manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance.
Independent Director Compensation	Independent Directors	We pay each of our independent directors an annual retainer of $40,000. We 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 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 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 Stage
Subordinated Participation in Net Cash Flows (4)(7)	KBS Capital Advisors	After our common stockholders have received, together as a collective group, aggregate distributions (regardless of the source used to fund such distributions and including distributions that may constitute a return of capital for federal income tax purposes) sufficient to provide (i) a return of their gross investment amount, which is the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by the total number of shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased) multiplied by the weighted average issue price of the shares sold in the primary offering, and (ii) a 7.0% per year cumulative, noncompounded return on such gross investment amount, KBS Capital Advisors is entitled to receive 15% of our net cash flows, whether from continuing operations, net sales proceeds, net financing proceeds, or otherwise. Net sales proceeds means the net cash proceeds realized by us after deduction of all expenses incurred (i) in connection with a disposition of our assets, or (ii) from the prepayment, maturity, workout or other settlement of any loan or other investment. Net financing proceeds means the net cash proceeds realized from the financing of our assets or refinancing of our debt. The 7.0% per year cumulative, noncompounded return on gross investment amount is calculated on a daily basis. In making this calculation, gross investment amount is determined for each day during the period for which the 7.0% per year cumulative, noncompounded return is being calculated, including a daily adjustment to reflect shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased). In addition, gross investment amount is reduced by the following: (i) distributions from net sales proceeds, (ii) distributions from net financing proceeds, and (iii) distributions paid from operating cash flow in excess of a cumulative, noncompounded, annual return of 7.0%. Gross investment amount is only reduced as described	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	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering $1,000,000 in Shares (1)
		above; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes. The 7.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder but rather is based on total distributions paid on all outstanding shares relative to total gross investment amount invested by all stockholders. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for KBS Capital Advisors to participate in our net cash flows. In fact, if KBS Capital Advisors is entitled to participate in our net cash flows, the returns of our stockholders will differ, and some may be less than a 7.0% per year cumulative, noncompounded return. This fee is payable only while we are not listed on an exchange. In addition, before we will be able to pay distributions to our stockholders equal to a return of their gross investment amount plus a 7% cumulative, non-compounded, annual return on such gross investment amount, we will need to sell a portion of our assets.  Thus, the sale of one or more assets will be a practical prerequisite for our advisor to receive this fee and we will likely be in our liquidation stage if the advisor is eligible to begin earning this fee.
Disposition Fees (4)(8)	KBS Capital Advisors or its affiliates	For substantial assistance in connection with the sale of investments, we will pay our advisor or its affiliates a percentage of the contract sales price of each loan, debt-related security, real property or other investment sold (including residential or commercial mortgage-backed securities or collateralized debt obligations issued by a subsidiary of ours as part of a securitization transaction) as a disposition fee. For dispositions with a contract sales price less than or equal to $50 million, the disposition fee will equal 1.5% of the contract sales price. For dispositions with a contract sales price greater than $50 million, the disposition fee will equal the sum of $750,000 (which amount is 1.5% of $50 million), plus 1.0% of the amount of the contract sales price in excess of $50 million. The disposition fee is determined on a per transaction basis and is not cumulative. If, in connection with such disposition, commissions are paid to third parties unaffiliated with our advisor, the fee paid to our advisor and its affiliates may not exceed the commissions paid to such unaffiliated third parties, and provided further that the disposition fees paid to our advisor, its affiliates and unaffiliated third parties may not exceed 6.0% of the contract sales price. The conflicts committee will determine whether the advisor or its affiliates has provided substantial assistance to us in connection with the sale of an asset. We will not pay a disposition fee upon the maturity, prepayment or workout of a loan or other debt-related investment, provided that if we negotiate a discounted payoff with the borrower we will pay a disposition fee and if we take ownership of a property as a result of a workout or foreclosure of a loan, we will pay a disposition fee upon the sale of	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	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering $1,000,000 in Shares (1)
		such property. 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 a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction conclude that the transaction is fair and reasonable to us. 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 Fee (4)(7)(9)	KBS Capital Advisors	Upon a merger or listing of our common stock on a national securities exchange, we will pay our advisor an incentive fee. Upon a listing this fee will equal 15% of the amount by which (i) the market value of our outstanding stock plus the total of all distributions paid by us to stockholders from inception until the date market value is determined (regardless of the source used to fund such distributions and including distributions that may constitute a return of capital for federal income tax purposes and excluding any stock dividend) exceeds (ii) the sum of our stockholders’ gross investment amount, which is the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by the total number of shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased) multiplied by the weighted average issue price of the shares sold in the primary offering, and the amount of cash flow necessary to generate a 7.0% per year cumulative, noncompounded return on our stockholders’ gross investment amount from our inception through the date the market value is determined. Upon a merger this fee will equal 15% of the amount by which (i) the merger consideration amount plus the total of all distributions paid or declared by us to stockholders from inception until the closing of the merger (regardless of the source used to fund such distributions and including distributions that may constitute a return of capital for federal income tax purposes and excluding any stock dividend) exceeds (ii) the sum of our stockholders’ gross investment amount, which is the amount calculated by multiplying the total number of shares purchased by stockholders by the issue price, reduced by the total number of shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased) multiplied by the weighted average issue price of the shares sold in the primary offering, and the amount necessary to generate a 7.0% per year cumulative, noncompounded return on our stockholders’ gross investment amount from our inception through the closing of the merger. If our advisor receives a subordinated incentive fee,	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	Recipient of Compensation	Determination of Amount	Estimated Amount for Maximum Primary Offering $1,000,000 in Shares (1)
		the fee will not be separately reduced by the prior payment to our advisor of a participation in our net cash flows as the calculation of the subordinated incentive fee takes into account any prior payment to our advisor of this participation. In addition, if KBS Capital Advisors is entitled to receive the subordinated incentive fee upon a listing, KBS Capital Advisors will no longer participate in our net cash flows as described above. The 7.0% per year cumulative, noncompounded return on gross investment amount is calculated on a daily basis. In making this calculation, gross investment amount is determined for each day during the period for which the 7.0% per year cumulative, noncompounded return is being calculated, including a daily adjustment to reflect shares repurchased by us (excluding shares received as a stock dividend which we subsequently repurchased). In addition, gross investment amount is reduced by the following: (i) distributions from net sales proceeds, (ii) distributions from net financing proceeds, and (iii) distributions paid from operating cash flow in excess of a cumulative, noncompounded, annual return of 7.0%. Gross investment amount is only reduced as described above; it is not reduced simply because a distribution constitutes a return of capital for federal income tax purposes. The 7.0% per year cumulative, noncompounded return is not based on the return provided to any individual stockholder but rather is based on total distributions paid on all outstanding shares relative to total gross investment amount invested by all stockholders. Accordingly, it is not necessary for each of our stockholders to have received any minimum return in order for KBS Capital Advisors to participate in our net cash flows. In fact, if KBS Capital Advisors is entitled to participate in our net cash flows, the returns of our stockholders will differ, and some may be less than a 7.0% per year cumulative, noncompounded return.

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⁽¹⁾ The estimated maximum dollar amounts are based on the sale of up to $1,000,000,000 of shares of our common stock to the public in the primary offering and exclude the shares we have registered under our dividend reinvestment plan as we do not expect the fees paid in this offering to be determined based on proceeds raised in our dividend reinvestment plan offering. We reserve the right to reallocate shares between our primary offering and our dividend reinvestment plan offering, and to the extent we reallocate shares from the dividend reinvestment plan offering to the primary offering, the fees disclosed above will be higher.

⁽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⁾ In addition to the selling commissions, dealer manager fees and stockholder servicing fee, some of the amounts described under “Organization and Other Offering Expenses” are also underwriting compensation in connection with this offering under the rules of FINRA. These amounts include (i) the attendance and sponsorship fees payable to participating broker-dealers hosting a retail seminar; (ii) the travel, meal and lodging costs of registered persons associated with our dealer manager and officers and employees of our affiliates to attend retail seminars; and (iii) the travel, meal and lodging costs of registered persons associated with our dealer manager and registered representatives of the participating broker-dealers to attend bona fide training and education meetings held by us. See “Plan of Distribution” for a discussion of underwriting compensation paid in connection with this offering.

⁽⁴⁾ Our advisor in its sole discretion may defer any fee payable to it under the advisory agreement. These fees may consist of charges of our advisor for administrative services related to the issuance of shares in this offering, acquisition and origination fees, asset management fees and disposition fees. All or any portion of such fees not taken may be deferred without interest and paid when the advisor determines.

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⁽⁵⁾ Because the acquisition and origination fee we pay our advisor is a percentage of the purchase price of an investment or the amount funded by us to acquire or originate a loan, this fee will be greater to the extent we fund acquisitions and originations through (i) the incurrence of debt (which we expect to represent 60% or less of the cost of our tangible assets (before deducting depreciation or other non-cash reserves), if we sell the maximum number of shares offered hereby), (ii) retained cash flow from operations, (iii) issuances of equity in exchange for assets and (iv) proceeds from the sale of shares under our dividend reinvestment plan.

⁽⁶⁾ 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 and origination fees, acquisition and origination 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, origination, disposition and ownership of real estate interests, loans or other property (other than disposition fees 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.

⁽⁷⁾ 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, noncompounded return. Under our advisory agreement, an incentive fee may be paid only if the stockholders first enjoy a 7.0% per year cumulative, noncompounded 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 in note 6 above.

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 an interest-bearing promissory note that becomes due only upon the sale of one or more assets or upon maturity or payoff of our debt investments, and the fee is payable solely from the proceeds from the sale, maturity or payoff of an asset and future asset sales, maturities or payoffs. See “Management - The Advisory Agreement.”

⁽⁸⁾ 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 under the current advisory agreement. 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 6 above.

⁽⁹⁾ 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. The subordinated incentive fee will count against the limit on “total operating expenses” described in note 6 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 entering into a business combination transaction with affiliates of our sponsors. Upon the recommendation of our advisor, our board of directors determined that, in the event our board of directors determine that it is in our best interest to obtain the personnel needed to become self-managed by entering into a business combination with affiliates of our sponsors (an “Internalization Transaction”), then we will not enter into such an Internalization Transaction unless our advisor or one of its affiliates agrees to proceed with the Internalization Transaction without the payment of any internalization fee or other consideration by us, whether in the form of a cash payment or in the form of stock, warrants or options. We cannot predict whether, and on what terms, an internalization transaction would occur in the future. Our charter requires that a majority of our board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction conclude 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 shows, as of January 31, 2016, the amount of our Class A common stock (which is the only class of common stock outstanding as of the date of this prospectus) beneficially owned by (1) any person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our Class A common stock, (2) our directors, (3) our executive officers, and (4) all of our directors and executive officers as a group.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)		Percentage
Robert E. Low (2)	763,118		7.4%
Keith D. Hall, Chief Executive Officer and Director (3)	291,906	(4)(5)	2.8%
Peter McMillan III, Chairman of the Board, President and Director (3)	291,906	(4)(5)	2.8%
Jeffrey K. Waldvogel, Chief Financial Officer, Treasurer and Secretary (3)	—		—
Stacie K. Yamane, Chief Accounting Officer (3)	—		—
Michael L. Meyer, Independent Director (3)	—		—
William M. Petak, Independent Director (3)	—		—
Laurent Degryse, Independent Director (3)	—		—
All directors and executive officers as a group	291,906	(3)(4)	2.8%

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⁽¹⁾ None of the shares are pledged as security. All of the shares owned by the beneficial owners are Class A shares.

⁽²⁾ The address of this beneficial owner is 2740 N. Mayfair Avenue, Springfield, Missouri 65803.

⁽³⁾ The address of this beneficial owner is 800 Newport Center Drive, Suite 700, Newport Beach, California 92660.

⁽⁴⁾ Includes 23,966 Class A shares owned by KBS Capital Advisors, which is indirectly owned and controlled by Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr.

⁽⁵⁾ Includes 267,940 Class A shares owned by Willowbrook Capital Group, an entity owned and controlled by Keith D. Hall and Peter McMillan III.

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CONFLICTS OF INTEREST

We are subject to various conflicts of interest arising out of our relationship with our advisor, KBS Capital Advisors, and its 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 Affiliates’ Interests in Other KBS Real Estate Programs

General

All of our executive officers and our affiliated directors and other key real estate and debt finance professionals at our advisor are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, our dealer manager and other KBS-affiliated investment advisors that are the sponsors of other real estate programs as well as executive officers and affiliated directors and/or key professionals of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT, the other non-traded REITs advised by KBS Capital Advisors. Through affiliates of our advisor, key real estate and debt finance professionals at our advisor also serve as investment advisors to KBS-advised investors in real estate and real estate-related assets. These persons 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 persons and other affiliates of our advisor may organize other real estate- or debt-related programs, serve as the investment advisor to other investors and acquire for their own account real estate-related investments that may be suitable for us.

Since 1992, investment advisors affiliated with Messrs. Bren and Schreiber have sponsored 14 private KBS-sponsored programs. Six of these programs were still operating as of December 31, 2014. Our sponsors, Messrs. Bren, Hall, McMillan and Schreiber are also the sponsors of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, and KBS Growth & Income REIT and, together with Legacy Partners Residential Realty LLC and certain of its affiliates, our sponsors are also sponsoring another public real estate investment trust, KBS Legacy Partners Apartment REIT. All of these KBS-sponsored programs 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 KBS-advised investors.

Allocation of Investment Opportunities

We rely on our sponsors, Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., and the real estate and debt finance professionals of our advisor to identify suitable investments. KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT are also advised by KBS Capital Advisors and rely on these same key real estate and debt finance professionals. Messrs. Bren and Schreiber and other real estate and debt finance professionals at KBS Capital Advisors are also the key real estate and debt finance professionals of KBS Realty Advisors and its affiliates, the advisors to the private KBS-sponsored programs and the investment advisors to KBS-advised investors in real estate and real estate-related assets. As such, the other KBS-sponsored programs that are raising funds for investment as of the date of this prospectus rely on many of the same real estate and debt finance professionals as will future programs and investors. Many investment opportunities that are suitable for us may also be suitable for other KBS-sponsored programs and KBS-advised investors. When these real estate and debt finance professionals direct an investment opportunity to any KBS-sponsored program or KBS-advised 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, these KBS real estate and debt finance professionals could direct attractive investment opportunities to other entities or investors. For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the corporation for us to purchase any significant asset unless the advisor has recommended the investment to us. See “- Certain Conflict Resolution Measures.”

Joint Ventures with Affiliates

We may enter into joint ventures with KBS Capital Advisors, any of our officers or directors or any of their affiliates for the acquisition, development or improvement of properties or other investments if a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transactions concludes that the transaction is fair and reasonable to us and on substantially the same terms and conditions as those received by other joint venturers. KBS Capital Advisors, our advisor, and KBS Realty Advisors and its affiliates, the advisors to the other KBS-sponsored programs and the investment advisers to KBS-advised investors in real estate and real estate-related assets, have some of the same executive officers, directors and other key real estate and debt finance

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professionals; and these persons will face conflicts of interest in determining which KBS program or investor should enter into any particular joint venture agreement. These persons may also face a conflict in structuring the terms of the relationship between our interests and the interests of the KBS-affiliated co-venturer and in managing the joint venture. Any joint venture agreement or transaction between us and a KBS-affiliated co-venturer will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers. The KBS-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.

Competition for Tenants and Others

Conflicts of interest may exist to the extent that we acquire properties in the same geographic areas where other KBS-sponsored programs, KBS-advised investors or KBS-affiliated entities own properties. In such a case, a conflict could arise in the leasing of properties in the event that we and another KBS-sponsored program, KBS-advised investor or KBS-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 KBS-sponsored program, KBS-advised investor or KBS-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 and the advisors of other KBS-sponsored programs, KBS-advised investors and KBS-affiliated entities 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 and the advisors of other KBS-sponsored programs, KBS-advised investors and KBS-affiliated entities 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 KBS-sponsored programs, KBS-advised investors and KBS-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 KBS Capital Advisors and the key real estate, debt finance, management and accounting professionals our advisor has assembled, including Messrs. Bren, Hall, McMillan, Schreiber and Waldvogel and Ms. Yamane, for the day-to-day operation of our business. KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT are also advised by KBS Capital Advisors and rely on our sponsors and many of the same real estate, debt finance, management and accounting professionals, as will future KBS-sponsored programs and KBS-advised investors. Further, our officers and affiliated directors are also officers and/or affiliated directors of some or all of the other KBS-sponsored programs. Messrs. Bren, Hall, McMillan, Schreiber and Waldvogel and Ms. Yamane are executive officers of KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT. Messrs. Hall, McMillan and Waldvogel and Ms. Yamane are executive officers of KBS Strategic Opportunity REIT, and Messrs. Bren, McMillan and Waldvogel and Ms. Yamane are executive officers of KBS Legacy Partners Apartment REIT. In addition, Messrs. Bren, Schreiber and Waldvogel and Ms. Yamane are the executive officers of KBS Realty Advisors and its affiliates, the advisors of the private KBS-sponsored programs and KBS-advised investors. As a result of their interests in other KBS-sponsored programs, their obligations to KBS-advised 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, Hall, McMillan, Schreiber and Waldvogel and Ms. Yamane face conflicts of interest in allocating their time among us, KBS Capital Advisors, other KBS-sponsored programs, KBS-advised investors and other business activities in which they are involved. In addition, KBS Capital Advisors and KBS Realty Advisors and their affiliates share many of the same key real estate, debt finance, management and accounting professionals. Our executive officers and the key real estate, debt finance, management and accounting professionals affiliated with our sponsors who provide services to us are not obligated to devote a fixed amount of their time to us.

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 businesses in which they are involved. We believe that our affiliates and executive officers will devote the time required to manage our business and expect that the amount of time a particular executive officer or affiliate devotes to us will vary during the course of the year and depend on our business activities at the given time. It is difficult to predict specific amounts of time an executive officer or affiliate will devote to us. We expect that our executive officers and affiliates will generally devote more time to programs raising and investing capital than to programs that have completed their offering stages, though from time to time each program will have its unique demands. Because many of the operational aspects of KBS-sponsored programs are very similar, there are significant efficiencies created by the same team of individuals at our advisor providing services to multiple programs.

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For example, our advisor has streamlined the structure for financial reporting, internal controls and investment approval processes for the programs.

Receipt of Fees and Other Compensation by KBS Capital Advisors and its Affiliates

KBS Capital Advisors and its affiliates receive substantial fees from us, which fees were not negotiated at arm’s length. These fees could influence our advisor’s advice to us as well as the judgment of affiliates of KBS Capital Advisors, some of whom also serve as our executive officers and directors and the key real estate and debt finance professionals at 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;

• 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 origination fees and asset management fees;

• sales of investments, which entitle KBS Capital Advisors to disposition fees and possible subordinated incentive fees;

• acquisitions of investments and originations of loans, which entitle KBS Capital Advisors to acquisition and origination fees based on the cost of the investment 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 investments and to originate loans, which borrowings will increase the acquisition and origination 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 fee; 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.

Our Board of Directors’ Loyalties to KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Growth & Income REIT and Possibly to Future KBS-Sponsored Programs

Four of our directors, including two of our independent directors, Messrs. Meyer and Petak, are also directors of KBS Strategic Opportunity REIT. Mr. Meyer is also a director of KBS Legacy Partners Apartment REIT. One of our affiliated directors is also a director of KBS REIT I, KBS REIT II, KBS REIT III and KBS Growth & Income REIT. The loyalties of our directors serving on the boards of directors of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT, or possibly on the board of directors of future KBS-sponsored programs, may influence the judgment of our board when considering issues for us that also may affect other KBS-sponsored programs, such as the following:

• The conflicts committee of our board must evaluate the performance of KBS Capital Advisors with respect to whether KBS Capital Advisors is presenting to us our fair share of investment opportunities. If our advisor is not presenting a sufficient number of investment opportunities to us because it is presenting many opportunities to other KBS-sponsored programs or if our advisor is giving preferential treatment to other KBS-sponsored programs in this regard, our conflicts committee may not be well suited to enforce our rights under the terms of the advisory agreement or to seek a new advisor.

• We could enter into transactions with other KBS-sponsored programs, such as property sales, acquisitions or financing arrangements. Such transactions might entitle KBS Capital Advisors or its affiliates to fees and other compensation from both parties to the transaction. For example, acquisitions from other KBS-sponsored programs might entitle KBS Capital Advisors or its affiliates to disposition fees and possible subordinated incentive fees in connection with its services for the seller in addition to acquisition or origination fees and other fees that we might pay to KBS Capital Advisors in connection with such transaction. Similarly, property sales to other KBS-sponsored programs might entitle KBS Capital Advisors or its affiliates to acquisition or origination fees in connection with its services to the purchaser in addition to disposition and other fees that we might pay to KBS Capital Advisors in connection with such transaction. Decisions of our board and the conflicts committee regarding the terms of those transactions may be influenced by our board’s and the conflicts committee’s loyalties to such other KBS-sponsored programs.

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• A decision of our board or the conflicts committee regarding the timing of a debt or equity offering could be influenced by concerns that the offering would compete with an offering of other KBS-sponsored programs.

• A decision of our board or the conflicts committee regarding the timing of property sales could be influenced by concerns that the sales would compete with those of other KBS-sponsored programs.

• A decision of our board or the conflicts committee regarding whether and when we seek to list our shares of common stock on a national securities exchange could be influenced by concerns that such listing could adversely affect the sales efforts for other KBS-sponsored programs, depending on the price at which our shares trade.

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

All of our executive officers and our affiliated directors and the key real estate and debt finance professionals at our advisor are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in:

• KBS Capital Advisors, our advisor;

• KBS Capital Markets Group, our dealer manager; and/or

• other KBS-sponsored programs.

Through KBS-affiliated entities, these persons also serve as the investment advisors to KBS-advised 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 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.”

KBS Growth & Income REIT is currently conducting a private placement offering and has filed a registration statement with the SEC for a proposed initial public offering. KBS Capital Markets Group is currently serving as dealer manager for the private placement for KBS Growth & Income REIT and expects to serve as the dealer manager for KBS Growth & Income REIT’s initial public offering. In addition, from time to time KBS Capital Markets Group serves as the dealer manager for other KBS-sponsored programs. Future KBS-sponsored programs may also seek to raise capital through 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 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 KBS-sponsored programs will be raising capital and may compete with us for investment capital.

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 or its affiliates and has not been so for the previous two years and meets the other requirements set forth in our charter. 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;

• offerings of securities;

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• the provision of direction and oversight to our advisor in connection with its authority to make the decisions regarding our investments;

• transactions with affiliates;

• compensation of our officers and directors who are affiliated with our advisor;

• 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 KBS Capital Advisors; and

• whether and when we seek to sell the company or substantially all of its assets.

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 will evaluate 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 will supervise 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 will be 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 total fees and 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

• 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 1.5% fee for sales less than or equal to $50 million and a fee equal to the sum of $750,000 plus 1.0% of amounts in excess of $50 million for sales greater than $50 million. The disposition fee is determined on a per transaction basis and is not cumulative. 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 sell an asset to an affiliate, our charter requires that a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction conclude that the transaction is fair and reasonable to us.

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

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issue price of the common stock per year cumulative. Under our advisory agreement, an incentive fee may be paid only if the stockholders first enjoy a 7.0% per year cumulative, noncompounded 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.

Our charter also limits the amount of acquisition and origination fees and expenses we can incur to a total of 6% of the contract purchase price for the asset or, in the case of a loan we originate, 6% of the funds advanced. This limit may only be exceeded if a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction approves the fees and expenses and finds the transaction to be commercially competitive, fair and reasonable to us. Although our charter permits combined acquisition and origination fees and expenses to equal 6% of the purchase price or funds advanced, our advisory agreement limits the acquisition and origination fee to 2.6% of the purchase price or funds to be advanced, including acquisition and origination expenses and any debt attributable to such investments plus significant capital expenditures related to the development, construction or improvement of the investment budgeted as of the date of acquisition. Any increase in the acquisition and origination fee stipulated in the advisory agreement could be made without the approval of our stockholders, subject to the approval of a majority of the members of the conflicts committee.

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 an interest-bearing promissory note that becomes due only upon the sale of one or more assets or upon maturity or payoff of our debt investments. The fee is payable solely from the proceeds from the sale, maturity or payoff of an asset and future asset sales, maturities or payoffs, 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 exceed (ii) the amount necessary to provide investors with a return of their gross investment amount and a 7.0% per year cumulative, noncompounded 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 assets in which KBS Capital Advisors, our sponsor, any of our directors or officers or any of their affiliates has an interest without a determination by a majority of the board of directors (including a majority of the members 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 asset to the affiliated seller or lessor, unless there is substantial justification for the excess amount. In no event may we acquire any such real property at an amount in excess of its current appraised value.

Our charter provides that the consideration we pay for real property will ordinarily be based on the fair market value of the 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 cases in which a majority of our independent directors so determine, and in all cases in which real property is acquired from KBS Capital Advisors, any of our directors or officers or any of their affiliates, the fair market value shall be determined by an independent expert selected by our independent directors not otherwise interested in the transaction.

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, a mortgagee’s or owner’s title insurance

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policy or commitment as to the priority of the mortgage or the condition of the title must be obtained. 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 the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transactions must conclude that all other transactions, including joint ventures, between us and KBS Capital Advisors, our sponsor, any of our officers or directors or any of their affiliates, are fair and reasonable to us and are either on terms and conditions not less favorable to us than those available from unaffiliated third parties or, in the case of joint ventures, on substantially the same terms and conditions as those received by other joint venturers.

Limitation on Operating Expenses. 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 from the sale of our assets; and (f) acquisition fees and origination fees, acquisition and origination 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, origination, disposition and ownership of real estate interests, loans or other property (other than disposition fees on the sale of assets other than real property), 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 common 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 common 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, our sponsor, 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 KBS Capital Advisors, our sponsor, or to our directors or officers or any of their affiliates. In addition, we will not borrow from these affiliates unless a majority of the board of directors (including a majority of the members 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 board of directors. 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 common stockholders within 120 days after the end of each fiscal year after this offering terminates. 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. KBS Capital Advisors, our directors and officers and their affiliates cannot vote their shares of common stock regarding (i) the removal of any of these affiliates or (ii) any transaction between them and us.

Ratification of Charter Provisions. Our board of directors and the conflicts committee have approved and ratified our charter by the vote of a majority of their respective members, as required by our charter.

Internalization Fee Restriction

If we ever decided to become self-managed by acquiring entities affiliated with our advisor, our charter requires that a majority of our board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction conclude 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. Upon the recommendation of our advisor, our board of directors determined that, in the event our board of directors determine that it is in our best interest to obtain the personnel needed to become self-managed by entering into a business combination with affiliates of our sponsors (an “Internalization Transaction”), then we will not enter into such an Internalization Transaction unless our advisor or one of its affiliates agrees to proceed with the Internalization Transaction without the payment of any internalization fee or other consideration by us, whether in the form of a cash payment or in the form of stock, warrants or options.

Allocation of Investment Opportunities

Many investment opportunities that are suitable for us may also be suitable for other KBS-sponsored programs, as well as for the KBS-advised investors for whom KBS Realty Advisors and its affiliates serve as investment advisors. KBS Capital Advisors, our advisor and the advisor to KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT and KBS Growth & Income REIT, and KBS Realty Advisors and its affiliates share many of the same key real estate and debt finance professionals. When these real estate and debt finance professionals direct an investment opportunity to any KBS-sponsored program or one of the KBS-advised investors, they, in their sole discretion, will have to determine 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. Our advisory agreement with KBS Capital Advisors requires that this determination be made in a manner that is fair without favoring any other KBS-sponsored program or investor. The factors that the real estate and debt finance professionals will consider when determining the KBS-sponsored program or KBS-advised investor for which an investment opportunity would be the most suitable are the following:

• the investment objectives and criteria of each program or investor;

• the cash requirements of each program or investor;

• the effect of the investment on the diversification of each program’s or investor’s portfolio by type of investment, risk of investment, type of commercial property, geographic location of properties, and tenants of properties and, in the case of debt-related investments, the characteristics of the underlying property;

• the policy of each program or investor relating to leverage;

• the anticipated cash flow of the property or asset to be acquired;

• the income tax effects of the purchase on each program or investor;

• the size of the investment; and

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• the amount of funds available to each program or investor and the length of time such funds have been available for investment.

If a subsequent event or development, such as a delay in the closing of a property or investment or a delay in the construction of a property, causes any investment, in the opinion of our advisor’s real estate and debt finance professionals, to be more appropriate for another KBS-sponsored program or KBS-advised investor, they may offer the investment to another KBS-sponsored program or KBS-advised investor. It shall be the duty of our board of directors, including the independent directors, to ensure that the allocation method described above is applied fairly to us.

Our advisory agreement with KBS Capital Advisors requires that KBS Capital Advisors inform the conflicts committee each quarter of the investments that have been purchased by other KBS-sponsored programs and KBS-advised investors for whom KBS Capital Advisors, KBS Realty Advisors or one of their affiliates serves as an investment advisor so that the conflicts committee can evaluate whether we are receiving our fair share of opportunities. KBS Capital Advisors’ success in generating investment opportunities for us and the fair allocation of opportunities among KBS-sponsored programs and KBS-advised investors are important factors in the conflicts committee’s determination to continue or renew our arrangements with KBS Capital Advisors and its affiliates. The conflicts committee has a duty to ensure that favorable investment opportunities are not disproportionately allocated to other KBS-sponsored programs and KBS-advised investors. For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the corporation for us to make any significant investment unless the advisor has recommended the investment to us.

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INVESTMENT OBJECTIVES AND CRITERIA

General

We expect to use substantially all of the net proceeds from this offering to invest in and manage a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. We intend to acquire distressed debt, to originate and acquire mortgage, mezzanine, bridge and other real estate-related loans, to invest in various types of opportunistic real estate and to invest in real estate-related debt securities such as residential and commercial mortgage-backed securities and collateralized debt obligations. In addition, we may acquire equity and preferred equity securities of companies that make similar investments such as other real estate operating companies. We may make our investments through loan origination and the acquisition of individual assets or by acquiring portfolios of assets, mortgage REITs or companies with investment objectives similar to ours. We plan to diversify our portfolio by investment type, investment size and investment risk with the goal of attaining a portfolio of assets that provide opportunities for capital appreciation as well as potential for cash distributions through increased cash flow from operations and targeted asset sales. We expect our investments to be in real estate located in the United States and Europe. Our funds will be invested in accordance with our charter, which will place numerous limitations on us with respect to the manner in which we may invest (see “—Charter-imposed Investment Limitations”). Except with respect to unimproved or non-income producing property, we are not limited in the percentage of net proceeds of this offering that we may allocate to a specific real estate asset type. Thus, we may make all of our investments in investments which present an increased risk of loss.

We are focused on acquiring an investment portfolio with a total return profile that is composed of investments that provide capital appreciation potential and current operating income. To that end, our primary investment objectives are:

• to preserve and return your capital contribution;

• to realize growth in the value of our investments; and

• to provide increasing cash distributions to you through increased cash flow from operations or targeted asset sales.

We will also seek to realize growth in the value of our investments by timing asset sales to maximize their value. We intend to actively pursue lending and investment opportunities that we believe provide an attractive risk-adjusted return.

We may return all or a portion of your capital contribution in connection with the sale of the company or the investments we will make or upon maturity or payoff of our debt investments. 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 within ten years of commencement of this initial public offering, our charter requires that we either:

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

• postpone the decision of whether to liquidate the company, if a majority of our conflicts committee determines that liquidation is not then in the best interests of the 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 would not require the conflicts committee to revisit the issue of liquidation, 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 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 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.

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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 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 conflicts committee reviews our investment policies at least annually to determine whether our policies are in the best interests of our stockholders. Our charter requires that the conflicts committee include the basis for its determination in its minutes and in an annual report delivered to our stockholders.

Investment Policies

Primary Investment Focus

We will focus our investment activities on real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments located in the United States and Europe. We may also acquire equity and preferred equity securities of companies that make investments similar to ours such as other real estate operating companies. Although the foregoing represents our present investment focus and targets, we have no target allocation for each asset class and we may adjust any of the foregoing based on real estate market conditions and investment opportunities. We may make our investments through loan origination and the acquisition of individual assets or by acquiring portfolios of assets, mortgage REITs or companies with investment objectives similar to ours. We believe that we are most likely to meet our investment objectives through the careful selection and underwriting of assets. When making an investment, we will emphasize 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.

Investments in Real Estate-Related Loans

We intend to invest in real estate-related loans, including distressed debt, first and second mortgage loans, mezzanine loans, B-Notes, bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans and participations in such loans. We intend to structure, underwrite and originate many of the debt products in which we invest. Our underwriting process will involve comprehensive financial, structural, operational and legal due diligence to assess the risks of investments so that we can optimize pricing and structuring. By originating loans directly, we will be able to efficiently structure a diverse range of products. For instance, we may sell some components of the debt we originate while retaining attractive, risk-adjusted strips of the debt for ourselves. Our advisor or a wholly owned subsidiary of our advisor will source our debt investments. We will pay our advisor or its subsidiary acquisition and origination fees for loans that we make or acquire and asset management fees for the loans that we hold for investment.

We may sell some of the loans (or portions of the loans after separating them into tranches) that we originate to third parties for a profit. We expect to hold other loans (or portions of loans) for investment and in some instances securitize these loans through a CDO structure (discussed below).

Described below are some of the types of loans we may originate or acquire:

Distressed Debt. We may invest in distressed debt, which may include sub- and non-performing real estate loans acquired from financial institutions and performing loans acquired from distressed sellers. We make these investments when we believe our underwriting, credit, financing and asset management experience will enable us to generate above-average risk-adjusted returns by resolving these distressed loans expeditiously through refinancings, negotiated repayments with borrowers or foreclosure and subsequent sale of the underlying property. A sub-performing loan is a loan with a very high loan-to-value ratio and a low debt service coverage ratio and that is likely to default at maturity because the property securing the loan cannot support a refinancing of the loan’s entire unpaid principal balance. A non-performing loan is a loan that is in default of its covenants, is past due in interest payments, or is past its final maturity date and has not been repaid. Sub- and non-performing loans are typically purchased at a discount to the note’s face amount.

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With respect to non-performing loans, we expect to explore various strategies for these investments including the following: (i) negotiating with the borrowers for reduced payoffs, (ii) restructuring the terms of the loans, and (iii) enforcing our rights as lender under the loans and foreclosing on the collateral securing the loans. Ultimately, we may obtain title to the properties securing any non-performing loan investments via foreclosure or deed-in-lieu proceedings.

Mortgage Loans. We may originate or acquire mortgage loans structured to permit us (i) to retain the entire loan, (ii) to sell or securitize the lower yielding senior portions of the loan and retain the higher yielding subordinate investment (or vice-versa) or (iii) to contribute all or a portion of the loan to a CDO. We expect these loans to be secured by commercial properties, generally, with exceptions, such as high-quality loans with low loan-to-value ratios. We may also acquire seasoned mortgage loans in the secondary market secured by single assets as well as portfolios of performing and sub-performing loans that were originated by third-party lenders such as banks, life insurance companies and other owners.

Second Mortgages. We may invest in second mortgages, which are loans secured by second deeds of trust on real property that is already subject to prior mortgage indebtedness, in an amount which, when added to the existing indebtedness, does not generally exceed 75% of the appraised value of the mortgage property.

B-Notes. B-Notes are junior participations in a first mortgage loan, which are typically secured by a single property, but may be secured by a group of related properties. The senior participation is known as an A-Note. Although a B-Note may be evidenced by its own promissory note, it shares a single borrower and mortgage with the A-Note and is secured by the same collateral. Though B-Note lenders have the same obligations, collateral and borrower as the A-Note lender, in most instances B-Note lenders are contractually limited in rights and remedies in the event of a default. The B-Note is subordinate to the A-Note by virtue of a contractual or intercreditor arrangement between the A-Note lender and the B-Note lender. For the B-Note lender to actively pursue its available remedies (if any), it must, in most instances, purchase the A-Note or maintain its performing status in the event of a default on the B-Note. The B-Note lender may in some instances require a security interest in the stock or partnership interests of the borrower as part of the transaction. If the B-Note holder can obtain a security interest, it may be able to accelerate gaining control of the underlying property, subject to the rights of the A-Note holder. These debt instruments are senior to the mezzanine debt tranches described below, though they may be junior to another junior participation in the first mortgage loan. B-Notes may or may not be rated by a recognized rating agency.

B-Notes typically are secured by a single property, and the associated credit risk is concentrated in that single property. B-Notes share certain credit characteristics with second mortgages in that both are subject to more credit risk with respect to the underlying mortgage collateral than the corresponding first mortgage or the A-Note. Our management believes that B-Notes are among the safest subordinated debt instruments because B-Notes share a single mortgage with the A-Note and, as a result, its position survives an event of foreclosure. After the A-Note is satisfied, any remaining recoveries go next to the B-Note holder.

Mezzanine Loans. The mezzanine loans we may originate or acquire will generally take the form of subordinated loans secured by a pledge of the ownership interests of an entity that directly or indirectly owns real property. We may hold senior or junior positions in mezzanine loans, such senior or junior position denoting the particular leverage strip that may apply.

We may require other collateral to provide additional security for mezzanine loans, including letters of credit, personal guarantees or collateral unrelated to the property. We may structure our mezzanine loans so that we receive a stated fixed or variable interest rate on the loan as well as a percentage of gross revenues and a percentage of the increase in the fair market value of the property securing the loan, payable upon maturity, refinancing or sale of the property. Our mezzanine loans may also have prepayment lockouts, penalties, minimum profit hurdles and other mechanisms to protect and enhance returns in the event of premature repayment.

These investments typically have terms from two to 10 years and bear interest at a rate of 275 to 800 basis points over the applicable interest rate index. Mezzanine loans may have maturities that match the maturity of the related mortgage loan but may have shorter terms. Mezzanine loans usually have loan-to-value ratios between 66% and 90%.

These types of investments are generally secured by the ownership interests in the property-owning entity and, as a result, are senior to the equity. Upon a default by the borrower under the mezzanine loan, the mezzanine lender generally can take immediate control and ownership of the property-owning entity, subject to the senior mortgage on the property that stays in place in the event of a mezzanine default and change of control of the borrower.

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These types of investments involve a higher degree of risk relative to the long-term senior mortgage secured by the underlying real property because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy the mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt.

Bridge Loans. We may offer bridge financing products to borrowers who are typically seeking short-term capital to be used in an acquisition, development or refinancing of a given property. From the borrower’s perspective, shorter-term bridge financing is advantageous because it allows time to improve the property value through repositioning without encumbering it with restrictive long-term debt. The terms of these loans generally do not exceed three years.

Convertible Mortgages. Convertible mortgages are similar to equity participations. We may invest in and/or originate convertible mortgages if our directors conclude that we may benefit from the cash flow or any appreciation in the value of the subject property.

Wraparound Mortgages. A wraparound mortgage loan is secured by a wraparound deed of trust on a real property that is already subject to prior mortgage indebtedness, in an amount which, when added to the existing indebtedness, does not generally exceed 75% of the appraised value of the mortgage property. A wraparound loan is one or more junior mortgage loans having a principal amount equal to the outstanding balance under the existing mortgage loan, plus the amount actually to be advanced under the wraparound mortgage loan. Under a wraparound loan, we would generally make principal and interest payments on behalf of the borrower to the holders of the prior mortgage loans.

Construction Loans. Construction loans are loans made for either original development or renovation of property. Construction loans in which we would generally consider an investment would be secured by first deeds of trust on real property for terms of six months to two years.

Pre-development Loans and Land Loans. We may provide financing to fund the costs of property pre-development as well as land acquisitions. These loans are frequently done in conjunction with construction loans and are often structured as a component of the construction loan. Due to the complexity and underwriting requirements of a construction loan, borrowers often need to secure financing prior to being able to satisfy all of the requirements for the construction loan. Funds are used for acquisition of the land, pre-development and site work and to fund other costs until a guaranteed maximum construction price can be put into place. The terms of these loans generally do not exceed three years.

Loans on Leasehold Interests. Loans on leasehold interests are secured by an assignment of the borrower’s leasehold interest in the particular real property. These loans are generally for terms of six months to 15 years. Leasehold interest loans are either amortized over a period that is shorter than the lease term or have a maturity date prior to the date the lease terminates. These loans would generally permit us to cure any default under the lease.

Fund Level or Corporate Level Debt. We may invest in various real estate ventures by providing financing to or purchasing the debt obligations of funds or corporate entities with a primary focus on the commercial real estate and real estate finance industries.

Participations. Participation investments are investments in partial interests of loans of the type described above that are made and administered by third-party lenders.

Underwriting Criteria

In evaluating prospective investments in and originations of loans, our management and our advisor will consider factors such as the following:

• the ratio of the amount of the investment to the value of the property by which it is secured;

• the amount of existing debt on the property and the priority thereof relative to our prospective investment;

• the property’s potential for capital appreciation;

• expected levels of rental and occupancy rates;

• current and projected cash flow of the property;

• potential for rental increases;

• the degree of liquidity of the investment;

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• the geographic location of the property;

• the condition and use of the property;

• the property’s income-producing capacity;

• the quality, experience and creditworthiness of the borrower; and

• general economic conditions in the area where the property is located.

Our advisor will evaluate all potential loan investments to determine if the security for the loan and the loan-to-value ratio meets our investment criteria and objectives. One of the real estate and debt finance professionals at our advisor or its subsidiary or their agent may inspect material properties during the loan approval process, if such an inspection is deemed necessary. Inspection of a property may be deemed necessary if that property is considered material to the transaction (such as a property representing a significant portion of the collateral underlying a pool of loans) or if there are unique circumstances related to such property such as recent capital improvements or possible functional obsolescence. We also may engage trusted third-party professionals to inspect properties on our behalf.

Most loans that we will consider for investment would provide for monthly payments of interest and some may also provide for principal amortization, although we expect that most of the loans in which we will invest will provide for payments of interest only during the loan term and a payment of principal in full at the end of the loan term.

Our loan investments may be subject to regulation by federal, state and local authorities and subject to laws and judicial and administrative decisions imposing various requirements and restrictions, including, among other things, regulating credit granting activities, establishing maximum interest rates and finance charges, requiring disclosure to customers, governing secured transactions and setting collection, repossession and claims handling procedures and other trade practices. In addition, certain states have enacted legislation requiring the licensing of mortgage bankers or other lenders, and these requirements may affect our ability to effectuate our proposed investments in loans. Commencement of operations in these or other jurisdictions may be dependent upon a finding of our financial responsibility, character and fitness. We may determine not to make loans in any jurisdiction in which the regulatory authority believes that we have not complied in all material respects with applicable requirements.

We will not make or invest in mortgage loans unless an appraisal concerning the underlying property is available, except for mortgage loans insured or guaranteed by a government or government agency. We will maintain each appraisal in our records for at least five years and will make it available during normal business hours for inspection and duplication by any stockholder at such stockholder’s expense. In addition to the appraisal, we will seek to obtain a customary lender’s title insurance policy or commitment as to the priority of the mortgage or condition of the title.

We will not make or invest in mortgage loans on any one property if the aggregate amount of all mortgage loans outstanding on the property, including our borrowings, would exceed an amount equal to 85% of the appraised value of the property, unless we find substantial justification due to the presence of other underwriting criteria.

Except as described below under “—Charter-Imposed Investment Limitations,” our charter does not limit the amount of gross offering proceeds that we may apply to loan investments. Our charter also does not place any limit or restriction on:

• the percentage of our assets that may be invested in any type of loan or in any single loan; or

• the types of properties subject to mortgages or other loans in which we may invest.

When determining whether to make investments in mortgage and other loans, we will consider such factors as: positioning the overall portfolio to achieve an optimal mix of real estate-related investments; the diversification benefits of the loans relative to the rest of the portfolio; the potential for the investment to deliver high current income and attractive risk-adjusted total returns; and other factors considered important to meeting our investment objectives. As discussed above, some of the loans we make will be sold shortly after origination.

Investments in Real Property

We expect that our real estate-related debt investments, in particular investments in distressed debt, will, in certain circumstances, result in us owning real property as a result of a loan workout, foreclosure or similar circumstances. In addition, we intend to invest a portion of the proceeds from this offering in real property, which may include, but is not limited to, office, industrial and retail properties, hospitality properties and undeveloped residential lots. If we invest in undeveloped residential lots, we do not expect to pay our advisor a separate fee, in addition to the asset management fee, related to the development of such lots. We expect some portion of our portfolio will consist of

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direct investments in opportunistic real estate, excluding real property that we take title to (i) as part of a portfolio of debt investments, (ii) through a loan workout, foreclosure or similar circumstances or (iii) through convertible debt investments, although the percentage could be higher or lower. We consider opportunistic or enhanced-return properties to be properties with significant possibilities for short-term capital appreciation, such as non-stabilized properties, properties with moderate vacancies or near-term lease rollovers, poorly managed and positioned properties, properties owned by distressed sellers and built-to-suit properties. Except as described below under “—Charter-Imposed Investment Limitations,” our charter does not limit the amount of gross offering proceeds that we may apply to investments in real property.

Hospitality Properties

We may also acquire hospitality properties that meet our opportunistic investment strategy. Such investments may include limited-service, extended-stay and full-service lodging facilities as well as all-inclusive resorts. We may acquire existing hospitality properties or properties under construction and development. We expect to acquire hospitality properties with high growth potential achievable through various strategies, such as brand repositioning, market-based recovery or improved management practices. If we acquire hotel properties, we will lease the hotel to a TRS in which we may own a 100% ownership interest. Our TRS will engage a third party in the business of operating hotels to manage the property.

Potential European Investments

We expect that a portion of our investments in Europe will be in the form of a loan to STAM, the proceeds of which STAM will use to fund a general partner interest in a STAM-sponsored institutional real estate fund with an unrelated third party joint venture partner. The real estate fund will invest in European real estate which STAM will manage on behalf of the joint venture. As part of the terms of these investments with STAM, we expect to receive a portion of the fees STAM receives from the fund.

Investments in Real Estate-Related Debt Securities

In addition to our investments in real estate-related loans, we also expect to invest in real estate-related debt securities such as commercial and residential mortgage-backed securities and collateralized debt obligations. We may invest in any residential and commercial mortgage-backed securities, collateralized debt obligations or other real estate-related debt security that we believe will provide an attractive risk-adjusted return. While we may invest in any real estate-related debt securities, we expect that the majority of these investments would be commercial mortgage-backed securities. A brief description of commercial mortgage-backed securities and collateralized debt obligations follows.

Commercial Mortgage-Backed Securities. Commercial mortgage-backed securities, or CMBS, are securities that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. Accordingly, these securities are subject to all of the risks of the underlying mortgage loans.

CMBS are generally pass-through certificates that represent beneficial ownership interests in common law trusts whose assets consist of defined portfolios of one or more commercial mortgage loans. They are typically issued in multiple tranches whereby the more senior classes are entitled to priority distributions from the trust’s income. Losses and other shortfalls from expected amounts to be received on the mortgage pool are borne by the most subordinate classes, which receive payments only after the more senior classes have received all principal and/or interest to which they are entitled. The equity tranche, which is the “first loss” position, bears most of the risk associated with the collateral pool. It is possible for a relatively few number of defaults in the collateral pool to cause large losses for the equity tranche. However, if the collateral pool performs well, the equity tranche has a greater potential return than the more senior tranches, which typically have returns capped at the coupon rates of the notes created in the structure.

In addition to tranche seniority, the credit quality of CMBS depends on the credit quality of the underlying mortgage loans, the real estate finance market and the parties directly involved in the transaction, which is a function of factors such as:

• the principal amount of the loans relative to the value of the related properties;

• the mortgage loan terms (e.g. amortization);

• market assessment and geographic location;

• construction quality of the property;

• the creditworthiness of the borrowers;

• macroeconomic variables that affect the supply and demand for commercial real estate;

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• structural features of the transaction, such as subordination levels, advancing terms and other credit enhancements;

• the originator of the loan and its motivation to sell it;

• the underwriter and issuer of the transaction and their ability to trade and support it in the secondary markets; and

• the servicers and trustees responsible for running and maintaining the transaction on a daily basis.

Residential Mortgage-Backed Securities. Residential mortgage-backed securities, or RMBS, are similar to CMBS, however, they evidence interests in, or are secured by, a pool of residential mortgage loans secured by residential real property. These securities are also subject to all of the risks underlying the mortgage loans.

Collateralized Debt Obligations. CDOs are multiple class debt securities, or bonds, secured by pools of assets, such as residential and commercial mortgage-backed securities, B-Notes, mezzanine loans, REIT debt and credit default swaps. Like typical securitization structures, in a collateralized debt obligation the assets are pledged to a trustee for the benefit of the holders of the bonds. Like the CMBS described above, CDOs are typically issued in multiple tranches with varying risk/reward attributes.

CDOs can be structured in many different ways. Some of the more common structural classifications include the following:

• Cash flow vs. market value. Cash flow CDOs pay interest and principal to investors from the cash flows produced by the assets owned by the CDO, while market value CDOs make principal and interest payments to investors from the cash flows produced by the assets owned by the CDO and by generating cash from trading such assets. The market value structure is often used when the collateral pool consists of assets that do not generate predictable cash flow streams, but have significant market value upside potential (such as a collateral pool of defaulted bonds or loans).

• Managed vs. unmanaged. Cash flow CDOs can be managed or unmanaged. The manager of a cash flow CDO is chosen for credit expertise rather than trading expertise and generally focuses on managing credit quality of the underlying portfolio. A cash flow CDO may be unmanaged only if it has a static pool of assets. Market value CDOs require a manager to generate returns through trading.

• Cash vs. synthetic. Cash CDOs are structures backed by a portfolio of cash assets owned by the CDO (such as a pool of bonds, loans and/or asset-backed securities), while synthetic CDOs are backed by credit default swaps, which are derivatives instruments that can reference any type of cash obligation. Hybrid CDOs may contain both cash assets as wells as credit default swaps.

• Funded vs. unfunded. A synthetic CDO tranche may be funded or unfunded. If it is unfunded, the investor will not contribute any capital initially but will have to make loss payments in the event the portfolio’s losses reach the investor’s tranche. Typically, a synthetic CDO has both funded tranches (for the more junior and risky tranches) and an unfunded tranche (for the most senior and least risky tranche).

Ratings of Real Estate-Related Debt Securities. For residential and commercial mortgage-backed securities and collateralized debt obligations, the securitization process is governed by one or more of the rating agencies, including Fitch, Moody’s and Standard & Poor’s, who determine the respective bond class sizes, generally based on a sequential payment structure. Bonds that are rated from AAA to BBB by the rating agencies are considered “investment grade.” Bond classes that are subordinate to the BBB class are considered “non-investment” grade. The respective bond class sizes are determined based on the review of the underlying collateral by the rating agencies. The payments received from the underlying loans are used to make the payments on the securities. Based on the sequential payment priority, the risk of nonpayment for the AAA securities is lower than the risk of nonpayment for the non-investment grade bonds. Accordingly, the AAA class is typically sold at a lower yield compared to the non-investment grade classes that are sold at higher yields. However, we will not acquire residential or commercial mortgage-backed securities, collateralized debt obligations or other structured debt securities (exclusive of investments in certificates that represent all of the beneficial interests in a pool of mortgages, which are referred to as a “whole pool” certificates and are akin to owning the underlying mortgages directly) that are not rated AA or higher. However, we may invest in such securities indirectly through investment in equity or preferred equity securities of mortgage REITs and companies with investment objectives similar to ours such as other real estate operating companies.

We evaluate the risk of residential and commercial mortgage-backed securities and collateralized debt obligations based on the credit risk of the underlying collateral and the risk of the transactional structure. The credit risk of the underlying collateral is crucial in evaluating the expected performance of an investment. Key variables in this

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assessment include rent levels, vacancy rates, supply and demand forecasts and tenant incentives (build-out incentives or other rent concessions) related to the underlying properties. We utilize third-party data providers to review loan level performance such as delinquencies and threats to credit performance. We also review monthly servicing reports of the master and special servicers as well as reports from rating agencies. We perform specific asset-level underwriting on all significant loans in the securities structure. We utilize sensitivity analysis and other statistical underwriting when evaluating the cash flows generated by a transaction. With respect to transactional structure, we assess the structure of a particular securities transaction as well as utilize third-party data providers for a structural sensitivity analysis. After assessing loan-level data and structural data, we combine this information to forecast expected cash flows, probability of default and loss given a default. Except as described below under “—Charter-Imposed Investment Limitations,” our charter does not limit the amount of gross offering proceeds that we may apply to investments in real estate-related debt securities.

Investments in Equity Securities

We may make equity and preferred equity investments in mortgage REITs and other companies with investment objectives similar to ours such as other real estate operating companies. We may purchase the common or preferred stock of these entities or options to acquire their stock. We will target a public company that owns real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments 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.

Generally, 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 investments through joint ventures, limited liability companies, partnerships and other types of common ownership or participations. Except as described below under “—Charter-Imposed Investment Limitations,” our charter does not limit the amount of gross offering proceeds that we may apply to investments in equity securities.

Other Possible Investments

Although we expect that most of our investments will be of the types described above, we may make other investments. In fact, we may invest in whatever types of interests in real estate- or debt-related assets that we believe are in our best interests. Although we can purchase any type of interest in real estate- or debt-related assets, our charter does limit certain types of investments. See “—Charter-Imposed Investment Limitations.” We do not intend to underwrite securities of other issuers.

Investment Decisions and Asset Management: The KBS Approach

KBS Capital Advisors has the authority to make all of the decisions regarding our investments, subject to the limitations in our charter and the direction and oversight of our board of directors. In particular, our board of directors is responsible for approving the investment opportunities presented by our advisor. In addition, our conflicts committee reviews our investment policies at least annually to determine whether our investment policies continue to be in the best interests of our common stockholders. See “Conflicts of Interest - Certain Conflict Resolution Procedures” and “Conflicts of Interest — Allocation of Investment Opportunities” for a discussion of additional requirements related to our board of director’s oversight of our advisor.

KBS Capital Advisors believes that successful investment requires the implementation of strategies that permit favorable purchases and originations, effective asset management and timely disposition of those assets. As such, KBS Capital Advisors has developed a disciplined investment approach that combines the experience of its team of real estate and debt finance professionals with a structure that emphasizes thorough market research, stringent underwriting standards and an extensive down-side analysis of the risks of each investment. The KBS approach also includes active and aggressive management of each asset acquired. KBS Capital Advisors believes that active management is critical to creating value. Our advisor also develops a well-defined exit strategy for each investment we make. KBS Capital Advisors then continually re-evaluates the exit strategy of each asset in response to the performance of the individual asset, market conditions and our overall portfolio objectives to determine the optimal time to hold the asset.

Our sponsors each have over 20 years of experience in real estate-related debt investments. Our sponsors will work together with their team of real estate and debt finance professionals in the identification, origination, acquisition and management of our investments. The senior real estate and debt finance professionals at KBS Capital Advisors have been through multiple financial cycles in their careers and have the expertise gained through hands-on experience in acquisitions, originations, loan workouts, asset management, dispositions, development, leasing and property and portfolio management.

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To execute KBS Capital Advisors’ disciplined investment approach, a team of our advisor’s real estate and debt finance professionals takes responsibility for the business plan of each investment. The following practices summarize KBS Capital Advisors’ investment approach:

• National Market Research - The investment team extensively researches the acquisition and/or origination and underwriting of each investment, utilizing both “real time” market data and the transactional knowledge and experience of KBS Capital Advisors’ network of professionals.

• Underwriting Discipline - KBS Capital Advisors follows a tightly controlled and managed process to examine all elements of a potential investment. Only those assets meeting our investment criteria will be accepted for inclusion in our portfolio. In an effort to keep an asset in compliance with those standards, the underwriting team remains involved through the investment life cycle of the asset and consults with our advisor’s other real estate and debt finance professionals responsible for the asset. This team of experts reviews and develops comprehensive reports for each asset throughout the holding period.

• Risk Management - Risk management is a fundamental principle in our advisor’s construction of our portfolio and in the management of each investment. Diversification by investment type, investment size and investment risk is critical to controlling portfolio-level risk. KBS Capital Advisors’ senior management continuously reviews the operating performance of investments against projections and provides the oversight necessary to detect and resolve issues as they arise.

• Asset Management - Prior to the purchase of an individual asset or portfolio, the asset managers work closely with the acquisition and underwriting teams to assess the asset business strategy and confirm the borrower submitted market operating information. This is a forecast of the action items to be taken and the capital needed to achieve the anticipated returns. KBS Capital Advisors reviews asset business strategies quarterly to anticipate changes or opportunities in the market during a given phase of a market cycle. KBS Capital Advisors designed this process to allow for realistic yet aggressive enhancement of value throughout the investment period.

Joint Venture Investments

We may enter into joint ventures, partnerships and other co-ownership arrangements (including preferred equity investments) or participations for the purpose of making investments. Joint venture investments permit us to own interests in large investments without unduly restricting the diversity of our portfolio. In determining whether to invest in a particular joint venture, KBS Capital Advisors will evaluate the assets 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.

KBS Capital Advisors will also evaluate the potential joint venture partner as to its financial condition, operating capabilities and integrity. We may enter into joint ventures with third parties or KBS Capital Advisors, any of our officers or directors or any of their affiliates; however, we may only enter into joint ventures with KBS Capital Advisors, any of our officers or directors or any of their affiliates if a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transactions concludes that the transaction is fair and reasonable to us and on substantially the same terms and conditions as those received by other joint venturers. 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 origination or acquisition of a significant investment, we will supplement this prospectus to disclose the terms of such proposed 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. 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:

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• 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 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.

Financing Strategy and Policies

We will fund our investments with proceeds from this offering and expect to finance a portion of our investments with debt. We will use debt financing in various forms in an effort to increase the size of our portfolio and potential returns to our stockholders. Access to low-cost capital is crucial to our business, as we will earn income based on the spread between the yield on our investments and the cost of our borrowings.

We expect to use short-term financing in the form of revolving credit facilities, repurchase agreements, bridge financings and bank warehousing facilities. For longer-term funding, we may utilize securitization structures, if available, and we may place mortgage financing on any real estate investments we make.

Repurchase Agreements. With repurchase agreements, we may borrow against the loans, residential and commercial mortgage-backed securities and other investments we own. Under these agreements, we may sell loans and other investments to a counterparty and agree to repurchase the same assets from the counterparty at a price equal to the original sales price plus an interest factor. Repurchase agreements economically resemble short-term, variable-rate financings and usually require the maintenance of specific loan-to-collateral value ratios. If the market value of the assets subject to a repurchase agreement decline, we may be required to provide additional collateral or make cash payments to maintain the loan-to-collateral value ratio. If we are unable to provide such collateral or cash repayments, we may lose our economic interest in the underlying assets.

Warehouse Facilities. We may rely on warehouse credit facilities for capital needed to fund our investments. These facilities are typically lines of credit from commercial and investment banks that we can draw from to fund our investments. Warehouse facilities are typically collateralized loans made to investors who invest in securities and loans and, in return for financing, pledge their securities and loans to the warehouse lender. Third-party custodians, usually banks, typically hold the securities and loans funded with the warehouse facility borrowings, including the securities, loans, notes, mortgages and other important loan documentation, for the benefit of the investor who is deemed to own the securities and loans and, if there is a default under the warehouse credit facility, for the benefit of the warehouse lender.

Securitizations. We may seek to enhance the returns on our investments through CMBS, CDO, and other securitizations, if available. For example, we may securitize the senior portion of our investments in whole mortgage loans by selling A-notes, while retaining the subordinated securities in our investment portfolio.

Warehouse facilities, bank credit facilities and repurchase agreements generally include a recourse component, meaning that lenders retain a general claim against us as an entity. Further, such borrowings may also provide the lender with the ability to make margin calls and may limit the length of time that any given asset may be used as eligible collateral.

We may incur indebtedness in other forms that may be appropriate. For example, for investments in real estate, we may incur indebtedness in the form of bank borrowings, purchase money obligations to the sellers of properties we purchase, or mortgage financing. The form of our indebtedness may be long-term or short-term, fixed or floating rate, and secured or unsecured. KBS Capital Advisors will seek to obtain financing on our behalf on the most favorable terms available. We may use borrowing proceeds to finance loan originations or new investments; to pay for capital improvements, repairs or tenant build-outs on foreclosure or other properties; to refinance existing indebtedness; to pay distributions; or to provide working capital.

We intend to focus our investment activities on obtaining a diverse portfolio of real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments. Careful use of debt will help us to achieve our diversification goals because we will have more funds available for investment. We expect that once we have fully invested the proceeds of this offering, our debt financing and other liabilities will be 60% or less of the cost of our tangible assets (before deducting depreciation or other non-cash reserves), although it may exceed this level during our offering stage. This is our target leverage as established by our board of directors. There is no

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limitation on the amount we may borrow for any single investment. Our charter limits our total liabilities to 75% of the cost of our tangible assets (before deducting depreciation or other non-cash reserves); 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 common 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 on attractive terms, our conflicts committee may approve debt such that our total liabilities would exceed this limit.

To the extent that we do not finance our investments, our ability to make additional investments will be restricted. When interest rates are high or financing is otherwise unavailable on a timely basis, we may make certain investments with cash with the intention of obtaining a loan for a portion of the cost of the investment at a later time. For a discussion of the risks associated with the use of debt, see “Risk Factors — Risks Related to Our Financing Strategy.”

Except with respect to any 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 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 make investments unless a majority of the board of directors (including a majority of the members 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.

Operating Policies

Credit Risk Management. We may be exposed to various levels of credit and special hazard risk depending on the nature of our underlying assets and the nature and level of credit enhancements supporting our assets. Our advisor and our executive officers will review and monitor credit risk and other risks of loss associated with each investment. In addition, we will seek to diversify our portfolio of assets to avoid undue geographic, issuer, industry and certain other types of concentrations. Our board of directors will monitor the overall portfolio risk and levels of provision for loss.

Interest Rate Risk Management. To the extent consistent with maintaining our qualification as a REIT, we will follow an interest rate risk management policy intended to mitigate the negative effects of major interest rate changes. We intend to minimize our interest rate risk from borrowings by attempting to structure the key terms of our borrowings to generally correspond to the interest rate term of our assets and through interest rate hedging activities.

Hedging Activities. We may engage in hedging transactions to protect our investment portfolio from interest rate fluctuations, currency risks and other changes in market conditions. These transactions may include interest rate and currency swaps, the purchase or sale of interest rate and currency collars, caps or floors, options, mortgage derivatives and other hedging instruments. These instruments may be used to hedge as much of the interest rate and currency 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 from time to time enter into interest rate swap agreements to offset the potential adverse effects of rising interest rates under certain short-term repurchase agreements. We may elect to bear a level of interest rate or currency risk that could otherwise be hedged when we believe, based on all relevant facts, that bearing such risk is advisable.

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 (i) sell additional shares in this or future offerings, including through the dividend reinvestment plan, (ii)  issue shares to our advisor, or its successors or assigns, in payment of an outstanding fee obligation or (iii) 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, whether in a primary offering, through 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 investments, you may also experience dilution in the book value and fair value of your shares and in the earnings and distributions per share.

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Disposition Policies

The period that we will hold our investments in real estate-related loans, opportunistic real estate, real estate-related debt securities and other real estate-related investments will vary depending on the type of asset, interest rates and other factors. Our advisor will develop a well-defined exit strategy for each investment we make. KBS Capital Advisors will continually perform a hold-sell analysis on each asset in order to determine the optimal time to hold the asset and generate a strong return for you. 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 have maximized its value to us or the sale of the asset would otherwise be in the best interests of our stockholders.

If we do not list our shares of common stock on a national securities exchange within ten years of commencement of this initial public offering, 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 would not require the conflicts committee to revisit the issue of liquidation, 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 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 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. Pursuant to our charter, we will not:

• incur debt such that it would cause our liabilities to exceed 75% of the aggregate cost of tangible assets owned by us, unless approved by a majority of the conflicts committee;

• invest 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 or on which there is no development or construction in progress or planned to commence within one year;

• make or invest in mortgage loans unless an appraisal is available 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 if the related acquisition and origination fees and expenses are not reasonable or exceed 6% of the contract purchase price for the asset or, in the case of a loan we originate, 6% of the funds advanced, provided that in either case the investment may be made if a majority of the board of directors (including a majority of the members of the conflicts committee) not otherwise interested in the transaction approves such fees and expenses and determines that the transaction is commercially competitive, fair and reasonable to us;

• acquire equity securities unless a majority of the board of directors (including a majority of the members of the 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 the board of directors (including a majority of the members of the 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);

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• 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;

• 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.

Investment Limitations under the Investment Company Act of 1940

We intend to conduct our operations so that neither we nor any of our subsidiaries will be required to register as an investment company under the Investment Company Act. Under the relevant provisions of Section 3(a)(1) of the Investment Company Act, an investment company is any issuer that:

• pursuant to Section 3(a)(1)(A), is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or

• pursuant to Section 3(a)(1)(C), is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7).

We believe that neither we nor our Operating Partnership will be required to register as an investment company based on the following analysis. With respect to the 40% test, most of the entities through which we and our Operating Partnership own our assets will be majority-owned subsidiaries that will not themselves be investment companies and will not be relying on the exceptions from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies).

With respect to the primarily engaged test, we and our Operating Partnership will be holding companies and do not intend to invest or trade in securities ourselves. Rather, through the majority-owned subsidiaries of our Operating Partnership, we and our Operating Partnership will be primarily engaged in the non-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real estate and real estate-related assets.

If any of the subsidiaries of our Operating Partnership fail to meet the 40% test, we believe they will usually, if not always, be able to rely on Section 3(c)(5)(C) of the Investment Company Act for an exception from the definition of an investment company. (Otherwise, they should be able to rely on the exceptions for private investment companies pursuant to Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act.) As reflected in no-action letters, the SEC staff’s position on Section 3(c)(5)(C) generally requires that an issuer maintain at least 55% of its assets in “mortgages and other liens on and interests in real estate,” or qualifying assets; at least 80% of its assets in qualifying assets plus real estate-related assets; and no more than 20% of the value of its assets in other than qualifying assets and real estate-related assets, which we refer to as miscellaneous assets. To constitute a qualifying asset under this 55% requirement, a real estate interest must meet various criteria based on no-action letters. We expect that any of the subsidiaries of our Operating Partnership relying on Section 3(c)(5)(C) will invest at least 55% of its assets in qualifying assets, and approximately an additional 25% of its assets in other types of real estate-related assets. If any subsidiary

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relies on Section 3(a)(5)(C), we expect to rely on guidance published by the SEC staff or on our analyses of guidance published with respect to types of assets to determine which assets are qualifying real estate assets and real estate-related assets.

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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) acting as our tax counsel has reviewed this summary. For purposes of this section under the heading “Federal Income Tax Considerations,” references to “KBS Strategic Opportunity REIT II, Inc.,” “we,” “our” and “us” mean only KBS Strategic Opportunity REIT II, 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 Strategic Opportunity REIT II, 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;

• 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 U.S. 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 Strategic Opportunity REIT II, Inc. —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 Strategic Opportunity REIT II, Inc.

We elected to be taxed as a REIT commencing with our taxable year ended December 31, 2014. We believe that we have been organized and have operated and expect to continue to be organized and to operate in such a manner as to qualify for taxation as a REIT.

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The law firm of DLA Piper LLP (US), acting as our tax counsel in connection with this offering, has rendered an opinion that commencing with our taxable year ending December 31 2014, we were organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and our proposed method of operation will enable us to continue meet the requirements for qualification and taxation as a REIT. It must be emphasized that the opinion of DLA Piper LLP (US) is based on various assumptions relating to our organization and operation and 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 does not cover subsequent periods. Counsel has 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 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 to our stockholders 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.

Certain domestic stockholders that are individuals, trusts or estates will be taxed on corporate distributions at a maximum rate of 20%. 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. 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 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

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sale or operation of the property may be subject to corporate income tax at the highest applicable rate (currently 35%).

• If we derive “excess inclusion income” from an interest in certain mortgage loan securitization structures (i.e., a “taxable mortgage pool” or a residual interest in a real estate mortgage investment conduit, or “REMIC”), we could be subject to corporate level federal income tax at a 35% rate to the extent that such income is allocable to specified types of tax-exempt stockholders known as “disqualified organizations” that are not subject to unrelated business income tax. See “—Taxable Mortgage Pools and Excess Inclusion Income” below. “Disqualified organizations” are any organization described in Section 860E (e)(5) of the Internal Revenue Code, including: (i) the United States; (ii) any state or political subdivision of the United States; (iii) any foreign government; and (iv) certain other organizations.

• 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 arm’s-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 5-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 (as described below), 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.

Requirements for Qualification—General

The Internal Revenue Code defines a REIT as a corporation, trust or association:

(i) that is managed by one or more trustees or directors;

(ii) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;

(iii) that would be taxable as a domestic corporation but for its election to be subject to tax as a REIT;

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(iv) that is neither a financial institution nor an insurance company subject to specific provisions of the Internal Revenue Code;

(v) the beneficial ownership of which is held by 100 or more persons;

(vi) 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);

(vii) 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

(viii) that meets other tests described below, including with respect to the nature of its income and assets.

The Internal Revenue Code provides that conditions (i) through (iv) must be met during the entire taxable year, and that condition (v) 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 (v) and (vi) need not be met during a corporation’s initial tax year as a REIT. 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 (v) and (vi) above.

We believe that we have issued in this offering common stock with sufficient diversity of ownership to satisfy conditions (v) and (vi). 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.

In addition, a corporation generally may not elect to become a REIT unless its taxable year is the calendar year. We have adopted 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 U.S. federal income tax purposes. An unincorporated domestic entity with two or more owners generally is treated as a partnership for U.S. federal income tax purposes. If we are a partner in an entity that is treated as a partnership for U.S. 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

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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 U.S. 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. Thus, in applying the requirements described herein, any qualified REIT subsidiary that we own will be ignored, and all assets, liabilities, and items of income, deduction and credit of such subsidiary will be treated as our assets, liabilities, and items of income, deduction and credit. If we own 100% of the equity interests in a CDO issuer or other securitization vehicle that is treated as a corporation for tax purposes, that CDO issuer or other securitization vehicle would be a qualified REIT subsidiary, unless we and the CDO issuer or other securitization vehicle jointly elect to treat the CDO issuer or other securitization vehicle as a TRS. It is anticipated that CDO financings we enter into, if any, will be treated as qualified REIT subsidiaries. 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 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% (20% for taxable years after 2017) 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 U.S. 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

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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 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 U.S. federal income tax. There is a specific exemption from U.S. 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 and certain limited personal property (including certain types of residential and commercial mortgage-backed securities), “rents from real property,” distributions received from other REITs, gains from the sale of real estate assets (other than certain non-qualified publicly offered REIT debt instruments), and any amount includible in gross income with respect to a regular or residual interest in a REMIC, unless less than 95% of the REMIC’s assets are real estate assets, in which case only a proportionate amount of such income will qualify, 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.

Gross income from the sale of inventory property is excluded from both the numerator and the denominator in both income tests. Income and gain from hedging transactions that we enter into to hedge indebtedness incurred or to be incurred to acquire or carry real estate assets will generally be excluded from both the numerator and the denominator for purposes of both gross income tests. We intend to monitor the amount of our non-qualifying income and manage our investment portfolio to comply at all times with the gross income tests but we cannot assure you that we will be successful in this effort.

The term “interest,” as defined for purposes of both gross income tests, generally excludes any amount that is based in whole or in part on the income or profits of any person. However, interest generally includes the following: (i) an amount that is based on a fixed percentage or percentages of gross receipts or sales and (ii) an amount that is based on the income or profits of a borrower where the borrower derives substantially all of its income from the real property securing the debt by leasing substantially all of its interest in the property, but only to the extent that the amounts received by the borrower would be qualifying “rents from real property” if received directly by a REIT.

If a loan contains a provision that entitles a REIT to a percentage of the borrower’s gain upon the sale of the real property securing the loan or a percentage of the appreciation in the property’s value as of a specific date, income attributable to that loan provision will be treated as gain from the sale of the property securing the loan, which generally is qualifying income for purposes of both gross income tests.

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Interest on debt secured by a mortgage on real property or on interests in real property is generally qualifying income for purposes of the 75% gross income test. However, where a mortgage covers both real property and personal property an apportionment of the interest income must be made as described below. If the highest principal amount of a loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of the date the REIT agreed to originate or acquire the loan, a portion of the interest income from such loan will not be qualifying income for purposes of the 75% gross income test, but will be qualifying income for purposes of the 95% gross income test. For purposes of the 75% gross income test, if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property, such personal property is treated as real property. Note that a “significant modification” of a debt instrument will result in a new debt instrument which can require new tests of the value of the underlying real estate. The portion of the interest income that will not be qualifying income for purposes of the 75% gross income test will be equal to the portion of the principal amount of the loan that is not secured by real property (i.e., the amount by which the loan exceeds the value of the real estate that is security for the loan).

Interest, including original issue discount or market discount, that we accrue on our real estate-related investments generally will be qualifying income for purposes of both gross income tests. However, some of our investments may not be secured by mortgages on real property or interests in real property. Our interest income from those investments will be qualifying income for purposes of the 95% gross income test but not the 75% gross income test. In addition, as discussed above, if the fair market value of the real estate securing any of our investments is less than the principal amount of the underlying loan as of a certain testing date, a portion of the income from that investment may be qualifying income for purposes of the 95% gross income test but not the 75% gross 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.

We and our subsidiaries may invest in mezzanine loans, which are loans secured by equity interests in an entity that directly or indirectly owns real property, rather than by a direct mortgage of the real property. The Internal Revenue Service has issued Revenue Procedure 2003-65, which provides a safe harbor applicable to mezzanine loans. Under the Revenue Procedure, if a mezzanine loan meets each of the requirements contained in the Revenue Procedure, (i) the mezzanine loan will be treated by the Internal Revenue Service as a real estate asset for purposes of the asset tests described below, and (ii) interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the 75% income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We intend to structure any investments in mezzanine loans in a manner that generally complies with the various requirements applicable to our qualification as a REIT. However, the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the safe harbor set forth in the Revenue Procedure, there can be no assurance that the Internal Revenue Service will not challenge the tax treatment of these loans.

We and our subsidiaries may also invest in real estate mortgage investment conduits, or REMICs, and we may invest in other types of residential and commercial mortgage-backed securities. See below under “—Asset Tests” for a discussion of the effect of such investments on our qualification as a REIT.

We may also hold certain participation interests, including B-Notes, in mortgage loans and mezzanine loans originated by other lenders. B-Notes are interests in underlying loans created by virtue of participations or similar agreements to which the originator of the loans is a party, along with one or more participants. The borrower on the underlying loans is typically not a party to the participation agreement. The performance of this investment depends upon the performance of the underlying loans and, if the underlying borrower defaults, the participant typically has no recourse against the originator of the loans. The originator often retains a senior position in the underlying loans and grants junior participations that absorb losses first in the event of a default by the borrower. We generally expect to treat our participation interests as qualifying real estate assets for purposes of the REIT asset tests described below and interest that we derive from such investments as qualifying mortgage interest for purposes of the 75% income test. The

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appropriate treatment of participation interests for federal income tax purposes is not entirely certain, however, and no assurance can be given that the Internal Revenue Service will not challenge our treatment of our participation interests. In the event of a determination that such participation interests do not qualify as real estate assets, or that the income that we derive from such participation interests does not qualify as mortgage interest for purposes of the REIT asset and income tests, we could be subject to a penalty tax, or could fail to qualify as a REIT. See “-Taxation of REITs in General,” “—Requirements for Qualification-General,” “—Asset Tests” and “—Failure to Qualify.”

We may acquire debt instruments in the secondary market for less than their face amount. The amount of such discount will generally be treated as “market discount” for federal income tax purposes. We may acquire distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under the applicable Treasury regulations, the modified debt may be considered to have been reissued to us in a debt-for-debt exchange with the borrower. This deemed reissuance may prevent the modified debt from qualifying as a good REIT asset if the underlying security has declined in value.

In general, we will be required to accrue original issue discount on a debt instrument as taxable income in accordance with applicable federal income tax rules even though no cash payments may be received on such debt instrument. With respect to market discount, although generally we are not required to accrue the discount annually as taxable income (absent an election to do so), interest payments with respect to any debt incurred to purchase the investment may not be deductible and a portion of any gain realized on the Operating Partnership’s disposition of the debt instrument may be treated as ordinary income rather than capital gain.

If we eventually collect less on a debt instrument than the amount we paid for it plus the market discount we had previously reported as income, there would potentially be an ordinary bad debt deduction (rather than capital loss) but this is not free from doubt, and may depend on the characteristics of the underlying obligation, and the amount of cash we collect on maturity, etc. Our ability to benefit from that bad debt deduction (or capital loss) would depend on our having taxable income (or capital gain) in that later taxable year. REITs may not carry back net operating losses, so this possible "income early, loss later" phenomenon could adversely affect us and our shareholders if it were persistent and in significant amounts.

Finally, in the event that any debt instruments acquired by us are delinquent as to mandatory principal and interest payments, or in the event a borrower with respect to a particular debt instrument acquired by the Operating Partnership encounters financial difficulty rendering it unable to pay stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income. Similarly, we may be required to accrue interest income with respect to subordinate residential and commercial mortgage-backed securities at the stated rate regardless of whether corresponding cash payments are received.

Due to each of these potential timing differences between income recognition or expense deduction and cash receipts or disbursements, there is a risk that we may recognize substantial taxable income in excess of cash available for distribution. In that event, we may need to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this taxable income for which cash has not been received is recognized. See “—Annual Distribution Requirements.”

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

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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 may receive various fees in connection with our operations relating to the origination or purchase of whole loans secured by first mortgages and other loans secured by real property. The fees will generally be qualifying income for purposes of both the 75% and 95% gross income tests if they are received in consideration for entering into an agreement to make a loan secured by real property and the fees are not determined by income and profits. Other fees generally are not qualifying income for purposes of either gross income test and will not be favorably counted for purposes of either gross income test. Any fees earned by any TRS will not be included for purposes of the gross 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 (i) 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, (ii) 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, and (iii) to manage risk with respect to the termination of certain prior hedging transactions described in (i) and (ii) above, each of 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.

Our foreign investments might generate foreign currency gains and losses. “Real estate foreign exchange gain” is excluded from gross income for purposes of both the 75% and 95% gross income tests. Real estate foreign exchange gain is foreign currency gain which is attributable to (i) any item of income or gain qualifying for the 75% gross income test, (ii) our acquisition or ownership of obligations secured by mortgages on real property or interests in real property; or (iii) our becoming or being the obligor under obligations secured by mortgages on real property or on interests in real property. Real estate foreign exchange gain also includes Section 987 gain attributable to a qualified business unit (“QBU”) of the REIT if the QBU itself meets the 75% income test for the taxable year, and meets the 75% asset test at the close of each quarter of the REIT that has directly or indirectly held the QBU.

“Passive foreign exchange gain” is another type of currency gain. This type of gain is excluded for purposes of the 95% income test but is included in gross income and treated as non-qualifying income (to the extent that it is not real estate foreign exchange gain), for purposes of the 75% income test. Passive foreign exchange gain includes all real estate foreign exchange gain, and in addition includes foreign currency gain which is attributable to (i) any item of income or gain which qualifies for the 95% gross income test, (ii) the acquisition or ownership of obligations, (iii) becoming or being the obligor under obligations, and (iv) any other foreign currency gain as determined by the Secretary of the Treasury.

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 (i) our failure to meet these tests was due to reasonable cause and not due to willful neglect and (ii) following our identification of the 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.

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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 residential and commercial mortgage-backed securities and mortgage loans and (subject to certain limitations) debt instruments issued by publicly offered REITs. Further, certain ancillary personal property leased with real property will be treated as real property for purposes of the 75% asset test if the rent attributable to such personal property does not exceed 15% of the total rent for the taxable year attributable to both the real and personal property leased under a lease. 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% (20% for taxable years after 2017) of the value of our total assets.

Any regular or residual interest that we own in a REMIC will generally qualify as real estate assets. However, if less than 95% of the assets of a REMIC consist of assets that qualify as real estate assets, then we will be treated as holding directly our proportionate share of the assets of such REMIC for purposes of the asset tests.

We believe that most of the real estate-related securities that we expect to hold will be qualifying assets for purposes of the 75% asset test. However, our investment in other asset-backed securities, bank loans and other instruments that are not secured by mortgages on real property, if any, will not be qualifying assets for purposes of the 75% asset test.

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 (i) the REIT provides the Internal Revenue Service with a description of each asset causing the failure, (ii) the failure is due to reasonable cause and not willful neglect, (iii) 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 (iv) 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 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 (i) 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 (ii) 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 (i) any

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loan made to an individual or an estate, (ii) 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), (iii) any obligation to pay rents from real property, (iv) 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, (v) any security (including debt securities) issued by another REIT, and (vi) 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.

Any interests that we hold in a REMIC will generally qualify as real estate assets and income derived from REMIC interests will generally be treated as qualifying income for purposes of the REIT income tests described above. If less than 95% of the assets of a REMIC are real estate assets, however, then only a proportionate part of our interest in the REMIC and income derived from the interest qualifies for purposes of the REIT asset and income tests. If we hold a “residual interest” in a REMIC from which we derive “excess inclusion income,” we will be required to either distribute the excess inclusion income or pay tax on it (or a combination of the two), even though we may not receive the income in cash. To the extent that distributed excess inclusion income is allocable to a particular stockholder, the income (i) would not be allowed to be offset by any net operating losses otherwise available to the stockholder, (ii) would be subject to tax as unrelated business taxable income in the hands of most types of stockholders that are otherwise generally exempt from federal income tax, and (iii) would result in the application of U.S. federal income tax withholding at the maximum rate (30%), without reduction of any otherwise applicable income tax treaty, to the extent allocable to most types of foreign stockholders. Moreover, any excess inclusion income that we receive that is allocable to specified categories of tax-exempt investors which are not subject to unrelated business income tax, such as government entities, may be subject to corporate-level income tax in our hands, whether or not it is distributed. See “—Taxable Mortgage Pools and Excess Inclusion Income.”

To the extent that we hold mortgage participations or CMBS that do not represent REMIC interests, such assets may not qualify as real estate assets, and the income generated from them might not qualify for purposes of either or both of the REIT income tests, depending upon the circumstances and the specific structure of the investment.

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. Certain mezzanine loans we make or acquire may qualify for the safe harbor in Revenue Procedure 2003-65 pursuant to which certain loans secured by a first priority security interest in ownership interests in a partnership or limited liability company will be treated as qualifying assets for purposes of the 75% real estate asset test and the 10% vote or value test. See “—Income Tests.” We may make some mezzanine loans that do not qualify for that safe harbor and that do not qualify as “straight debt” securities or for one of the other exclusions from the definition of “securities” for purposes of the 10% value test. We intend to make such investments in such a manner as not to fail the asset tests described above.

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 (i) satisfied the asset tests at the close of the preceding calendar quarter and (ii) 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 (ii) 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.

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:

(i) the sum of

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(a) 90% of our “REIT taxable income,” computed without regard to our net capital gains and the dividends paid deduction, and

(b) 90% of our net income, if any, (after tax) from foreclosure property (as described below), minus

(ii) 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 (i) the amounts of capital gain distributions that we designated and that they include in their taxable income, minus (ii) 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 (i) 85% of our REIT ordinary income for such year, (ii) 95% of our REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior periods, we would be subject to a non-deductible 4% excise tax 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 (i) our actual receipt of cash, including receipt of distributions from our subsidiaries, and (ii) our inclusion of items in income for federal income tax purposes. Other potential sources of non-cash taxable income include:

• “residual interests” in REMICs or taxable mortgage pools;

• loans or residential or commercial mortgage-backed securities held as assets that are issued at a discount and require the accrual of taxable economic interest in advance of receipt in cash; and

• loans on which the borrower is permitted to defer cash payments of interest, and distressed loans on which we may be required to accrue taxable interest income even though the borrower is unable to make current servicing payments in cash.

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

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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 certain domestic stockholders that are individuals, trusts and estates will generally be taxable at capital gains rates. 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.

Foreclosure Property

Foreclosure property is real property and any personal property incident to such real property (i) 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, (ii) for which we acquired the related loan or lease at a time when default was not imminent or anticipated, and (iii) 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 and exchange rate and 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 and exchange rate swap agreements, interest rate and exchange 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 (i) 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

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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, (ii) 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, and (iii) to manage risk with respect to the termination of certain prior hedging transactions described in (i) and/or (ii) above, each of 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.

Taxable Mortgage Pools and Excess Inclusion Income

An entity, or a portion of an entity, may be classified as a taxable mortgage pool, or TMP, under the Internal Revenue Code if:

• substantially all of its assets consist of debt obligations or interests in debt obligations;

• more than 50% of those debt obligations are real estate mortgages or interests in real estate mortgages as of specified testing dates;

• the entity has issued debt obligations (liabilities) that have two or more maturities; and

• the payments required to be made by the entity on its debt obligations (liabilities) “bear a relationship” to the payments to be received by the entity on the debt obligations that it holds as assets.

Under regulations issued by the U.S. Treasury Department, if less than 80% of the assets of an entity (or a portion of an entity) consist of debt obligations, these debt obligations are considered not to comprise “substantially all” of its assets, and therefore the entity would not be treated as a TMP. Our financing and securitization arrangements may give rise to TMPs with the consequences as described below.

Where an entity, or a portion of an entity, is classified as a TMP, it is generally treated as a taxable corporation for federal income tax purposes. In the case of a REIT, or a portion of a REIT, or a disregarded subsidiary of a REIT, that is a TMP, however, special rules apply. The TMP is not treated as a corporation that is subject to corporate income tax, and the TMP classification does not directly affect the tax qualification of the REIT. Rather, the consequences of the TMP classification would, in general, except as described below, be limited to the stockholders of the REIT.

A portion of the REIT’s income from the TMP, which might be noncash accrued income, could be treated as excess inclusion income. Section 860E(c) of the Internal Revenue Code defines the term “excess inclusion” with respect to a residual interest in a REMIC. The Internal Revenue Service, however, has yet to issue guidance on the computation of excess inclusion income on equity interests in a TMP held by a REIT. Generally, however, excess inclusion income with respect to our investment in any TMP and any taxable year will equal the excess of (i) the amount of income we accrue on our investment in the TMP over (ii) the amount of income we would have accrued if our investment were a debt instrument having an issue price equal to the fair market value of our investment on the day we acquired it and a yield to maturity equal to 120% of the long-term applicable federal rate in effect on the date we acquired our interest. The term “applicable federal rate” refers to rates that are based on weighted average yields for treasury securities and are published monthly by the Internal Revenue Service for use in various tax calculations. If we undertake securitization transactions that are TMPs, the amount of excess inclusion income we recognize in any taxable year could represent a significant portion of our total taxable income for that year. Under Internal Revenue Service guidance, the REIT’s excess inclusion income, including any excess inclusion income from a residual interest in a REMIC, must be allocated among its stockholders in proportion to distributions paid. We are required to notify our stockholders of the amount of “excess inclusion income” allocated to them. A stockholder’s share of our excess inclusion income:

• cannot be offset by any net operating losses otherwise available to the stockholder;

• is subject to tax as unrelated business taxable income in the hands of most types of stockholders that are otherwise generally exempt from federal income tax; and

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• results in the application of U.S. federal income tax withholding at the maximum rate (30%), without reduction for any otherwise applicable income tax treaty or other exemption, to the extent allocable to most types of foreign stockholders.

See “—Taxation of Stockholders.” To the extent that excess inclusion income is allocated from a TMP to a tax-exempt stockholder of a REIT that is not subject to unrelated business income tax (such as a government entity), the REIT will be subject to tax on this income at the highest applicable corporate tax rate (currently 35%). In this case, we are authorized to reduce and intend to reduce distributions to such stockholders by the amount of such tax paid by the REIT that is attributable to such stockholder’s ownership. The manner in which excess inclusion income is calculated, or would be allocated to stockholders, including allocations among shares of different classes of stock, remains unclear under current law. As required by Internal Revenue Service guidance, we intend to make such determinations using a reasonable method. Tax-exempt investors, foreign investors and taxpayers with net operating losses should carefully consider the tax consequences described above, and are urged to consult their tax advisors.

If a subsidiary partnership of ours that we do not wholly own, directly or through one or more disregarded entities, were a TMP, the foregoing rules would not apply. Rather, the partnership that is a TMP would be treated as a corporation for federal income tax purposes and potentially could be subject to corporate income tax or withholding tax. In addition, this characterization would alter our income and asset test calculations and could adversely affect our compliance with those requirements. We intend to monitor the structure of any TMPs (including whether a TRS election might be made in respect of any such TMP) in which we have an interest to ensure that they will not adversely affect our qualification as a REIT.

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 for qualified distributions received by certain 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 Strategic Opportunity REIT II, Inc. — 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 20% 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

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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.

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 Strategic Opportunity REIT II, Inc.—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.

If excess inclusion income from a taxable mortgage pool or REMIC residual interest is allocated to any stockholder, that income will be taxable in the hands of the stockholder and would not be offset by any net operating losses of the stockholder that would otherwise be available. See “—Taxation of KBS Strategic Opportunity REIT II, Inc.—Taxable Mortgage Pools and Excess Inclusion Income.” As required by Internal Revenue Service guidance, we intend to notify our stockholders if a portion of a distribution paid by us is attributable to excess inclusion income.

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 20% if the stock is held for more than one year, and will be taxed at ordinary income rates 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.

Medicare Contribution Tax. U.S. stockholders who are individuals, estates or certain trusts are generally required to pay a 3.8% Medicare tax on their net investment income (including dividends and gains from the disposition of our stock), or in the case of estates and trusts on their net investment income that is not distributed, in each case to the extent that their total adjusted income exceeds applicable thresholds.

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;

• 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;

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• 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 U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. 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 (i) that is payable out of our earnings and profits, (ii) which is not attributable to our capital gains and (iii) 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. Reduced treaty rates and other exemptions are not available to the extent that income is attributable to excess inclusion income allocable to the foreign stockholder. Accordingly, we will withhold at a rate of 30% on any portion of a distribution that is paid to a non-U.S. holder and attributable to that holder’s share of our excess inclusion income. See “—Taxation of KBS Strategic Opportunity REIT II, Inc.—Taxable Mortgage Pools and Excess Inclusion Income.” As required by Internal Revenue Service guidance, we intend to notify our stockholders if a portion of a distribution paid by us is attributable to excess inclusion income.

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. Note that certain “qualified foreign pension funds” are exempt from FIRPTA.

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 (i) 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 (ii) the non- U.S. holder

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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 (i) 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 (ii) the recipient non-U.S. holder does not own more than 10% 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 10% 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.

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 15% 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: (i) 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 (ii) 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 (i) 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 (ii) 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.

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Information Reporting Requirements and Backup Withholding for Non-U.S. Stockholders. Payments of dividends or of proceeds from the disposition of stock made to a non-U.S. holder may be subject to information reporting and backup withholding unless such holder establishes an exemption, for example, by properly certifying its non-U.S. status on an Internal Revenue Service Form W-8BEN or another appropriate version of Internal Revenue Service Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we have, or our paying agent has actual knowledge or reason to know, that a non-U.S. holder is a United States person. Backup withholding is not an additional tax. Rather, the United States income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may be obtained, provided that the required information is furnished to the Internal Revenue Service.

Foreign Accounts. The Hiring Incentives to Restore Employment Act (the “HIRE Act”), which was enacted in 2010, imposes a 30% withholding tax on certain types of payments made to “foreign financial institutions” and certain other non‑U.S. entities unless certain due diligence, reporting, withholding, and certification obligations requirements are satisfied. The portion of the HIRE Act that provides for this withholding tax and related provisions is known as the “Foreign Account Tax Compliance Act” or “FATCA.”

As a general matter, FATCA (i) currently imposes a 30% withholding tax on dividends on our shares if paid to a foreign entity, and (ii) beginning January 2019 will impose a 30% withholding tax on gross proceeds from the sale or other disposition of, our shares if paid to a foreign entity unless (in each case) either (i) the foreign entity is a “foreign financial institution” that undertakes certain due diligence, reporting, withholding, and certification obligations, (ii) the foreign entity is not a “foreign financial institution” and identifies certain of its U.S. investors, or (iii) the foreign entity otherwise is excepted under FATCA.

If withholding is required under FATCA on a payment related to our stock, investors that otherwise would not be subject to withholding (or that otherwise would be entitled to a reduced rate of withholding) generally will be required to seek a refund or credit from the IRS to obtain the benefit of such exemption or reduction (provided that such benefit is available). We will not pay any additional amounts in respect of amounts withheld under FATCA. Prospective investors should consult their tax advisors regarding the effect of FATCA in their particular circumstances.

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 (i) 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 (ii) 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.

To the extent, however, that we are (or a part of us, or a disregarded subsidiary of ours, is) deemed to be a TMP, or if we hold residual interests in a REMIC, a portion of the distributions paid to a tax-exempt stockholder that is allocable to excess inclusion income may be treated as UBTI. We anticipate that our investments may generate excess inclusion income.

If excess inclusion income is allocable to some categories of tax-exempt stockholders that are not subject to UBTI, such as governmental investors, we will be subject to corporate level tax on such income, and, in that case, we are authorized to reduce and intend to reduce the amount of distributions to those stockholders whose ownership gave rise to the tax. See “-Taxation of KBS Strategic Opportunity REIT II, Inc.—Taxable Mortgage Pools and Excess Inclusion Income.” As required by Internal Revenue Service guidance, we intend to notify our stockholders if a portion of a distribution paid by us is attributable to excess inclusion income.

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 (i) one pension trust owns more than 25% of the value of our stock, or (ii) a group of pension trusts, each

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individually holding more than 10% of the value of our stock, 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.

Foreign Investments

Taxes and similar impositions paid by us or our subsidiaries in foreign jurisdictions may not be passed through to, or used by, our stockholders as a foreign tax credit or otherwise. Such taxes and impositions will, however, generally be deductible by us against our taxable income. See “Risk Factors—Federal Income Tax Risks.”

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.

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.

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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;

• 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.

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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.

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 the publicly-offered securities exception described below.

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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:

• either (a) part of a class of securities registered under the Exchange Act, or (b) sold as part of a public offering registered under the Securities Act, and be part of a class of securities registered under the Exchange Act, 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 have in excess of 100 independent stockholders of our Class A shares of our common stock and have restricted the purchase of Class T shares by Benefit Plan investors in this offering until shares of our Class T common stock are held by 100 or more persons who are independent of us and one another. See “Plan of Distribution — Special Notice to Benefit Plan Investors” for a discussion of the specific escrow procedures applicable to Benefit Plan investors who desire to purchase Class T 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 an 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.

Our structure has been established 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.”

Provided our Class A and Class T shares of common stock are each held by 100 or more stockholders independent of us and each other, 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.” Accordingly, we believe that our underlying assets should not be considered “plan assets” under the Plan Assets Regulation.

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

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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) (i) that the advice will serve as the primary basis for investment decisions and (ii) that the advice will be individualized for the Benefit Plan based on its particular needs.

The Department of Labor has recently proposed to amend the regulation defining a fiduciary under ERISA.  The proposed amendment would broaden the definition of fiduciary and make a number of changes to the prohibited transaction exemptions relating to investments by Benefit Plans and IRAs.  The proposed changes, if finalized, could have a significant effect on investments in our shares by Benefit Plans and IRAs.  Plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding this development.

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. Failure to satisfy these requirements may result in penalties, damages or other sanctions.

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 or IRA custodian should determine the fair market value of shares when the fair market value of such shares is not determined in the marketplace.

To assist the FINRA members and their associated persons that participate in this offering in meeting their customer account statement reporting obligations pursuant to FINRA and NASD Conduct Rules, we will disclose in each annual report distributed to stockholders a per share estimated value of our shares, the method by which it was developed, and the date of the data used to develop the estimated value. In addition, 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. We will report the net investment amount of our shares as our estimated value per share, which net investment amount will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. This estimated per share value will be accompanied by any disclosures required under the FINRA and NASD Conduct Rules. No later than 150 days after the second anniversary of the date on which we broke escrow in our initial public offering, we will provide an estimated NAV per share that we will use as our estimated value per share. This value will be based on valuations of our assets and liabilities performed at least annually, by, or with the material assistance or confirmation of, a third-party valuation expert or service and will comply with the Practice Guideline 2013-01, Valuations of Publicly Registered, Non-Listed REITs issued by the Investment Program in April 2013 (the “IPA Valuation Guidelines”).

In connection with determining an estimated NAV per share, we will obtain independent third-party appraisals for our real estate investments and certain real-estate related investments as appropriate. With respect to our cash, real estate loans receivable, other assets, mortgage debt and other liabilities, we will obtain valuations from our advisor as we expect these will equal GAAP fair value as reported in our publicly filed financial statements. These valuations will be reviewed by the independent third-party engaged to assist in the determination of our estimated NAV per share. We will value our other assets in a manner we deem most suitable under the circumstances consistent with the IPA Valuation Guidelines. Once we announce an estimated NAV per share we generally expect to update the estimated NAV per share in December of each year.

In calculating an estimated NAV per share, we intend to allocate the company’s accrued stockholder servicing fees attributable to Class T shares sold in the primary offering to the Class T shares, on a class-wide basis. We may allocate these accrued expenses to the Class T shares through distribution adjustments or NAV adjustments. It is our intention for any adjustment related to the expense of the stockholder servicing fee to be made through distributions, to the extent distributions are made. However, the NAV of the Class T shares will be adjusted relative to that of the Class A shares to account for any of the company’s accrued stockholder servicing fees that have not already been allocated to the Class T shares through distribution adjustments. Selling commissions and the dealer manager fee, which are paid by purchasers of Class A and Class T shares in the primary offering at the time of purchase, will have no effect on the NAV of any class.

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Our conflicts committee, composed of all our independent directors, will be responsible for oversight of the valuation process, including approving the engagement of one or more third-party valuation experts (as determined by the board of directors) to assist in determining our estimated NAV per share and to provide appraisals of our real estate assets. The appraiser selected will be a member of the Appraisal Institute with an MAI (Member of the Appraisal Institute) designation. All appraisals will be made available to participating broker-dealers conducting due diligence on our products who have signed confidentiality agreements.

Until we report an estimated NAV per share, this initial reported value will likely differ from the price at which a stockholder could resell his or her shares primarily because (i) there is no public trading market for the shares at this time; (ii) when derived from the primary offering price, the estimated value will not reflect, and will not be derived from, the fair market value of our assets nor will it represent the amount of net proceeds that would result from an immediate liquidation of our assets, (iii) the purchase prices at which shares of our Class A common stock were sold prior to commencement of this offering were significantly below the purchase prices for shares in this offering and we paid significant organization and offering expenses in connection with our private offering; (iv) the estimated value does not take into account how market fluctuations affect the value of our investments; and (v) the estimated value does not take into account how developments related to individual assets may have increased or decreased the value of our portfolio.

Once we report an estimated NAV, our stockholders 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, because there is not expected to be an active trading market for the shares; and

• the estimated values, or the method used to establish values, may not be sufficient to enable an ERISA fiduciary or an IRA custodian to comply with the ERISA or IRA requirements described above. The Department of Labor or the Internal Revenue Service may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our shares.

The foregoing requirements of ERISA and the Internal Revenue Code are complex and subject to change. Plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding an investment in our shares.

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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. Of the total shares of common stock authorized, 500,000,000 shares are classified as Class A shares and 500,000,000 are classified as Class T shares. In addition, our board of directors may amend our charter to increase or decrease the amount of our authorized shares. As of February 1, 2016, 10,341,365 shares of our Class A common stock were issued and outstanding, and no shares of our Class T common stock or our preferred stock were 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 Class A and Class T shares of common stock are entitled to receive such distributions on their respective class of shares as may be 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. The payment of the ongoing stockholder servicing fee with respect to Class T shares sold in the primary offering will result in the payment of lower distributions on Class T shares relative to the distributions paid on Class A shares because the amount of the ongoing stockholder servicing fee will reduce the amount available for distribution to Class T stockholders. Distribution amounts paid on Class A and Class T shares will only vary due to the stockholder servicing fee; there are no additional class-specific expenses that will affect relative distribution amounts. See “ — Common Stock — Class T Shares” for a discussion of when the stockholder servicing fee will terminate. See also "Description of Shares — Distributions." In addition, as a result of the allocation of the stockholder servicing fees to the Class T shares, each share class could have a different NAV per share if distributions are not adjusted to take account of such fee. See "ERISA Considerations — Annual Valuation" and "Description of Shares — Distributions" for more information. In any liquidation, each outstanding share of common stock entitles its holder to share (based on the percentage of shares held and the estimated NAV of each class of shares) in the assets that remain after we pay our liabilities and any preferential distributions owed to preferred stockholders. In the event of any voluntary or involuntary liquidation, dissolution or winding up of us, or any liquidating distribution of our assets, then such assets, or the proceeds therefrom, will be distributed between the holders of Class A shares and Class T shares ratably in proportion to the respective NAV for each class until the NAV for each class has been paid. We will calculate the NAV per share as a whole for all Class A shares and Class T shares and then will determine any differences attributable to each class. As noted above, except in the unlikely event that the stockholder servicing fees payable on the Class T shares sold in the primary offering exceed the amount otherwise available for distribution to Class A stockholders in a particular period, we expect the NAV per share of each Class A share and Class T share to be the same. Each holder of shares of a particular class of common stock will be entitled to receive, ratably with each other holder of shares of such class, that portion of such aggregate assets available for distribution as the number of outstanding shares of such class held by such holder bears to the total number of outstanding shares of such class then outstanding. In the event that we have not previously calculated an NAV for our Class A and Class T shares prior to a liquidation, we will calculate the NAV for our Class A and Class T shares in connection with such a liquidation specifically to facilitate the equitable distribution of assets or proceeds to the share classes. 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. These requests should be delivered or mailed to:

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• Regular mail: KBS Strategic Opportunity REIT II, Inc., c/o DST Systems, Inc., PO Box 219015, Kansas City, MO 64121-9015.

• Overnight mail: KBS Strategic Opportunity REIT II, Inc., c/o DST Systems, Inc., 430 W. 7th Street, Kansas City, MO 64105.

• Telephone: (866) 584-1381.

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.

Class A Shares

Our dealer manager will receive selling commissions of up to 6.5% of the gross offering proceeds for Class A shares sold in the primary offering all of which will be reallowed to participating broker-dealers. In addition, our dealer manager will receive a dealer manager fee of up to 2.0% of the gross proceeds for Class A shares sold in the primary offering. From its dealer manager fee, our dealer manager may generally reallow to any participating broker dealer up to 1.0% of the gross primary offering proceeds attributable to that participating broker dealer as a marketing fee. In select cases up to 1.5% of the gross primary offering proceeds may be reallowed. This reallow will be based upon such factors as the projected sales volume by such participating broker-dealer, access to conferences and meetings and the general level of assistance of such participating broker-dealer in marketing this offering. Reduced selling commissions and dealer manager fees will be paid for Class A shares with respect to certain volume discount sales and for sales through certain distribution channels. These reduced fees will reduce the purchase price paid for our Class A shares for certain categories of purchasers. See “Plan of Distribution — Compensation of Dealer Manager and Participating Broker-Dealers” for additional information. We will not pay any selling commissions or dealer manager fees for Class A shares sold under our dividend reinvestment plan. No stockholder servicing fee is payable with respect to our Class A shares.

Class T Shares

Our dealer manager will receive selling commissions of up to 3.0% of the gross offering proceeds for Class T shares sold in the primary offering. In addition, our dealer manager will receive a dealer manager fee of up to 2.0% of the gross proceeds for Class T shares sold in the primary offering. The dealer manager fee may be reallowed as described above. In addition, our dealer manager will receive an annual stockholder servicing fee of 1.0% of the purchase price per share (ignoring any discounts that may be available to certain categories of purchasers) for our Class T shares sold in the primary offering solely to the extent there is a broker dealer of record with respect to such Class T share that has entered a currently effective selected dealer agreement or servicing agreement that provides for the payment to such broker dealer of the stockholder servicing fee with respect to such Class T share, and such broker dealer of record is in compliance with the applicable terms of such selected dealer agreement or servicing agreement related to such payment. To the extent payable, the stockholder servicing fee will accrue daily and be paid monthly in arrears and is an ongoing fee that is not paid at the time of purchase. The dealer manager will reallow 100% of the stockholder servicing fee to such broker dealer of record for services provided to Class T stockholders after the initial sale of the Class T share. See “Plan of Distribution — Compensation of Dealer Manager and Participating Broker-Dealers” for additional information including a description of the services required from the broker dealer of record.

No selling commissions or dealer manager fees are payable on Class T shares sold through our dividend reinvestment plan. In addition, no stockholder servicing fee will be paid with respect to Class T shares purchased through the dividend reinvestment plan or issued pursuant to a stock dividend; however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to all the Class T shares as a class expense. The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares. Distributions on Class T shares will be lower than distributions on Class A shares because of the ongoing stockholder servicing fee to be paid with respect to Class T shares.

The stockholder servicing fee with respect to a Class T share will cease accruing upon the occurrence of any of the following events: (i) the date at which aggregate underwriting compensation from all sources equals 10% of the gross

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proceeds from the primary offering in which the Class T share was sold, as calculated by us with the assistance of the dealer manager after the termination of the primary offering in which the Class T share was sold, (ii) with respect to a particular Class T share, on the fourth anniversary of the issuance of the share, (iii) a listing of our common stock on a national securities exchange, (iv) a merger or other extraordinary transaction, and (v) the date the Class T share associated with the stockholder servicing fee is no longer outstanding such as upon its redemption or our dissolution.

Underwriting compensation includes the selling commissions, dealer manager fee, and stockholder servicing fee being paid by us as well as other items of value paid in connection with this offering, including amounts not paid or reimbursed by us, that are viewed by FINRA as underwriting compensation. Assuming that (a) the gross offering price of our Class T shares in the primary offering remains constant at $9.59, (b) 85% of the gross primary offering proceeds raised are from the sale of Class T shares, (c) 4% of the proceeds raised in the primary offering are from the sale of Class A shares through distribution channels that do not pay selling commissions of 6.5%, and (d) none of the Class T shares purchased in the primary offering are redeemed and no extraordinary or other transaction affecting whether the share is outstanding occurs prior to the four year anniversary of the issuance of the T share, and because the stockholder servicing fee on a particular Class T share will cease to accrue on the fourth anniversary of the issuance of the share, we expect that with respect to a one-time $10,000 investment in Class T shares, approximately $400 in servicing fees will be paid over 4.0 years and $500 in selling commissions and dealer manager fees will be paid at the time of the investment for a total of $900 in selling commissions, dealer manager fees and stockholder servicing fees, or 9.0% of the price per share of Class T common stock. For further clarity, with respect to any Class T share purchased in the primary offering at $9.59, under the same assumptions, we would pay approximately $0.3836 in servicing fees over 4.0 years and $0.4795 in selling commissions and dealer manager fees at the time of the investment for a total of $0.8631 in selling commissions, dealer manager fees and stockholder servicing fees, or 9.0% of the purchase price per share of Class T common stock. The selling commissions and dealer manager fees would be paid at the time of the investment from the offering proceeds we receive from the investor. The stockholder servicing fee is an ongoing fee that is not paid at the time of purchase and is not intended to be paid from the offering proceeds we receive from an individual investor; rather, it is an on-going class-specific expense that is allocated to all the Class T stockholders for services provided by the broker dealer of record, see the “Plan of Distribution” section of this prospectus for a discussion of the stockholder services.

Rights Upon Liquidation

In the event of any voluntary or involuntary liquidation, dissolution or winding up of us, or any liquidating distribution of our assets, then such assets, or the proceeds therefrom, will be distributed between the holders of Class A shares and Class T shares ratably in proportion to the respective NAV for each class until the NAV for each class has been paid. We will calculate the NAV per share as a whole for all Class A shares and Class T shares and then will determine any differences attributable to each class. As noted above, except in the unlikely event that the stockholder servicing fees payable on the Class T shares sold in the primary offering exceed the amount otherwise available for distribution to Class A stockholders in a particular period, we expect the NAV per share of each Class A share and Class T share to be the same. Each holder of shares of a particular class of common stock will be entitled to receive, ratably with each other holder of shares of such class, that portion of such aggregate assets available for distribution as the number of outstanding shares of such class held by such holder bears to the total number of outstanding shares of such class then outstanding. In the event that we have not previously calculated an NAV for our Class A and Class T shares prior to a liquidation, we will calculate the NAV for our Class A and Class T shares in connection with such a liquidation specifically to facilitate the equitable distribution of assets or proceeds to the share classes.

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. A majority of our conflicts committee who do not have an interest in the transaction must approve any issuance of preferred stock. In addition, our charter empowers our conflicts committee to retain its own legal and financial advisors at the expense of the company. 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

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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 the written request of stockholders holding at least 10% of the shares of common stock entitled to be cast on any issue proposed to be considered at the special meeting. Upon receipt of a written request of common stockholders holding at least 10% of the shares entitled to be cast stating the purpose of the special meeting, our secretary, within 10 days of receipt of such request, will provide all of our stockholders written notice of the meeting and the purpose of such meeting. The meeting must be held not less than 15 days nor 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 on any matter 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. Under our charter, a majority of the shares entitled to vote and present in person or by proxy at a meeting of stockholders at which a quorum is present is required for the election of the directors at a meeting of stockholders called for that purpose. This means that, of the shares entitled to vote and present in person or by proxy, a director nominee needs to receive affirmative votes from a majority of such shares in order to be elected to our board of directors. 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 the 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;

• sell all or substantially all of our assets other than in the ordinary course of business; or

• cause our merger or reorganization.

The term of our advisory agreement with KBS Capital Advisors will end after one year 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, 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 at any meeting of stockholders called expressly for the purpose of removing a director.

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.

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 two requirements specified in the two preceding sentences shall not apply to any period prior to the second year for which we elect to be taxed as a REIT. 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.

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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 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 such lower percentage as required by the Internal Revenue Code or regulations promulgated thereunder) 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.

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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 our 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 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

Our board of directors has authorized stock dividends and a cash distribution on our shares of outstanding Class A common stock, which, as of the date of each declaration, was the only class of common stock issued and outstanding. On each of March 24, April 7, August 6, and November 10 of 2015, our board of directors authorized a quarterly stock dividend of 0.01 shares of Class A common stock (or 1% of a share of Class A common stock) on each outstanding share of Class A common stock issuable to all of our Class A common stockholders of record as of the close of business on each of March 25, June 24, September 22, and December 16 of 2015, respectively. We issued these quarterly stock dividends on March 27, June 29, September 29, and December 22 of 2015.

On December 10, 2015, our board of directors declared a stock dividend of 0.06 shares of Class A common stock (or 6% of a share of Class A common stock) on each outstanding share of Class A common stock to stockholders of record as of the close of business on December 16, 2015. We issued this stock dividend on December 21, 2015.

On December 10, 2015, our board of directors also declared a cash distribution in the amount of $0.12 per share of Class A common stock to stockholders of record as of the close of business on December 16, 2015. We paid this distribution on December 18, 2015. The distribution amount was generally determined based on both our estimated undistributed taxable income and the results of operations. The distribution was paid in cash or, for investors enrolled in our dividend reinvestment plan, reinvested in additional shares. Until our board of directors determines we have sufficient cash flow from operations to authorize regular, monthly cash distributions based on daily record dates, we expect our board of directors will declare distributions from time to time based on our income, cash flow and investing and financing activities. As such, we can give no assurances as to the timing, amount or notice with respect to any future cash distribution declarations.

During our offering stage, we currently expect our board of directors to declare stock dividends on a set quarterly basis based on quarterly record dates. Especially during the early stages of our operations and until our cash flows stabilize, our board of directors believes the declaration of stock dividends is in our best interest because it will allow us to focus on our investment strategy of investing in opportunistic real estate investments that may generate limited cash flow but have the potential for appreciation. These stock dividends may reflect in part an increase or anticipated increase in portfolio value to the extent our board of directors believes assets in our portfolio have appreciated or will appreciate in value after acquisition or after we have taken control of the assets. In addition, these stock dividends may reflect in part cash flow from operations. However, we can provide no assurances that our stock dividends will reflect appreciation in our portfolio or cash flow from operations. Unless our assets appreciate in an amount sufficient to offset the dilutive effect of any stock dividends, the return per share for later investors purchasing our stock will be below the return per share of earlier investors. With respect to any non-performing assets that we acquire, we believe that within a relatively short time after acquisition or taking control of such investments via foreclosure or deed-in-lieu proceedings, we will often experience an increase in their value. For example, in most instances, we bring financial stability to the property, which reduces uncertainty in the market and alleviates concerns regarding the property’s management, ownership and future. We also may have more capital available for investment in these properties than their prior owners and operators were willing to invest, and as such, we are able to invest in tenant improvements and capital expenditures with respect to such properties, which enables us to attract substantially increased interest from brokers and tenants.

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We expect that once our board of directors determines we have sufficient cash flow from operations, our board of director will authorize and declare cash distributions based on daily record dates and pay these distributions on a monthly basis. We expect that we will fund these cash distributions from interest income on our debt investments, rental and other income on our real property investments and to the extent we acquire investments with short maturities or investments that are close to maturity, we may fund distributions with the proceeds received at the maturity, payoff or settlement of those investments. We may also utilize strategic refinancings to fund cash distributions for investments that have appreciated in value after our acquisition. Generally, our distribution policy is not to pay cash distributions from sources other than cash flow from operations, investment activities and strategic financings. However, we may fund cash distributions from any source and there are no limits to the amount of distributions that we may pay from any source, including proceeds from this offering or the proceeds from the issuance of securities in the future, other third party borrowings, advances from our advisor or sponsors or from our advisor’s deferral of its fees under the advisory agreement. Distributions paid from sources other than current or accumulated earnings and profits may constitute a return of capital. From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. In these situations we may make distributions in excess of our cash flow from operations, investment activities and strategic financings to satisfy the REIT distribution requirement described above. In such an event, we would look first to other third party borrowings to fund these distributions.

Upon completion of our offering stage, we expect to fund cash distributions from interest and rental and other income on investments, the maturity, payoff or settlement of investments and from strategic sales of loans, debt securities, properties and other assets as well as the strategic use of debt financing as described above. We do not expect to make significant asset sales (and related cash distributions from net sales proceeds) during our offering stage because, as a REIT, we will generally have to hold our assets for two years in order to meet the safe harbor to avoid a 100% prohibited transactions tax, unless such assets are held through a taxable REIT subsidiary (“TRS”) or other taxable corporation. At such time as we have assets that we have held for at least two years, we anticipate that we may authorize and declare distributions based on gains on asset sales monthly, to the extent we close on the sale of one or more assets and the board of directors does not determine to reinvest the proceeds of such sales.

Cash distributions on Class T shares will be lower than cash distributions on Class A shares because of the ongoing stockholder servicing fee to be paid with respect to Class T shares sold in the primary offering. We will not pay the stockholder servicing fee on Class T shares issued as a stock dividend or purchased in our dividend reinvestment plan offering; however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to all the Class T shares as a class expense. The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares.

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 U.S. generally accepted accounting principles (“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 Strategic Opportunity REIT II, Inc. — Annual Distribution Requirements.” In general, we anticipate making distributions to our stockholders of at least 100% of our REIT taxable income so that none of our income is subject to federal income tax. 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.

Distributions that our stockholders 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 our dividend reinvestment plan at a discount to fair market value, if any. 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 a stockholder’s distribution is not from current or accumulated earnings and profits, it will not be subject to tax immediately; it will be considered a return of capital for tax purposes and will reduce the tax basis of the stockholder’s investment (and potentially result in taxable gain upon the stockholder’s sale of the stock). During the first few years of our operations, we expect that portions of our distributions will not be funded from current

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or accumulated earnings and profits and will therefore be considered a return of capital. Distributions that constitute a return of capital, in effect, defer a portion of a stockholder’s tax until the stockholder’s investment is sold or we are liquidated, at which time the stockholder will be taxed at capital gains rates. However, because each investor’s tax considerations are different, we suggest that stockholders consult with their tax advisor.

We believe that any stock dividends should be tax-free transactions for U.S. federal income tax purposes under Section 305(a) of the Internal Revenue Code of 1986, as amended, and the adjusted tax basis of each share of “old” and “new” common stock should be computed by dividing the adjusted tax basis of the old common stock by the total number of shares, old and new. The holding period of the common stock received in such non-taxable distribution is expected to begin on the date the taxpayer acquired the common stock which is the date that each dividend is issued. Stockholders should consult their own tax advisors regarding the tax consequences of any stock dividends

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

Under Maryland law, a stockholder is entitled to inspect and copy (at all reasonable times) the following corporate documents: bylaws, minutes of the proceedings of stockholders, annual statements of affairs, voting trust agreements and stock records for certain specified periods. In addition, within seven days after a request for such documents is presented to an officer or our resident agent, we will have the requested documents available on file at our principal office. 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 stockholder within 10 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: (i) any person who beneficially owns 10% or more of the voting power of the corporation’s shares; or (ii) 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 10% 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: (i) 80% of the votes entitled to be cast by holders of outstanding voting shares of the corporation; and (ii) two-thirds of the votes entitled to be cast by holders of voting shares of the corporation other than shares held by

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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 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 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.

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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.

Our charter does not prohibit us 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 10 business days before initiating the tender offer. Pursuant to our charter, Regulation 14D would require any stockholder initiating a tender offer to provide:

• 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, all tendering stockholders will have the opportunity to rescind the tender of their shares to the non-complying offeror within 30 days of our provision of a position statement on such non-compliant tender offer to stockholder. 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, excluding those dividends and other distributions that our board of directors designates as ineligible for reinvestment through the plan, reinvested in additional shares of our common stock. Purchases pursuant to our dividend reinvestment plan will be in the same class of shares as the shares for which such stockholder received the distributions that are being reinvested. 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 regardless of the offering in which they acquired their shares; 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. We request that participants notify us

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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 or increase your participation 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.

Stock Purchases

Shares will be purchased under the dividend reinvestment plan on the distribution payment dates declared by our board of directors and will be in the same class of shares as the shares for which such stockholder received the distributions that are being reinvested. The purchase of fractional shares is a permissible and likely result of the reinvestment of distributions under the dividend reinvestment plan.

Until we announce an estimated NAV per share, participants in our dividend reinvestment plan will acquire shares of our common stock at a price per share equal to 95% of the then-current offering price for shares in the primary portion of an offering (whether in this primary offering or a follow-on primary offering and ignoring any discounts that may be available to certain categories of purchasers) or 95% of the most recent offering price in a primary offering if there is no current offering. These dividend reinvestment plan offering prices are initially $9.50 per Class A share and $9.12 per Class T share.

Once we have announced an estimated NAV per share, which we expect to occur no later than June 6, 2017, which date is 150 days after the second anniversary of the date on which we broke escrow in this offering, participants in our dividend reinvestment plan will acquire shares of our common stock at a price equal to 95% of the estimated NAV per share of our common stock.

Our board of directors may adjust the offering prices of the primary offering shares or dividend reinvestment plan shares during the course of the offering by filing a post-effective amendment.

Account Statements

You or your designee will receive a confirmation of your purchases under the dividend reinvestment plan monthly. 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.

Fees and Commissions and Use of Proceeds

No selling commissions or dealer manager fees will be payable on the shares sold under our dividend reinvestment plan. In addition, no stockholder servicing fee will be paid with respect to Class T shares purchased through the dividend reinvestment plan (or issued pursuant to a stock dividend); however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to all the Class T shares as a class expense. The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares. 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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• future funding obligations under any real estate loan receivable we acquire;

• acquisition or origination of assets, which would include payment of acquisition fees or origination fees to our advisor (see “Management Compensation”);

• the repayment of debt; and

• expenses relating to our investments, such as purchasing a loan senior to ours to protect our junior position in the event of a default by the borrower on the senior loan, making protective advances to preserve collateral securing a loan, or making capital and tenant improvements or paying leasing costs and commissions related to real property.

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. 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 four business days prior to the last business day prior to the payment date for the distribution; provided that, if we publicly announce in a filing with the SEC a new offering price under the dividend reinvestment plan, then a participant shall have no less than two business days after the date of such announcement to notify us in writing of a participant’s termination of participation in the dividend reinvestment plan and the participant’s termination will be effective for the next date shares are purchased under the dividend reinvestment plan. Any transfer of your shares will effect a termination of the participation of those shares in the dividend reinvestment plan. We will terminate your 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 10 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.

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. However, our share redemption program includes numerous restrictions that limit our stockholders’ ability to sell their shares.

If and when we do have funds available for redemption under our share redemption program, unless the shares are being redeemed upon a stockholder’s death, “qualifying disability” (as defined below) or “determination of incompetence” (as defined below) (collectively, “Special Redemptions”), the prices at which we will redeem shares are as follows:

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Redemption Price

Until we announce an estimated NAV per share of our common stock, the price at which we will redeem the shares is as follows:

• For those shares held by the redeeming stockholder for at least one year, 92.5% of the price paid to acquire the shares from us;

• For those shares held by the redeeming stockholder for at least two years, 95.0% of the price paid to acquire the shares from us;

• For those shares held by the redeeming stockholder for at least three years, 97.5% of the price paid to acquire the shares from us; and

• For those shares held by the redeeming stockholder for at least four years, 100% of the price paid to acquire the shares from us.

Notwithstanding the foregoing, stock dividends will initially be redeemed at the “net investment amount” per share, which will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. For each class of shares, this amount will initially equal $9.01 per share for redemptions of shares received as a result of a stock dividend.

After we establish an estimated NAV per share of our common stock, the price at which we will redeem the shares is as follows:

• For those shares held by the redeeming stockholder for at least one year, 92.5% of our most recent estimated NAV per share as of the applicable redemption date;

• For those shares held by the redeeming stockholder for at least two years, 95.0% of our most recent estimated NAV per share as of the applicable redemption date;

• For those shares held by the redeeming stockholder for at least three years, 97.5% of our most recent estimated NAV per share as of the applicable redemption date; and

• For those shares held by the redeeming stockholder for at least four years, 100% of our most recent estimated NAV per share as of the applicable redemption date.

For purposes of determining the time period a redeeming stockholder has held each share, the time period begins as of the date the stockholder acquired the share; provided, that shares purchased by the redeeming stockholder pursuant to our dividend reinvestment plan and shares received as a stock dividend will be deemed to have been acquired on the same date as the initial share to which the dividend reinvestment plan shares or stock dividend shares relate. The date of the share’s original issuance by us is not determinative. In addition, as described above, the shares owned by a stockholder may be redeemed at different prices depending on how long the stockholder has held each share submitted for redemption.

Limitations on Redemption

There are several limitations on our ability to redeem shares under the program:

• Unless the shares are being redeemed in connection with a Special Redemption, we may not redeem a share unless the stockholder has held the share for one year.

• 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. Notwithstanding the foregoing, the share redemption program provides up to $500,000 in additional funds to redeem a qualifying stockholder’s shares if the shares are being redeemed in connection with a Special Redemption. For purposes of determining the amount of funds available for redemption under the share redemption program, redemptions for a Special Redemption are to be made first from this $500,000. This restriction may significantly limit your ability to have your shares redeemed pursuant to our share redemption program because initial distributions have been in the form of stock dividends and, particularly during our offering stage, we do not expect to have cash flow sufficient to pay significant cash distributions, which would in turn severely limit redemptions during the next 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.

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• 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.

Procedures for Redemption

We will redeem shares on the last business day of each month, except that the first redemption date following our announcement of an estimated NAV per share shall be no less than 10 business days after our announcement of an estimated NAV per share in a filing with the SEC and the redemption date shall be set forth in such filing. 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 if a pro rata redemption would result in you owning less than the minimum purchase amount described below under “Plan of Distribution - Minimum Purchase Requirements,” then we will redeem all of your shares.

If we did not completely satisfy a stockholder’s redemption request at the redemption date 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 or at the next redemption date following the resumption of the share redemption program 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.

Special Redemptions

In several respects we would treat redemptions sought upon a Special Redemption differently from other redemptions:

• there is no one-year holding requirement;

• until we announce an estimated NAV per share, the redemption price is the amount paid to acquire the shares from us; provided that, stock dividends will initially be redeemed at the “net investment amount” per share, which will be based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table. For each class of shares, this amount will initially equal $9.01 per share for redemptions of shares received as a result of a stock dividend; and

• once we have announced an estimated NAV per share, the redemption price for all shares would be the estimated NAV of the shares, as determined by our board of directors.

In order for a disability to entitle a stockholder to the special redemption terms described above (a “qualifying disability”), (i) 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 (ii) such determination of disability would have to be made by the governmental agency responsible for reviewing the disability retirement benefits that the stockholder 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 taxes 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

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would have to be accompanied by: (i) the investor’s initial application for disability benefits and (ii) 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.

Amendment or Termination of Program and Notice

In its sole discretion, our board of directors may amend, suspend or terminate the program without stockholder approval upon 30 days’ notice, provided that we may increase or decrease the funding available for the redemption of shares pursuant to our share redemption program upon ten business days’ notice to our stockholders. 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, at which time the program would terminate. No such market presently exists, and we cannot assure you that any market for your shares will ever develop.

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 Strategic Opportunity REIT II, Inc., c/o DST Systems, Inc., PO Box 219015, Kansas City, MO 64121-9015.

• Overnight mail: KBS Strategic Opportunity REIT II, 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

We have engaged 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

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• 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:

(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 common 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.

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THE OPERATING PARTNERSHIP AGREEMENT

General

KBS Strategic Opportunity Limited Partnership II, which we refer to as the Operating Partnership, is a 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 Strategic Opportunity Holdings II 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 this offering to our Operating Partnership as a capital contribution in exchange for units of limited partnership interest of the same class as the applicable shares with respect to which offering proceeds have been received. Such units will have economic terms that vary based upon the class of shares issued. However, we will be deemed to have made capital contributions in the amount of the gross offering proceeds received from investors, and our Operating Partnership will be deemed to have simultaneously paid the selling commissions and dealer manager fees associated with the sale of the shares. These units will be held by KBS Strategic Opportunity Holdings II. Because we are currently the only limited partner in the Partnership, we do not have multiple classes of operating partnership interests that correspond to our classes of common stock. However, in the future we may issue new classes of operating partnership interests with unique terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption.

As a result of this structure, we will be 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.

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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.

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, manage and dispose of loans, securities, real property and any other assets;

• construct buildings and make other improvements on owned or leased properties;

• authorize, issue, sell, redeem or otherwise purchase any debt or other securities;

• borrow or loan money;

• originate loans;

• 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 or originating and operating and managing investments. 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;

• all expenses relating to the public offering and registration of our securities;

• all expenses associated with the payment of the ongoing stockholder servicing fee;

• 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 assets we may own outside of the Operating Partnership. We would pay the expenses relating to such assets directly.

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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 (i) the holders of a majority of partnership units (including those we held) approved the transaction; (ii) 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; (iii) we were the surviving entity and our stockholders did not receive cash, securities or other property in the transaction; or (iv) 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.

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PLAN OF DISTRIBUTION

General

We are publicly offering up to $1,000,000,000 in shares of our common stock in the primary offering, consisting of two classes of shares: Class A shares at a price of $10.00 per share and Class T shares at a price of $9.59 per share. Both classes of shares have discounts available to certain categories of purchasers as described below. This offering is being conducted 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 also offering up to 76,366,006 shares of our common stock pursuant to our dividend reinvestment plan. Purchases pursuant to our dividend reinvestment plan will be in the same class of shares as the shares for which such stockholder received the distributions that are being reinvested. Until we announce an estimated NAV per share, participants in our dividend reinvestment plan will acquire shares of our common stock at a price per share equal to 95% of the then-current offering price for shares purchased in the primary portion of an offering (ignoring any discounts that may be available to certain categories of purchasers). These dividend reinvestment plan offering prices are initially $9.50 per Class A share and $9.12 per Class T share. Once we have announced an estimated NAV per share, which we expect to occur no later than June 6, 2017, which date is 150 days after the second anniversary of the date on which we broke escrow in this offering, participants in our dividend reinvestment plan will acquire shares of our common stock at a price equal to 95% of the estimated NAV per share of our common stock. We generally expect to update the estimated NAV per share in December of each year.

We are offering to sell any combination of Class A and Class T shares in our primary offering and dividend reinvestment plan offering but in no event may we sell more than 180,000,000 of shares of our common stock pursuant to this offering. We reserve the right to reallocate shares between the primary offering and our dividend reinvestment plan offering, and to reallocate shares among classes of common stock, if we elect to offer additional classes in the future. Based on our current estimates, as of the date of this prospectus, we have allocated 103,633,994 and 76,366,006 shares of our common stock to our primary and dividend reinvestment plan offerings, respectively. Our board of directors may adjust the offering prices of the primary offering shares or dividend reinvestment plan shares during the course of this offering by filing a post-effective amendment.

This primary offering shall terminate approximately 90 days (as determined by our Chief Executive Officer) after we have announced that we have raised $650 million in our primary public offering. In no event may the primary offering continue beyond the time period permitted by the rules promulgated by the SEC, which rules provide that absent the filing of a registration statement for a follow-on offering, this primary offering shall terminate after a three-year period. If we decide to revise the threshold upon which we will terminate this primary offering, we will provide that information in a prospectus supplement. We may continue to offer shares under our dividend reinvestment plan after the primary offering terminates until we have sold up to 76,366,000 shares of our common stock through the reinvestment of distributions. We may terminate this offering at any time.

Our dealer manager, KBS Capital Markets Group, registered as a broker-dealer with the SEC in October 2004, and this offering is the sixth public 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 sponsors, Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr. 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, our dealer manager will receive selling commissions of 6.5% of the gross offering proceeds for Class A shares sold in the primary offering and up to 3.0% of the gross offering proceeds for Class T shares sold in the primary offering. Reduced selling commissions will be paid for shares with respect to certain volume discount sales and sales through certain distribution channels. We will not pay any selling commissions for shares sold under our dividend reinvestment plan.

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.

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We may sell our Class A shares at a discount to the primary offering price (initially $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 adviser with whom the investor has agreed to pay compensation for investment advisory services or other financial or investment advice (other than a registered investment adviser 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 Class A shares through one of these channels in the primary offering, we will sell the Class A shares at a 6.5% discount (e.g. initially at $9.35 per share based on the initial primary offering price of $10.00 per share), reflecting that selling commissions will not be paid in connection with such purchases. We will receive the same net proceeds for sales of Class A shares through these channels.

If an investor purchases Class A shares in the primary offering net of commissions through a registered investment adviser that is affiliated with a participating broker‑dealer in a transaction in which the registered investment adviser is compensated on a fee‑for‑service basis by the investor, our dealer manager may reallow to the affiliated participating broker‑dealer up to 1% of the gross offering proceeds attributable to that transaction as a marketing fee. The marketing fee paid to participating broker‑dealers would be paid by our dealer manager out of its dealer manager fee. If an investor purchases Class A shares in this offering through a registered investment adviser (or bank acting as a trustee or fiduciary) not affiliated with a participating broker‑dealer, our dealer manager will not reallow any portion of the dealer manager fee.

Neither our dealer manager nor its affiliates will compensate any person engaged as an investment adviser by a potential investor as an inducement for such investment adviser to advise favorably for an investment in us.

If an investor purchases Class A shares in the primary offering net of commissions through a registered investment adviser 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 Class A 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 Class A shares is only available for the investor’s initial investment in our Class A 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 Class A shares reduced by the amount of his or her annual custodial fee.

Our dealer manager will receive a dealer manager fee of up to 2.0% of the gross primary offering proceeds for Class A and Class T shares as compensation for acting as our dealer manager. The dealer manager fee paid with respect to any purchases made net of selling commissions as described in this “Plan of Distribution” section, will be calculated based on the undiscounted purchase price. A reduced dealer manager fee will be paid with respect to certain volume discount sales related to sales of our shares as described below. We will not pay dealer manager fees for shares sold under our dividend reinvestment plan.

Our dealer manager may generally reallow to any participating broker dealer up to 1.0% of the gross primary offering proceeds attributable to that participating broker dealer as a marketing fee. In select cases up to 1.5% of the gross primary offering proceeds may be reallowed. This reallow will be based upon such factors as the projected sales volume by such participating broker-dealer, access to conferences and meetings and the general level of assistance of such participating broker-dealer in marketing this offering. For volume discount sales of $3,000,001 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 our dealer manager out of its dealer manager fee.

In addition, our dealer manager will receive an annual stockholder servicing fee of 1.0% of the purchase price per share (ignoring any discounts that may be available to certain categories of purchasers) of Class T common stock sold in the primary offering solely to the extent there is a broker dealer of record with respect to such Class T share that has entered a currently effective selected dealer agreement or servicing agreement that provides for the payment to such

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broker dealer of the stockholder servicing fee with respect to such Class T share, and such broker dealer of record is in compliance with the applicable terms of such selected dealer agreement or servicing agreement related to such payment. Such terms include providing ongoing services to the holder of the Class T share including (i) offering to meet with the holder of the Class T share no less than annually to provide overall guidance on the holder’s investment in us, including discussing the mechanics of the dividend reinvestment plan, share redemption program or a tender offer, or to answer questions about the account statement or valuations, and (ii) discussing with the holder of the Class T share, upon such holder’s request, any questions related to the holder’s investment in us. While we expect that the broker dealer of record for a Class A stockholder may provide similar services to a Class A stockholder, they are under no contractual obligation to do so and we will not pay a stockholder servcing fee for such services. To the extent payable, the stockholder servicing fee will accrue daily and be paid monthly in arrears, and the dealer manager will reallow 100% of the stockholder servicing fee to such broker dealer of record for services provided to Class T stockholders after the initial sale of the class T share.  If the broker dealer of record with respect to a Class T share has changed during a calendar month, the broker dealer of record as of the end of the month with respect to such Class T share will be entitled to the full amount of the stockholder servicing fee accrued for that month; provided, however, that if the broker dealer of record has changed during a calendar month in conjunction with a change in the registered holder of the Class T share, the servicing fee accrued for the month will be prorated among the broker dealers of record associated with the account.  In addition, no stockholder servicing fee will be paid with respect to Class T shares purchased through the dividend reinvestment plan or issued pursuant to a stock dividend; however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to the Class T shares as a class expense.  The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares. 

The stockholder servicing fee with respect to a Class T share will cease accruing upon the occurrence of any of the following events: (i) the date at which aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the primary offering in which the Class T share was sold, as calculated by us with the assistance of the dealer manager after the termination of the primary offering in which the Class T share was sold, (ii) with respect to a particular Class T share, on the fourth anniversary of the issuance of the share, (iii) a listing of our common stock on a national securities exchange, (iv) a merger or other extraordinary transaction, and (v) the date the Class T share associated with the stockholder servicing fee is no longer outstanding such as upon its redemption or our dissolution. Assuming that (a) the gross offering price of our Class T shares in the primary offering remains constant at $9.59, (b) 85% of the gross primary offering proceeds raised are from the sale of Class T shares, (c) 4% of the proceeds raised in the primary offering are from the sale of Class A shares through distribution channels that do not pay selling commissions of 6.5%, and (d) none of the Class T shares purchased in the primary offering are redeemed and no extraordinary or other transaction affecting whether the share is outstanding occurs prior to the four year anniversary of the issuance of the T share, and because the stockholder servicing fee on a particular Class T share will cease to accrue on the fourth anniversary of the issuance of the share, we expect that with respect to a one-time $10,000 investment in Class T shares, approximately $400 in servicing fees will be paid over 4.0 years and $500 in selling commissions and dealer manager fees will be paid at the time of the investment for a total of $900 in selling commissions, dealer manager fees and stockholder servicing fees, or 9.0% of the price per share of Class T common stock. For further clarity, with respect to any Class T share purchased in the primary offering at $9.59, under the same assumptions, we would pay approximately $0.3836 in servicing fees over 4.0 years and $0.4795 in selling commissions and dealer manager fees at the time of the investment for a total of $0.8631 in selling commissions, dealer manager fees and stockholder servicing fees, or 9.0% of the purchase price per share of Class T common stock. The selling commissions and dealer manager fees would be paid at the time of the investment from the offering proceeds we receive from the investor. The stockholder servicing fee is an ongoing fee that is not paid at the time of purchase and is not intended to be paid from the offering proceeds we receive from an individual investor; rather, it is an on-going class-specific expense that is allocated to all the Class T stockholders for services provided by the broker dealer of record, see the “Plan of Distribution” section of this prospectus for a discussion of the stockholder services.

Underwriting compensation includes selling commissions, dealer manager fees, and stockholder servicing fees being paid in connection with an offering as well as other items of value paid in connection with an offering, including amounts not paid or reimbursed by us, that are viewed by FINRA as underwriting compensation. We describe in the table below the underwriting compensation expected to be paid in connection with this offering. 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 and 11% of the proceeds raised in the primary offering are from the sale of Class A shares at the highest possible selling commissions and dealer manager fee, 4% of the proceeds raised in the primary offering are from

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the sale of Class A shares through distribution channels that do not pay selling commissions of 6.5%, and 85% of the proceeds raised in the primary offering are from the sale of Class T shares at the highest possible selling commissions and dealer manager fee. Except for wholesaling compensation expenses, which are solely the responsibility of our dealer manager and its affiliates, we will reimburse or pay directly our dealer manager and their affiliates for the costs listed below, subject to reimbursement by our advisor and its affiliates as described below.

Dealer Manager and Participating Broker-Dealer Compensation
	Total Compensation		% of Primary Offering Gross Proceeds
Selling commissions (maximum)
Class A common stock (1)	$	7,150,000	0.72
Class T common stock	25,500,000		2.55
Dealer manager fee (maximum)
Class A common stock (2)	3,598,000		0.36
Class T common stock	17,000,000		1.70
Stockholder Servicing Fee (maximum)(3)
Class T common stock	34,000,000		3.40
Other underwriting compensation:
Expense reimbursements for retail activities (4)(5)	2,214,000		0.22
Expense reimbursements for wholesaling activities (5)(6)	10,250,500		1.02
Legal fees allocable to our dealer manager (5)	100,000		*
Promotional items (5)	187,500		*
Total	$	100,000,000	10%

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^* Less than 0.1%

⁽¹⁾ The maximum amount of commissions we expect to pay has been determined based on the assumption that 4% of the proceeds raised in the primary offering are from the sale of Class A shares through distribution channels that do not pay selling commissions of 6.5%, similar to the assumptions described in footnote 3 below for the estimated amount of stockholder servicing fee. If all Class A shares are sold through distribution channels with the highest commissions, the maximum commissions payable would be $35,250,000, which would reduce the amount available for the stockholder servicing fee to $31,400,000.

⁽²⁾ Effective for subscriptions admitted after February 16, 2016, we reduced the dealer manager fee payable in this offering from 3% of gross offering proceeds to 2% of gross offering proceeds. Prior to the reduction in the dealer manager fee, we had raised approximately $59.8 million in gross offering proceeds. The amount of dealer manager fees shown reflects a weighted average fee assuming we paid the maximum possible amount in dealer manager fees of $1.79 million with respect to the approximately $59.8 million of Class A shares sold in the primary offering prior to the reduction in the dealer manager fee.

⁽³⁾ The stockholder servicing fee is an ongoing fee that is not paid at the time of purchase. Except as described herein, the stockholder servicing fee will accrue daily and be paid monthly in arrears and our dealer manager will reallow 100% of the stockholder servicing fee to the broker dealer of record with respect to the Class T share that has entered a currently effective selected dealer agreement or servicing agreement that provides for the payment to such broker dealer of the stockholder servicing fee with respect to such Class T share, and such broker dealer of record is in compliance with the applicable terms of such selected dealer agreement or servicing agreement related to such payment. The maximum amount of the stockholder servicing fee we expect to pay has been determined based on the following assumptions: (a) the gross offering price of our Class T shares in the primary offering remains constant at $9.59, (b) 85% of the gross primary offering proceeds raised are from the sale of Class T shares, (c) 4% of the proceeds raised in the primary offering are from the sale of Class A shares through distribution channels that do not pay selling commissions of 6.5%, (d) none of the Class T shares purchased in the primary offering are redeemed and no extraordinary or other transaction affecting whether the share is outstanding occurs prior to the four year anniversary of the issuance of the T share.

⁽⁴⁾ These fees will consist primarily of reimbursements for attendance and sponsorship fees payable to participating broker‑dealers hosting a retail seminar and the travel, meals and lodging costs of representatives of participating broker‑dealers to attend bona fide training and education meetings hosted by us.

⁽⁵⁾ We reimburse KBS Capital Markets Group or its affiliates for these expenses other than wholesaling compensation expenses noted in footnote 6 below. In some cases, these payments serve to reimburse our dealer manager for amounts it has paid to participating broker‑dealers for the items noted. Our advisor and its affiliates have agreed to reimburse us at the termination of our primary offering to the extent that organization and other offering expenses borne by us in connection with this primary offering, regardless of when incurred, exceed 1.0% of gross primary offering proceeds. Our advisor and its affiliates will be responsible for the payment of such organization and other offering expenses related to the primary offering to the extent they exceed 1.0% of gross primary offering proceeds.

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⁽⁶⁾ These fees will consist primarily of (i) the travel, meals and lodging costs incurred by registered persons associated with our dealer manager to attend (a) retail conferences sponsored by participating broker‑dealers, other meetings with participating broker‑dealers and industry conferences, and (b) bona fide training and education meetings hosted by us, (ii) wholesaling compensation expenses (which expenses we are not reimbursing our dealer manager), and (iii) 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.

Under the rules of FINRA, total underwriting compensation in this offering, including selling commissions, the dealer manager fee and the stockholder servicing fee, may not exceed 10% of the gross offering proceeds from the 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.

We will pay directly or reimburse our dealer manager for all items of underwriting compensation discussed in this prospectus for this primary offering, as amended and supplemented, to the extent that this prospectus, as amended and supplemented, indicates such items will be paid by us. We also pay directly or reimburse our dealer manager for bona fide invoiced due diligence expenses of broker-dealers. We estimate these expenses will be approximately $400,000. However, no reimbursements made by us to our advisor or our dealer manager may cause total organization and offering expenses incurred by us (including selling commissions, dealer manager fees, the stockholder servicing fee and all other items of organization and offering expenses) to exceed 15% of the aggregate gross proceeds from this primary offering and the offering under our dividend reinvestment plan as of the date of reimbursement. We also pay organization and other offering expenses directly. At the termination of our primary offering, our advisor and its affiliates will reimburse us to the extent that the organization and other offering expenses (which exclude selling commissions, dealer manager fees and stockholder servicing fees) paid directly or reimbursed by us in connection with this primary offering exceed, regardless of when incurred, 1.0% of gross primary offering proceeds. Our advisor and its affiliates will be responsible for any organization and other offering expenses related to the primary offering to the extent they exceed 1.0% of gross primary offering proceeds as of the termination of the primary offering. Prior to the termination of the primary offering, at which time the advisor will reimburse us as described above, we will be responsible for the payment of all organization and other offering expenses we incur directly and the reimbursement of organization and other offering expenses our advisor and dealer manager incur on our behalf in connection with this offering subject to the 15% limit on reimbursements discussed above.

Upon the fourth anniversary of the issuance of the last Class T share sold in this primary offering, to the extent that total underwriting compensation for this primary offering is less than 10% of the gross offering proceeds of this primary offering, KBS Capital Markets Group may establish a bonus pool program for employees that participated in this offering and certain other employees that provided substantial stockholder services to our stockholders. The amount of funds available for any such bonus pool would be specifically limited to an amount that would not cause total underwriting compensation in this primary offering to exceed 10% of gross offering proceeds of this primary offering. The bonus pool would be funded by our sponsor, most likely from advisory fees payable to KBS Capital Advisors under the advisory agreement, although the exact source of funds has not been determined.

To the extent permitted by law and our charter, we will indemnify the participating broker‑dealers and our dealer manager against some civil liabilities, including certain liabilities under the Securities Act of 1933 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.”

Our dealer manager has agreed to sell up to 5% of the shares offered in the primary offering, in either class, 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 of either class 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. Under the “friends and family program” we will sell Class A shares at a 6.5% discount (e.g. initially at $9.35 per share based on the initial primary offering price of $10.00 per share) and Class T shares at a 3.0% discount (e.g. initially at $9.302 per share based on the initial primary offering price of $9.59 per share), reflecting that selling commissions will not be paid in connection with such purchases. The net proceeds to us from the sales of Class A shares and Class T shares made net of commissions will be the same as the net proceeds we receive from other sales of Class A shares and Class T shares, respectively.

We may sell shares of either class to participating broker‑dealers, their retirement plans, their representatives and the family members, IRAs and the qualified plans of their representatives at a 6.5% discount for Class A shares or a 3.0% discount for Class T shares (e.g. initially at $9.35 or $9.302) per share for the Class A and Class T shares,

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respectively based on the primary offering price of $10.00 and $9.59, respectively), reflecting that selling commissions will not be paid in connection with such purchases in consideration of the services rendered by such broker‑dealers and representatives in this 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 Class A shares and Class T shares made net of selling commissions will be the same as the net proceeds we receive from other sales of Class A shares and Class T shares, respectively.

We are offering volume discounts to investors who purchase $1,000,001 or more of either class of shares of our common stock in the primary offering. The net proceeds to us from a sale of shares eligible for a volume discount will be the same, but the selling commissions and, in some cases, the dealer manager fees we pay will be reduced. Because our dealer manager will reallow all selling commissions, the amount of commissions participating broker‑dealers receive for such sales of shares will be reduced.

The following table shows the discounted price per share and the reduced selling commissions and dealer manager fee payable for volume sales of our Class A shares based on the initial primary offering price of $10.00 per share.

Volume Discount Table for Class A Shares
Dollar Volume Class A 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	$1,000,000	6.5%	2.0%	$10.00
$1,000,001	to	$2,000,000	5.5%	2.0%	$9.90
$2,000,001	to	$3,000,000	4.5%	2.0%	$9.80
$3,000,001	to	$4,000,000	3.5%	1.5%	$9.65
$4,000,001	to	$10,000,000	2.0%	1.5%	$9.50
$10,000,001	and above		1.0%	1.0%	$9.35

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 Class A 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 $50,000.

If an investor purchases $3,000,001 or more of Class A shares in the primary offering through a distribution channel under which selling commissions are not paid, we will apply the reduced dealer manager fee available as set forth in the table below. The following table shows the discounted price per Class A share and the reduced dealer manager fee payable for volume sales of our shares sold net of selling commissions.

Volume Discount Table for Purchases of Class A Shares Made Net of Selling Commissions
Dollar Volume Class A Shares Purchased			Dealer Manager Fee (Based on $10.00 Price Per Class A Share)	Price Per Class A Share to Investor*
$3,000,001	to	$10,000,000	1.5%	$9.300
$10,000,001	and above		1.0%	$9.250

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*Price per Class A share to investor assumes a purchase price of $10.00; the dealer manager fee is calculated based on the $10.00 purchase price.

The following table shows the discounted price per share and the reduced selling commissions and dealer manager fee payable for volume sales of our Class T shares based on the initial primary offering price of $9.59 per share.

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Volume Discount Table for Class T Shares
Dollar Volume of Class T Shares Purchased			Sales Commissions (Based on $9.59 Price Per Share)	Dealer Manager Fee (Based on $9.59 Price Per Share)	Price Per Share to Investor
$0	to	$1,000,000	3.0%	2.0%	$9.590
$1,000,001	to	$2,000,000	2.0%	2.0%	$9.494
$2,000,001	to	$3,000,000	1.5%	2.0%	$9.446
$3,000,001	to	$4,000,000	1.0%	1.5%	$9.350
$4,000,001	to	$10,000,000	0.5%	1.5%	$9.302
$10,000,001	and above		0.5%	1.0%	$9.254

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 $9.59. For example, a purchase of 250,000 Class T shares in a single transaction would result in a purchase price of $2,361,500 ($9.446 per share), selling commissions of $35,962.50 and dealer manager fees of $47,950.

To qualify for a volume discount as a result of multiple purchases of our Class A or Class T shares, a stockholder must mark the “Additional Investment” space on the subscription agreement. We are not responsible for failing to combine purchases if a stockholder fails to mark the “Additional Investment” space.Once a stockholder qualifies for a volume discount, such stockholder will be eligible to receive the benefit of such discount for subsequent purchases of shares in the primary offering. 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.

For purposes of qualifying for a volume discount as the result of multiple purchases of shares, only an individual or entity with the same social security number or taxpayer identification number, as applicable may combine their purchases as a “single purchaser”; provided that, purchases by an individual investor and his or her spouse living in the same household may also be combined as a “single purchaser” for purposes of determining the applicable volume discount.

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 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.

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 an investor 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 for combined purchases by an individual investor and his or her spouse living in the same household.

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Subscription Procedures

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 class and number of shares and pay for the shares at the time of your subscription. Unless you are a Benefit Plan investor subscribing to purchase Class T shares, you should make your check payable to “KBS Strategic Opportunity REIT II, Inc.” Benefit Plan investors subscribing to purchase Class T shares should follow the instructions below under “-Special Notice to Benefit Plan Investors.” You are required to represent in the subscription agreement that you have received a copy of the final prospectus at least five business days before signing the subscription agreement. Subscriptions will be effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part. 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.

Investors who desire to purchase Class A or Class T 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, Kansas 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, selling commissions and the stockholder servicing fee 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 a stockholder elects 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 our dividend reinvestment plan. For a discussion of our dividend reinvestment plan, see “Description of Shares-Dividend Reinvestment Plan.”

You will receive a confirmation of your purchases under the automatic investment program monthly. 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, 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.

Special Notice to Benefit Plan Investors

As a result of plan asset considerations related to ERISA we expect to initially limit participation by Benefit Plan investors subscribing to purchase Class T shares in this offering. Thus, all subscription payments for the purchase of Class T shares received from Benefit Plan investors initially will be placed in an account held by the escrow agent, UMB Bank, N.A., in trust for Benefit Plan investors’ benefit pending release to us. Until we have received subscriptions for Class T Shares which would result in ownership of the Class T Shares by 100 or more persons who are independent of us and one another (the “ownership condition”), Benefit Plan investors subscribing to purchase Class T shares should make their checks payable to “UMB Bank, N.A., as Escrow Agent for KBS Strategic Opportunity REIT II, Inc.” Further, until we have satisfied the ownership condition, completed subscription agreements and payments for Benefit Plan investors subscribing to purchase Class T shares should be sent by the broker dealer or registered investment advisor, as applicable, to the escrow agent, UMB Bank, N.A., at the address set forth in the subscription agreement.  Once we have

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satisfied the ownership condition we will request that our escrow agent release to us any funds received from Benefit Plan investors for the purchase of Class T shares and Benefit Plan investors subscribing to purchase Class T shares should make their checks payable to “KBS Strategic Opportunity REIT II, Inc.” In the event we do not satisfy the ownership condition prior to the termination of the primary portion of this offering, we will promptly return all funds held in escrow for the benefit of Benefit Plan investors subscribing to purchase Class T shares. 

Suitability Standards

Our sponsor, those selling shares on our behalf and participating broker-dealers and registered investment advisers 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 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; 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 advisers 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 applicable to this offering in shares of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS Growth & Income 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.

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.

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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, Equity Trust Company (with respect to our Class A shares), NuView IRA, and Community National Bank have agreed to act as IRA custodians for purchasers of our common stock as described below; however, we do not require that you use these IRA custodians.

If you would like to establish a new IRA account with Equity Trust Company for an investment in our Class A shares, we will pay the fees related to the establishment of the investor account with Equity Trust Company. Investors will be responsible for the annual IRA maintenance fees charged by Equity Trust Company, including the first year annual maintenance fees.

If you would like to establish a new IRA account with NuView IRA for an investment in our shares, we will pay the first year annual account fee. After we pay the first year annual account fee, investors will be responsible for the annual account fees charged by NuView IRA at the anniversary date of the opening of the account, as well as all other fees related to the account charged by NuView IRA.

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. 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.

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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 Strategic Opportunity REIT II, Inc. and our investment objectives;

• asset flyers describing our recent acquisitions or originations;

• 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. 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.

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.

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.

We 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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APPENDIX B

THIRD AMENDED AND RESTATED

DIVIDEND REINVESTMENT PLAN

Adopted February 16, 2016

KBS Strategic Opportunity REIT II, Inc., a Maryland corporation (the “Company”), has adopted a Third 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, as amended and supplemented, unless otherwise defined herein.

1.Amount of Shares Issuable. Up to an aggregate of 76,366,006 shares in any combination of Class A and Class T Common Stock (the “Shares”) is authorized for issuance under the DRP.

2.Participants. “Participants” are holders of the Company’s shares of any class of Common Stock who elect to participate in the DRP regardless of the offering in which such Participant acquired their shares.

3.Dividend Reinvestment. Exclusive of dividends and other distributions that the Company’s board of directors designates as ineligible for reinvestment through this DRP, 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 any class of Common Stock to the purchase of additional Shares for such Participant. Purchases will be in the same class of Shares as the shares for which such Participant received the distributions that are being reinvested. The Company will not pay selling commissions or dealer manager fees on the Shares purchased in the DRP. No stockholder servicing fee will be paid with respect to Shares of Class T Common Stock purchased through this DRP; however, the stockholder servicing fee payable by the Company with respect to shares of Class T Common Stock purchased in a primary offering will be allocated to all shares of Class T Common Stock as a class expense. The stockholder servicing fee therefore will impact the distributions payable on all shares of Class T Common Stock and may impact the NAV of all shares of Class T Common Stock if the amount of the stockholder servicing fee payable on the shares of Class T Common Stock sold in a primary offering exceeds amounts available for distribution to holders of shares of Class A Common Stock.

4.Procedures for Participation. Qualifying stockholders may elect to become Participants or to increase participation in the DRP 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. Participation in the DRP will begin with the next Distribution payable after receipt of a Participant’s subscription agreement, enrollment form or other Company approved authorization form.

5.Purchase of Shares.

a.Shares will be purchased on the date that the Company makes a Distribution. Distributions will be paid upon the terms as authorized and declared by the Company’s board of directors.

b.Until the Company announces an estimated net asset value per share, Participants will acquire Shares at a price per share equal to 95% of the then-current offering price for shares in the primary portion of the Company’s current offering (whether in the Company’s initial offering or a follow-on offering and ignoring any discounts that may be available to certain categories of purchasers) or 95% of the most recent offering price in a primary offering if there is no current offering. Upon the Company’s announcement, whether in a separate mailing to stockholders, a public filing with the Securities and Exchange Commission (the “SEC”) or otherwise, that the Company has established an estimated net asset value per share, Participants will acquire the Shares at a price equal to 95% of the estimated net asset value per share, as estimated by the Company’s board of directors.

c.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 purchase Shares under the DRP to the extent such purchase would cause it to exceed limits set forth in the Company’s charter, as amended.

B-1

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, including fractional 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 distributions, 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.

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 four business days prior to the payment of the Distribution. Notwithstanding the preceding sentence, if the Company announces, whether in a mailing to stockholders, a public filing with the SEC or otherwise, a new purchase price for Shares under the DRP, then a Participant shall have no less than two business days after the date of such announcement to notify the Company in writing of Participant’s termination of participation in the DRP and Participant’s termination will be effective for the next date Shares are purchased under the DRP. 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 at any time upon ten days’ 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 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.

B-2

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	32
Cautionary Note Regarding Forward-Looking Statements	75
Estimated Use of Proceeds	76
Management	78
Management Compensation	94
Stock Ownership	104
Conflicts of Interest	105
Investment Objectives and Criteria	114
Federal Income Tax Considerations	128
ERISA Considerations	148
Description of Shares	153
The Operating Partnership Agreement	169
Plan of Distribution	172
Supplemental Sales Material	183
Legal Matters	183
Where You Can Find More Information	183
Appendix A – Form of Subscription Agreement with Instructions	A-1
Appendix B – Third 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” on page 32 to read about risks you should consider before buying shares of our common stock.

KBS STRATEGIC OPPORTUNITY REIT II, INC.
Maximum Offering of180,000,000 Shares of Common Stock
	PROSPECTUS
KBS CAPITAL MARKETS GROUP LLC

KBS STRATEGIC OPPORTUNITY REIT II, INC.

SUPPLEMENT NO. 5 DATED APRIL 26, 2016

TO THE PROSPECTUS DATED FEBRUARY 17, 2016

This document supplements, and should be read in conjunction with, the prospectus of KBS Strategic Opportunity REIT II, Inc. dated February 17, 2016. As used herein, the terms “we,” “our” and “us” refer to KBS Strategic Opportunity REIT II, Inc. and, as required by context, KBS Strategic Opportunity Limited Partnership II, which we refer to as our “Operating Partnership,” and to their subsidiaries. Capitalized terms used in this supplement have the same meanings as set forth in the prospectus. The purpose of this supplement is to disclose prior performance information as of December 31, 2015.

PRIOR PERFORMANCE SUMMARY

In January 2006, our 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. In April 2008, our sponsors launched KBS Real Estate Investment Trust II, Inc., which we refer to as KBS REIT II; in November 2009, our sponsors launched KBS Strategic Opportunity REIT, Inc., which we refer to as KBS Strategic Opportunity REIT; in March 2010, our sponsors, together with Legacy Partners Residential Realty LLC and certain of its affiliates, launched KBS Legacy Partners Apartment REIT, Inc., which we refer to as KBS Legacy Partners Apartment REIT; and in October 2010, our sponsors launched KBS Real Estate Investment Trust III, which we refer to as KBS REIT III. Our sponsors are also sponsoring a new REIT, KBS Growth & Income REIT, Inc., which we refer to as KBS Growth & Income REIT, and which commenced a private placement offering in June 2015 and has filed a registration statement with the SEC to register an initial public offering. As described below, KBS REIT I, KBS REIT II, and KBS Strategic Opportunity REIT each acquired a diverse portfolio of commercial properties and real estate-related investments. KBS REIT III has acquired a diverse portfolio that consists almost entirely of equity investments in core office properties. KBS Legacy Partners Apartment REIT acquired a portfolio of equity investments in high-quality apartment communities. KBS Growth & Income has acquired one office building. Our advisor, KBS Capital Advisors LLC, which we refer to as KBS Capital Advisors, is also the external advisor to KBS REIT I, KBS REIT II, KBS REIT III, KBS Growth & Income REIT, KBS Strategic Opportunity REIT, and KBS Legacy Partners Apartment REIT. Each of these programs, with the exception of KBS Growth & Income REIT, which is not currently a public reporting company, is a publicly registered, non-traded REIT. In January 2013, KBS Capital Advisors registered as an investment adviser with the SEC.

Since 1992, two of our 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 programs that had raised over $2.7 billion of equity from institutional investors as of December 31, 2015. Together, Messrs. Bren and Schreiber founded KBS Realty Advisors LLC, a nationally recognized real estate investment advisor. KBS Realty Advisors is registered as an investment adviser with the SEC. We refer to the investment advisors affiliated with Messrs. Bren and Schreiber as KBS-affiliated investment advisors.

Unless otherwise indicated, the information presented below represents the historical experience of KBS REIT I, KBS REIT II, KBS Strategic Opportunity REIT, KBS Legacy Partners Apartment REIT, KBS REIT III and KBS Growth & Income REIT, including information regarding the most recent estimated value per share (if applicable) and share redemption program (if applicable) of each REIT, and the 10 KBS-sponsored private real estate programs as of the 10 years ended December 31, 2015.

By purchasing shares in this offering, you will not acquire any ownership interest in any programs 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 programs discussed. Further, the KBS-sponsored private programs 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. We have omitted from this discussion information regarding the prior performance of entities for which an institutional investor engaged a KBS-affiliated investment advisor if the investor had the power to reject the real estate acquisitions proposed by the KBS-affiliated investment advisor. Such entities are not considered “programs” as that term is used in this supplement.

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Upon request, prospective investors may obtain from us without charge copies of any public reports prepared in connection with KBS-sponsored public programs, 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 materials and reports prepared in connection with KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT are also available on their websites at www.kbsreit.com, www.kbsreitii.com, www.kbsreitiii.com, www.kbsstrategicopportunityreit.com and www.kbslegacyreit.com. Neither the contents of those websites nor any of the materials or reports relating to KBS-sponsored public programs are incorporated by reference in or otherwise a part of this supplement. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and other information that KBS-sponsored public programs file electronically with the SEC.

KBS REIT I

On January 27, 2006, our sponsors launched the initial public offering of KBS REIT I, a publicly registered, non-traded REIT. Its primary 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 initially priced at $9.50 per share pursuant to its dividend reinvestment plan. KBS REIT I ceased offering shares in its primary offering on May 30, 2008 and terminated its dividend reinvestment plan effective April 10, 2012. KBS REIT I accepted gross offering proceeds of $1.7 billion in its primary offering and accepted gross offering proceeds of $233.7 million from shares issued pursuant to its dividend reinvestment plan. As of December 31, 2015, KBS REIT I had approximately 41,000 stockholders. As of December 31, 2015, KBS REIT I had redeemed $91.8 million of shares, or 13,021,433 shares, under its share redemption program.

As of December 31, 2015, KBS REIT I owned or, with respect to a limited number of properties, held a leasehold interest in 364 real estate properties (of which eight properties were held for sale), including the GKK Properties (defined below). As of December 31, 2015, KBS REIT I’s real estate portfolio held for investment was approximately 85% occupied (which excludes the eight properties that were held for sale). In addition, as of December 31, 2015, KBS REIT I also owned four real estate loans receivable and a participation interest with respect to a real estate joint venture.

KBS REIT I had investment objectives similar to ours. Like ours, its primary investment objectives were to preserve and return investors’ capital contributions and realize growth in the value of its investments. In addition, investments in real estate and real estate-related assets involve similar assessments of the risks and rewards of the operation of the underlying real estate and financing thereof as well as an understanding of the real estate and real estate-finance markets. KBS REIT I’s focus in 2016 is to manage its existing investment portfolio, including strategically selling assets and exploring value-add opportunities for a small number of GKK Properties; and distributing operating cash flow and net sales proceeds to stockholders.

KBS REIT I acquired and manages a diverse portfolio of real estate and real estate-related assets. It sought to diversify its 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 would provide attractive and stable returns to its investors. In constructing its portfolio, KBS REIT I 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. With proceeds from its initial public offering and debt financing (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.

As described in more detail below, after KBS REIT I’s acquisition of these properties, loans and other investments, KBS REIT I’s portfolio composition changed when it restructured certain investments, took title to properties underlying investments in certain loans, sold or otherwise disposed of assets and received repayment of debt investments.

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, including $34.5 million in acquisition fees and closing costs. KBS REIT I used the net proceeds from its initial public offering for the acquisition and origination of real estate properties and real estate-related assets in the amounts of $0.8 billion and $0.8 billion, respectively, and had debt financing on its real estate properties and real estate-related assets in the amounts of $1.2 billion and $0.3 billion, respectively, at acquisition.

2

With proceeds from its initial public offering and debt financing, as a percentage of the amount invested (based on purchase price), KBS REIT I invested in the following types of assets (including its investments through a consolidated joint venture): 35% in 22 office properties, 29% in 42 industrial properties and a master lease in another industrial property, 26% in interests in 12 mezzanine loans, 5% in interests in six 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 were located within the United States. 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): 40% in 26 properties and a master lease in another property in the East; 30% in 22 properties in the South; 15% in nine properties in the West; and 15% in seven properties in the Midwest. All of the real properties purchased by KBS REIT I had prior owners and operators.

With respect to its historical real estate portfolio, KBS REIT I had disposed of 29 properties as of December 31, 2015 for approximately $682.8 million, net of closing costs. Also during the year ended December 31, 2015, KBS REIT I sold the remaining two condominium units of the Tribeca Building. KBS REIT I originally intended to hold its core properties for four to seven years. Additionally, KBS REIT I has sold or otherwise terminated the leasehold interests in 362 GKK Properties for $1.162 billion, net of closing costs, and its management continues to evaluate which of the remaining GKK Properties to hold and which properties to sell. The hold period of certain GKK Properties has been affected by the underlying debt structure and related defeasance costs and prepayment penalties. KBS REIT I has also transferred 153 GKK Properties to the respective lenders of certain loans for which these properties served as security, in exchange for the release from the debt outstanding and other obligations related to these mortgage loans. See also the discussion of the KBS-New Leaf Joint Venture below. Economic and market conditions may influence KBS REIT I to hold its investments for different periods of time. KBS REIT I initially intended to hold its real estate-related investments to maturity, though economic and market conditions may also influence KBS REIT I to hold these investments for different periods of time. See Table V under “Prior Performance Tables” in this supplement.

The following summarizes asset sales, restructurings, pay-offs and discounted pay-offs of KBS REIT I’s investments in real estate loans receivable as of December 31, 2015:

• One Madison Park Mezzanine Loan - The borrowers paid off the loan in full with an outstanding principal balance of $21.0 million, including a spread maintenance premium, in November 2007.

• Arden Portfolio Mezzanine Loans -KBS REIT I released the borrowers from liability and received a preferred membership interest in a joint venture that owns the properties that had secured the loans (the “HSC Partners Joint Venture”).  KBS REIT I wrote-off its investment in this loan in July 2009. In June 2012, the HSC Partners Joint Venture redeemed KBS REIT I’s preferred membership interest in the joint venture in exchange for a settlement of $0.8 million. KBS REIT I acquired these loans in January 2008 for $144.0 million plus closing costs.

• 18301 Von Karman Loans - KBS REIT I foreclosed on the office property securing the loans in October 2009 and subsequently disposed of the property in June 2010 for $41.3 million. KBS REIT I acquired these loans in June 2008 for $61.9 million plus closing costs.

• Tribeca Loans - KBS REIT I acquired these loans in 2006 and 2007 for an aggregate purchase price including additional principal funded and net of principal repayments subsequent to acquisition of $57.0 million plus closing costs. KBS REIT I foreclosed on the Tribeca Building, which secured loans, in February 2010 and acquired the remaining unsold units of the Tribeca Building consisting of 27 residential units, 2 commercial retail units and parking spaces and assumed the project liabilities including $39.2 million of mortgage debt and $13.3 million of other liabilities. As of December 31, 2015, KBS REIT I had sold 27 residential units, both commercial retail units and parking spaces for an aggregate sales price of $106.2 million.

• 55 East Monroe Mezzanine Loan Origination - The borrower paid off the loan in full with an outstanding principal balance of $55.0 million in September 2010 at maturity.

• 200 Professional Drive Loan Origination - KBS REIT I foreclosed on the property securing the loan and received $4.1 million upon the sale of the property in December 2010. In July 2007, KBS REIT I originated this loan and funded an aggregate of $9.3 million of principal to the borrower.

• Artisan Multifamily Portfolio Mezzanine Loan - KBS REIT I wrote-off this investment in January 2011. KBS REIT I acquired this loan in December 2007 for $15.9 million plus closing costs.

• 2600 Michelson Mezzanine Loan - KBS REIT I sold the loan at a discount in June 2011 and received $52,000 upon the sale. KBS REIT I acquired this loan in June 2008 for $8.5 million plus closing costs.

3

• GKK Mezzanine Loans - In May 2011, the borrower (the “GKK Borrower”) under the GKK Mezzanine Loan (defined below) defaulted on its payment obligations and, as a result, on September 1, 2011, KBS REIT I entered into a settlement agreement (the “Settlement Agreement”) with the GKK Borrower pursuant to which the GKK Borrower transferred all of its interest in certain real estate properties (the “GKK Properties”) which indirectly secured the GKK Mezzanine Loan, and the mortgage debt related to the GKK Properties, to KBS REIT I in satisfaction of its obligations. KBS REIT I acquired these loans in August 2008 for $496.0 million plus closing costs.

• San Antonio Business Park Mortgage Loan - KBS REIT I sold the loan to an unaffiliated buyer for $26.0 million in December 2011. KBS REIT I acquired this loan in March 2008 for $23.8 million plus closing costs.

• Park Central Mezzanine Loan - KBS REIT I released the borrower under the loan from all outstanding debt and liabilities under a discounted payoff agreement at a discounted amount of $7.3 million in December 2011. KBS REIT I acquired its portion of this loan in March 2007 for $15.0 million plus closing costs.

• Petra Subordinated Debt Tranche A and B - KBS REIT I wrote-off this investment in March 2012. KBS REIT I acquired these loans in October 2007 for $50.0 million plus closing costs.

• 11 South LaSalle Loan - KBS REIT I sold the loan to an unaffiliated buyer for $17.0 million in March 2012. KBS originated this loan in August 2007 and funded $38.8 million of principal to the borrower.

• Sandmar Mezzanine Loan - As of December 31, 2015, KBS REIT I recorded an asset-specific loan loss reserve to reduce the carrying value of this investment to $0. KBS REIT I acquired this loan in January 2007 for $8.0 million plus closing costs.

• Lawrence Village Plaza Loan - On September 1, 2015, the Lawrence Village Plaza Loan Origination matured without repayment. KBS REIT I had recorded an asset-specific loan loss reserve against this investment as of December 31, 2015. KBS REIT I entered into a deed in lieu of foreclosure agreement with the borrower under the Lawrence Village Plaza Loan Origination to transfer title of the property securing the loan to KBS REIT I in full satisfaction of the debt outstanding under, and all other obligations related to, the Lawrence Village Plaza Loan Origination.

KBS REIT I’s primary public offering was subject to certain up-front commissions, fees and expenses similar to those associated with this offering and KBS REIT I had and has certain fee arrangements with KBS affiliates structured similarly to ours. For more information regarding the fees paid to KBS affiliates by KBS REIT I, see Table II under “Prior Performance Tables” in this supplement.

The disruptions in the financial markets from 2008 to 2011 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 certain assets.

KBS REIT I recognized an other-than-temporary impairment related to its real estate securities of $50.1 million during the year ended December 31, 2008 and a $5.1 million impairment related to its real estate securities during the year ended December 31, 2009. During the year ended December 31, 2009, KBS REIT I also reversed $14.8 million of the cumulative other-than-temporary impairment related to its real estate securities out of retained earnings. During the year ended December 31, 2012, KBS REIT I sold one of its real estate securities investments to an unaffiliated buyer for $46.7 million resulting in a gain of $25.5 million and wrote-off its investment in the other real estate securities.

Since inception, KBS REIT I invested approximately $1.1 billion in real estate-related loans. As of December 31, 2015, KBS REIT I had recorded $6.5 million of asset-specific loan loss reserves related to its investments in the Sandmar Mezzanine Loan and the Lawrence Village Plaza Loan Origination. Over the last nine years, KBS REIT I also charged-off approximately $303.5 million of reserves for loan losses related to 13 of its real estate-related loan investments.

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In August 2007, KBS REIT I entered a joint venture (the “KBS-New Leaf Joint Venture”) with New Leaf Industrial Partners Fund, L.P. to acquire a portfolio of industrial properties (the “National Industrial Portfolio”) for approximately $515.9 million plus closing costs. The National Industrial Portfolio consisted of 23 industrial properties and a master lease with respect to another industrial property. KBS REIT I had an 80% membership interest in the KBS-New Leaf Joint Venture and consolidated the joint venture in its financial statements. The mortgage and mezzanine loans with which the KBS-New Leaf Joint Venture financed a portion of its purchase of the National Industrial Portfolio (the “NIP Loans”) were to mature on December 31, 2011. However, due to a decline in the operating performance of the National Industrial Portfolio resulting from increased vacancies, lower rental rates and tenant bankruptcies, in addition to declines in market value across all real estate types in the period following the initial investment, it became unlikely that the KBS-New Leaf Joint Venture would be able to refinance or extend the NIP Loans upon their maturities. As a result, on December 28, 2011, the KBS-New Leaf Joint Venture entered into an agreement in lieu of foreclosure and related documents to transfer the National Industrial Portfolio properties to certain indirect wholly owned subsidiaries of the lender under the NIP Loans in full satisfaction of the debt outstanding under, and other obligations related to, the NIP Loans. As a result, KBS REIT I recorded a gain on extinguishment of debt of $115.5 million (including amounts for noncontrolling interest of approximately $24.2 million), which represents the difference between the carrying amount of the outstanding debt and other liabilities of approximately $446.1 million and the carrying value of the real estate properties and other assets of approximately $328.3 million, net of closing costs of $2.3 million, upon transfer of the properties (during the year ended December 31, 2010, KBS REIT I had recognized an impairment charge on real estate of $123.5 million with respect to 17 properties within the National Industrial Portfolio).

In addition, KBS REIT I had recorded real estate impairments of $354.0 million due to changes in cash flow estimates of certain properties. In the future, 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 of December 15, 2011, pursuant to the Settlement Agreement entered in September 2011 after the GKK Borrower defaulted on its payment obligations in May 2011, the GKK Borrower had transferred to KBS REIT I the equity interests in the indirect owners of, or holders of a leasehold interest, in approximately 867 properties, including 576 bank branch properties and 291 office buildings and operations centers. KBS REIT I also assumed approximately $1.5 billion of mortgage debt related to the GKK Properties. In consideration of the performance of the Settlement Agreement, KBS REIT I agreed to release the GKK Borrower from its obligations under KBS REIT I’s investment in a senior mezzanine loan with an original face amount of $500,000,000 (the “GKK Mezzanine Loan”) that KBS REIT I acquired in August 2008 for $496.0 million plus closing costs. KBS REIT I’s estimated fair values of the underlying GKK Properties and related current assets and liabilities was approximately $1.9 billion and supported the approximately $1.9 billion total of the combined outstanding mortgage loan balance encumbering the GKK Properties (including a portion of a mortgage loan secured by some of the GKK Properties which KBS REIT I owned), plus KBS REIT I’s carrying value of the GKK Mezzanine Loan and a portion of a junior mezzanine loan relating to the GKK Properties that KBS REIT I owned prior to KBS REIT I’s entry into the Settlement Agreement. KBS REIT I has sold or otherwise terminated the leasehold interests in 362 GKK Properties for $1.162 billion, net of closing costs, and its management continues to evaluate which of the remaining GKK Properties to hold and which properties to sell. KBS REIT I has also transferred 153 GKK Properties to the respective lenders of certain loans for which these properties served as security, in exchange for the release from the debt outstanding and other obligations related to these mortgage loans.

Liquidity

KBS REIT I’s charter requires that it seek stockholder approval of its liquidation if its shares of common stock are not listed on a national securities exchange by November 2012, unless a majority of its independent directors determines that liquidation is not then in the best interest of its stockholders. In November 2015, the conflicts committee unanimously determined that liquidation was not then in the best interests of KBS REIT I’s stockholders. KBS REIT I’s charter requires 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 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.

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Distributions

In order to manage its reduced cash flow from operations and to redirect available funds to reduce its debt, and as a result of the general impact of then-current economic conditions on rental rates, occupancy rates and property cash flows, in March 2012, KBS REIT I’s board of directors approved the suspension of monthly distribution payments. On December 5, 2013, KBS REIT I paid a special distribution in the amount of $0.3950 per share of common stock to stockholders of record as of the close of business on November 8, 2013. In October 2014 KBS REIT I began paying quarterly distributions in the amount of $0.025 per share of common stock to its stockholders of record based on a quarterly record date for each quarter. In addition, on December 7, 2015, KBS REIT I paid a special distribution in the amount of $0.25 per share of common stock to stockholders of record as of the close of business on December 1, 2015 (the “KBS REIT I Special Distribution”), which it funded with proceeds from the sales of real estate properties. KBS REIT I plans to make certain strategic asset sales and, from time to time, may declare additional special distributions to its stockholders that would be funded with the net proceeds from those asset sales or from cash flow from other sources. KBS REIT I will continue its existing strategy of selling assets when it believes the assets have reached the stage that disposition will assist in improving returns to its stockholders. KBS REIT I’s board of directors currently expects to authorize and declare distributions on a quarterly basis based on cash flow generated by KBS REIT I’s real estate and real estate-related investments. Future asset sales will result in decreases in cash flow from operations.

Estimated Value Per Share

On December 8, 2015, the board of directors of KBS REIT I approved an estimated value per share of KBS REIT I’s common stock of $3.94 based on the estimated value of KBS REIT I’s assets less the estimated value of its liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2015, with the exception of an adjustment to KBS REIT I’s net asset value to give effect to the KBS REIT I Special Distribution. Excluding the impact of the KBS REIT I Special Distribution, KBS REIT I’s estimated value per share of common stock would be $4.19. KBS REIT I provided this estimated value per share to assist broker-dealers that participated in KBS REIT I’s initial public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers (“NASD”) Conduct Rule 2340 as required by Financial Industry Regulatory Authority (“FINRA”). This valuation was performed in accordance with the provisions of and also to comply with Practice Guideline 2013-01, Valuations of Publicly Registered, Non-Listed REITs, issued by the Investment Program Association (“IPA”) in April 2013 (the “IPA Valuation Guidelines”). As with any valuation methodology, the methodologies used were based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated value per share of KBS REIT I’s common stock, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of KBS REIT I’s assets less the fair value of its liabilities according to U.S. generally accepted accounting principles (“GAAP”), nor does 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. The estimated value per share does not reflect a discount for the fact that KBS REIT I is externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account debt defeasance costs KBS REIT I may incur in connection with prepayments on its notes payable, debt prepayment penalties or swap breakage fees that could apply upon the prepayment of certain of KBS REIT I’s debt obligations or termination of related swap agreement prior to expiration, the impact of restrictions on the assumption of debt, or disposition costs and fees for real estate properties that are not under contract to sell. KBS REIT I has generally incurred disposition costs and fees related to the sale of KBS REIT I’s historical real estate properties since inception through September 30, 2015 of 1.7% to 5.7% of the gross sales price less concessions and credits, with the weighted average being 2.7%. KBS REIT I has generally incurred disposition costs and fees related to the sale of the GKK Properties since December 15, 2011 (the date of the completion of the transfer of the GKK Properties to KBS REIT I pursuant to the Settlement Agreement) through September 30, 2015 of 1.5% to 8.5% of the gross sales price less concessions and credits, with the weighted average being 2.3%. If both these ranges of disposition costs and fees were applied to KBS REIT I’s real estate properties, which do not include these costs and fees in the appraised values, the resulting impact on the estimated value per share would be a decrease of $0.09 to $0.41 per share.

KBS REIT I’s estimated value per share takes into consideration any potential liability related to a participation fee its advisor, KBS Capital Advisors, is entitled to upon meeting certain stockholder return thresholds in accordance with its advisory agreement. For purposes of determining the estimated value per share, KBS Capital Advisors calculated the potential liability related to this incentive fee based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would be no liability related to the participation fee.

The value of KBS REIT I’s shares will fluctuate over time in response to developments related to individual assets in KBS REIT I’s portfolio and the management of those assets and in response to the real estate and finance markets. For a full description of the methodologies and assumptions used to value KBS REIT I’s assets and liabilities in connection with the calculation of the estimated value per share, see KBS REIT I’s Current Report on Form 8-K filed with the SEC on December 10, 2015.

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Share Redemption Program

KBS REIT I has not had funds available for ordinary redemptions since the April 2009 redemption date, and on March 20, 2012, KBS REIT I’s board of directors amended and restated its share redemption program, which amendment and restatement became effective on April 25, 2012, to provide only for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program and, together with redemptions sought in connection with a stockholder’s death, “special redemptions”). Such redemptions were subject to an annual dollar limitation, which was $10.0 million in the aggregate for the calendar year 2012, subject to the limitations described in the share redemption program document. In December 2012, 2013, 2014 and 2015, KBS REIT I’s board of directors approved the same annual dollar limitation for such special redemptions of $10.0 million in the aggregate for the calendar years 2013 through 2016 (subject to review and adjustment during the year by the board of directors and further subject to the limitations described in the share redemption program document), respectively.

KBS REIT II

On April 22, 2008, our sponsors launched the initial public offering of KBS REIT II, a publicly registered, non-traded REIT. Its primary 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 initially priced at $9.50 per share pursuant to its dividend reinvestment plan. KBS REIT II ceased offering shares in its primary offering on December 31, 2010 and terminated its dividend reinvestment plan effective May 29, 2014. KBS REIT II accepted aggregate gross offering proceeds of approximately $1.8 billion in its primary offering, and accepted gross offering proceeds of approximately $298.2 million pursuant to its dividend reinvestment plan. As of December 31, 2015, KBS REIT II had approximately 48,000 stockholders. As of December 31, 2015, KBS REIT II had redeemed $235.4 million of shares, or 24,048,952 shares, under its share redemption program.

As of December 31, 2015, KBS REIT II owned 12 real estate properties (consisting of 10 office properties, one office/flex property and an office campus consisting of eight office buildings). As of December 31, 2015, KBS REIT II’s portfolio of real estate encompassed 5.2 million rentable square feet and was approximately 87% occupied. In addition, KBS REIT II owned one real estate loan receivable.

KBS REIT II had investment objectives that are similar to ours. Like ours, its primary investment objectives were to preserve and return investors’ capital contributions and realize growth in the value of its investments. In addition, both real estate and real estate-related assets involve similar assessments of the risks and rewards of the operation of the underlying real estate and financing thereof as well as an understanding of the real estate and real estate-finance markets. KBS REIT II’s focus in 2016 is to: continue to strategically sell assets and make special distributions to stockholders; strategically negotiate lease renewals or new leases that facilitate the sales process and enhance property stability for prospective buyers; and complete major capital improvement projects, such as renovations or amenity enhancements, with the goal of attracting a greater pool of quality buyers.

KBS REIT II acquired and manages a diverse portfolio of real estate and real estate-related assets. It sought to diversify its portfolio by investment type, investment size, investment risk and geographic region 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. Based on KBS REIT II’s purchase or origination price, KBS REIT II allocated approximately 90% of its portfolio to investments in core properties and approximately 10% of its portfolio to real estate-related investments such as mortgage loans.

KBS REIT II used the net proceeds from its initial public offering and debt financing to purchase or fund $3.3 billion of real estate and real estate-related assets as of December 31, 2015, including $40.1 million of acquisition and origination fees and expenses. KBS REIT II used the net proceeds from its initial public offering and debt financing for the acquisition of real estate properties and real estate-related assets in the amounts of $2.9 billion and $392.3 million, respectively. On November 22, 2010, KBS REIT II originated a first mortgage loan in the amount of $175.0 million (the “One Kendall Square First Mortgage”) and on November 30, 2010, KBS REIT II sold, at par, a pari-passu participation interest with respect to 50% of the outstanding principal balance of this loan.  The acquisition amounts presented herein do not include the 50% participation interest KBS REIT II sold. However, KBS REIT II paid an origination fee on this 50% participation interest and the origination fees presented herein include such amount paid.

With proceeds from its initial public offering and debt financing, as a percentage of amount invested (based on purchase price), KBS REIT II invested in the following types of assets: 82% in 21 office properties, 8% in six mortgage loans, 2% in a participation in a mortgage loan, 3% in a portfolio of four industrial properties, 2% in an A-Note, 1% in an office/flex property, 1% in two industrial properties, and 1% in a leasehold interest in an industrial property. All of KBS REIT II’s real property investments are located within the United States. 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: 28% in three properties in the Midwest, 33% in ten properties in the West, 29% in ten properties in the East, and 10% in six properties in the South. All of the real properties purchased by KBS REIT II had prior owners and operators.

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As of December 31, 2015, KBS REIT II had sold 11 office properties, one industrial property, a portfolio of four industrial properties and a leasehold interest in one industrial property for aggregate sale proceeds of approximately $1.7 billion, net of closing costs. See Table V under “Prior Performance Tables” in this supplement for information regarding the sale of properties.

The following summarizes asset sales, pay-offs and discounted pay-offs of KBS REIT II’s investments in real estate-related investments as of December 31, 2015:

• CMBS - In 2009, KBS REIT II purchased AAA/Aaa rated CMBS for $3.9 million, which it subsequently sold in 2009 for $4.2 million.

• Northern Trust Building A-Note - In June 2012, KBS REIT II entered into a discounted payoff agreement for the payoff of the Northern Trust Building A-Note and the Northern Trust Building B-Note for approximately $85.8 million, less closing costs of $0.9 million. KBS REIT II acquired the Northern Trust Building A-Note in December 2008 for $57.4 million plus closing costs and the Northern Trust Building B-Note in June 2012 for $2.0 million including closing costs.

• One Liberty Plaza Notes - In October 2013, KBS REIT II sold the One Liberty Plaza Notes for $114.3 million plus closing costs. KBS REIT II acquired the One Liberty Plaza Notes in February 2009 for an aggregate purchase price net of principal repayments subsequent to acquisition of $63.8 million plus closing costs.

• One Kendall Square First Mortgage - On November 30, 2010, KBS REIT II sold, at par, a pari-passu participation interest with respect to 50% of the outstanding principal balance of the One Kendall Square First Mortgage, leaving it with an $87.5 million interest. On April 5, 2011, KBS REIT II restructured the One Kendall Square First Mortgage to provide for two debt tranches with varying interest rates - the A-Note, with an original principal amount of $90.0 million, in which KBS REIT II held a $45.0 million interest, and the B-Note, with an original principal amount of $85.0 million, in which KBS REIT II held a $42.5 million interest. On April 6, 2011, KBS REIT II sold and transferred its $45.0 million interest in the A-Note, at par, to an unaffiliated buyer. Upon maturity on December 4, 2013, the borrower under the One Kendall First Mortgage paid off the entire principal balance outstanding due to KBS REIT II.

• Tuscan Inn First Mortgage Loan - In February 2014, the borrower paid off the loan in full, including the outstanding principal balance of $20.2 million.

• Chase Tower First Mortgage Loan - In February 2014, KBS REIT II entered into an early payoff agreement, pursuant to which the borrower paid off the loan in full, including the outstanding principal balance of $58.9 million. Additionally, the borrower paid a yield maintenance premium of $4.9 million in accordance with the early payoff agreement.

• Pappas Commerce First Mortgage Loan - In June 2014, the borrower paid off the loan in full, including the outstanding principal balance of $32.7 million.

• Summit I & II First Mortgage - In August 2015, the borrower paid off the entire principal balance outstanding of $58.3 million plus a yield maintenance premium of $0.9 million and accrued interest of $0.4 million.

KBS REIT II originally intended to hold its core properties for four to seven years. KBS REIT II originally intended to hold its real estate-related investments until maturity. Economic and market conditions may influence KBS REIT II to hold its investments for different periods of time. KBS REIT II may sell an asset before the end of the expected holding period if it believes that market conditions and asset positioning have maximized the asset’s value to the REIT or the sale of the asset would otherwise be in the best interests of the REIT’s stockholders.

KBS REIT II’s primary offering was subject to certain up-front commissions, fees and expenses similar to those associated with this offering and it has certain fee arrangements with KBS affiliates structured similarly to ours. For more information regarding the fees paid to KBS affiliates by KBS REIT II and the operating results of KBS REIT II, see Tables II and III under “Prior Performance Tables” in this supplement.

Liquidity

The KBS REIT II prospectus disclosed 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 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.

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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 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.

Distributions

On September 23, 2014, KBS REIT II paid a special distribution in an aggregate amount of $4.50 per share of common stock to stockholders of record as of the close of business on September 15, 2014. KBS REIT II funded this special distribution from proceeds from the dispositions of nine real estate properties between May 2014 and August 2014 as well as cash on hand resulting primarily from the repayment or sale of five real estate loans receivable during 2013 and 2014. This special distribution totaled approximately $858.6 million. In addition, during the year ended December 31, 2015, KBS REIT II disposed of one office property and received the repayment of one of its real estate loans receivable. KBS REIT II’s cash flow from operations has decreased and will continue to decrease as a result of its disposition activity, and it adjusted its distribution policy with respect to the amount of monthly distribution payments to take into account its disposition activity and current real estate investments. KBS REIT II may continue to make strategic asset sales as opportunities become available in the market. Any future special distributions KBS REIT II makes from the proceeds of future dispositions will reduce its estimated value per share and this reduction will be reflected in its updated estimated value per share, which it expects to update no later than December 2016.

Estimated Value Per Share

On December 8, 2015, the board of directors of KBS REIT II approved an estimated value per share of KBS REIT II’s common stock of $5.62 based on the estimated value of KBS REIT II’s assets less the estimated value of its liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2015. KBS REIT II provided this estimated value per share to assist broker-dealers that participated in KBS REIT II’s initial public offering in meeting their customer account statement reporting obligations under NASD Conduct Rule 2340 as required by FINRA. This valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines. As with any valuation methodology, the methodologies used were based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated value per share, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of KBS REIT II’s assets less the fair value of its liabilities according to GAAP, nor does it represent a liquidation value of KBS REIT II’s assets and liabilities or the price at which KBS REIT II’s shares of common stock would trade on a national securities exchange. The estimated value per share does not reflect a discount for the fact that KBS REIT II is externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties that are not under contract to sell, debt prepayment penalties or swap breakage fees that could apply upon the prepayment of certain of KBS REIT II’s debt obligations or termination of related swap agreements prior to expiration or the impact of restrictions on the assumption of debt. KBS REIT II has generally incurred disposition costs and fees related to the sale of each real estate property since inception through September 30, 2015 of 1.7% to 3.5% of the gross sales price less concessions and credits, with the weighted average being approximately 2.2%. If this range of disposition costs and fees was applied to KBS REIT II’s real estate properties, which do not include these costs and fees in the appraised values, the resulting impact on the estimated value per share would be a decrease of $0.14 to $0.28 per share.

KBS REIT II’s estimated value per share takes into consideration any potential liability related to a participation fee KBS Capital Advisors is entitled to upon meeting certain stockholder return thresholds in accordance with its advisory agreement. For purposes of determining the estimated value per share, KBS Capital Advisors calculated the potential liability related to this incentive fee based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would be no liability related to the participation fee.

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The value of KBS REIT II’s shares will fluctuate over time in response to developments related to individual assets in its portfolio and the management of those assets and in response to the real estate and finance markets. For a full description of the methodologies and assumptions used to value KBS REIT II’s assets and liabilities in connection with the calculation of the estimated value per share, see KBS REIT II’s Current Report on Form 8-K filed with the SEC on December 9, 2015.

Share Redemption Program

On May 15, 2014, KBS REIT II’s board of directors amended and restated its share redemption program, which amendment and restatement became effective on June 18, 2014, to provide only for special redemptions. Such redemptions are subject to an annual dollar limitation, which was $10.0 million in the aggregate for remainder of the calendar year 2014 (subject to the limitations described in the share redemption program document). In December 2014 and 2015, KBS REIT II’s board of directors approved the same annual dollar amount limitation for special redemptions of $10.0 million in the aggregate for the calendar years 2015 and 2016 (subject to review and adjustment during the year by the board of directors and further subject to the limitations described in the share redemption program document).

KBS Strategic Opportunity REIT

On November 20, 2009, our sponsors launched the initial public offering of KBS Strategic Opportunity REIT, a publicly registered, non-traded REIT. Its primary initial public offering was for a maximum of 100,000,000 shares of common stock at a price of $10.00 per share, plus an additional 40,000,000 shares of common stock initially priced at $9.50 per share pursuant to its dividend reinvestment plan. KBS Strategic Opportunity REIT ceased offering shares in its primary offering on November 14, 2012, and continues to offer shares under its dividend reinvestment plan. KBS Strategic Opportunity REIT accepted aggregate gross offering proceeds of approximately $561.7 million in its primary offering, and as of December 31, 2015, KBS Strategic Opportunity REIT had accepted aggregate gross offering proceeds of approximately $52.8 million pursuant to its dividend reinvestment plan. As of December 31, 2015, KBS Strategic Opportunity REIT had approximately 15,000 stockholders. As of December 31, 2015, KBS Strategic Opportunity REIT had redeemed $38.4 million of shares, or 3,281,612 shares, under its share redemption program.

As of December 31, 2015, KBS Strategic Opportunity REIT owned 10 office properties, one office campus consisting of nine office buildings, one office portfolio consisting of four office buildings and 25 acres of undeveloped land, one office portfolio consisting of three office properties and one retail property encompassing, in the aggregate, approximately 4.4 million rentable square feet. As of December 31, 2015, these properties were 84% occupied. In addition, KBS Strategic Opportunity REIT owned two apartment properties, containing 383 units and encompassing approximately 0.3 million rentable square feet, which was 92% occupied. KBS Strategic Opportunity REIT also owned two investments in undeveloped land encompassing an aggregate of 1,670 acres and two investments in unconsolidated joint ventures.

KBS Strategic Opportunity REIT has investment objectives that are similar to ours. Like ours, its primary investment objectives are to preserve and return investors’ capital contributions and realize growth in the value of its investments. In addition, both real estate and real estate-related assets involve similar assessments of the risks and rewards of the operation of the underlying real estate and financing thereof as well as an understanding of the real estate and real estate-finance markets.

KBS Strategic Opportunity REIT diversified its portfolio by investment type, investment size and investment risk with the goal of attaining a portfolio of income-producing assets that provide attractive and stable returns to its investors. Based on KBS Strategic Opportunity REIT’s portfolio composition as of December 31, 2015, KBS Strategic Opportunity REIT had allocated approximately 87% to direct investments in opportunistic real estate, excluding property that it took title to (i) as part of a portfolio of debt investments, (ii) through loan workouts, foreclosure or similar circumstances, or (iii) through convertible debt investments. The remainder of its initial portfolio was allocated to real estate-related investments.

KBS Strategic Opportunity REIT has used the net proceeds from its initial public offering and debt financing to purchase or fund $1.1 billion of real estate and real estate-related assets, including $17.3 million of real estate acquisition and origination fees and expenses and costs related to foreclosures of or taking title to properties securing loans. As of December 31, 2015, KBS Strategic Opportunity REIT had $550.8 million of debt financing related to its real estate properties.

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With proceeds from its initial public offering and debt financing, as a percentage of amount invested (based on purchase price), KBS Strategic Opportunity REIT had invested in the following types of assets: 72% in 10 office properties, one office campus consisting of nine office buildings, one retail property, one office portfolio consisting of five office buildings and 63 acres of undeveloped land and, one office portfolio consisting of three office properties, 8% in eight non-performing mortgage loans, 6% in two first mortgage loan originations, 4% in two investments in undeveloped land, 7% in two unconsolidated joint ventures and 4% in one apartment property. KBS Strategic Opportunity REIT also invested in six CMBS investments for cash management purposes, of which all had been paid off or sold as of December 31, 2015. As of December 31, 2015, KBS Strategic Opportunity REIT had foreclosed on, or otherwise received title to, the properties which secured seven of the non-performing mortgage loans. All of KBS Strategic Opportunity REIT’s real property investments have been made within the United States. As a percentage of amount invested (based on purchase price), the geographic locations of KBS Strategic Opportunity REIT’s investments in real properties were as follows: 17% in five properties in the East, 64% in nine properties in the West, 19% in three properties in the South. These properties all had prior owners and operators.

As of December 31, 2015, KBS Strategic Opportunity REIT had foreclosed on or otherwise received title to the properties securing seven of its real estate-related loans, negotiated a discounted payoff with respect to one of its real estate-related loans and received repayment of one of its real estate-related loans. During the year ended December 31, 2012, KBS Strategic Opportunity REIT disposed of one industrial/flex building and four parcels of partially improved land encompassing 6.0 acres. During the year ended December 31, 2013, KBS Strategic Opportunity REIT disposed of three office buildings and one industrial/flex property. During the year ended December 31, 2014, KBS Strategic Opportunity REIT disposed of one office property. During the year ended December 31, 2015, KBS Strategic Opportunity REIT disposed of two office properties. See Table V under “Prior Performance Tables” in this supplement. In addition, during the year ended December 31, 2015, KBS Strategic Opportunity REIT sold 26 acres of undeveloped land and conveyed 12 acres of non-developable land to a non-profit owners association. The period that it will hold its investments in real estate properties, real estate-related loans, real estate-related debt securities and other real estate-related investments will vary depending on the type of asset, interest rates, market and economic conditions and other factors.

KBS Strategic Opportunity REIT’s primary offering was subject to certain up-front commissions, fees and expenses similar to those associated with this offering and it has certain fee arrangements with KBS affiliates structured similarly to ours. For more information regarding the fees paid to KBS affiliates by KBS Strategic Opportunity REIT and the operating results of KBS Strategic Opportunity REIT, see Tables II and III under “Prior Performance Tables” in this supplement.

On March 8, 2016, KBS SOR (BVI) Holdings, Ltd. (“KBS SOR BVI”), a wholly owned subsidiary of KBS Strategic Opportunity REIT, issued 970.2 million Israeli new Shekels (approximately $256 million as of April 7, 2016) of Series A debentures (the “Debentures”) to Israeli investors pursuant to a public offering registered with the Israel Securities Authority.  The terms of the Debentures are governed by a deed of trust, dated as of March 1, 2016, among KBS SOR BVI and Reznik Paz Nevo Trusts Ltd., as trustee.  The notes will bear interest at the rate of 4.25% per year. Interest on the notes will accrue from March 1, 2016 and will be payable in Israeli new Shekels semi-annually in arrears on March 1 and September 1 of each year, commencing September 1, 2016.  The annual interest rate may increase by increments of 0.25% as a result of downgrades in the credit rating of the Debentures by rating agencies or by increments of 0.5% as a result of violations of certain financial covenants set forth in the deed of trust. The cumulative increase in the interest rate as a result of these events is limited and shall not exceed an aggregate of 1.75%.

The notes have principal installment payments equal to 20% of the face amount of the Debentures on March 1st of each year from 2019 to 2023.  The trustee may declare the Debentures due and payable upon the occurrence of certain prohibited events set forth in the deed of trust, including, but not limited to, the violation of specified financial covenants, the payment of distributions in excess of those permitted by the deed of trust, investment in development projects to an extent greater than 10% of KBS Strategic Opportunity REIT’s portfolio, and a greater than 10% increase in the fees percentage paid by KBS Strategic Opportunity REIT to KBS Capital Advisors in a given year.  The deed of trust restricts KBS SOR BVI’s ability to make distributions in the event that certain financial requirements have not been met; however, KBS SOR BVI is not restricted from distributing an amount necessary to allow KBS Strategic Opportunity REIT to distribute at least 100% of its taxable income to its stockholders.  The deed of trust also restricts KBS SOR BVI from selling any of its properties prior to the investment of 75% of the net proceeds from the offering of the Debentures if the remaining properties will not meet a minimum EBITDA requirement.  KBS SOR BVI may voluntarily redeem the Debentures prior to their maturity date subject to certain conditions set forth in the deed of trust.

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Liquidity

The KBS Strategic Opportunity REIT prospectus disclosed that the program may seek to publicly list its shares of common stock if its independent directors believe a public 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 charter requires 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 were to determine that liquidation is not then in the best interests of its stockholders, KBS Strategic Opportunity REIT’s charter requires 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 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.

Estimated Value Per Share

On December 8, 2015, the board of directors of KBS Strategic Opportunity REIT approved an estimated value per share of KBS Strategic Opportunity REIT’s common stock of $13.44 based on the estimated value of KBS Strategic Opportunity REIT’s assets less the estimated value of its liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2015. KBS Strategic Opportunity REIT provided this estimated value per share to assist broker-dealers that participated in KBS Strategic Opportunity REIT’s initial public offering in meeting their customer account statement reporting obligations pursuant to applicable FINRA and NASD Conduct Rules. This valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines. As with any valuation methodology, the methodologies used are based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different estimated value per share, and these differences could be significant. The estimated value per share is not audited and does not represent the fair value of KBS Strategic Opportunity REIT’s assets less the fair value of its liabilities according to GAAP, nor does it represent a liquidation value of KBS Strategic Opportunity REIT’s assets and liabilities or the price at which KBS Strategic Opportunity REIT’s shares of common stock would trade on a national securities exchange. The estimated value per share does not reflect a discount for the fact that KBS Strategic Opportunity REIT is externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties that are not held for sale, debt prepayment penalties or defeasance costs that could apply upon the prepayment of certain of KBS Strategic Opportunity REIT’s debt obligations or the impact of restrictions on the assumption of debt. The estimated value per share does consider any participation or incentive fees that would be due to KBS Capital Advisors based on the aggregate net asset value of KBS Strategic Opportunity REIT and that would be payable in a hypothetical liquidation of KBS Strategic Opportunity REIT as of the valuation date in accordance with the terms of KBS Strategic Opportunity REIT’s advisory agreement. The value of KBS Strategic Opportunity REIT’s shares will fluctuate over time in response to developments related to individual assets in KBS Strategic Opportunity REIT’s portfolio and the management of those assets and in response to the real estate and finance markets. For a full description of the methodologies and assumptions used to value KBS Strategic Opportunity REIT’s assets and liabilities in connection with the calculation of the estimated value per share, see KBS Strategic Opportunity REIT’s Current Report on Form 8-K filed with the SEC on December 10, 2015.

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Share Redemption Program

On December 8, 2015, the board of directors of KBS Strategic Opportunity REIT adopted an eighth amended and restated share redemption program (the “Eighth SRP”). Pursuant to the Eighth SRP, redemptions made upon a stockholder’s death, “qualifying disability” or “determination of incompetence” will be made on the last business day of each month and all other redemptions will be made on the last business day of each quarter. KBS Strategic Opportunity REIT may not redeem more than $3.0 million of shares in a given quarter (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”). To the extent that KBS Strategic Opportunity REIT redeems less than $3.0 million of shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) in a given fiscal quarter, any remaining excess capacity to redeem shares in such fiscal quarter will be added to KBS Strategic Opportunity REIT’s capacity to otherwise redeem shares (excluding shares redeemed in connection with a stockholder’s death, “qualifying disability” or “determination of incompetence”) during the succeeding fiscal quarter. This limit may be increased or decreased by KBS Strategic Opportunity REIT upon ten business days’ notice to stockholders. KBS Strategic Opportunity REIT’s board of directors may approve an increase in this limit to the extent that KBS Strategic Opportunity REIT has received proceeds from asset sales or the refinancing of debt or for any other reason deemed appropriate by the board of directors.

During the year ended December 31, 2015, KBS Strategic Opportunity REIT redeemed $30.1 million of common stock, which represented all redemption requests received in good order and eligible for redemption through the December 2015 redemption date, except for $3.7 million of shares in connection with redemption requests not made upon a stockholder’s death, “qualifying disability” or “determination of incompetence,” which redemption requests will be fulfilled subject to the limitations described above. Based on the amount of net proceeds raised from the sale of shares under the dividend reinvestment plan during 2015, KBS Strategic Opportunity REIT has $13.6 million available for redemptions during 2016, subject to the limitations described above.

KBS Legacy Partners Apartment REIT

On March 12, 2010, our sponsors, together with Legacy Partners Residential Realty LLC and certain of its affiliates, launched the initial public offering of KBS Legacy Partners Apartment REIT, a publicly registered, non-traded REIT. Its primary initial public offering was for a maximum of 200,000,000 shares of common stock at an initial price of $10.00 per share, plus an additional 80,000,000 shares of common stock initially priced at $9.50 per share pursuant to its dividend reinvestment plan. On March 12, 2013, KBS Legacy Partners Apartment REIT ceased offering shares in its initial public offering. From commencement of the initial public offering through its termination on March 12, 2013, KBS Legacy Partners Apartment REIT sold 18,088,084 shares of common stock for gross offering proceeds of $179.2 million, including 368,872 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $3.5 million. On March 13, 2013, KBS Legacy Partners Apartment REIT commenced offering shares to the public pursuant to a follow-on public offering for a maximum of $2,000,000,000 of shares of common stock in a primary offering, initially priced at $10.68 per share, plus an additional $760,000,000 of shares of common stock pursuant to its dividend reinvestment plan, initially priced at $10.15 per share. KBS Legacy Partners Apartment REIT ceased offering shares of common stock in the primary portion of its follow-on offering on March 31, 2014, but continues to offer shares of common stock under its dividend reinvestment plan. KBS Legacy Partners Apartment REIT sold an aggregate of 19,215,410 shares of common stock in its primary public offerings for aggregate gross offering proceeds of $191.5 million. As of December 31, 2015, KBS Legacy Partners Apartment REIT had sold an aggregate of 1,881,964 shares of common stock pursuant to the dividend reinvestment plan for aggregate gross offering proceeds of $18.7 million. As of December 31, 2015, KBS Legacy Partners Apartment REIT had approximately 5,800 stockholders. Also, as of December 31, 2015, KBS Legacy Partners Apartment REIT had redeemed $5.9 million of shares sold in its public offerings or 608,977 shares, under its share redemption program. See Table I under “Prior Performance Tables” in this supplement for more information regarding KBS Legacy Apartment REIT’s initial public offering and follow-on offering.

As of December 31, 2015, KBS Legacy Partners Apartment REIT owned 11 apartment communities.  As of December 31, 2015, KBS Legacy Partners Apartment REIT’s real estate portfolio was 93% occupied. 

KBS Legacy Partners Apartment REIT has investment objectives that are similar to ours. Like ours, its primary investment objectives are to preserve and return investors’ contributions and realize growth in the value of its investments. In addition, both real estate and real estate-related assets involve similar assessments of the risks and rewards of the operation of the underlying real estate and financing thereof as well as an understanding of the real estate and real estate-finance markets.

KBS Legacy Partners Apartment REIT made all of its equity investments in core apartment properties that were already well-positioned and producing rental income at acquisition, with the goal of attaining a portfolio of income-producing properties that provide attractive and stable returns to its investors.

KBS Legacy Partners Apartment REIT used the net proceeds from its initial public offering and debt financing to purchase $424.0 million of real estate, including $7.3 million in acquisition fees and expenses. As of December 31, 2015, KBS Legacy Partners Apartment REIT had $288.4 million of debt financing on its real estate properties.

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With proceeds from its initial public offering and debt financing, KBS Legacy Partners Apartment REIT had invested in 11 apartment communities, all located within the United States. As a percentage of amount invested (based on purchase price), the geographic locations of KBS Legacy Partners Apartment REIT’s investments were as follows: 57% in six properties in the East, 34% in four properties in the Midwest and 9% in one property in the South. All of the real properties purchased by KBS Legacy Partners Apartment REIT had prior owners and operators.

KBS Legacy Partners Apartment REIT has not disposed of any properties.

KBS Legacy Partners Apartment REIT’s offerings were subject to certain up-front commissions, fees and expenses similar to those associated with this offering and it had and has certain fee arrangements with KBS affiliates structured similarly to ours. For more information with respect to fees paid to affiliates by KBS Legacy Partners Apartment REIT and the operating results of KBS Legacy Partners Apartment REIT, see Table II and III under “Prior Performance Tables.”

Liquidity

The KBS Legacy Partners Apartment REIT prospectus disclosed that the program may seek to publicly list its shares of common stock if its independent directors believe a public listing would be in the best interests of its stockholders. To date, such a determination has not been made. If KBS Legacy Partners Apartment REIT does not list its shares of common stock on a national securities exchange by January 31, 2020, its charter requires that KBS Legacy Partners Apartment 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 January 31, 2020, none of the actions described in (i) or (ii) above have occurred.

If a majority of the conflicts committee of KBS Legacy Partners Apartment REIT were to determine that liquidation is not then in the best interests of its stockholders, KBS Legacy Partners Apartment REIT’s charter requires 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 best interest of the stockholders. If KBS Legacy Partners Apartment REIT sought and failed to obtain stockholder approval of its liquidation, the KBS Legacy Partners Apartment REIT charter would not require KBS Legacy Partners Apartment REIT to list or liquidate, and the company could continue to operate as before. If KBS Legacy Partners Apartment 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 Legacy Partners Apartment REIT’s directors will try to determine whether listing its shares or liquidating its assets will result in greater value for stockholders.

Estimated Value Per Share

On December 8, 2015, the board of directors of KBS Legacy Partners Apartment REIT approved an estimated value per share of KBS Legacy Partners Apartment REIT’s common stock of $10.29 based on the estimated value of KBS Legacy Partners Apartment REIT’s assets less the estimated value of its liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2015. KBS Legacy Partners Apartment REIT provided this estimated value per share to assist broker-dealers that participated in KBS Legacy Partners Apartment REIT’s public offerings in meeting their customer account statement reporting obligations under NASD Conduct Rule 2340 as required by FINRA. This valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines. As with any valuation methodology, the methodologies used were based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated value per share, and this difference could be significant. In particular, due in part to (i) KBS Legacy Partners Apartment REIT’s relatively small asset base, (ii) the high concentration of KBS Legacy Partners Apartment REIT’s total assets in real estate, and (iii) the number of shares of KBS Legacy Partners Apartment REIT’s common stock outstanding, even modest changes in key assumptions made in appraising KBS Legacy Partners Apartment REIT’s real estate properties could have a very significant impact on the estimated value of its shares. The estimated value per share is not audited and does not represent the fair value of KBS Legacy Partners Apartment REIT’s assets less the fair value of its liabilities according to GAAP, nor does it represent a liquidation value of KBS Legacy Partners Apartment REIT’s assets and liabilities or the price at which KBS Legacy Partners Apartment REIT’s shares of common stock would trade on a national securities exchange. The estimated value per share does not reflect a discount for the fact that KBS Legacy Partners Apartment REIT is externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of KBS Legacy Partners Apartment REIT’s debt obligations or the impact of restrictions on the assumption of debt.

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KBS Legacy Partners Apartment REIT’s estimated value per share takes into consideration any potential liability related to a participation fee KBS Capital Advisors is entitled to upon meeting certain stockholder return thresholds in accordance with its advisory agreement. For purposes of determining the estimated value per share, KBS Capital Advisors calculated the potential liability related to this incentive fee based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would be no liability related to the participation fee.

The value of KBS Legacy Partners Apartment REIT’s shares will fluctuate over time in response to developments related to individual assets in KBS Legacy Partners Apartment REIT’s portfolio and the management of those assets and in response to the real estate and finance markets. For a full description of the assumptions and methodologies used to value KBS Legacy Partners Apartment REIT’s assets and liabilities in connection with the calculation of the updated offering price and estimated value per share, see KBS Legacy Partners Apartment REIT’s Current Report on Form 8-K filed with the SEC on December 11, 2015.

Share Redemption Program

Pursuant to KBS Legacy Partners Apartment REIT’s share redemption program, KBS Legacy Partners Apartment REIT may redeem only the number of shares that it could purchase with the amount of the net proceeds from the sale of shares under its dividend reinvestment plan during the prior calendar year; provided that KBS Legacy Partners Apartment REIT may not redeem more than $2.0 million of shares in the aggregate during any calendar year. Furthermore, during any calendar year, once KBS Legacy Partners Apartment REIT has redeemed $1.5 million of shares under its share redemption program, including redemptions in connection with special redemptions, the remaining $0.5 million of the $2.0 million annual limit shall be reserved exclusively for shares being redeemed in connection with special redemptions, provided that KBS Legacy Partners Apartment REIT’s board of directors may increase or decrease the funding available for the redemption of shares pursuant to the share redemption program upon ten business days’ notice to stockholders.

In March 2015, KBS Legacy Partners Apartment REIT exhausted $1.5 million of funds available for redemptions during 2015 and thus, because of the limitations on the dollar value of shares that could be redeemed under the share redemption program, KBS Legacy Partners Apartment REIT was not be able to process ordinary redemptions for the remainder of 2015 and could only process special redemptions. As of December 31, 2015, KBS Legacy Partners Apartment REIT had $1.1 million of outstanding and unfulfilled ordinary redemption requests, representing 109,344 shares. The $2.0 million annual limitation was reset beginning January 1, 2016 and $1.0 million of the outstanding and unfulfilled ordinary redemption requests as of December 31, 2015, representing 103,808 shares, were fulfilled in January 2016. In January 2016, KBS Legacy Partners Apartment REIT exhausted $1.5 million of funds available for redemptions for 2016. Because of the limitations on the dollar value of shares that may be redeemed under the share redemption program, KBS Legacy Partners Apartment REIT will only be able to process special redemptions for the remainder of 2016.

KBS REIT III

On October 26, 2010, our sponsors launched the initial public offering of KBS REIT III, a publicly registered, non-traded REIT. Its primary initial public offering was for a maximum of up to 200,000,000 shares, or up to $2,000,000,000 of shares, of common stock at an initial price of $10.00 per share, plus up to 80,000,000 shares, or up to $760,000,000 of shares, of common stock initially priced at $9.50 per share pursuant to its dividend reinvestment plan. On March 24, 2011, KBS REIT III broke escrow in its initial public offering. KBS REIT III ceased offering shares of common stock in its primary offering on May 29, 2015 and terminated the primary offering on July 28, 2015. KBS REIT III sold 169,006,162 shares of common stock for gross offering proceeds of $1.7 billion in its primary initial public offering. As of December 31, 2015, KBS REIT III had sold 10,487,846 shares of common stock under its dividend reinvestment plan for gross offering proceeds of $103.1 million. KBS REIT III has approximately 41,000 stockholders. Additionally, on October 3, 2014, KBS REIT III issued 258,462 shares of common stock, for $2.4 million, in private transactions exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933. As of December 31, 2015, KBS REIT III had redeemed $17.7 million of shares, or 1,829,232 shares, under its share redemption program. See Table I under “Prior Performance Tables” in this supplement for more information regarding KBS REIT III’s initial public offering.

As of December 31, 2015, KBS REIT III owned 27 office properties and one mixed-use office/retail property encompassing 10.6 million rentable square feet in the aggregate that were collectively 92% occupied. In addition, KBS REIT III owned one first mortgage loan.

KBS REIT III has investment objectives that are similar to ours. Like ours, its primary investment objectives are to preserve and return investors’ capital contributions and realize growth in the value of its investments. In addition, both real estate and real estate-related assets involve similar assessments of the risks and rewards of the operation of the underlying real estate assets and the financing thereof as well as an understanding of the real estate and real estate-finance markets.

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KBS REIT III has invested substantially all of the net proceeds from its now-terminated initial public offering in a diverse portfolio of real estate investments. KBS REIT III has made investments in core real estate properties, which are generally lower risk, existing properties with at least 80% occupancy and minimal near-term lease rollover. KBS REIT III’s primary investment focus is core office properties located throughout the United States, though KBS REIT III may also invest in other types of properties. KBS REIT III’s core property focus in the U.S. office sector has reflected a more value creating core strategy. In many cases, these properties have slightly higher (10% to 15%) vacancy rates and/or higher near-term lease rollover at acquisition than more conservative value-maintaining core properties. All such real estate assets are generally acquired directly by KBS REIT III or the Operating Partnership, though KBS REIT III may invest in other entities that make similar investments. KBS REIT III may also invest in real estate-related investments, such as mortgage loans. KBS REIT III may make adjustments to its target portfolio based on real estate market conditions and investment opportunities.

KBS REIT III had used the net proceeds from its now-terminated initial public offering and debt financing to purchase or fund $3.2 billion of real estate investments as of December 31, 2015, including $44.8 million in acquisition and origination fees and expenses. As of December 31, 2015, KBS REIT III had debt financing on its real estate properties in the amount of $1.7 billion.

As of December 31, 2015, with proceeds from its now-terminated initial public offering and debt financing, as a percentage of amount invested (based on purchase price), KBS REIT III had invested 99% in 29 office properties and 1% in one mortgage loan. All of KBS REIT III’s real property investments are located within the United States. As a percentage of amount invested (based on purchase price), the geographic locations of KBS REIT III’s investments in real properties as of December 31, 2015 were as follows: 30% in four properties in the Midwest; 28% in nine properties in the West; 28% in 11 properties in the South; and 14% in five properties in the East. All of the real properties purchased by KBS REIT III had prior owners and operators.

As of December 31, 2015, KBS REIT III had disposed of one office property for $43.2 million. See Table V under “Prior Performance Tables” in this supplement for information regarding the sale of the office property.

KBS REIT III’s primary offering was subject to certain up-front commissions, fees and expenses similar to those associated with this offering and KBS REIT III has certain fee arrangements with KBS affiliates structured similarly to ours. For more information regarding the fees paid to KBS affiliates by KBS REIT III and the operating results of KBS REIT III, see Tables II and III under “Prior Performance Tables” in this supplement.

Liquidity

The KBS REIT III prospectus discloses that KBS REIT III 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 III does not list its shares of common stock on a national securities exchange by September 2020, its charter requires that KBS REIT III 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 September 2020, neither of the actions described in (i) or (ii) above have occurred.

If a majority of the conflicts committee of KBS REIT III were to determine that liquidation is not then in the best interests of its stockholders, KBS REIT III’s charter requires 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 best interest of the stockholders. If KBS REIT III sought and failed to obtain stockholder approval of its liquidation, the KBS REIT III charter would not require KBS REIT III to list or liquidate and would not require the conflicts committee to revisit the issue of liquidation, and KBS REIT III could continue to operate as before. If KBS REIT III sought and obtained stockholder approval of its liquidation, KBS REIT III 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 its stockholders. In making the decision to apply for listing of its shares, KBS REIT III’s directors will try to determine whether listing its shares or liquidating its assets will result in greater value for stockholders.

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Estimated Value Per Share

On December 8, 2015, the board of directors of KBS REIT III approved an estimated value per share of KBS REIT III’s common stock of $10.04 based on the estimated value of KBS REIT III’s assets less the estimated value of its liabilities, or net asset value, divided by the number of shares outstanding, all as of September 30, 2015, with the exception of a reduction to KBS REIT III’s net asset value for acquisition fees and closing costs related to a real estate acquisition that closed subsequent to September 30, 2015 and deferred financing costs related to a mortgage loan that closed subsequent to September 30, 2015. KBS REIT III provided this estimated value per share to assist broker-dealers that participated in KBS REIT III’s initial public offering in meeting their customer account statement reporting obligations under NASD Conduct Rule 2340 as required by FINRA. This valuation was performed in accordance with the provisions of and also to comply with the IPA Valuation Guidelines. As with any valuation methodology, the methodologies used were based upon a number of estimates and assumptions that may not be accurate or complete. Different parties using different assumptions and estimates could derive a different estimated value per share of its common stock, and this difference could be significant. The estimated value per share is not audited and does not represent the fair value of KBS REIT III’s assets less the fair value of its liabilities according to GAAP, nor does it represent a liquidation value of KBS REIT III’s assets and liabilities or the price at which KBS REIT III’s shares of common stock would trade on a national securities exchange. The estimated value per share does not reflect a discount for the fact that KBS REIT III is externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of KBS REIT III’s debt obligations, the impact of restrictions on the assumption of debt or swap breakage fees that may be incurred upon the termination of certain of KBS REIT III’s swaps prior to expiration. In addition, KBS REIT III was still investing proceeds from its now-terminated initial public offering as of the date of its estimated value per share and the estimated value per share does not take into consideration acquisition-related costs and financing costs related to future acquisitions.

KBS REIT III’s estimated value per share takes into consideration any potential liability related to a participation fee KBS Capital Advisors is entitled to upon meeting certain stockholder return thresholds in accordance with its advisory agreement. For purposes of determining the estimated value per share, KBS Capital Advisors calculated the potential liability related to this incentive fee based on a hypothetical liquidation of the assets and liabilities at their estimated fair values, after considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would be no liability related to the participation fee.

The value of KBS REIT III’s shares will fluctuate over time in response to developments related to future investments, the performance of individual assets in KBS REIT III’s portfolio and the management of those assets and the real estate and finance markets. For a full description of the assumptions and methodologies used to value KBS REIT III’s assets and liabilities in connection with the calculation of the updated estimated value per share, see KBS REIT III’s Current Report on Form 8-K filed with the SEC on December 9, 2015.

Share Redemption Program

KBS REIT III continues to process redemption requests and through the December 2015 redemption date has redeemed all redemption requests received in good order and eligible for redemption.    

KBS Growth & Income REIT

On June 11, 2015, our sponsors launched the private placement offering of KBS Growth & Income REIT. As of December 31, 2015, KBS Growth & Income REIT had sold 2,151,799 shares of its Class A common stock for gross offering proceeds of $18,760,265 in the private offering, including 6,311 shares of Class A common stock under its distribution reinvestment plan for gross offering proceeds of $53,830. Additionally, on August 11, 2015, two of the individuals who own and control KBS Growth & Income REIT’s sponsor, Charles J. Schreiber, Jr. (who also acts as chief executive officer, the chairman of the board and a director of KBS Growth & Income REIT) and Peter M. Bren (who also acts as president of KBS Growth & Income REIT), purchased 21,181.2380 and 21,181.2390 shares of its Class A common stock, respectively, each for an aggregate purchase price of $172,500, in private transactions exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933. As of December 31, 2015, KBS Growth & Income REIT had approximately 300 stockholders.

KBS Growth & Income REIT has filed a registration statement on Form S-11 with the SEC to register an initial public offering of its common stock. As of the date of this supplement, the SEC has not declared the initial public offering of KBS Growth & Income REIT effective and no guarantees can be made that KBS Growth & Income REIT will successfully commence an initial public offering.

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As of December 31, 2015, KBS Growth & Income REIT owned one office property, located in the West region of the United States. The office property had a prior owner. KBS Growth & Income REIT used proceeds from its private offering and debt financing to invest $21.8 million in this office property, including $0.6 million of real estate acquisition fees and closing costs. As of December 31, 2015, KBS Growth & Income REIT has $16.3 million of debt financing related to its real estate investment. As of December 31, 2015, the office building was 100% occupied.

As of December 31, 2015, KBS Growth & Income REIT had not sold any investments.

KBS Growth & Income REIT has investment objectives that are similar to ours. Like ours, its primary investment objectives are to preserve and return investors’ capital contributions and realize growth in the value of its investments. In addition, both real estate and real estate-related assets involve similar assessments of the risks and rewards of the operation of the underlying real estate and financing thereof as well as an understanding of the real estate and real estate-finance markets.

KBS Growth & Income REIT intends to use substantially all of the net proceeds from its offerings to invest in a diverse portfolio of core real estate properties and real estate-related assets, including the acquisition of commercial properties and the acquisition and origination of real estate-related assets. Such real estate-related assets may include mortgage, mezzanine, bridge and other loans, debt and derivative securities related to real estate assets, including mortgage-backed securities, and equity securities such as common stocks, preferred stocks and convertible preferred securities of other REITs and real estate companies.

KBS Growth & Income REIT’s private offering is subject to (and its proposed public offering would be subject to) certain up-front commissions, fees and expenses similar to those associated with this offering and it has fee arrangements with KBS affiliates structured similarly to ours.

Liquidity

The KBS Growth & Income REIT prospectus for its proposed initial public offering on file with the SEC discloses that the program may seek to list its shares of common stock on a national securities exchange if its independent directors believes listing would be in the best interests of its stockholders. To date, such a determination has not been made. If KBS Growth & Income REIT does not list its shares of common stock on a national securities exchange within ten years from commencement of an initial public offering, its charter requires that it either (i) seek stockholder approval of the liquidation of the company or (ii) postpone the decision of whether to liquidate the company, if a majority of its conflicts committee determines that liquidation is not then in the best interests of the stockholders. As the potential initial public offering has not yet commenced, neither of the actions described in (i) or (ii) above have occurred.

If a majority of KBS Growth & Income REIT’s conflicts committee does determine that liquidation is not then in the best interests of its stockholders, KBS Growth & Income REIT’s charter requires 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 KBS Growth & Income REIT’s conflicts committee again determined that liquidation would not be in the best interest of its stockholders. If KBS Growth & Income REIT sought and failed to obtain stockholder approval of its liquidation, KBS Growth & Income REIT’s charter would not require it to list or liquidate and would not require its conflicts committee to revisit the issue of liquidation, and KBS Growth & Income REIT could continue to operate as before. If KBS Growth & Income REIT sought and obtained stockholder approval of its liquidation, KBS Growth & Income REIT would begin an orderly sale of its assets. The precise timing of such sales would take into account the prevailing real estate and financial markets, the economic conditions in the submarkets where KBS Growth & Income REIT’s properties are located 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 Growth & Income REIT’s directors would try to determine whether listing KBS Growth & Income REIT’s shares or liquidating its assets would be more likely to result in greater benefit its stockholders.

Private Programs

During the 10-year period ended December 31, 2015, KBS-affiliated investment advisors managed 10 private real estate programs, three of which were multi-investor, commingled programs and seven of which were single-client, separate accounts. All of these private programs were limited partnerships for which affiliates of Messrs. Bren and Schreiber act or acted as a general partner. In all cases, affiliates of Messrs. Bren and Schreiber had responsibility for acquiring, investing, managing, developing and selling the real estate and real estate-related assets of each of the programs. Five of the 10 private programs managed by KBS-affiliated investment advisors during the 10-year period ended December 31, 2015 used private REITs to structure the ownership of some of their investments.

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Five of the 10 private real estate programs managed by KBS-affiliated investment advisors raised approximately $846.9 million of equity capital from one institutional investor during the 10-year period ended December 31, 2015. The institutional investor investing in the private programs was a public pension fund. During this 10-year period, the remaining five of the 10 private programs managed by KBS-affiliated investment advisors did not raise any capital as they had completed their respective offering stages.

During the 10-year period ended December 31, 2015, KBS-affiliated investment advisors acquired 31 real estate investments and invested over $1.6 billion in these assets (including equity, debt and reinvestment of income and sales proceeds) on behalf of the five private programs raising capital for new investments during this period. Debt financing was used in acquiring the properties in all of these five private programs.

Each of the private programs managed by KBS-affiliated investment advisors during the 10-year period ended December 31, 2015 have or had (four of the programs have been fully liquidated) investment objectives that are similar to ours. Like ours, their primary investment objectives are to preserve and return investors’ capital contributions and to realize growth in the value of their investments. In addition, investments in real estate and real estate-related assets involve similar assessments of the risks and rewards of the operation of the underlying real estate and financing thereof as well as an understanding of the real estate and real estate-finance markets.

For each of the private programs, the KBS-affiliated investment advisor has focused on acquiring a diverse portfolio of real estate investments. The KBS-affiliated investment advisor typically diversified the portfolios of the private programs by property type and geographic region as well as investment size and investment risk. In constructing the portfolios for eight of the 10 private programs, the KBS-affiliated 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 the remaining two of the 10 private programs, the KBS-affiliated investment advisor is focusing on the acquisition of core real estate assets.

Substantially all of the assets acquired by the private programs have involved commercial properties. The chart below shows amounts invested (based on purchase price) by property type, during the 10-year period ended December 31, 2015, by KBS-affiliated investment advisors on behalf of the private programs.

KBS-AFFILIATED INVESTMENT ADVISORS - PRIVATE PROGRAMS

CAPITAL INVESTED BY PROPERTY TYPE

19

The KBS-affiliated investment advisors for the private programs also sought to diversify the investments of the programs 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 10-year period ended December 31, 2015. KBS-affiliated 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 programs were within the United States.

KBS-AFFILIATED INVESTMENT ADVISORS - PRIVATE PROGRAMS

CAPITAL INVESTED BY REGION

In seeking to diversify the portfolios of the private programs by investment risk, KBS-affiliated 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 programs had prior owners and operators.

As stated above, during the 10-year period ended December 31, 2015, KBS-affiliated investment advisors invested over $1.6 billion (including equity, debt and reinvestment of income and sales proceeds) for its clients through five private programs. Of the properties acquired during the 10-year period ended December 31, 2015, KBS investment advisors sold one property on behalf of these five private programs, which represents 3% of all properties these five private programs had acquired during this period. During the 10-year period ended December 31, 2015, KBS-affiliated investment advisors sold another 56 properties on behalf of the remaining five programs that did not acquire properties during the period.

Though the private programs were not subject to the up-front commissions, fees and expenses associated with this offering, the private programs have certain fee arrangements with KBS affiliates structured similarly to ours. The percentage of the fees varied based on the market factors at the time the particular program was formed. Historically a majority of the private programs 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 programs’ assets after achieving a stipulated return for the investors or based on gains from the sale of assets.

The recession that started in the late 1990s resulted in more business failures among smaller tenants typical to Class B buildings.  This resulted in higher vacancy rates for these buildings and in real estate programs investing additional capital to cover the costs of re-letting the properties, these events affected the performance of five of the 10 private programs.  These private programs also retained the buildings for a longer period of time so that the buildings would be sufficiently leased for disposition.  As a result, rental rates on newly leased space and renewals in the buildings owned by these programs decreased.  Higher vacancy rates also increased the period of time it took the KBS-affiliated investment advisors to get the properties to the planned stabilized occupancy level for disposition for these five programs.  These adverse market conditions reduced the distributions made by these private programs and may have caused the total returns to investors to be lower than they otherwise would have been.  One of these private programs is still in its operating stage, while the other four programs are fully liquidated.

20

PRIOR PERFORMANCE TABLES

The tables presented in this section provide summary unaudited information related to the historical experience of KBS REIT I, KBS REIT II, KBS REIT III, KBS Strategic Opportunity REIT and KBS Legacy Partners Apartment REIT. By purchasing shares in this offering, you will not acquire any ownership interest in any programs 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 funds discussed.

The information in this section should be read together with the summary information in this supplement 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 public programs sponsored by our sponsors have completed their operations and sold all of their properties during the five years ended December 31, 2015.

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TABLE I

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 sponsors in raising and investing funds for the public programs that had offerings close during the three years ended December 31, 2015. These programs have investment objectives similar to ours.

	KBS Legacy Partners Apartment REIT (Initial Public Offering)		KBS Legacy Partners Apartment REIT (Follow-on Offering)		KBS REIT III
Dollar amount offered	$	2,000,000,000	$	2,000,000,000	$	2,760,000,000
Dollar amount raised	$	175,633,000	$	15,864,000	$	1,722,838,000
Length of offering (in months)	36 (1)		12 (1)		56 (3)
Months to invest 90% of amount available for investments (4)	47		N/A (2)		55

_____________________

⁽¹⁾ KBS Legacy Partners Apartment REIT is a publicly registered, non-traded REIT. KBS Legacy Partners Apartment REIT launched its initial public offering on March 12, 2010 and then commenced real estate operations. On December 9, 2010, KBS Legacy Partners Apartment REIT broke escrow in its initial public offering. KBS Legacy Partners Apartment REIT ceased offering shares of common stock in its initial public offering on March 12, 2013. On March 13, 2013, KBS Legacy Partners Apartment REIT commenced its follow-on offering for a maximum of $2,000,000,000 of shares of common stock in its primary offering plus an additional $760,000,000 of shares of common stock pursuant to its dividend reinvestment plan. KBS Legacy Partners Apartment REIT ceased offering shares of common stock in its primary follow-on offering on March 31, 2014 and completed subscription processing procedures on April 30, 2014. KBS Legacy Partners Apartment REIT continues to offer shares under its dividend reinvestment plan; dollar amount of shares offered under and proceeds from the dividend reinvestment plan are omitted from Table I. KBS Legacy Partners Apartment REIT sold an aggregate of 19,215,410 shares of common stock in both the initial and follow-on primary offerings for gross primary offering proceeds of $191.5 million. As of December 31, 2015, KBS Legacy Partners Apartment REIT had acquired 11 apartment communities.

⁽²⁾ Upon completion of the follow-on offering, KBS Legacy Partners Apartment REIT did not anticipate making additional acquisitions. 

⁽³⁾ KBS REIT III is a publicly registered, non-traded REIT. KBS REIT III launched its initial public offering on October 26, 2010. On March 24, 2011, KBS REIT III broke escrow in its initial public offering and then commenced real estate operations. KBS REIT III ceased offering shares of common stock in its primary offering on May 29, 2015 and terminated the primary offering on July 28, 2015. KBS REIT III continues to issue shares under its dividend reinvestment plan; dollar amount of shares offered under and proceeds from the dividend reinvestment plan are omitted from Table I. KBS REIT III sold 169,006,162 shares of common stock in the primary offering for gross proceeds of $1.7 billion. As of December 31, 2015, the Company had also sold 10,487,846 shares of common stock under the dividend reinvestment plan for gross offering proceeds of $103.1 million. With proceeds from its initial public offering and debt financing, KBS REIT III had acquired 28 office properties and one mixed-use office/retail property and one first mortgage loan through December 31, 2015. As of December 31, 2015 KBS REIT III had sold one office property.

⁽⁴⁾ Includes the length of offering.

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TABLE II

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 in connection with (1) each public program sponsored by our sponsors that had offerings close during the three years ended December 31, 2015 and (2) KBS REIT I, KBS REIT II and KBS Strategic Opportunity REIT, the remaining public programs that have made payments to KBS affiliates during the three years ended December 31, 2015. Each of the programs represented has investment objectives similar to ours. All figures are as of December 31, 2015.

	KBS Legacy Partners Apartment REIT (3)			KBS REIT III (4)			KBS REIT I (5)		KBS REIT II (6)		KBS Strategic Opportunity REIT (7)
Date offering commenced	(3)			(4)			(5)		(6)		(7)
Dollar amount raised	$	210,166,000		$	1,825,928,000		$	1,936,784,000	$	2,118,756,000	$	614,501,000
Amount paid to sponsor from proceeds of offering:
Underwriting fees (1)	$	2,724,000		$	39,229,000		$	—	$	—	$	5,000
Acquisition fees:
real estate commissions	—			—			—		—		—
advisory fees (2)	4,362,000			30,932,000			—		1,797,000		7,074,000
other	—			—			—		—		—
Other	—			—			—		—		—
Dollar amount of cash generated from operations before deducting payments to sponsors	$	37,578,000		$	208,035,000		$	102,518,000	$	296,865,000	$	83,305,000
Amount paid to sponsor from operations:
Property management fees	$	4,000,000		$	—		$	—	$	—	$	—
Partnership and asset management fees	3,195,000		(8)	28,015,000		(9)	30,573,000		54,247,000		20,169,000
Reimbursements	2,187,000			823,000			649,000		572,000		415,000
Leasing commissions	—			—			—		—		—
Construction management fees	134,000			—			—		—		—
Loan servicing fees	—			—			—		—		—
Dollar amount of property sales and refinancing before deducting payments to sponsors:
Cash from property	$	—		$	42,739,000		$	616,885,000	$	1,719,764,000	$	71,421,000
Notes	—			—			—		—		—
Amounts paid to sponsor from property sales and refinancing:
Real estate commissions	$	—		$	—		$	—	$	—	$	—
Disposition fees related to property sales	—			—			7,733,000		17,440,000		598,000
Disposition fees related to notes receivable sales	—			—			—		1,143,000		—
Incentive fees	—			—			—		—		—
Other	—			—			—		—		—

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TABLE II

COMPENSATION TO SPONSOR (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

_____________________

⁽¹⁾ 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.

⁽²⁾ Advisory fees are acquisition fees and origination fees that are calculated as a percentage of purchase price (including any portion of the investment that was funded with debt financings) plus acquisition or origination expenses and are paid to the advisor of each program.

⁽³⁾ KBS Legacy Partners Apartment REIT is a publicly registered, non-traded REIT. KBS Legacy Partners Apartment REIT launched its initial public offering on March 12, 2010 and then commenced real estate operations. On December 9, 2010, KBS Legacy Partners Apartment REIT broke escrow in its initial public offering. KBS Legacy Partners Apartment REIT ceased offering shares of common stock in its initial public offering on March 12, 2013. On March 13, 2013, KBS Legacy Partners Apartment REIT commenced a follow-on offering, the primary portion of which terminated on March 31, 2014. KBS Legacy Partners Apartment REIT continues to offer 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. Compensation paid to KBS affiliates includes all compensation paid since the program’s inception. With proceeds from its public offerings and debt financing, KBS Legacy Partners Apartment REIT acquired 11 apartment communities.

⁽⁴⁾ KBS REIT III is a publicly registered, non-traded REIT. KBS REIT III launched its initial public offering on October 26, 2010. On March 24, 2011, KBS REIT III broke escrow in its initial public offering and then commenced real estate operations. KBS REIT III ceased offering shares of common stock in its primary offering on May 29, 2015 and terminated the primary offering on July 28, 2015. KBS REIT III continues to offer 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. Compensation paid to KBS affiliates includes all compensation paid since the program’s inception. With proceeds from its initial public offering and debt financing, KBS REIT III had acquired 28 office buildings and one mixed-use office/retail and one mortgage loan through December 31, 2015.

⁽⁵⁾ 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. KBS REIT I terminated its dividend reinvestment plan effective April 10, 2012; proceeds from the dividend reinvestment plan are included in “Dollar amount raised.” Compensation paid to KBS affiliates only includes amounts paid in the three years ended December 31, 2015. With proceeds from its initial public offering and debt financing, KBS REIT I acquired 64 real estate properties, one master lease, 21 real estate loans receivable and two investments in securities directly or indirectly backed by commercial mortgage loans. After KBS REIT I’s acquisition of these properties, loans and other investments, KBS REIT I’s portfolio composition changed when it restructured certain investments, took title to properties underlying investments in loans, sold assets and received repayment of debt investments.

⁽⁶⁾ 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. KBS REIT II ceased offering shares of common stock in its primary offering on December 31, 2010. KBS REIT II terminated its dividend reinvestment plan effective May 29, 2014; proceeds from the dividend reinvestment plan are included in “Dollar amount raised.” Compensation paid to KBS affiliates only includes amounts paid in the three years ended December 31, 2015. With proceeds from its initial public offering and debt financing, KBS REIT II acquired 28 real estate properties, a leasehold interest in one industrial property, eight real estate loans receivable and an investment in real estate securities. After KBS REIT II’s acquisition of these properties and loans, KBS REIT II’s portfolio composition changed when it sold assets and received repayment of debt investments.

⁽⁷⁾ KBS Strategic Opportunity REIT is a publicly registered, non-traded REIT. KBS Strategic Opportunity REIT launched its initial public offering on November 20, 2009. On April 19, 2010, KBS Strategic Opportunity REIT broke escrow in its initial public offering and then commenced real estate operations. KBS Strategic Opportunity REIT ceased offering shares of common stock in its primary offering on November 14, 2012. KBS Strategic Opportunity REIT continues to issue shares under its dividend reinvestment plan; proceeds from the dividend reinvestment plan are included in “Dollar amount raised” in this table. Compensation paid to KBS affiliates only includes amounts paid in the three years ended December 31, 2015. As of December 31, 2015, KBS Strategic Opportunity REIT had acquired 10 office properties, one office campus consisting of nine office buildings, one retail property, one office portfolio consisting of five office buildings and 63 acres of undeveloped land, one office portfolio consisting of three office buildings, two investments in undeveloped land, one apartment property, and investments in two unconsolidated joint ventures and acquired or originated 10 real estate loans receivable. After KBS Strategic Opportunity REIT’s acquisition of these investments, its portfolio composition changed when it received title to the properties which secured seven of its original investments in real estate loans receivable, negotiated a discounted payoff with respect to one of its real estate-related loans, received repayment of one of its real estate-related loans and sold assets.

⁽⁸⁾ As of December 31, 2015, KBS Legacy Partners Apartment REIT accrued and deferred payment of $1.5 million of asset management fees for February 2013 through July 2013 under the advisory agreement and deferred payment of $3.3 million of asset management fees for August 2013 through December 31, 2014 under the advisory agreement as, pursuant to the terms of the advisory agreement, KBS Legacy Partners Apartment REIT believed the payment of these amounts to its advisor were considered probable at the time they were recorded. During the year ended December 31, 2015, KBS Legacy Partners Apartment REIT incurred $2.8 million of asset management fees. However, KBS Legacy Partners Apartment REIT only recorded $0.7 million pursuant to the limitations in the advisory agreement and did not accrue the remaining $2.1 million of these deferred asset management fees as it is uncertain whether any of these amounts will be paid in the future. The deferred asset management fees are excluded from the partnership and asset management fees paid amount.

⁽⁹⁾ As of December 31, 2015, KBS REIT III had accrued and deferred payment of $10.1 million of asset management fees under the advisory agreement. The deferred asset management fees are excluded from the partnership and asset management fees paid amount. Pursuant to the terms of the advisory agreement, KBS REIT III believes payment of this amount to its advisor is probable.

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TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

This table summarizes the operating results of public programs sponsored by our sponsors that have had offerings close during the five years ended December 31, 2015. 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 programs represented has investment objectives similar to ours. All figures are as of December 31 of the year indicated, except as otherwise noted.

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TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

	KBS REIT II
	2011			2012			2013			2014			2015
Selected Operating Results (1)
Operating revenues	$	320,156,000		$	348,635,000		$	360,634,000		$	279,400,000		$	165,295,000
Operating expenses		(115,629,000	)		(129,250,000	)		(140,107,000	)		(113,796,000	)		(68,679,000	)
Interest expense		(50,554,000	)		(58,624,000	)		(65,687,000	)		(62,944,000	)		(22,115,000	)
Operating income (2)		153,973,000			160,761,000			154,840,000			102,660,000			74,501,000
Net income - GAAP basis		21,793,000			48,374,000			55,779,000			445,507,000			18,377,000
Summary Statements of Cash Flows (1)
Cash flows provided by operating activities	$	113,226,000		$	128,669,000		$	133,146,000		$	67,336,000		$	42,136,000
Cash flows (used in) provided by investing activities		(673,682,000	)		22,510,000			(71,706,000	)		1,656,313,000			158,128,000
Cash flows provided by (used in) financing activities		573,597,000			(198,343,000	)		65,212,000			(1,719,670,000	)		(306,598,000	)
Amount and Source of Distributions
Amount of cash distributions paid to common stockholders	$	(54,001,000	)	$	(57,601,000	)	$	(64,694,000	)	$	(944,224,000	)	$	(57,468,000	)
Amount of reinvested distributions paid to common stockholders		(67,789,000	)		(66,460,000	)		(70,562,000	)		(26,885,000	)		—
Total distributions paid to common stockholders	$	(121,790,000	)	$	(124,061,000	)	$	(135,256,000	)	$	(971,109,000	)	$	(57,468,000	)
Source of Distributions (per $1,000 invested):
From operations (3)		60			65			68			36			21
From sales of properties		—			—			—			470			—
From debt financing		5			—			—			—			—
From all other sources (4)		—			—			2			1			8
Summary Balance Sheet (1)
Total assets (before depreciation/amortization)	$	3,159,886,000		$	3,085,459,000		$	3,309,321,000		$	1,776,450,000		$	1,477,990,000
Total assets (after depreciation)		2,976,031,000			2,814,921,000			2,946,499,000			1,654,323,000			1,364,530,000
Total liabilities		1,488,898,000			1,419,464,000			1,606,455,000			844,796,000			546,077,000
Share Valuation(5)
Estimated per share at December 31,	$	10.11		$	10.29		$	10.29		$	5.86		$	5.62

_____________________

⁽¹⁾ Amounts include discontinued operations.

⁽²⁾ Operating income is operating revenues less operating expenses (which include operating, maintenance and management, real estate taxes and insurance and asset management fees to affiliate) and interest expense.

⁽³⁾ Cash distributions to investors from “operations,” assumes that KBS REIT II used cash flow from operating activities from the quarter corresponding to the payment of the distribution or prior period surplus to fund distribution payments.

⁽⁴⁾ Cash distributions to investors from “all other sources” were funded with cash on hand.

⁽⁵⁾ Prior to December 19, 2011, KBS REIT II valued its shares at $10.00 per share based solely on the offering price in the primary portion of its initial public offering. For a full description of the assumptions and methodologies used to value KBS REIT II’s assets and liabilities in connection with the calculation of the estimated value per share for the years ended December 31, 2011, 2012, 2013, 2014 and 2015 see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” in KBS REIT II's Annual Report on Form 10-K for the years ended December 31, 2011, 2012, 2013, 2014 and 2015, respectively.

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TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

	KBS STRATEGIC OPPORTUNITY REIT
	2011			2012			2013			2014			2015
Selected Operating Results (1)
Operating revenues (2)	$	4,278,000		$	19,909,000		$	69,883,000		$	106,154,000		$	112,128,000
Operating expenses (2)		(4,173,000	)		(13,216,000	)		(37,393,000	)		(57,805,000	)		(60,425,000	)
Interest expense (2)		(313,000	)		(2,505,000	)		(3,146,000	)		(15,598,000	)		(14,986,000	)
Operating income (loss) (2) (3)		(208,000	)		4,188,000			29,344,000			32,751,000			36,717,000
Net (loss) income attributable to common stockholders - GAAP basis		(7,581,000	)		(9,762,000	)		11,493,000			(23,194,000	)		2,444,000
Summary Statements of Cash Flows (1)
Cash flows (used in) provided by operating activities	$	(3,507,000	)	$	(1,028,000	)	$	24,630,000		$	11,450,000		$	27,056,000
Cash flows (used in) provided by investing activities		(154,405,000	)		(242,074,000	)		(289,875,000	)		(285,814,000	)		1,992,000
Cash flows provided by (used in) financing activities		220,649,000			282,683,000			197,281,000			235,461,000			(25,083,000	)
Amount and Source of Distributions
Amount of cash distributions paid to common stockholders	$	(2,318,000	)	$	(4,341,000	)	$	(9,038,000	)	$	(5,785,000	)	$	(8,707,000	)
Amount of reinvested distributions paid to common stockholders		(4,087,000	)		(8,544,000	)		(16,641,000	)		(9,911,000	)		(13,573,000	)
Total distributions paid to common stockholders	$	(6,405,000	)	$	(12,885,000	)	$	(25,679,000	)	$	(15,696,000	)	$	(22,280,000	)
Source of Distributions (per $1,000 invested):
From operations (4)		—			—			22			26			38
From sales of properties		—			2			22			—			—
From debt financing		30			38			—			—			—
From all other sources		—			—			—			—			—
Summary Balance Sheet (1)
Total assets (before depreciation/amortization)	$	259,909,000		$	545,606,000		$	801,043,000		$	1,080,484,000		$	1,095,774,000
Total assets (after depreciation)		257,326,000			537,085,000			771,184,000			1,016,313,000			1,004,214,000
Total liabilities		65,491,000			43,782,000			278,925,000			556,266,000			585,565,000
Share Valuation (5)
Estimated per share at December 31,	$	N/A		$	N/A		$	N/A		$	12.24		$	13.44

_____________________

⁽¹⁾ Amounts include discontinued operations.

⁽²⁾ Amounts include non-controlling portion of KBS Strategic Opportunity REIT’s consolidated joint ventures.

⁽³⁾ Operating income (loss) is operating revenues less operating expenses (which include operating, maintenance and management, real estate taxes and insurance and asset management fees to affiliate) and interest expense.

⁽⁴⁾ Cash distributions to investors from “operations,” assumes that KBS Strategic Opportunity REIT used cash flow from operating activities from the quarter corresponding to the payment of the distribution or prior period surplus to fund distribution payments.

⁽⁵⁾ Prior to March 25, 2014, KBS Strategic Opportunity REIT valued its shares at $10.00 per share based solely on the offering price in the primary portion of its initial public offering. For a full description of the assumptions and methodologies used to value KBS Strategic Opportunity REIT’s assets and liabilities in connection with the calculation of the estimated value per share for the years ended December 31, 2014 and 2015, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” in KBS Strategic Opportunity REIT’s Annual Report on Form 10-K for the years ended December 31, 2014 and 2015, respectively.

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TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

	KBS LEGACY PARTNERS APARTMENT REIT
		2011			2012			2013			2014			2015
Selected Operating Results
Operating revenues		$	5,372,000		$	16,105,000		$	32,825,000		$	42,200,000		$	44,613,000
Operating expenses			(2,850,000	)		(8,211,000	)		(15,873,000	)		(19,660,000	)		(19,070,000	)
Interest expense			(1,323,000	)		(4,688,000	)		(8,000,000	)		(10,261,000	)		(10,501,000	)
Operating income (1)			1,199,000			3,206,000			8,952,000			12,279,000			15,042,000
Net (loss) income - GAAP basis			(2,093,000	)		(10,233,000	)		(7,745,000	)		(3,560,000	)		791,000
Summary Statements of Cash Flows
Cash flows (used in) provided by operating activities		$	(845,000	)	$	(1,533,000	)	$	8,196,000		$	12,086,000		$	12,902,000
Cash flows (used in) investing activities			(1,595,000	)		(196,336,000	)		(122,114,000	)		(17,372,000	)		(1,885,000	)
Cash flows provided by (used in) financing activities			22,387,000			206,646,000			118,767,000			(7,534,000	)		(14,702,000	)
Amount and Source of Distributions
Amount of cash distributions paid to common stockholders		$	(553,000	)	$	(3,038,000	)	$	(6,349,000	)	$	(7,259,000	)	$	(7,416,000	)
Amount of reinvested distributions paid to common stockholders			(350,000	)		(2,229,000	)		(4,761,000	)		(5,591,000	)		(5,736,000	)
Total distributions paid to common stockholders		$	(903,000	)	$	(5,267,000	)	$	(11,110,000	)	$	(12,850,000	)	$	(13,152,000	)
Source of Distributions (per $1,000 invested):
From operations (2)			—			21			48			61			64
From sales of properties			—			—			—			—			—
From debt financing			65			44			17			4			1
From all other sources			—			—			—			—			—
Summary Balance Sheet
Total assets (before depreciation/amortization)		$	62,959,000		$	265,583,000		$	389,626,000		$	443,933,000		$	441,892,000
Total assets (after depreciation)			60,310,000			260,285,000			376,197,000			419,589,000			406,179,000
Total liabilities			25,779,000			171,707,000			250,376,000			302,326,000			297,914,000
Share Valuation (3)
Estimated per share at December 31,		$	N/A		$	N/A		$	10.68		$	10.14		$	10.29

_____________________

⁽¹⁾ Operating income is operating revenues less operating expenses (which include operating, maintenance and management, real estate taxes and insurance, asset management fees to affiliate and property management fees to affiliate) and interest expense.

⁽²⁾ Cash distributions to investors from “operations,” assumes that KBS Legacy Partners Apartment REIT used cash flow from operating activities from the quarter corresponding to the payment of the distribution or prior period surplus to fund distribution payments.

⁽³⁾Prior to December 9, 2014 KBS Legacy Partners Apartment REIT valued its shares based solely on the offering price to acquire a share in its then-current primary public offering. From its inception through March 3, 2013, KBS Legacy Partners Apartment REIT valued its shares at $10.00 per share based solely on its initial offering price to acquire a share in its primary initial public offering.

On March 4, 2013, KBS Legacy Partners Apartment REIT’s board of directors established an updated offering price for shares of common stock to be sold in KBS Legacy Partners Apartment REIT’s initial public offering of $10.68 per share, effective on March 5, 2013. This offering price was based on the estimated value of KBS Legacy Partners Apartment REIT’s assets less the estimated value of KBS Legacy Partners Apartment REIT’s liabilities, or net asset value (which estimated net asset value per share was equal to $9.08), divided by the number of shares outstanding, all as of December 31, 2012, and increased for certain offering and other costs (which were equal to $1.60). For a full description of the assumptions and methodologies used to value KBS Legacy Partners Apartment REIT’s assets and liabilities in connection with the establishment of KBS Legacy Partners Apartment REIT’s updated offering price and estimated net asset value per share as of March 4, 2013, see KBS Legacy Partners Apartment REIT’s Current Report on Form 8-K filed on March 4, 2013.

For a full description of the assumptions and methodologies used to value KBS Legacy Partners Apartment REIT’s assets and liabilities in connection with the establishment of KBS Legacy Partners Apartment REIT’s estimated value per share for the years ended December 31, 2014 and 2015, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” in KBS Legacy Partners Apartment REIT’s Annual Report on Form 10-K for the years ended December 31, 2014 and 2015.

P-8

TABLE III

OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

	KBS REIT III
		2011			2012			2013			2014			2015
Selected Operating Results
Operating revenues		$	2,512,000		$	27,283,000		$	80,423,000		$	188,896,000		$	315,709,000
Operating expenses			(913,000	)		(12,221,000	)		(39,657,000	)		(89,322,000	)		(145,690,000	)
Interest expense			(300,000	)		(3,568,000	)		(9,751,000	)		(27,003,000	)		(45,370,000	)
Operating income (1)			1,299,000			11,494,000			31,015,000			72,571,000			124,649,000
Net loss - GAAP basis			(2,440,000	)		(7,682,000	)		(21,637,000	)		(12,352,000	)		(29,015,000	)
Summary Statements of Cash Flows
Cash flows provided by operating activities		$	724,000		$	7,657,000		$	20,164,000		$	50,346,000		$	101,129,000
Cash flows (used in) investing activities			(93,527,000	)		(233,423,000	)		(938,610,000	)		(1,035,952,000	)		(831,986,000	)
Cash flows provided by financing activities			129,782,000			212,105,000			928,117,000			1,051,552,000			739,964,000
Amount and Source of Distributions
Amount of cash distributions paid to common stockholders		$	(922,000	)	$	(6,352,000	)	$	(13,773,000	)	$	(27,126,000	)	$	(47,603,000	)
Amount of reinvested distributions paid to common stockholders			(740,000	)		(5,241,000	)		(12,414,000	)		(29,329,000	)		(55,367,000	)
Total distributions paid to common stockholders		$	(1,662,000	)	$	(11,593,000	)	$	(26,187,000	)	$	(56,455,000	)	$	(102,970,000	)
Source of Distributions (per $1,000 invested):
From operations (2)			—			41			50			52			64
From sales of properties			—			—			—			—			—
From debt financing			34			24			15			13			1
From all other sources (3)			—			—			—			—			—
Summary Balance Sheet
Total assets (before depreciation/amortization)		$	131,717,000		$	362,571,000		$	1,352,055,000		$	2,486,069,000		$	3,356,305,000
Total assets (after depreciation)			130,616,000			348,481,000			1,305,447,000			2,375,288,000			3,133,874,000
Total liabilities			45,605,000			136,456,000			790,216,000			1,412,863,000			1,791,675,000
Share Valuation(4)
Estimated per share at December 31,		$	N/A		$	N/A		$	N/A			10.51			10.04

_____________________

⁽¹⁾ Operating income is operating revenues less operating expenses (which include operating, maintenance and management, real estate taxes and insurance and asset management fees to affiliate) and interest expense.

⁽²⁾ Cash distributions to investors from “operations,” assumes that KBS REIT III used cash flow from operating activities from the quarter corresponding to the payment of the distribution or prior period surplus to fund distribution payments.

⁽³⁾ Cash distributions to investors from “all other sources” were funded with debt and cash on hand.

⁽⁴⁾ Prior to December 8, 2015 KBS REIT III valued its shares based solely on the offering price to acquire a share in its then-current primary public offering. From its inception through May 7, 2014, KBS REIT III valued its shares at $10.00 per share based solely on its initial offering price to acquire a share in its primary initial public offering. On December 9, 2014, KBS REIT III’s board of directors established an updated offering price for shares of common stock to be sold in KBS REIT III’s initial public offering of $10.51 per share, effective on December 12, 2014. This offering price was based on the estimated value of KBS REIT III’s assets less the estimated value of KBS REIT III’s liabilities, or net asset value (which estimated net asset value per share was equal to $9.42), divided by the number of shares outstanding, all as of September 30, 2014, with certain adjustments, and then increased for certain offering and other costs (which were equal to $1.09). For a full description of the assumptions and methodologies used to value KBS REIT III’s assets and liabilities in connection with the establishment of KBS REIT III’s updated offering price and estimated net asset value per share as of December 9, 2014, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” in KBS REIT III’s Annual Report on Form 10-K for the year ended December 31, 2014. For a full description of the assumptions and methodologies used to value KBS REIT III’s assets and liabilities in connection with the establishment of KBS REIT III’s estimated value per share for the year ended December 31, 2015, see Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Market Information” in KBS REIT III’s Annual Report on Form 10-K for the year ended December 31, 2015.

P-9

TABLE V

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 public programs sponsored by our sponsors during the three years ended December 31, 2015. 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 has investment objectives similar to ours.

P-10

TABLE V

SALES OR DISPOSALS OF PROPERTIES (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Property (1)	Date Acquired	Date of Sale	Selling Price, Net of Closing Costs and GAAP Adjustments										Cost of Properties Including Closing and Soft Costs						Excess (Deficiency) of Property Operating Cash Receipts Over Cash Expenditures (3)
			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 Acquisitions Costs, Capital Improvements, Closing and Soft Costs (2)		Total
KBS REIT I (4) (5)
Five Tower Bridge	10/08	01/12	$	27,469,874	$	40,162,087	$	—	$	—	$	67,631,961	$	41,000,000	$	37,938,736	$	78,938,736	$	11,705,404
2200 West Loop	09/07	01/12	10,329,574		17,426,000		—		—		27,755,574		17,426,000		18,344,454		35,770,454		9,008,847
Kensington	03/07	02/12	6,614,345		18,500,000		—		—		25,114,345		18,500,000		12,857,510		31,357,510		5,701,712
Hartman Business Center	07/07	06/12	74,994		15,525,091		—		—		15,600,085		9,479,000		4,781,556		14,260,556		3,574,852
South Towne I & II	11/07	06/12	15,516,189		27,500,000		—		—		43,016,189		25,200,000		24,534,196		49,734,196		6,464,880
Plano Corporate Center	08/07	08/12	6,966,919		30,591,000		—		—		37,557,919		30,591,000		12,279,275		42,870,275		4,035,887
Patrick Henry	11/07	08/12	227,334		13,431,680		—		—		13,659,014		11,100,000		9,287,534		20,387,534		6,118,991
Greenbriar	11/07	09/12	11,999,715		—		—		—		11,999,715		10,200,000		6,425,135		16,625,135		6,550,833
Great Oaks - SunGard	08/08	11/12	3,361,730		9,000,000		—		—		12,361,730		6,352,000		5,693,605		12,045,605		5,242,228
Rickenbacker IV	08/07	11/12	5,497,209		6,096,903		—		—		11,594,112		—		15,265,382		15,265,382		4,340,505
Millennium Building	06/08	12/13	79,954,560		—		—		—		79,954,560		36,000,000		56,514,333		92,514,333		23,028,017
Crescent Green Buildings	01/07	01/14	11,038,991		25,400,000		—		—		36,438,991		40,800,000		13,151,552		53,951,552		13,675,951
2230 Avenue J	07/07	06/14	6,282,941		—		—		—		6,282,941		—		9,229,471		9,229,471		3,489,686
Nashville Portfolio Consolidated	11/07	06/14	26,183,542		6,250,688		—		—		32,434,230		22,230,000		19,149,528		41,379,528		4,424,954
Sabal VI	07/06	03/15	6,955,936		5,700,000		—		—		12,655,936		11,030,467		5,410,120		16,440,587		2,360,841
Royal Ridge	06/07	03/15	15,927,563		11,418,750		—		—		27,346,313		21,718,000		13,582,191		35,300,191		5,259,360
Plainfield Business Center	07/07	12/15	14,260,935		—		—		—		14,260,935		10,675,000		6,046,610		16,721,610		3,646,601
KBS REIT II
Hartman II	04/10	06/12	$	5,454,169	$	6,755,627	$	—	$	—	$	12,209,796	$	—	$	10,926,522	$	10,926,522	$	1,534,061
Mountain View Corporate Center	07/08	05/14	24,394,290		—						$	24,394,290	9,500,000		25,743,020		$	35,243,020	13,054,391
Dallas Cowboys Distrib. Center	07/10	06/14	9,911,326		11,793,117		—		—		$	21,704,443	—		19,482,482		$	19,482,482	3,754,620
601 Tower at Carlson Center	02/11	06/14	56,702,430		16,320,000		—		—		$	73,022,430	—		63,048,134		$	63,048,134	11,106,247
Plano Business Park	03/10	06/14	12,507,859		10,226,968		—		—		$	22,734,827	—		18,644,658		$	18,644,658	4,894,669
Metropolitan Center	12/11	06/14	72,044,679		33,360,000		—		—		$	105,404,679	65,000,000		45,064,617		$	110,064,617	15,544,550
300 N. LaSalle Building	07/10	07/14	486,932,489		344,600,796		—		—		$	831,533,285	350,000,000		324,152,677		$	674,152,677	79,141,040
Torrey Reserve West	09/10	07/14	21,421,050		16,827,945		—		—		$	38,248,995	16,985,382		14,039,473		$	31,024,855	7,040,324
Two Westlake Park	02/11	07/14	64,543,098		53,130,000		—		—		$	117,673,098	48,300,000		53,934,827		$	102,234,827	21,015,905
City Place Tower	04/11	08/14	74,920,077		71,000,000		—		—		$	145,920,077	—		133,629,297		$	133,629,297	18,611,046
I-81 Industrial Portfolio	02/11	11/14	45,656,113		56,475,714		—		—		$	102,131,827	51,085,375		40,949,350		$	92,034,725	16,862,540
Crescent VIII Building	05/10	11/14	7,432,433		8,599,384		—		—		$	16,031,817	—		14,642,830		$	14,642,830	2,966,624
One Main Place Building	02/10	12/14	66,710,714		16,938,500		—		—		$	83,649,214	—		67,889,814		$	67,889,814	19,930,981
National City Tower	12/10	02/15	33,473,823		89,700,000		—		—		$	123,173,823	69,000,000		56,159,202		$	125,159,202	32,161,280
KBS REIT III
Las Cimas IV	10/11	02/14	$	42,738,811	$	—	$	—	$	—	$	42,738,811	$	24,000,000	$	13,026,027	$	37,026,027	$	3,537,245

P-11

TABLE V

SALES OR DISPOSALS OF PROPERTIES (CONTINUED)

(UNAUDITED)

Prior Performance Is Not Indicative of Future Results

Property (1)	Date Acquired	Date of Sale	Selling Price, Net of Closing Costs and GAAP Adjustments										Cost of Properties Including Closing and Soft Costs						Excess (Deficiency) of Property Operating Cash Receipts Over Cash Expenditures (3)
			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 Acquisitions Costs, Capital Improvements, Closing and Soft Costs (2)		Total
KBS Strategic Opportunity REIT
10564 Roseville	09/10	01/12	$	1,143,062	$	—	$	—	$	—	$	1,143,062	$	—	$	1,149,374	$	1,149,374	$	509,099
Land- Roseville Commerce Center	09/10	05/12	709,055		—		—		—		709,055		—		653,400		653,400		(12,815		)
Greenway II Building (6)	11/11	01/13	2,418,534		5,207,275		—		—		7,625,809		3,389,396		—		3,389,396		(1,292,201		)
10556, 10560, 10600 and 10604 Roseville	09/10	10/13	5,585,085		—		—		—		5,585,085		—		4,876,454		4,876,454		553,802
6151 and 6201 Powers Ferry	09/12	10/13	14,708,953		2,822,000		—		—		17,530,953		—		12,152,540		12,152,540		144,896
Village Overlook	08/10	08/14	1,392,939		—		—		—		1,392,939		—		2,204,998		2,204,998		27,502
1635 N Cahuenga	08/11	03/15	11,201,427		4,650,000		—		—		15,851,427		—		9,109,680		9,109,680		757,076
Academy Point Atrium I	09/10	09/15	3,319,656		—		—		—		3,319,656		—		4,100,071		4,100,071		(747,800		)

_____________________

⁽¹⁾ Table V includes information only with respect to the results of sales or disposals of real properties.  Sales, disposals, restructuring, pay-offs, discounted payoffs and settlements of investments in loans and real estate-related investments are omitted from Table V. For information with respect to loan investments by public programs, see the “Prior Performance Summary.” Upon request, prospective investors may obtain from us without charge copies of any public reports prepared in connection with public programs sponsored by our sponsors, including a copy of the most recent Annual Reports on Form 10-K filed with the SEC.

⁽²⁾ Total acquisition costs, capital improvements and soft costs is gross of depreciation and impairments. Acquisition costs include acquisition fees paid to the program’s advisor. 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.

⁽⁴⁾ This table does not include KBS REIT I’s agreement in lieu of foreclosure to transfer the National Industrial Portfolio properties to an affiliate of the lender of certain mortgage and mezzanine loans related to the properties.

⁽⁵⁾ On September 1, 2011, KBS REIT I entered into a Collateral Transfer and Settlement Agreement with, among other parties, GKK Stars Acquisition LLC, the wholly owned subsidiary of Gramercy Property Trust, Inc. (“Gramercy”) that indirectly owned the Gramercy real estate portfolio, to effect the orderly transfer of certain assets and liabilities of the Gramercy real estate portfolio to KBS REIT I in satisfaction of certain debt obligations owed by wholly owned subsidiaries of Gramercy to KBS REIT I.  Pursuant to the Collateral Transfer and Settlement Agreement, the subsidiaries of Gramercy transferred to KBS REIT I the equity interests in the indirect owners of or holders of leasehold interests in approximately 867 properties (the “GKK Properties”).  Through December 31, 2015, KBS REIT I has sold or terminated the leasehold interests in 362 GKK Properties for net sales proceeds of $1.2 billion.  The original purchase price allocated to these properties was $1.0 billion.  In addition, as of December 31, 2015, KBS REIT I had transferred 153 GKK Properties to the respective lenders of the mortgage loans for which these properties served as security, in exchange for the release from the debt outstanding and other obligations related to, these mortgage loans.  The purchase price allocated to these properties was $266.2 million and the carrying value of the debt and accrued liabilities extinguished was $272.9 million.

⁽⁶⁾KBS Strategic Opportunity REIT owned a 90% equity interest in the Greenway II Building.

P-12

KBS STRATEGIC OPPORTUNITY REIT II, INC.

SUPPLEMENT NO. 23 DATED FEBRUARY 2, 2017

TO THE PROSPECTUS DATED FEBRUARY 17, 2016

This document supplements, and should be read in conjunction with, the prospectus of KBS Strategic Opportunity REIT II, Inc. dated February 17, 2016 and supplement no. 5 dated April 26, 2016. Supplement no. 5 and this supplement no. 23, together, supersede and replace all prior supplements to the February 17, 2016 prospectus. As used herein, the terms “we,” “our” and “us” refer to KBS Strategic Opportunity REIT II, Inc. and, as required by context, KBS Strategic Opportunity Limited Partnership II, which we refer to as our “Operating Partnership,” and to their subsidiaries. Capitalized terms used in this supplement have the same meanings as set forth in the prospectus. The purpose of this supplement is to disclose:

• a change to the suitability standards for our offering applicable to California investors;

• the status of the offering;

• updated risks related to an investment in us;

• our entry into an amended and restated advisory agreement and renewal of our advisory agreement;

• cash distributions and stock dividends for the year ended December 31, 2015 and the nine months ended September 30, 2016;

• the declaration of cash distributions and stock dividends for the period from October 2016 through March 2017;

• changes to our volume discount table for purchases of our Class T shares;

• our entry into an agreement with Equity Trust Company relating to IRA custodial services with respect to our Class T shares;

• an update regarding allocation of investment opportunities;

• additional information regarding loans we may acquire or originate;

• update to the key personnel at STAM;

• information with respect to our real estate and real estate-related investments;

• selected financial data;

• fees earned by and expenses reimbursable to our advisor and the dealer manager;

• information with respect to our share redemption program;

• information regarding the net tangible book value of our shares;

• updated disclosure regarding “Charter-imposed Investment Limitations;”

• updated disclosure regarding “Restrictions on Roll-Up Transactions;”

• clarifications to the services provided to holders of a Class T share;

• quantitative and qualitative disclosures about market risk; and

• information incorporated by reference.

Suitability Standards

The suitability standard for California investors in this offering is revised to read as follows:

• 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 net worth of at least ten times their investment in us.

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.

1

Our sponsor, those selling shares on our behalf and participating broker-dealers and registered investment advisers 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” in the prospectus for a detailed discussion of the determinations regarding suitability that we require.

Status of the Offering

We commenced this offering of up to 180,000,000 shares of common stock, or up to $1,760,000,000 of shares of common stock, on August 12, 2014. Effective February 17, 2016, we are offering any combination of two classes of shares of common stock: Class A shares and Class T shares. As of January 26, 2017, we had accepted aggregate gross offering proceeds of $151.7 million related to the sale of 9,204,922 and 6,369,165 shares of Class A and Class T common stock in this offering, respectively, including 222,784 and 29,921 shares of Class A and Class T common stock sold under our dividend reinvestment plan, respectively, for gross offering proceeds of $2.1 million.  Accordingly, as of January 26, 2017, there were 164,173,208 shares of common stock available for sale in this offering.

Risk Factors

The following risk factors update and supplement the risk factors appearing in the prospectus.

Based on sales volume to date, we expect to raise substantially less than the maximum offering amount in this offering. Because we expect to raise substantially less than the maximum offering amount, we will not be able to invest in as diverse a portfolio of properties as we otherwise would, which will cause the value of our stockholders’ investment to vary more widely with the performance of specific assets, and cause our general and administrative expenses to constitute a greater percentage of our revenue. Raising fewer proceeds in our offering, therefore, increases the risk that our stockholders will lose money in their investment.

This offering is being made on a “best efforts” basis, whereby the brokers participating in the offering have no firm commitment or obligation to purchase any of the shares. To date, the proceeds we have raised in this offering are lower than our sponsor and dealer manager originally expected. Unless we file a registration statement with the SEC to conduct a follow-on public offering, we expect this offering to terminate by August 2017.  As a result, we do not expect to raise the maximum offering amount in this offering. Therefore, we will make fewer investments than originally intended resulting in less diversification in terms of the number of investments owned and the geographic regions in which our investments are located. Adverse developments with respect to a single property, or a geographic region, will have a greater adverse impact on our operations than they otherwise would. In addition, our inability to raise substantial funds will increase our fixed operating expenses as a percentage of our revenue, limiting our ability to pay distributions to our stockholders.

Because the offering price in this offering exceeds our net tangible book value per share, investors in this offering will experience immediate dilution in the net tangible book value of their shares.

We are currently offering shares of our Class A common stock and our Class T common stock in this offering at $10.00 and $9.59 per share, respectively, with discounts available to certain categories of purchasers. Our current primary public offering price exceeds our net tangible book value per share. Our net tangible book value per share is a rough approximation of value calculated as total book value of assets minus total book value of liabilities, divided by the total number of shares of common stock outstanding. Net tangible book value is used generally as a conservative measure of net worth that we do not believe reflects our estimated value per share. It is not intended to reflect the value of our assets upon an orderly liquidation of the company in accordance with our investment objectives. However, net tangible book value does reflect certain dilution in value of our common stock from the issue price in this offering primarily as a result of (i) the substantial fees paid in connection with this offering and our now terminated private offering, including selling commissions and marketing fees re-allowed by our dealer manager to participating broker-dealers, (ii) the fees and expenses paid to our advisor and its affiliates in connection with the selection, acquisition, management and sale of our investments, (iii) general and administrative expenses, (iv) accumulated depreciation and amortization of real estate investments, and (v) the issuance of shares in our now-terminated private offering at a purchase price of less than the offering price in this offering.

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As of September 30, 2016, our net tangible book value per share of both Class A and Class T common stock, was $7.90. The offering price of shares of our common stock under this primary offering (ignoring purchase price discounts for certain categories of purchasers is $10.00 per Class A share and $9.59 per Class T share. To the extent we are able to raise additional proceeds in this offering, some of the expenses that cause dilution of the net tangible book value per share are expected to decrease on a per share basis, resulting in increases in the net tangible book value per share. This increase would be partially offset by increases in depreciation and amortization expenses related to our real estate investments.

Adverse weather conditions may affect operations of the hotels we acquire or reduce our operators’ ability to make scheduled rent payments to us, which could reduce our cash flow from such investments.

Adverse weather conditions may influence revenues at the hotels we acquire. These adverse weather conditions include heavy snowfall (or lack thereof), hurricanes, tropical storms, high winds, heat waves, frosts, drought (or merely reduced rainfall levels), excessive rain and floods. In particular, Springmaid Beach Resort Hotel, which represented 22% of our total assets as of September 30, 2016 is located in Myrtle Beach, South Carolina, an area that sustained significant damage from Hurricane Matthew in October 2016.  As of February 2, 2017, a number of rooms at the Springmaid Beach Resort Hotel remain offline due to damages from the hurricane. We are still assessing the impact of the hurricane at Springmaid Beach Resort Hotel, including any losses due to business interruption and it is uncertain whether we will fully recover all of our losses beyond our deductible. Adverse weather such as Hurricane Matthew could reduce the number of people that visit Springmaid Beach Resort as well as other hotels we acquire.  In addition, certain properties such as Springmaid Beach Resort are susceptible to damage from weather conditions such as hurricanes, which damage (including but not limited to property damage and loss of revenue) is not generally insurable at commercially reasonable rates. Poor weather conditions could also disrupt operations at hotels we acquire, including Springmaid Beach Resort, and may adversely affect both the value of our investment in a hotel and the ability of our tenants and operators to make their scheduled rent payments to us.

Our revenue and net income may vary significantly from one period to another due to investments in opportunity-oriented properties and portfolio acquisitions, which could increase the variability of our cash available for distributions.

Our opportunistic property-acquisition strategy may include investments in properties in various phases of development, redevelopment or repositioning and portfolio acquisitions, which may cause our revenues and net income to fluctuate significantly from one period to another. Projects do not produce revenue while in development or redevelopment. During any period when our projects in development or redevelopment or those with significant capital requirements increase without a corresponding increase in stable revenue-producing properties, our revenues and net income will likely decrease. Many factors may have a negative impact on the level of revenues or net income produced by our portfolio of properties and projects, including higher than expected construction costs, failure to complete projects on a timely basis, failure of the properties to perform at expected levels upon completion of development or redevelopment, and increased borrowings necessary to fund higher than expected construction or other costs related to the project. Further, our net income and shareholders equity could be negatively affected during periods with large portfolio acquisitions, which generally require large cash outlays and may require the incurrence of additional financing. Any such reduction in our revenues and net income during such periods could cause a resulting decrease in our cash available for distributions during the same periods.

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Our operating results may be negatively affected by potential development and construction delays and result in increased costs and risks, which could diminish the return on your investment.

We may invest some of the proceeds available for investment in the acquisition, development and/or redevelopment of properties upon which we will develop and construct improvements. We could incur substantial capital obligations in connection with these types of investments. We will be subject to risks relating to uncertainties associated with rezoning for development and environmental concerns of governmental entities and/or community groups and our builder's ability to control construction costs or to build in conformity with plans, specifications and timetables. The builder's failure to perform may necessitate legal action by us to rescind the purchase or the construction contract or to compel performance. Performance may also be affected or delayed by conditions beyond the builder's control. Delays in completion of construction could also give tenants the right to terminate preconstruction leases for space at a newly developed project. We may incur additional risks when we make periodic progress payments or other advances to such builders prior to completion of construction. These and other such factors can result in increased costs of a project or loss of our investment. Substantial capital obligations could delay our ability to make distributions. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. Furthermore, we must rely upon projections of rental income and expenses and estimates of the fair market value of property upon completion of construction when agreeing upon a price to be paid for the property at the time of acquisition of the property. If our projections are inaccurate, we may pay too much for a property, and the return on our investment could suffer.

In addition, we may invest in unimproved real property. Returns from development of unimproved properties are also subject to risks and uncertainties associated with rezoning the land for development and environmental concerns of governmental entities and/or community groups. Although our intention is to limit any investment in unimproved property to property we intend to develop, your investment nevertheless is subject to the risks associated with investments in unimproved real property.

We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.

We face risks associated with security breaches, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.

A security breach or other significant disruption involving our IT networks and related systems could:

• disrupt the proper functioning of our networks and systems and therefore our operations;

• result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines;

• result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT;

• result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or which could expose us to damage claims by third-parties for disruptive, destructive or otherwise harmful purposes and outcomes;

• require significant management attention and resources to remedy any damages that result;

• subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or

• damage our reputation among our stockholders.

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Any or all of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.

KBS Capital Advisors and its affiliates face conflicts of interest relating to the acquisition and origination of assets and leasing of properties due to their relationship with other KBS-sponsored programs and KBS-advised investors, which could result in decisions that are not in our best interest or the best interests of our stockholders.

We rely on key real estate and debt finance professionals at KBS Capital Advisors, including Peter M. Bren, Keith D. Hall, Peter McMillan III and Charles J. Schreiber, Jr., to identify suitable investment opportunities for us. KBS REIT I, KBS REIT II, KBS Legacy Partners Apartment REIT, KBS REIT III, KBS Strategic Opportunity REIT II and KBS Growth & Income REIT are also advised by KBS Capital Advisors and rely on many of the same real estate and debt finance professionals as will future KBS-sponsored programs advised by our advisor. Messrs. Bren and Schreiber and several of the other key real estate professionals at KBS Capital Advisors are also the key real estate professionals at KBS Realty Advisors and its affiliates, the advisors to the private KBS-sponsored programs and the investment advisors to KBS-advised investors. As such, we and the other KBS-sponsored programs that currently have funds available for investment and KBS-advised investors rely on many of the same real estate and debt finance professionals, as will future KBS-sponsored programs and KBS-advised investors. Many investment opportunities that are suitable for us may also be suitable for other KBS-sponsored programs and KBS-advised investors. When these real estate and debt finance professionals direct an investment opportunity to any KBS-sponsored program or KBS-advised 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. Our current acquisition stage will overlap to some extent with KBS REIT III, KBS Strategic Opportunity REIT and KBS Growth & Income REIT, five private KBS-sponsored programs and possibly future KBS-sponsored programs and KBS-advised investors. In particular, KBS Strategic Opportunity REIT, which has investment objectives similar to ours, raised approximately $250 million in proceeds in March 2016 from a foreign bond offering in the Israeli debt markets and is investing the proceeds from this bond offering while we are raising and investing proceeds from our offering stage.

For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the corporation for us to make any significant investment unless KBS Capital Advisors has recommended the investment to us. Thus, the real estate and debt finance professionals of KBS Capital Advisors could direct attractive investment opportunities to other KBS-sponsored programs or KBS-advised investors. Such events could result in us investing in properties that provide less attractive returns, which would reduce the level of distributions we may be able to pay our stockholders.

We and other KBS-sponsored programs and KBS-advised investors may also rely on these real estate professionals to supervise the property management and leasing of properties. If we engage a KBS-affiliated property manager and the KBS team of real estate professionals directs creditworthy prospective tenants to properties owned by another KBS-sponsored program or KBS-advised investor when it could direct such tenants to our properties, our tenant base may have more inherent risk and our properties’ occupancy may be lower than might otherwise be the case.

Further, existing and future KBS-sponsored programs and KBS-advised investors and Messrs. Bren, Hall, McMillan and Schreiber generally are not and will not be prohibited from engaging, directly or indirectly, in any business or from possessing interests in any other business venture or ventures, including businesses and ventures involved in the acquisition, origination, development, ownership, leasing or sale of real estate-related investments.

Investments in non-performing real estate assets involve greater risks than investments in stabilized, performing assets and make our future performance more difficult to predict.

Traditional performance metrics of real estate assets are generally not meaningful for non-performing real estate assets. Non-performing properties, for example, do not have stabilized occupancy rates to provide a useful measure of revenue. Similarly, non-performing loans do not have a consistent stream of loan servicing or interest payments to provide a useful measure of revenue. In addition, for non-performing loans, often there is no expectation that the face amount of the note will be paid in full. Appraisals may provide a sense of the value of the investment, but any appraisal of the property or underlying property will be based on numerous estimates, judgments and assumptions that significantly affect the appraised value of the underlying property. Further, an appraisal of a nonstabilized property, in particular, involves a high degree of subjectivity due to high vacancy levels and uncertainties with respect to future market rental rates and timing of lease-up and stabilization. Accordingly, different assumptions may materially change the appraised value of the property. In addition, the value of the property will change over time.

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In addition, we may pursue more than one strategy to create value in a non-performing real estate investment. With respect to a property, these strategies may include development, redevelopment, or lease-up of such property. With respect to a loan, these strategies may include negotiating with the borrower for a reduced payoff, restructuring the terms of the loan or enforcing our rights as lender under the loan and foreclosing on the collateral securing the loan.

The factors described above make it challenging to evaluate non-performing investments.

We have paid distributions in part from financings and expect that in the future we may not pay distributions solely from our cash flow from operating activities. To the extent that we pay distributions from sources other than our cash flow from operating activities, we will have less funds available for investment in properties and other assets, the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

Our organizational documents permit us to pay distributions from any source, including offering proceeds or borrowings (which may constitute a return of capital), and our charter does not limit the amount of funds we may use from any source to pay such distributions. We have paid distributions in part from financings and expect that in the future we may not pay distributions solely from our cash flow from operating activities, in which case distributions may be paid in whole or in part from debt financing. We may also fund such distributions with proceeds from the sale of assets or from the maturity, payoff or settlement of debt investments. If we fund distributions from borrowings, our interest expense and other financing costs, as well as the repayment of such borrowings, will reduce our earnings and cash flow from operating activities available for distribution in future periods. If we fund distributions from the sale of assets or the maturity, payoff or settlement of debt investments, this will affect our ability to generate cash flow from operating activities in future periods. To the extent that we pay distributions from sources other than our cash flow from operating activities, we will have fewer funds available with which to make real estate investments, the overall return to our stockholders may be reduced and subsequent investors will experience dilution. In addition, to the extent distributions exceed cash flow from operating activities, 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 may fund from sources other than from cash flow from operating activities.

During our public offering stage, when we may raise capital in this offering (and possibly future offerings) more quickly than we acquire income-producing assets, and from time to time during our operational stage, we may not pay distributions solely from our cash flow from operating activities.

For the year ended December 31, 2015, we paid aggregate distributions of $1.0 million, including $0.4 million of distributions paid in cash and $0.6 million of distributions reinvested in shares of our common stock through our dividend reinvestment plan. For the year ended December 31, 2015, our net loss attributable to common stockholders was $2.1 million and cash flow provided by operating activities was $0.3 million. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with $0.3 million of cash flow provided by operating activities and $0.7 million of debt financing.

For the nine months ended September 30, 2016, we paid aggregate distributions of $1.1 million, including $0.4 million of distributions paid in cash and $0.7 million of distributions reinvested in shares of our common stock through our dividend reinvestment plan. For the nine months ended September 30, 2016, our net loss attributable to common stockholders was $2.3 million and cash flow provided by activities was $2.6 million. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with cash flow provided by operating activities.

From inception through September 30, 2016, we paid cumulative distributions of $2.1 million and our cumulative net loss during the same period was $6.9 million.

Newly constructed and existing multifamily rental properties or other properties that compete with any properties we may acquire in any particular location could adversely affect the operating results of our properties and our cash available for distribution.

We may acquire properties in locations that experience increases in construction of multifamily rental or other properties that compete with our properties. This increased competition and construction could:

• make it more difficult for us to find residents to lease units in our apartment communities;

• force us to lower our rental prices in order to lease units in our apartment communities; or

• substantially reduce our revenues and cash available for distribution.

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Our efforts to upgrade multifamily rental properties to increase occupancy and raise rental rates through redevelopment and repositioning may fail, which may reduce our net income and the cash available for distributions to you.

The success of our ability to upgrade any multifamily rental properties that we may acquire and realize capital gains and current income for you on these investments materially depends upon the status of the economy where the multifamily rental property is located. Our revenues will be lower if the rental market cannot bear the higher rental rate that accompanies the upgraded multifamily rental property due to job losses or other economic hardships. Should the local market be unable to support a higher rental rate for a multifamily rental property that we upgraded, we may not realize the premium rental we had assumed by a given upgrade and we may realize reduced rental income or a reduced gain or even loss upon the sale of the property. These events could cause us to reduce the cash available for distributions.

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

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 or earlier in certain situations, such as when a resident loses his/her job, without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

If the fiduciary of an employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (such as a profit sharing, Section 401(k) or pension plan) or an owner of a retirement arrangement subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) (such as an individual retirement account (“IRA”)), 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 penalties and other sanctions.

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 and IRA owners investing the assets of such a plan or account in our common stock should satisfy themselves that:

• the investment is consistent with their fiduciary and other 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 in our shares, for which no public market currently exists, is consistent with the liquidity needs 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 comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and

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

With respect to the annual valuation requirements described above, we will provide an estimated value for our shares annually. We can make no claim whether such estimated value will satisfy the applicable annual valuation requirements under ERISA and the Internal Revenue Code. The Department of Labor or the IRS may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our common stock. In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties or other sanctions.

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On April 8, 2016, the Department of Labor issued a final regulation relating to the definition of a fiduciary under ERISA. The final regulation broadens the definition of fiduciary and is accompanied by new and revised prohibited transaction exemptions relating to investments by IRAs and Benefit Plans.  The final regulation and the related exemptions will become applicable for investment transactions on and after April 10, 2017, but generally should not apply to purchases of our shares before that date.  The final regulation and the accompanying exemptions are complex, and plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding this development.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties and could subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. In addition, the investment transaction must be undone. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified as a tax-exempt account and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in our common stock.

Regulatory developments related to how we report our estimated value per share under recently effective FINRA and NASD Conduct Rules and changes to the definition of “fiduciary” under ERISA and the Code, may significantly affect our ability to raise substantial additional funds in thisoffering.

In April 2016, final regulations went into effect that require FINRA members and their associated persons that participate in this offering to disclose a per share estimated value of our shares developed in a manner reasonably designed to ensure that the per share estimated value is reliable.  As a result, we report the net investment amount of our shares as our estimated value per share, which net investment amount is based on the “amount available for investment/net investment amount” percentage shown in our estimated use of proceeds table and is effectively the purchase price of our primary offering shares, less the associated selling commission, dealer manager fee, and estimated organization and other offering expenses as shown in our estimated use of proceeds table.  Also in April 2016, the Department of Labor issued a final regulation relating to the definition of a fiduciary under ERISA and Section 4975 of the Internal Revenue Code. The final regulation broadens the definition of fiduciary and is accompanied by new and revised prohibited transaction exemptions relating to investments by employee benefit plans subject to Title I of ERISA or retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (including IRAs). The final regulation and the related exemptions will become applicable for investment transactions on and after April 10, 2017, but generally should not apply to purchases of our shares before that date. These regulatory developments may significantly affect our ability to raise substantial additional funds in the this offering.

Amended and Restated Advisory Agreement

On March 21, 2016, we entered an amended and restated advisory agreement with our advisor to provide that if our advisor were entitled to a termination fee upon the termination of the advisory agreement, the promissory note received in connection with the payment of such a fee would not bear interest.

On August 12, 2016, we renewed the advisory agreement with KBS Capital Advisors LLC for an additional one-year period. The renewed agreement is effective through August 12, 2017; however, either party may terminate the agreement without cause or penalty upon providing 60 days’ written notice.

Cash Distributions For the Year Ended December 31, 2015 and the Nine Months Ended September 30, 2016

On December 10, 2015, our board of directors declared a one-time cash distribution in the amount of $0.12 per share of common stock to common stockholders of record as of the close of business on December 16, 2015. On December 18, 2015 we paid $1.0 million, comprised of $0.4 million of cash dividends and $0.6 million of distributions reinvested by stockholders in shares of our common stock. The distribution amount was generally determined based on both our estimated undistributed taxable income and our results of operations.

For the year ended December 31, 2015, we paid aggregate distributions of $1.0 million, including $0.4 million of distributions paid in cash and $0.6 million of distributions reinvested in shares of our common stock through our dividend reinvestment plan. For the year ended December 31, 2015 our net loss attributable to common stockholders was $2.1 million and cash flow provided by operating activities was $0.3 million. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with $0.3 million of cash flow provided by operating activities and $0.7 million of debt financing.

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Commencing with cash distributions for the period from March 1, 2016 through March 31, 2016, we began paying regular, monthly cash distributions based on daily record dates. Distributions declared, distributions paid and cash flow used in operations were as follows for the first, second and third quarters of 2016 (in thousands, except per share amounts):

	Distributions Declared (1)		Distributions Declared Per Class A Share (1) (2)		Distributions Declared Per Class T Share (1) (2)		Distributions Paid (3)						Cash  Flows (Used in)/Provided by Operations			Source of Cash Distributions Paid
Period							Cash		Reinvested		Total					Amount Paid from Cash Flows From Operating Activities/ Percentage of Distributions Paid			Amount Paid from Borrowings/ Percentage of Distributions Paid
First Quarter 2016	$	93	$	0.008	$	—	$	—	$	—	$	—	$	(939	)	$	—	/0%	$	—	/0%
Second Quarter 2016	570		0.048		0.024		183		286		469		1,941			469		/100%	—		/0%
Third Quarter 2016	1,513		0.098		0.074		251		378		629		1,627			629		/100%	—		/0%
	$	2,176	$	0.154	$	0.098	$	434	$	664	$	1,098	$	2,629		$	1,098		$	—

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⁽¹⁾ Distributions for the period from March 1, 2016 through March 31, 2016 were based on daily record dates and were calculated at a rate of $0.00026202 per share per day less the applicable daily stockholder servicing fee. Distributions for the period from April 1, 2016 through September 30, 2016 were based on daily record dates and were calculated at a rate of $0.00052404 per share per day less the applicable daily stockholder servicing fee. On September 27, 2016, our board of directors declared a one-time cash distribution in the amount of $0.05 per share on the outstanding shares of all classes of our common stock to stockholders of record as of the close of business on September 27, 2016, which we paid on October 5, 2016.

⁽²⁾ Assumes Class A share was issued and outstanding each day that was a record date for distributions during the period presented. Assumes Class T share was issued and outstanding from March 2, 2016 through September 30, 2016. Given the distribution rate declared for the period and the applicable daily stockholder servicing fee for Class T shares of common stock, the Company did not pay cash distributions on shares of Class T common stock for record dates from March 2, 2016 to March 31, 2016.

⁽³⁾ Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid on or about the first business day of the following month.

For the nine months ended September 30, 2016, we paid aggregate distributions of $1.1 million, including $0.4 million distributions paid in cash and $0.7 million of distributions reinvested in our common stock through our dividend reinvestment plan. For the nine months ended September 30, 2016, our net loss attributable to common stockholders was $2.3 million and cash flow provided by operations was $2.6 million. We funded our total distributions paid, which includes net cash distributions and dividends reinvested by stockholders, with cash flow provided by operating activities.

From inception through September 30, 2016, we paid cumulative distributions of $2.1 million and our cumulative net loss during the same period was $6.9 million.

To the extent that we pay distributions from sources other than our cash flow from operating activities, we will have less funds available for the acquisition of real estate investments, the overall return to our stockholders may be reduced and subsequent investors will experience dilution.

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Stock Dividends Declared for the Year Ended December 31, 2015 and the Nine Months Ended September 30, 2016

Our board of directors declared the following stock dividends on our shares of common stock for the year ended December 31, 2015 and the nine months ended September 30, 2016:

Declaration Date	Record Date (1)	Issue Date	Amount Declared per Share Outstanding	Total Shares Issued
March 24, 2015	March 25, 2015	March 27, 2015	0.01 shares	44,538
April 7, 2015	June 24, 2015	June 29, 2015	0.01 shares	56,219
August 6, 2015	September 22, 2015	September 29, 2015	0.01 shares	65,710
November 10, 2015	December 16, 2015	December 22, 2015	0.01 shares	85,591
December 10, 2015	December 16, 2015	December 21, 2015	0.06 shares	513,546
March 21, 2016	March 31, 2016	April 1, 2016	0.005 shares	57,172
March 21, 2016	April 30, 2016	May 3, 2016	0.001667 shares	19,781
March 21, 2016	May 31, 2016	June 1, 2016	0.001667 shares	20,257
May 10, 2016	June 30, 2016	July 1, 2016	0.001667 shares	21,900
May 10, 2016	July 31, 2016	August 2, 2016	0.001667 shares	23,719
July 6, 2016	August 31, 2016	September 1, 2016	0.001667 shares	26,037
August 11, 2016	September 30, 2016	October 4, 2016	0.001667 shares	28,420
September 27, 2016	September 27, 2016	October 6, 2016	0.015 shares	254,287

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⁽¹⁾We currently expect that during our offering stage, our board of directors will declare stock dividends on a set monthly basis based on a monthly record date as of the end of the month. Prior to the second quarter of 2016, our board of directors was declaring stock dividends on a quarterly basis based on a record date as of the end of the fiscal quarter. On September 27, 2016 our board of directors declared a one-time stock dividend. Stock dividends are issued in the same class of shares as the shares for which such stockholder received the stock dividend and are non-taxable to stockholders at the time of issuance.

Cash Distributions Declared for the Period from October 2016 through March 2017

On August 11, 2016, our board of directors declared cash distributions on the outstanding shares of all classes of common stock based on daily record dates for the period from October 1, 2016 through October 31, 2016, which we paid on November 1, 2016. On October 11, 2016, our board of directors declared cash distributions on the outstanding shares of all classes of common stock based on daily record dates for the period from November 1, 2016 through November 30, 2016, which we paid on December 1, 2016. On November 10, 2016, our board of directors declared cash distributions on the outstanding shares of all classes of common stock based on daily record dates for the period from December 1, 2016 through December 31, 2016, which we paid on January 4, 2017, and cash distributions on the outstanding shares of all classes of our common stock based on daily record dates for the period from January 1, 2017 through January 31, 2017, which we paid on February 1, 2017. On January 26, 2017, our board of directors declared cash distributions on the outstanding shares of all classes of our common stock based on daily record dates for the period from February 1, 2017 through February 28, 2017, which we expect to pay in March 2017, and cash distributions on the outstanding shares of all classes of our common stock based on daily record dates for the period from March 1, 2017 through March 31, 2017, which we expect to pay in April 2017.

Distributions for the period from October 1, 2016 through December 31, 2016 were calculated based on stockholders of record each day during these periods at a rate of (i) $0.00052404 per share per day less (ii) the applicable daily stockholder servicing fees accrued for and allocable to any class of common stock, divided by the number of shares of common stock of such class outstanding as of the close of business on each respective record date. Distributions for the period from January 1, 2017 through March 31, 2017 were or will be calculated based on stockholders of record each day during these periods at a rate of (i) $0.00052548 per share per day less (ii) the applicable daily stockholder servicing fees accrued for and allocable to any class of common stock, divided by the number of shares of common stock of such class outstanding as of the close of business on each respective record date.

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Stock Dividends Declared for the Period from October 2016 through March 2017

Our board of directors has declared the following monthly stock dividends on our shares of common stock for the period from October 2016 through March 2017:

Declaration Date	Record Date	Issue or Expected Issue Date	Amount Declared per Share Outstanding	Total Shares Issued
August 11, 2016	October 31, 2016	November 2, 2016	0.001667 shares	30,341
October 11, 2016	November 30, 2016	December 2, 2016	0.001667 shares	31,809
November 10, 2016	December 31, 2016	January 5, 2017	0.001667 shares	33,542
November 10, 2016 (1)	January 31, 2017	February 2, 2017 (1)	0.001667 shares	(1)
January 26, 2017 (1)	February 28, 2017	March 2, 2017 (1)	0.001667 shares	(1)
January 26, 2017 (1)	March 31, 2017	April 4, 2017 (1)	0.001667 shares	(1)

_____________________

⁽¹⁾ As of February 1, 2017, these stock dividends have been declared but not issued.

Volume Discounts for Purchases of Our Class T Shares

We are offering volume discounts to investors who purchase $1,000,001 or more of either class of shares of our common stock in the primary offering. The net proceeds to us from a sale of shares eligible for a volume discount will be the same, but the selling commissions and, in some cases, the dealer manager fees we pay will be reduced. Because our dealer manager will reallow all selling commissions and may reallow a portion of the dealer manager fee as a marketing fee, the amount of commissions participating broker‑dealers receive for such sales of shares will be reduced as may the amount of the marketing fee. For information with respect to volume sales of our Class A shares, see the prospectus.

The following table shows the discounted price per share and the reduced selling commissions and dealer manager fee payable for volume sales of our Class T shares based on the initial primary offering price of $9.59 per share.

Volume Discount Table for Class T Shares
Dollar Volume of Class T Shares Purchased			Sales Commissions (Based on $9.59 Price Per Share)	Dealer Manager Fee (Based on $9.59 Price Per Share)	Price Per Share to Investor
$0	to	$1,000,000	3.0%	2.0%	$9.590
$1,000,001	to	$2,000,000	2.0%	2.0%	$9.494
$2,000,001	to	$3,000,000	1.5%	2.0%	$9.446
$3,000,001	to	$4,000,000	1.0%	1.5%	$9.350
$4,000,001	to	$5,000,000	0.5%	1.5%	$9.302
$5,000,001	to	$10,000,000	0.0%	1.0%	$9.111*
$10,000,001	and above		0.0%	1.0%**	$9.015**

*With respect to Class T shares sold at $9.111 per share pursuant to the table above, our advisor will reimburse us $0.096 per share for estimated organization and offering expenses with respect to the sale of such shares, such that the only organization and offering expenses borne by us with respect to the sale of such shares will be the 1.0% dealer manager fee set forth above and the stockholder servicing fee.

**With respect to Class T Shares sold at $9.015 per share pursuant to the table above, our advisor will (i) reimburse us $0.096 per share for estimated organization and offering expenses with respect to the sale of such shares, and (ii) pay us a 1% dealer manager fee based on a $9.59 undiscounted price per share, or $0.096 per share, which we will remit to our dealer manager. As a result of such reimbursements and payments, the only organization and offering expenses borne by us with respect to the sale of such shares will be the stockholder servicing fee.

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 $9.59. For example, a purchase of 250,000 Class T shares in a single transaction would result in a purchase price of $2,361,500 ($9.446 per share), selling commissions of $35,962.50 and dealer manager fees of $47,950.

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To qualify for a volume discount as a result of multiple purchases of our Class A or Class T shares, a stockholder must mark the “Additional Investment” space on the subscription agreement. We are not responsible for failing to combine purchases if a stockholder fails to mark the “Additional Investment” space. Once a stockholder qualifies for a volume discount, such stockholder will be eligible to receive the benefit of such discount for subsequent purchases of shares in the primary offering. 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.

For purposes of qualifying for a volume discount as the result of multiple purchases of shares, only an individual or entity with the same social security number or taxpayer identification number, as applicable may combine their purchases as a “single purchaser”; provided that, purchases by an individual investor and his or her spouse living in the same household may also be combined as a “single purchaser” for purposes of determining the applicable volume discount.

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 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.

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 an investor 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 for combined purchases by an individual investor and his or her spouse living in the same household.

IRA Account Investments through Equity Trust Company

If you would like to establish a new IRA account with Equity Trust Company for an investment in our Class T shares, we will pay the fees related to the establishment of the investor account with Equity Trust Company. Investors will be responsible for the annual IRA maintenance fees charged by Equity Trust Company, including the first year annual maintenance fees.

Previously, only purchasers of our Class A shares were eligible to establish a new IRA account through Equity Trust Company under the terms described above. NuView IRA and Community National Bank previously had agreed to act as IRA custodians for purchasers of both classes of our common stock as described in the prospectus; however, we do not require that you use either NuView IRA, Equity Trust Company or Community National Bank. Further information about custodial services is available through your broker or our dealer manager at www.kbs-cmg.com.

Allocation of Investment Opportunities

Our acquisition stage will overlap to some extent with KBS Strategic Opportunity REIT, a public KBS-sponsored program with a primary investment focus similar to ours. KBS Strategic Opportunity REIT raised approximately $250 million in proceeds in March 2016 from a foreign bond offering in the Israeli debt markets and is investing the proceeds from this debt offering while we are raising and investing proceeds from our offering stage.  In considering whether to direct an investment opportunity to us or KBS Strategic Opportunity REIT, our advisor will consider our cash flow requirements, operating needs, diversification goals and overall portfolio mix, along with the amount of funds we have available for investment and current market conditions.  Our advisor does not believe, however, it is likely we will be competing directly with KBS Strategic Opportunity REIT for investment opportunities because our advisor believes the initial investment opportunities appropriate for our portfolio will generally be in a price range of $60 million or less, while KBS Strategic Opportunity REIT will generally be considering investments at a purchase price in excess of $60 million based on its current portfolio composition and available cash for investment. 

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Investment Objectives and Criteria

In addition to the types of loans described in the prospectus that we may originate or acquire we may also originate or acquire loans on equity interests.  Loans on equity interests are typically made to the general partner or managing member of a newly-formed joint venture acquiring real estate and are often secured by an assignment of the borrower’s equity interest in the particular joint venture and/or a guaranty of payment.  These loans are generally for terms of six months to five years.  The terms of equity interest loans vary; they can have fixed repayment intervals or be repaid based on cash flow from the property the particular joint venture owns, or both. These loans would generally permit us to become a direct or indirect member of the particular joint venture if a default occurs.  We may also originate an equity interest loan where a direct equity investment through a joint venture is not feasible or economical.

STAM Key Personnel

The key personnel at STAM who provide management services to our advisor have changed. Bruno Cosse is no longer employed by STAM as Chief Financial Officer. Arnaud Beyens has joined STAM as Chief Financial Officer. Mr. Beyens experience is as follows.

Mr. Beyens has more than 20 years’ experience in real estate.  Prior to joining STAM, Mr. Beyens was interim head of finance and operations at Cofinance Inc., a real estate development company,  where he managed a real estate portfolio of $350 million. From May 2013 through March 2015, he was a Deputy Managing Director for Financière Rive Gauche, also a real estate development firm.   From 2005 through 2012, Mr. Beyens was with ING Real Estate Investment Management as Chief Financial Officer for pan-European funds and Chief Operating Officer for France.  Mr. Beyens holds a diploma in economic science from Centre Universitaire et Catholique de Lille and a master degree of finance from University Paris Panthéon Assas.

Real Estate and Real Estate-Related Investments Summary

Real Estate Investments

As of September 30, 2016, we owned two hotel properties and two office buildings. We acquired each of these properties from third parties unaffiliated with us or our advisor. The following table provides summary information regarding our hotel properties as of September 30, 2016 (in thousands):

Property	Location	Number of Rooms	Date Acquired	Purchase Price (1)		Average Revenue per Available Room		Average Daily Rate		Percentage Occupied for the Nine Months Ended September 30, 2016		Ownership %
Springmaid Beach Resort (2)	Myrtle Beach, SC	452	12/30/2014	$	41,638	$	99.33	$	121.30	81.9	%	90	%
Q&C Hotel	New Orleans, LA	196	12/17/2015	52,469		89.88		161.50		55.7	%	90	%
				$	94,107

_____________________

⁽¹⁾ Purchase price includes acquisition fees and closing costs.

⁽²⁾ In November 2015, Springmaid Beach Resort took 238 rooms of the 452 rooms available offline to complete a renovation of a building. The 238 rooms were excluded from the percentage occupied and average revenue per available room for the period they were offline. In January 2016, the 238 rooms were put back into service and we took the remaining 214 rooms offline to complete renovations. In May 2016, these 214 rooms were put back into service. Rooms not in service were excluded from the percentage occupied and average revenue per available room for the period they were offline.

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The following table provides summary information regarding our office properties as of September 30, 2016:

Property Location of Property	Date Acquired	Property Type	Rentable Square Feet	Purchase Price (1)		Annualized Base Rent (2)  (in thousands)		Average Annualized Base Rent per Sq. Ft. (3)		Average Remaining Lease Term in Years	Occupancy	Ownership %
2200 Paseo Verde Henderson, NV	12/23/2015	Office	59,818	$	13,661	$	1,198	$	29.01	2.7	69.0%	100.0%
Lincoln Court      Campbell, CA	05/20/2016	Office	123,529	52,803		5,227		43.32		2.4	97.7%	100.0%
				$	66,464

_____________________

⁽¹⁾ Purchase price includes acquisition fees and closing costs.

⁽²⁾ Annualized base rent represents annualized contractual base rental income as of September 30, 2016, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

⁽³⁾Average annualized base rent per square foot is calculated as the annualized base rent divided by the leased square feet.

Other than Springmaid Beach Resort, we do not intend to make significant renovations or improvements to any individual real estate property listed above in the near term. We have projected an investment of approximately $19.4 million for renovations and improvements to the Springmaid Beach Resort.  On September 7, 2015, we commenced renovation of the hotel property which resulted in the elimination of 39 rooms. As of September 30, 2016, we had invested approximately $17.9 million for renovations and improvements to Springmaid Beach Resort. We expect to fund remaining renovations and improvements with proceeds from debt financing and proceeds from this offering.

We believe that our real estate investments are suitable for their respective intended purposes and are adequately insured.

TRS Leases

Our hotels are leased by the respective joint venture owners of each hotel (the “Hotel Owner Joint Venture”) to a second joint venture (the “Hotel Operations Joint Venture”) we have formed between each hotel’s respective joint venture partner and an indirect wholly owned subsidiary we have formed with respect to each hotel that we have elected to treat as a TRS.

Each lease agreement provides for a five-year term with the right for the respective Hotel Operations Joint Venture to extend the term of the lease for up to three additional terms of three years each; provided, however, that the Hotel Owner Joint Venture has the right to terminate the lease upon the sale of the hotel or any members of the Hotel Owner Joint Venture buying out any other member, as well as upon the occurrence of an event of default under the respective lease agreement.

Pursuant to the lease agreements, the Hotel Operations Joint Venture will pay to the Hotel Owner Joint Venture, on a monthly basis, an annual basic rent. The annual basic rent will be adjusted as set forth in the lease agreements beginning in 2016 as well as prorated for any partial years. For the Springmaid Beach Resort, the annual basic rent was $3.3 million for 2016. For the Q&C Hotel, the annual basic rent was $3.2 million for 2016.

In addition to annual basic rent, each respective Hotel Operations Joint Venture will pay a monthly percentage rent to the respective Hotel Owner Joint Venture equal to (i) an agreed percentage of year-to-date gross revenue that exceeds certain annual threshold amounts, less (ii) all prior percentage rent payments. Each respective Hotel Operations Joint Venture is also required to establish and fund a repairs and replacement reserve for the periodic refurbishment, replacements and non-routine repairs of all tangible personal property owned by the respective Hotel Owner Joint Venture. For each lease, the reserve is a percentage of gross receipts as set forth in the lease agreement. For Springmaid Beach Resort, this percentage ranges from 1% to 4%. For Q&C Hotel, this percentage ranges from 2% to 5%. In addition, the lease agreements require each Hotel Operations Joint Venture to pay all income taxes, rent, and all costs and expenses and utility and other charges incurred in the operations of the respective hotel.

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Management Agreements

For us to qualify as a REIT, we cannot directly or indirectly operate any of our hotels. Third parties must operate our hotels. As described above, our hotels are leased to TRS lessees, which in turn have engaged property managers to manage our hotels pursuant to a hotel management agreement.

Springmaid Beach Resort

The Springmaid Hotel Operations Joint Venture has entered a management agreement with Doubletree Management LLC, an independent third-party hotel operator (“Doubletree”) pursuant to which Doubletree manages and operates the Springmaid Beach Resort. The hotel was branded a DoubleTree by Hilton in September 2016 (the “Brand Commencement Date”).

The management agreement requires us to maintain a minimum working capital reserve for the Springmaid Beach Resort. In addition, the Springmaid Hotel Owner Joint Venture is responsible for providing funds to meet the cash needs for the hotel operations if at any time the funds available from hotel operations are insufficient to meet the financial requirements of the hotel. The management agreement expires on December 31, 2036. Upon mutual agreement, the parties may extend the term of the agreement for two successive periods of five years each. If an event of default occurs and continues beyond any applicable notice and cure periods set forth in the management agreement, the non-defaulting party generally has, among other remedies, the option of terminating the management agreement upon written notice to the defaulting party with no termination fee payable to Doubletree. In addition, we have the right to terminate the management agreement without the payment of a termination fee if Doubletree fails to achieve certain criteria relating to the performance of the hotel for any two consecutive years following the Brand Commencement Date. Under certain circumstances following a casualty or condemnation event, either party may terminate the management agreement provided Doubletree receives a termination fee an amount equal to two years of the base fee.  We are permitted to terminate the management agreement upon a sale, lease or other transfer of the Springmaid Beach Resort any time after January 1, 2017 so long as the buyer is approved for, and enters into a DoubleTree by Hilton franchise agreement for the balance of the agreement’s term. Finally, we are restricted in our ability to assign the management agreement upon a sale, lease or other transfer the Springmaid Beach Resort unless the transferee is approved by Doubletree to assume the management agreement.

Pursuant to the management agreement Doubletree receives the following fees:

• a base fee, which is a percentage of total operating revenue that starts at 2.5% and increases to 2.75% in the second year following the Brand Commencement Date and further increases in the third year following the Brand Commencement Date and thereafter to 3.0%;

• a campground area management fee, which is 2% of any campground revenue;

• an incentive fee, which is 15% of operating cash flow (after deduction for capital renewals reserve and the Springmaid Hotel Owner Joint Venture’s priority, which is 12% of the Springmaid Hotel Owner Joint Venture’s total investment);

• an additional services fee in the amount reasonably determined by Doubletree from time to time; and

• commencing on the Brand Commencement Date, a brand services fee in the amount of 4% of total rooms revenue, and an other brand services fee in an amount determined by Doubletree from time to time.

Q&C Hotel

A wholly owned subsidiary of the Q&C Hotel Operations Joint Venture (“Q&C Hotel Operations”) has entered a management agreement with Encore Hospitality, LLC (“Encore Hospitality”), an affiliate of the Q&C JV Partner, pursuant to which Encore Hospitality will manage and operate the Q&C Hotel. The management agreement expires on December 17, 2035. Subject to certain conditions, Encore Hospitality may extend the term of the agreement for a period of five years. Q&C Hotel Operations may terminate the management agreement upon (1) the occurrence of an event of default that continues beyond any applicable notice and cure periods, (2) a sale of the Q&C Hotel, (3) a change of control of Encore Hospitality without Q&C Hotel Operations’ approval, (4) a failure of Encore Hospitality to meet certain performance thresholds, (5) a sale of the Q&C Joint Venture Partner’s interest in the joint venture to us, and (6) if Q&C Hotel Operations is required to do so pursuant to the terms of the loan documents or the franchise agreement. Pursuant to the management agreement Encore Hospitality will receive a base fee, which is 4.0% of gross revenue (as defined in the management agreement).

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Q&C Hotel Operations has also entered a franchise agreement with Marriott International (“Marriott”) pursuant to which Marriott has granted Q&C Hotel Operations a limited, non-exclusive license to establish and operate the Q&C Hotel using certain of Marriott’s proprietary marks and systems and the hotel was branded as a Marriott Autograph Collection hotel on May 25, 2016. The franchise agreement will expire on May 25, 2041. Marriott may terminate the franchise agreement immediately upon certain defaults and after an opportunity to cure with respect to certain other defaults. Pursuant to the franchise agreement, Q&C Hotel Operations pays Marriott a monthly franchise fee equal to a percent of gross room sales on a sliding scale that is initially 2% and increases to 5% on May 25, 2019 and a monthly marketing fund contribution fee equal to 1.5% of the Q&C Hotel’s gross room sales. In addition, the franchise agreement requires the maintenance of a reserve account to fund all renovations at the hotel based on a percentage of gross revenues which starts at 2% of gross revenues and increases to 5% of gross revenues on May 25, 2019. Q&C Hotel Operations will also be responsible for the payment of certain other fees, charges and costs as set forth in the agreement.

In addition, in connection with the execution of the franchise agreement, KBS SOR US Properties II LLC (“SOR US Properties II”), our indirect wholly owned subsidiary, is providing an unconditional guarantee that all Q&C Hotel Operations’ obligations under the franchise agreement will be punctually paid and performed. Finally, certain transfers of the Q&C Hotel or an ownership interest therein are subject to a notice and consent requirement, and the franchise agreement further provides Marriott with a right of first refusal with respect to a sale of the hotel to a competitor of Marriott.

Real Estate Investment Activity Subsequent to September 30, 2016

Acquisition of the Lofts at NoHo Commons

On November 16, 2016, we, through a joint venture (the “Lofts at NoHo Commons Joint Venture”) between our indirect wholly owned subsidiary and Noho Commons Pacific Investors LLC (the “Lofts at NoHo Commons JV Partner”), acquired a 292-unit apartment building in North Hollywood, California (the “Lofts at NoHo Commons”). Neither the Lofts at NoHo Commons JV Partner nor the seller is affiliated with us or our advisor.

We own a 90% equity interest in the Lofts at NoHo Commons Joint Venture. The Lofts at NoHo Commons JV Partner is the managing member of the joint venture; however, its authority is limited, as we must give approval of major decisions involving the business of the joint venture or the Lofts at NoHo Commons and its operations, in the manner set forth in the joint venture agreement. Income, losses and distributions are generally allocated based on the members’ respective equity interests, subject to adjustments based on certain performance thresholds set forth in the joint venture agreement. Additionally, in certain circumstances described in the joint venture agreement, we and the Lofts at NoHo Commons JV Partner may be required to make additional capital contributions to the Lofts at NoHo Commons Joint Venture, in proportion to the members’ respective equity interests. An indirect wholly owned subsidiary of the Lofts at NoHo Commons JV Partner will act as property manager for the Lofts at NoHo Commons.

The purchase price of the Lofts at NoHo Commons was $102.5 million plus closing costs. The Lofts at NoHo Commons Joint Venture funded the acquisition of the Lofts at NoHo Commons with capital contributions from its members and with proceeds from the Lofts at NoHo Commons Mortgage Loan (described below). We funded our contribution to the joint venture with proceeds from this offering.

The Lofts at NoHo Commons is located in North Hollywood, California and consists of 292 apartment units, encompassing 224,755 rentable square feet.  The Lofts at NoHo Commons was constructed in 2007, and was 93% occupied at acquisition.  The aggregate annual effective base rent at acquisition for the tenants of the Lofts at NoHo Commons was approximately $6.6 million.

Acquisition of 210 West 31st Street

On December 1, 2016, we, through a joint venture (the “210 West 31st Street Joint Venture”) between our indirect wholly owned subsidiary and Onyx 31 Street LLC (the “210 West 31st Street JV Partner”), acquired a ground lease in 210 West 31st Street, New York, New York (“210 West 31st Street”).  The ground lease for 210 West 31st Street expires on January 31, 2114.  Neither the 210 West 31st Street JV Partner nor the seller is affiliated with us or our advisor.

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We own an 80% equity interest in the 210 West 31st Street Joint Venture. The 210 West 31st Street JV Partner is the managing member of the joint venture; however, its authority is limited, as we must give approval of major decisions involving the business of the joint venture and 210 West 31st Street and its operations, in the manner set forth in the joint venture agreement. Income, losses and distributions are generally allocated based on the members’ respective equity interests, subject to adjustments based on certain performance thresholds set forth in the joint venture agreement. Additionally, in certain circumstances described in the joint venture agreement, we and the 210 West 31st Street JV Partner may be required to make additional capital contributions to the 210 West 31st Street Joint Venture, in proportion to the members’ respective equity interests.

The purchase price of 210 West 31st Street was $48.0 million plus closing costs. The 210 West 31st Street Joint Venture funded the acquisition of 210 West 31st Street with capital contributions from its members and with proceeds from the 210 West 31st Street Mortgage Loan (described below). We funded our contribution to the joint venture with proceeds from this offering.

210 West 31st Street is located in New York, New York and consists of an 8,637 square foot development site located directly across the street from Madison Square Garden and Penn Station. 210 West 31st Street is currently a 23,110 square foot, 2-story building with basement. We intend to make significant renovations or improvements to 210 West 31st Street, including demolishing the existing structure and redeveloping the property into a 2-story retail building with a lower level and a rooftop deck and currently estimate these renovation and improvements to cost approximately $14.2 million. We expect to utilize debt financing and proceeds from this offering for these renovations.

Real Estate-Related Investment

As of September 30, 2016, we, through an indirect wholly owned subsidiary, had originated a real estate loan receivable as follows (in thousands):

Date Acquired / Originated

Property Type

Loan Type

Payment Type

Outstanding Principal Balance as of September 30, 2016(1)

Purchase/ Origination Price (2)

Book Value as of September 30, 2016 (3)

Contractual Interest Rate (4)

Annualized Effective Interest Rate (4)

Loan-to- Value (5)

Maturity Date

Loan Name Location of Related Property or Collateral

655 Summer Street First Mortgage Loan

Boston, Massachusetts

09/04/2014

Office

Mortgage

Interest Only

$

3,500

$

3,500

$

3,424

9.25

%

11.68

%

53%

10/01/2017

____________________

⁽¹⁾ Outstanding principal balance as of September 30, 2016 represents original principal balance outstanding under the loan, increased for any subsequent fundings and reduced for any principal paydowns, and does not include closing costs and direct acquisition and origination fees.

⁽²⁾ Purchase/origination price represents the amount funded by us to acquire or originate the loan, increased for any subsequent fundings, decreased for any principal repayments, and does not include closing costs and direct acquisition and origination fees.

⁽³⁾ Book value represents outstanding principal balance, adjusted for unamortized origination fees and direct acquisition and origination expenses.

⁽⁴⁾ Contractual interest rate is the stated interest rate on the face of the loan. Annualized effective interest rate is calculated as the actual interest income recognized in 2016, using the interest method, divided by the average amortized cost basis of the investment. The annualized effective interest rate and contractual interest rate presented are as of September 30, 2016.

⁽⁵⁾ The loan-to-value ratio is based upon the amount funded at origination (excluding closing costs and certain other fees) and the “as-is” appraised value of the property the loan.  Appraisals are based on numerous estimates, judgments and assumptions that significantly affect the appraised value of the underlying property.  Differing assumptions may materially change the appraised value of the property.  In addition, the value of the property will change over time due to various factors.

Investment in Unconsolidated Entity

On June 28, 2016 we originated a participating loan facility in an amount up to €2.6 million ($2.9 million at closing). We funded approximately €2.1 million ($2.3 million at closing). The proceeds were used by the borrower to fund a 5% general partner interest in a joint venture acquiring a portfolio of light industrial properties located throughout France. The total acquisition cost of the portfolio was approximately €95.5 million ($105.6 million at closing). Under the terms of the participating loan facility, we participate in the expected residual profits of the portfolio and the terms are structured in a manner such that the risks and rewards of the arrangement are similar to those associated with an investment in a real estate joint venture. Accordingly, the participating loan facility is accounted for under the equity method of accounting. In addition to the amount funded at closing, we also capitalized an additional $0.2 million of acquisition costs and fees.

As of September 30, 2016, the book value of this investment was $2.6 million. During the three and nine months ended September 30, 2016, the Company recognized $0.1 million of income with respect to this investment.

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Outstanding Debt Obligations as of September 30, 2016

As of September 30, 2016, we had $107.3 million of variable rate debt outstanding. Our mortgage debt consisted of four variable rate notes payable that mature between 2017 and 2020. Also, as of September 30, 2016, we had entered into two interest rate caps for a total notional amount of $54.3 million that mature in 2018. The interest rate caps have a one-month LIBOR strike rate of 3.0%. As of September 30, 2016, our borrowings and other liabilities were approximately 47% of the cost (before depreciation or other noncash reserves) and book value (before depreciation) of our tangible assets.

The following table details our outstanding debt as of September 30, 2016 (in thousands):

	Outstanding Principal Balance		Contractual Interest Rate (1)	Effective  Interest Rate (1)	Payment Type	Maturity Date (2)	% of Total Indebtedness
Springmaid Beach Resort Mortgage Loan	$	38,000	One-month LIBOR +3.00%	3.52%	Interest Only	12/30/2017	36	%
Q&C Hotel Mortgage Loan (3)	28,330		One-month LIBOR +3.25%	3.77%	(3)	12/17/2018	26	%
2200 Paseo Verde Mortgage Loan	7,430		One-month LIBOR +2.25%	2.77%	Interest Only	01/01/2017	7	%
Lincoln Court Mortgage Loan	33,500		One-month LIBOR +1.75%	2.28%	Interest Only	06/01/2020	31	%
	$	107,260

____________________

⁽¹⁾ Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2016. Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2016 (consisting of the contractual interest rate and the effect of interest rate swaps, if applicable), using interest rate indices as of September 30, 2016, where applicable.

⁽²⁾ Represents the maturity date as of September 30, 2016; subject to certain conditions, the maturity date of the loan may be extended beyond the date shown.

⁽³⁾ As of January 26, 2017, $28.3 million of the loan was funded and $1.7 million remained available under the loan for future disbursements to be used for renovation costs, subject to certain terms and conditions contained in the loan documents. Initially, monthly payments are interest-only. Beginning on February 1, 2018, monthly payments also include principal amortization payments of $55,000 per month, unless certain conditions described in the loan documents are satisfied. As of December 31, 2016 , the borrower under the Q&C Hotel Mortgage Loan was out of debt service coverage compliance. Such non-compliance does not constitute an event of default under the applicable loan agreement. As a result of such non-compliance, under the loan, the borrower may be required to repay a portion of outstanding principal in an amount equal to the debt service coverage shortfall or deliver a letter of credit in the amount equal to the debt service coverage shortfall.

With respect to the Springmaid Beach Resort Mortgage Loan, SOR US Properties II is providing a: (a) guaranty of the sum of $5.5 million plus certain other sums described in the loan documents, which guaranteed amount shall decrease pursuant to the terms of the equity contribution guaranty executed by SOR US Properties II in favor of the lender; (b) guaranty of Springmaid Hotel Owner Joint Venture’s obligations to complete the renovations to the Springmaid Beach Resort, as described in the completion guaranty executed by SOR US Properties II in favor of the lender; (c) limited guaranty of the Springmaid Beach Resort Mortgage Loan with respect to certain potential fees, costs, expenses, losses or damages incurred or suffered by the lender as a result of certain intentional actions committed by us, Springmaid Hotel Owner Joint Venture, SOR US Properties II, and/or any affiliates of us, as applicable, in violation of the loan documents as well as Springmaid Hotel Owner Joint Venture’s obligation to refund certain key money amounts to the independent third-party hotel operator under the management agreement; and (d) guaranty of the principal balance and any interest or other sums outstanding under the Springmaid Beach Resort Mortgage Loan in the event of certain bankruptcy or insolvency proceedings involving Springmaid Hotel Owner Joint Venture or Springmaid Hotel Operations Joint Venture.

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With respect to the Q&C Hotel Mortgage Loan, SOR US Properties II is providing a: (a) guaranty of the lesser of the currently outstanding loan amount or 25% of the outstanding principal balance, which principal balance may decrease pursuant to the terms of the partial repayment and limited guaranty executed by SOR US Properties II in favor of the lender; (b) guaranty of the Borrower’s obligations to complete the renovations to the Q&C Hotel required by the franchise agreement, as described in the completion guaranty executed by SOR US Properties II in favor of the Q&C Hotel lender; (c) limited guaranty entered with Marriott International with respect to certain potential fees, costs, expenses, losses or damages incurred or suffered by the Q&C Hotel lender in relation to the Q&C Hotel Mortgage Loan as a result of certain intentional actions committed by us, the direct owner of the Q&C Hotel, SOR US Properties II, and/or any of their affiliates in violation of the loan documents; (d) a limited guaranty of the joint venture through which we lease the Q&C Hotel obligation to refund certain key money amounts to the third party hotel operator under the management agreement; and (e) guaranty of the principal balance and any interest or other sums outstanding under the Q&C Hotel Mortgage Loan in the event of certain bankruptcy or insolvency proceedings involving the borrowers.

With respect to the 2200 Paseo Verde Mortgage Loan, SOR US Properties II is providing a guaranty of all principal and interest outstanding upon the commission of certain intentional actions by the buyer, SOR US Properties II or any of their affiliates in violation of the loan documents (the “Triggering Events”). SOR US Properties II is also providing a limited guaranty with respect to certain potential losses or damages suffered by the lender as a result of the occurrence of a Triggering Event.

With respect to the Lincoln Court Mortgage Loan, SOR US Properties II is providing a guaranty of an amount not greater than 25% of the outstanding balance of the Lincoln Court Mortgage Loan with respect to certain potential fees, costs, expenses, losses or damages incurred or suffered by the lender as a result of certain intentional actions committed by the borrower in violation of the loan documents. SOR US Properties II is also providing a guaranty of the principal balance and any interest or other sums outstanding under the Lincoln Court Mortgage Loan in the event of certain bankruptcy or insolvency proceedings involving the borrower, certain direct or indirect transfers or financings of Lincoln Court in violation of the loan documents and the violation of certain other terms of the loan documents by the borrower.

Debt Financings Subsequent to September 30, 2016

Lofts at NoHo Commons Mortgage Loan

On November 16, 2016, in connection with the acquisition of the Lofts at NoHo Commons, the Lofts at NoHo Commons Joint Venture entered into a multifamily loan and security agreement with Wells Fargo Bank, National Association, an unaffiliated lender, for borrowings of $72.1 million, secured by the Lofts at NoHo Commons (the “Lofts at NoHo Commons Mortgage Loan”).

The Lofts at NoHo Commons Mortgage Loan matures on December 1, 2019, with two one-year extension options, subject to certain terms and conditions contained in the loan documents. The Lofts at NoHo Commons Mortgage Loan bears interest at a floating rate of 266 basis points over one-month LIBOR. Monthly payments are interest only with the entire unpaid principal balance and all outstanding interest and fees due at maturity. The Lofts at NoHo Commons Joint Venture has the right to prepay the loan in whole subject to, in certain circumstances, a prepayment fee, and other terms and conditions as described in the loan documents.

210 West 31st Street Mortgage Loan

On December 1, 2016, in connection with the acquisition of 210 West 31st Street, the 210 West 31st Street Joint Venture entered into a building loan agreement and an acquisition and project loan agreement with PacificCal PC Core Lender, LLC, an unaffiliated lender, for aggregate borrowings of $47.1 million, each secured by 210 West 31st Street (together, the “210 West 31st Street Mortgage Loan”).  At closing, $32.6 million of the loan was funded and the remaining $14.5 million was available for future disbursements to be used for capital improvement costs, tenant improvement costs, leasing commissions and operating/interest shortfall, subject to certain terms and conditions contained in the loan documents.

The 210 West 31st Street Mortgage Loan matures on December 1, 2019, with two one-year extension options, subject to certain terms and conditions contained in the loan documents.  The 210 West 31st Street Mortgage Loan bears interest at a floating rate of 550 basis points over one-month LIBOR.  The 210 West 31st Street Joint Venture entered into an interest rate cap that effectively limits one-month LIBOR on the full loan amount at 3.00% effective December 1, 2016 through December 1, 2019.  Monthly payments are interest only with the entire unpaid principal balance and all outstanding interest and fees due at maturity.  The 210 West 31st Street Joint Venture has the right to prepay the loan in whole subject to, in certain circumstances, a prepayment fee, and other terms and conditions as described in the loan documents.

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Selected Financial Data

The following selected financial data as of September 30, 2016, December 31, 2015, 2014 and 2013 and for the nine months ended September 30, 2016 and 2015, for the years ended December 31, 2015, 2014 and the period from July 3, 2013 to December 31, 2013 should be read in conjunction with our consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2016 and our Annual Report on Form 10-K for the year ended December 31, 2015, both incorporated by reference into the prospectus (in thousands, except share and per share amounts):

				As of September 30,			As of December 31,
				2016			2015			2014			2013
Balance sheet data
Total real estate and real estate-related investments, net				$	174,723		$	113,345		$	43,374		$	—
Total assets				252,963			139,729			57,873			724
Total notes payable, net				106,238			60,836			25,341			—
Total liabilities				118,265			67,895			27,215			642
Redeemable common stock				1,716			1,092			—			—
Total equity				132,982			70,742			30,658			82
	For the Nine Months Ended September 30,						For the Years Ended December 31,						For the Period from July 3, 2013 to December 31, 2013
Operating data	2016			2015			2015			2014
Total revenues	$	24,150		$	14,410		$	17,025		$	184		$	—
Class A Common Stock:
Net (loss) income attributable to common stockholders	(2,230		)	1,731			(2,012		)	(2,380		)	(66		)
Net (loss) income per common share - basic and diluted	(0.18		)	0.28			(0.29		)	(0.76		)	(0.05		)
Class T Common Stock:
Net (loss) income attributable to common stockholders	(72		)	28			(44		)	(76		)	(5		)
Net (loss) income per common share - basic and diluted	(0.08		)	0.28			(0.44		)	(0.76		)	(0.05		)
Other data
Cash flows provided by (used in) operating activities	$	2,629		$	2,596		$	256		$	(1,661	)	$	—
Cash flows used in investing activities	(71,356		)	(2,665		)	(69,343		)	(43,635		)	—
Cash flows provided by financing activities	110,461			24,529			80,598			57,840			513
Distributions declared	2,176			—			1,027			—			—
Distributions declared per common share - Class A	$	0.154		$	—		$	0.120		$	—		$	—
Distributions declared per common share - Class T	$	0.098		$	—		$	—		$	—		$	—
Stock dividends declared per common share	0.030			0.030			0.100			—			—
Weighted-average number of common shares outstanding, basic and diluted - Class A	12,100,353			6,287,693			6,917,994			3,151,289			1,261,883
Weighted-average number of common shares outstanding, basic and diluted - Class T	953,499			100,974			100,974			100,974			100,974

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Fees Earned by and Expenses Reimbursable to Our Advisor and the Dealer Manager

Summarized below are the fees earned by and expenses reimbursable to our advisor and our dealer manager for the the nine months ended September 30, 2016 and the year ended December 31, 2015, the amounts paid, and any related amounts payable as of September 30, 2016 and December 31, 2015 (in thousands):

	Incurred				Paid				Payable as of
	Nine Months Ended September 30, 2016		Year Ended December 31, 2015		Nine Months Ended September 30, 2016		Year Ended December 31, 2015		September 30, 2016		December 31, 2015
Form of Compensation
Organization and Offering Stage
Selling commissions	$	2,808	$	2,618	$	2,808	$	2,618	$	—	$	—
Dealer manager fees	1,460		1,437		1,460		1,437		—		—
Reimbursable other offering costs	177		3,265		20		1,043		157		2,222
Acquisition and Development Stage
Acquisition and origination fees (1)	228		—		62		—		166		—
Origination fees on real estate loan receivable	—		—		—		—		—		—
Operational Stage
Asset management fees	908		380		908		381		—		—
Reimbursable operating expenses (2)	337		238		334		356		29		26
Real estate acquisition fees (1)	1,341		995		1,354		1,442		95		108
Stockholder service fees	1,509		—		35		—		1,474		—
Operational and Liquidation/Listing Stage
Disposition fee	—		—		—		—		—		—
Subordinated participation in net cash flows	—		—		—		—		—		—
Subordinated incentive fee	—		—		—		—		—		—
	$	8,768	$	8,933	$	6,981	$	7,277	$	1,921	$	2,356

_____________________

⁽¹⁾ Acquisition fees are expensed at the time of acquisition on real estate investments. Acquisition fees on investment in unconsolidated entities are capitalized into the cost basis of the investment. Acquisition fees on significant capital expenditures related to the development, construction or improvement of the investment budgeted as of the date of acquisition are capitalized.

⁽²⁾ Reimbursable operating expenses primarily consists of internal audit personnel costs, accounting software and cyber-security related expenses incurred by our advisor under the advisory agreement. Our advisor will reimburse us 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 our conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. Operating expense reimbursements for the four fiscal quarters ended September 30, 2016 exceeded this limitation; however, the conflicts committee determined that the relationship of our operating expenses to our average invested assets was justified for these periods given the costs of operating a public company and the early stage of our operations. We have reimbursed our advisor for our allocable portion of the salaries, benefits, and overhead of internal audit department personnel providing services to us. These amounts totaled $333,000 for the nine months ended September 30, 2016 and $204,000 for the year ended December 31, 2015, and were the only employee costs reimbursed under the Advisory Agreement for the nine months ended September 30, 2016 and the year ended December 31, 2015.  We will not reimburse for employee costs in connection with services for which our advisor earns acquisition or origination fees or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits our advisor or its affiliates may pay to our executive officers. In addition to the amounts above, we reimburse our advisor for certain of our direct costs incurred from third parties that were initially paid by our advisor on behalf of us.

During the nine months ended September 30, 2016, our advisor reimbursed us $87,000 for legal and professional fees and property insurance rebates. 

Offering Costs

We reimburse our advisor and dealer manager for commercially reasonable organization and other offering expenses they incur on our behalf in connection with this offering; however, no reimbursements made by us to our advisor or our dealer manager may cause total organization and offering expenses incurred by us (including selling commissions, dealer manager fees, the stockholder servicing fee and all other items of organization and offering expenses) to exceed 15% of the aggregate gross proceeds from this primary offering and the offering under our dividend reinvestment plan as of the date of reimbursement.

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We also pay organization and other offering expenses directly. At the termination of our primary offering, our advisor and its affiliates will reimburse us to the extent that the organization and other offering expenses (which exclude selling commissions, dealer manager fees and stockholder servicing fees) paid directly or reimbursed by us in connection with this primary offering exceed 1.0% of gross primary offering proceeds. Our advisor and its affiliates will be responsible for any organization and other offering expenses related to the primary offering to the extent they exceed 1.0% of gross primary offering proceeds as of the termination of the primary offering. Prior to the termination of the primary offering, at which time the advisor will reimburse us as described above, we will be responsible the payment of all organization and other offering expenses we incur directly and the reimbursement of organization and other offering expenses our advisor and dealer manager incur on our behalf in connection with this offering subject to the 15% limit on reimbursements discussed above.

Organization and other offering expenses include all expenses to be paid or reimbursed by us in connection with this offering, excluding selling commissions, the dealer manager fee and the ongoing stockholder servicing fee with respect to Class T share sold in the primary offering. Organization and other offering expenses include 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 this 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 payable to participating broker-dealers hosting retail seminars 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, legal fees of our dealer manager, and promotional items.

We do not reimburse our dealer manager for wholesaling compensation expenses.

Through September 30, 2016, our advisor and its affiliates had incurred organization and other offering costs (which exclude selling commissions dealer manager fees and stockholder servicing fees) on our behalf in connection with our initial public offering of approximately $7.7 million. As of September 30, 2016, we had paid $8.3 million in selling commissions and dealer manager fees and accrued $1.5 million of stockholder servicing fees. As of December 31, 2015, we had paid or accrued $3.3 million of other organization and offering expenses. After December 31, 2015, we reversed $2.2 million of accrued organization and offering expenses due to affiliates as a result of an amendment to the advisory agreement, which limits organization and other offering costs to 1.0% of gross proceeds from the primary portion of our public offering, as described above. As of September 30, 2016, we had recorded $1.2 million of other organization and offering expenses, which amounts represent our maximum liability for organization and other offering costs as of September 30, 2016 based on the 1.0% limitation described above.

During our private offering, there was no limit on the amount of organization and offering costs we could incur. As of September 30, 2016, we had recorded $1.0 million of offering costs (other than selling commissions and dealer manager fees) related to our private offering, all of which were initially paid by our advisor or its affiliates on our behalf and subsequently reimbursed by us. In addition, we paid $1.9 million in selling commissions and dealer manager fees related to our private offering.

Insurance

On January 6, 2014, we, together with KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust II, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc. and KBS Legacy Partners Apartment REIT, Inc., our dealer manager, our advisor and other KBS-affiliated entities, entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage are shared. The cost of these lower tiers is allocated by our advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. Our advisor’s and our dealer manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance. In June 2015, KBS Growth & Income REIT, Inc. was added to the insurance program. The insurance program was renewed and is effective through June 30, 2017.

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Share Redemption Program

Our share redemption program contains numerous restrictions on your ability to redeem your shares. Among other restrictions, 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, provided that we may increase or decrease the funding available for the redemption of shares upon 10 business days’ notice. This restriction may significantly limit your ability to have your shares redeemed pursuant to our share redemption program because our initial distributions have been in the form of stock dividends and we do not expect to have cash flow sufficient to pay a significant cash distribution.

During the nine months ended September 30, 2016, we redeemed $40,000 of common stock, which represented all redemption requests received in good order and eligible for redemption through the September 2016 redemption date.

Based on the amount of net proceeds raised from the sale of shares under the dividend reinvestment plan during 2016 and the $0.5 million set aside for stockholder’s death, qualifying disability or determination of incompetence, we have $2.1 million available for all redemptions in 2017, including shares that are redeemed in connection with a Special Redemption.

Net Tangible Book Value Per Share

In connection with this offering of shares of our common stock, we are providing information about our net tangible book value per share. Our net tangible book value per share is a rough approximation of value calculated as total book value of assets minus total book value of liabilities, divided by the total number of shares of common stock outstanding. Net tangible book value is used generally as a conservative measure of net worth that we do not believe reflects our estimated value per share. It is not intended to reflect the value of our assets upon an orderly liquidation of the company in accordance with our investment objectives. However, net tangible book value does reflect certain dilution in value of our common stock from the issue price in this offering primarily as a result of (i) the substantial fees paid in connection with this offering and our now terminated private offering, including selling commissions and marketing fees re-allowed by our dealer manager to participating broker dealers, (ii) the fees and expenses paid to our advisor and its affiliates in connection with the selection, acquisition, management and sale of our investments, (iii) general and administrative expenses, (iv) accumulated depreciation and amortization of real estate investments, and (v) the issuance of shares in our now-terminated private offering at a purchase price of less than $10.00. As of September 30, 2016, our net tangible book value per share of Class A and Class T common stock, was $7.90. The offering price of shares of our common stock under this primary offering (ignoring purchase price discounts for certain categories of purchasers is $10.00 per Class A share and $9.59 per Class T share. To the extent we are able to raise substantial proceeds in this offering, some of the expenses that cause dilution of the net tangible book value per share are expected to decrease on a per share basis, resulting in increases in the net tangible book value per share. This increase would be partially offset by increases in depreciation and amortization expenses related to our real estate investments.

The factors described above with respect to the dilution in the value of our common stock are likely to cause our offering price to be higher than the amount you would receive per share if we were to liquidate at this time.

Charter-imposed Investment Limitations

The following disclosure is added to the “Charter-imposed Investment Limitations” on page 126 of the prospectus.

• make distributions in kind, except for distributions of readily marketable securities, distributions of beneficial interests in a liquidating trust established for our dissolution and the liquidation of our assets in accordance with the terms of our charter or distributions that meet all of the following conditions: (a) our board of directors advises each stockholder of the risks associated with direct ownership of the property, (b) our board of directors offers each stockholder the election of receiving such in kind distributions and (c) in kind distributions are made only to those stockholders who accept such offer.

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Restrictions on Roll-Up Transactions

The second paragraph under “Restrictions on Roll-Up Transactions” on page 168 of the prospectus is revised to read as follows:

In connection with any proposed Roll-up Transaction, an appraisal of all our assets will be obtained from a competent independent expert. 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 expert 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.

Compensation of Dealer Manager and Participating Broker-Dealers

The tenth paragraph under “Compensation of Dealer Manager and Participating Broker-Dealers” on pages 173 and 174 of the prospectus is revised to read as follows:

In addition, our dealer manager will receive an annual stockholder servicing fee of 1.0% of the purchase price per share (ignoring any discounts that may be available to certain categories of purchasers) of Class T common stock sold in the primary offering solely to the extent there is a broker dealer of record with respect to such Class T share that has entered a currently effective selected dealer agreement or servicing agreement that provides for the payment to such broker dealer of the stockholder servicing fee with respect to such Class T share, and such broker dealer of record is in compliance with the applicable terms of such selected dealer agreement or servicing agreement related to such payment. Such terms include providing ongoing services to the holder of the Class T share, which services would generally include (i) offering to meet with the holder of the Class T share no less than annually to provide overall guidance on the holder’s investment in us, including discussing the mechanics of the dividend reinvestment plan, share redemption program or a tender offer, or to answer questions about the account statement or valuations, and (ii) discussing with the holder of the Class T share, upon such holder’s request, any questions related to the holder’s investment in us. While we expect that the broker dealer of record for a Class A stockholder may provide similar services to a Class A stockholder, they are under no contractual obligation to do so and we will not pay a stockholder servicing fee for such services. To the extent payable, the stockholder servicing fee will accrue daily and be paid monthly in arrears, and the dealer manager will reallow 100% of the stockholder servicing fee to such broker dealer of record for services provided to Class T stockholders after the initial sale of the class T share.  If the broker dealer of record with respect to a Class T share has changed during a calendar month, the broker dealer of record as of the end of the month with respect to such Class T share will be entitled to the full amount of the stockholder servicing fee accrued for that month; provided, however, that if the broker dealer of record has changed during a calendar month in conjunction with a change in the registered holder of the Class T share, the servicing fee accrued for the month will be prorated among the broker dealers of record associated with the account.  In the event of a change in the broker dealer the stockholder servicing fee will only be paid to the extent that the new broker dealer has signed a selected dealer agreement or servicing agreement that provides for the payment to such broker dealer of the stockholder servicing fee with respect to such Class T shares and such broker dealer of record is in compliance with the applicable terms of such selected dealer agreement or servicing agreement related to such payment. In addition, no stockholder servicing fee will be paid with respect to Class T shares purchased through the dividend reinvestment plan or issued pursuant to a stock dividend; however, the stockholder servicing fee payable with respect to Class T shares purchased in the primary offering will be allocated to the Class T shares as a class expense.  The stockholder servicing fee therefore will impact the distributions payable on all Class T shares and may impact the NAV of all Class T shares if the amount of the stockholder servicing fee payable on the Class T shares sold in the primary offering exceeds amounts available for distribution to holders of Class A shares. 

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Quantitative and Qualitative Disclosures about Market Risk

We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the financing of our real estate investment portfolio and operations. We are also exposed to the effects of changes in interest rates as a result of the origination of a mortgage loan. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We may manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

As of September 30, 2016, we owned one fixed-rate real estate loan receivable. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate real estate loan receivable unless such instrument matures or is otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instrument. At September 30, 2016, the fair value and carrying value of our fixed rate real estate loan receivable was $3.4 million. The fair value estimate of our real estate loan receivable is estimated using an internal valuation model that considers the expected cash flows for the loan, underlying collateral value and the estimated yield requirements of institutional investors for loans with similar characteristics, including remaining loan term, loan-to-value, type of collateral and other credit enhancements. As we expect to hold our fixed rate instrument to maturity and the amounts due under such instrument would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instrument, would have a significant impact on our operations.

Conversely, movements in interest rates on variable rate debt would change our future earnings and cash flows, but would not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of floating rate instruments. As of September 30, 2016, we were exposed to market risks related to fluctuations in interest rates on $107.3 million of variable rate debt outstanding. Based on interest rates as of September 30, 2016, if interest rates were 100 basis points higher during the 12 months ending September 30, 2017, interest expense on our variable rate debt would increase by $1.1 million. As of September 30, 2016, one-month LIBOR was 0.53111% and if the LIBOR index was reduced to 0% during the 12 months ending September 30, 2017, interest expense on our variable rate debt would decrease by $0.6 million.

The annual effective interest rate of our fixed rate real estate loan receivable as of September 30, 2016 was 11.7%. The effective interest rate represents the effective interest rate as of September 30, 2016, using the interest method, which we use to recognize interest income on our real estate loan receivable. The weighted-average interest rate of our variable rate debt as of September 30, 2016 was 3.1%.  The weighted-average interest rate represent the actual interest rate in effect as of September 30, 2016 (consisting of the contractual interest rate and the effect of interest rate caps, if applicable), using interest rate indices as of September 30, 2016 where applicable.

For a discussion of the interest rate risks related to the current capital and credit markets, see “Risk Factors” herein and in the prospectus, in Part I, Item 1, “Business - Real Estate Portfolio - Market Outlook - Real Estate and Real Estate Finance Markets” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Outlook - Real Estate and Real Estate Finance Markets” contained in our Annual Report on Form 10-K for the year ended December 31, 2015, incorporated by reference herein.

A Clarification to the Tax Treatment of Stock Dividends

We believe that any stock dividends should be tax-free transactions for U.S. federal income tax purposes under Section 305(a) of the Internal Revenue Code of 1986, as amended, and the adjusted tax basis of each share of “old” and “new” common stock should be computed by dividing the adjusted tax basis of the old common stock by the total number of shares, old and new. The holding period of the common stock received in such non-taxable distribution is expected to begin on the date the taxpayer acquired the common stock on which such stock dividend is being made. Stockholders should consult their own tax advisors regarding the tax consequences of any stock dividends.

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Experts

The consolidated financial statements of KBS Strategic Opportunity REIT II, Inc. appearing in its Annual Report on Form 10-K for the year ended December 31, 2015 (including schedule appearing therein) have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The carve-out financial statements of Springmaid Beach Resort and Conference Center for the nine-months ended September 30, 2014 and the year ended December 31, 2013, incorporated by reference in this prospectus from KBS Strategic Opportunity REIT II, Inc.’s Current Report on Form 8-K/A, filed with the SEC on March 17, 2015 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon, included therein, and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The financial statements of AGRE NV Q&C Property Owner, LLC for the nine-months ended September 30, 2015 and the year ended December 31, 2014, incorporated by reference in this prospectus from KBS Strategic Opportunity REIT II, Inc.’s Current Report on Form 8-K/A, filed with the SEC on February 9, 2016 have been audited by Squar Milner LLP, independent auditors, as set forth in their report thereon, included therein, and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The statement of revenue over certain operating expenses of Lincoln Court for the year ended December 31, 2015, incorporated by reference in this prospectus from KBS Strategic Opportunity REIT II, Inc.’s Current Report on Form 8-K/A, filed with the SEC on July 13, 2016 has been audited by Squar Milner LLP, independent auditors, as set forth in their report thereon, included therein, and incorporated herein by reference. Such financial statement is incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The statement of revenue over certain operating expenses of the Lofts at NoHo Commons for the year ended December 31, 2015, incorporated by reference in this prospectus from KBS Strategic Opportunity REIT II, Inc.’s Current Report on Form 8-K/A, filed with the SEC on January 24, 2017 has been audited by Squar Milner LLP, independent auditors, as set forth in their report thereon, included therein, and incorporated herein by reference. Such financial statement is incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

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Incorporation of Certain Information by Reference

We have elected to “incorporate by reference” certain information into this prospectus. By incorporating by reference, we are disclosing important information to you by referring you to documents we have filed separately with the Securities and Exchange Commission (“SEC”). The information incorporated by reference is deemed to be part of this prospectus, except for information incorporated by reference that is superseded by information contained in this prospectus. You can access documents that are incorporated by reference into this prospectus at the website maintained for us, other KBS-sponsored programs and our advisor and its affiliates at www.kbsreits.com(URL for documents: https://kbs-cmg.com/offerings/kbs-strategic-opportunity-reit-ii/investor-information/). There is additional information about us and our affiliates at our website, but unless specifically incorporated by reference herein as described in the paragraphs below, the contents of that site are not incorporated by reference in or otherwise a part of this prospectus.

The following documents filed with the SEC are incorporated by reference in this prospectus (Commission File No. 333-192331), except for any document or portion thereof deemed to be “furnished” and not filed in accordance with SEC rules:

• Quarterly Report on Form 10-Q for the nine months ended September 30, 2016 filed with the SEC on November 14, 2016;

• Quarterly Report on Form 10-Q for the six months ended June 30, 2016 filed with the SEC on August 12, 2016;

• Quarterly Report on Form 10-Q for the three months ended March 31, 2016 filed with the SEC on May 12, 2016;

• Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC on March 22, 2016;

• Definitive Proxy Statement on Schedule 14A filed with the SEC on April 19, 2016;

• Current Report on Form 8-K/A filed with the SEC on January 24, 2017;

• Current Report on Form 8-K filed with the SEC on December 6, 2016;

• Current Report on Form 8-K filed with the SEC on November 18, 2016;

• Current Report on Form 8-K filed with the SEC on November 3, 2016;

• Current Report on Form 8-K filed with the SEC on September 30, 2016;

• Current Report on Form 8-K filed with the SEC on August 5, 2016;

• Current Report on Form 8-K/A filed with the SEC on July 13, 2016;

• Current Report on Form 8-K filed with the SEC on July 8, 2016;

• Current Report on Form 8-K filed with the SEC on May 23, 2016;

• Current Report on Form 8-K filed with the SEC on April 25, 2016;

• Current Report on Form 8-K filed with the SEC on February 22, 2016;

• Current Report on Form 8-K/A filed with the SEC on February 9, 2016;

• Current Report on Form 8-K/A filed with the SEC on March 17, 2015; and

• Registration Statement on Form 8-A filed with the SEC on April 16, 2015.

We hereby undertake to provide without charge to each person, including any beneficial owner, to whom a prospectus is delivered, upon written or oral request of that person, a copy of any document incorporated herein by reference (or incorporated into the documents that this prospectus incorporates by reference). To receive a free copy of any of the documents incorporated by reference in this prospectus, other than exhibits, unless they are specifically incorporated by reference in those documents, call or write us at:

KBS Capital Markets Group LLC

800 Newport Center Drive, Suite 700

Newport Beach, California 92660

Telephone: (866) 527-4264

Fax: (949) 417-6501

www.kbs-cmg.com

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The information relating to us contained in this prospectus does not purport to be comprehensive and should be read together with the information contained in the documents incorporated or deemed to be incorporated by reference in this prospectus.

Where You Can Find More Information

We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any documents filed by us at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. Our filings with the SEC are also available to the public through the SEC’s Internet site at http://www.sec.gov. We have filed with the SEC a registration statement relating to the securities covered by this prospectus. This prospectus is a part of the registration statement and does not contain all the information in the registration statement. Whenever a reference is made in this prospectus to a contract or other document of ours, the reference is only a summary and you should refer to the exhibits that are a part of the registration statement for a copy of the contract or other document. You may review a copy of the registration statement at the SEC’s public reference room in Washington, D.C., as well as through the SEC’s Internet site.

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SUPPLEMENTAL INFORMATION - The prospectus of KBS Strategic Opportunity REIT II, Inc. consists of this sticker, the prospectus dated February 17, 2016, supplement no. 5 dated April 26, 2016, supplement no. 23 dated February 2, 2017 and any supplements filed subsequent thereto.

Supplement no. 5 includes:

• prior performance information as of December 31, 2015.

Supplement no. 23 includes:

• a change to the suitability standards for our offering applicable to California investors;

• the status of the offering;

• updated risks related to an investment in us;

• our entry into an amended and restated advisory agreement and renewal of our advisory agreement;

• cash distributions and stock dividends for the year ended December 31, 2015 and the nine months ended September 30, 2016;

• the declaration of cash distributions and stock dividends for the period from October 2016 through March 2017;

• changes to our volume discount table for purchases of our Class T shares;

• our entry into an agreement with Equity Trust Company relating to IRA custodial services with respect to our Class T shares;

• an update regarding allocation of investment opportunities;

• additional information regarding loans we may acquire or originate;

• update to the key personnel at STAM;

• information with respect to our real estate and real estate-related investments;

• selected financial data;

• fees earned by and expenses reimbursable to our advisor and the dealer manager;

• information with respect to our share redemption program;

• information regarding the net tangible book value of our shares;

• updated disclosure regarding “Charter-imposed Investment Limitations;”

• updated disclosure regarding “Restrictions on Roll-Up Transactions;”

• clarifications to the services provided to holders of a Class T share;

• quantitative and qualitative disclosures about market risk; and

• information incorporated by reference.

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 Strategic Opportunity REIT II, Inc. (the “Company”) in connection with the distribution of the securities being registered, other than selling commissions and the dealer manager fee. All amounts are estimated except the SEC registration fee and the FINRA filing fee.

Item	Amount
SEC registration fee	$	231,840
FINRA filing fee	225,500
Legal fees and expenses	2,750,000
Blue sky fees and expenses	128,875
Accounting fees and expenses	1,000,000
Sales and advertising expenses	1,000,000
Issuer costs regarding bona fide training and education meetings and retail seminars	450,000
Printing	2,200,000
Postage and delivery of materials	1,300,000
Transfer agent, escrow agent, and administrative services relating to the issuance of shares in the offering	2,000,000
Due diligence expenses (retailing)	150,000
Telephone	100,000
Miscellaneous expenses	400,000
Expense reimbursement for broker-dealer technology and other costs	150,000
Expense reimbursements for retail and wholesaling activities	1,924,800
Legal fees—dealer manager portion	100,000
Promotional items	175,000
Total	$	14,286,015

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 (“KBS Capital Advisors”) 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 either class, in the Company’s primary offering at a discount from the public offering price. The purchase price for the Class A 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 purchase price for the Class T shares will be $9.302, reflecting the fact that selling commissions in the amount of $0.288 per share will not be payable in connection with such sales. The dealer manager has agreed to sell up to 5% of the shares offered in the primary offering, in either class, to persons to be identified by the Company at a discount from the public offering price pursuant to the “friends and family” program. The net proceeds to the Company from the sales of Class A shares and Class T shares made net of commissions will be the same as the net proceeds we receive from other sales of Class A shares and Class T shares in the primary offering, respectively.

Item 33. Recent Sales of Unregistered Securities

Sale to KBS Capital Advisors

In connection with the Company’s organization, on July 3, 2013, it issued 21,739 shares of its common stock to KBS Capital Advisors at a purchase price of $9.20 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 Act.

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Private Offering

Additionally, the Company conducted a private offering for the sale of a maximum of $105,000,000 of shares of its common stock to accredited investors through a best efforts private placement offering pursuant to Regulation D of the Act, which offering commenced on July 5, 2013 (the “Private Offering”). $100,000,000 of shares in the primary Private Offering were sold at a purchase price of $9.20 or $9.40 per share depending upon the amount of gross proceeds the Company had raised in the Private Offering with discounts available to some categories of purchasers. Shares were sold at $9.20 until August 6, 2014. As of August 7, 2014 until the termination of the Private Offering on August 11, 2014, shares were sold at $9.40. From inception through the termination of the Private Offering, the Company raised approximately $32.2 million related to the sale of 3,619,851 shares of common stock in the Private Offering.

Sales to Willowbrook Capital Group LLC

On April 1, 2014, the Company issued $1,000,000 of shares of its common stock to Willowbrook Capital Group LLC, an entity owned and controlled by Keith D. Hall, one of the Company’s directors and its Chief Executive Officer, and Peter McMillan III, one of the Company’s directors and its President, for $8.326 per share. The per share purchase price was the $9.20 offering price of shares in the Private Offering, net of selling commission and the dealer manager fee. The Company issued these shares of common stock in a private transaction exempt from the registration requirements pursuant to Section 4(2) of the Act.

On July 31, 2014, the Company issued $1,000,000 of shares of its common stock to Willowbrook Capital Group LLC for $8.326 per share. The per share purchase price was the $9.20 offering price of shares in the Private Offering, net of selling commission and the dealer manager fee. The Company issued these shares of common stock in a private transaction exempt from the registration requirements pursuant to Section 4(2) of the Act.

Sale to Certain Business Associates

On July 31, 2014, the Company issued $100,000 of shares of its common stock to Victor Calandra, a business associate of Keith D. Hall and Peter McMillan III, for $8.326 per share.  The Company issued these shares of common stock in a private transaction exempt from the registration requirements of the Act pursuant to Section 4(2) of the Act.

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.

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.

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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.

Item 36. Financial Statements and Exhibits

(a)    Financial Statements.

The following financial statements are incorporated into this registration statement by reference:

• The consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 22, 2016.

• The consolidated financial statements of the Company included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 filed with the SEC on May 12, 2016.

• The consolidated financial statements of the Company included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the SEC on August 12, 2016.

• The consolidated financial statements of the Company included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 filed with the SEC on November 14, 2016.

• The financial statements of the Lofts at NoHo Commons for the nine months ended September 30, 2016 and year ended December 31, 2015 and the related pro forma financial statements of the Company contained in the Company’s Current Report on Form 8-K/A filed with the SEC on January 24, 2017.

• The financial statements of Lincoln Court for the three months ended March 31, 2016 and year ended December 31, 2015 and the related pro forma financial statements of the Company contained in the Company’s Current Report on Form 8-K/A filed with the SEC on July 13, 2016.

• The financial statements of AGRE NV Q&C Property Owner, LLC for the nine months ended September 30, 2015 and year ended December 31, 2014 and the related pro forma financial statements of the Company contained in the Company’s Current Report on Form 8-K/A filed with the SEC on February 9, 2016.

• The carve-out financial statements of Springmaid Beach Resort and Conference Center for the nine months ended September 30, 2014 and year ended December 31, 2013 and the related pro forma financial statements of the Company contained in the Company’s Current Report on Form 8-K/A filed with the SEC on March 17, 2015.

The following financial statements are included in this registration statement:

• The prior performance tables contained in supplement no. 5 dated April 26, 2016, which is a part of this registration statement.

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(b)    Exhibits.

The following exhibits are filed as part of this registration statement or incorporated into this registration statement by reference:

Ex.	Description
1.1	Dealer Manager Agreement, between KBS Strategic Opportunity REIT II, Inc. and KBS Capital Markets Group LLC, dated August 12, 2014, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2014, filed November 13, 2014
1.3	Amended and Restated Dealer Manager Agreement, by and between the Company and KBS Capital Markets Group LLC, dated February 17, 2016, incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed February 22, 2016
3.1	Second Articles of Amendment and Restatement adopted on August 11, 2014, incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014, filed September 19, 2014
3.2	Second Amended and Restated Bylaws adopted August 6, 2015, incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2015, filed August 11, 2015
3.3	Articles Supplementary for the Class T Shares of common stock, dated February 16, 2016, incorporated by reference to Exhibit 3.3 to Post-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed November 14, 2013
3.4	Articles Supplementary for the Class A Shares of common stock, dated February 16, 2016, incorporated by reference to Exhibit 3.4 to Post-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed November 14, 2013
3.5	Articles of Amendment, dated February 16, 2016, incorporated by reference to Exhibit 3.5 to Post-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed November 14, 2013
4.1*	Form of Subscription Agreement, incorporated by reference to Appendix A to the 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 Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2014, filed September 19, 2014
4.3	Third Amended and Restated Dividend Reinvestment Plan, adopted February 16, 2016, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed February 22, 2016
4.4	Escrow Agreement dated May 6, 2014, incorporated by reference to Exhibit 4.4 to the Company's Registration Statement filing on Form S-11 (No. 333-192331) dated August 8, 2014
4.5	Escrow Agreement dated January 22, 2016, incorporated by reference to Exhibit 4.5 to Post-Effective Amendment No.3 to the Company’s Registration Statement filing on Form S-11 (No. 333-192331) filed February 11, 2016
4.6	Multiple Class Plan, dated February 16, 2016, incorporated by reference to Exhibit 4.6 to Post-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed March 23, 2016
5.1	Opinion of DLA Piper LLP (US) re: legality, incorporated by reference to Exhibit 5.1 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331), filed February 11, 2016
8.1	Opinion of DLA Piper LLP (US) re: tax matters, incorporated by reference to Exhibit 8.1 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331), filed February 11, 2016
10.1	Amended and Restated Advisory Agreement, between KBS Strategic Opportunity REIT II, Inc. and KBS Capital Advisors LLC, dated August 12, 2014, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2014, filed November 13, 2014

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Ex.	Description
10.2	Advisory Agreement, between KBS Strategic Opportunity REIT II, Inc. and KBS Capital Advisors LLC, dated July 3, 2013, incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement filing on Form S-11 dated November 14, 2013
10.3	Amendment no. 1 to the Advisory Agreement, between KBS Strategic Opportunity REIT II, Inc. and KBS Capital Advisors LLC, dated October 11, 2013, incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement filing on Form S-11 dated November 14, 2013
10.4	Amendment no. 2 to the Advisory Agreement, between KBS Strategic Opportunity REIT II, Inc. and KBS Capital Advisors LLC, dated June 26, 2014, incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement filing on Form S-11 dated August 8, 2014
10.5	Purchase and Sale Agreement by and between Leroy Springs & Company, Inc. and IC Myrtle Beach LLC, dated as of September 12, 2014, incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.6	First Amendment to Purchase and Sale Agreement by and between Leroy Springs & Company, Inc. and IC Myrtle Beach LLC, dated October 17, 2014, incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.7	Reinstatement of and Second Amendment to Purchase and Sale Agreement by and between Leroy Springs & Company, Inc. and IC Myrtle Beach LLC, dated October 24, 2014, incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.8	Reinstatement of and Third Amendment to Purchase and Sale Agreement by and between Leroy Springs & Company, Inc. and IC Myrtle Beach LLC, dated November 17, 2014, incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.9	Fourth Amendment to Purchase and Sale Agreement by and between Leroy Springs & Company, Inc. and IC Myrtle Beach LLC, dated December 2, 2014, incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.10	Fifth Amendment to Purchase and Sale Agreement by and between Leroy Springs & Company, Inc. and IC Myrtle Beach LLC, dated December 9, 2014, incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.11	Reinstatement of and Sixth Amendment to Purchase and Sale Agreement by and between Leroy Springs & Company, Inc. and IC Myrtle Beach LLC, dated December 22, 2014, incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.12	Loan Agreement by and between IC Myrtle Beach LLC, IC Myrtle Beach Operations LLC, and Wells Fargo Bank, N.A., dated as of December 30, 2014, incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.13	Promissory Note (related to Myrtle Beach), by IC Myrtle Beach LLC for the benefit of Wells Fargo Bank, N.A., dated as of December 30, 2014, incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.14	Limited Liability Company Agreement of KBS SOR II IC Myrtle Beach Operations, LLC by and between IC Myrtle Beach Holdings LLC and KBS SOR II Myrtle Beach TRS JV, LLC, dated as of December 30, 2014, incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.15	Limited Liability Company Agreement of KBS SOR II IC Myrtle Beach Property, LLC by and between IC Myrtle Beach Holdings LLC and KBS SOR II Myrtle Beach JV, LLC, dated as of November 14, 2014, incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.16	Lease by and between IC Myrtle Beach LLC, an affiliate of KBS Strategic Opportunity REIT II, Inc., and IC Myrtle Beach Operations LLC, dated as of December 30, 2014, incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015

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Ex.	Description
10.17	Management Agreement by and between IC Myrtle Beach Operations LLC and Doubletree Management LLC, dated as of December 30, 2014, incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.18	Completion Guaranty by KBS SOR US Properties II LLC in favor of Wells Fargo Bank, N.A., dated as of December 30, 2014, incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.19	Limited Guaranty by KBS SOR US Properties II LLC in favor of Wells Fargo Bank, N.A., dated as of December 30, 2014, incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.20	Equity Contribution Guaranty by KBS SOR US Properties II LLC in favor of Wells Fargo Bank, N.A., dated as of December 30, 2014, incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the period ended December 31, 2014, filed March 26, 2015
10.21	Second Amended and Restated Advisory Agreement between the Company and KBS Capital Advisors LLC, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2015, filed November 12, 2015
10.22	Contract of Sale between AGRE NV Q&C Property Owner LLC and KBS SOR II Q&C Property LLC, dated October 12, 2015, incorporated by reference to Exhibit 10.22 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.23	Loan Agreement (related to Q&C Hotel), by and between KBS SOR II Q&C Property, LLC, KBS SOR II Q&C Operations, LLC and Wells Fargo Bank, National Association, dated as of December 17, 2015, incorporated by reference to Exhibit 10.23 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.24	Promissory Note (related to Q&C Hotel), by KBS SOR II Q&C Property, LLC, for the benefit of Wells Fargo Bank, National Association, dated as of December 17, 2015, incorporated by reference to Exhibit 10.24 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.25	Limited Liability Company Agreement of KBS SOR II IC Q&C Operations JV, LLC by and between EH Q&C, LLC and KBS SOR II Q&C TRS JV, LLC, dated as of October 9, 2015, incorporated by reference to Exhibit 10.25 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.26	Limited Liability Company Agreement of KBS SOR II Q&C Property JV, LLC by and between EH Q&C, LLC, and KBS SOR II Q&C JV, LLC, dated as of October 12, 2015, incorporated by reference to Exhibit 10.26 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.27	Lease by and between KBS SOR II Q&C Property, LLC and KBS SOR II Q&C Operations, LLC, dated as of December 17, 2015, incorporated by reference to Exhibit 10.27 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.28	Hotel Management Agreement by and between KBS SOR II Q&C Operations LLC and Encore Hospitality, LLC, dated as of December 17, 2015, incorporated by reference to Exhibit 10.28 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.29	Completion Guaranty by KBS SOR US Properties II LLC in favor of Wells Fargo Bank, National Association, dated as of December 17, 2015, incorporated by reference to Exhibit 10.29 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.30	Partial Repayment and Limited Guaranty by KBS SOR US Properties II LLC in favor of Wells Fargo Bank, National Association, dated as of December 17, 2015, incorporated by reference to Exhibit 10.30 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016

II-6

Ex.	Description
10.31	Autograph Collection Franchise Agreement by and between KBS SOR II Q&C Operations, LLC and Marriott International, Inc., dated as of December 17, 2015, incorporated by reference to Exhibit 10.31 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.32	Guaranty by KBS SOR US Properties II LLC for the benefit of Marriott International, Inc., dated as of December 17, 2015, incorporated by reference to Exhibit 10.32 to Post-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.33	Third Amended and Restated Advisory Agreement, by and between the Company and KBS Capital Advisors LLC, dated February 17, 2016, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 22, 2016
10.34	Amended and Restated Dealer Manager Agreement, between KBS Strategic Opportunity REIT II, Inc. and KBS Capital Markets Group LLC, dated October 14, 2013, entered into in connection with the private offering, incorporated by reference to Exhibit 1.2 to the Company’s Registration Statement filing on Form S-11 dated November 14, 2013
10.35	Fourth Amended and Restated Advisory Agreement by and between the Company and KBS Capital Advisors LLC, dated March 21, 2016, incorporated by reference to Exhibit 10.35 to to Post-Effective Amendment No. 6 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.36	Purchase and Sale Agreement by and between CRP Lincoln, LLC., and KBS Capital Advisors LLC, dated as of April 20, 2016, incorporated by reference to Exhibit 10.36 to to Post-Effective Amendment No. 7 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.37	Assignment and Assumption of Purchase Agreement by and between KBS Capital Advisors LLC and KBS SOR II Lincoln Court, LLC, dated as of April 13, 2016, incorporated by reference to Exhibit 10.37 to to Post-Effective Amendment No. 7 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.38	Loan Agreement between KBS SOR II Lincoln Court, LLC and U.S. Bank National Association, dated May 20, 2016, incorporated by reference to Exhibit 10.38 to to Post-Effective Amendment No. 7 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.39	Repayment Guaranty made by KBS SOR US Properties II LLC in favor of U.S. Bank National Association, dated May 20, 2016, incorporated by reference to Exhibit 10.39 to to Post-Effective Amendment No. 7 to the Company’s Registration Statement on Form S-11 (No. 333-192331) filed February 11, 2016
10.40	Advisory Agreement, between KBS Strategic Opportunity REIT II, Inc. and KBS Capital Advisors LLC, dated August 12, 2016 incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, filed November 14, 2016
10.41	Limited Liability Company Agreement of KBS SOR II Lofts at Noho Commons, LLC by and between Noho Commons Pacific Investors LLC, and KBS SOR II Lofts at Noho Commons JV, LLC, dated as of September 29, 2016 incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, filed November 14, 2016
10.42	Purchase and Sale Agreement by and between Redrock Noho Residential, LLC and Noho Commons Pacific Owner LLC, dated as of September 29, 2016 incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, filed November 14, 2016
10.43*	Multifamily Note between Noho Commons Pacific Owner LLC and Wells Fargo Bank, National Association dated as of November 16, 2016
10.44*	Multifamily Loan and Security Agreement by and between NoHo Commons Pacific Owner LLC, and Wells Fargo Bank, National Association, dated as of November 16, 2016
10.45*	Limited Liability Company Agreement of KBS SOR II 210 West 31st Street, LLC by and between Onyx 31st Street, LLC, and KBS SOR II 210 West 31st Street JV, LLC, dated as of October 28, 2016
10.46*	Purchase and Sale Agreement by and between Onyx 31st Street and 210 West 31st Street Owner LLC, dated as of October 28, 2016

II-7

Ex.	Description
10.47*	First Amendment to Limited Liability Company Agreement of KBS SOR II 210 West 31st Street, LLC by and between Onyx 31st Street, LLC, and KBS SOR II 210 West 31st Street JV, LLC, dated as of December 1, 2016
10.48*	Amended and Restated Acquisition Loan Promissory Note (related to 210 West 31st Street), by 210 West 31st Street Owner, LLC for the benefit of Pacificcal PC Core Lender, LLC, dated as of December 1, 2016
10.49*	Amended and Restated Acquisition Loan Mortgage between 210 West 31st Street Owner, LLC and Pacificcal PC Core Lender, LLC, dated as of December 1, 2016
10.50*	Project Loan Promissory Note (related to 210 West 31st Street), by 210 West 31st Street Owner, LLC for the benefit of Pacificcal PC Core Lender, LLC, dated as of December 1, 2016
10.51*	Project Loan Mortgage of KBS SOR II 210 West 31st Street, LLC by and between 210 West 31st Street Owner, LLC, and Pacificcal PC Core Lender, LLC, dated as of December 1, 2016
10.52*	Acquisition and Project Loan Agreement by and between Pacificcal PC Core Lender, LLC, and 210 West 31st Street Owner, LLC, dated as of December 1, 2016
10.53*	Building Note Promissory Note (related to 210 West 31st Street), by 210 West 31st Street Owner, LLC for the benefit of Pacificcal PC Core Lender, LLC, dated December 1, 2016
10.54*	Building Loan Mortgage of KBS SOR II 210 West 31st Street, LLC, by and between 210 West 31st Street Owner, LLC and Pacificcal PC Core Lender, LLC, dated December 1, 2016
10.55*	Building Loan Agreement by and between Pacificcal PC Core Lender, LLC, and 210 West 31st Street Owner, LLC, dated as of December 1, 2016
21.1*	Subsidiaries of the Company
23.1	Consent of DLA Piper LLP (US) (included in Exhibit 5.1 and Exhibit 8.1)
23.2*	Consent of Ernst & Young LLP
23.3*	Consent of Squar Milner LLP
24.1	Power of Attorney of Keith D. Hall, Peter McMillan III, David E. Snyder and Stacie K. Yamane, incorporated by reference to the signature page of the Company’s Registration Statement filing on Form S-11 dated November 14, 2013
24.2	Power of Attorney of Laurent Degryse and Michael L. Meyer, incorporated by reference to the signature page of the Company’s Registration Statement filing on Form S-11 dated May 2, 2014
24.3	Power of Attorney of William M. Petak, incorporated by reference to the signature page of the Company’s Registration Statement filing on Form S-11 dated June 12, 2014
99.1	Third Amended and Restated Share Redemption Program, adopted February 16, 2016, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed February 22, 2016
* Filed herewith

II-8

Item 37. Undertakings

(a)    The Company 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; (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 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 Company 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 Company 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.

(d)    For the purpose of determining liability of the Company under the Act to any purchaser in the initial distribution of the securities, the Company 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 Company 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 Company 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 Company or used or referred to by the Company, (iii) the portion of any other free writing prospectus relating to the offering containing material information about the Company or its securities provided by or on behalf of the Company, and (iv) any other communication that is an offer in the offering made by the Company to the purchaser.

(e)    The Company 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 Company 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 should disclose all compensation and fees received by the Advisor and its affiliates in connection with any such acquisition. The post-effective amendment shall include or incorporated by reference audited financial statements meeting the requirements of Rule 3-14 of Regulation S-X that have been filed or should have been filed on Form 8-K for all significant properties acquired during the distribution period.

(g)    The Company also undertakes to file, after 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 for each significant property acquired 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.

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(h)    The Company 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 Company pursuant to the foregoing provisions, or otherwise, the Company 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 Company of expenses incurred or paid by a director, officer or controlling person of the Company 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 Company 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 Company 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-10

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 the 2nd day of February, 2017.

KBS STRATEGIC OPPORTUNITY REIT II, INC.
By:	/s/ Jeffrey K. Waldvogel
	Jeffrey K. Waldvogel
	Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer)

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
*	Chief Executive Officer and Director (Principal Executive Officer)	February 2, 2017
Keith D. Hall
*	Chairman of the Board, President and Director	February 2, 2017
Peter D. McMillian III
/s/ Jeffrey K. Waldvogel	Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer)	February 2, 2017
Jeffrey K. Waldvogel
*	Chief Accounting Officer (Principal Accounting Officer)	February 2, 2017
Stacie K. Yamane
*	Independent Director	February 2, 2017
Laurent Degryse
*	Independent Director	February 2, 2017
Michael L. Meyer
*	Independent Director	February 2, 2017
William M. Petak

*By:	/s/ Jeffrey K. Waldvogel
	Jeffrey K. Waldvogel
	Chief Financial Officer, Treasurer and Secretary, Attorney-in-Fact

EX-10.43

Exhibit 10.43

Freddie Mac Loan Number: 932790054

Property Name: Lofts at NoHo Commons

MULTIFAMILY NOTE

FLOATING RATE - VALUE-ADD TRANSACTION

(Revised 7-12-2016)

US $72,100,000.00 Effective Date: November 16, 2016

FOR VALUE RECEIVED, NOHO COMMONS PACIFIC OWNER LLC, a Delaware limited liability company (together with such party’s or parties’ successors and assigns, “Borrower”) jointly and severally (if more than one), promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, the principal sum of $72,100,000.00, with interest on the unpaid principal balance, as hereinafter provided.

1.    Defined Terms.

(a)    As used in this Note:

“Base Recourse” meansa portion of the Indebtedness equal to 0% of the original principal balance of this Note.

“Business Day” means any day other than a Saturday, a Sunday, or any other day on which Lender or the national banking associations are not open for business.

“Capped Interest Rate” is not applicable; there is no Capped Interest Rate for the Loan.

“Default Rate” means a variable annual interest rate equal to 4 percentage points above the Floating Interest Rate in effect from time to time. However, at no time will the Default Rate exceed the Maximum Interest Rate.

“Exit Fee” means a fee equal to 1.0% of (x) the original principal balance of this Note less (y) (i) any amounts prepaid as a result of the application of any Insurance Proceeds or Condemnation award, or (ii) any amounts required to be prepaid under the terms of the Loan Agreement in connection with a Condemnation proceeding.

“Extension Fee” means (i) with respect to the First Extension Period, a fee equal to 0.5% of the original principal balance of this Note, or (ii) with respect to the

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Second Extension Period, a fee equal to 1.0% of the original principal balance of this Note.

“First Extended Scheduled Maturity Date” is defined in the definition of “Scheduled Maturity Date.”

“First Extension Period” means the period commencing on the day following the Initial Scheduled Maturity Date and ending on the First Extended Scheduled Maturity Date.

“First Installment Due Date” means January 1, 2017.

“Floating Interest Rate” means the variable annual interest rate calculated for each Interest Adjustment Period so as to equal the Index Rate for such Interest Adjustment Period (truncated at the 5^th decimal place if necessary) plus the Margin. However, in no event will the Floating Interest Rate exceed the Capped Interest Rate.

“Freddie Mac” means the Federal Home Loan Mortgage Corporation.

“Freddie Mac Refinance Commitment” means a binding commitment between Freddie Mac and a Freddie Mac approved Seller/Servicer for the purchase of a mortgage loan to Borrower that will be secured by the Mortgaged Property and that complies with Freddie Mac’s requirements for loans to be securitized.

“ICE” means ICE Benchmark Administration Limited.

“Index Rate” means, for any Interest Adjustment Period, theLIBOR Index Rate for such Interest Adjustment Period.

“Installment Due Date” means, for any monthly installment of interest-only or principal and interest, the date on which such monthly installment is due and payable pursuant to Section 3 of this Note.

“Interest Adjustment Period” means each successive One (1)calendar month period until the entire Indebtedness is paid in full, except that the first Interest Adjustment Period is the period from the date of this Note through November 30, 2016. Therefore, the second Interest Adjustment Period will be the period from December 1, 2016 through December 31, 2016, and so on until the entire Indebtedness is paid in full.

“Lender” means the holder from time to time of this Note.

“LIBOR” means the London Interbank Offered Rate.

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“LIBOR Index” means ICE’s One (1) month LIBOR rate for United States Dollar deposits, as displayed on the LIBOR Index Page used to establish the LIBOR Index Rate.

“LIBOR Index Rate” means, for any Interest Adjustment Period after the first Interest Adjustment Period, ICE’s LIBOR rate for the LIBOR Index released by ICE most recently preceding the first day of such Interest Adjustment Period, as such LIBOR rate is displayed on the LIBOR Index Page. The LIBOR Index Rate for the first Interest Adjustment Period means ICE’s LIBOR rate for the LIBOR Index released by ICE most recently preceding the first day of the month in which the first Interest Adjustment Period begins, as such LIBOR rate is displayed on the LIBOR Index Page; provided, however, that if at any time the LIBOR Index Rate is less than zero, the LIBOR Index Rate shall be deemed to be zero for all purposes of this Note and the Loan Agreement.

“LIBOR Index Page” is the Bloomberg L.P., page “BBAM”, or such other page for the LIBOR Index as may replace page BBAM on that service, or at the option of Lender (i) the applicable page for the LIBOR Index on another service which electronically transmits or displays ICE LIBOR rates, or (ii) any publication of LIBOR rates available from ICE. In the event ICE ceases to set or publish a LIBOR rate/interest settlement rate for the LIBOR Index, Lender will designate an alternative index, and such alternative index will constitute the LIBOR Index Page.

“Loan” means the loan evidenced by this Note.

“Loan Agreement” means the Multifamily Loan and Security Agreement entered into by and between Borrower and Lender, effective as of the effective date of this Note, as amended, modified, or supplemented from time to time.

“Lockout Period” is not applicable.

“Margin” means 2.66 percentage points (266 basis points).

“Maturity Date” meansthe earlier of(i) the Scheduled Maturity Date and (ii) the date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise pursuant to the Loan Documents or the exercise by Lender of any right or remedy under any Loan Document; provided, however, that if the unpaid principal balance of this Note becomes due and payable by acceleration but such acceleration is rendered null and void and of no further force and effect by operation of law or agreement by Lender, such acceleration will have no effect on the Maturity Date.

“Maximum Interest Rate” means the rate of interest which results in the maximum amount of interest allowed by applicable law.

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“Scheduled Maturity Date” means, initially, December 1, 2019(“Initial Scheduled Maturity Date”); provided, however, that if the requirements of Section 3(o) are satisfied, then the Scheduled Maturity Date will mean December 1, 2020(“First Extended Scheduled Maturity Date”), and if the requirements of Section 3(p) are satisfied, then the Scheduled Maturity Date will mean December 1, 2021 (“Second Extended Scheduled Maturity Date”) .

“Second Extended Scheduled Maturity Date” is defined in the definition of “Scheduled Maturity Date.”

“Second Extension Period” means the period commencing on the day following the First Extended Scheduled Maturity Date and ending on the Second Extended Scheduled Maturity Date.

“Security Instrument” means the multifamily mortgage, deed to secure debt or deed of trust effective as of the effective date of this Note, from Borrower to or for the benefit of Lender and securing this Note, as amended, modified or supplemented from time to time.

(b) Other capitalized terms used but not defined in this Note will have the meanings given to such terms in the Loan Agreement.

2. Address for Payment. All payments due under this Note will be payable at 2010 Corporate Ridge, Suite 1000, McLean, Virginia 22102, or such other place as may be designated by Notice to Borrower from or on behalf of Lender.

3.    Payments.

(a) Interest will accrue on the outstanding principal balance of this Note at the Floating Interest Rate, subject to the provisions of Section 8 of this Note.

(b) Interest under this Note will be computed, payable and allocated on the basis of an actual/360 interest calculation schedule (interest is payable for the actual number of days in each month, and each month’s interest is calculated by multiplying the unpaid principal amount of this Note as of the first day of the month for which interest is being calculated by the applicable Floating Interest Rate, dividing the product by 360, and multiplying the quotient by the number of days in the month for which interest is being calculated). For convenience in determining the amount of a monthly installment of principal and interest under this Note, Lender will use a 30/360 interest calculation payment schedule (each year is treated as consisting of twelve 30-day months). However, as provided above, the portion of the monthly installment actually payable as and allocated to interest will be based upon an actual/360 interest calculation schedule, and the amount of each installment attributable to principal and the amount attributable to interest will vary based upon the number of days in the month for which such installment is paid. Each monthly payment of principal and interest will first be

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applied to pay in full interest due, and the balance of the monthly payment paid by Borrower will be credited to principal.

(c) Unless disbursement of principal is made by Lender to Borrower on the first day of a calendar month, interest for the period beginning on the date of disbursement and ending on and including the last day of such calendar month will be payable by Borrower simultaneously with the execution of this Note. If disbursement of principal is made by Lender to Borrower on the first day of a calendar month, then no payment will be due from Borrower at the time of the execution of this Note. The Installment Due Date for the first monthly installment payment under Section 3(d) of interest-only or principal and interest, as applicable, will be the First Installment Due Date set forth in Section 1(a) of this Note. Except as provided in this Section 3(c) and Section 10, accrued interest will be payable in arrears.

(d) Beginning on the First Installment Due Date, and continuing until and including the monthly installment due on the Maturity Date, accrued interest-only will be payable by Borrower in consecutive monthly installments due and payable on the first day of each calendar month. The amount of the monthly installment of interest-only payable pursuant to this Section 3(d) on an Installment Due Date will equal the product of (i) annual interest on the unpaid principal balance of this Note as of the first day of the Interest Adjustment Period immediately preceding the Installment Due Date at the Floating Interest Rate in effect for such Interest Adjustment Period, divided by 360, multiplied by (ii) the number of days in such Interest Adjustment Period.

(e) Reserved.

(f) Reserved.

(g) Reserved.

(h) All remaining Indebtedness, including all principal and interest, will be due and payable by Borrower on the Maturity Date.

(i) Lender will provide Borrower with Notice, given in the manner specified in the Loan Agreement, of the amount of each monthly installment due under this Note. However, if Lender has not provided Borrower with prior Notice of the monthly payment due on any Installment Due Date, then Borrower will pay on that Installment Due Date an amount equal to the monthly installment payment for which Borrower last received Notice. If Lender at any time determines that Borrower has paid one or more monthly installments in an incorrect amount because of the operation of the preceding sentence, or because Lender has miscalculated the Floating Interest Rate or has otherwise miscalculated the amount of any monthly installment, then Lender will give Notice to Borrower of such determination. If such determination discloses that Borrower has paid less

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than the full amount due for the period for which the determination was made, Borrower, within 30 calendar days after receipt of the Notice from Lender, will pay to Lender the full amount of the deficiency. If such determination discloses that Borrower has paid more than the full amount due for the period for which the determination was made, then the amount of the overpayment will be credited to the next installment(s) of interest only or principal and interest, as applicable, due under this Note (or, if an Event of Default has occurred and is continuing, such overpayment will be credited against any amount owing by Borrower to Lender).

(j) All payments under this Note must be made in immediately available U.S. funds.

(k) Any regularly scheduled monthly installment of interest only or principal and interest payable pursuant to this Section 3 that is received by Lender before the date it is due will be deemed to have been received on the due date for the purpose of calculating interest due.

(l) Any accrued interest remaining past due for 30 days or more, at Lender’s discretion, may be added to and become part of the unpaid principal balance of this Note and any reference to “accrued interest” will refer to accrued interest which has not become part of the unpaid principal balance. Any amount added to principal pursuant to the Loan Documents will bear interest at the applicable rate or rates specified in this Note and will be payable with such interest upon demand by Lender and absent such demand, as provided in this Note for the payment of principal and interest.

(m) In accordance with Section 16, interest charged under this Note cannot exceed the Maximum Interest Rate. If the Floating Interest Rate at any time exceeds the Maximum Interest Rate, resulting in the charging of interest hereunder to be limited to the Maximum Interest Rate, then any subsequent reduction in the Floating Interest Rate will not reduce the rate at which interest under this Note accrues below the Maximum Interest Rate until the total amount of interest accrued hereunder equals the amount of interest which would have accrued had the Floating Interest Rate at all times been in effect.

(n) Reserved.

(o) Borrower, at its option, may extend the Scheduled Maturity Date from the Initial Scheduled Maturity Date to the First Extended Scheduled Maturity Date, provided that each of the following conditions is satisfied:

(i) At least 30 days before the Initial Scheduled Maturity Date, Borrower provides Lender with Notice of its election to extend, together with the Extension Fee applicable to the First Extension Period.

(ii) At the time of such Notice and immediately before the commencement of the First Extension Period, no Event of Default has occurred and is

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continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

If Borrower refinances the Loan during the First Extension Period with the proceeds of a loan that is the subject of a Freddie Mac Refinance Commitment, then, upon Freddie Mac’s purchase of such new loan, 1/12^th of the Extension Fee for the First Extension Period will be refunded to Borrower for each full calendar month that remains in the First Extension Period after such prepayment.

(p) Lender, in its sole discretion, may further extend the Scheduled Maturity Date from the First Extended Scheduled Maturity Date to the Second Extended Scheduled Maturity Date provided that each of the following conditions is satisfied:

(i) At least 30 days before the First Extended Scheduled Maturity Date, Borrower provides Lender with its request to extend.

(ii) At the time of such request and immediately before the commencement of the Second Extension Period, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

(iii) If Lender grants the extension, Borrower pays to Lender prior to the First Extended Scheduled Maturity Date the Extension Fee applicable to the Second Extension Period.

4. Application of Partial Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply the amount received to amounts then due and payable in any manner and in any order determined by Lender, in Lender’s discretion. Borrower agrees that neither Lender’s acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender’s application of such payment will constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5. Security. The Indebtedness is secured by, among other things, the Security Instrument, and reference is made to the Security Instrument and the Loan Agreement for other rights with respect to collateral for the Indebtedness.

6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, any prepayment premium payable under Section 10, and all other amounts payable under this Note and any other Loan Document, will at once become due and payable, at the option of Lender, without any prior Notice to Borrower (except if notice is required by applicable law, then after such notice). Lender

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may exercise this option to accelerate regardless of any prior forbearance. For purposes of exercising such option, Lender will calculate the prepayment premium as if prepayment occurred on the date of acceleration. If prepayment occurs thereafter, Lender will recalculate the prepayment premium as of the actual prepayment date.

7. Late Charge.

(a) If any monthly installment of interest or principal and interest or other amount payable under this Note or under the Loan Agreement or any other Loan Document is not received in full by Lender within 10 days after the installment or other amount is due, counting from and including the date such installment or other amount is due (unless applicable law requires a longer period of time before a late charge may be imposed, in which event such longer period will be substituted), Borrower must pay to Lender, immediately and without demand by Lender, a late charge equal to 5% of such installment or other amount due (unless applicable law requires a lesser amount be charged, in which event such lesser amount will be substituted). If the Loan is not fully amortizing, the late charge will not be due on the final payment of principal owed on the Maturity Date if such payment is not timely made.

(b) Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan and that it is extremely difficult and impractical to determine those additional expenses. Borrower agrees that the late charge payable pursuant to this Section represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment. The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Section 8.

8. Default Rate.

(a) So long as (i) any monthly installment under this Note remains past due for 30 days or more or (ii) any other Event of Default has occurred and is continuing, then notwithstanding anything in Section 3 of this Note to the contrary, interest under this Note will accrue on the unpaid principal balance from the Installment Due Date of the first such unpaid monthly installment or the occurrence of such other Event of Default, as applicable, at the Default Rate.

(b) From and after the Maturity Date, the unpaid principal balance will continue to bear interest at the Default Rate until and including the date on which the entire principal balance is paid in full.

(c) Borrower acknowledges that (i) its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, (ii) during the time that any monthly installment under this Note is delinquent for 30 days or more, Lender will incur additional costs and expenses arising from its

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loss of the use of the money due and from the adverse impact on Lender’s ability to meet its other obligations and to take advantage of other investment opportunities, and (iii) it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any monthly installment under this Note is delinquent for 30 days or more or any other Event of Default has occurred and is continuing, Lender’s risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk. Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of the Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9. Limits on Personal Liability.

(a) Except as otherwise provided in this Section 9, Borrower will have no personal liability under this Note, the Loan Agreement or any other Loan Document for the repayment of the Indebtedness or for the performance of or compliance with any other obligations of Borrower under the Loan Documents and Lender’s only recourse for the satisfaction of the Indebtedness and the performance of such obligations will be Lender’s exercise of its rights and remedies with respect to the Mortgaged Property and to any other collateral held by Lender as security for the Indebtedness. This limitation on Borrower’s liability will not limit or impair Lender’s enforcement of its rights against any Guarantor of the Indebtedness or any Guarantor of any other obligations of Borrower.

(b) Borrower will be personally liable to Lender for the amount of the Base Recourse, plus any other amounts for which Borrower has personal liability under this Section 9.

(c) In addition to the Base Recourse, Borrower will be personally liable to Lender for the repayment of a further portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of the occurrence of any of the following events:

(i) Borrower fails to pay to Lender upon demand after an Event of Default all Rents to which Lender is entitled under Section 3 of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence. However, Borrower will not be personally liable for any failure described in this Section 9(c)(i) if Borrower is unable to pay to Lender all Rents and security deposits as required by the Security Instrument because of a valid order issued in a bankruptcy, receivership, or similar judicial proceeding.

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(ii) Borrower fails to apply all Insurance proceeds and Condemnation proceeds as required by the Loan Agreement. However, Borrower will not be personally liable for any failure described in this Section 9(c)(ii) if Borrower is unable to apply Insurance or Condemnation proceeds as required by the Loan Agreement because of a valid order issued in a bankruptcy, receivership, or similar judicial proceeding.

(iii) Either of the following occurs:

(A) Borrower fails to deliver the statements, schedules and reports required by Section 6.07 of the Loan Agreement and Lender exercises its right to audit those statements, schedules and reports.

(B) If an Event of Default has occurred and is continuing, Borrower fails to deliver all books and records relating to the Mortgaged Property or its operation in accordance with the provisions of Section 6.07 of the Loan Agreement.

(iv) Borrower fails to pay when due in accordance with the terms of the Loan Agreement the amount of anyitem below marked “Deferred”; provided however, that if no item is marked “Deferred”, this Section 9(c)(iv) will be of no force or effect.

Collect Property Insurance premiums or other Insurance premiums,

Collect        Taxes or payments in lieu of taxes (PILOT)

Deferred water and sewer charges (that could become a lien on the Mortgaged Property)

N/A        Ground Rents

Deferred assessments or other charges (that could become a lien on the Mortgaged Property), including home owner association dues

(v) Borrower engages in any willful act of material waste of the Mortgaged Property.

(vi) Borrower fails to comply with any provision of Section 6.13(a)(iii) through (xxvi) of the Loan Agreement or any SPE Equity Owner fails to comply with any provision of Section 6.13(b)(iii) through (v) of the Loan Agreement (subject to possible full recourse liability as set forth in Section 9(f)(ii)).

(vii) Any of the following Transfers occurs:

(A) Any Person that is not an Affiliate creates a mechanic’s lien or other involuntary lien or encumbrance against the Mortgaged

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Property and Borrower has not complied with the provisions of the Loan Agreement.

(B) A Transfer of property by devise, descent or operation of law occurs upon the death of a natural person and such Transfer does not meet the requirements set forth in the Loan Agreement.

(C) Borrower grants an easement that does not meet the requirements set forth in the Loan Agreement.

(D) Borrower executes a Lease that does not meet the requirements set forth in the Loan Agreement.

(viii) Reserved.

(ix)    Reserved.

(x)    through (xx) are Reserved.

(d) In addition to the Base Recourse, Borrower will be personally liable to Lender for all of the following:

(i) Borrower will be personally liable for the performance of all of Borrower’s obligations under Sections 6.12 and 10.02(b) of the Loan Agreement (relating to environmental matters).

(ii) Borrower will be personally liable for the costs of any audit under Section 6.07 of the Loan Agreement.

(iii) Borrower will be personally liable for any costs and expenses incurred by Lender in connection with the collection of any amount for which Borrower is personally liable under this Section 9, including Attorneys’ Fees and Costs and the costs of conducting any independent audit of Borrower’s books and records to determine the amount for which Borrower has personal liability.

(iv) Reserved.

(v) Reserved.

(vi) Borrower will be personally liable for the Exit Fee due under this Note if Lender determines that Borrower has not complied with the provisions of Section 6.42 of the Loan Agreement in any material respect.

(vii) Reserved.

(viii) Reserved.

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(ix) Borrower will be personally liable for any fees, costs, or expenses incurred by Lender in connection with Borrower’s termination of any agreement for the provision of services to or in connection with the Mortgaged Property, including cable, internet, garbage collection, landscaping, security, and cleaning.

(x) Reserved.

(e) All payments made by Borrower with respect to the Indebtedness and all amounts received by Lender from the enforcement of its rights under the Loan Agreement and the other Loan Documents will be applied first to the portion of the Indebtedness for which Borrower has no personal liability.

(f) Notwithstanding the Base Recourse, Borrower will become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default:

(i) Borrower fails to comply with Section 6.13(a)(i) or (ii) of the Loan Agreement or any SPE Equity Owner fails to comply with Section 6.13(b)(i) or (ii) of the Loan Agreement.

(ii) Borrower fails to comply with any provision of Section 6.13(a)(iii) through (xxvi) of the Loan Agreement or any SPE Equity Owner fails to comply with any provision of Section 6.13(b)(iii) through (v) of the Loan Agreement and a court of competent jurisdiction holds or determines that such failure or combination of failures is the basis, in whole or in part, for the substantive consolidation of the assets and liabilities of Borrower or any SPE Equity Owner with the assets and liabilities of a debtor pursuant to Title 11 of the Bankruptcy Code.

(iii) A Transfer that is an Event of Default under Section 7.02 of the Loan Agreement occurs other than a Transfer set forth in Section 9(c)(vii) above (for which Borrower will have personal liability for Lender’s loss or damage); provided, however, that Borrower will not have any personal liability for a Transfer consisting solely of the involuntary removal or involuntary withdrawal of a general partner in a limited partnership or a manager in a limited liability company.

(iv) There was fraud or written material misrepresentation by Borrower or any officer, director, partner, member, or employee of Borrower in connection with the application for or creation of the Indebtedness or there is fraud in connection with any request for any action or consent by Lender.

(v) Borrower or any SPE Equity Owner voluntarily files for bankruptcy protection under the Bankruptcy Code.

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(vi) Borrower or any SPE Equity Owner voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

(vii) The Mortgaged Property or any part of the Mortgaged Property becomes an asset in a voluntary bankruptcy or becomes subject to any voluntary reorganization, receivership, insolvency proceeding, or other similar voluntary proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

(viii) An order of relief is entered against Borrower or any SPE Equity Owner pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party.

(ix) An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against Borrower or any SPE Equity Owner (by a party other than Lender) but only if Borrower or such SPE Equity Owner has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in Borrower or any SPE Equity Owner to contribute or cause the contribution of additional capital to Borrower or any SPE Equity Owner.

(x) through (xiii) are Reserved.

(g) For purposes of Sections 9(f) and (h), the term “Related Party” will include all of the following:

(i)    Borrower, any Guarantor, or any SPE Equity Owner.

(ii) Any Person that holds, directly or indirectly, any ownership interest (including any shareholder, member or partner) in Borrower, any Guarantor, or any SPE Equity Owner or any Person that has a right to manage Borrower, any Guarantor, or any SPE Equity Owner.

(iii) Any Person in which Borrower, any Guarantor, or any SPE Equity Owner has any ownership interest (direct or indirect) or right to manage.

(iv) Any Person in which any partner, shareholder, or member of Borrower, any Guarantor, or any SPE Equity Owner has an ownership interest or right to manage.

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(v) Any Person in which any Person holding an interest in Borrower, any Guarantor, or any SPE Equity Owner also has any ownership interest.

(vi) Any creditor (as defined in the Bankruptcy Code) of Borrower that is related by blood, marriage or adoption to Borrower, any Guarantor, or any SPE Equity Owner.

(vii) Any creditor (as defined in the Bankruptcy Code) of Borrower that is related to any partner, shareholder or member of, or any other Person holding an interest in, Borrower, any Guarantor, or any SPE Equity Owner.

(h) If Borrower, any Guarantor, any SPE Equity Owner, or any Related Party has solicited creditors to initiate or participate in any proceeding referred to in Section 9(f), regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding will be considered as having been initiated by a Related Party.

(i) To the extent that Borrower has personal liability under this Section 9, Lender may, to the fullest extent permitted by applicable law, exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any Guarantor, or pursued any other rights available to Lender under this Note, the Loan Agreement, any other Loan Document, or applicable law. To the fullest extent permitted by applicable law, in any action to enforce Borrower’s personal liability under this Section 9, Borrower waives any right to set off the value of the Mortgaged Property against such personal liability.

10. Voluntary and Involuntary Prepayments; Exit Fee.

(a) Any receipt by Lender of principal due under this Note prior to the Maturity Date, other than principal required to be paid in monthly installments pursuant to Section 3, constitutes a prepayment of principal under this Note. Without limiting the foregoing, any application by Lender, prior to the Maturity Date, of any proceeds of collateral or other security to the repayment of any portion of the unpaid principal balance of this Note constitutes a prepayment under this Note.

(b) Reserved.

(c) Borrower may voluntarily prepay all of the unpaid principal balance of this Note on an Installment Due Date so long as Borrower designates the date for such prepayment in a Notice from Borrower to Lender given at least 30 days prior to the date of such prepayment. If an Installment Due Date (as defined in Section 1(a)) falls on a day which is not a Business Day,thenwith respect to payments made under this Section 10 only, the term “Installment Due Date” will mean the Business Day immediately preceding the scheduled Installment Due Date.

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(d) Notwithstanding Section 10(c), Borrower may voluntarily prepay all of the unpaid principal balance of this Note on a Business Day other than an Installment Due Date if Borrower provides Lender with the Notice set forth in Section 10(c) and meets the other requirements set forth in this Section 10(d). Borrower acknowledges that Lender has agreed that Borrower may prepay principal on a Business Day other than an Installment Due Date only because Lender will deem any prepayment received by Lender on any day other than an Installment Due Date to have been received on the Installment Due Date immediately following such prepayment and Borrower must pay to Lender all interest that would have been due if the prepayment had actually been made on the Installment Due Date immediately following such prepayment.

(e) Unless otherwise expressly provided in the Loan Documents, Borrower may not voluntarily prepay less than all of the unpaid principal balance of this Note. In order to voluntarily prepay all or any part of the principal of this Note, Borrower must also pay to Lender, together with the amount of principal being prepaid, (i) all accrued and unpaid interest due under this Note, plus (ii) all other sums due to Lender at the time of such prepayment.

(f) Reserved.

(g) Reserved.

(h) Unless Lender agrees otherwise in writing, a permitted or required prepayment of less than the unpaid principal balance of this Note will not extend or postpone the due date of any subsequent monthly installments or change the amount of such installments.

(i) Reserved.

(j) The Exit Fee will be due and payable upon the Maturity Date or earlier prepayment in full of the Loan; provided, however, that no Exit Fee will be due if the Loan is refinanced in whole or in part with the proceeds of a mortgage loan that is the subject of a Freddie Mac Refinance Commitment. Borrower acknowledges that the Exit Fee is a material part of the consideration for the Loan, and that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s voluntary agreement to the provisions of this Note relating to the Exit Fee.

(k) Reserved.

11. Reserved.

12. Reserved.

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13. Costs and Expenses. To the fullest extent allowed by applicable law, Borrower must pay all expenses and costs, including Attorneys’ Fees and Costs incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding. Borrower acknowledges and agrees that, in connection with each request by Borrower under this Note or any Loan Document, Borrower must pay all reasonable Attorneys’ Fees and Costs and expenses incurred by Lender, including any fees charged by the Rating Agencies (if applicable), regardless of whether the matter is approved, denied or withdrawn.

14. Forbearance. Any forbearance by Lender in exercising any right or remedy under this Note, the Loan Agreement, or any other Loan Document, or otherwise afforded by applicable law, will not be a waiver of or preclude the exercise of that or any other right or remedy. The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, will not be a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment. Enforcement by Lender of any security for Borrower’s obligations under this Note will not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

15. Waivers. Borrower and all endorsers and Guarantors of this Note and all other third party obligors waive presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness.

16. Loan Charges. Neither this Note nor any of the other Loan Documents will be construed to create a contract for the use, forbearance, or detention of money requiring payment of interest at a rate greater than the Maximum Interest Rate. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation. The amounts, if any, previously paid to Lender in excess of the permitted amounts will be applied by Lender to reduce the unpaid principal balance of this Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, will be deemed to be allocated and spread ratably over the stated term of this Note. Unless otherwise required by applicable law, such allocation and spreading will be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of this Note.

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17. Commercial Purpose. Borrower represents that Borrower is incurring the Indebtedness solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family, household, or agricultural purposes.

18. Counting of Days. Any reference in this Note to a period of “days” means calendar days, not Business Days, except where otherwise specifically provided.

19. Governing Law. This Note will be governed by the law of the Property Jurisdiction.

20. Captions. The captions of the Sections of this Note are for convenience only and will be disregarded in construing this Note.

21. Notices; Written Modifications.

(a) All Notices, demands, and other communications required or permitted to be given pursuant to this Note will be given in accordance with Section 11.03 of the Loan Agreement.

(b) Any modification or amendment to this Note will be ineffective unless in writing and signed by the party sought to be charged with such modification or amendment; provided, however, in the event of a Transfer under the terms of the Loan Agreement that requires Lender’s consent, any or some or all of the Modifications to Multifamily Note set forth in Exhibit A to this Note may be modified or rendered void by Lender at Lender’s option, by Notice to Borrower and the transferee, as a condition of Lender’s consent.

22. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising under or in relation to this Note may be litigated in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction will have jurisdiction over all controversies that will arise under or in relation to this Note. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence, or otherwise. However, nothing in this Note is intended to limit any right that Lender may have to bring any suit, action, or proceeding relating to matters arising under this Note in any court of any other jurisdiction.

23. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (a) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (b) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

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24. State-Specific Provisions. State-specific provisions, if any, are included on Schedule 1 to this Note.

25.    Attached Riders. The following Riders are attached to this Note:

Regulatory Agreement Default Recourse

Shared Amenities, Management Office, or Other Shared Facilities

26. Attached Schedules and Exhibits. The following Schedules and Exhibits, if marked with an “X” in the space provided, are attached to this Note:

|X|Schedule 1State Specific Provisions for Multifamily Note

|X|    Exhibit AModifications to Multifamily Note

27.Reserved.

28.    Reserved.

29.    Reserved.

30.    Reserved.

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IN WITNESS WHEREOF, and in consideration of the Lender’s agreement to lend Borrower the principal amount set forth above, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.

BORROWER:

NOHO COMMONS PACIFIC OWNER LLC,

a Delaware limited liability company

By:    KBS SOR II LOFTS AT NOHO COMMONS, LLC,

a Delaware limited liability company

its sole member

By:    NOHO COMMONS PACIFIC INVESTORS LLC,

a Delaware limited liability company,

its Managing Member

By:     SLOVIN PROPERTIES, INC.,

a Delaware corporation,

its Manager

By:    /s/ Karl Slovin                    

Name:    Karl Slovin                    

Title:    President                    

(SIGNATURES CONTINUE ON FOLLOWING PAGE)

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PAY TO THE ORDER OF
	Federal Home Loan Mortgage Corporation
WITHOUT RECOURSE
LENDER:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
a national banking association
By:	/s/ Christian Adrian
Name:	Christian Adrian
Title:	Director

Freddie Mac Loan Number: 932790054

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SCHEDULE 1

STATE SPECIFIC PROVISIONS FOR MULTIFAMILY NOTE

Property Jurisdiction

State-Specific Provision(s)

California

(a) If a Guarantor is liable for only a portion of the Indebtedness, Borrower hereby waives its rights under California Civil Code Section 2822(a) to designate the portion of the Indebtedness that will be satisfied by Borrower’s partial payment. (b) Reserved. (c) Borrower hereby expressly waives any right it may have, under California Civil Code Section 2954.10 or otherwise, to prepay this Note, in whole or in part, without prepayment charge, upon acceleration of the maturity date of this Note, and agrees that if for any reason, a prepayment of any or all of this Note is made, whether voluntarily or upon or following any acceleration of the maturity date of this Note by Lender, then Borrower shall pay the prepayment premium calculated pursuant to Section 10 hereof. By initialing this provision in the space provided below, Borrower hereby declares that Lender’s agreement to make the Loan at the interest rate provided for herein and for the term set forth in this Note constitutes adequate consideration, given individual weight by Borrower, for this waiver and agreement. INITIALS OF BORROWER: /s/ K.S.

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RIDER TO MULTIFAMILY NOTE

REGULATORY AGREEMENT DEFAULT RECOURSE

(Revised 3-1-2014)

The following changes are made to the Note which precedes this Rider:

A. Section 9(c)(xiii) is restated as follows:

(xiii) A default, event of default, or breach (however such terms may be defined in the Regulatory Agreement) occurs after the expiration of any applicable notice and/or cure periods under the Regulatory Agreement.

Rider to Multifamily Note

Regulatory Agreement Default Recourse

Lofts at NoHo Commons

RIDER TO MULTIFAMILY NOTE

SHARED AMENITIES, MANAGEMENT OFFICE, OR OTHER SHARED FACILITIES

(Revised 3-1-2014)

The following changes are made to the Note which precedes this Rider:

A. Section 9(c)(xii) is restated as follows:

(xii) Either of the following occurs:

(A) The Mortgaged Property ceases to have full access to and/or the use of any of the Shared Facilities, which Shared Facilities (listed below) are shared pursuant to the SECOND AMENDED AND RESTATED DECLARATION AND ESTABLISHMENT OF COVENANTS, CONDITIONS AND RESTRICTIONS AND GRANT OF EASEMENTS from REDROCK NOHO RETAIL, LLC  to REDROCK NOHO RESIDENTIAL, LLC dated December 31, 2014 and recorded at Instrument 2015-0061853 in the records of Los Angeles County, California, as amended (“Shared Facilities Agreement”).

(B) Any dispute or controversy arises under or with respect to the Shared Facilities Agreement. The “Shared Facilities” consist of the following:

Portions of NoHo Alley

Rider to Multifamily Note

Shared Amenities, Management Office, or Other Shared Facilities

Lofts at NoHo Commons

EXHIBIT A

MODIFICATIONS TO MULTIFAMILY NOTE

The following modifications are made to the text of the Note that precedes this Exhibit.

1. Section 9(c)(viii) of the Note must be deleted and replaced with the following:

(viii) Any loss or damage to Lender arising out of the UFAS Litigation.

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EX-10.44

Exhibit 10.44

Freddie Mac Loan Number: 932790054

Property Name: Lofts at NoHo Commons

MULTIFAMILY LOAN AND SECURITY AGREEMENT

(Revised 7-12-2016)

Borrower:	NOHO COMMONS PACIFIC OWNER LLC, a Delaware limited liability company
Lender:	WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association
Date:	November 16, 2016
Loan Amount:	$72,100,000.00

Reserve Fund Information

(See Article IV)

Imposition Reserves	(fill in “Collect” or “Deferred” as appropriate for each item)
Collect	Insurance
Collect	Taxes
Deferred	water/sewer
N/A	Ground Rents
Deferred	assessments/other charges

Repairs & Repair Reserve	Repairs required?	XYes	No
	If No, is radon testing required?	Yes	No
	If Yes, is a Reserve required?	Yes	X No
If Yes to Repairs, but No Reserve, is a Letter of Credit required?		Yes	No

Replacement Reserve	XYes	If Yes:	X Funded	Deferred
	No

Rental Achievement Reserve	Yes	If Yes:	Cash	Letter of Credit
	X No

Rate Cap Agreement Reserve Yes X No

Other Reserve(s)	Yes	No
If Yes, specify:

Lease-Up Transaction	Yes	No
	If Yes, is a Reserve required?		Yes	No
	If Yes, is a Letter of Credit required?		Yes	No

Attached Riders

(See Article XIII)

Name of Rider	Date Revised
Rider to Multifamily Loan and Security Agreement – Affiliate Transfer	7-12-2016
Rider to Multifamily Loan and Security Agreement – Buy-Sell Transfer	7-12-2016
Rider to Multifamily Loan and Security Agreement – Cooperation with Rating Agencies and Investors	1-27-2015
Rider to Multifamily Loan and Security Agreement – Repairs – No Repair Reserve Established	7-12-2016
Rider to Multifamily Loan and Security Agreement – Replacement Reserve Fund – Immediate Deposits	7-1-2014
Rider to Multifamily Loan and Security Agreement – Tax Method of Accounting	3-1-2014
Rider to Multifamily Loan and Security Agreement – Value-Add Transaction	7-28-2015
Rider to Multifamily Loan and Security Agreement – Splitting the Note	1-7-2015
Rider to Multifamily Loan and Security Agreement – Entity Guarantor	3-1-2014
Rider to Multifamily Loan and Security Agreement – Regulatory Agreement and Owner Participation Agreement	7-17-2014
Rider to Multifamily Loan and Security Agreement – Standard Freddie Mac Modifications	10-19-2016

Exhibit B Modifications

(See Article XIV)

Are anyExhibit B modifications attached?     XYes  No

TABLE OF CONTENTS

ARTICLE I    DEFINED TERMS; CONSTRUCTION

1.01 Defined Terms

1.02 Construction

ARTICLE II LOAN

2.01 Loan Terms

2.02 Prepayment Premium

2.03 Exculpation

2.04 Application of Payments

2.05 Usury Savings

2.06 Floating Rate Mortgage - Third Party Cap Agreement

ARTICLE III LOAN SECURITY AND GUARANTY

3.01 Security Instrument

3.02 Reserve Funds

3.03 Uniform Commercial Code Security Agreement

3.04 Cap Agreement and Cap Collateral Assignment

3.05 Guaranty

3.06 Reserved

3.07 Reserved

3.08 Reserved

ARTICLE IV RESERVE FUNDS AND REQUIREMENTS

4.01 Reserves Generally

4.02 Reserves for Taxes, Insurance and Other Charges

4.03 Repairs; Repair Reserve Fund

4.04 Replacement Reserve Fund

4.05 Rental Achievement Provisions

4.06 Debt Service Reserve

4.07 Rate Cap Agreement Reserve Fund

4.08 through 4.20 are Reserved

ARTICLE V REPRESENTATIONS AND WARRANTIES

5.01 Review of Documents

5.02 Condition of Mortgaged Property

5.03 No Condemnation

5.04 Actions; Suits; Proceedings

5.05 Environmental

5.06 Commencement of Work; No Labor or Materialmen’s Claims

5.07 Compliance with Applicable Laws and Regulations

5.08 Access; Utilities; Tax Parcels

5.09 Licenses and Permits

5.10 No Other Interests

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5.11 Term of Leases

5.12 No Prior Assignment; Prepayment of Rents

5.13 Illegal Activity

5.14 Taxes Paid

5.15 Title Exceptions

5.16 No Change in Facts or Circumstances

5.17 Financial Statements

5.18 ERISA – Borrower Status

5.19 No Fraudulent Transfer or Preference

5.20 No Insolvency or Judgment

5.21 Working Capital

5.22 Cap Collateral

5.23 Ground Lease

5.24 Purpose of Loan

5.25 Through 5.39 are Reserved

5.40    Recycled SPE Borrower

5.41    Recycled SPE Equity Owner

5.42 through 5.50 are Reserved

5.51 Survival

5.52    through 5.57 are Reserved

5.58    Prohibited Parties Lists; Economic Sanctions Laws

5.59    through 5.62 are Reserved

ARTICLE VI BORROWER COVENANTS

6.01 Compliance with Laws

6.02 Compliance with Organizational Documents

6.03 Use of Mortgaged Property

6.04 Non-Residential Leases

6.05 Prepayment of Rents

6.06 Inspection

6.07 Books and Records; Financial Reporting

6.08 Taxes; Operating Expenses; Ground Rents

6.09 Preservation, Management and Maintenance of Mortgaged Property

6.10 Insurance

6.11 Condemnation

6.12 Environmental Hazards

6.13 Single Purpose Entity Requirements

6.14 Repairs and Capital Replacements

6.15 Residential Leases Affecting the Mortgaged Property

6.16 Litigation; Government Proceedings

6.17 Further Assurances and Estoppel Certificates; Lender’s Expenses

6.18 Cap Collateral

6.19 Ground Lease

6.20 ERISA Requirements

6.21 through 6.52 are Reserved

6.53 Economic Sanctions Laws

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6.54 through 6.58 are Reserved

ARTICLE VII TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER

7.01 Permitted Transfers

7.02 Prohibited Transfers

7.03 Conditionally Permitted Transfers

7.04 Preapproved Intrafamily Transfers

7.05 Lender’s Consent to Prohibited Transfers

7.06 SPE Equity Owner Requirement Following Transfer

7.07 Additional Transfer Requirements - External Cap Agreement

7.08 Reserved

7.09 Reserved

ARTICLE VIII SUBROGATION

ARTICLE IX EVENTS OF DEFAULT AND REMEDIES

9.01 Events of Default

9.02 Protection of Lender’s Security; Security Instrument Secures Future Advances

9.03 Remedies

9.04 Forbearance

9.05 Waiver of Marshalling

ARTICLE X RELEASE; INDEMNITY

10.01 Release

10.02 Indemnity

10.03 Reserved

ARTICLE XI MISCELLANEOUS PROVISIONS

11.01 Waiver of Statute of Limitations, Offsets and Counterclaims

11.02 Governing Law; Consent to Jurisdiction and Venue

11.03 Notice

11.04 Successors and Assigns Bound

11.05 Joint and Several (and Solidary) Liability

11.06 Relationship of Parties; No Third Party Beneficiary

11.07 Severability; Amendments

11.08 Disclosure of Information

11.09 Determinations by Lender

11.10 Sale of Note; Change in Servicer; Loan Servicing

11.11 Supplemental Financing

11.12 Defeasance

11.13 Lender’s Rights to Sell or Securitize

11.14 Cooperation with Rating Agencies and Investors

11.15 Letter of Credit Requirements

11.16 through 11.18 are Reserved

11.19 State Specific Provisions

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11.20 Time is of the Essence

ARTICLE XII    DEFINITIONS

ARTICLE XIII    INCORPORATION OF ATTACHED RIDERS

ARTICLE XIV    INCORPORATION OF ATTACHED EXHIBITS

ARTICLE XV    RESERVED.

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MULTIFAMILY LOAN AND SECURITY AGREEMENT

THIS MULTIFAMILY LOAN AND SECURITY AGREEMENT (“Loan Agreement”) is dated as of the 16th day of November, 2016 and is made by and between NOHO COMMONS PACIFIC OWNER LLC, a Delaware limited liability company (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (together with its successors and assigns, “Lender”).

RECITAL

Lender has agreed to make and Borrower has agreed to accept a loan in the original principal amount of $72,100,000.00 (“Loan”). Lender is willing to make the Loan to Borrower upon the terms and subject to the conditions set forth in this Loan Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of these promises, the mutual covenants contained in this Loan Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

ARTICLE I        DEFINED TERMS; CONSTRUCTION.

1.01 Defined Terms. Each defined term in this Loan Agreement will have the meaning ascribed to that term in Article XII unless otherwise defined in this Loan Agreement.

1.02 Construction.

(a) The captions and headings of the Articles and Sections of this Loan Agreement are for convenience only and will be disregarded in construing this Loan Agreement.

(b) Any reference in this Loan Agreement to an “Exhibit,” an “Article” or a “Section” will, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Loan Agreement or to an Article or Section of this Loan Agreement.

(c) All Exhibits and Riders attached to or referred to in this Loan Agreement are incorporated by reference in this Loan Agreement.

(d) Any reference in this Loan Agreement to a statute or regulation will be construed as referring to that statute or regulation as amended from time to time.

(e) Use of the singular in this Loan Agreement includes the plural and use of the plural includes the singular.

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(f) As used in this Loan Agreement, the term “including” means “including, but not limited to” and the term “includes” means “includes without limitation.”

(g) The use of one gender includes the other gender, as the context may require.

(h) Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document in this Loan Agreement will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in this Loan Agreement), and (ii) any reference in this Loan Agreement to any Person will be construed to include such Person’s successors and assigns.

(i) Any reference in this Loan Agreement to “Lender’s requirements,” “as required by Lender,” or similar references will be construed, after Securitization, to mean Lender’s requirements or standards as determined in accordance with Lender’s and Loan Servicer’s obligations under the terms of the Securitization documents.

ARTICLE II         LOAN.

2.01 Loan Terms. The Loan will be evidenced by the Note and will bear interest and be paid in accordance with the payment terms set forth in the Note.

2.02 Prepayment Premium. Borrower will be required to pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender’s exercise of any right of acceleration of the Indebtedness, as provided in the Note.

2.03 Exculpation. Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Loan Agreement is limited in the manner, and to the extent, provided in the Note.

2.04 Application of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender (unless otherwise required by applicable law), in Lender’s sole and absolute discretion. Neither Lender’s acceptance of an amount that is less than all amounts then due and payable, nor Lender’s application of such payment in the manner authorized, will constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. Notwithstanding the application of any such amount to the Indebtedness, Borrower’s obligations under this Loan Agreement, the Note and all other Loan Documents will remain unchanged.

2.05 Usury Savings. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied

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in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is reduced to the extent necessary to eliminate that violation. The amounts, if any, previously paid to Lender in excess of the permitted amounts will be applied by Lender to reduce the principal amount of the Indebtedness. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges levied in connection with the Indebtedness which constitute interest, will be deemed to be allocated and spread ratably over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading will be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

2.06 Floating Rate Mortgage - Third Party Cap Agreement. If (a) the Note does not provide for interest to accrue at a floating or variable interest rate (other than during any Extension Period, if applicable), and (b) a third party Cap Agreement is not required, then this Section 2.06 and Section 3.04 will be of no force or effect.

(a) So long as there is no Event of Default, Lender or Loan Servicer will remit to Borrower each Cap Payment received by Lender or Loan Servicer with respect to any month for which Borrower has paid in full the monthly installment of principal and interest or interest only, as applicable, due under the Note. Alternatively, at Lender’s option, so long as there is no Event of Default, Lender may apply a Cap Payment received by Lender or Loan Servicer with respect to any month to the applicable monthly payment of accrued interest due under the Note if Borrower has paid in full the remaining portion of such monthly payment of principal and interest or interest only, as applicable.

(b) Neither the existence of a Cap Agreement nor anything in this Loan Agreement will relieve Borrower of its primary obligation to timely pay in full all amounts due under the Note and otherwise due on account of the Indebtedness.

ARTICLE III     LOAN SECURITY AND GUARANTY.

3.01 Security Instrument. Borrower will execute the Security Instrument dated of even date with this Loan Agreement. The Security Instrument will be recorded in the applicable land records in the Property Jurisdiction.

3.02 Reserve Funds.

(a) Security Interest. To secure Borrower’s obligations under this Loan Agreement and to further secure Borrower’s obligations under the Note and the other Loan Documents, Borrower conveys, pledges, transfers and grants to Lender a security interest pursuant to the Uniform Commercial Code of the Property Jurisdiction or any other applicable law in and to all money in the Reserve Funds, as the same may increase or decrease from time to time, all interest and dividends thereon and all proceeds thereof.

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(b) Supplemental Loan. If this Loan Agreement is entered into in connection with a Supplemental Loan and if the same Person is or becomes both Senior Lender and Supplemental Lender, then:

(i) Borrower assigns and grants to Supplemental Lender a security interest in the Reserve Funds established in connection with the Senior Indebtedness as additional security for all of Borrower’s obligations under the Supplemental Note.

(ii) In addition, Borrower assigns and grants to Senior Lender a security interest in the Reserve Funds established in connection with the Supplemental Indebtedness as additional security for all of Borrower’s obligations under the Senior Note.

(iii) It is the intention of Borrower that all amounts deposited by Borrower in connection with either the Senior Loan Documents, the Supplemental Loan Documents, or both, constitute collateral for the Supplemental Indebtedness secured by the Supplemental Instrument and the Senior Indebtedness secured by the Senior Instrument, with the application of such amounts to such Senior Indebtedness or Supplemental Indebtedness to be at the discretion of Senior Lender and Supplemental Lender.

3.03 Uniform Commercial Code Security Agreement. This Loan Agreement is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subjected to a security interest under the Uniform Commercial Code, for the purpose of securing Borrower’s obligations under this Loan Agreement and to further secure Borrower’s obligations under the Note, Security Instrument and other Loan Documents, whether such Mortgaged Property is owned now or acquired in the future, and all products and cash and non-cash proceeds thereof (collectively, “UCC Collateral”), and by this Loan Agreement, Borrower grants to Lender a security interest in the UCC Collateral.

3.04 Cap Agreement and Cap Collateral Assignment. Reserved.

3.05 Guaranty. Borrower will cause each Guarantor (if any) to execute a Guaranty of all or a portion of Borrower’s obligations under the Loan Documents effective as of the date of this Loan Agreement.

3.06    Reserved.

3.07    Reserved.

3.08    Reserved.

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ARTICLE IV        RESERVE FUNDS AND REQUIREMENTS.

4.01 Reserves Generally.

(a) Establishment of Reserve Funds; Investment of Deposits. Unless otherwise provided in Section 4.03 and/or Section 4.04, each Reserve Fund will be established on the date of this Loan Agreement and each of the following will apply:

(i) All Reserve Funds will be deposited in an Eligible Account at an Eligible Institution or invested in “permitted investments” as then defined and required by the Rating Agencies.

(ii) Lender will not be obligated to open additional accounts or deposit Reserve Funds in additional institutions when the amount of any Reserve Fund exceeds the maximum amount of the federal deposit insurance or guaranty. Borrower acknowledges and agrees that it will not have the right to direct Lender as to any specific investment of monies in any Reserve Fund. Lender will not be responsible for any losses resulting from investment of monies in any Reserve Fund or for obtaining any specific level or percentage of earnings on such investment.

(b) Interest on Reserve Funds; Trust Funds. Unless applicable law requires, Lender will not be required to pay Borrower any interest, earnings or profits on the Reserve Funds. Any amounts deposited with Lender under this Article IV will not be trust funds, nor will they operate to reduce the Indebtedness, unless applied by Lender for that purpose pursuant to the terms of this Loan Agreement.

(c) Use of Reserve Funds. Each Reserve Fund will, except as otherwise provided in this Loan Agreement, be used for the sole purpose of paying, or reimbursing Borrower for payment of, the item(s) for which the applicable Reserve Fund was established. Borrower acknowledges and agrees that, except as specified in this Loan Agreement, monies in one Reserve Fund will not be used to pay, or reimburse Borrower for, matters for which another Reserve Fund has been established.

(d) Termination of Reserve Funds. Upon the payment in full of the Indebtedness, Lender will pay to Borrower all funds remaining in any Reserve Funds.

(e) Reserved.

4.02 Reserves for Taxes, Insurance and Other Charges.

(a) Deposits to Imposition Reserve Deposits. Borrower will deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness

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is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due, the items marked “Collect” below. Except as provided in Section 4.02(e), Lender will not require Borrower to make Imposition Reserve Deposits with respect to the items marked “Deferred” below.

Collect Property Insurance premiums or premiums for other Insurance required by Lender under Section 6.10

Collect Taxes and payments in lieu of taxes

Deferred water and sewer charges that could become a Lien on the Mortgaged Property

N/A Ground Rents

Deferred assessments or other charges that could become a Lien on the Mortgaged Property, including home owner association dues

The amounts deposited pursuant to this Section 4.02(a) are collectively referred to in this Loan Agreement as the “Imposition Reserve Deposits.” The obligations of Borrower for which the Imposition Reserve Deposits are required are collectively referred to in this Loan Agreement as “Impositions.” The amount of the Imposition Reserve Deposits must be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added. Lender will maintain records indicating how much of the monthly Imposition Reserve Deposits and how much of the aggregate Imposition Reserve Deposits held by Lender are held for the purpose of paying Taxes, Insurance premiums, Ground Rent (if applicable) and each other Imposition.

(b) Disbursement of Imposition Reserve Deposits. Lender will apply the Imposition Reserve Deposits to pay Impositions so long as no Event of Default has occurred and is continuing. Lender will pay all Impositions from the Imposition Reserve Deposits held by Lender upon Lender’s receipt of a bill or invoice for an Imposition. If Borrower holds a ground lessee interest in the Mortgaged Property and Imposition Reserve Deposits are collected for Ground Rent, then Lender will pay the monthly or other periodic installments of Ground Rent from the Imposition Reserve Deposits, whether or not Lender receives a bill or invoice for such installments. Lender will have no obligation to pay any Imposition to the extent it exceeds the amount of the Imposition Reserve Deposits then held by Lender. Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office, Ground Lessor (if applicable) or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

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(c) Excess or Deficiency of Imposition Reserve Deposits. If at any time the amount of the Imposition Reserve Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess will be credited against future installments of Imposition Reserve Deposits. If at any time the amount of the Imposition Reserve Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower will pay to Lender the amount of the deficiency within 15 days after Notice from Lender.

(d) Delivery of Invoices. Borrower will promptly deliver to Lender a copy of all notices of, and invoices for, Impositions.

(e) Deferral of Collection of Any Imposition Reserve Deposits; Delivery of Receipts. If Lender does not collect an Imposition Reserve Deposit with respect to an Imposition either marked “Deferred” in Section 4.02(a) or pursuant to a separate written deferral by Lender, then on or before the earlier of the date each such Imposition is due, or the date this Loan Agreement requires each such Imposition to be paid, Borrower will provide Lender with proof of payment of each such Imposition. Upon Notice to Borrower, Lender may revoke its deferral and require Borrower to deposit with Lender any or all of the Imposition Reserve Deposits listed in Section 4.02(a), regardless of whether any such item is marked “Deferred” (i) if Borrower does not timely pay any of the Impositions, (ii) if Borrower fails to provide timely proof to Lender of such payment, (iii) at any time during the existence of an Event of Default or (iv) upon placement of a Supplemental Loan in accordance with Section 11.11.

(f) through (i) are Reserved.

4.03 Repairs; Repair Reserve Fund. Reserved.

4.04 Replacement Reserve Fund. Reserved.

4.05 Rental Achievement Provisions. Reserved.

4.06    Debt Service Reserve. Reserved.

4.07    Rate Cap Agreement Reserve Fund. Reserved.

4.08    through 4.20 are Reserved.

ARTICLE V        REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants to Lender as follows as of the date of this Loan Agreement:

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5.01 Review of Documents. Borrower has reviewed: (a) the Note, (b) the Security Instrument, (c) the Commitment Letter, and (d) all other Loan Documents.

5.02 Condition of Mortgaged Property. Except as Borrower may have disclosed to Lender in writing in connection with the issuance of the Commitment Letter, the Mortgaged Property has not been damaged by fire, water, wind or other cause of loss, or any previous damage to the Mortgaged Property has been fully restored.

5.03 No Condemnation. No part of the Mortgaged Property has been taken in Condemnation or other like proceeding, and, to the best of Borrower’s knowledge after due inquiry and investigation, no such proceeding is pending or threatened for the partial or total Condemnation or other taking of the Mortgaged Property.

5.04 Actions; Suits; Proceedings.

(a) There are no judicial, administrative, mediation or arbitration actions, suits or proceedings pending or, to the best of Borrower’s knowledge, threatened in writing against or affecting Borrower (and, if Borrower is a limited partnership, any of its general partners or if Borrower is a limited liability company, any member of Borrower) or the Mortgaged Property which, if adversely determined, would have a Material Adverse Effect.

(b) Reserved.

5.05 Environmental. Except as previously disclosed by Borrower to Lender in writing (which written disclosure may be in certain environmental assessments and other written reports accepted by Lender in connection with the funding of the Indebtedness and dated prior to the date of this Loan Agreement), each of the following is true:

(a) Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions on the Mortgaged Property.

(b) To the best of Borrower’s knowledge after due inquiry and investigation, no Prohibited Activities or Conditions exist or have existed on the Mortgaged Property.

(c) The Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after due inquiry and investigation, the Mortgaged Property has not contained any underground storage tanks in the past. If there is an underground storage tank located on the Mortgaged Property that has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws.

(d) To the best of Borrower’s knowledge after due inquiry and investigation, Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials. Without

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limiting the generality of the foregoing, all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect have been obtained and all such Environmental Permits are in full force and effect.

(e) To the best of Borrower’s knowledge after due inquiry and investigation, no event has occurred with respect to the Mortgaged Property that constitutes, or with the passage of time or the giving of notice, or both, would constitute noncompliance with the terms of any Environmental Permit.

(f) There are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after due inquiry and investigation, threatened in writing that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition.

(g) Borrower has received no actual or constructive notice of any written complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any property that is adjacent to the Mortgaged Property.

5.06 Commencement of Work; No Labor or Materialmen’s Claims. Except as set forth on Exhibit E, prior to the recordation of the Security Instrument, no work of any kind has been or will be commenced or performed upon the Mortgaged Property, and no materials or equipment have been or will be delivered to or upon the Mortgaged Property, for which the contractor, subcontractor or vendor continues to have any rights including the existence of or right to assert or file a mechanic’s or materialmen’s Lien. If any such work of any kind has been commenced or performed upon the Mortgaged Property, or if any such materials or equipment have been ordered or delivered to or upon the Mortgaged Property, then prior to the execution of the Security Instrument, Borrower has satisfied each of the following conditions:

(a) Borrower has fully disclosed in writing to the title insurance company issuing the mortgagee title insurance policy insuring the Lien of the Security Instrument that work has been commenced or performed on the Mortgaged Property, or materials or equipment have been ordered or delivered to or upon the Mortgaged Property.

(b) Borrower has obtained and delivered to Lender and the title company issuing the mortgagee title insurance policy insuring the Lien of the Security Instrument Lien waivers from all contractors, subcontractors, suppliers or any other applicable party, pertaining to all work commenced or performed on the Mortgaged Property, or materials or equipment ordered or delivered to or upon the Mortgaged Property.

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Borrower represents and warrants that all parties furnishing labor and materials for which a Lien or claim of Lien may be filed against the Mortgaged Property have been paid in full and, except for such Liens or claims insured against by the policy of title insurance to be issued in connection with the Loan, there are no mechanics’, laborers’ or materialmen’s Liens or claims outstanding for work, labor or materials affecting the Mortgaged Property, whether prior to, equal with or subordinate to the Lien of the Security Instrument.

5.07 Compliance with Applicable Laws and Regulations.

(a) To the best of Borrower’s knowledge after due inquiry and investigation, each of the following is true:

(i) All Improvements and the use of the Mortgaged Property comply with all applicable statutes, rules and regulations, including all applicable statutes, rules and regulations pertaining to requirements for equal opportunity, anti-discrimination, fair housing, environmental protection, zoning and land use (“legal, non-conforming” status with respect to uses or structures will be considered to comply with zoning and land use requirements for the purposes of this representation).

(ii) The Improvements comply with applicable health, fire, and building codes.

(iii) There is no evidence of any illegal activities relating to controlled substances on the Mortgaged Property.

(b) Reserved.

(c) Reserved.

5.08 Access; Utilities; Tax Parcels. The Mortgaged Property (a) has ingress and egress via a publicly dedicated right of way or via an irrevocable easement permitting ingress and egress, (b) is served by public utilities and services generally available in the surrounding community or otherwise appropriate for the use in which the Mortgaged Property is currently being utilized, and (c) constitutes one or more separate tax parcels.

5.09 Licenses and Permits.

(a) Borrower, any commercial tenant of the Mortgaged Property and/or any operator of the Mortgaged Property is in possession of all material licenses, permits and authorizations required for use of the Mortgaged Property, which are valid and in full force and effect as of the date of this Loan Agreement.

(b) Through (i) are reserved.

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5.10 No Other Interests. To the best of Borrower’s knowledge after due inquiry and investigation, no Person has (a) any possessory interest in the Mortgaged Property or right to occupy the Mortgaged Property except under and pursuant to the provisions of existing Leases by and between tenants and Borrower (a form of residential lease having been previously provided to Lender together with the material terms of any and all Non-Residential Leases at the Mortgaged Property), or (b) an option to purchase the Mortgaged Property or an interest in the Mortgaged Property, except as has been disclosed to and approved in writing by Lender.

5.11 Term of Leases. All Leases for residential dwelling units with respect to the Mortgaged Property satisfy each of the following conditions:

(a) They are on forms that are customary for similar multifamily properties in the Property Jurisdiction.

(b) They are for initial terms of at least 6 months and not more than 2 years (unless otherwise approved in writing by Lender).

(c) They do not include any Corporate Leases (unless otherwise approved in writing by Lender).

(d) They do not include options to purchase.

5.12 No Prior Assignment; Prepayment of Rents. Borrower has (a) not executed any prior assignment of Rents (other than an assignment of Rents securing any prior indebtedness that is being assigned to Lender, or that is being paid off and discharged with the proceeds of the Loan evidenced by the Note or, if this Loan Agreement is entered into in connection with a Supplemental Loan, other than an assignment of Rents securing any Senior Indebtedness), and (b) not performed any acts and has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under any Loan Document. At the time of execution of this Loan Agreement, unless otherwise approved by Lender in writing, there has been no prepayment of any Rents for more than 2 months prior to the due dates of such Rents.

5.13 Illegal Activity. No portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

5.14 Taxes Paid. Borrower has filed all federal, state, county and municipal tax returns required to have been filed by Borrower, and has paid all Taxes which have become due pursuant to such returns or to any notice of assessment received by Borrower, and Borrower has no knowledge of any basis for additional assessment with respect to such Taxes. To the best of Borrower’s knowledge after due inquiry and investigation, there are not presently pending any special assessments against the Mortgaged Property or any part of the Mortgaged Property.

5.15 Title Exceptions. To the best of Borrower’s knowledge after due inquiry and investigation, none of the items shown in the schedule of exceptions to coverage in the

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title policy issued to and accepted by Lender contemporaneously with the execution of this Loan Agreement and insuring Lender’s interest in the Mortgaged Property will have a Material Adverse Effect on the (a) ability of Borrower to pay the Loan in full, (b) ability of Borrower to use all or any part of the Mortgaged Property in the manner in which the Mortgaged Property is being used on the Closing Date, except as set forth in Section 6.03, (c) operation of the Mortgaged Property, or (d) value of the Mortgaged Property.

5.16 No Change in Facts or Circumstances.

(a) All information in the application for the Loan submitted to Lender, including all financial statements for the Mortgaged Property, Borrower, and any Borrower Principal, and all Rent Schedules, reports, certificates, and any other documents submitted in connection with the application (collectively, “Loan Application”) is complete and accurate in all material respects as of the date such information was submitted to Lender.

(b) There has been no change in any fact or circumstance since the Loan Application was submitted to Lender that would make any information submitted as part of the Loan Application materially incomplete or inaccurate.

(c) The organizational structure of Borrower is as set forth in Exhibit H.

5.17 Financial Statements. The financial statements of Borrower and each Borrower Principal furnished to Lender as part of the Loan Application reflect in each case a positive net worth as of the date of the applicable financial statement.

5.18 ERISA – Borrower Status. Borrower represents as follows:

(a) Borrower is not an “investment company,” or a company under the Control of an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.

(b) Borrower is not an “employee benefit plan,” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA or a “plan” to which Section 4975 of the Tax Code applies, and the assets of Borrower do not constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA.

(c) Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA, and is not subject to state statutes regulating investments or fiduciary obligations with respect to governmental plans.

5.19 No Fraudulent Transfer or Preference. No Borrower or Borrower Principal (a) has made, or is making in connection with and as security for the Loan, a transfer of an interest in the property of Borrower or Borrower Principal to or for the benefit of Lender

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or otherwise as security for any of the obligations under the Loan Documents which is or could constitute a voidable preference under federal bankruptcy, state insolvency or similar applicable creditors’ rights laws, or (b) has made, or is making in connection with the Loan, a transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of Borrower or any Borrower Principal in property which is or could constitute a voidable preference under federal bankruptcy, state insolvency or similar applicable creditors’ rights laws, or (c) has incurred, or is incurring in connection with the Loan, any obligation (including any obligation to or for the benefit of an insider under an employment contract) which is or could constitute a fraudulent transfer under federal bankruptcy, state insolvency, or similar applicable creditors’ rights laws.

5.20 No Insolvency or Judgment.

(a) No Pending Proceedings or Judgments. No Borrower or Borrower Principal is (i) the subject of or a party to (other than as a creditor) any completed or pending bankruptcy, reorganization or insolvency proceeding, or (ii) the subject of any judgment unsatisfied of record or docketed in any court located in the United States.

(b) Insolvency. Borrower is not presently insolvent, and the Loan will not render Borrower insolvent. As used in this Section, the term “insolvent” means that the total of all of a Person’s liabilities (whether secured or unsecured, contingent or fixed, or liquidated or unliquidated) is in excess of the value of all of the assets of the Person that are available to satisfy claims of creditors.

5.21 Working Capital. After the Loan is made, Borrower intends to have sufficient working capital, including cash flow from the Mortgaged Property or other sources, not only to adequately maintain the Mortgaged Property, but also to pay all of Borrower’s outstanding debts as they come due (other than any balloon payment due upon the maturity of the Loan). Lender acknowledges that no members or partners of Borrower or any Borrower Principal will be obligated to contribute equity to Borrower for purposes of providing working capital to maintain the Mortgaged Property or to pay Borrower’s outstanding debts except as may otherwise be required under their organizational documents.

5.22    Cap Collateral. Reserved.

5.23 Ground Lease. Reserved.

5.24 Purpose of Loan. The purpose of the Loan is as indicated by the checked boxes below:

[ ] Refinance Loan: The Loan is a refinancing of existing indebtedness and, except to the extent specifically required by Lender, there is to be no change in the ownership of either the Mortgaged Property or Borrower Principals. The intended

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use of any cash received by Borrower from Lender, to the extent applicable, in connection with the refinancing has been fully disclosed to Lender.

X Acquisition Loan – Mortgaged Property: All of the consideration given or received or to be given or received in connection with the acquisition of the Mortgaged Property has been fully disclosed to Lender. The Mortgaged Property was or will be purchased from REDROCK NOHO RESIDENTIAL, LLC (“Property Seller”). No Borrower or Borrower Principal has or had, directly or indirectly (through a family member or otherwise), any interest in the Property Seller and the acquisition of the Mortgaged Property is an arm’s-length transaction. To the best of Borrower’s knowledge after due inquiry and investigation, the purchase price of the Mortgaged Property represents the fair market value of the Mortgaged Property and Property Seller is not or will not be insolvent subsequent to the sale of the Mortgaged Property.

[ ] Acquisition Loan – Membership Interests: All of the consideration given or received or to be given or received in connection with the acquisition of 100% of the membership interests of the Borrower (“Membership Interests”) has been fully disclosed to Lender. The Membership Interests were or will be purchased from _________________________________ (“Membership Interests Seller”). No Borrower Principal has or had, directly or indirectly (through a family member or otherwise), any interest in the Membership Interests Seller and the acquisition of the Membership Interests is an arm’s-length transaction. To the best of Borrower’s knowledge after due inquiry and investigation, the purchase price of the Membership Interests represents the fair market value of the Membership Interests and Membership Interest Seller is not or will not be insolvent subsequent to the sale of the Membership Interest.

[ ] Supplemental Loan: The Loan is a Supplemental Loan and, except to the extent specifically required or approved by Lender, there has been no change in the ownership of either the Mortgaged Property or Borrower Principals since the date of the Senior Note. The intended use of any cash received by Borrower from Lender, to the extent applicable, in connection with the Supplemental Loan has been fully disclosed to Lender.

[ ] Cross-Collateralized/Cross-Defaulted Loan Pool: The Loan is part of a cross-collateralized/cross-defaulted pool of loans described as follows:

____ being simultaneously made to Borrower and/or Borrower’s Affiliates

____ made previously to Borrower and/or Borrower’s Affiliates

The intended use of any cash received by Borrower from Lender, to the extent applicable, in connection with the Loan and the other loans comprising the cross-collateralized/cross-defaulted loan pool has been fully disclosed to Lender.

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5.25 through 5.39 are reserved.

5.40    Recycled SPE Borrower. Reserved.

5.41    Recycled SPE Equity Owner. Reserved.

5.42 through 5.50 are Reserved.

5.51 Survival. The representations and warranties set forth in this Loan Agreement will survive until the Indebtedness is paid in full; however, the representations and warranties set forth in Section 5.05 will survive beyond repayment of the entire Indebtedness, to the extent provided in Section 10.02(i).

5.52    through 5.57 are Reserved.

5.58 Prohibited Parties Lists; Economic Sanctions Laws. To the best of Borrower’s knowledge, after due inquiry and investigation, none of (a) Borrower, (b) any Borrower Principal, (c) any Person with a collective equity interest (whether direct or indirect) in Borrower of 25% or more, or (d) any Non-U.S. Equity Holder, is presently listed or at any time has been listed on any Prohibited Parties List.

5.59    through 5.62 are Reserved.

ARTICLE VI     BORROWER COVENANTS.

6.01 Compliance with Laws. Borrower will comply with all laws, ordinances, rules, regulations and requirements of any Governmental Authority having jurisdiction over the Mortgaged Property and all licenses and permits and all recorded covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, Repairs, Capital Replacements, fair housing, disability accommodation, zoning and land use, applicable building codes, special use permits and environmental regulations, Leases and the maintenance and disposition of tenant security deposits. Borrower will take appropriate measures to prevent, and will not engage in or knowingly permit, any illegal activities at the Mortgaged Property, including those that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the Lien created by the Security Instrument or Lender’s interest in the Mortgaged Property. Borrower will at all times maintain records sufficient to demonstrate compliance with the provisions of this Section 6.01.

6.02 Compliance with Organizational Documents. Borrower will at all times comply with all laws, regulations and requirements of any Governmental Authority relating to Borrower’s formation, continued existence and good standing in its state of formation and, if different, in the Property Jurisdiction. Borrower will at all times comply with its organizational documents, including its partnership agreement (if Borrower is a

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partnership), its by-laws (if Borrower is a corporation or housing cooperative corporation or association) or its operating agreement (if Borrower is a limited liability company or tenancy-in-common). If Borrower is a housing cooperative corporation or association, Borrower will at all times maintain its status as a “cooperative housing corporation” as such term is defined in Section 216(b) of the Internal Revenue Code of 1986, as amended, or any successor statute thereto.

6.03 Use of Mortgaged Property.

(a) Unless required by applicable law, without the prior written consent of Lender, Borrower will not take any of the following actions:

(i) Allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Loan Agreement is executed.

(ii) Convert any individual dwelling units or common areas to commercial use.

(iii) Initiate a change in the zoning classification of the Mortgaged Property or acquiesce to a change in the zoning classification of the Mortgaged Property.

(iv) Establish any condominium or cooperative regime with respect to the Mortgaged Property beyond any which may be in existence on the date of this Loan Agreement.

(v) Combine all or any part of the Mortgaged Property with all or any part of a tax parcel which is not part of the Mortgaged Property.

(vi) Subdivide or otherwise split any tax parcel constituting all or any part of the Mortgaged Property.

(vii) Add to or change any location at which any of the Mortgaged Property is stored, held or located unless Borrower (A) gives Notice to Lender within 30 days after the occurrence of such addition or change, (B) executes and delivers to Lender any modifications of or supplements to this Loan Agreement that Lender may require, and (C) authorizes the filing of any financing statement which may be filed in connection with this Loan Agreement, as Lender may require.

(viii) Convert, in whole or in part, any non-residential income producing units to non-income producing units.

(b) Reserved.

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(c) Notwithstanding anything contained in this Section to the contrary, if Borrower is a housing cooperative corporation or association, Lender acknowledges and consents to Borrower’s use of the Mortgaged Property as a housing cooperative.

6.04 Non-Residential Leases.

(a) Prohibited New Non-Residential Leases or Modified Non-Residential Leases. Except as set forth in Section 6.04(b), Borrower will not enter into any New Non-Residential Lease, enter into any Modified Non-Residential Lease or terminate any Non-Residential Lease (including any Non-Residential Lease in existence on the date of this Loan Agreement) without the prior written consent of Lender.

(b) New Non-Residential Leases or Modified Non-Residential Leases for which Lender’s Consent is Not Required. Lender’s consent will not be required for Borrower to enter into a Modified Non-Residential Lease or a New Non-Residential Lease, provided that the Modified Non-Residential Lease or New Non-Residential Lease satisfies each of the following requirements:

(i) The tenant under the New Non-Residential Lease or Modified Non-Residential Lease is not an Affiliate of Borrower or any Guarantor.

(ii) The terms of the New Non-Residential Lease or Modified Non-Residential Lease are at least as favorable to Borrower as those customary in the applicable market at the time Borrower enters into the New Non-Residential Lease or Modified Non-Residential Lease.

(iii) The Rents paid to Borrower pursuant to the New Non-Residential Lease or Modified Non-Residential Lease are not less than 90% of the rents paid to Borrower pursuant to the Non-Residential Lease, if any, for that portion of the Mortgaged Property that was in effect prior to the New Non-Residential Lease or Modified Non-Residential Lease.

(iv) The term of the New Non-Residential Lease or Modified Non-Residential Lease, including any option to extend, is 10 years or less.

(v) Any New Non-Residential Lease must provide that the space may not be used or operated, in whole or in part, for any of the following:

(A) The operation of a so-called “head shop” or other business devoted to the sale of articles or merchandise normally used or associated with illegal or unlawful activities such as, but not limited to, the sale of paraphernalia used in connection with marijuana or controlled drugs or substances.

(B) A gun shop, shooting gallery or firearms range.

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(C) A so-called massage parlor or any business which sells, rents or permits the viewing of so-called “adult” or pornographic materials such as, but not limited to, adult magazines, books, movies, photographs, sexual aids, sexual articles and sex paraphernalia.

(D) Any use involving the sale or distribution of any flammable liquids, gases or other Hazardous Materials.

(E) An off-track betting parlor or arcade.

(F) A liquor store or other establishment whose primary business is the sale of alcoholic beverages for off-site consumption.

(G) A burlesque or strip club.

(H) Any illegal activity.

(vi) The aggregate of the income derived from the space leased pursuant to the New Non-Residential Lease accounts for less than 20% of the gross income of the Mortgaged Property on the date that Borrower enters into the New Non-Residential Lease.

(vii) Such New Non-Residential Lease is not an oil or gas lease, pipeline agreement or other instrument related to the production or sale of oil or natural gas.

(c) Executed Copies of Non-Residential Leases. Borrower will, without request by Lender, deliver a fully executed copy of each Non-Residential Lease to Lender promptly after such Non-Residential Lease is signed.

(d) Subordination and Attornment Requirements. All Non-Residential Leases, regardless of whether Lender’s consent or approval is required, will specifically include the following provisions:

(i) The Lease is subordinate to the Lien of the Security Instrument, with such subordination to be self-executing.

(ii) The tenant will attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner.

(iii) The tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request.

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(iv) The tenant will, upon receipt of a written request from Lender following the occurrence of and during the continuance of an Event of Default, pay all Rents payable under the Lease to Lender.

(v)    Reserved.

(vi)    Reserved.

6.05 Prepayment of Rents. Borrower will not receive or accept Rent under any Lease (whether a residential Lease or a Non-Residential Lease) for more than 2 months in advance.

6.06 Inspection.

(a) Right of Entry. Borrower will permit Lender, its agents, representatives and designees and any interested Governmental Authority to make or cause to be made entries upon and inspections of the Mortgaged Property to inspect, among other things: (i) Repairs, (ii) Capital Replacements, (iii) Restorations, (iv) Property Improvement Alterations, and (v) any other Improvements, both in process and upon completion (including environmental inspections and tests performed by professional inspection engineers) during normal business hours, or at any other reasonable time, upon reasonable Notice to Borrower if the inspection is to include occupied residential units (which Notice need not be in writing). During normal business hours, or at any other reasonable time, Borrower will also permit Lender to examine all books and records and contracts and bills pertaining to the foregoing. Notice to Borrower will not be required in the case of an emergency, as determined in Lender’s Discretion, or when an Event of Default has occurred and is continuing.

(b) Inspection of Mold. If Lender determines that Mold has or may have developed as a result of a water intrusion event or leak, Lender, at Lender’s Discretion, may require that a professional inspector inspect the Mortgaged Property to confirm whether Mold has developed and, if so, thereafter as frequently as Lender determines is necessary until any issue with Mold and its cause(s) are resolved to Lender’s satisfaction. Such inspection will be limited to a visual and olfactory inspection of the area that has experienced the Mold, water intrusion event or leak. Borrower will be responsible for the cost of each such professional inspection and any remediation deemed to be necessary as a result of the professional inspection. After any issue with Mold is remedied to Lender’s satisfaction, Lender will not require a professional inspection any more frequently than once every 3 years unless Lender otherwise becomes aware of Mold as a result of a subsequent water intrusion event or leak.

(c) Certification in Lieu of Inspection. If Lender or Loan Servicer determines not to conduct an annual inspection of the Mortgaged Property, and in lieu thereof Lender requests a certification, Borrower will provide to Lender a factually

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correct certification, each year that the annual inspection is waived, to the following effect:

Borrower has not received any written complaint, notice, letter or other written communication from any tenant, Property Manager or governmental authority regarding mold, fungus, microbial contamination or pathogenic organisms (“Mold”) or any activity, condition, event or omission that causes or facilitates the growth of Mold on or in any part of the Mortgaged Property or, if Borrower has received any such written complaint, notice, letter or other written communication, that Borrower has investigated and determined that no Mold activity, condition or event exists or alternatively has fully and properly remediated such activity, condition, event or omission in compliance with the Moisture Management Plan for the Mortgaged Property.

If Borrower is unwilling or unable to provide such certification, Lender may require a professional inspection of the Mortgaged Property at Borrower’s expense.

6.07    Books and Records; Financial Reporting.

(a) Delivery of Books and Records. Borrower will keep and maintain at all times at the Mortgaged Property or the Property Manager’s office, and upon Lender’s request will make available at the Mortgaged Property (or, at Borrower’s option, at the Property Manager’s office), complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, in accordance with GAAP consistently applied (or such other method which is reasonably acceptable to Lender), and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property. The books, records, contracts, Leases and other instruments will be subject to examination and inspection by Lender at any reasonable time.

(b) Delivery of Statement of Income and Expenses; Rent Schedule and Other Statements. Borrower will furnish to Lender each of the following:

(i) Within 25 days after the end of each calendar quarter prior to Securitization and within 35 days after each calendar quarter after Securitization, each of the following:

(A) A Rent Schedule dated no earlier than the date that is 5 days prior to the end of such quarter.

(B) A statement of income and expenses for Borrower’s operation of the Mortgaged Property that is either of the following:

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(1) For the 12 month period ending on the last day of such quarter.

(2) If at the end of such quarter Borrower or any Affiliate of Borrower has owned the Mortgaged Property for less than 12 months, for the period commencing with the acquisition of the Mortgaged Property by Borrower or its Affiliate, and ending on the last day of such quarter.

(C) When requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal quarter.

(ii) Within 90 days after the end of each fiscal year of Borrower, each of the following:

(A) An annual statement of income and expenses for Borrower’s operation of the Mortgaged Property for that fiscal year.

(B) A balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year and a profit and loss statement for Borrower.

(C) An accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts.

(iii) Within 30 days after the date of filing, copies of all tax returns filed by Borrower.

(c) Delivery of Borrower Financial Statements Upon Request. Borrower will furnish to Lender each of the following:

(i) Upon Lender’s request, in Lender’s sole and absolute discretion prior to a Securitization, and thereafter upon Lender’s request in Lender’s Discretion, a monthly Rent Schedule and a monthly statement of income and expenses for Borrower’s operation of the Mortgaged Property, in each case within 25 days after the end of each month.

(ii) Upon Lender’s request in Lender’s sole and absolute discretion prior to a Securitization, and thereafter upon Lender’s request in Lender’s

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Discretion, within 10 days after such a request from Lender, each of the following:

(A) A statement that identifies all owners of any interest in Borrower and any Designated Entity for Transfers and the interest held by each (unless Borrower or any Designated Entity for Transfers is a publicly-traded entity in which case such statement of ownership will not be required), and if Borrower or a Designated Entity for Transfers is a corporation then all officers and directors of Borrower and the Designated Entity for Transfers, and if Borrower or a Designated Entity for Transfers is a limited liability company then all non-member Managers.

(B) To the extent not included in the statement provided under Section 6.07(c)(ii)(A), a statement that identifies (1) all Persons with a collective equity interest (whether direct or indirect) of 25% or more in Borrower, and (2) all Non-U.S. Equity Holders.

(iii) Upon Lender’s request in Lender’s Discretion, such other financial information or property management information (including information on tenants under Leases to the extent such information is available to Borrower, copies of bank account statements from financial institutions where funds owned or controlled by Borrower are maintained, and an accounting of security deposits) as may be required by Lender from time to time, in each case within 30 days after such request.

(iv) Upon Lender’s request in Lender’s Discretion, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender within 30 days after such request. However, Lender will not require the foregoing more frequently than quarterly except when there has been an Event of Default and such Event of Default is continuing, in which case Lender may require Borrower to furnish the foregoing more frequently.

(d) Form of Statements; Audited Financials. A natural person having authority to bind Borrower (or the SPE Equity Owner or Guarantor, as applicable) will certify each of the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) to be complete and accurate. Each of the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) will be in such form and contain such detail as Lender may reasonably require. Lender also may require that any of the statements, schedules or reports listed in Sections 6.07(b), 6.07(c) and 6.07(f) be audited at Borrower’s expense by independent certified public accountants acceptable to Lender, at any time when an Event of Default has occurred and is

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continuing or at any time that Lender, in its reasonable judgment, determines that audited financial statements are required for an accurate assessment of the financial condition of Borrower or of the Mortgaged Property.

(e) Failure to Timely Provide Financial Statements. If Borrower fails to provide in a timely manner the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f), Lender will give Notice to Borrower specifying the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) that Borrower has failed to provide. If Borrower has not provided the required statements, schedules and reports within 10 Business Days following such Notice, then (i) Borrower will pay a late fee of $500 for each late statement, schedule or report, plus an additional $500 per month that any such statement, schedule or report continues to be late, and (ii) Lender will have the right to have Borrower’s books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender will become immediately due and payable and will become an additional part of the Indebtedness as provided in Section 9.02. Notice to Borrower of Lender’s exercise of its rights to require an audit will not be required in the case of an emergency, as determined in Lender’s Discretion, or when an Event of Default has occurred and is continuing.

(f) Delivery of Guarantor and SPE Equity Owner Financial Statements. Borrower will cause Guarantor and/or SPE Equity Owner to deliver each of the following to Lender within 10 Business Days following Lender’s request:

(i) Guarantor’s or SPE Equity Owner’s (as applicable) balance sheet and profit and loss statement as of the end of (A) the quarter that ended at least 30days prior to the due date of the requested items, and/or (B) the fiscal year that ended at least 90 days prior to the due date of the requested items.

(ii) Other Guarantor or SPE Equity Owner (as applicable) financial statements as Lender may reasonably require.

(iii) Written updates on the status of all litigation proceedings that Guarantor or SPE Equity Owner (as applicable) disclosed or should have disclosed to Lender as of the Closing Date.

(iv) If an Event of Default has occurred and is continuing, copies of Guarantor’s or SPE Equity Owner’s (as applicable) most recent filed state and federal tax returns, including any current tax return extensions.

(g) Reporting Upon Event of Default. If an Event of Default has occurred and is continuing, Borrower will deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

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(h) Credit Reports. Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(i) Reserved.

6.08 Taxes; Operating Expenses; Ground Rents.

(a) Payment of Taxes and Ground Rent. Subject to the provisions of Sections 6.08(c) and (d), Borrower will pay or cause to be paid (i) all Taxes when due and before the addition of any interest, fine, penalty or cost for nonpayment, and (ii) if Borrower’s interest in the Mortgaged Property is as a Ground Lessee, then the monthly or other periodic installments of Ground Rent before the last date upon which each such installment may be made without penalty or interest charges being added.

(b) Payment of Operating Expenses. Subject to the provisions of Section 6.08(c), Borrower will (i) pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including utilities, Repairs and Capital Replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added, and (ii) pay Insurance premiums at least 30 days prior to the expiration date of each policy of Insurance, unless applicable law specifies some lesser period.

(c) Payment of Impositions and Reserve Funds. If Lender is collecting Imposition Reserve Deposits pursuant to Article IV, then so long as no Event of Default exists, Borrower will not be obligated to pay any Imposition for which Imposition Reserve Deposits are being collected, whether Taxes, Insurance premiums, Ground Rent (if applicable) or any other individual Impositions, but only to the extent that sufficient Imposition Reserve Deposits are held by Lender for the purpose of paying that specific Imposition and Borrower has timely delivered to Lender any bills or premium notices that it has received with respect to that specific Imposition (other than Ground Rent). Lender will have no liability to Borrower for failing to pay any Impositions to the extent that: (i) any Event of Default has occurred and is continuing, (ii) insufficient Imposition Reserve Deposits are held by Lender at the time an Imposition becomes due and payable, or (iii) Borrower has failed to provide Lender with bills and premium notices as provided in this Section.

(d) Right to Contest. Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than Insurance premiums and Ground Rent (if applicable), if: (i) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (ii) the Mortgaged Property is not in danger of being sold or forfeited, (iii) if Borrower has not already paid the Imposition, Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (iv) Borrower furnishes whatever additional security is required in

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the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of reserves established by Borrower to pay the contested Imposition.

6.09 Preservation, Management and Maintenance of Mortgaged Property.

(a) Maintenance of Mortgaged Property; No Waste. Borrower will keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality. Borrower will not commit waste or permit impairment or deterioration of the Mortgaged Property.

(b) Abandonment of Mortgaged Property. Borrower will not abandon the Mortgaged Property.

(c) Preservation of Mortgaged Property. Borrower will restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not Insurance proceeds or Condemnation awards are available to cover any costs of such Restoration or repair; provided, however, that Borrower will not be obligated to perform such Restoration or repair if (i) no Event of Default has occurred and is continuing, and (ii) Lender has elected to apply any available Insurance proceeds and/or Condemnation awards to the payment of Indebtedness pursuant to Section 6.10(l) or Section 6.11(d).

(d) Property Management. Borrower will provide for professional management of the Mortgaged Property by the Property Manager at all times under a property management agreement approved by Lender in writing. Borrower will not surrender, terminate, cancel, modify, renew or extend its property management agreement, or enter into any other agreement relating to the management or operation of the Mortgaged Property with Property Manager or any other Person, or consent to the assignment by the Property Manager of its interest under such property management agreement, in each case without the consent of Lender, which consent will not be unreasonably withheld.

(i) If at any time Lender consents to the appointment of a new Property Manager, such new Property Manager and Borrower will, as a condition of Lender’s consent, execute an Assignment of Management Agreement in a form acceptable to Lender.

(ii) If any such replacement Property Manager is an Affiliate of Borrower, and if a nonconsolidation opinion was delivered on the Closing Date, Borrower will deliver to Lender an updated nonconsolidation opinion in form and substance satisfactory to Lender with regard to nonconsolidation.

(iii) Reserved.

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(e) Alteration of Mortgaged Property. Borrower will give Notice to Lender of and, unless otherwise directed in writing by Lender, will appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender’s security or Lender’s rights under this Loan Agreement. Borrower will not (and will not permit any tenant or other Person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property, including any removal, demolition or alteration occurring in connection with a rehabilitation of all or part of the Mortgaged Property, except that each of the following is permitted:

(i) Repairs or Capital Replacements in accordance with the terms and conditions of this Loan Agreement.

(ii) Any repairs or replacements made in connection with the replacement of tangible Personalty.

(iii) If Borrower is a cooperative housing corporation or association, repairs or replacements to the extent permitted with respect to individual dwelling units under the form of a proprietary lease or occupancy agreement.

(iv)  Any repairs orreplacements in connection with making an individual unit ready for a new occupant or pursuant to Sections 6.09(a) and (c).

(v) Property Improvement Alterations, provided that each of the following conditions is satisfied:

(A) At least 30 days prior to the commencement of any Property Improvement Alterations, Borrower must submit to Lender a Property Improvement Notice. The Property Improvement Notice must include all of the following information:

(1) The expected start date and completion date of the Property Improvement Alterations.

(2) A description of the anticipated Property Improvement Alterations to be made.

(3) The projected budget of the Property Improvement Alterations and the source of funding.

If any changes to Property Improvement Alterations as described in the Property Improvement Notice are made that extend beyond the overall scope and intent of the Property Improvement Alterations set forth in the Property Improvement Notice (e.g., renovations changed to renovate common areas but Property Improvement Notice only described renovations to the residential

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dwelling unit bathrooms), then Borrower must submit a new Property Improvement Notice to Lender in accordance with this Section 6.09(e)(v)(A).

(B) The Property Improvement Alterations may not be commenced within 12 months prior to the Maturity Date without prior written consent of the Lender and must be completed at least 6 months prior to the Maturity Date.

(C) Neither the performance nor completion of the Property Improvement Alterations may result in any of the following:

(1)    An adverse effect on any Major Building System.

(2) A change in residential dwelling unit configurations on a permanent basis.

(3) An increase or decrease in the total number of residential dwelling units.

(4) The demolition of any existing Improvements.

(5) A permanent obstruction of tenants’ access to units or a temporary obstruction of tenants’ access to units without a reasonable alternative access provided during the period of renovation which causes the obstruction.

(D) The cost of the Property Improvement Alterations made to residential dwelling units during the term of the Mortgage must not exceed the Property Improvement Total Amount.

(E) The Leases used to calculate Minimum Occupancy for use in Section 6.09(e)(v)(I) must meet all of the following conditions:

(1) The Leases are with tenants that are not Affiliates of Borrower or Guarantor (except as otherwise expressly agreed by Lender in writing).

(2) The Leases are on arms’ length terms and conditions.

(3) The Leases otherwise satisfy the requirements of the Loan Documents.

(F) The Property Improvement Alterations must be completed in accordance with Section 6.14 and any reference to Repairs in

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Sections 6.06 and 6.14 will be deemed to include Property Improvement Alterations.

(G) Upon completion of the applicable Property Improvement Alterations, Borrower must provide all of the following to the Lender:

(1) Borrower’s Certificate of Property Improvement Alterations Completion, in the form attached as Exhibit O (“Certificate of Completion”).

(2) Any other certificates or approval, acceptance or compliance required by Lender, including certificates of occupancy, from any Governmental Authority having jurisdiction over the Mortgaged Property and the Property Improvement Alterations and professional engineers certifications.

(H) Borrower must deliver to Lender within 10 days of Lender’s request a written status update on the Property Improvement Alterations.

(I) While Property Improvement Alterations that result in individual residential dwelling units not being available for leasing are ongoing, if a Rent Schedule shows that the occupancy of the Mortgaged Property has decreased to less than the Minimum Occupancy, Borrower must take each of the following actions:

(1) Complete all pending Property Improvement Alterations to such individual residential dwelling units in a timely manner until the Mortgaged Property satisfies the Minimum Occupancy requirement.

(2) Suspend any additional Property Improvement Alterations which would cause residential dwelling units to be unavailable for leasing until the Mortgaged Property satisfies the Minimum Occupancy requirement.

(J) If Borrower has commenced Property Improvement Alterations on the Mortgaged Property, then Borrower will deliver to Lender, upon Lender’s request, and in a timely manner, the Certificate of Completion together with such additional information as Lender may request.

(K) At no time during the term of the Loan may the Property Improvement Total Amount (including any amounts expended by

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Borrower on Property Improvement Alterations for Non-Residential Units) then outstanding for services and/or materials that are then due and payable exceed 10% of the original principal loan amount;provided that at no time will such amount exceed the Property Improvement Total Amount.

(vi)    Reserved.

(vii)    Reserved.

(viii)    Reserved.

(f) Establishment of MMP. Unless otherwise waived by Lender in writing, Borrower will have or will establish and will adhere to the MMP. If Borrower is required to have an MMP, Borrower will keep all MMP documentation at the Mortgaged Property or at the Property Manager’s office and available for review by Lender or the Loan Servicer during any annual assessment or other inspection of the Mortgaged Property that is required by Lender. At a minimum, the MMP must contain a provision for: (i) staff training, (ii) information to be provided to tenants, (iii) documentation of the plan, (iv) the appropriate protocol for incident response and remediation, and (v) routine, scheduled inspections of common space and unit interiors.

(g) No Reduction of Housing Cooperative Charges. If Borrower is a housing cooperative corporation or association, until the Indebtedness is paid in full, Borrower will not reduce the maintenance fees, charges or assessments payable by shareholders or residents under proprietary leases or occupancy agreements below a level which is sufficient to pay all expenses of Borrower, including all operating and other expenses for the Mortgaged Property and all payments due pursuant to the terms of the Note and any Loan Documents.

(h) through (l) are reserved.

6.10 Insurance. At all times during the term of this Loan Agreement, Borrower will maintain at its sole cost and expense, for the mutual benefit of Borrower and Lender, all of the Insurance specified in this Section 6.10, as required by Lender and applicable law, and in such amounts and with such maximum deductibles as Lender may require, as those requirements may change:

(a) Property Insurance. Borrower will keep the Improvements insured at all times against relevant physical hazards that may cause damage to the Mortgaged Property as Lender may require (“Property Insurance”). Required Property Insurance coverage may include any or all of the following:

(i) All Risks of Physical Loss. Insurance against loss or damage from fire, wind, hail, and other related perils within the scope of a “Special Causes

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of Loss” or “All Risk” policy, in an amount not less than the Replacement Cost of the Mortgaged Property.

(ii) Ordinance and Law. If any part of the Mortgaged Property is legal non-conforming under current building, zoning or land use laws or ordinances, then “Ordinance and Law Coverage” in the amount required by Lender.

(iii) Flood. If any of the Improvements are located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as a “Special Flood Hazard Area,” flood Insurance in the amount required by Lender.

(iv) Windstorm. If windstorm and/or windstorm related perils and/or “named storm” are excluded from the “Special Causes of Loss” policy required under Section 6.10(a)(i), then separate coverage for such risks (“Windstorm Coverage”), either through an endorsement or a separate policy. Windstorm Coverage will be written in an amount not less than the Replacement Cost of the Mortgaged Property.

(v) Boiler and Machinery/Equipment Breakdown. If the Mortgaged Property contains a central heating, ventilation and cooling system (“HVAC System”) where steam boilers and/or other pressurized systems are in operation and are regulated by the Property Jurisdiction, Insurance providing coverage in the amount required by Lender.

(vi) Builder’s Risk. During any period of construction or Restoration, builder’s risk Insurance (including fire and other perils within the scope of a policy known as “Causes of Loss – Special Form” or “All Risk” policy) in an amount not less than the sum of the related contractual arrangements.

(vii) Other. Insurance for other physical perils applicable to the Mortgaged Property as may be required by Lender including earthquake, sinkhole, mine subsidence, avalanche, mudslides, and volcanic eruption. If Lender reasonably requires any updated reports or other documentation to determine whether additional Insurance is necessary or prudent, Borrower will pay for the updated reports or other documentation at its sole cost and expense.

(viii) Reserved.

(ix) Reserved.

(b) Business Income/Rental Value. Business income/rental value Insurance for all relevant perils to be covered in the amount required by Lender, but in no case less than the effective gross income attributable to the Mortgaged Property for the preceding 12 months, as determined by Lender in Lender’s Discretion.

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(c) Commercial General Liability Insurance. Commercial general liability Insurance against legal liability claims for personal and bodily injury, property damage and contractual liability in such amounts and with such maximum deductibles as Lender may require, but not less than $1,000,000 per occurrence and $2,000,000 in the general aggregate on a per-location basis, plus excess and/or umbrella liability coverage in such amounts as Lender may require.

(d) Terrorism Insurance. Insurance required under Section 6.10(a)(i) and (ii) and Section 6.10(b) will provide coverage for acts of terrorism. Terrorism coverage may be provided through one or more separate policies, which will be on terms (including amounts) consistent with those required under Section 6.10(a)(i) and (ii) and Section 6.10(b). If Insurance against acts of terrorism is not available at commercially reasonable rates and if the related hazards are not at the time commonly insured against for properties similar to the Mortgaged Property and located in or around the region in which the Mortgaged Property is located, then Lender may opt to temporarily suspend, cap or otherwise limit the requirement to have such terrorism insurance for a period not to exceed one year, unless such suspension or cap is renewed by Lender for additional one year increments.

(e) Payment of Premiums. All Property Insurance premiums and premiums for other Insurance required under this Section 6.10 will be paid in the manner provided in Article IV, unless Lender has designated in writing another method of payment.

(f) Policy Requirements. The following requirements apply with respect to all Insurance required by this Section 6.10:

(i) All Insurance policies will be in a form approved by Lender.

(ii) All Insurance policies will be issued by Insurance companies authorized to do business in the Property Jurisdiction and/or acting as eligible surplus insurers in the Property Jurisdiction, which have a general policyholder’s rating satisfactory to Lender.

(iii) All Property Insurance policies will contain a standard mortgagee or mortgage holder’s clause and a loss payable clause, in favor of, and in a form approved by, Lender.

(iv) If any Insurance policy contains a coinsurance clause, the coinsurance clause will be offset by an agreed amount endorsement in an amount not less than the Replacement Cost.

(v) All commercial general liability and excess/umbrella liability policies will name Lender, its successors and/or assigns, as additional insured.

(vi) Professional liability policies will not include Lender, its successors and/or assigns, as additional insured.

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(vii) All Insurance policies will provide that the insurer will notify Lender in writing of cancelation of policies at least 10 days before the cancelation of the policy by the insurer for nonpayment of the premium or nonrenewal and at least 30 days before cancelation by the insurer for any other reason.

(g) Evidence of Insurance; Insurance Policy Renewals. Borrower will deliver to Lender a legible copy of each Insurance policy, and Borrower will promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies. Borrower will ensure that the Mortgaged Property is continuously covered by the required Insurance. At least 15 days prior to the expiration date of each Insurance policy, Borrower will deliver to Lender evidence acceptable to Lender in Lender’s Discretion that each policy has been renewed. If the evidence of a renewal does not include a legible copy of the renewal policy, Borrower will deliver a legible copy of such renewal no later than the earlier of the following:

(i)  60 days after the expiration date of the original policy.

(ii) The date of any Notice of an insured loss given to Lender under Section 6.10(i).

(h) Compliance With Insurance Requirements. Borrower will comply with all Insurance requirements and will not permit any condition to exist on the Mortgaged Property that would invalidate any part of any Insurance coverage required under this Loan Agreement.

(i) Obligations Upon Casualty; Proof of Loss.

(i) If an insured loss occurs, then Borrower will give immediate written notice to the Insurance carrier and to Lender.

(ii) Borrower authorizes and appoints Lender as attorney in fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of Property Insurance, to appear in and prosecute any action arising from such Property Insurance policies, to collect and receive the proceeds of Property Insurance, to hold the proceeds of Property Insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds. This power of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained in this Section 6.10 will require Lender to incur any expense or take any action.

(j) Lender’s Options Following a Casualty. Lender may, at Lender’s option, take one of the following actions:

(i) Require a “repair or replacement” settlement, in which case the proceeds will be used to reimburse Borrower for the cost of restoring and repairing

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the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (“Restoration”). If Lender determines to require a repair or replacement settlement and to apply Insurance proceeds to Restoration, Lender will apply the proceeds in accordance with Lender’s then-current policies relating to the Restoration of casualty damage on similar multifamily properties. If Lender, in Lender’s Discretion, retains a professional inspection engineer or other qualified third party to inspect any Restoration items, Lender may charge Borrower an amount sufficient to pay all reasonable costs and expenses charged by such third party inspector.

(ii) Require an “actual cash value” settlement in which case the proceeds may be applied to the payment of the Indebtedness, whether or not then due.

(k) Borrower’s Options Following a Casualty. Subject to Section 6.10(l), Borrower may take the following actions:

(i) If a casualty results in damage to the Mortgaged Property for which the cost of Repairs will be less than the Borrower Proof of Loss Threshold, Borrower will have the sole right to make proof of loss, adjust and compromise the claim and collect and receive any proceeds directly without the approval or prior consent of Lender so long as the Insurance proceeds are used solely for the Restoration of the Mortgaged Property.

(ii) If a casualty results in damage to the Mortgaged Property for which the cost of Repairs will be more than the Borrower Proof of Loss Threshold, but less than the Borrower Proof of Loss Maximum, Borrower is authorized to make proof of loss and adjust and compromise the claim without the prior consent of Lender, and Lender will hold the applicable Insurance proceeds to be used to reimburse Borrower for the cost of Restoration of the Mortgaged Property and will not apply such proceeds to the payment of the Indebtedness.

(l) Lender’s Right to Apply Insurance Proceeds to Indebtedness. Lender will have the right to apply Insurance proceeds to the payment of the Indebtedness if Lender determines, in Lender’s Discretion, that any of the following conditions are met:

(i) An Event of Default (or any event, which, with the giving of Notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing.

(ii) There will not be sufficient funds from Insurance proceeds, anticipated contributions of Borrower of its own funds or other sources acceptable to Lender to complete the Restoration.

(iii) The rental income from the Mortgaged Property after completion of the Restoration will not be sufficient to meet all operating costs and other

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expenses, deposits to Reserve Funds and Loan repayment obligations relating to the Mortgaged Property.

(iv) The Restoration will be completed less than (A) 6 months prior to the Maturity Date if re-leasing will be completed prior to the Maturity Date, or (B) 12 months prior to the Maturity Date if re-leasing will not be completed prior to the Maturity Date.

(v) The Restoration will not be completed within one year after the date of the loss or casualty.

(vi) The casualty involved an actual or constructive loss of more than 30% of the fair market value of the Mortgaged Property, and rendered untenantable more than 30% of the residential units of the Mortgaged Property.

(vii) After completion of the Restoration the fair market value of the Mortgaged Property is expected to be less than the fair market value of the Mortgaged Property immediately prior to such casualty (assuming the affected portion of the Mortgaged Property is re-let within a reasonable period after the date of such casualty).

(viii) Leases covering less than 35% of the residential units of the Mortgaged Property will remain in full force and effect during and after the completion of Restoration.

(m) Lender’s Succession to Insurance Policies. If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender will automatically succeed to all rights of Borrower in and to any Insurance policies and unearned Insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

(n) Payment of Installments After Application of Insurance Proceeds. Unless Lender otherwise agrees in writing, any application of any Insurance proceeds to the Indebtedness will not extend or postpone the due date of any monthly installments referred to in the Note, Article IV of this Loan Agreement or change the amount of such installments.

(o) Assignment of Insurance Proceeds. Borrower agrees to execute such further evidence of assignment of any Insurance proceeds as Lender may require.

(p) Borrower Acknowledgment of Lender’s Right to Change Insurance Requirements. Borrower acknowledges and agrees that Lender’s Insurance requirements may change from time to time throughout the term of the Indebtedness to include coverage for the kind of risks customarily insured against and in such minimum coverage amounts and maximum deductibles as are

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generally required by institutional lenders for properties comparable to the Mortgaged Property.

6.11 Condemnation.

(a) Rights Generally. Borrower will promptly notify Lender in writing of any action or proceeding or notice relating to any proposed or actual condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (“Condemnation”). Borrower will appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing. Borrower authorizes and appoints Lender as attorney in fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation, after consultation with Borrower and consistent with commercially reasonable standards of a prudent lender. This power of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained in this Section 6.11(a) will require Lender to incur any expense or take any action. Borrower transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b) Application of Award. Lender may hold such awards or proceeds andapply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts (including Attorneys’ Fees and Costs) at Lender’s option, to the Restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower. Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness will not extend or postpone the due date of any monthly installments referred to in the Note or Article IV of this Loan Agreement, or change the amount of such installments. Borrower agrees to execute such further evidence of assignment of any Condemnation awards or proceeds as Lender may require.

(c) Borrower’s Right to Condemnation Proceeds. Notwithstanding any provision to the contrary in this Section 6.11, but subject to Section 6.11(e), in the event of a partial Condemnation of the Mortgaged Property, as long as no Event of Default, or any event which, with the giving of Notice or the passage of time, or both, would constitute an Event of Default, has occurred and is continuing, in the event of a partial Condemnation resulting in proceeds or awards in the amount of less than $100,000, Borrower will have the sole right to make proof of loss, adjust and compromise the claim and collect and receive any proceeds directly without the approval or prior consent of Lender so long as the proceeds or awards are used solely for the Restoration of the Mortgaged Property.

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(d) Right to Apply Condemnation Proceeds to Indebtedness. In the event of a partial Condemnation of the Mortgaged Property resulting in proceeds or awards in the amount of $100,000 or more and subject to Section 6.11(e), Lender will have the right to exercise its option to apply Condemnation proceeds to the payment of the Indebtedness only if Lender, in Lender’s Discretion, determines that at least one of the following conditions is met:

(i) An Event of Default (or any event, which, with the giving of Notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing.

(ii) There will not be sufficient funds from Condemnation proceeds, anticipated contributions of Borrower of its own funds or other sources acceptable to Lender to complete the Restoration.

(iii) The rental income from the Mortgaged Property after completion of the Restoration will not be sufficient to meet all operating costs and other expenses, deposits to Reserve Funds and Loan repayment obligations relating to the Mortgaged Property.

(iv) The Restoration will not be completed at least one year before the Maturity Date (or 6 months before the Maturity Date if re-leasing of the Mortgaged Property will be completed within such 6 month period).

(v) The Restoration will not be completed within one year after the date of the Condemnation.

(vi) The Condemnation involved an actual or constructive loss of more than 15% of the fair market value of the Mortgaged Property, and rendered untenantable more than 25% of the residential units of the Mortgaged Property.

(vii) After Restoration the fair market value of the Mortgaged Property is expected to be less than the fair market value of the Mortgaged Property immediately prior to the Condemnation (assuming the affected portion of the Mortgaged Property is re-let within a reasonable period after the date of the Condemnation).

(viii) Leases covering less than 35% of residential units of the Mortgaged Property will remain in full force and effect during and after the completion of Restoration.

(e) Right to Apply Condemnation Proceeds in Connection with a Partial Release. Notwithstanding anything to the contrary set forth in this Loan Agreement, including this Section 6.11, for so long as the Loan or any portion of the Loan is included in a Securitization in which the Note is assigned to a REMIC trust, then each of the following will apply:

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(i) If any portion of the Mortgaged Property is released from the Lien of the Loan in connection with a Condemnation and if the ratio of (A) the unpaid principal balance of the Loan to (B) the value of the Mortgaged Property (with the value of the Mortgaged Property first being reduced by the outstanding principal balance of any Senior Indebtedness or any indebtedness secured by the Mortgaged Property that is at the same level of priority with the Indebtedness and taking into account only the related land and buildings and not any personal property or going-concern value), as determined by Lender in its sole and absolute discretion based on a commercially reasonable valuation method permitted in connection with a Securitization, is greater than 125% immediately after such Condemnation and before any Restoration or repair of the Mortgaged Property (but taking into account any planned Restoration or repair of the Mortgaged Property as if such planned Restoration or repair were completed), then Lender will apply any net proceeds or awards from such Condemnation, in full, to the payment of the principal of the Indebtedness whether or not then due and payable, unless Lender has received an opinion of counsel (acceptable to Lender if such opinion is provided by Borrower) that a different application of the net proceeds or awards will not cause such Securitization to fail to meet applicable federal income tax qualification requirements or subject such Securitization to any tax, and the net proceeds or awards are applied in the manner specified in such opinion..

(ii) If (A) neither Borrower nor Lender has the right to receive any or all net proceeds or awards as a result of the provisions of any agreement affecting the Mortgaged Property (including any Ground Lease (if applicable), condominium document, or reciprocal easement agreement) and, therefore cannot apply the net proceeds or awards to the payment of the principal of the Indebtedness as set forth above, or (B) Borrower receives any or all of the proceeds or awards described in Section 6.11(e)(ii)(A) and fails to apply the proceeds in accordance with Section 6.11(e)(i), then Borrower will prepay the Indebtedness in an amount which Lender, in its sole and absolute discretion, deems necessary to ensure that the Securitization will not fail to meet applicable federal income tax qualification requirements or be subject to any tax as a result of the Condemnation, unless Lender has received an opinion of counsel (acceptable to Lender if such opinion is provided by Borrower) that a different application of the net proceeds or awards will not cause such Securitization to fail to meet applicable federal income tax qualification requirements or subject such Securitization to any tax, and the net proceeds or awards are applied in the manner specified in such opinion.

(f) Succession to Condemnation Proceeds. If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender will

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automatically succeed to all rights of Borrower in and to any Condemnation proceeds and awards prior to such sale or acquisition.

6.12 Environmental Hazards.

(a) Prohibited Activities and Conditions. Except for matters described in this Section 6.12, Borrower will not cause or permit Prohibited Activities or Conditions. Borrower will comply with all Hazardous Materials Laws applicable to the Mortgaged Property. Without limiting the generality of the previous sentence, Borrower will: (i) obtain and maintain all Environmental Permits required by Hazardous Materials Laws and comply with all conditions of such Environmental Permits, (ii) cooperate with any inquiry by any Governmental Authority, and (iii) comply with any governmental or judicial order that arises from any alleged Prohibited Activity or Condition.

(b) Employees, Tenants and Contractors. Borrower will take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Loan Agreement) to prevent its employees, agents and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions. Borrower will not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(c) O&M Programs. As required by Lender, Borrower will also have established a written operations and maintenance program with respect to certain Hazardous Materials. Each such operations and maintenance program and any additional or revised operations and maintenance programs established for the Mortgaged Property pursuant to this Section 6.12 must be approved by Lender and will be referred to in this Loan Agreement as an “O&M Program.” Borrower will comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other Persons present on the Mortgaged Property to comply with each O&M Program. Borrower will pay all costs of performance of Borrower’s obligations under any O&M Program, and Lender’s out of pocket costs incurred in connection with the monitoring and review of each O&M Program must be paid by Borrower upon demand by Lender. Any such out-of-pocket costs of Lender that Borrower fails to pay promptly will become an additional part of the Indebtedness as provided in Section 9.02.

(d) Notice to Lender. Borrower will promptly give Notice to Lender upon the occurrence of any of the following events:

(i) Borrower’s discovery of any Prohibited Activity or Condition.

(ii) Borrower’s receipt of or knowledge of any written complaint, order, notice of violation or other communication from any tenant, Property Manager,

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Governmental Authority or other Person with regard to present or future alleged Prohibited Activities or Conditions, or any other environmental, health or safety matters affecting the Mortgaged Property.

(iii) Borrower’s breach of any of its obligations under this Section 6.12.

Any such Notice given by Borrower will not relieve Borrower of, or result in a waiver of, any obligation under this Loan Agreement, the Note or any other Loan Document.

(e) Environmental Inspections, Tests and Audits. Borrower will pay promptly the costs of any environmental inspections, tests or audits, a purpose of which is to identify the extent or cause of or potential for a Prohibited Activity or Condition (“Environmental Inspections”), required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Article VII, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist. Any such costs incurred by Lender (including Attorneys’ Fees and Costs and the costs of technical consultants whether incurred in connection with any judicial or administrative process or otherwise) that Borrower fails to pay promptly will become an additional part of the Indebtedness as provided in Section 9.02. As long as: (i) no Event of Default has occurred and is continuing, (ii) Borrower has actually paid for or reimbursed Lender for all costs of any such Environmental Inspections performed or required by Lender, and (iii) Lender is not prohibited by law, contract or otherwise from doing so, Lender will make available to Borrower, without representation of any kind, copies of Environmental Inspections prepared by third parties and delivered to Lender. Lender reserves the right, and Borrower expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by or for Lender with respect to the Mortgaged Property. Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any Environmental Inspections made by or for Lender. Borrower acknowledges that Lender cannot control or otherwise ensure the truthfulness or accuracy of the results of any Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount that a party may bid at such sale. Borrower agrees that Lender will have no liability whatsoever as a result of delivering the results of any Environmental Inspections made by or for Lender to any third party, and Borrower releases and forever discharges Lender from any and all claims, damages or causes of action arising out of, connected with or incidental to the results of the delivery of any Environmental Inspections made by or for Lender.

(f) Remedial Work. If any investigation, site monitoring, containment, clean-up, Restoration or other remedial work (“Remedial Work”) is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that

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has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property, or is otherwise required by Lender as a consequence of any Prohibited Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition, Borrower will, by the earlier of (i) the applicable deadline required by Hazardous Materials Law, or (ii) 30 days after Notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and must in any event complete the work by the time required by applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower will reimburse Lender on demand for the cost of doing so. Any reimbursement due from Borrower to Lender will become part of the Indebtedness as provided in Section 9.02.

6.13    Single Purpose Entity Requirements.

(a) Single Purpose Entity Requirements. Until the Indebtedness is paid in full, each Borrower and any SPE Equity Owner will remain a “Single Purpose Entity,” which means at all times since its formation and thereafter it will satisfy each of the following conditions:

(i) It will not engage in any business or activity, other than the ownership, operation and maintenance of the Mortgaged Property and activities incidental thereto.

(ii) It will not acquire, own, hold, lease, operate, manage, maintain, develop or improve any assets other than the Mortgaged Property and such Personalty as may be necessary for the operation of the Mortgaged Property and will conduct and operate its business as presently conducted and operated.

(iii) It will preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its formation or organization and will do all things necessary to observe organizational formalities.

(iv) It will not merge or consolidate with any other Person.

(v) It will not take any action to dissolve, wind-up, terminate or liquidate in whole or in part; to sell, transfer or otherwise dispose of all or substantially all of its assets; to change its legal structure; transfer or permit the direct or indirect transfer of any partnership, membership or other equity interests, as applicable, other than Transfers permitted under this Loan Agreement; issue additional partnership, membership or other equity interests, as applicable, or seek to accomplish any of the foregoing.

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(vi) It will not, without the prior unanimous written consent of all of Borrower’s partners, members, or shareholders, as applicable, and, if applicable, the prior unanimous written consent of 100% of the members of the board of directors or of the board of Managers of Borrower or the SPE Equity Owner, take any of the following actions:

(A) File any insolvency, or reorganization case or proceeding, to institute proceedings to have Borrower or any SPE Equity Owner be adjudicated bankrupt or insolvent.

(B) Institute proceedings under any applicable insolvency law.

(C) Seek any relief under any law relating to relief from debts or the protection of debtors.

(D) Consent to the filing or institution of bankruptcy or insolvency proceedings against Borrower or any SPE Equity Owner.

(E) File a petition seeking, or consent to, reorganization or relief with respect to Borrower or any SPE Equity Owner under any applicable federal or state law relating to bankruptcy or insolvency.

(F) Seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official for Borrower or a substantial part of its property or for any SPE Equity Owner or a substantial part of its property.

(G) Make any assignment for the benefit of creditors of Borrower or any SPE Equity Owner.

(H) Admit in writing Borrower’s or any SPE Equity Owner’s inability to pay its debts generally as they become due.

(I) Take action in furtherance of any of the foregoing.

(vii) It will not amend or restate its organizational documents if such change would cause the provisions set forth in those organizational documents not to comply with the requirements set forth in this Section 6.13.

(viii) It will not own any subsidiary or make any investment in, any other Person.

(ix) It will not commingle its assets with the assets of any other Person and will hold all of its assets in its own name.

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(x) It will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the following:

(A) The Indebtedness and any further indebtedness as described in Section 11.11 with regard to Supplemental Instruments.

(B) Customary unsecured trade payables incurred in the ordinary course of owning and operating the Mortgaged Property provided the same are not evidenced by a promissory note, do not exceed, in the aggregate, at any time a maximum amount of 2% of the original principal amount of the Indebtedness and are paid within 60 days of the date incurred.

(C) through (H) are reserved.

(xi) It will maintain its records, books of account, bank accounts, financial statements, accounting records and other entity documents separate and apart from those of any other Person and will not list its assets as assets on the financial statement of any other Person; provided, however, that Borrower’s assets may be included in a consolidated financial statement of its Affiliate provided that (A) appropriate notation will be made on such consolidated financial statements to indicate the separateness of Borrower from such Affiliate and to indicate that Borrower’s assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person, and (B) such assets will also be listed on Borrower’s own separate balance sheet.

(xii) Except for capital contributions or capital distributions permitted under the terms and conditions of its organizational documents, it will only enter into any contract or agreement with any general partner, member, shareholder, principal or Affiliate of Borrower or any Guarantor, or any general partner, member, principal or Affiliate thereof, upon terms and conditions that are commercially reasonable and substantially similar to those that would be available on an arm’s-length basis with third parties.

(xiii) It will not maintain its assets in such a manner that will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person.

(xiv) It will not assume or guaranty (excluding any guaranty that has been executed and delivered in connection with the Note) the debts or obligations of any other Person, hold itself out to be responsible for the debts of another Person, pledge its assets to secure the obligations of any other Person or otherwise pledge its assets for the benefit of any other Person, or hold out its credit as being available to satisfy the obligations of any other Person.

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(xv) It will not make or permit to remain outstanding any loans or advances to any other Person except for those investments permitted under the Loan Documents and will not buy or hold evidence of indebtedness issued by any other Person (other than cash or investment-grade securities).

(xvi) It will file its own tax returns separate from those of any other Person, except to the extent that Borrower is treated as a “disregarded entity” for tax purposes and is not required to file tax returns under applicable law, and will pay any taxes required to be paid under applicable law.

(xvii) It will hold itself out to the public as a legal entity separate and distinct from any other Person and conduct its business solely in its own name, will correct any known misunderstanding regarding its separate identity and will not identify itself or any of its Affiliates as a division or department of any other Person.

(xviii) It will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations and will pay its debts and liabilities from its own assets as the same become due.

(xix) It will allocate fairly and reasonably shared expenses with Affiliates (including shared office space) and use separate stationery, invoices and checks bearing its own name.

(xx) It will pay (or cause the Property Manager to pay on behalf of Borrower from Borrower’s funds) its own liabilities (including salaries of its own employees) from its own funds.

(xxi) It will not acquire obligations or securities of its partners, members, shareholders, or Affiliates, as applicable.

(xxii) Except as contemplated or permitted by the property management agreement with respect to the Property Manager, it will not permit any Affiliate or constituent party independent access to its bank accounts.

(xxiii) It will maintain a sufficient number of employees (if any) in light of its contemplated business operations and pay the salaries of its own employees, if any, only from its own funds.

(xxiv) If such entity is a single member limited liability company, such entity will satisfy each of the following conditions:

(A) Be formed and organized under Delaware law.

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(B) Have either one springing member that is a corporation or two springing members who are natural persons. If there is more than one springing member, only one springing member will be the sole member of Borrower or SPE Equity Owner (as applicable) at any one time, and the second springing member will become the sole member only upon the first springing member ceasing to be a member.

(C) Otherwise comply with all Rating Agencies’ criteria for single member limited liability companies (including the delivery of Delaware single member limited liability company opinions acceptable in all respects to Lender).

(D) At all times Borrower or SPE Equity Owner (as applicable) will have one and only one member.

(xxv) If such entity is a single member limited liability company that is board-managed, such entity will have a board of Managers separate from that of Guarantor and any other Person and will cause its board of Managers to keep minutes of board meetings and actions and observe all other Delaware limited liability company required formalities.

(xxvi) If an SPE Equity Owner is required pursuant to this Loan Agreement, if Borrower is (A) a limited liability company with more than one member, then Borrower has and will have at least one member that is an SPE Equity Owner that has satisfied and will satisfy the requirements of Section 6.13(b) and such member is its managing member, or (B) a limited partnership, then all of its general partners are SPE Equity Owners that have satisfied and will satisfy the requirements set forth in Section 6.13(b).

(xxvii)    Reserved.

(xxviii)    Reserved.

(b) SPE Equity Owner Requirements. The SPE Equity Owner, if applicable, will at all times since its formation and thereafter comply in its own right (subject to the modifications set forth below), and will cause Borrower to comply, with each of the requirements of a Single Purpose Entity. Upon the withdrawal or the disassociation of an SPE Equity Owner from Borrower, Borrower will immediately appoint a new SPE Equity Owner, whose organizational documents are substantially similar to those of the withdrawn or disassociated SPE Equity Owner, and deliver a new nonconsolidation opinion to Lender in form and substance satisfactory to Lender with regard to nonconsolidation by a bankruptcy court of the assets of each of Borrower and SPE Equity Owner with those of its Affiliates.

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(i) With respect to Section 6.13(a)(i), the SPE Equity Owner will not engage in any business or activity other than being the managing member or general partner, as the case may be, of Borrower and owning at least 0.5% equity interest in Borrower.

(ii) With respect to Section 6.13(a)(ii), the SPE Equity Owner has not and will not acquire or own any assets other than its equity interest in Borrower and personal property related thereto.

(iii) With respect to Section 6.13(a)(viii), the SPE Equity Owner will not own any subsidiary or make any investment in any other Person, except for Borrower.

(iv) With respect to Section 6.13(a)(x), the SPE Equity Owner has not and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (A) customary unsecured payables incurred in the ordinary course of owning Borrower provided the same are not evidenced by a promissory note, do not exceed, in the aggregate, at any time a maximum amount of $10,000 and are paid within 60 days of the date incurred, and (B) in its capacity as general partner of Borrower (if applicable).

(v) With respect to Section 6.13(a)(xiv), the SPE Equity Owner will not assume or guaranty the debts or obligations of any other Person, hold itself out to be responsible for the debts of another Person, pledge its assets to secure the obligations of any other Person or otherwise pledge its assets for the benefit of any other Person, or hold out its credit as being available to satisfy the obligations of any other Person, except for in its capacity as general partner of Borrower (if applicable).

(c) Effect of Transfer on Single Purpose Entity Requirements. Notwithstanding anything to the contrary in this Loan Agreement, no Transfer will be permitted under Article VII unless the provisions of this Section 6.13 are satisfied at all times.

6.14 Repairs and Capital Replacements.

(a) Completion of Repairs. Borrower will commence any Repairs as soon as practicable after the date of this Loan Agreement and will diligently proceed with and complete such Repairs on or before the Completion Date. All Repairs and Capital Replacements will be completed in a good and workmanlike manner, with suitable materials, and in accordance with good building practices and all applicable laws, ordinances, rules, regulations, building setback lines and restrictions applicable to the Mortgaged Property. Borrower agrees to cause the replacement of any material or work that is defective, unworkmanlike or that does

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not comply with the requirements of this Loan Agreement, as determined by Lender.

(b) Purchases. Without the prior written consent of Lender, no materials, machinery, equipment, fixtures or any other part of the Repairs or Capital Replacements will be purchased or installed under conditional sale contracts or lease agreements, or any other arrangement wherein title to such Repairs or Capital Replacements is retained or subjected to a purchase money security interest, or the right is reserved or accrues to anyone to remove or repossess any such Repairs or Capital Replacements, or to consider them as personal property.

(c) Lien Protection. Borrower will promptly pay or cause to be paid, when due, all costs, charges and expenses incurred in connection with the construction and completion of the Repairs or Capital Replacements, and will keep the Mortgaged Property free and clear of any and all Liens other than the Lien of the Security Instrument and any other Lien to which Lender has consented.

(d) Adverse Claims. Borrower will promptly advise Lender in writing of any litigation, Liens or claims affecting the Mortgaged Property and of all complaints and charges made by any Governmental Authority that may delay or adversely affect the Repairs or Capital Replacements.

6.15 Residential Leases Affecting the Mortgaged Property.

(a) Borrower will, promptly upon Lender’s request, deliver to Lender an executed copy of each residential Lease then in effect.

(b) All Leases for residential dwelling units will satisfy the following conditions:

(i) They will be on forms that are customary for similar multifamily properties in the Property Jurisdiction.

(ii) They will be for initial terms of at least 6 months and not more than 2 years (unless otherwise approved in writing by Lender).

(iii) They will not include any Corporate Leases (unless otherwise approved in writing by Lender).

(iv) They will not include options to purchase.

(c) If Borrower is a cooperative housing corporation or association, notwithstanding anything to the contrary contained in this Loan Agreement, so long as Borrower remains a cooperative housing corporation or association and is not in breach of any covenant of this Loan Agreement, Lender consents to each of the following:

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(i) The execution of Leases for terms in excess of 2 years to a tenant shareholder of Borrower, so long as such Leases, including proprietary Leases, are and will remain subordinate to the Lien of the Security Instrument.

(ii) The surrender or termination of such Leases where the surrendered or terminated Lease is immediately replaced or where Borrower makes its best efforts to secure such immediate replacement by a newly-executed Lease of the same apartment to a tenant shareholder of Borrower. However, no consent is given by Lender to any execution, surrender, termination or assignment of a Lease under terms that would waive or reduce the obligation of the resulting tenant shareholder under such Lease to pay cooperative assessments in full when due or the obligation of the former tenant shareholder to pay any unpaid portion of such assessments.

6.16 Litigation; Government Proceedings. Borrower will give prompt Notice to Lender of any litigation or governmental proceedings pending or, to the best of Borrower’s knowledge, threatened in writing against Borrower or any Borrower Principal which might have a Material Adverse Effect. As and when requested by Lender, Borrower will provide Lender with written updates on the status of all litigation proceedings affecting Borrower or any Borrower Principal.

6.17 Further Assurances and Estoppel Certificates; Lender’s Expenses. Within 10 days after a request from Lender, in Lender’s Discretion, Borrower will take each of the following actions:

(a) Deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any Person designated by Lender, as of the date of such statement: (i) that the Loan Documents are unmodified and in full force and effect (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications), (ii) the unpaid principal balance of the Note, (iii) the date to which interest under the Note has been paid, (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Loan Agreement or any of the other Loan Documents (or, if Borrower is in default, describing such default in reasonable detail), (v) whether there are any then-existing setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents, and (vi) any additional facts requested by Lender.

(b) Execute, acknowledge and/or deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements or amendments, transfers and assurances as Lender may require from time to time in order to better assure, grant and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Loan Agreement and the Loan Documents or in connection with Lender’s consent rights under Article VII.

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Borrower acknowledges and agrees that, in connection with each request by Borrower under this Loan Agreement or any Loan Document, Borrower will pay all reasonable Attorneys’ Fees and Costs and expenses incurred by Lender and Loan Servicer, including any fees charged by the Rating Agencies, if applicable, regardless of whether the matter is approved, denied or withdrawn. Any amounts payable by Borrower under this Loan Agreement will be deemed a part of the Indebtedness, will be secured by the Security Instrument and will bear interest at the Default Rate if not fully paid within 10 days of written demand for payment.

6.18 Cap Collateral. Reserved.

6.19 Ground Lease. Reserved.

6.20 ERISA Requirements.

(a) Borrower will not engage in any transaction which would cause an obligation, or action taken or to be taken under this Loan Agreement (or the exercise by Lender of any of its rights under the Note, this Loan Agreement or any of the other Loan Documents) to be a non-exempt prohibited transaction under ERISA or Section 4975 of the Tax Code.

(b) Borrower will deliver to Lender such certifications or other evidence from time to time throughout the term of this Loan Agreement, as requested by Lender in Lender’s Discretion, confirming each of the following:

(i) Borrower is not an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, a “plan” to which Section 4975 of the Tax Code applies, or an entity whose underlying assets constitute “plan assets” of one or more of such plans.

(ii) Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA.

(iii) Borrower is not subject to state statutes regulating investments or fiduciary obligations with respect to governmental plans.

(iv) One or more of the following circumstances is true:

(A) Equity interests in Borrower are publicly offered securities within the meaning of 29 C.F.R. Section 2510.3-101(b)(2), as amended from time to time or any successor provision.

(B) Less than 25% of each outstanding class of equity interests in Borrower are held by “benefit plan investors” within the meaning

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of Section 3(42) of ERISA, as amended from time to time or any successor provision.

(C) Borrower qualifies as either an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e), as either may be amended from time to time or any successor provisions, or is an investment company registered under the Investment Company Act of 1940.

6.21 through 6.52 are Reserved.

6.53    Economic Sanctions Laws.

(a) Borrower, each Borrower Principal and each Non-U.S. Equity Holder will at all times comply with the Economic Sanctions Laws.

(b) Borrower and each Borrower Principal will have in place practices and procedures to ensure, and will ensure, that no Person who is listed on any Prohibited Parties List is admitted into the ownership or management of Borrower or any Borrower Principal.

6.54 through 6.58 are Reserved.

ARTICLE VII TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

Upon the occurrence of a Transfer prohibited by or requiring Lender’s approval (if applicable) under this Article VII, Lender may, in Lender’s Discretion, by Notice to Borrower and the proposed transferee(s), modify or render void, any or all of the negotiated modifications to the Loan Documents (and/or deferral of deposits to Reserve Funds) as a condition to Lender’s consent to the proposed Transfer.

7.01 Permitted Transfers. The occurrence of any of the following Transfers will not constitute an Event of Default under this Loan Agreement, notwithstanding any provision of Section 7.02 to the contrary:

(a) A Transfer to which Lender has consented.

(b) A Transfer that is not a prohibited Transfer pursuant to Section 7.02.

(c) A Transfer that is conditionally permitted pursuant to Section 7.03 upon the satisfaction of all applicable conditions.

(d) The grant of a leasehold interest in an individual dwelling unit for a term of 2 years or less (or longer if approved by Lender in writing) not containing an option to purchase.

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(e) Entering into any New Non-Residential Lease, or modifying or terminating any Non-Residential Lease, in each case in compliance with Section 6.04.

(f) A Condemnation with respect to which Borrower satisfies the requirements of Section 6.11.

(g) A Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of Liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender.

(h) The creation of a mechanic’s, materialmen’s, or judgment Lien against the Mortgaged Property, which is released of record, bonded, or otherwise remedied to Lender’s satisfaction within 60 days of the date of creation; provided, however, if Borrower is diligently prosecuting such release or other remedy and advises Lender that such release or remedy cannot be consummated within such 60-day period, Borrower will have an additional period of time (not exceeding 120 days from the date of creation or such earlier time as may be required by applicable law in which the lienor must act to enforce the Lien) within which to obtain such release of record or consummate such other remedy.

(i) If Borrower is a housing cooperative corporation or association, the Transfer of the shares in the housing cooperative or the assignment of the occupancy agreements or Leases relating thereto to tenant shareholders of the housing cooperative or association.

(j) A Supplemental Instrument that complies with Section 11.11(if applicable) or Defeasance that complies with Section 11.12 (if applicable).

(k) If applicable, a Preapproved Intrafamily Transfer that satisfies the requirements of Section 7.04.

(l) Reserved

7.02 Prohibited Transfers. The occurrence of any of the following Transfers will constitute an Event of Default under this Loan Agreement:

(a) A Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property, including the grant, creation or existence of any Lien on the Mortgaged Property, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the Lien of the Security Instrument, other than the Lien of the Security Instrument or, if this Loan Agreement is entered into in connection with a Supplemental Loan, the Lien of the Senior Instrument, or any other Lien to which Lender has consented.

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(b) A Transfer or series of Transfers of any legal or equitable interest of any Guarantor which owns a direct or indirect interest in Borrower that result(s) in such Guarantor no longer owning any direct or indirect interest in Borrower.

(c) A Transfer or series of Transfers of any legal or equitable interest since the Closing Date that result(s) in a change of more than 50% of the ownership interests (or beneficial interests, if the applicable entity is a trust) in Borrower or any Designated Entity for Transfers.

(d) A Transfer of any general partnership interest in a partnership, or any manager interest (whether a member manager or nonmember manager) in a limited liability company, or a change in the trustee of a trust other than as permitted in Section 7.04, if such partnership, limited liability company, or trust, as applicable, is Borrower or a Designated Entity for Transfers.

(e) If Borrower or any Designated Entity for Transfers is a corporation whose outstanding voting stock is held by 100 or more shareholders, one or more Transfers by a single transferor within a 12-month period affecting an aggregate of 10% or more of that stock.

(f) The grant, creation or existence of any Lien, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the Lien of the Security Instrument, on any ownership interest in Borrower or any Designated Entity for Transfers, if the foreclosure of such Lien would result in a Transfer prohibited under Sections 7.02(b), (c), (d), or (e).

(g) If Borrower is a trust (i) the termination or revocation of the trust, or (ii) the removal, appointment or substitution of a trustee of the trust.

(h) Reserved.

(i) Reserved.

(j) Reserved.

7.03 Conditionally Permitted Transfers. The occurrence of any of the following Transfers will not constitute a prohibited Transfer under Section 7.02, provided that Borrower has complied with all applicable specified conditions in this Section.

(a) Transfer by Devise, Descent or Operation of Law. Upon the death of a natural person, a Transfer which occurs by devise, descent, or by operation of law to one or more Immediate Family Members of such natural person or to a trust or family conservatorship established for the benefit of such Immediate Family Members (each a “Beneficiary”), provided that each of the following conditions is satisfied:

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(i) The Property Manager continues to be responsible for the management of the Mortgaged Property, and such Transfer will not result in a change in the day-to-day operations of the Mortgaged Property.

(ii) Lender receives confirmation acceptable to Lender, in Lender’s Discretion, that Borrower continues to satisfy the requirements of Section 6.13.

(iii) Each Guarantor executes such documents and agreements as Lender requires in Lender’s Discretion to evidence and effect the ratification of each Guaranty, or in the event of the death of any Guarantor, Borrower causes one of the following to occur:

(A) One or more Persons acceptable to Lender, in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

(B) The estate of the deceased Guarantor immediately ratifies the Guaranty in writing, and within 6 months after the date of the death of the deceased Guarantor one or more Persons, acceptable to Lender in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

(iv) Borrower gives Lender Notice of such Transfer together with copies of all documents effecting such Transfer not more than 30 calendar days after the date of such Transfer, and contemporaneously with the Notice, takes each of the following additional actions:

(A) Borrower reaffirms the representations and warranties under Article V.

(B) Borrower satisfies Lender, in Lender’s Discretion, that the Beneficiary’s organization, credit and experience in the management of similar properties are appropriate to the overall structure and documentation of the existing financing.

(v) Borrower or Beneficiary causes to be delivered to Lender such legal opinions as Lender deems necessary, in Lender’s Discretion, including a nonconsolidation opinion (if a nonconsolidation opinion was delivered on the Closing Date and if required by Lender), an opinion that the ratification of the Loan Documents and Guaranty (if applicable) have been duly authorized, executed, and delivered and that the ratification

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documents and Guaranty (if applicable) are enforceable as the obligations of Borrower, Beneficiary or Guarantor, as applicable.

(vi) Borrower (A) pays the Transfer Processing Fee to Lender, and (B) pays or reimburses Lender, upon demand, for all costs and expenses including all Attorneys’ Fees and Costs, incurred by Lender in connection with such Transfer; provided, however, that Lender will not be entitled to collect a Transfer Fee.

(b) Easement, Restrictive Covenant or Other Encumbrance. The grant of an easement, restrictive covenant or other encumbrance, provided that each of the following conditions is satisfied:

(i) Borrower provides Lender with at least 30 days prior Notice of the proposed grant.

(ii) Prior to the grant, Lender determines, in Lender’s Discretion, that the easement, restrictive covenant or other encumbrance will not materially affect the operation or value of the Mortgaged Property or Lender’s interest in the Mortgaged Property.

(iii) Borrower pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with reviewing Borrower’s request for Lender’s review of such grant of easement, restrictive covenant or other encumbrance; provided, however, that Lender will not be entitled to collect a Transfer Fee.

(iv) If the Note is held by a REMIC trust, Lender may require an opinion of counsel which meets each of the following requirements:

(A) The counsel providing the opinion is acceptable to Lender.

(B)  The opinion is addressed to Lender.

(C)  The opinion is paid for by Borrower.

(D)  The opinion is in form and substance satisfactory to Lender in its sole and absolute discretion.

(E)  The opinion confirms each of the following:

(1) The grant of such easement has been effected in accordance with the requirements of Treasury Regulation Section 1.860G-2(a)(8) (as such regulation may be modified, amended or replaced from time to time).

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(2) The qualification and status of the REMIC trust as a REMIC will not be adversely affected or impaired as a result of such grant.

(3) The REMIC trust will not incur a tax under Section 860G(d) of the Tax Code as a result of such grant.

(c) Publicly-Held Fund or Publicly-Held Real Estate Investment Trust. If a Designated Entity for Transfers is a publicly-held fund or a publicly-held real estate investment trust, either of the following:

(i) The public issuance of common stock, convertible debt, equity or other similar securities (“Public Fund/REIT Securities”) and the subsequent Transfer of such Public Fund/REIT Securities.

(ii) The acquisition by a single Public Fund/REIT Securities holder of an ownership percentage of 10% or more in the Designated Entity for Transfers, if within 30 days following the acquisition, Borrower does each of the following:

(A) Provides notice to Lender of that acquisition.

(B)    Complies with each of the following conditions:

(1) Borrower delivers to Lender searches confirming that no Person with a collective equity interest (whether direct or indirect) of 25% or more in Borrower is on any Prohibited Parties List.

(2) Borrower either (a) certifies in writing to Lender that there are no Non-U.S. Equity Holders, or (b) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

(d) Transaction Specific Transfers.

(i) through (v) are reserved.

(vi) Limited Partner or Non-Managing Member Transfer. A Transfer that results in the cumulative Transfer of more than 50% and up to 100% of the non-managing membership interests in or the limited partnership interests in Borrower or any Designated Entity for Transfer (“Investor Interests”) to third party transferees (“Investor Interest Transfer”), provided that each of the following conditions is satisfied:

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(A) Borrower provides Lender with at least 30 days prior Notice of the proposed Investor Interest Transfer.

(B) At the time of the proposed Investor Interest Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

(C) Following the Investor Interest Transfer, Control and management of the day-to-day operations of Borrower continue to be held by the Person exercising such Control and management immediately prior to the Investor Interest Transfer and there is no change in the Guarantor, if applicable.

(D) The Investor Interest Transfer does not result in a Transfer of the type described in Section 7.02(b).

(E) At any time that one Person acquires 25% or more of the aggregate of direct or indirect Investor Interests as a result of the Investor Interest Transfer, Borrower must meet the following additional requirements:

(1) Borrower pays to Lender the Transfer Processing Fee at the time the Borrower provides Lender with the Notice set forth in Section 7.03(d)(vi)(A).

(2) Borrower pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Investor Interest Transfer.

(3) Lender receives confirmation acceptable to Lender that (X) the requirements of Section 6.13 continue to be satisfied, and (Y) the term of existence of the holder of 25% or more of the Investor Interests after the Investor Interest Transfer (exclusive of any unexercised extension options or rights) does not expire prior to the Maturity Date.

(4) Lender receives organizational charts reflecting the structure of Borrower prior to and after the Investor Interest Transfer and copies of the then-current organizational documents of Borrower and the entity in which Investor Interests were transferred, if different from Borrower, including any amendments.

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(5) Each transferee with an interest of 25% or more delivers to Lender a certification that each of the following is true:

(X) He/she/it has not been convicted of fraud or a crime involving moral turpitude (or if an entity, then no principal of such entity has been convicted of fraud or a crime involving moral turpitude).

(Y) He/she/it has not been involved in a bankruptcy or reorganization within the ten years preceding the date of the Investor Interest Transfer.

(6) Borrower delivers to Lender searches confirming that no Person with a collective equity interest (whether direct or indirect) in Borrower of 25% or more is on any Prohibited Parties List.

(7) If a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect to the Investor Interest Transfer and all prior Transfers, 50% or more in the aggregate of direct or indirect interests in Borrower are owned by any Person and its Affiliates that owned less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower delivers to Lender an opinion of counsel for Borrower, in form and substance satisfactory to Lender, with regard to nonconsolidation.

(F) Borrower either (1) certifies that there are no Non-US Equity Holders, or (2) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

(vii) through (x) are reserved.

(e) through (k) are reserved.

7.04 Preapproved Intrafamily Transfers. The occurrenceof a Transfer of more than a 50% interest in Borrower or a Designated Entity for Transfers as set forth in this Section will be considered to be a “PreapprovedIntrafamily Transfer”provided that each of the conditions set forth in Sections 7.04(a) and (b) is satisfied:

(a) Type of Transfer. The Transfer is one of the following:

(i) A sale or transfer to one or more of the transferor’s Immediate Family Members.

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(ii) A sale or transfer to any trust having as its sole beneficiaries the transferor and/or one or more of the transferor’s Immediate Family Members.

(iii) A sale or transfer from a trust to any one or more of its beneficiaries who are the settlor and/or Immediate Family Members of the settlor of the trust.

(iv) The substitution or replacement of the trustee of any trust with a trustee who is an Immediate Family Member of the settlor of the trust.

(v) A sale or transfer from a natural person to an entity owned and under the Control of the transferor or the transferor’s Immediate Family Members.

(b) Conditions. The Preapproved Intrafamily Transfer satisfies each of the following conditions:

(i) Borrower must provide Lender with 30 days prior Notice of the proposed Preapproved Intrafamily Transfer.

(ii) Following the Transfer, Control and management of the day-to-day operations of Borrower continue to be held by the Person exercising such Control and management immediately prior to the Transfer and there is no change in the Guarantor, if applicable.

(iii) At the time of the Preapproved Intrafamily Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

(iv) At any time that one Person acquires 25% or more of the aggregate of direct or indirect interests in Borrower or a Designated Entity for Transfers as a result of the Preapproved Intrafamily Transfer, Borrower must meet the following additional requirements:

(A) Borrower must pay to Lender the Transfer Processing Fee at the time the Borrower provides Lender with the Notice set forth in Section 7.04(b)(i).

(B) Borrower must pay or reimburse Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Preapproved Intrafamily Transfer.

(C) Borrower must deliver to Lender organizational charts reflecting the structure of Borrower prior to and after the Preapproved Intrafamily Transfer, together with copies of the then-current

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organizational documents of Borrower and any other entity in which interests were transferred, including any amendments made in connection with the Preapproved Intrafamily Transfer.

(D) Each transferee with an interest of 25% or more must deliver to Lender a certification that each of the following is true:

(1) He/she/it has not been convicted of fraud or a crime involving moral turpitude (or if an entity, then no principal of such entity has been convicted of fraud or a crime involving moral turpitude).

(2) He/she/it has not been involved in a bankruptcy or reorganization within the 10 years preceding the date of the Preapproved Intrafamily Transfer.

(E) Borrower must deliver to Lender searches confirming that no Person with a collective equity interest (whether direct or indirect) in Borrower of 25% or more is on any Prohibited Parties List.

(F) If a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect to the Preapproved Intrafamily Transfer and all prior Transfers, 50% or more in the aggregate of direct or indirect interests in Borrower are owned by any Person and its Affiliates that owned less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower must deliver to Lender an opinion of counsel for Borrower, in form and substance satisfactory to Lender, with regard to nonconsolidation.

(v) Borrower either (A) certifies that there are no Non-U.S. Equity Holders, or (B) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

7.05 Lender’s Consent to Prohibited Transfers.

(a) Conditions for Lender’s Consent. With respect to a Transfer that would otherwise constitute an Event of Default under this Article VII, Lender will consent, without any adjustment to the rate at which the Indebtedness bears interest or to any other economic terms of the Indebtedness set forth in the Note, provided that, prior to such Transfer, each of the following requirements is satisfied:

(i) Borrower has submitted to Lender all information required by Lender to make the determination required by this Section along with the Transfer Processing Fee.

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(ii) No Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default unless such Transfer would cure the Event of Default.

(iii) Lender in Lender’s Discretion has determined that the transferee meets Lender’s eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee).

(iv) Lender in Lender’s Discretion has determined that the transferee’s organization, credit and experience in the management of similar properties to be appropriate to the overall structure and documentation of the Loan.

(v) Lender in Lender’s Discretion has determined that the Mortgaged Property will be managed by a Property Manager meeting the requirements of Section 6.09(d).

(vi) Lender in Lender’s Discretion has determined that the Mortgaged Property, at the time of the proposed Transfer, meets all of Lender’s standards as to its physical condition, occupancy, net operating income and the accumulation of reserves.

(vii) Lender in Lender’s Discretion has determined that the transferee and any SPE Equity Owner of such transferee meet the requirements of Section 6.13.

(viii) If any Supplemental Instrument is outstanding, Borrower has obtained the consent of each Supplemental Lender, if different from Lender.

(ix) In the case of a Transfer of all or any part of the Mortgaged Property, each of the following conditions is satisfied:

(A) The transferee executes Lender’s then-standard assumption agreement that, among other things, requires the transferee to perform all obligations of Borrower set forth in the Note, the Security Instrument, this Loan Agreement and any other Loan Document, and may require that the transferee comply with any provisions of this Loan Agreement or any other Loan Document which previously may have been waived or modified by Lender.

(B) If Lender requires, the transferee causes one or more Persons acceptable to Lender, in Lender’s Discretion, to execute and deliver to Lender a Guaranty in a form acceptable to Lender.

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(C) The transferee executes such additional documentation (including filing financing statements, as applicable) as Lender may require.

(x) In the case of a Transfer of any interest in Borrower or a Designated Entity for Transfers, if a Guarantor requests that Lender release the Guarantor from its obligations under a Guaranty executed and delivered in connection with the Note, this Loan Agreement or any of the other Loan Documents, then Borrower causes one or more Persons acceptable to Lender, in Lender’s Discretion, to execute and deliver to Lender a Guaranty in a form acceptable to Lender.

(xi) Lender has received such legal opinions as Lender deems necessary, including a nonconsolidation opinion (if a nonconsolidation opinion was delivered on the Closing Date and if required by Lender), an opinion that the assignment and assumption of the Loan Documents has been duly authorized, executed, and delivered and that the assignment documents and the Loan Documents are enforceable as the obligations of Borrower, transferee and Guarantor, as applicable.

(xii) Lender collects all costs, including the cost of all title searches, title insurance and recording costs, and all Attorneys’ Fees and Costs incurred in reviewing the Transfer request and any fees charged by the Rating Agencies, if applicable.

(xiii) At the time of the Transfer, Borrower pays the Transfer Fee to Lender.

(xiv) The Transfer will not occur during any Extension Period, if applicable.

(xv) Reserved.

(b) Continuing Liability of Borrower. If Borrower requests a release of its liability under the Loan Documents in connection with a Transfer of all of Borrower’s interest in the Mortgaged Property, and Lender approves the Transfer pursuant to Section 7.05(a), then one of the following will apply:

(i) If Borrower delivers to Lender a current Site Assessment which (A) is dated within 90 days prior to the date of the proposed Transfer, and (B) evidences no presence of Hazardous Materials on the Mortgaged Property and no other Prohibited Activities or Conditions with respect to the Mortgaged Property (“Clean Site Assessment”), then Lender will release Borrower from all of Borrower’s obligations under the Loan Documents except for any liability under Section 6.12 or Section 10.02(b) with respect to any loss, liability, damage, claim, cost or expense which directly or indirectly arises from or relates to any Prohibited Activities or Conditions existing prior to the date of the Transfer.

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(ii) If Borrower does not deliver a Clean Site Assessment as described in Section 7.05(b)(i), then Lender will release Borrower from all of Borrower’s obligations under the Loan Documents except for liability under Section 6.12 or Section 10.02(b).

(c) Continuing Liability of Guarantor. If Guarantor requests a release of its liability under the Guaranty in connection with a Transfer which is permitted, preapproved, or approved by Lender pursuant to this Article VII, and Borrower has provided a replacement Guarantor acceptable to Lender under the terms of Section 7.05(a)(ix)(B), then one of the following will apply:

(i) If Borrower delivers to Lender a Clean Site Assessment, then Lender will release Guarantor from all of Guarantor’s obligations except Guarantor’s obligation to guaranty Borrower’s liability under Section 6.12 or Section 10.02(b) with respect to any loss, liability, damage, claim, cost or expense which directly or indirectly arises from or relates to any Prohibited Activities or Conditions existing prior to the date of the Transfer.

(ii) If Borrower does not deliver a Clean Site Assessment as described in Section 7.05(b)(i), then Lender will release Guarantor from all of Guarantor’s obligations except for Guarantor’s obligation to guaranty Borrower’s liability under Section 6.12 or Section 10.02(b).

7.06 SPE Equity Owner Requirement Following Transfer. Following any Transfer pursuant to this Article VII, Borrower must satisfy the applicable conditions regarding an SPE Equity Owner set forth in Section 6.13(a)(xxvi) of this Loan Agreement.

7.07 Additional Transfer Requirements - External Cap Agreement.

(a) Continuation of Cap Agreement. If a Transfer of all or part of the Mortgaged Property permitted by this Loan Agreement occurs, Borrower will ensure that any third-party Cap Agreement is transferred to the applicable transferee or, if the Cap Agreement is not transferable, Borrower will replace the third-party Cap Agreement in accordance with Lender’s then-current requirements.

(b) Establishment or Modification of Rate Cap Agreement Reserve Fund

(i) If the third-party Cap Agreement which will be in place immediately following the Transfer is scheduled to expire prior to the Maturity Date, Lender may require Borrower to establish a Rate Cap Agreement Reserve Fund.

(ii) If Borrower has previously established a Rate Cap Agreement Reserve Fund, then Lender will determine whether the balance of any existing Rate Cap Agreement Reserve Fund is sufficient under then-current market

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conditions to purchase a Replacement Cap Agreement, and may then take any of the following actions:

(A) Lender may require Borrower to make an additional deposit into the Rate Cap Agreement Reserve Fund.

(B) If funding of the Rate Cap Agreement Reserve Fund has been deferred, Lender may require Borrower to begin making monthly deposits into the Rate Cap Agreement Reserve Fund.

(C) Lender may require Borrower to increase the amount of monthly deposits to the Rate Cap Agreement Reserve Fund.

7.08    Reserved.

7.09    Reserved.

ARTICLE VIII    SUBROGATION.

If, and to the extent that, the proceeds of the Loan, or subsequent advances under Section 9.02, are used to pay, satisfy or discharge a Prior Lien, such Loan proceeds or advances will be deemed to have been advanced by Lender at Borrower’s request, and Lender will automatically, and without further action on its part, be subrogated to the rights, including Lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

ARTICLE IX     EVENTS OF DEFAULT AND REMEDIES.

9.01 Events of Default. The occurrence of any one or more of the following will constitute an Event of Default under this Loan Agreement:

(a) Borrower fails to pay or deposit when due any amount required by the Note, this Loan Agreement or any other Loan Document.

(b) Borrower fails to maintain the Insurance coverage required by Section 6.10.

(c) Borrower or any SPE Equity Owner fails to comply with the provisions of Section 6.13 or if any of the assumptions contained in any nonconsolidation opinions delivered to Lender at any time is or becomes untrue in any material respect.

(d) Borrower or any SPE Equity Owner, any of its officers, directors, trustees, general partners or managers or any Guarantor commits fraud or a material misrepresentation or material omission in connection with: (i) the application for or creation of the Indebtedness, (ii) any financial statement, Rent Schedule, or other report or information provided to Lender during the term of the

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Indebtedness, or (iii) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under this Loan Agreement.

(e) Borrower fails to comply with the Condemnation provisions of Section 6.11.

(f) A Transfer occurs that violates the provisions of Article VII, whether or not any actual impairment of Lender’s security results from such Transfer.

(g) A forfeiture action or proceeding, whether civil or criminal, is commenced which could result in a forfeiture of the Mortgaged Property or otherwise materially impair the Lien created by the Security Instrument or Lender’s interest in the Mortgaged Property.

(h) Borrower fails to perform any of its obligations under this Loan Agreement (other than those specified in Section 9.01), as and when required, which failure continues for a period of 30 days after Notice of such failure by Lender to Borrower. However, if Borrower’s failure to perform its obligations as described in this Section 9.01(h) is of the nature that it cannot be cured within the 30 day cure period after such Notice from Lender but reasonably could be cured within 90 days, then Borrower will have additional time as determined by Lender in Lender’s Discretion, not to exceed an additional 60 days, in which to cure such default, provided that Borrower has diligently commenced to cure such default during the initial 30 day cure period and diligently pursues the cure of such default. However, no such Notice or cure periods will apply in the case of any such failure which could, in Lender’s judgment, absent immediate exercise by Lender of a right or remedy under this Loan Agreement, result in harm to Lender, danger to tenants or third parties, or impairment of the Note, the Security Instrument or this Loan Agreement or any other security given under any other Loan Document.

(i) Borrower fails to perform any of its obligations as and when required under any Loan Document other than this Loan Agreement which failure continues beyond the applicable cure period, if any, specified in that Loan Document.

(j) The holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property exercises any right to declare all amounts due under that debt instrument immediately due and payable.

(k) Any of the following occurs:

(i) Borrower or any SPE Equity Owner commences any case, Proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors (A) seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up,

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liquidation, dissolution, composition or other relief with respect to it or its debt, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets.

(ii) Any party other than Lender commences any case, Proceeding, or other action of a nature referred to in Section 9.01(k)(i) against Borrower or any SPE Equity Owner which (A) results in the entry of an order for relief or any such adjudication or appointment, or (B) has not been dismissed, discharged or bonded for a period of 90 days.

(iii) Any case, Proceeding or other action is commenced against Borrower or any SPE Equity Owner seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order by a court of competent jurisdiction for any such relief which is not vacated, discharged, or stayed or bonded pending appeal within 90 days from the entry thereof.

(iv) Borrower or any SPE Equity Owner takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in Section 9.01(k)(i), (ii) or (iii).

(l) Borrower or any SPE Equity Owner has made any representation or warranty in Article V or any other Section of this Loan Agreement that is false or misleading in any material respect.

(m) If the Loan is secured by an interest under a Ground Lease, Borrower fails to comply with the provisions of Section 6.19.

(n) If the Loan is a Supplemental Loan, any Event of Default occurs under (i) the Senior Note, the Senior Instrument or any other Senior Loan Document, or (ii) any loan document related to another loan in connection with the Mortgaged Property, regardless of whether Borrower has obtained Supplemental Lender’s approval of the placement of such Lien on the Mortgaged Property. In addition, if the Loan is a Supplemental Loan, as Borrower under both the Supplemental Instrument and the Senior Instrument, Borrower acknowledges and agrees that if there is an Event of Default under the Supplemental Note, the Supplemental Instrument or any other Supplemental Loan Document, such Event of Default will be an Event of Default under the terms of the Senior Instrument and will entitle Senior Lender to invoke any and all remedies permitted to Senior Lender by applicable law, the Senior Note, the Senior Instrument or any of the other Senior Loan Documents.

(o) If the Mortgaged Property is subject to any covenants, conditions and/or restrictions, land use restriction agreements or similar agreements, Borrower fails

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to perform any of its obligations under any such agreement as and when required, and such failure continues beyond any applicable cure period.

(p) A Guarantor files for bankruptcy protection under the Bankruptcy Code or a Guarantor voluntarily becomes subject to any reorganization, receivership, insolvency proceeding or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights, or any creditor (other than Lender) of a Guarantor commences any involuntary case against a Guarantor pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights, unless each of the following conditions is satisfied:

(i) Borrower or Guarantor provides Notice of such action to Lender within 30 days after the filing of such action.

(ii) Either (A) the case is dismissed or discharged within 90 days after filing, or (B) within 90 days following the date of such filing or commencement, the affected Guarantor is replaced with one or more other Persons acceptable to Lender, in Lender’s Discretion, each of whom executes and delivers to Lender a replacement Guaranty in form and content acceptable to Lender, together with such legal opinions as Lender deems necessary.

(iii) If Borrower must provide a replacement Guarantor pursuant to Section 9.01(p)(ii), then Borrower pays the Transfer Processing Fee to Lender.

(q)    With respect to a Guarantor, either of the following occurs:

(i) The death of any Guarantor who is a natural person, unless within 30 days following the Guarantor’s death, Borrower causes one of the following to occur:

(A) One or more Persons acceptable to Lender, in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

(B) The estate of the deceased Guarantor immediately ratifies the Guaranty in writing, and within 6 months after the date of the death of the deceased Guarantor one or more Persons, acceptable to Lender in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

(ii) The dissolution of any Guarantor who is an entity, unless each of the following conditions is satisfied:

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(A) Within 30 days following the dissolution of the Guarantor, Borrower causes one or more Persons acceptable to Lender, in Lender’s Discretion, to execute and deliver to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

(B) Borrower pays the Transfer Processing Fee to Lender.

(r) If a Cap Agreement is required, Borrower fails to provide Lender with a Replacement Cap Agreement prior to the expiration of the then-existing Cap Agreement.

(s)    through (hhh) are Reserved.

9.02 Protection of Lender’s Security; Security Instrument Secures Future Advances.

(a) If Borrower fails to perform any of its obligations under this Loan Agreement or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender’s security or Lender’s rights under this Loan Agreement, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender, in Lender’s Discretion, may make such appearances, file such documents, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender’s interest, including: (i) payment of Attorneys’ Fees and Costs, (ii) payment of fees and out-of-pocket expenses of accountants, inspectors and consultants, (iii) entry upon the Mortgaged Property to make Repairs or secure the Mortgaged Property, (iv) procurement of the Insurance required by Section 6.10, (v) payment of amounts which Borrower has failed to pay under Section 6.08, (vi) performance of Borrower’s obligations under Section 6.09, and (vii) advances made by Lender to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a Prior Lien.

(b) Any amounts disbursed by Lender under this Section 9.02, or under any other provision of this Loan Agreement that treats such disbursement as being made under this Section 9.02, will be secured by the Security Instrument, will be added to, and become part of, the principal component of the Indebtedness, will be immediately due and payable and will bear interest from the date of disbursement until paid at the Default Rate.

(c) Nothing in this Section 9.02 will require Lender to incur any expense or take any action.

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9.03 Remedies.

(a) Upon an Event of Default, Lender may exercise any or all of its rights and remedies provided under the Loan Documents and Borrower will pay all costs associated therewith, including Attorneys’ Fees and Costs.

(b) Each right and remedy provided in this Loan Agreement is distinct from all other rights or remedies under this Loan Agreement or any other Loan Document or afforded by applicable law or equity, and each will be cumulative and may be exercised concurrently, independently or successively, in any order. Lender’s exercise of any particular right or remedy will not in any way prevent Lender from exercising any other right or remedy available to Lender. Lender may exercise any such remedies from time to time and as often as Lender chooses.

(c) Lender will have all remedies available to Lender under Revised Article 9 of the Uniform Commercial Code of the Property Jurisdiction, the Loan Documents and under applicable law.

(d) Lender may also retain (i) all money in the Reserve Funds, including interest, and (ii) any Cap Payment, and in Lender’s sole and absolute discretion, may apply such amounts, without restriction and without any specific order of priority, to the payment of any and all Indebtedness.

(e) If a claim or adjudication is made that Lender has acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender has an obligation to act reasonably or promptly, then Lender will not be liable for any monetary damages, and Borrower’s sole remedy will be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably will be determined by an action seeking declaratory judgment.

(f) Reserved.

9.04 Forbearance.

(a) Lender may (but will not be obligated to) agree with Borrower, from time to time, and without giving Notice to, or obtaining the consent of, or having any effect upon the obligations of, any Guarantor or other third party obligor, to take any of the following actions:

(i) Extend the time for payment of all or any part of the Indebtedness.

(ii) Reduce the payments due under this Loan Agreement, the Note or any other Loan Document.

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(iii) Release anyone liable for the payment of any amounts under this Loan Agreement, the Note or any other Loan Document.

(iv) Accept a renewal of the Note.

(v) Modify the terms and time of payment of the Indebtedness.

(vi) Join in any extension or subordination agreement.

(vii) Release any portion of the Mortgaged Property.

(viii) Take or release other or additional security.

(ix) Modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note.

(x) Otherwise modify this Loan Agreement, the Note or any other Loan Document.

(b) Any forbearance by Lender in exercising any right or remedy under the Note, this Loan Agreement or any other Loan Document or otherwise afforded by applicable law, will not be a waiver of or preclude the exercise of any other right or remedy, or the subsequent exercise of any right or remedy. The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, will not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness will not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender. Lender’s receipt of any awards or proceeds under Sections 6.10 and 6.11 will not operate to cure or waive any Event of Default.

9.05 Waiver of Marshalling. Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender will have the right to determine the order in which any or all of the Mortgaged Property will be subjected to the remedies provided in this Loan Agreement or any other Loan Document or applicable law. Lender will have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies. Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of the Security Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Loan Agreement.

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ARTICLE X        RELEASE; INDEMNITY.

10.01 Release. Borrower covenants and agrees that, in performing any of its duties under this Loan Agreement, none of Lender, Loan Servicer or any of their respective agents or employees will be liable for any losses, claims, damages, liabilities and expenses that may be incurred by any of them as a result of such performance, except that no party will be released from liability for any losses, claims, damages, liabilities or expenses arising out of the willful misconduct or gross negligence of such party.

10.02 Indemnity.

(a) General Indemnity. Borrower agrees to indemnify, hold harmless and defend Lender, including any custodian, trustee and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefit of third parties,any prior owner or holder of the Note, the Loan Servicer, any prior Loan Servicer, the officers, directors, shareholders, partners, employees and trustees of each of the foregoing, and the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, “Indemnitees”) against any and all losses, claims, damages, liabilities and expenses including Attorneys’ Fees and Costs, which may be imposed or incurred by any of them directly or indirectly arising out of, or in any way relating to, or as a result of: (i) any failure of the Mortgaged Property to comply with the laws, regulations, ordinance, code or decree of any Governmental Authority, including those pertaining to the Americans with Disabilities Act, zoning, occupancy and subdivision of real property, (ii) any obligation of Borrower under any Lease, and (iii) any accident, injury or death to any natural person on the Mortgaged Property or any damage to personal property located on the Mortgaged Property, except that no such party will be indemnified from liability for any losses, claims, damages, liabilities or expenses arising out of the willful misconduct or gross negligence of such party.

(b) Environmental Indemnity. Borrower agrees to indemnify, hold harmless and defend Indemnitees from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including Attorneys’ Fees and Costs and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

(i) Any breach of any representation or warranty of Borrower in Section 5.05.

(ii) Any failure by Borrower to perform any of its obligations under Section 6.12.

(iii) The existence or alleged existence of any Prohibited Activity or Condition.

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(iv) The presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or in any of the Improvements.

(v) The actual or alleged violation of any Hazardous Materials Law.

(c) Indemnification Regarding ERISA Covenants. BORROWER WILL INDEMNIFY LENDER AND DEFEND AND HOLD LENDER HARMLESS FROM AND AGAINST ALL CIVIL PENALTIES, EXCISE TAXES, OR OTHER LOSS, COST, DAMAGE AND EXPENSE (INCLUDING REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED IN THE INVESTIGATION, DEFENSE AND SETTLEMENT OF CLAIMS AND LOSSES INCURRED IN CORRECTING ANY PROHIBITED TRANSACTION OR IN THE SALE OF A PROHIBITED LOAN, AND IN OBTAINING ANY INDIVIDUAL PROHIBITED TRANSACTION EXEMPTION UNDER ERISA THAT MAY BE REQUIRED, IN LENDER’S SOLE AND ABSOLUTE DISCRETION) THAT LENDER MAY INCUR, DIRECTLY OR INDIRECTLY, AS A RESULT OF DEFAULT UNDER SECTION 6.20. THIS INDEMNITY WILL SURVIVE ANY TERMINATION, SATISFACTION OR FORECLOSURE OF THE SECURITY INSTRUMENT.

(d) Securitization Indemnification.

(i) Borrower agrees to indemnify, hold harmless and defend the Indemnified Parties from and against any and all proceedings, losses, claims, damages, liabilities, penalties, costs and expenses (whether initiated or sought by Governmental Authorities or private parties), including Attorneys’ Fees and Costs, which may be incurred by any Indemnified Party (either directly or indirectly), which arise out of, are in any way related to, or are as a result of a claim that the Borrower Information contains an untrue statement of any material fact or the Borrower Information omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading (collectively, the “Securitization Indemnification”).

(ii) Borrower will not be liable under the Securitization Indemnification if the claim is based on Borrower Information which Lender has materially misstated or materially misrepresented in the Disclosure Document.

(iii)    For purposes of this Section 10.02(d):

(A) “Borrower Information” includes any information provided at any time to Lender or Loan Servicer by Borrower, any SPE Equity Owner, any Guarantor, any Property Manager or any Affiliates of the foregoing with respect to any of the following:

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(1) Any Person listed in Section 10.02(d)(iii)(A).

(2) The Loan.

(3) The Mortgaged Property.

Borrower Information includes: (i) representations and warranties made in the Loan Documents, (ii) financial statements of Borrower, any SPE Equity Owner, any Designated Entity for Transfers or any Guarantor, and (iii) operating statements and rent rolls with respect to the Mortgaged Property. Borrower Information does not include any information provided directly to Lender or Loan Servicer by a third party such as an appraiser or an environmental consultant.

(B) The term “Lender” includes its officers and directors.

(C) An “Issuer Person” includes all of the following:

(1) Any Person that has filed the registration statement, if any, relating to the Securitization, and any Affiliate of such Person.

(2) Any Person acting as issuer, depositor, sponsor and/or in a similar capacity with respect to the Securitization, and any Affiliate of such Person.

(D) The “Issuer Group” includes all of the following:

(1) Each director and officer of any Issuer Person.

(2) Each entity that Controls any Issuer Person within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act.

(E) The “Underwriter Group” includes all of the following:

(1) Each entity which is acting as an underwriter, manager, placement agent, initial purchaser or in a similar capacity with respect to the Securitization.

(2) Each entity that Controls any such entity described in Section 10.02(d)(iii)(E)(1) within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act and is acting as an underwriter, manager,

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placement agent, initial purchaser or in a similar capacity with respect to the Securitization.

(3) The directors and officers of the entities described in Section 10.02(d)(iii)(E)(1) and Section 10.02(d)(iii)(E)(2).

(F) “Indemnified Party” or “Indemnified Parties” means one or more of Lender, Issuer Person, Issuer Group, and Underwriter Group.

(e) Selection and Direction of Counsel. Counsel selected by Borrower to defend Indemnitees will be subject to the approval of those Indemnitees. In any circumstances in which the indemnity under this Article X applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which will not be unreasonably withheld, delayed or conditioned) may settle or compromise any action or legal or administrative proceeding. However, unless an Event of Default has occurred and is continuing, or the interests of Borrower and Lender are in conflict, as determined by Lender in Lender’s Discretion, Lender will permit Borrower to undertake the actions referenced in this Article X so long as Lender approves such action, which approval will not be unreasonably withheld or delayed. Borrower will reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, consultants’ fees and Attorneys’ Fees and Costs.

(f) Settlement or Compromise of Claims. Borrower will not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (“Claim”), settle or compromise the Claim if the settlement (i) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender, or (ii) may materially and adversely affect Lender, as determined by Lender in Lender’s Discretion.

(g) Effect of Changes to Loan on Indemnification Obligations. Borrower’s obligation to indemnify the Indemnitees will not be limited or impaired by any of the following, or by any failure of Borrower or any Guarantor to receive notice of or consideration for any of the following:

(i) Any amendment or modification of any Loan Document.

(ii) Any extensions of time for performance required by any Loan Document.

(iii) Any provision in any of the Loan Documents limiting Lender’s recourse to property securing the Indebtedness, or limiting the personal liability of

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Borrower or any other party for payment of all or any part of the Indebtedness.

(iv) The accuracy or inaccuracy of any representations and warranties made by Borrower under this Loan Agreement or any other Loan Document.

(v) The release of Borrower or any other Person, by Lender or by operation of law, from performance of any obligation under any Loan Document.

(vi) The release or substitution in whole or in part of any security for the Indebtedness.

(vii) Lender’s failure to properly perfect any Lien or security interest given as security for the Indebtedness.

(h) Payments by Borrower. Borrower will, at its own cost and expense, do all of the following:

(i) Pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Article X.

(ii) Reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Article X.

(iii) Reimburse Indemnitees for any and all expenses, including Attorneys’ Fees and Costs, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Article X, or in monitoring and participating in any legal or administrative proceeding.

(i) Other Obligations. The provisions of this Article X will be in addition to any and all other obligations and liabilities that Borrower may have under applicable law or under other Loan Documents, and each Indemnitee will be entitled to indemnification under this Article X without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any Guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one Person, the obligation of those Persons to indemnify the Indemnitees under this Article X will be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Article X will survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the Lien of the Security Instrument. Notwithstanding the foregoing, if Lender has never been a mortgagee-in-possession of, or held title to, the

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Mortgaged Property, Borrower will have no obligation to indemnify the Indemnitees under this Article X after the date of the release of record of the Lien of the Security Instrument by payment in full at the Maturity Date or by voluntary prepayment in full.

(j)    Reserved.

10.03    Reserved.

ARTICLE XI     MISCELLANEOUS PROVISIONS.

11.01 Waiver of Statute of Limitations, Offsets and Counterclaims. Borrower waives the right to assert any statute of limitations as a bar to the enforcement of this Loan Agreement or the Lien of the Security Instrument or to any action brought to enforce any Loan Document. Borrower waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or otherwise to offset any obligations to make the payments required by the Loan Documents. No failure by Lender to perform any of its obligations under the Loan Documents will be a valid defense to, or result in any offset against, any payments that Borrower is obligated to make under any of the Loan Documents.

11.02 Governing Law; Consent to Jurisdiction and Venue.

(a) This Loan Agreement, and any Loan Document which does not itself expressly identify the law which is to apply to it, will be governed by the laws of the Property Jurisdiction.

(b) Borrower agrees that any controversy arising under or in relation to the Note, the Security Instrument, this Loan Agreement or any other Loan Document may be litigated in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction will have jurisdiction over all controversies that may arise under or in relation to the Note, any security for the Indebtedness or any other Loan Document. Borrower irrevocably consents to service, jurisdiction and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. However, nothing in this Section 11.02 is intended to limit Lender’s right to bring any suit, action or proceeding relating to matters under this Loan Agreement in any court of any other jurisdiction.

11.03 Notice.

(a) All Notices under or concerning this Loan Agreement will be in writing. Each Notice will be deemed given on the earliest to occur of: (i) the date when the Notice is received by the addressee, (ii) the first Business Day after the Notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery, or (iii) the third Business Day

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after the Notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested. Addresses for Notice are as follows:

If to Lender:	Wells Fargo Bank, National Association 2010 Corporate Ridge, Suite 1000 McLean, Virginia 22102 Attention: Loan Servicing Department
If to Borrower:	NoHo Commons Pacific Owner LLC 13949 Ventura Boulevard, Suite 350 Sherman Oaks, California 91423 Attention: Karl Slovin

(b) Any party to this Loan Agreement may change the address to which Notices intended for it are to be directed by means of Notice given to the other party in accordance with this Section 11.03. Each party agrees that it will not refuse or reject delivery of any Notice given in accordance with this Section 11.03, that it will acknowledge, in writing, the receipt of any Notice upon request by the other party and that any Notice rejected or refused by it will be deemed for purposes of this Section 11.03 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c) Any Notice under the Note and any other Loan Document that does not specify how Notices are to be given will be given in accordance with this Section 11.03.

(d) Reserved.

11.04 Successors and Assigns Bound. This Loan Agreement will bind the respective successors and assigns of Borrower and Lender, and the rights granted by this Loan Agreement will inure to Lender’s successors and assigns.

11.05 Joint and Several (and Solidary) Liability. If more than one Person signs this Loan Agreement as Borrower, the obligations of such Persons will be joint and several. For a Mortgaged Property located in Louisiana, if more than one Person signs this Loan Agreement as Borrower, the obligations of such Persons with be joint and several and solidary, and wherever the phrase “joint and several” appears in this Loan Agreement, the phrase is amended to read “joint, several, and solidary.”

11.06 Relationship of Parties; No Third Party Beneficiary.

(a) The relationship between Lender and Borrower will be solely that of creditor and debtor, respectively, and nothing contained in this Loan Agreement will create any other relationship between Lender and Borrower. Nothing contained in this Loan Agreement will constitute Lender as a joint venturer, partner or agent of

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Borrower, or render Lender liable for any debts, obligations, acts, omissions, representations or contracts of Borrower.

(b) No creditor of any party to this Loan Agreement and no other Person will be a third party beneficiary of this Loan Agreement or any other Loan Document. Without limiting the generality of the preceding sentence: (i) any arrangement (“Servicing Arrangement”) between Lender and any Loan Servicer for loss sharing or interim advancement of funds will constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (ii) Borrower will not be a third party beneficiary of any Servicing Arrangement, and (iii) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

11.07 Severability; Amendments.

(a) The invalidity or unenforceability of any provision of this Loan Agreement will not affect the validity or enforceability of any other provision, and all other provisions will remain in full force and effect. This Loan Agreement contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Loan Agreement.

(b) This Loan Agreement may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

11.08 Disclosure of Information. Borrower acknowledges that Lender may provide to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, ownership, purchase, participation or Securitization of the Loan, including any of the Rating Agencies, any entity maintaining databases on the underwriting and performance of commercial mortgage loans, as well as governmental regulatory agencies having regulatory authority over Lender, any and all information which Lender now has or may hereafter acquire relating to the Loan, the Mortgaged Property, Borrower, any SPE Equity Owner or any Guarantor, as Lender determines necessary or desirable and that such information may be included in disclosure documents in connection with a Securitization or syndication of participation interests, including a prospectus, prospectus supplement, offering memorandum, private placement memorandum or similar document (each, a “Disclosure Document”) and also may be included in any filing with the Securities and Exchange Commission pursuant to the Securities Act or the Securities Exchange Act. To the fullest extent permitted under applicable law, Borrower irrevocably waives all rights, if any, to prohibit such disclosure, including any right of privacy.

11.09 Determinations by Lender. Unless otherwise provided in this Loan Agreement, in any instance where the consent or approval of Lender may be given or is required, or where any determination, judgment or decision is to be rendered by Lender under this Loan Agreement, the granting, withholding or denial of such consent or approval and the rendering of such determination, judgment or decision will be made or exercised by

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Lender (or its designated representative) at its sole and exclusive option and in its sole and absolute discretion.

11.10 Sale of Note; Change in Servicer; Loan Servicing. The Note or a partial interest in the Note (together with this Loan Agreement and the other Loan Documents) may be sold one or more times without prior Notice to Borrower. A sale may result in a change of the Loan Servicer. There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note. If there is a change of the Loan Servicer, Borrower will be given Notice of the change. All actions regarding the servicing of the Loan evidenced by the Note, including the collection of payments, the giving and receipt of Notice, inspections of the Mortgaged Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives Notice to the contrary. If Borrower receives conflicting Notices regarding the identity of the Loan Servicer or any other subject, any such Notice from Lender will govern.

11.11    Supplemental Financing.

(a) This Section will apply only if at the time of any application referred to in Section 11.11(b), Freddie Mac has in effect a product described in its Multifamily Seller/Servicer Guide under which it purchases supplemental mortgages on multifamily properties that meet specified criteria (“Supplemental Mortgage Product”). For purposes of this Section 11.11 only, the term “Freddie Mac” will include any affiliate or subsidiary of Freddie Mac.

(b) After the first anniversary of the date of the most recently incurred Senior Indebtedness, Freddie Mac will consider an application from an originating lender that is generally approved by Freddie Mac to sell mortgages to Freddie Mac under the Supplemental Mortgage Product (“Approved Seller/Servicer”) for the purchase by Freddie Mac of a proposed indebtedness of Borrower to the Approved Seller/Servicer to be secured by one or more Supplemental Instruments on the Mortgaged Property. Freddie Mac will purchase each Supplemental Loan secured by the Mortgaged Property if each of the following conditions is satisfied:

(i) At the time of the proposed Supplemental Loan, no Event of Default may have occurred and be continuing and no event or condition may have occurred and be continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

(ii) Borrower and the Mortgaged Property must be acceptable to Freddie Mac under its Supplemental Mortgage Product.

(iii) New loan documents must be entered into to reflect each Supplemental Loan, such documents to be acceptable to Freddie Mac in its discretion.

(iv) No Supplemental Loan may cause the combined debt service coverage ratio of the Mortgaged Property after the making of that Supplemental

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Loan to be less than the Minimum DSCR. As used in this Section, the term “combined debt service coverage ratio” means, with respect to the Mortgaged Property, the ratio of:

(A) the annual net operating income from the operations of the Mortgaged Property at the time of the proposed Supplemental Loan,

to

(B) the aggregate of the annual principal and interest payable on all of the following:

(I) the Indebtedness under this Loan Agreement (using a 30 year amortization schedule),

(II) any “Indebtedness” as defined in any security instruments recorded against the Mortgaged Property (using a 30 year amortization schedule for any Supplemental Loans), and

(III) the proposed “Indebtedness” for any Supplemental Loan (using a 30 year amortization schedule).

As used in this Section, “annual principal and interest” with respect to a floating rate loan will be calculated by Freddie Mac using an interest rate equal to one of the following:

(X) If the loan has an internal interest rate cap, the Capped Interest Rate.

(Y) If the loan has an external interest rate cap, the Strike Rate plus the Margin.

(Z) If the loan has no interest rate cap, the greater of (I) 7%, or (II) the then-current LIBOR Index Rate plus the Margin plus 300 basis points.

The annual net operating income of the Mortgaged Property will be as determined by Freddie Mac in its discretion considering factors such as income in place at the time of the proposed Supplemental Loan and income during the preceding 12 months, and actual, historical and anticipated operating expenses. Freddie Mac will determine the combined debt service coverage ratio of the Mortgaged Property based on its underwriting. Borrower will provide Freddie Mac such financial statements and other information Freddie Mac may require to make these determinations.

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(v) No Supplemental Loan may cause the combined loan to value ratio of the Mortgaged Property after the making of that Supplemental Loan to exceed the Maximum Combined LTV, as determined by Freddie Mac. As used in this Section, “combined loan to value ratio” means, with respect to the Mortgaged Property, the ratio, expressed as a percentage, of:

(A) the aggregate outstanding principal balances of all of the following:

(I) the Indebtedness under this Loan Agreement,

(II) any “Indebtedness” as defined in any security instruments recorded against the Mortgaged Property, and

(III) the proposed “Indebtedness” for any Supplemental Loan,

to

(B) the value of the Mortgaged Property.

Freddie Mac will determine the combined loan to value ratio of the Mortgaged Property based on its underwriting. Borrower will provide Freddie Mac such financial statements and other information Freddie Mac may require to make these determinations. In addition, Freddie Mac, at Borrower’s expense, may obtain MAI appraisals of the Mortgaged Property in order to assist Freddie Mac in making the determinations under this Section. If Freddie Mac requires an appraisal, then the value of the Mortgaged Property that will be used to determine whether the Maximum Combined LTV has been met will be the lesser of the appraised value set forth in such appraisal or the value of the Mortgaged Property as determined by Freddie Mac.

(vi) Borrower’s organizational documents are amended to permit Borrower to incur additional debt in the form of Supplemental Loans (Lender will consent to such amendment(s)).

(vii) One or more Persons acceptable to Freddie Mac executes and delivers to the Approved Seller/Servicer a Guaranty in a form acceptable to Freddie Mac with respect to the exceptions to non-recourse liability described in Freddie Mac’s form promissory note, unless Freddie Mac has elected to waive its requirement for a Guaranty.

(viii) The loan term of each Supplemental Loan will be coterminous with the Senior Indebtedness or longer than the Senior Indebtedness, in Freddie Mac’s discretion.

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(ix) The Prepayment Premium Period of each Supplemental Loan will be coterminous with the Prepayment Premium Period or the combined Lockout Period and Defeasance Period, as applicable, of the Senior Indebtedness.

(x) The interest rate of each Supplemental Loan will be determined by Freddie Mac in its discretion.

(xi) Lender enters into an intercreditor agreement (“Intercreditor Agreement”) acceptable to Freddie Mac and to Lender for each Supplemental Loan.

(xii) Borrower’s payment of fees and other expenses charged by Lender, Freddie Mac, the Approved Seller/Servicer, and the Rating Agencies (including reasonable Attorneys’ Fees and Costs) in connection with reviewing and originating each Supplemental Loan.

(xiii) Commencing on the date that the first Supplemental Loan is originated and continuing for so long as any Supplemental Loan is outstanding, the first lien Senior Lender will begin collection of any deferred Monthly Deposit or Revised Monthly Deposit for Capital Replacements in accordance with Section 4.04(e) (if applicable) as well as Imposition Reserve Deposits for any of the following Impositions marked ‘Deferred’ in Section 4.02(a):

(A) Property Insurance premiums or premiums for other Insurance required by Lender under Section 6.10.

(B)    Taxes and payments in lieu of taxes

(C)    Ground Rents

Such deposits will be credited to the payment of any such required Imposition Reserve Deposits under any Supplemental Loan.

(xiv) If any covenants, conditions and restrictions affecting the Mortgaged Property provide for a lien for any assessments or other unpaid amounts, Borrower will provide satisfactory evidence that such lien will be subordinate to the lien of the Supplemental Instrument.

(xv) All other requirements of the Supplemental Mortgage Product must be met, unless Freddie Mac has elected to waive one or more of its requirements.

(xvi) Reserved.

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(xvii) Reserved.

(xviii) Reserved.

(c) No later than 5 Business Days after Lender’s receipt of a written request from Borrower, Lender will provide the following information to an Approved Seller/Servicer:

(i) The then-current outstanding principal balance of the Senior Indebtedness.

(ii) Payment history of the Senior Indebtedness.

(iii) Whether any Reserve Funds are being collected on the Senior Indebtedness and the amount of each such Reserve Fund deposit as of the date of the request.

(iv) Whether any Repairs, Capital Replacements or improvements or rental achievement or burn-off guaranty requirements are existing or outstanding under the terms of the Senior Indebtedness.

(v) A copy of the most recent inspection report for the Mortgaged Property.

(vi) Whether any modifications or amendments have been made to the Loan Documents for the Senior Indebtedness since origination of the Senior Indebtedness and, if applicable, a copy of such modifications and amendments.

(vii) Whether to Lender’s knowledge any Event of Default exists under the Senior Indebtedness.

Lender will only be obligated to provide this information in connection with Borrower’s request for a Supplemental Loan from an Approved Seller/Servicer. Notwithstanding anything in this Section to the contrary, if Freddie Mac is the owner of the Note, this Section 11.11(c) is not applicable.

(d) Lender will have no obligation to consent to any mortgage or Lien on the Mortgaged Property that secures any indebtedness other than the Indebtedness, except as set forth in this Loan Agreement.

(e) If a Supplemental Loan is made to Borrower, Borrower agrees that the terms of the Intercreditor Agreement will govern with respect to any distributions of excess proceeds by Lender to the Supplemental Lender, and Borrower agrees that Lender may distribute any excess proceeds received by Lender pursuant to the Loan Documents to Supplemental Lender pursuant to the Intercreditor Agreement.

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11.12 Defeasance.(Section Applies if Loan is Assigned to REMIC Trust Prior to the Cut-off Date and if the Note provides for Defeasance). This Section 11.12 will apply only if the Note is assigned to a REMIC trust prior to the Cut-off Date, and if the Note provides for Defeasance. If both of these conditions are met, then, subject to Section 11.12(a) and (c), Borrower will have the right to defease the Loan in whole (“Defeasance”) and obtain the release of the Mortgaged Property from the Lien of the Security Instrument upon the satisfaction of each of the following conditions:

(a) Borrower will not have the right to obtain Defeasance at any of the following times:

(i) If the Loan is not assigned to a REMIC trust.

(ii) During the Lockout Period.

(iii) After the expiration of the Defeasance Period.

(iv) After Lender has accelerated the maturity of the unpaid principal balance of, accrued interest on, and other amounts payable under, the Note pursuant to Section 11 of the Note.

(b) Borrower will give Lender Notice (“Defeasance Notice”) specifying a Business Day (“Defeasance Closing Date”) on which Borrower desires to close the Defeasance. The Defeasance Closing Date specified by Borrower may not be more than 60 calendar days, nor less than 30 calendar days, after the date on which Lender receives the Defeasance Notice. Lender will acknowledge receipt of the Defeasance Notice and will notify Borrower of the identity of the accommodation borrower (“Successor Borrower”).

(c) The Defeasance Notice must be accompanied by a $10,000 non-refundable fee (“Defeasance Fee”) for Lender’s processing of the Defeasance. If Lender does not receive the Defeasance Fee, then Borrower’s right to obtain Defeasance pursuant to that Defeasance Notice will terminate.

(d) (i)    If Borrower timely pays the Defeasance Fee, but Borrower fails to perform its other obligations under this Section, Lender will have the right to retain the Defeasance Fee as liquidated damages for Borrower’s default and, except as provided in Section 11.12(d)(ii), Borrower will be released from all further obligations under this Section 11.12. Borrower acknowledges that Lender will incur financing costs in arranging and preparing for the release of the Mortgaged Property from the Lien of the Security Instrument in reliance on the executed Defeasance Notice. Borrower agrees that the Defeasance Fee represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Loan

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Agreement, of the damages Lender will incur by reason of Borrower’s default.

(ii) If the Defeasance is not consummated on the Defeasance Closing Date for any reason, Borrower agrees to reimburse Lender for all third party costs and expenses (other than financing costs covered by Section 11.12(d)(i)) incurred by Lender in reliance on the executed Defeasance Notice, within 5 Business Days after Borrower receives a written demand for payment, accompanied by a statement, in reasonable detail, of Lender’s third party costs and expenses.

(iii) All payments required to be made by Borrower to Lender pursuant to this Section 11.12 will be made by wire transfer of immediately available funds to the account(s) designated by Lender in its acknowledgement of the Defeasance Notice.

(e) No Event of Default has occurred and is continuing.

(f) Borrower will deliver each of the following documents to Lender, in form and substance satisfactory to Lender, on or prior to the Defeasance Closing Date, unless Lender has issued a written waiver of its right to receive any such document:

(i) One or more opinions of counsel for Borrower confirming each of the following:

(A) Lender has a valid and perfected first Lien and first priority security interest in the Defeasance Collateral and the proceeds of the Defeasance Collateral.

(B) The Pledge Agreement is duly authorized, executed, delivered and enforceable against Borrower in accordance with its terms.

(C) If, as of the Defeasance Closing Date, the Note is held by a REMIC trust, then each of the following is correct:

(1) The Defeasance has been effected in accordance with the requirements of Treasury Regulation Section 1.860G-2(a)(8) (as such regulation may be modified, amended or replaced from time to time).

(2) The qualification and status of the REMIC trust as a REMIC will not be adversely affected or impaired as a result of the Defeasance.

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(3) The REMIC trust will not incur a tax under Section 860G(d) of the Tax Code as a result of the Defeasance.

(D) The Defeasance will not result in a “sale or exchange” of the Note within the meaning of Section 1001(c) of the Tax Code and the temporary and final regulations promulgated thereunder.

(ii) A written certificate from an independent certified public accounting firm (reasonably acceptable to Lender), confirming that the Defeasance Collateral will generate cash sufficient to make all Scheduled Debt Payments as they fall due under the Note, including full payment due on the Note on the Maturity Date.

(iii) Lender’s form of a pledge and security agreement (“Pledge Agreement”) and financing statements which pledge and create a first priority security interest in the Defeasance Collateral in favor of Lender.

(iv) Lender’s form of a transfer and assumption agreement (“Transfer and Assumption Agreement”), pursuant to which Borrower and any Guarantor (in each case, subject to satisfaction of all requirements under this Loan Agreement) will be relievedfrom liability in connection with the Loan to the extent described in Sections 7.05(b) and 7.05(c), respectively, and Successor Borrower will assume all remaining obligations.

(v) Forms of all documents necessary to release the Mortgaged Property from the Liens created by the Security Instrument and related UCC financing statements (collectively, “Release Instruments”), each in appropriate form required by the Property Jurisdiction.

(vi) Any other opinions, certificates, documents or instruments that Lender may reasonably request.

(g) Borrower will deliver to Lender, on or prior to the Defeasance Closing Date, each of the following:

(i) The Defeasance Collateral, which meets all of the following requirements:

(A) It is owned by Borrower, free and clear of all Liens and claims of third-parties.

(B) It is in an amount sufficient to provide for (1) redemption payments to occur prior, but as close as possible, to all successive Installment Due Dates occurring under the Note after the Defeasance Closing Date, and (2) delivery of redemption proceeds at least equal to the amount of principal and interest due on the

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Note on each Installment Due Date including full payment due on the Note on the Maturity Date (“Scheduled Debt Payments”).

(C) All redemption payments received from the Defeasance Collateral will be paid directly to Lender to be applied on account of the Scheduled Debt Payments occurring after the Defeasance Closing Date.

(D) The pledge of the Defeasance Collateral will be effected through the book-entry facilities of a qualified securities intermediary designated by Lender in conformity with all applicable laws.

(ii) All accrued and unpaid interest and all other sums due under the Note, this Loan Agreement and under the other Loan Documents, including all amounts due under Section 11.12(i), up to the Defeasance Closing Date.

(h) Reserved.

(i) Borrower will pay all reasonable costs and expenses incurred by Lender in connection with the Defeasance in full on or prior to the Defeasance Closing Date, which payment is required prior to Lender’s issuance of the Release Instruments and whether or not Defeasance is completed. Such expenses include all fees, costs and expenses incurred by Lender and its agents in connection with the Defeasance (including Attorneys’ Fees and Costs for the review and preparation of the Pledge Agreement and of the other materials described in this Loan Agreement and any related documentation, Rating Agencies’ fees, or other costs related to the Defeasance).

Lender reserves the right to require that Borrower post a deposit to cover costs which Lender reasonably anticipates that Lender will incur in connection with the Defeasance.

(j) No Transfer Fee will be payable to Lender upon a Defeasance made in accordance with this Section 11.12.

(k) Reserved.

11.13 Lender’s Rights to Sell or Securitize. Borrower acknowledges that Lender, and each successor to Lender’s interest, may (without prior Notice to Borrower or Borrower’s prior consent), sell or grant participations in the Loan (or any part of the Loan), sell or subcontract the servicing rights related to the Loan, securitize the Loan or place the Loan in a trust. Borrower agrees to cooperate with all reasonable requests of Lender in connection with any of the foregoing including taking the following actions:

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(a) Executing any financing statements or other documents deemed necessary by Lender or its transferee to create, perfect or preserve the rights and interest to be acquired by such transferee.

(b) Delivering revised organizational documents, counsel opinions, and executed amendments to the Loan Documents satisfactory to the Rating Agencies.

(c) Providing updated financial information with appropriate verification through auditors’ letters, if required by Lender. (If Lender requires that Borrower’s updated financial information be accompanied by appropriate verification through auditors’ letters, then Lender will reimburse Borrower for the costs which Borrower reasonably incurs in connection with obtaining such auditors’ letters.)

(d) Providing updated information on all litigation proceedings affecting Borrower or any Borrower Principal as required in Section 6.16.

(e) Reviewing information contained in any Disclosure Document and providing a mortgagor estoppel certificate, written confirmation of Borrower’s indemnification obligations under this Loan Agreement, and such other information about Borrower, any SPE Equity Owner, any Guarantor, any Property Manager or the Mortgaged Property as Lender may require for Lender’s offering materials.

11.14 Cooperation with Rating Agencies and Investors. Borrower covenants and agrees that if Lender decides to include the Loan as an asset of a Secondary Market Transaction, Borrower will do all of the following:

(a) At Lender’s request, meet with representatives of the Rating Agencies and/or investors to discuss the business and operations of the Mortgaged Property.

(b) Permit Lender or its representatives to provide related information to the Rating Agencies and/or investors.

(c) Cooperate with the reasonable requests of the Rating Agencies and/or investors in connection with all of the foregoing.

11.15 Letter of Credit Requirements.

(a) Any Letter of Credit required under this Loan Agreement must satisfy the following conditions:

(i) It must be a clean, irrevocable, unconditional standby letter of credit.

(ii) It must name Lender as the sole beneficiary and permit Lender to assign the Letter of Credit without further consent from Issuer.

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(iii) It must have an initial term of not less than 12 months.

(iv) It must be in the form required by Lender.

(v) It must provide that it may be drawn on by Lender or Loan Servicer, in whole or in part, by presentation to Issuer of a sight draft without any other restrictions on the right to draw.

(vi) It must be issued by an Issuer meeting Lender’s requirements, which Issuer (i) must be an Eligible Institution, and (ii) may not, unless Lender agrees in writing, be an affiliate of Borrower or Lender.

(vii) It must be obtained on behalf of Borrower by a Person other than Borrower’s general partners or managing members if Borrower is a general or limited partnership or limited liability company. Neither Borrower nor the general partners or managing members, if applicable, may have any liability or other obligations under any reimbursement agreement with respect to the Letter of Credit.

(viii) It may not be secured by a lien on all or any part of the Mortgaged Property or related Personalty.

(ix) When delivered to Lender, it must be accompanied by an opinion acceptable to Lender in Lender’s Discretion issued by counsel to the Issuer that includes opinions as to Issuer’s power and authority to issue the Letter of Credit and the enforceability of the Letter of Credit against Issuer and an updated nonconsolidation opinion with regard to any such Letter of Credit in form and substance satisfactory to Lender.

(b) If at any time the Issuer of a Letter of Credit held by Lender ceases to be an Eligible Institution, Lender will have the right to immediately draw down the Letter of Credit in full and hold the Proceeds in an escrow account in accordance with the terms of this Loan Agreement.

(c) Each Letter of Credit held by Lender pursuant to this Loan Agreement provides additional collateral for the Indebtedness in addition to the lien of the Security Instrument.

11.16 Reserved.

11.17    Reserved.

11.18 Reserved.

11.19 State Specific Provisions. Reserved.

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11.20 Time is of the Essence. Time is of the essence with respect to each covenant of this Loan Agreement.

ARTICLE XII    DEFINITIONS.

The following terms, when used in this Loan Agreement (including when used in the recitals), will have the following meanings:

“Affiliate” of any Person means:

(i)    Any other individual or entity that is, directly or indirectly, one of the following:

(A)    In Control of the applicable Person.

(B)    Under the Control of the applicable Person.

(C)    Under common Control with the applicable Person.

(ii) Any individual that is a director or officer of the applicable Person.

(iii) Any individual that is a director or officer of any entity described in clause (i) of this definition.

“Approved Seller/Servicer” is defined in Section 11.11(b).

“Assignment of Management Agreement” means the Assignment of Management Agreement and Subordination of Management Fees, dated the same date as this Loan Agreement, among Borrower, Lender and Property Manager, including all schedules, riders, allonges and addenda, as such Assignment of Management Agreement may be amended from time to time, and any future Assignment of Management Agreement and Subordination of Management Fees executed in accordance with Section 6.09(d).

“Attorneys’ Fees and Costs” means: (i) fees and out of pocket costs of Lender’s and Loan Servicer’s attorneys, as applicable, including costs of Lender’s and Loan Servicer’s in-house counsel, support staff costs, costs of preparing for litigation, computerized research, telephone and facsimile transmission expenses, mileage, deposition costs, postage, duplicating, process service, videotaping and similar costs and expenses; (ii) costs and fees of expert witnesses, including appraisers; (iii) investigatory fees; and (iv) costs for any opinion required by Lender pursuant to the terms of the Loan Documents.

“Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended from time to time.

“Borrower” means all Persons identified as “Borrower” in the first paragraph of this Loan Agreement, together with their successors and assigns.

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“Borrower Information” is defined in Section 10.02(d).

“Borrower Principal” means any of the following:

(i) Any general partner of Borrower (if Borrower is a partnership).

(ii) Any manager or managing member of Borrower (if Borrower is a limited liability company).

(iii) Any Person (limited partner, member or shareholder) with a collective direct or indirect equity interest in Borrower equal to or greater than 25%.

(iv) Any Guarantor of all or any portion of the Loan or of any obligations of Borrower under the Loan Documents.

“Borrower Proof of Loss Threshold” means $200,000.

“Borrower Proof of Loss Maximum” means $800,000.

“Business Day” means any day other than a Saturday, a Sunday, or any other day on which Lender or the national banking associations are not open for business.

“Cap Agreement” means any interest rate cap agreement, interest rate swap agreement or other interest rate-hedging contract or agreement, in a form acceptable to Lender, obtained by Borrower from a Cap Provider as a requirement of any Loan Document or as a condition of Lender’s making the Loan.

“Cap Collateral” means all of the following:

(i) The Cap Agreement.

(ii) The Cap Payments.

(iii) All rights of Borrower under any Cap Agreement and all rights of Borrower to all Cap Payments, including contract rights and general intangibles, whether existing now or arising after the date of this Loan Agreement.

(iv) All rights, liens and security interests or guaranties granted by a Cap Provider or any other Person to secure or guaranty payment of any Cap Payments whether existing now or granted after the date of this Loan Agreement.

(v) All documents, writings, books, files, records and other documents arising from or relating to any of the foregoing, whether existing now or created after the date of this Loan Agreement.

(vi) All cash and non-cash proceeds and products of (ii) through (v) of this definition.

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“Cap Payment(s)” means any and all monies payable pursuant to any Cap Agreement by a Cap Provider.

“Cap Provider” means the third-party financial institution approved by Lender that is the counterparty under any Cap Agreement or Replacement Cap Agreement.

“Capital Replacement” means the replacement of those items listed on Exhibit F.

“Capped Interest Rate” is defined in the Note, if applicable.

“Claim” is defined in Section 10.02(f).

“Clean Site Assessment” is defined in Section 7.05(b)(i).

“Closing Date” means the date on which Lender disburses the proceeds of the Loan to or for the account of Borrower.

“Commitment Letter” means the fully executed commitment letter or early rate lock application between Lender and Borrower issued in connection with the Loan, as such document may have been modified, amended or extended.

“Completion Date” means, with respect to any Repair, the date specified for that Repair in theRepair Schedule of Work (Exhibit C), as such date may be extended by Lender in writing.

“Condemnation” is defined in Section 6.11(a).

“Control” means to possess, directly or indirectly, the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors or trustees of a corporation or trust, as the case may be.

“Corporate Lease” means a Lease for one or more residential units under which one entity will rent all such units from Borrower and will have the right to sublease such units to individual subtenants.

“Cut-off Date” is defined in the Note, if applicable.

“Default Rate” is defined in the Note.

“Defeasance” is defined in Section 11.12.

“Defeasance Closing Date” is defined in Section 11.12(b).

“Defeasance Collateral” means: (i) a Freddie Mac Debt Security, (ii) a Fannie Mae Debt Security, (iii) U.S. Treasury Obligations, or (iv) FHLB Obligations.

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“Defeasance Fee” is defined in Section 11.12(c).

“Defeasance Notice” is defined in Section 11.12(b).

“Defeasance Period” is defined in the Note, if applicable.

“Designated Entity for Transfers” means each entity so identified in Exhibit I, and that entity’s successors and permitted assigns.

“Disclosure Document” is defined in Section 11.08.

“Economic Sanctions Laws” means the foreign assets control regulations, 31 C.F.R. Chapter V, as amended, and any amending legislation or executive order relating to such legislation, as administered by OFAC.

“Eligible Account” means an identifiable account which is separate from all other funds held by the holding institution that is either (i) an account or accounts maintained with the corporate trust department of a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution, or (ii) a segregated trust account or accounts maintained with the corporate trust department of a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and state authority. An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

“Eligible Institution” means a federal or state chartered depository institution or trust company insured by the Federal Deposit Insurance Corporation, the short term unsecured debt obligations or commercial paper of which are rated at least A-1 by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., P-1 by Moody’s Investors Service, Inc. and F-3 by Fitch, Inc. in the case of accounts in which funds are held for 30 days or less or, in the case of letters of credit or accounts in which funds are held for more than 30 days, the long term unsecured debt obligations of which are rated at least “A” by Fitch, Inc. and Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and “A2” by Moody’s Investors Service, Inc. If at any time an Eligible Institution does not meet the required rating, the Loan Servicer must move the Eligible Account within 30 days of such event to an appropriately rated Eligible Institution.

“Environmental Inspections” is defined in Section 6.12(e).

“Environmental Permit” means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

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“Event of Default” means the occurrence of any event listed in Section 9.01.

“Extension Period” is defined in the Note, if applicable.

“Fannie Mae Debt Security” means any non-callable bond, debenture, note, or other similar debt obligation issued by the Federal National Mortgage Association.

“FHLB Obligations” mean direct, non-callable and non-redeemable securities issued, or fully insured as to payment, by the Federal Home Loan Bank.

“Fixtures” means all property owned by Borrower which is attached to the Land or the Improvements so as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators and installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

“Freddie Mac” means the Federal Home Loan Mortgage Corporation.

“Freddie Mac Debt Security” means any non-callable bond, debenture, note, or other similar debt obligation issued by Freddie Mac.

“Freddie Mac Web Site” means the web site of Freddie Mac, located at www.freddiemac.com.

“GAAP” means generally accepted accounting principles.

“Governmental Authority” means any board, commission, department, agency or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property, or the use, operation or improvement of the Mortgaged Property, or over Borrower.

“Guarantor” means the Person(s) required by Lender to guaranty all or a portion of Borrower’s obligations under the Loan Documents, as set forth in the Guaranty. The required Guarantors as of the date of this Loan Agreement are set forth in Exhibit I.

“Guaranty” means the Guaranty executed by Guarantor and/or any replacement or supplemental guaranty executed pursuant to the terms of this Loan Agreement.

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“Hazardous Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (PCBs) and compounds containing them; lead and lead-based paint; asbestos or asbestos containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any Governmental Authority; any substance that requires special handling and any other material or substance now or in the future that (i) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by or within the meaning of any Hazardous Materials Law, or (ii) is regulated in any way by or within the meaning of any Hazardous Materials Law.

“Hazardous Materials Law” and “Hazardous Materials Laws” means any and all federal, state and local laws, ordinances, regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future, including all amendments, that relate to Hazardous Materials or the protection of human health or the environment and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state analogs.

“HVAC System” is defined in Section 6.10(a)(v).

“Immediate Family Members” means a Person’s spouse, parent, child (including stepchild), grandchild (including step-grandchild) or sibling.

“Imposition Reserve Deposits” is defined in Section 4.02(a).

“Impositions” is defined in Section 4.02(a).

“Improvements” means the buildings, structures and improvements now constructed or at any time in the future constructed or placed upon the Land, including any future alterations, replacements and additions.

“Indebtedness” means the principal of, interest at the fixed or variable rate set forth in the Note on, and all other amounts due at any time under, the Note, this Loan Agreement or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 9.02 to protect the security of the Security Instrument.

“Indemnified Party/ies” is defined in Section 10.02(d).

“Indemnitees” is defined in Section 10.02(a).

“Installment Due Date” is defined in the Note.

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“Insurance” means Property Insurance, liability insurance and all other insurance that Lender requires Borrower to maintain pursuant to this Loan Agreement.

“Intercreditor Agreement” is defined in Section 11.11(b).

“Investor Interest Transfer” is defined in Section 7.03(d)(vi).

“Investor Interests” is defined in Section 7.03(d)(vi).

“Issuer” means the issuer of any Letter of Credit.

“Issuer Group” is defined in Section 10.02(d).

“Issuer Person” is defined in Section 10.02(d).

“Land” means the land described in Exhibit A.

“Leases” means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

“Lender” means the entity identified as “Lender” in the first paragraph of this Loan Agreement, or any subsequent holder of the Note.

“Lender’s Discretion” means Lender’s reasonable discretion unless otherwise set forth in this Loan Agreement.

“Letter of Credit” means any letter of credit required under the terms of this Loan Agreement or any other Loan Document.

“LIBOR Index Rate” is defined in the Note, if applicable.

“Lien” means any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance on the Mortgaged Property.

“Loan” is defined on Page 1 of this Loan Agreement.

“Loan Agreement” means this Multifamily Loan and Security Agreement.

“Loan Application” is defined in Section 5.16(a).

“Loan Documents” means the Note, the Security Instrument, this Loan Agreement, all guaranties, all indemnity agreements, all collateral agreements, UCC filings, O&M Programs,

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the MMP and any other documents now or in the future executed by Borrower, any Guarantor or any other Person in connection with the Loan evidenced by the Note, as such documents may be amended from time to time.

“Loan Servicer” means the entity that from time to time is designated by Lender to collect payments and deposits and receive Notices under the Note, the Security Instrument, this Loan Agreement and any other Loan Document, and otherwise to service the Loan evidenced by the Note for the benefit of Lender.

“Lockout Period,” if applicable, is defined in the Note.

“Major Building System” means one that is integral to the Improvements, providing basic services to the tenants and other occupants of the Improvements including:

•Electrical (electrical lines or power upgrades, excluding fixture replacement).

•HVAC (central and unit systems, excluding replacement of in kind unit systems).

•Plumbing (supply and waste lines, excluding fixture replacement).

•Structural (foundation, framing, and all building support elements).

“Manager”or“Managers” means a Person who is named or designated as a manager or managing member or otherwise acts in the capacity of a manager or managing member of a limited liability company in a limited liability company agreement or similar instrument under which the limited liability company is formed or operated.

“Margin” is defined in the Note, if applicable.

“Material Adverse Effect” means a significant detrimental effect on: (i) the Mortgaged Property, (ii) the business, prospects, profits, operations or condition (financial or otherwise) of Borrower, (iii) the enforceability, validity, perfection or priority of the Lien of any Loan Document, or (iv) the ability of Borrower to perform any obligations under any Loan Document.

“Maturity Date” means the Scheduled Maturity Date, as defined in the Note.

“Maximum Combined LTV” [CHOOSE ONE AS REQUIRED BY THE COMMITMENT OR ERLA:] means_________%. [INSERT LTV REQUIRED BY COMMITMENT OR ERLA].

“Membership Interests” is defined in Section 5.24.

“Membership Interests Seller” is defined in Section 5.24.

“Minimum DSCR” means, with respect to a Supplemental Loan, (i) if the Senior Indebtedness bears interest at a fixed rate, 1.25:1, or (ii) if the Senior Indebtedness bears interest at a floating rate, 1.10:1.

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“Minimum Occupancy” means __% of units at the Mortgaged Property with leases that comply with Section 5.11, Section 6.09(e)(v)(E), and Section 6.15.

“MMP” means a moisture management plan to control water intrusion and prevent the development of Mold or moisture at the Mortgaged Property throughout the term of this Loan Agreement.

“Modified Non-Residential Lease” means an extension or modification of any Non-Residential Lease, which Non-Residential Lease was in existence as of the date of this Loan Agreement.

“Mold” means mold, fungus, microbial contamination or pathogenic organisms.

“Mortgaged Property” means all of Borrower’s present and future right, title and interest in and to all of the following:

(i) The Land, or, if Borrower’s interest in the Land is pursuant to a Ground Lease, the Ground Lease and the Leasehold Estate.

(ii) The Improvements.

(iii) The Fixtures.

(iv) The Personalty.

(v) All current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights of way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses and appurtenances related to or benefiting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated.

(vi) All proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the Insurance pursuant to Lender’s requirement.

(vii) All awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land or the Leasehold Estate, as applicable, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from Condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof.

(viii) All contracts, options and other agreements for the sale of the Land, or the Leasehold Estate, as applicable, the Improvements, the Fixtures, the Personalty or

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any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations.

(ix) All proceeds from the conversion, voluntary or involuntary, of any of the items described in items (i) through (viii) of this definition, into cash or liquidated claims, and the right to collect such proceeds.

(x) All Rents and Leases.

(xi) All earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the Loan.

(xii) All Imposition Reserve Deposits.

(xiii) All refunds or rebates of Impositions by any Governmental Authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Loan Agreement is dated).

(xiv) All tenant security deposits which have not been forfeited by any tenant under any Lease and any bond or other security in lieu of such deposits.

(xv) All names under or by which any of the Mortgaged Property may be operated or known, and all trademarks, trade names and goodwill relating to any of the Mortgaged Property.

(xvi) If required by the terms of Section 4.05 or elsewhere in this Loan Agreement, all rights under any Letter of Credit and the Proceeds, as such Proceeds may increase or decrease from time to time.

(xvii) If the Note provides for interest to accrue at a floating or variable rate and there is a Cap Agreement, the Cap Collateral.

(xviii) through (xxv) are Reserved.

“New Non-Residential Lease” is any Non-Residential Lease not in existence as of the date of this Loan Agreement.

“Non-Residential Lease” is a Lease of a portion of the Mortgaged Property to be used for non-residential purposes.

“Non-U.S. Equity Holder” means any Person with a collective equity interest (whether direct or indirect of 10% or more in Borrower, and which is either (a) an individual who is not a citizen of the United States, or (b) an entity formed outside the United States.

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“Note” means the Multifamily Note (including any Amended and Restated Note, Consolidated, Amended and Restated Note, or Extended and Restated Note) executed by Borrower in favor of Lender and dated as of the date of this Loan Agreement, including all schedules, riders, allonges and addenda, as such Multifamily Note may be amended, modified and/or restated from time to time.

“Notice” or “Notices” means all notices, demands and other communication required under the Loan Documents, provided in accordance with the requirements of Section 11.03.

“O&M Program” is defined in Section 6.12(c) and consists of the following: Operations and Maintenance program for Asbestos as set forth in the environmental report dated September 20, 2016, prepared by Partner Engineering and Science, Inc.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“Person”means any natural person, sole proprietorship, corporation, general partnership, limited partnership, limited liability company, limited liability partnership, limited liability limited partnership, joint venture, association, joint stock company, bank, trust, estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision thereof), endowment fund or any other form of entity.

“Personalty” means all of the following:

(i) Accounts (including deposit accounts) of Borrower related to the Mortgaged Property.

(ii) Equipment and inventory owned by Borrower, which are used now or in the future in connection with the ownership, management or operation of the Land or Improvements or are located on the Land or Improvements, including furniture, furnishings, machinery, building materials, goods, supplies, tools, books, records (whether in written or electronic form) and computer equipment (hardware and software).

(iii) Other tangible personal property owned by Borrower which is used now or in the future in connection with the ownership, management or operation of the Land or Improvements or is located on the Land or in the Improvements, including ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances (other than Fixtures).

(iv) Any operating agreements relating to the Land or the Improvements.

(v) Any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements.

(vi) All other intangible property, general intangibles and rights relating to the operation of, or used in connection with, the Land or the Improvements, including

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all governmental permits relating to any activities on the Land and including subsidy or similar payments received from any sources, including a Governmental Authority.

(vii) Any rights of Borrower in or under any Letter of Credit.

“Pledge Agreement” is defined in Section 11.12(f)(iii).

“Preapproved Intrafamily Transfer” is defined in Section 7.04.

“Prepayment Premium Period” is defined in the Note.

“Prior Lien” means a pre-existing mortgage, deed of trust or other Lien encumbering the Mortgaged Property.

“Proceeding” means, whether voluntary or involuntary, any case, proceeding or other action against Borrower or any SPE Equity Owner under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors.

“Proceeds” means the cash obtained by a draw on a Letter of Credit.

“Prohibited Activity or Condition” means each of the following:

(i) The presence, use, generation, release, treatment, processing, storage (including storage in above-ground and underground storage tanks), handling or disposal of any Hazardous Materials on or under the Mortgaged Property.

(ii) The transportation of any Hazardous Materials to, from or across the Mortgaged Property.

(iii) Any occurrence or condition on the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws.

(iv) Any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property.

(v) Any violation or noncompliance with the terms of any O&M Program.

However, the term “Prohibited Activity or Condition” expressly excludes lawful conditions permitted by an O&M Program or the safe and lawful use and storage of quantities of: (i) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (ii) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property, and (iii) petroleum products used in the operation and maintenance of motor vehicles from time to time located on

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the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

“Prohibited Parties List” means any one or more of the following:

(i)    The OFAC Specially Designated Nationals and Blocked Persons List.

(ii)    The OFAC Consolidated Sanctions List.

(iii) The list of individuals and entities prohibited from doing business with the Department of Housing and Urban Development.

“Property Improvement Alterations” means alterations and additions to the Improvements existing at or upon the Mortgaged Property as of the date of this Loan Agreement, which are being made to renovate or upgrade the Mortgaged Property and are not otherwise permitted under Section 6.09(e). Repairs, Capital Replacements, Restoration or other work required to be performed at the Mortgaged Property pursuant to Sections 6.10 or 6.11 will not constitute Property Improvement Alterations.

“Property Improvement Notice” means a Notice to Lender that Borrower intends to begin the Property Improvement Alterations identified in the Property Improvement Notice.

“Property Improvement Total Amount” means the aggregate of $_____________ during the term of the Mortgage.

[INSERT THE FOLLOWING AS APPLICABLE:

• FOR LOANS UP TO $50MM, ENTER AMOUNT THAT IS THE LESSER OF (i) 20% OF THE APPRAISED VALUE OF THE PROPERTY OR (ii) $10,000,000.

• FOR LOANS $50MM OR GREATER, ENTER AMOUNT THAT IS THE LESSER OF (i) 15% OF THE APPRAISED VALUE OF THE PROPERTY OR (ii) $15,000,000.]

“Property Insurance” is defined in Section 6.10(a).

“Property Jurisdiction” means the jurisdiction in which the Land is located.

“Property Manager” means POLARIS PROPERTY MANAGEMENT LLC, a California limited liability company, or another residential rental property manager which is approved by Lender in writing.

“Property Seller” is defined in Section 5.24.

“Public Fund/REIT Securities” is defined in Section 7.03(c).

“Rate Cap Agreement Reserve Fund”means the account established pursuant to Section 4.07, if applicable, to pay for the cost of a Replacement Cap Agreement.

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“Rating Agencies” means Fitch, Inc., Moody’s Investors Service, Inc., or Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor entity of the foregoing, or any other nationally recognized statistical rating organization.

“Release Instruments” is defined in Section 11.12(f).

“Remedial Work” is defined in Section 6.12(f).

“Rent(s)” means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due or to become due, and deposits forfeited by tenants, and, if Borrower is a cooperative housing corporation or association, maintenance fees, charges or assessments payable by shareholders or residents under proprietary leases or occupancy agreements, whether now due, past due or to become due.

“Rent Schedule” means a written schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender.

“Repairs” means the repairs to be made to the Mortgaged Property, as described on the Repair Schedule of Work (Exhibit C) or as otherwise required by Lender in accordance with this Loan Agreement.

“Replacement Cap Agreement” means any Cap Agreement satisfying the provisions of this Loan Agreement, using documentation approved by Lender, and purchased by Borrower to replace any initial Cap Agreement or subsequent Cap Agreement.

“Replacement Cost” means the estimated replacement cost of the Improvements, Fixtures, and Personalty (or, when used in reference to a property that is not the Mortgaged Property, all improvements, fixtures, and personalty located on such property), excluding any deduction for depreciation, all as determined annually by Borrower using customary methodology and sources of information acceptable to Lender in Lender’s Discretion. Replacement Cost will not include the cost to reconstruct foundations or site improvements, such as driveways, parking lots, sidewalks, and landscaping.

“Reserve Fund” means each account established for Imposition Reserve Deposits, the Replacement Reserve Fund, the Repair Reserve Fund (if any), the Rate Cap Agreement Reserve Fund (if any), the Rental Achievement Reserve Fund (if any), and any other account established pursuant to Article IV of this Loan Agreement.

“Restoration” is defined in Section 6.10(j)(i).

“Scheduled Debt Payments” is defined in Section 11.12(g)(i)(B).

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“Secondary Market Transaction” means: (i) any sale or assignment of this Loan Agreement, the Note and the other Loan Documents to one or more investors as a whole loan, (ii) a participation of the Loan to one or more investors, (iii) any deposit of this Loan Agreement, the Note and the other Loan Documents with a trust or other entity which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or other entity, or (iv) any other sale, assignment or transfer of the Loan or any interest in the Loan to one or more investors.

“Securitization” means when the Note or any portion of the Note is assigned to a REMIC or grantor trust.

“Securitization Indemnification” is defined in Section 10.02(d).

“Security Instrument” means the mortgage, deed of trust, deed to secure debt or other similar security instrument encumbering the Mortgaged Property and securing Borrower’s performance of its Loan obligations, including Borrower’s obligations under the Note and this Loan Agreement (including any Amended and Restated Security Instrument, Consolidation, Modification and Extension Agreement, Extension and Modification Agreement or similar agreement or instrument amending and restating existing security instruments).

“Senior Indebtedness” means, for a Supplemental Loan, if any, the Indebtedness evidenced by each Senior Note and secured by each Senior Instrument for the benefit of each Senior Lender.

“Senior Instrument” – Not applicable.

“Senior Lender” means each holder of a Senior Note.

“Senior Loan Documents” means, for a Supplemental Loan, if any, all documents relating to each loan evidenced by a Senior Note.

“Senior Note” means, for a Supplemental Loan, if any, each Multifamily Note secured by a Senior Instrument.

“Servicing Arrangement” is defined in Section 11.06(b).

“Single Purpose Entity” is defined in Section 6.13(a).

“Site Assessment” means an environmental assessment report for the Mortgaged Property prepared at Borrower’s expense by a qualified environmental consultant engaged by Borrower, or by Lender on behalf of Borrower, and approved by Lender, and in a manner reasonably satisfactory to Lender, based upon an investigation relating to and making appropriate inquiries to evaluate the risks associated with Mold and any existence of Hazardous Materials on or about the Mortgaged Property, and the past or present discharge, disposal, release or escape of any such substances, all consistent with the most current version of the ASTM 1527 standard (or any successor standard published by ASTM) and good customary and commercial practice.

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“SPE Equity Owner” is not applicable. Borrower will not be required to maintain an SPE Equity Owner in its organizational structure during the term of the Loan and all references to SPE Equity Owner in this Loan Agreement and in the Note will be of no force or effect.

“Successor Borrower” is defined in Section 11.12(b).

“Supplemental Indebtedness” the Indebtedness evidenced by the Supplemental Note(s) and secured by the Supplemental Instrument(s) for the benefit of Supplemental Lender(s), if any.

“Supplemental Instrument” means, for each Supplemental Loan (whether one or more), if any, the Security Instrument executed to secure the Supplemental Note for that Supplemental Loan.

“Supplemental Lender” means, for each Supplemental Loan (whether one or more), if any, the lender named in the Supplemental Instrument for that Supplemental Loan and its successors and/or assigns.

“Supplemental Loan” means any loan that is subordinate to the Senior Indebtedness.

“Supplemental Loan Documents” means, for each Supplemental Loan (whether one or more), if any, all documents relating to the loan evidenced by the Supplemental Note for that Supplemental Loan.

“Supplemental Mortgage Product” is defined in Section 11.11(a).

“Supplemental Note” means, for each Supplemental Loan (whether one or more), if any, the Multifamily Note secured by the Supplemental Instrument for that Supplemental Loan.

“Tax Code” means the Internal Revenue Code of the United States, 26 U.S.C. Section 1 et seq., as amended from time to time.

“Taxes” means all taxes, assessments, vault rentals and other charges, if any, whether general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a Lien on the Land or the Improvements.

“Total Insurable Value” means the sum of the Replacement Cost, business income/rental value Insurance and the value of any business personal property.

“Transfer” means any of the following:

(i) A sale, assignment, transfer or other disposition or divestment of any interest in Borrower, a Designated Entity for Transfers, or the Mortgaged Property (whether voluntary, involuntary or by operation of law).

(ii) The granting, creating or attachment of a Lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law).

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(iii) The issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock.

(iv) The withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or Manager in a limited liability company.

(v) The merger, dissolution, liquidation, or consolidation of a legal entity or the reconstitution of one type of legal entity into another type of legal entity.

(vi) A change of the Guarantor.

For purposes of defining the term “Transfer,” the term “partnership” means a general partnership, a limited partnership, a joint venture, a limited liability partnership, or a limited liability limited partnership and the term “partner” means a general partner, a limited partner, or a joint venturer.

“Transfer” does not include any of the following:

(i) A conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under the Security Instrument.

(ii) The Mortgaged Property becoming part of a bankruptcy estate by operation of law under the Bankruptcy Code.

(iii) The filing or recording of a Lien against the Mortgaged Property for local taxes and/or assessments not then due and payable.

“Transfer and Assumption Agreement” is defined in Section 11.12(f)(iv).

“Transfer Fee” means a fee paid when the Transfer is completed. Unless otherwise specified, the Transfer Fee will be equal to the lesser of the following:

(i) 1% of the outstanding principal balance of the Indebtedness as of the date of the Transfer.

(ii) $250,000.

“Transfer Processing Fee” means a nonrefundable fee of $15,000 for Lender’s review of a proposed or completed Transfer.

“U.S. Treasury Obligations” means direct, non-callable and non-redeemable securities issued, or fully insured as to payment, by the United States of America.

“UCC Collateral” is defined in Section 3.03.

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“Underwriter Group” is defined in Section 10.02(d).

“Uniform Commercial Code” means the Uniform Commercial Code as promulgated in the applicable jurisdiction.

“Windstorm Coverage” is defined in Section 6.10(a)(iv).

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ARTICLE XIII    INCORPORATION OF ATTACHED RIDERS.

The Riders listed on Page ii are attached to and incorporated into this Loan Agreement.

ARTICLE XIV    INCORPORATION OF ATTACHED EXHIBITS.

The following Exhibits, if marked with an “X” in the space provided, are attached to this Loan Agreement:

X	Exhibit A	Description of the Land (required)
X	Exhibit B	Modifications to Multifamily Loan and Security Agreement
X	Exhibit C	Repair Schedule of Work
X	Exhibit D	Repair Disbursement Request (required)
	Exhibit E	Work Commenced at Mortgaged Property
X	Exhibit F	Capital Replacements (required)
	Exhibit G	Description of Ground Lease
X	Exhibit H	Organizational Chart of Borrower as of the Closing Date (required)
X	Exhibit I	Designated Entities for Transfers and Guarantor(s) (required)

Exhibit J Description of Release Parcel

X Exhibit K Reserved

X Exhibit L Reserved

	Exhibit M	Reserved
	Exhibit N	Reserved
X	Exhibit O	Borrower’s Certificate of Property Improvement Alterations Completion (required)

ARTICLE XV    RESERVED.

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REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURES ON FOLLOWING PAGES

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BORROWER:

NOHO COMMONS PACIFIC OWNER LLC,

a Delaware limited liability company

By:    KBS SOR II LOFTS AT NOHO COMMONS, LLC,

a Delaware limited liability company

its sole member

By:    NOHO COMMONS PACIFIC INVESTORS LLC,

a Delaware limited liability company,

its Managing Member

By:     SLOVIN PROPERTIES, INC.,

a Delaware corporation,

its Manager

By:    /s/ Karl Slovin                

Name:    Karl Slovin                

Title:    President                

SIGNATURES CONTINUE ON FOLLOWING PAGE

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LENDER:

WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association

By:    /s/ Christian Adrian                

Name:    Christian Adrian

Title:    Director

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

AFFILIATE TRANSFER

(Revised 7-12-2016)

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 7.03(d)(i) is deleted and replaced with the following:

(i) Affiliate Transfer. A Transfer of any direct or indirect interests in Borrower held by an entity owned and Controlled by KEK Family Holdings, LLC (“Affiliate Transferor”) to one or more of Affiliate Transferor’s Affiliates (“Affiliate Transfer”) provided that each of the following conditions is satisfied:

(A) Borrower provides Lender with at least 30 days prior Notice of the proposed Affiliate Transfer and pays to Lender the Transfer Processing Fee.

(B) At the time of the proposed Affiliate Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

(C) Borrower pays or reimburses Lender, upon demand, for all costs and expenses including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Affiliate Transfer.

(D) Lender determines, in Lender’s Discretion, that the Affiliate meets Lender’s eligibility, credit, management and other standards.

(E) After the Affiliate Transfer, Control and management of the day-to-day operations of Borrower continue to be held by the Person exercising such Control and management immediately prior to the Affiliate Transfer and there is no change in the Guarantor, if applicable.

(F) Lender receives organizational charts reflecting the structure of Borrower prior to and after the Affiliate Transfer.    

(G) Lender will not be entitled to collect a Transfer Fee as the result of the Affiliate Transfer.

(H) Lender receives confirmation acceptable to Lender that (1) the requirements of Section 6.13 continue to be satisfied, and (2) the term of

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existence of the Affiliate (exclusive of any unexercised extension options or rights) does not expire prior to the Maturity Date.

(I) Borrower delivers to Lender a search confirming that the Affiliate is not on any Prohibited Parties List.

(J) If a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect to the Affiliate Transfer and all prior Transfers, 50% or more in the aggregate of direct or indirect interests in Borrower are owned by any Person and its Affiliates that owned less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower delivers to Lender an opinion of counsel for Borrower, in form and substance satisfactory to Lender, with regard to nonconsolidation.

(K) Borrower either (1) certifies that there are no Non-US Equity Holders, or (2) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

B. The following definition is added to Article XII:

“Affiliate Transfer” is defined in Section 7.03(d)(i).

“Affiliate Transferor” is defined in Section 7.03(d)(i).

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

BUY-SELL TRANSFER

(Revised 7-12-2016)

[MODIFIED]

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 7.03(d)(iii) is deleted and replaced with the following:

(iii) Buy-Sell Transfer. A one-time Transfer (“Buy-Sell Transfer”) pursuant to a buy-sell agreement, operating agreement, joint venture agreement or similar agreement of the interests in KBS SOR II LOFTS AT NOHO COMMONS, LLC, the sole member of Borrower

(A)    The Buy-Sell Transfer may consist of either of the following Transfers:

(1) The Transfer of the interests of NOHO Commons Pacific Investors LLC (“Manager”) to KBS SOR II LOFTS AT NOHO COMMONS JV, LLC or to its wholly owned Affiliate (“Equity”) (either by purchase of the ownership interest of the Manager or replacement of the Manager as the general partner, manager or managing member).

(2) The Transfer of the Equity’s ownership to the Manager or to a wholly owned Affiliate of Manager.

(B) The Buy-Sell Transfer will be a permitted Transfer if each of the following conditions is satisfied:

(1) Borrower provides Lender with at least 30 days prior Notice of the proposed Buy-Sell Transfer and pays to Lender the Transfer Processing Fee.

(2) At the time of the proposed Buy-Sell Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default; provided, however, if the Buy-Sell Transfer would cure the Event of Default, the Buy-Sell Transfer must occur within 60 days after all conditions in this Section have been met to Lender’s satisfaction.

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(3) Borrower pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Buy-Sell Transfer.

(4) If there is a new manager of Borrower (“New Manager”), New Manager provides a guarantor (“New Manager Guarantor”) acceptable to Lender in Lender’s Discretion, and each of the following requirements is met (collectively, the “New Manager Requirements”):

(I) At the time of the Buy-Sell Transfer, New Manager Guarantor has a net worth of at least $32,445,000, and liquid assets of at least $10,815,000.

(II) Lender receives all information and organizational documents requested by Lender in Lender’s Discretion, with respect to New Manager Guarantor.

(III) New Manager Guarantor executes a Guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date (“New Manager Guaranty”), however, if New Manager Guarantor is an entity, the following conditions will be applicable:

(X) The New Manager Guaranty has been modified to include, at New Manager Guarantor’s option, either the Rider to Guaranty – Material Adverse Change, or the Rider to Guaranty – Minimum Net Worth/Liquidity.

(Y) Section 9.01(ccc) will be deleted and replaced with the following:

(ccc) Any failure by Guarantor to comply with the Minimum Net Worth/Liquidity Rider to the Guaranty, or the Material Adverse Change Rider to the Guaranty, if applicable.

(IV) Following the Buy-Sell Transfer, Control and management of the day-to-day operations of the Equity continues to be held by the Person exercising such Control and management immediately prior to the Buy-Sell Transfer.

(5) The Mortgaged Property continues to be managed by the initial Property Manager or a successor Property Manager satisfactory to

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Lender pursuant to a property management agreement approved by Lender in writing; which approval will not be unreasonably withheld, provided that such successor Property Manager and Borrower execute an assignment of the management agreement in form acceptable to Lender.

(6) [CHOOSE ONE] [FOR CONVENTIONAL LOAN:Reserved.][OR] [FOR SENIORS LOAN:If applicable, the Facility continues to be operated by the initial operator of the Facility or a successor operator of the Facility satisfactory to Lender pursuant to an operating lease approved by Lender in writing, provided that such successor operator of the Facility and Borrower execute a subordination and assignment of such operating lease in form acceptable to Lender.]At the time of the proposed Buy-Sell Transfer, Borrower must have completed the Value-Add Work in substantial conformance with the Value-Add Schedule of Work.

(7) At the time of the proposed Buy-Sell Transfer, if the Equity becomes a New Manager, it certifies to Lender that its net worth and liquidity are substantially the same as or better than its net worth and liquidity as of the date of this Loan Agreement and there is not any pending bankruptcy, reorganization or litigation which would substantially negatively affect such net worth and/or liquidity.

(8) Lender receives organizational charts reflecting the structure of Borrower prior to and after the Buy-Sell Transfer.

(9) Lender receives confirmation acceptable to Lender that (1) the requirements of Section 6.13 continue to be satisfied, and (2) the term of existence of the Equity (exclusive of any unexercised extension options or rights) does not expire prior to the Maturity Date.

(10) If the Transfer is to a wholly-owned Affiliate of either the Equity or Manager, Borrower delivers to Lender a search confirming that the transferee Affiliate is not on any Prohibited Parties List.

(11) If a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect to the Buy-Sell Transfer and all prior Transfers, 50% or more in the aggregate of direct or indirect interests in Borrower are owned by any Person and its Affiliates that owned less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower delivers to Lender an opinion of counsel for Borrower, in form and substance satisfactory to Lender with regard to nonconsolidation.

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(12) If there is a New Manager Guarantor and all of the New Manager Requirements have been satisfied, the Guarantor may request a release of its liability under the Guaranty in accordance with Section 7.05(c) of this Loan Agreement.

(13) Borrower either (1) certifies that there are no Non-US Equity Holders, or (2) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

B. The following definitions are added to Article XII:

“Buy-Sell Transfer” is defined in Section 7.03(d)(iii).

“Equity” is defined in Section 7.03(d)(iii)(A)(1).

“Manager” is defined in Section 7.03(d)(iii)(A)(1).

“New Manager” is defined in Section 7.03(d)(iii)(B)(4).

“New Manager Guarantor” is defined in Section 7.03(d)(iii)(B)(4).

“New Manager Guaranty” is defined in Section 7.03(d)(iii)(B)(4)(III).

“New Manager Requirements” is defined in Section 7.03(d)(iii)(B)(4).

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

COOPERATION WITH RATING AGENCIES AND INVESTORS

(Revised 1-27-2015)

A. Section 11.14is deleted and replaced with the following:

11.14 Cooperation with Rating Agencies and Investors. At the request of Lender and, to the extent not already required to be provided by Borrower under this Loan Agreement, Borrower must use reasonable efforts to satisfy the market standards to which Lender customarily adheres or which may be reasonably required in the marketplace or by the Rating Agencies in connection with any Securities secured by or evidencing ownership interests in the Note and this Loan Agreement, including all of the following:

(a) Borrower will providefinancial and other information with respect to the Mortgaged Property, the Borrower and the Property Manager.

(b) Borrower will perform or permit or cause to be performed or permitted such site inspections and other due diligence investigations of the Mortgaged Property, as may be requested by Lender in Lender’s Discretion or may reasonably be requested by the Rating Agencies or as may be necessary or appropriate in connection with the Secondary Market Transaction. Lender will reimburse Borrower for any third party costs which Borrower reasonably incurs in connection with any such due diligence investigation.

(c) Borrower will make such representations and warranties as of the closing date of the Secondary Market Transaction with respect to the Mortgaged Property, Borrower and the Loan Documents as are customarily provided in securitization transactions and as may be requested by Lender in Lender’s Discretion or may reasonably be requested by the Rating Agencies and consistent with the facts covered by such representations and warranties as they exist on the date of this Loan Agreement, including the representations and warranties made in the Loan Documents, together, if customary, with appropriate verification of and/or consents to the Provided Information through letters of auditors or opinions of counsel of independent attorneys acceptable to Lender and to the Rating Agencies. Lender will reimburse Borrower for any third party costs which Borrower reasonably incurs in connection with obtaining such auditors’ letters or opinions of counsel.

(d) Borrower will cause its counsel to render opinions, which may be relied upon by Lender, the Rating Agencies and their respective counsel, agents

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and representatives, as to nonconsolidation or any other opinion customary in securitization transactions with respect to the Mortgaged Property and Borrower and its Affiliates, which counsel and opinions must be satisfactory to Lender in Lender’s Discretion and be reasonably satisfactory to the Rating Agencies. Lender will reimburse Borrower for any third party costs which Borrower reasonably incurs in connection with obtaining such opinions of Borrower’s counsel.

(e) Borrower will execute such amendments to the Loan Documents and organizational documents, establish and fund the Replacement Reserve Fund, if any, and complete any Repairs, if any, as may be requested by Lender or by the Rating Agencies or otherwise to effect the Secondary Market Transaction; provided, however, that the Borrower will not be required to modify or amend any Loan Document if such modification or amendment would (i) change the interest rate, the stated maturity or the amortization of principal set forth in the Note, or (ii) modify or amend any other material economic term of the Loan.

B.    The following definitions are added to Article XII:

“Provided Information” means the information provided by Borrower as required by Section 11.14 (a), (b) and (c).

“Securities” means single or multi‑class securities.

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Cooperation with Rating Agencies and Investors

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

REPAIRS – NO REPAIR RESERVE ESTABLISHED

(Revised 5-1-2015)

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 4.03 is deleted and replaced with the following:

4.03 Repairs – No Repair Reserve Fund Established. No Repair Reserve Fund has been established. Borrower must commence and complete the Repairs as required pursuant to Section 6.14.

(a) Reporting Requirements; Completion. Prior to the applicable Completion Date, Borrower will deliver all of the following to Lender:

(i) Contractor’s Certificate. If required by Lender, a certificate signed by each major contractor and supplier of materials, as reasonably determined by Lender, engaged to provide labor or materials for the Repairs to the effect that such contractor or supplier has been paid in full for all work completed and that the portion of the Repairs provided by such contractor or supplier has been fully completed in accordance with the plans and specifications (if any) provided to it by Borrower and that such portion of the Repairs is in compliance with all applicable building codes and other rules and regulations promulgated by any applicable regulatory authority or Governmental Authority.

(ii) Borrower’s Certificate. A certificate signed by Borrower to the effect that the Repairs have been fully paid for and no claim exists against Borrower or against the Mortgaged Property out of which a lien based on furnishing labor or material exists or might ripen. Borrower may except from the certificate described in the preceding sentence any claim(s) that Borrower intends to contest, provided that any such claim is described in Borrower’s certificate. If required by Lender, Borrower also must certify to Lender that the Repairs are in compliance with all applicable building codes and zoning ordinances.

(iii) Engineer’s Certificate. If required by Lender, a certificate signed by the professional engineer employed by Lender to the effect that the Repairs have been completed in a good and workmanlike manner in compliance with the Repair Schedule of Work and all applicable building codes, zoning ordinances and other rules and

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regulations promulgated by applicable regulatory or Governmental Authority.

(iv) Other Certificates. Any other certificates of approval, acceptance or compliance required by Lender from any Governmental Authority having jurisdiction over the Mortgaged Property and the Repairs.

(b) Right to Complete Repairs. If Borrower abandons or fails to proceed diligently with the Repairs or otherwise, or there exists an Event of Default under this Loan Agreement, Lender will have the right (but not the obligation) to enter upon the Mortgaged Property and take over and cause the completion of the Repairs. Any contracts entered into or indebtedness incurred upon the exercise of such right may be in the name of Borrower, and Lender is irrevocably appointed the attorney in fact of Borrower, such appointment being coupled with an interest, to enter into such contracts, incur such obligations, enforce any contracts or agreements made by or on behalf of Borrower (including the prosecution and defense of all actions and proceedings in connection with the Repairs and the payment, settlement, or compromise of all claims for materials and work performed in connection with the Repairs) and do any and all things necessary or proper to complete the Repairs including signing Borrower’s name to any contracts and documents as may be deemed necessary by Lender. In no event will Lender be required to expend its own funds to complete the Repairs, but Lender may, in Lender’s sole and absolute discretion, advance such funds. Any funds advanced will be added to the Indebtedness, secured by the Security Instrument and payable to Lender by Borrower in accordance with the provisions of the Loan Documents pertaining to the protection of Lender’s security and advances made by Lender.

(c) Completion of Repairs. Any acknowledgment by Lender of completion of any Repair in a manner satisfactory to Lender will not be deemed a certification by Lender that the Repair has been completed in accordance with applicable building, zoning or other codes, ordinances, statutes, laws, regulations or requirements of any Governmental Authority. Borrower will at all times have the sole responsibility for insuring that all Repairs are completed in accordance with all such governmental requirements.

(d) Costs Charged by Lender. If Lender, in Lender’s Discretion, retains a professional inspection engineer or other qualified third party to inspect any Repairs pursuant to the terms of Section 6.06, Lender may charge Borrower an amount sufficient to pay all reasonable costs and expenses charged by such third party inspector. Borrower will pay the amount of such item(s) to Lender immediately after Notice from Lender to Borrower of such charge(s).

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B.    The following definitions are added to Article XII:

“Repair Schedule of Work” means the Repair Schedule of Work attached as Exhibit C.

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

REPLACEMENT RESERVE FUND – IMMEDIATE DEPOSITS

(Revised 7-1-2014)

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 4.04 is deleted and replaced with the following:

4.04    Replacement Reserve Fund.

(a) Deposits to Replacement Reserve Fund. On the Closing Date, the parties will establish the Replacement Reserve Fund and Borrower will pay the Initial Deposit to Lender for deposit into the Replacement Reserve Fund. Commencing on the date the first installment of principal and/or interest is due under the Note and continuing on the same day of each successive month until the Loan is paid in full, Borrower will pay the Monthly Deposit to Lender for deposit into the Replacement Reserve Fund, together with its regular monthly payments of principal and/or interest as required by the Note. A transfer of funds into the Replacement Reserve Fund from the Repair Reserve Fund, pursuant to the terms of Section 4.03(e), if applicable, will not alter or reduce the amount of any deposits to the Replacement Reserve Fund.

(b) Costs Charged by Lender.

(i) If Lender, in Lender’s Discretion, retains a professional inspection engineer or other qualified third party to inspect any Capital Replacements pursuant to the terms of Section 6.06, Lender may charge Borrower an amount sufficient to pay all reasonable costs and expenses charged by such third party inspector.

(ii) If there are sufficient funds in Replacement Reserve Fund, Lender will be entitled, but not obligated, to deduct from the Replacement Reserve Fund the costs and expenses set forth in Section 4.04(b)(i). Lender will be entitled to charge Borrower for such costs and expenses and Borrower will pay the amount of such item(s) to Lender immediately after Notice from Lender to Borrower of such charge(s).

(iii) If there are insufficient funds in the Replacement Reserve Fund, then Lender will be entitled to charge Borrower for the costs and expenses specified in Section 4.04(b)(i), and Borrower will pay the amount of such item(s) to Lender immediately after Notice from Lender to Borrower of such charge(s).

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(c) Adjustments to Replacement Reserve Fund. If the initial term of the Loan is greater than 120 months, then the following provisions will apply:

(i) Lender reserves the right to adjust the amount of the Monthly Deposit based on Lender’s assessment of the physical condition of the Mortgaged Property, however, Lender will not make such an adjustment prior to the date that is 120 months after the first installment due date, nor more frequently than every 10 years thereafter during the term of the Loan.

(ii) Borrower will pay the cost of any assessment required by Lender pursuant to Section 4.04(c)(i) to Lender immediately after Notice from Lender to Borrower of such charge.

(iii) Upon Notice from Lender or Loan Servicer, Borrower will begin paying the Revised Monthly Deposit on the first monthly payment date that is at least 30 days after the date of Lender’s or Loan Servicer’s Notice. If Lender or Loan Servicer does not provide Borrower with Notice of a Revised Monthly Deposit, Borrower will continue to pay the Monthly Deposit or the Revised Monthly Deposit then in effect.

(d) Insufficient Amount in Replacement Reserve Fund. If Borrower requests disbursement from the Replacement Reserve Fund for a Capital Replacement in accordance with this Loan Agreement in an amount which exceeds the amount on deposit in the Replacement Reserve Fund, Lender will disburse to Borrower only the amount on deposit in the Replacement Reserve Fund. Borrower will pay all additional amounts required in connection with any such Capital Replacement from Borrower’s own funds.

(e) Reserved.

(f) Reserved.

(g) Disbursements from Replacement Reserve Fund.

(i) Requests for Disbursement. Lender will disburse funds from the Replacement Reserve Fund as follows:

(A) Borrower’s Request. If Borrower determines, at any time or from time to time, that a Capital Replacement is necessary or desirable, Borrower will perform such Capital Replacement and request from Lender, in writing, reimbursement for such Capital Replacement. Borrower’s request for reimbursement will include (1) a detailed description of the Capital Replacement performed, together

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with evidence, satisfactory to Lender, that the cost of such Capital Replacement has been paid, and (2) if required by Lender, lien waivers from each contractor and material supplier supplying labor or materials for such Capital Replacement.

(B) Lender’s Request. If Lender reasonably determines at any time or from time to time, that a Capital Replacement is necessary for the proper maintenance of the Mortgaged Property, it will so notify Borrower, in writing, requesting that Borrower obtain and submit to Lender bids for all labor and materials required in connection with such Capital Replacement. Borrower will submit such bids and a time schedule for completing each Capital Replacement to Lender within 30 days after Borrower’s receipt of Lender’s Notice. Borrower will perform such Capital Replacement and request from Lender, in writing, reimbursement for such Capital Replacement. Borrower’s request for reimbursement will include (1) a detailed description of the Capital Replacement performed, together with evidence, satisfactory to Lender, that the cost of such Capital Replacement has been paid, and (2) if required by Lender, lien waivers from each contractor and material supplier supplying labor or materials for such Capital Replacement.

(ii) Conditions Precedent. Disbursement from the Replacement Reserve Fund will be made no more frequently than once every Replacement Reserve Disbursement Period and, except for the final disbursement, no disbursement will be made in an amount less than the Minimum Replacement Disbursement Request Amount. Disbursements will be made only if the following conditions precedent have been satisfied, as determined by Lender in Lender’s Discretion:

(A) Each Capital Replacement has been performed and/or installed on the Mortgaged Property in a good and workmanlike manner with suitable materials (or in the case of a partial disbursement, performed and/or installed on the Mortgaged Property to an acceptable stage), in accordance with good building practices and all applicable laws, ordinances, rules and regulations, building setback lines and restrictions applicable to the Mortgaged Property, and has been paid for by Borrower as evidenced by copies of all applicable paid invoices or bills submitted to Lender by Borrower at the time Borrower requests disbursement from the Replacement Reserve Fund.

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(B) There is no condition, event or act that would constitute a default (with or without Notice and/or lapse of time).

(C) No Lien or claim based on furnishing labor or materials has been recorded, filed or asserted against the Mortgaged Property, unless Borrower has properly provided a bond or other security against loss in accordance with applicable law.

(D) All licenses, permits and approvals of any Governmental Authority required for the Capital Replacement as completed to the applicable stage have been obtained and submitted to Lender upon Lender’s request.

(h) Right to Complete Capital Replacements. If Borrower abandons or fails to proceed diligently with any Capital Replacement in a timely fashion or an Event of Default occurs and continues under this Loan Agreement for 30 days after Notice of such failure by Lender to Borrower, Lender will have the right (but not the obligation) to enter upon the Mortgaged Property and take over and cause the completion of such Capital Replacement. However, no such Notice or cure period will apply in the case of such failure which could, in Lender’s sole and absolute discretion, absent immediate exercise by Lender of a right or remedy under this Loan Agreement, result in harm to Lender, tenants or third parties or impairment of the security given under this Loan Agreement, the Security Instrument or any other Loan Document. Any contracts entered into or indebtedness incurred upon the exercise of such right may be in the name of Borrower, and Lender is irrevocably appointed the attorney in fact for Borrower, such appointment being coupled with an interest, to enter into such contracts, incur such obligations, enforce any contracts or agreements made by or on behalf of Borrower (including the prosecution and defense of all actions and proceedings in connection with the Capital Replacement and the payment, settlement or compromise of all bills and claims for materials and work performed in connection with the Capital Replacement) and do any and all things necessary or proper to complete any Capital Replacement, including signing Borrower’s name to any contracts and documents as may be deemed necessary by Lender. In no event will Lender be required to expend its own funds to complete any Capital Replacement, but Lender may, in Lender’s Discretion, advance such funds. Any funds advanced will be added to the Indebtedness, secured by the Security Instrument and payable to Lender by Borrower in accordance with the provisions of the Note, this Loan Agreement, the Security Instrument and any other Loan Document pertaining to the protection of Lender’s security and advances made by Lender.

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(i) Completion of Capital Replacements. Lender’s disbursement of monies from the Replacement Reserve Fund or other acknowledgment of completion of any Capital Replacement in a manner satisfactory to Lender in Lender’s Discretion will not be deemed a certification by Lender that the Capital Replacement has been completed in accordance with applicable building, zoning or other codes, ordinances, statutes, laws, regulations or requirements of any Governmental Authority. Borrower will at all times have the sole responsibility for ensuring that all Capital Replacements are completed in accordance with all such requirements of any Governmental Authority.

(j)    Reserved.

(k)    Reserved.

B.The following definitions are added to Article XII:

“Initial Deposit” means $146,000.

“Minimum Replacement Disbursement Request Amount” means $5,000.

“Monthly Deposit” means $567.

“Replacement Reserve Deposit” means the Initial Deposit, the Monthly Deposit and/or the Revised Monthly Deposit, as appropriate.

“Replacement ReserveDisbursement Period” means the interval between disbursements from the Replacement Reserve Fund, which interval will be no shorter than once a month.

“Replacement Reserve Fund” means the account established pursuant to this Loan Agreement to defray the costs of Capital Replacements.

“Revised Monthly Deposit” means the adjusted amount per month that Lender determines Borrower must deposit in the Replacement Reserve Fund following any adjustment determination by Lender pursuant to Section 4.04(c).

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

TAX METHOD OF ACCOUNTING

(Revised 3-1-2014)

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 6.07(a) is deleted and replaced with the following:

(a) Delivery of Books and Records. Borrower will keep and maintain at all times at the Mortgaged Property or the Property Manager’s office, and upon Lender’s request will make available at the Mortgaged Property (or, at Borrower’s option, at the Property Manager’s office), complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, in accordance with Borrower’s tax method of accounting, consistently applied, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property. Under the tax method of accounting, the accrual basis may be used for interest expense, real estate taxes and insurance expense, and the cash basis will be used for all other items, including, income, prepaid rent, utilities and payroll expense. Financial statements may exclude depreciation and amortization. Any change in tax methods by Borrower must be disclosed to Lender in writing. If Borrower adopts or returns to the GAAP method of accounting, then Borrower must maintain its books and records in accordance with such GAAP method of accounting, consistently applied, for the remainder of the term of the Loan. The books, records, contracts, Leases and other instruments will be subject to examination and inspection by Lender at any reasonable time.

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Tax Method of Accounting

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

VALUE-ADD TRANSACTION

(Revised 7-28-2015)

The following changes are made to the Loan Agreement which precedes this Rider:

A. Section 6.09(e)(viii) is deleted and replaced with the following:

(viii)    Value-Add Work pursuant to Section 6.42.

B.    The following Section is added to Article VI:

6.42 Value-Add Work.

(a) Completion of Value-Add Work; Minimum Expenditure Requirement.

(i) Borrower will commence the Value-Add Work no later than 90 days after the date of this Loan Agreement and will diligently proceed with and complete the Value-Add Work on or before the Value-Add Completion Date. All Value-Add Work will be completed in a good and workmanlike manner, with suitable materials, and in accordance with good building practices and all applicable laws, ordinances, rules, regulations, building setback lines and restrictions applicable to the Mortgaged Property. Borrower agrees to cause the replacement of any material or work that is defective, unworkmanlike or that does not comply with the requirements of this Loan Agreement, as determined by Lender.

(ii) During the period that commences on the date of this Loan Agreement through and including the Value-Add Completion Date, Borrower must spend at least $3,985,600 in the aggregate on Qualified Value-Add Work (as defined below) (the “Minimum Expenditure Requirement”). For the purposes hereof, “Qualified Value-Add Work” means Value-Add Work that will (A) increase income from the Mortgaged Property, (B) decrease expenses of the Mortgaged Property; and/or (C) enhance the durability of the Mortgaged Property, all as determined by Lender in Lender’s Discretion.

(b) Conformance to Value-Add Schedule of Work; Modifications

(i) Borrower must complete the Value-Add Work in substantial conformance with the Value-Add Schedule of Work. The Value-Add Schedule of Work as of the date of this Loan Agreement is attached as Exhibit K (“Original Value-Add Schedule of Work”).

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(ii) Except as set forth in Section 6.42(b)(iii), Borrower may not modify the Value-Add Schedule of Work without Lender’s prior written approval, to be granted or withheld by Lender in its sole discretion. For the purpose of this Loan Agreement, each of the following will be deemed a modification of the Value-Add Schedule of Work:

(A) The completion or performance of any repairs, alterations, replacements and/or other work that are not set forth on the Value-Add Schedule of Work (excluding any Repairs or other items required under the Loan Documents).

(B) The failure to complete any repairs, alterations, replacements and/or other work that are set forth on the Value-Add Schedule of Work.

Borrower may request Lender’s consent to a modification to the Value-Add Schedule of Work by submitting to Lender a description of the proposed modifications together with a revised Value-Add Schedule of Work together with such other information as may be requested by Lender in Lender’s Discretion.

(iii) Notwithstanding the provisions of 6.42(b)(ii), Borrower may modify the Value-Add Schedule of Work without the prior written consent of Lender provided that each of the following requirements is satisfied:

(A) Such changes do not result in the budgeted costs for the Value-Add Work being more than the Maximum Value-Add Budget Amount or less than the Minimum Value-Add Budget Amount.

(B) Such changes will not cause or result in the Value-Add Work being completed later than the Value-Add Completion Date.

(C) Such changes do not include any Prohibited Work.

(D) If such changes, when considered in the aggregate with all previous changes to the Value-Add Schedule of Work, result in an increase or decrease to the Approved Value-Add Budget of more than 20%, Borrower provides to Lender at least 10 days’ prior Notice, together with a description of changes and a copy of the revised Value-Add Schedule of Work.

(iv) The following constitutes “Prohibited Work”:

(A) Repairs, alterations, replacements or other work that will result in a breach of the provisions of this Section 6.42 or any other provision of this Loan Agreement or the other Loan Documents.

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(B)    Except as expressly approved by Lender in its sole discretion,

(1) Repairs, alterations, or replacements of, or that adversely affect, any Major Building System.

(2) Repairs, alterations, or replacements of, or that adversely affect, more than 2 Ancillary Building Systems.

(3) Repairs, alterations, or replacements that result in:

(a) A change in residential dwelling unit configurations on a permanent basis.

(b) An increase or decrease in the total number of residential dwelling units.

(c) The demolition of any existing Improvements.

(d) A permanent obstruction of tenants’ access to units or a temporary obstruction of tenants’ access to units without a reasonable alternative access provided during the period of renovation which causes the obstruction.

(v) Nothing in this Section will be deemed to modify or waive Borrower’s obligation to satisfy the Minimum Expenditure Requirement.

(c) Purchases. Without the prior written consent of Lender, no materials, machinery, equipment, fixtures or any other part of the Value-Add Work will be purchased or installed under conditional sale contracts or lease agreements, or any other arrangement wherein title to such Value-Add Work is retained or subjected to a purchase money security interest, or the right is reserved or accrues to anyone to remove or repossess any such Value-Add Work, or to consider them as personal property.

(d) Lien Protection. Borrower will promptly pay or cause to be paid, when due, all costs, charges and expenses incurred in connection with the construction and completion of the Value-Add Work, and will keep the Mortgaged Property free and clear of any and all Liens other than the Lien of the Security Instrument and any other junior Lien to which Lender has consented.

(e) Adverse Claims. Borrower will promptly advise Lender in writing of any litigation, Liens or claims affecting the Mortgaged Property and of all complaints and charges made by any Governmental Authority that may delay or adversely affect the Value-Add Work.

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(f) Inspection. Lender will be entitled to inspect the Value-Add Work in accordance with Section 6.06. If Lender, in Lender’s Discretion, retains a professional inspection engineer or other qualified third party to inspect any Value-Add Work pursuant to the terms of Section 6.06, Lender also will be entitled to charge Borrower an amount sufficient to pay all reasonable fees and expenses charged by such third party inspector. Borrower will pay any such amounts to Lender immediately after Notice from Lender to Borrower of such charge.

(g) Reporting Requirements.

(i) Within 15 days after the end of each calendar month, Borrower must provide to Lender a written summary regarding the progress of the Value-Add Work. Such summary may be in such format as Borrower uses for its own internal purposes, or in such other format as is acceptable to Lender.

(ii) On each Quarterly Reporting Date, Borrower must provide to Lender the Quarterly Certification, together with such other items, information or certifications as Lender may require in Lender’s Discretion. Borrower must disclose in the Quarterly Certification any failure to achieve the Minimum Occupancy Target and/or the Minimum Unit Improvement Target.

(ii) Prior to the Value-Add Completion Date, Borrower must deliver all of the following to Lender:

(A) Engineer’s Certificate. A certificate signed by the professional engineer employed by Lender to the effect that the Value-Add Work has been completed in a good and workmanlike manner in compliance with the Value-Add Schedule of Work and all applicable building codes, zoning ordinances and other rules and regulations promulgated by applicable regulatory or Governmental Authority.

(B) Evidence of Lien-Free Completion. Final Lien waivers from all applicable contractors and other parties providing material or services in connection with the Value-Add Work, and an endorsement to Lender’s title policy evidencing that the Security Instrument continues to be a first Lien and that there are no subordinate liens.

(C) Evidence of Compliance with Laws. Evidence satisfactory to Lender that the Mortgaged Property continues to comply with all applicable laws, including building codes and zoning requirements. Such evidence must include any final Certificates of Occupancy, if applicable, and, if required by Lender, an updated zoning letter.

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(D) Evidence of Minimum Expenditure Requirement. Evidence satisfactory to Lender that the Minimum Expenditure Requirement has been satisfied.

(E) Other Certificates and Items. One or more of the following items, if requested by Lender in Lender’s Discretion:

(1) Any other certificates of approval, acceptance or compliance required by Lender from any Governmental Authority having jurisdiction over the Mortgaged Property and the Value-Add Work.

(2) Any certificates as required by Lender in Lender’s Discretion from any architect or major contractor or supplier providing labor or materials for the Value-Add Work.

(3) If the Value-Add Work includes the construction of any new structures or buildings, an updated survey.

(h) Right to Complete Value-Add Work. If Borrower abandons or fails to proceed diligently with the Value-Add Work, or there exists an Event of Default under this Loan Agreement, Lender will have the right (but not the obligation) to enter upon the Mortgaged Property and take over and cause the completion of the Value-Add Work. Any contracts entered into or indebtedness incurred upon the exercise of such right may be in the name of Borrower, and Lender is irrevocably appointed the attorney in fact of Borrower, such appointment being coupled with an interest, to enter into such contracts, incur such obligations, enforce any contracts or agreements made by or on behalf of Borrower (including the prosecution and defense of all actions and proceedings in connection with the Value-Add Work and the payment, settlement, or compromise of all claims for materials and work performed in connection with the Value-Add Work) and do any and all things necessary or proper to complete the Value-Add Work including signing Borrower’s name to any contracts and documents as may be deemed necessary by Lender. In no event will Lender be required to expend its own funds to complete the Value-Add Work, but Lender may, in Lender’s sole and absolute discretion, advance such funds. Any funds advanced will be added to the Indebtedness, secured by the Security Instrument and payable to Lender by Borrower in accordance with the provisions of the Loan Documents pertaining to the protection of Lender’s security and advances made by Lender.

(i) Completion of Value-Add Work. Any acknowledgment by Lender of completion of any Value-Add Work in a manner satisfactory to Lender will not be deemed a certification by Lender that the Value-Add Work has been completed in accordance with applicable building, zoning or other codes, ordinances, statutes, laws, regulations or requirements of any Governmental Authority. Borrower will

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at all times have the sole responsibility for insuring that all Value-Add Work is completed in accordance with all such governmental requirements.

(j) Compliance Required for Freddie Mac Refinance. Borrower acknowledges that compliance with the provisions of this Section 6.42 will be a condition precedent to the issuance of a Freddie Mac Refinance Commitment. Nothing in this subsection or in any other provision of this Loan Agreement or any other Loan Document will be deemed or may be construed as the agreement or obligation of Freddie Mac to issue a Freddie Mac Refinance Commitment or to purchase any loan made to Borrower.

C.    Section 9.01(dd) is deleted and replaced with the following:

(dd) Guarantor fails to comply with the provisions of the Section of the Guaranty entitled “Minimum Net Worth/Liquidity Requirements”.

D. The following subsections are added to Section 9.01:

(pp) Borrower fails to complete the Value-Add Work on or before the Value-Add Completion Date and/or satisfy the Minimum Expenditure Requirement in accordance with the terms of this Loan Agreement.

(qq) Borrower makes a modification of the Value-Add Schedule of Work that is not permitted under or is not in compliance with Section 6.42.

(rr) Borrower fails to provide the Quarterly Certification and other information to Lender as and when required under Section 6.42.

E. The references to “Repairs” in the following Sections will be deemed to also refer to Value-Add Work:

Section 6.01

Section 6.06

Section 6.08(b)

F. The following provisions are deleted and replaced with: “Reserved”:

Section 3.02(b)

Section 4.02(e)(iv)

Section 6.06(a)(iv)

Section 6.09(e)(v)

Section 7.05

Section 9.01(n)

Exhibit O

G.    Section 11.11 is deleted and replaced with the following:

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11.11 No Supplemental Financing Permitted.

(a) Notwithstanding any provision in Freddie Mac’s Multifamily Seller/Servicer Guide that may be in effect relating to a product under which Freddie Mac purchases supplemental mortgage loans on multifamily properties that meet specified criteria (“Supplemental Mortgage Product”), Borrower may not during the term of the Loan obtain any such supplemental mortgage loan.

(b) Any provision or reference in this Loan Agreement or in any other Loan Document relating to the following terms (other than in Section 11.11(a) above) will be deemed of no force and effect:

“Supplemental Indebtedness”

“Supplemental Instrument”

“Supplemental Lender”

“Supplemental Loan”

“Supplemental Loan Documents”

“Supplemental Note”

H.    The following definitions are added to Article XII:

“Ancillary Building System” means a building system that may affect all, or limited, building areas and provides support service to tenants, including the following: (i) security, (ii) elevators, (iii) fire protection equipment (excluding replacement of in-kind equipment), and (iv) photovoltaic (solar) panel installation.

“Approved Value-Add Budget” means the budget contained in the Original Value-Add Schedule of Work, or any subsequent budget expressly approved by Lender pursuant to 6.42(b)(ii).

“Freddie MacRefinance Commitment”is defined in the Note.

“Maximum Value-Add Budget Amount” means $7,300,000.

“Minimum Occupancy Target” means that no less than 85.5% of the residential units are occupied pursuant to Leases that (1) are with tenants that are not Affiliates of Borrower or Guarantor (except as otherwise expressly agreed by Lender in writing), (2) are on arms’ length terms and conditions, and (3) otherwise satisfy the requirements of the Loan Documents.

“Minimum Expenditure Requirement” is defined in Section 6.42.

“MinimumUnit Improvement Target” means at least 50% of the budgeted costs for the Value-Add Schedule of Work is allocated to improvements to the interiors of the residential dwelling units at the Mortgaged Property.

“Minimum Value-Add Budget Amount”means $2,920,000.

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“Original Value-Add Schedule of Work” is defined in Section 6.42.

“Qualified Value-Add Work” is defined in Section 6.42.

“Quarterly Certification” means a certification in the form attached to this Loan Agreement as Exhibit L.

“Quarterly Reporting Date”means 25 days after the end of each calendar quarter.

“Value-Add Completion Date” means August 16, 2019, provided, however, that Lender may in its sole discretion extend the Value-Add Completion Date so long as (i) no Event of Default exists, and (ii) the Scheduled Initial Maturity Date has been extended in accordance with the terms of the Note.

“Value-Add Schedule of Work” means the Original Value-Add Schedule of Work, as amended by any modifications permitted under Section 6.42.

“Value-Add Work” means the repairs, alterations, replacements or other work to be made or done to the Mortgaged Property as described on the Value-Add Schedule of Work.

I.    The following definitions are deleted from Article XII:

“Approved Seller/Servicer”

“Intercreditor Agreement”

“Maximum Combined LTV”

“Minimum DSCR”

“Minimum Occupancy”

“Property Improvement Alterations”

“Property Improvement Notice”

“Property Improvement Total Amount”

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

SPLITTING THE NOTE

(Revised 1-7-2015)

The following changes are made to the Loan Agreement which precedes this Rider:

A. Section 11.17 is deleted and replaced with the following:

11.17    Splitting the Note.

(a) Lender has the right from time to time to sever the Note into two or more separate promissory notes in such denominations as Lender determines in its sole discretion, which promissory notes may be included in separate sales or Securitizations undertaken by Lender. In conjunction with any such action, Lender may redefine the interest rate and amortization schedule; provided however, each of the following will be true:

(i) If Lender elects to sever the Note during any period that the interest rate is a Fixed Interest Rate (as defined in the Note), and if Lender redefines the interest rate, then the weighted average of the interest rates contained in the severed promissory notes taken in the aggregate will equal the Fixed Interest Rate.

(ii) If Lender elects to sever the Note during any period that the interest rate is floating, and if Lender redefines the interest rate, then the weighted average of the margins contained in the severed promissory notes taken in the aggregate will equal the Margin (as defined in the Note).

(iii) If Lender redefines the amortization schedule, the amortization of the severed promissory notes taken in the aggregate will require no more amortization to be paid under the Loan than as was required under the Note at the time such action was taken by Lender and such redefined amortization will not result in a change in the amount of the monthly payment due under the Note.

(b) Borrower will only be required to make one payment under such separate promissory notes. Subject to the foregoing, each severed promissory note, and the Loan evidenced by each severed promissory note, will be upon all of the terms and provisions contained in this Loan Agreement and the Loan Documents which continue in full force and effect, except that Lender may allocate specific collateral given for the Loan as security for

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performance of specific promissory notes, in each case with or without cross default provisions.

(c) Following any severance of the Note, the term "Lender" will be deemed to refer collectively to the holder(s) of the Notes, and the Loan will be serviced by Loan Servicer as if the Loan were evidenced by a single Note.

(d) Borrower agrees to cooperate with all reasonable requests of Lender to accomplish the foregoing, including execution and prompt delivery to Lender of a severance agreement and such other documents as Lender requires in Lender’s Discretion, and Lender will reimburse Borrower for all costs reasonably incurred by Borrower in connection with actions taken by Borrower pursuant to Lender’s request under the terms of this Section 11.17.

(e) Borrower hereby appoints Lender its attorney-in-fact with full power of substitution (which appointment will be deemed to be coupled with an interest and irrevocable until the Loan is paid in full and the Security Instrument is discharged of record, with Borrower hereby ratifying all that its said attorney may do by virtue of such power) to make and execute all documents necessary or desirable to effect the severance set forth in Section 11.17(a); provided, however, Lender will not make or execute any such documents under such power until 10 Business Days after Lender has given Borrower Notice of Lender’s intent to exercise its rights under such power.

(f) Borrower’s failure to deliver any of the documents requested by Lender under this Section for a period of 10 Business Days after Notice of such request by Lender will, at Lender’s option, constitute an Event of Default under this Loan Agreement.

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

ENTITY GUARANTOR

(Revised 3-1-2014)

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 9.01(dd) is deleted and replaced with the following:

(dd) Guarantor fails to comply with the provisions of the Section of the Guaranty entitled “Material Adverse Change” or “Minimum Net Worth/Liquidity Requirements”, as applicable.

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

REGULATORY AGREEMENT AND OWNER PARTICIPATION AGREEMENT

(Revised 7-17-2014)

The following changes are made to the Loan Agreement which precedes this Rider:

A. Section 3.07 is deleted and replaced with the following:

3.07    Owner Participation Agreement.

(a) The Mortgaged Property is the subject of the Owner Participation Agreement. The security interest granted by Borrower to Lender under Section 3.01 will include, without limitation, a security interest in the OPA Contract Rights.

(b) If an Event of Default has occurred and is continuing, Lender may direct the Regulatory Agreement Agency to remit future Housing Subsidy Payments to Lender. Borrower consents to all such remittances. Lender will apply to the Indebtedness any Housing Subsidy Payments that it receives.

B. Section 5.46 is deleted and replaced with the following:

5.46 Regulatory Agreement and Owner Participation Agreement. Borrower represents and warrants that all of the following are correct:

(a) No Default. Borrower is in compliance with all requirements of the Regulatory Agreement and Owner Participation Agreement. Borrower has not received any notice from the Regulatory Agreement Agency that Borrower is in default under the Regulatory Agreement or the Owner Participation Agreement.

(b) Accurate Copy. The copy of the Regulatory Agreement and Owner Participation Agreement that Borrower has provided to Lender includes all amendments, schedules and exhibits and is complete and accurate in all respects.

(c) Termination Date. The Regulatory Agreement terminates on August 31, 2044.

(d) Intentionally Omitted

B. Section 6.36 is deleted and replaced with the following:

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6.36 Regulatory Agreement. Lender acknowledges that the Mortgaged Property is subject to the Regulatory Agreement.

(a) Annual Compliance. Borrower will submit to Lender on an annual basis evidence that the Mortgaged Property is in ongoing compliance with all income, occupancy and rent restrictions under the Regulatory Agreement. Such submissions to Lender will be made contemporaneously with the submission of reports to the Regulatory Agreement Agency as required under the Regulatory Agreement, if applicable.

(b) Reporting Requirements. Borrower will promptly provide Lender with a copy of any notice Borrower receives alleging that Borrower is in breach of the Regulatory Agreement. Borrower will provide Lender with Notice upon termination of the Regulatory Agreement.

(c) Lender’s Consent. Borrower will obtain Lender’s prior approval for any amendment to or modification of the Regulatory Agreement.

C.    Section 9.01(jj) is deleted and replaced with the following:

(jj) Any default, event of default, or breach under the Regulatory Agreement (however such terms may be defined) which continues beyond the applicable cure period, if any.

Section 9.01(kk) is deleted and replaced with the following:

(kk) Any Transfer of: (i) the Property, (ii) any interest in the Property, or (iii) any interest in the Borrower without any prior consent of the Regulatory Agreement Agency that is required by the Owner Participation Agreement.

D.    The following definitions are added to Article XII:

“Regulatory Agreement” means Agreement Containing Covenants Affecting Real Property (SubArea B-2) dated August 31, 2004 and recorded in the applicable land records of the Property Jurisdiction at recording number 04-2252756 and First Amendment to Agreement Containing Covenants Affecting Real Property (SubArea B-2)datedJanuary 1, 2007 and recorded in the applicable land records of the Property Jurisdiction at recording number 2007-0050952, by and between Borrower’s predecessor-in-interest and The Community Redevelopment Agency of the City of Los Angeles [predecessor in interest to RA/LA, A DESIGNATED LOCAL AUTHORITY, a public body formed pursuant to California Health & Safety Code Section 34173(d)(3)].

“Regulatory Agreement Agency” means CRA/LA, A DESIGNATED LOCAL

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AUTHORITY, a public body formed pursuant to California Health & Safety Code Section 34173(d)(3), acting through any authorized representative, or any other Governmental Authority or quasi-governmental authority entitled to enforce the provisions of the Regulatory Agreement (as successor to The Community Redevelopment Agency of the City of Los Angeles).

E. The following definitions are added to Article XII:

“Owner Participation Agreement” means the Owner Participation Agreement dated as of March 5, 2002, as supplemented and amended by (i) that certain First Implementation Agreement dated as of November 18, 2002, (ii) that certain Second Implementation Agreement dated as of December 12, 2003, (iii) that certain Third Implementation Agreement dated as of October 1, 2004, (iv) that certain Partial Assignment and Assumption Agreement dated as of December 18, 2003, (v) that certain Second Partial Assignment and Assumption Agreement dated as of October 1, 2004, (vi) that certain Third Partial Assignment of Owner Participation Agreement and Consent to Assignment, dated as of January 9, 2007, (vii) that certain letter agreement dated August 31, 2005 correcting Attachment 10, (viii) that certain Fourth Partial Assignment of Owner Participation Agreement and Consent to Assignment, dated as of August 3, 2007, (ix) that certain Fourth Implementation Agreement dated June 16, 2008, (x) that certain Fifth Partial Assignment of Owner Participation Agreement and Consent to Assignment dated as of August 19, 2008, (xi) that certain Sixth Partial Assignment of Owner Participation Agreement and Consent to Assignment dated as of May 1, 2015, and (xii) that certain Seventh Partial Assignment of Owner Participation Agreement and Consent to Assignment dated as of November 16, 2016.

“OPA Contract Rights” means the right to Housing Subsidy Payments and all other interests and rights of the Borrower in and under the Owner Participation Agreement.

“Housing Subsidy Payments” means payments received under the Owner Participation Agreement.

F. The following definitions in Article XII are modified as follows:

The “Mortgaged Property” granted, conveyed and assigned to Lender will include the Borrower’s right to receive Housing Subsidy Payments under the Owner Participation Agreement and any and all other OPA Contract Rights and all amendments, renewals and extensions of the Owner Participation Agreement.

The “UCC Collateral” will include the Borrower’s right to receive Housing Subsidy Payments under the Owner Participation Agreement and any and all other OPA Contract Rights and all amendments, renewals and extensions of the Owner Participation Agreement.

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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

STANDARD FREDDIE MAC MODIFICATIONS

(Revised 10-19-2016)

The following changes are made to the Loan Agreement which precedes this Rider:

A. Section 5.09(a) is deleted and replaced with the following:

(a) Borrower and any operator of the Mortgaged Property, if applicable, and to the best of Borrower’s knowledgeany commercial tenant of the Mortgaged Property is in possession of all material licenses, permits and authorizations required for use of the Mortgaged Property, which are valid and in full force and effect as of the date of this Loan Agreement.

B. Section 5.12 is deleted and replaced with the following:

5.12 No Prior Assignment; Prepayment of Rents. Borrower has (a) not executed any prior assignment of Rents (other than an assignment of Rents securing any prior indebtedness that is being assigned to Lender, or that is being paid off and discharged with the proceeds of the Loan evidenced by the Note or, if this Loan Agreement is entered into in connection with a Supplemental Loan, other than an assignment of Rents securing any Senior Indebtedness), and (b) not performed any acts and has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under any Loan Document. At the time of execution of this Loan Agreement, unless otherwise approved by Lender in writing, there has been no prepayment of any Rents for more than 2 months prior to the due dates of such Rents other than the last month’s rent that is collected at the time a tenant enters into a Lease.

C. Sections 6.04(d) is deleted and replaced with the following:

(d) Subordination and Attornment Requirements. All Non-Residential Leases entered into after the date of this Loan Agreement, regardless of whether Lender’s consent or approval is required, will specifically include the following provisions:

(i) The Lease is subordinate to the Lien of the Security Instrument, with such subordination to be self-executing.

(ii) The tenant will attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner.

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(iii) The tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request.

(iv) The tenant will, upon receipt of a written request from Lender following the occurrence of and during the continuance of an Event of Default, pay all Rents payable under the Lease to Lender.

(v) Reserved

(vi) Reserved

D. Section 6.06(a) is deleted and replaced with the following:

(a) Right of Entry. Subject to the rights of tenants under Leases, Borrower will permit Lender, its agents, representatives and designees and any interested Governmental Authority to make or cause to be made entries upon and inspections of the Mortgaged Property to inspect, among other things: (i) Repairs, (ii) Capital Replacements, (iii) Restorations, (iv) Property Improvement Alterations, and (v) any other Improvements, both in process and upon completion (including environmental inspections and tests performed by professional inspection engineers) during normal business hours, or at any other reasonable time, upon reasonable Notice to Borrower if the inspection is to include occupied residential units (which Notice need not be in writing). During normal business hours, or at any other reasonable time, Borrower will also permit Lender to examine all books and records and contracts and bills pertaining to the foregoing. Notice to Borrower will not be required in the case of an emergency, as determined in Lender’s Discretion, or when an Event of Default has occurred and is continuing.

E. Section 6.07(a) is deleted and replaced with the following:

(a) Delivery of Books and Records. Borrower will keep and maintain at all times at the Mortgaged Property, its main business office, or the Property Manager’s office, and upon Lender’s request will make available at the Mortgaged Property (or, at Borrower’s option, at the Property Manager’s office), complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, in accordance with GAAP consistently applied (or such other method which is reasonably acceptable to Lender), and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property. The books, records, contracts, Leases and other instruments will be subject to examination and inspection by Lender at any reasonable time.

F. Section 6.07(c)(ii) is deleted and replaced with the following:

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(c) (ii)    Upon Lender’s request in Lender’s sole and absolute discretion prior to a Securitization, and thereafter upon Lender’s request in Lender’s Discretion, within 10 days after such a request from Lender, each of the following:

(A) A statement that identifies all owners of any interest in Borrower and any designated Entities for TransferPersons with a collective equity interest (whether direct or indirect) of 25% or more in Borrower, and the interest held by each (unless Borrower or any Designated Entity for Transferssuch Person is a publicly-traded entity in which case such statement of ownership will not be required), and if such PersonBorrower or a Designated Entity for Transfers is a corporation then all officers and directors ofsuch PersonBorrower and the Designated Entity for Transfers, and if such PersonBorrower or a Designated Entity for Transfers is a limited liability company then all non-member Managers.

(B) To the extent not included in the statement provided under Section 6.07(c)(ii)(A), a statement that identifies (1) allPersons with a collective equity interest (whether direct or indirect) of 25% or more in Borrowerand (2) all Non-U.S. Equity Holders.

G. Section 6.07(d) is deleted and replaced with the following:

(d) Form of Statements; Audited Financials. A natural person having authority to bind Borrower (or the SPE Equity Owner or Guarantor, as applicable), acting in his or her capacity as a manager, general partner, or an officer of Borrower, SPE Equity Owner, or Guarantor, and not in his or her individual capacity, will certify each of the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) to be complete and accurate. Each of the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) will be in such form and contain such detail as Lender may reasonably require. Lender also may require that any of the statements, schedules or reports listed in Sections 6.07(b), 6.07(c) and 6.07(f) be audited at Borrower’s expense by independent certified public accountants acceptable to Lender, at any time when an Event of Default has occurred and is continuing or at any time that Lender, in its reasonable judgment, determines that audited financial statements are required for an accurate assessment of the financial condition of Borrower or of the Mortgaged Property.

H. Section 6.12(a) is deleted and replaced with the following:

(a) Prohibited Activities and Conditions. Except for matters described in this Section 6.12, Borrower will not cause or permit Prohibited Activities or Conditions. Borrower will comply with all Hazardous Materials Laws applicable to the Mortgaged Property. Without limiting the generality of the previous sentence, Borrower will: (i) obtain and maintain all Environmental Permits required by

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Hazardous Materials Laws and comply with all conditions of such Environmental Permits, (ii) cooperate with any inquiry by any Governmental Authority, and (iii) comply with any governmental or judicial order that arises from any alleged Prohibited Activity or Condition. Subsection (iii) of this Section 6.12(a) is subject to the final sentence of Section 6.12(f).

I. Section 6.12(f) is deleted and replaced with the following:

(f) Remedial Work. If any investigation, site monitoring, containment, clean-up, Restoration or other remedial work (“Remedial Work”) is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property, or is otherwise required by Lender as a consequence of any Prohibited Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition, Borrower will, by the earlier of (i) the applicable deadline required by Hazardous Materials Law, or (ii) 30 days after Notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and must in any event complete the work by the time required by applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower will reimburse Lender on demand for the cost of doing so. Any reimbursement due from Borrower to Lender will become part of the Indebtedness as provided in Section 9.02. Notwithstanding the foregoing, Borrower may contest the order of any Governmental Authority in good faith through appropriate proceedings, provided that (i) Borrower has demonstrated to Lender’s satisfaction that any delay in completing Remedial Work pending the outcome of such proceedings would not result in damage to the Mortgaged Property or to persons who use or occupy the Improvements, or otherwise impair Lender’s interest under this Loan Agreement, and (ii) if any delay in completing the Remedial Work results or may result in a Lien against the Mortgaged Property, Borrower must promptly furnish to Lender a bond or other security satisfactory to Lender in an amount no less than 150% of the applicable claim.

J. Sections 6.13(a)(xvi), (xviii), (xx), and (xxiii) are deleted and replaced with the following:

(xvi) It will file its own tax returns separate from those of any other Person, except to the extent that (A) Borrower is treated as a “disregarded entity” for tax purposes and is not required to file tax returns under applicable law or (B) is required by applicable law to file consolidated tax returns, and will pay any taxes required to be paid under applicable law.

(xviii) It will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations and will pay its debts and liabilities

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from its own assets as the same become due; provided, however, nothing in this Section will require any member or partner of Borrower or any Borrower Principal to make any equity contribution to Borrower.

(xx) It will pay (or cause the Property Manager to pay on behalf of Borrower from Borrower’s funds) its own liabilities (including salaries of its own employees) from its own funds; provided, however, nothing in this Section will require any member or partner of Borrower or any Borrower Principal to make any equity contribution to Borrower.

(xxiii) It will maintain a sufficient number of employees (if any) in light of its contemplated business operations and pay the salaries of its own employees, if any, only from its own funds; provided, however, nothing in this Section will require any member or partner of Borrower or any Borrower Principal to make any equity contribution to Borrower.

K. The lead paragraph of Section 7.01 is deleted and replaced with the following:

7.01 Permitted Transfers. The occurrence of any of the following Transfers will not constitute an Event of Default under this Loan Agreement, notwithstanding any provision of Section 7.02 to the contrary:

L. Section 7.01(h) is deleted and replaced with the following:

(h) The creation of a mechanic’s, materialmen’s, or judgment Lien against the Mortgaged Property, which is released of record, bonded, or otherwise remedied to Lender’s satisfaction within 60 days of the date of creation, or is being contested as otherwise provided in this Loan Agreement; provided, however, if Borrower is diligently prosecuting such release or other remedy and advises Lender that such release or remedy cannot be consummated within such 60-day period, Borrower will have an additional period of time (not exceeding 120 days from the date of creation or such earlier time as may be required by applicable law in which the lienor must act to enforce the Lien) within which to obtain such release of record or consummate such other remedy.

M. Section 11.03(a) is deleted and replaced with the following:

(a) All Notices under or concerning this Loan Agreement will be in writing. Each Notice will be deemed given on the earliest to occur of: (i) the date when the Notice is received by the addressee, (ii) the first Business Day after the Notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery, or (iii) the third Business Day after the Notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested. Addresses for Notice are as follows:

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If to Lender:	Wells Fargo Bank, National Association 2010 Corporate Ridge, Suite 1000 McLean, Virginia 22102 Attention: Loan Servicing Department
If to Borrower:	NoHo Commons Pacific Owner LLC 13949 Ventura Boulevard, Suite 350 Sherman Oaks, California 91423 Attention: Karl Slovin

Lender will endeavor to provide a courtesy copy of any Notice given to Borrower by Lender, at the following address. However, the failure to provide such courtesy copy will not affect the validity or sufficiency of any Notice to Borrower, will not affect Lender’s rights and remedies under this Loan Agreement or any other Loan Document, and will not subject Lender to any claims by or liability to Borrower or any other Person. No person listed below will be a third-party beneficiary of any of the Loan Documents.

Courtesy Copy to: KBS Strategic Opportunity REIT II, Inc. 800 Newport Center Drive, Suite 700 Newport Beach, California 92660 Attention: Brian Ragsdale

N. The following is added to the end of Section 11.13:

Notwithstanding anything set forth above, Borrower will not be required to execute any document that changes the interest rate, the stated maturity date, or the amortization of principal set forth in the Note, or modifies or amends any essential economic terms of the Loan.

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EXHIBIT A

DESCRIPTION OF THE LAND

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EXHIBIT B

MODIFICATIONS TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

1.    Section 6.10(g) of the Loan Agreement is replaced with the following:

(g) Evidence of Insurance; Insurance Policy Renewals. Borrower will deliver to Lender a legible copy of each Insurance policy, and Borrower will promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies. Borrower will ensure that the Mortgaged Property is continuously covered by the required Insurance. At least 15 days prior to the expiration date of each Insurance policy, Borrower will deliver to Lender evidence acceptable to Lender in Lender’s Discretion that each policy has been renewed. If the evidence of a renewal does not include a legible copy of the renewal policy, Borrower will deliver a legible copy of such renewal no later than the earlier of the following:

(i)     60 days after the expiration date of the original policy.

(ii) The date of any Notice of an insured loss given to Lender under Section 6.10(i).

2.    Section 7.03(c)(i) of the Loan Agreement is replaced with the following:

(i) The public issuance of common stock, convertible debt, equity or other similar securities, including securities registered under Section 12(b) of 12(g) of the Securities Exchange Act of 1934, as amended (“Public Fund/REIT Securities”) and the subsequent Transfer of such Public Fund/REIT Securities.

3.    The Loan Agreement must be modified to include the following:

11.16.    Litigation Updates. In connection with the UFAS Lawsuit, Borrower must provide, or cause to be provided, to Lender periodic updates regarding the status of the UFAS Lawsuit within 10 days of Lender’s request prior to Securitization, if applicable, and then quarterly updates thereafter or within 10 days of Lender’s written request; provided that copies of any court orders or settlement agreements that are issued or agreed upon in connection with the UFAS Lawsuit, together with a summary acceptable to Lender, must be delivered promptly to Lender upon issuance or execution of such court order or settlement agreement.

The following definitions must be added to Article XII:

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“Defendant” means Redrock Noho Residential, LLC.

“UFASLawsuit” means the lawsuit filed against Defendant (and other parties) known as Independent Living Center et al. v. City of Los Angeles, Redrock Noho Residential, LLC et al., Docket No. 2:12-cv-00551-FMO-PJW (C.D. CA) (“UFAS Litigation”) and any counterclaims filed in connection therewith.

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EXHIBIT C

REPAIR SCHEDULE OF WORK

Description of Repair	Completion Date Days after Origination)
Landscaping planter repairs - Planter Waterproofing should be restored.	180
Irrigation repairs - Irrigation should be fitted with directional heads to eliminate water spraying onto building	180
Metal fencing repairs - Metal guard railing should be replaced due to corrosion.	180
Building sealants - Sealant along base of the building should be replaced as needed.	180
Arrest active water infiltration - Perform epoxy injection at SE corner of perimeter wall at lower level parking deck.	180
Elevator room HVAC - Install a dedicated split dx system due to high temperatures.	180
Ventilation in gas meter rooms - Increase ventilation to gas meter rooms.	180
ADA improvements – Correct non-compliant ADA design issues.	180

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EXHIBIT D

REPAIR DISBURSEMENT REQUEST

The undersigned requests from (“Lender”) the disbursement of funds in the amount of $_________________         (“Disbursement Request”) from the Repair Reserve Fund established pursuant to the Multifamily Loan and Security Agreement dated , 20 by and between Lender and the undersigned ( “Loan Agreement”) to pay for repairs to the multifamily apartment project known as and located in .

The undersigned represents and warrants to Lender that the following information and certifications provided in connection with this Disbursement Request are true and correct as of the date hereof:

1. Purpose for which disbursement is requested:

2. To whom the disbursement will be made (may be the undersigned in the case of reimbursement for advances and payments made or cost incurred for work done by the undersigned):    

3. Estimated costs of completing the uncompleted Repairs as of the date of this Disbursement Request:

4. The undersigned certifies that each of the following is true:

(a)    The disbursement requested pursuant to this Disbursement Request will be used solely to pay a cost or costs allowable under the Loan Agreement.

(b)    None of the items for which disbursement is requested pursuant to this Disbursement Request has formed the basis for any disbursement previously made from the Repair Reserve Fund.

(c)    All labor and materials for which disbursements have been requested have been incorporated into the Improvements or suitably stored upon the Mortgaged Property in accordance with reasonable and standard building practices, the Loan Agreement and all applicable laws, ordinances, rules and regulations of any governmental authority having jurisdiction over the Mortgaged Property.

(d)    The materials, supplies and equipment furnished or installed for the Repairs are not subject to any Lien or security interest or that the funds to be disbursed pursuant to this Disbursement Request are to be used to satisfy any such Lien or security interest.

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5. All capitalized terms used in this Disbursement Request without definition will have the meanings ascribed to them in the Loan Agreement.

IN WITNESS WHEREOF, the undersigned has executed this Disbursement Request as of the day and date first above written.

Date:     BORROWER:

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EXHIBIT E

WORK COMMENCED AT MORTGAGED PROPERTY

None.

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EXHIBIT F

CAPITAL REPLACEMENTS

• Carpet/vinyl flooring

• Window treatments

• Roofs

• Furnaces/boilers

• Air conditioners

• Ovens/ranges

• Refrigerators

• Dishwashers

• Water heaters

• Garbage disposals

• Pool and/or spa plaster/liner

• Pool and/or spa filtration equipment

• Exterior walls (paint/repair)

• Microwaves

• Clothes washer

• Clothes dryer

• Other items that Lender may approve subject to any conditions that Lender may require, all in Lender’s sole and absolute discretion.

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EXHIBIT H

ORGANIZATIONAL CHART OF BORROWER AS OF THE CLOSING DATE

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EXHIBIT I

DESIGNATED ENTITIES FOR TRANSFERS AND GUARANTOR(S)

Designated Entities for Transfers

KBS SOR II LOFTS AT NOHO COMMONS, LLC

KBS SOR II LOFTS AT NOHO COMMONS JV, LLC

KBS SOR II ACQUISITION V, LLC

KBS SOR US PROPERTIES II LLC

KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP II

KBS STRATEGIC OPPORTUNITY HOLDINGS II, LLC

KBS STRATEGIC OPPORTUNITY REIT II, INC.

NOHO COMMONS PACIFIC INVESTORS LLC

SLOVIN PROPERTIES, INC.

Guarantor(s)

KARL SLOVIN

KEK FAMILY HOLDINGS, LLC

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EXHIBIT K

SCOPE OF WORK AND BUDGET FOR VALUE-ADD WORK

Multifamily Loan and Security Agreement    Page K-1

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Multifamily Loan and Security Agreement    Page K-2

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EXHIBIT L

Freddie Mac Loan Number: 932790054

Property Name: Lofts at NoHo Commons

BORROWER QUARTERLY CERTIFICATION

VALUE-ADD TRANSACTION

(Revised 5-1-2015)

THIS CERTIFICATION (“Certification”) dated _________ 1, 20____ is made in connection with the mortgage loan (“Loan”) in the original principal amount of $_________________ payable by NOHO COMMONS PACIFIC OWNER LLC, a Delaware limited liability company (“Borrower”) and currently held by Federal Home Loan Mortgage Corporation (together with its successors and/or assigns, “Freddie Mac”). Capitalized terms not defined in this Certification will have the meanings set forth in that certain Multifamily Loan and Security Agreement dated ______________, 20__ executed by Borrower in connection with the Loan, as amended (“Loan Agreement”).

Pursuant to the requirements of the Loan Agreement, Borrower certifies, represents, and warrants the following to Freddie Mac as of the date set forth above:

1. Attached as Exhibit A is the current Value-Add Schedule of Work. No modifications have been made to the Original Value-Add Schedule of Work except in compliance with the provisions of the Loan Agreement. If the Value-Add Schedule of Work does not satisfy the Minimum Unit Improvement Target, Exhibit A contains an explanation as to the cause. [THE VALUE-ADD SCHEDULE OF WORK ATTACHED TO THIS CERTIFICATION MUST SET FORTH THE VALUE-ADD WORK AND COSTS IN AT LEAST AS MUCH DETAIL AS THE SCHEDULE OF WORK ATTACHED TO THE LOAN AGREEMENT.]

2. Attached as Exhibit B is a summary that sets forth the following: (a) the Value-Add Work that has been completed, (b) the progress and status of the remaining Value-Add Work, and (c) the costs incurred and paid to date with respect to the Value-Add Work. No claim exists against Borrower or against the Mortgaged Property out of which a lien based on furnishing labor or material exists or might ripen, except for those claim(s) Borrower intends to contest that are expressly described on Exhibit B.

3. Except as described on Exhibit C, the occupancy for the Mortgaged Property has achieved the Minimum Occupancy Target during each month since the date of the last Quarterly Certification delivered to Lender, or, if no Quarterly Certification was previously delivered to Lender, since the date of the origination of the Loan. If the Minimum Occupancy Target

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has not been achieved, Exhibit C includes an explanation as to the cause and Borrower’s plan to increase the occupancy.

4. Borrower has performed the Value-Add Work in conformance with, and has otherwise complied with, the provisions of Section 6.42 of the Loan Agreement.

[INSERT ANY ADDITIONAL CERTIFICATIONS REQUIRED BY LENDER]

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IN WITNESS WHEREOF, the undersigned has executed this Certification as of the day and date first above written.

BORROWER:

NOHO COMMONS PACIFIC OWNER LLC,

a Delaware limited liability company

By:    KBS SOR II LOFTS AT NOHO COMMONS, LLC,

a Delaware limited liability company

its sole member

By:    NOHO COMMONS PACIFIC INVESTORS LLC,

a Delaware limited liability company,

its Managing Member

By:     SLOVIN PROPERTIES, INC.,

a Delaware corporation,

its Manager

By:

Name:

Title:

(SIGNATURES CONTINUE ON FOLLOWING PAGE)

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By its signature below, Guarantor certifies that it is in compliance with the provisions of the Section of the Guaranty entitled “Minimum Net Worth/Liquidity Requirements”.

GUARANTOR:

___________________________________

KARL SLOVIN

(SIGNATURES CONTINUE ON FOLLOWING PAGE)

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GUARANTOR:

KEK FAMILY HOLDINGS, LLC, a

Delaware limited liability company

By:     _____________________________

Robert Zimmerman, Manager

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EXHIBIT A

VALUE-ADD SCHEDULE OF WORK

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EXHIBIT B

SUMMARY OF PROGRESS; CONTESTED CLAIMS

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EXHIBIT C

MINIMUM OCCUPANCY TARGET

[IF PROPERTY HAS NOT FALLEN BELOW MINIMUM OCCUPANCY TARGET INSERT “NOT APPLICABLE”]

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EXHIBIT O

BORROWER’S CERTIFICATE OF

PROPERTY IMPROVEMENT ALTERATIONS COMPLETION

THIS BORROWER’S CERTIFICATE OF PROPERTY IMPROVEMENT ALTERATIONS COMPLETION (“Certificate”) is made as of _______ ___, 20___, by ______________, a ________________ (“Borrower”) for the benefit of ________________, a ________________, and it successors and assigns (collectively, “Lender”).

In connection with Section 6.09(e)(v)(G) of the Loan Agreement, Borrower certifies to Lender as follows:

[INSERT THE APPLICABLE SECTION (a) AND DELETE THE OTHER:]

[USE THE FOLLOWING IF ALL PROPERTY IMPROVEMENT ALTERATIONS THAT WERE COMMENCED HAVE BEEN COMPLETED]

(a) All Property Improvement Alterations described in the Property Improvement Notice that were commenced have been completed. The completed Property Improvement Alterations and their completion dates are as follows:

Description of Property Improvement Alteration Commenced Completion Date

[OR]

[USE THE FOLLOWING IF MINIMUM OCCUPANCY HAS DECREASED BELOW THE MINIMUM OCCUPANCY REQUIREMENT AND NOT ALL THE PROPERTY IMPROVEMENT ALTERATIONS THAT WERE COMMENCED HAD BEEN COMPLETED AT SUCH TIME]

(a) All Property Improvement Alterations described in the Property Improvement Notice that resulted in individual residential dwelling units not being available for leasing that were commenced have been or will be completed in a timely manner. Such Property Improvement Alterations that were commenced and their completion dates and/or, if applicable, anticipated completion dates, are as follows:

Description of Property Improvement Alteration Commenced Completion Date Anticipated Completion Date Comments

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[FOR ALL LOANS:]

(b) The completed Property Improvement Alterations were completed in a good and workmanlike manner and in compliance with all laws (including, without limitation, any and all life safety laws, environmental laws, building codes, zoning ordinances and laws for the handicapped and/or disabled)

(c) Should Borrower intend to contest any claim or claims for labor, materials or other costs, Borrower agrees to give Lender notice within 30 days of the existence of such claim or claims and certifies to Lender that payment of the full amount which might in any event be payable in order to satisfy such claim or claims will be made.

[INSERT THE FOLLOWING IF MINIMUM OCCUPANCY HAS DECREASED BELOW THE MINIMUM OCCUPANCY REQUIREMENT]

(d) Any additional Property Improvement Alterations not yet commenced which would cause residential dwelling units to be unavailable for leasing have been suspended.

[BORROWER SIGNATURE]

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EX-10.45

Exhibit 10.45

LIMITED LIABILITY COMPANY AGREEMENT
OF KBS SOR II 210 WEST 31ST STREET, LLC

This LIMITED LIABILITY COMPANY AGREEMENT OF KBS SOR II 210 WEST 31ST, LLC (this “Agreement”), is entered into effective as of October 28, 2016 (the “Effective Date”), by and between ONYX 31^ST STREET, LLC, a Delaware limited liability company (“JV Member”), and KBS SOR II 210 WEST 31st STREET JV, LLC, a Delaware limited liability company (“KBS” or “Co-Managing Member”). JV Member and KBS may hereinafter be referred to herein collectively, as the “Members” or individually as a “Member.”

RECITALS

WHEREAS, the Members desire to form KBS SOR II 210 West 31st Street, LLC, a Delaware limited liability company (the “Company”).

WHEREAS, the Company shall cause 210 West 31^st Street Owner LLC, a Delaware limited liability company (“Property Owner Subsidiary”) and a wholly owned subsidiary of the Company, to enter into that certain Purchase and Sale Agreement to Assign Eighty Percent (80%) Ground Lease (the “Purchase Agreement”) with JV Member and other parties to be joined thereto (Phalanx Fund II, L.P., Onyx EP 31^st Street, LLC and LMB II, LLC) as contemplated by the Purchase Agreement, collectively as seller and ground lessee (collectively, “Seller”), in a form approved by the Members, for the purchase of eighty percent (80%) of a leasehold interest in 210 West 31st Street, New York, New York and the improvements located thereon (along with the contribution of the remaining 20% by the JV Member hereunder, the “Property”) pursuant to that certain Amended and Restated Ground Lease Agreement dated as of December 30, 2014, as modified by Second Amendment to Option Agreement and First Amendment to Lease dated December 30, 2014 (collectively, the “Ground Lease”), together with Seller’s Project Work Product (defined below).

WHEREAS, the Members desire to redevelop the Property as a 2-story commercial retail building with approximately 29,018 square feet, a basement level and a terraced roof, as more particularly described in the Preliminary Development Plan (defined below) (the “Project”).

WHEREAS, at the closing of the transaction contemplated by the Purchase Agreement (the “Property Closing”), the Company will cause Property Owner Subsidiary to obtain a mortgage loan (“Mortgage Loan”) from a lender acceptable to the Members (“Lender”), on and subject to the terms and conditions of this Agreement.

ARTICLE I
FORMATION

1.01.Formation. The Company was formed pursuant to this Agreement and the filing of that certain Certificate of Formation dated October 27, 2016 pursuant to the Act. The term “Act” means the 6 Delaware Code §§18 101, et. seq., Delaware Limited Liability Code, as hereafter amended from time to time. Joshua Weiss, Esq. is designated as an “authorized person” within the meaning of the Act, and such “authorized person” has executed, delivered and filed the Certificate

SMRH:479330698.9

of Formation with the Secretary of State of the State of Delaware. Upon the filing of the Certificate of Formation, his power as an “authorized person” ceased, and Managing Member thereupon became the designated “authorized person” and shall continue as the designated “authorized person” within the meaning of the Act. Subject to the terms of this Agreement, Managing Member or an attorney authorized by Managing Member shall execute, acknowledge and file such other documents and instruments as are necessary and/or appropriate to register, qualify to do business and/or operate the Company as a foreign limited liability company in any jurisdiction in which the Company may own property or wish to conduct business. The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.

1.02.Names and Addresses. The name of the Company is KBS SOR II 210 West 31st Street, LLC. The principal office of the Company in the State of Delaware. The name and address of the registered agent of the Company in the State of Delaware currently is Registered Agent Solutions, Inc., 1679 S. DuPont Highway, Suite 100, Dover, County of Kent, Delaware 19901 until changed by the Managing Member with written notice to all Members. The names and addresses of the Members are set forth on Exhibit A attached hereto. The organizational structure of the Company and any subsidiaries directly or indirectly owned by the Company, including Property Owner Subsidiary (each, a “Subsidiary” and collectively, the “Subsidiaries”), that will exist as of the consummation of the Property Closing, is as set forth on Exhibit B attached hereto. The ownership interests of the Members in the Company shall not be certificated interests, unless otherwise determined as a Major Decision pursuant to Section 2.02below.

1.03.Nature of Business. The express, limited and only purposes of the Company shall be (i) to indirectly acquire, own, redevelop, lease, hold for long-term investment, sell, exchange, dispose of and otherwise realize the economic benefit from the Property, and (ii) to conduct such other activities with respect to the Property as are appropriate to carrying out the foregoing purposes and to do all things incidental to or in furtherance of the above-enumerated purposes. Neither the Company nor any of the Subsidiaries shall engage in any other business or activity, unless such other business or activity has been approved as a Major Decision (as defined below).

1.04.Term of Company. The term of the Company shall commence on the date the Certificate of Formation for the Company is filed with the Office of the Delaware Division of Corporations and shall continue until dissolved pursuant to Article VIII. The existence of the Company as a separate legal entity shall continue until the cancellation of the Company’s Certificate of Formation.

1.05.Purchase Agreement. The Members acknowledge that the Purchase Agreement will provide for certain conditions to the Property Owner Subsidiary’s obligation to close, including the absence of a default by Seller (“Buyer Closing Conditions”). The decision as to whether each of such conditions have been satisfied as of the closing date under the Purchase Agreement shall be decided by the Members, subject to the following:

(a)Failed Conditions; Members Agree to Terminate. If both Members determine that any of the Buyer Closing Conditions have not been satisfied (after expiration of any notice and cure periods) and do not desire to close over any unsatisfied Buyer Closing Conditions, Managing Member (as defined below) shall deliver to Seller a termination notice under the Purchase Agreement

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and seek a return of the Earnest Money (as such term is defined under the Purchase Agreement) to the extent all or any portion of the Earnest Money is refundable and thereafter cause the Company to be dissolved pursuant to Article VIII.

(b)Failed Conditions; KBS Desires to Proceed. If Co-Managing Member has notified JV Member in writing that it desires to close over any unsatisfied Buyer Closing Condition, but JV Member has notified Co-Managing Member in writing of its desire to terminate the Purchase Agreement, then Co-Managing Member shall have the right, in its sole and absolute discretion, to elect to (A) deliver to Seller a termination notice under the Purchase Agreement and seek a return of the Earnest Money, or (B) deliver written notice to JV Member requiring JV Member to withdraw from the Company. If Managing Member elects to deliver a notice pursuant to clause (B), then the Co-Managing Member shall reimburse JV Member for the amount of the Earnest Money then posted by JV Member (and not previously reimbursed by Co-Managing Member) to the extent all or any portion of the Earnest Money is refundable and Co-Managing Member shall be free to cause the Property Owner Subsidiary or an Affiliate of KBS to consummate the Property Closing without JV Member being a Member of the Company or otherwise a party to such transaction.

(c)Failed Conditions; JV Member Desires to Proceed. If JV Member has notified Co-Managing Member in writing that it desires to close, but Co-Managing Member has notified JV Member in writing of its desire to terminate the Purchase Agreement, then JV Member shall have the right, in its sole and absolute discretion, to elect to (A) deliver to Seller a termination notice under the Purchase Agreement and seek a return of the Earnest Money to the extent all or any portion of the Earnest Money is refundable, or (B) deliver written notice to Co-Managing Member requiring Co-Managing Member to withdraw from the Company. If JV Member elects to deliver a notice pursuant to clause (B), then JV Member shall reimburse Co-Managing Member for the amount of the Earnest Money then posted by Co-Managing Member and JV Member shall be free to cause the Property Owner Subsidiary or an Affiliate of JV Member to consummate the Property Closing without KBS being a Member of the Company or otherwise a party to such transaction.

1.06.Mortgage Loan. Notwithstanding anything to the contrary in Article II below, Co-Managing Member shall lead and control the sourcing and selection of the Lender and negotiation of the loan documents evidencing and securing the Mortgage Loan. The Mortgage Loan shall be at least 60% of the Development Budget and non-recourse to the Property Owner Subsidiary, the Company and the Members, except to the extent Lender requires customary non-recourse carve outs, a customary environmental indemnity, and a completion guaranty with respect to the completion of the Project. JV Member or an Affiliate shall be the party to enter into such guarantees with Lender and JV Member or its Affiliate shall have the right to negotiate such guarantees, and the terms thereof, with Lender. If requested by Co-Managing Member, JV Member shall cooperate with Co-Managing Member’s efforts to obtain the Mortgage Loan, which cooperation shall include providing the Lender or prospective Lenders with information and documents concerning JV Member and its Affiliates.

1.07.Preliminary Development Plan; Construction Plans. Attached hereto as Exhibit C is a development plan the (“Preliminary Development Plan”) for the development and construction of the Project. The Preliminary Development Plan has been approved by the Members. Attached

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hereto as Exhibit C-1 is a list of the current construction plans (the “Preliminary Constructions Plans”) for the Project, which have not been finalized or approved by applicable governmental and quasi-governmental authorities having jurisdiction over the Property and the Project, including specifically, the City of New York (the “Governmental Authorities”). Attached hereto as Exhibit C-2 is a preliminary development budget (the “Preliminary Development Budget”) that is based the Preliminary Development Plan and the Preliminary Construction Plans.

1.08.Development Plan. The Members acknowledge that certain components of the Preliminary Development Plan are not finalized as of the Effective Date. The Members shall work together diligently and in good faith to finalize the remaining components of the Preliminary Development Plan (and upon the approval of such remaining components pursuant to this Section 1.08, the Preliminary Development Plan shall become the “Development Plan”). The remaining components include, without limitation, the following:

(a)Approval by all Governmental Authorities of the Preliminary Construction Plans (and upon the approval of the Preliminary Construction Plans, the Preliminary Construction Plan shall become the Preliminary Construction Plans shall be become the “Construction Plans”) and issuance of all necessary permits and approvals for the construction of the Project;

(b)Approval by the Members of the selection of the general contractor and the form and cost of the Construction Contract (as hereinafter defined) as a Major Decision pursuant to Section 2.02 below;

(c)Approval by the Members of changes to the Construction Plans for the Project as a Major Decision pursuant to Section 2.02 below; provided, however, that each Member shall not withhold their consent if: (1) the changes are to complete detail not yet completed in the Preliminary Construction Plans and such changes are otherwise consistent with the Preliminary Construction Plans and the Preliminary Development Plan, or (2) the changes are required by Governmental Authorities or are determined to be necessary to obtain the approval by Governmental Authorities for the Construction Plans and the Project and do not materially increase or change the scope of the Project as contemplated by the Preliminary Development Plan (and for purposes of this Section 1.08(c), the Members agree that a material change would include a change that results in more than a twenty-five percent (25%) reduction in the leasable square footage of the Project or more than a twenty-five percent (25%) reduction in pro-forma rent, or more than a twenty-five percent (25%) in the proposed building height for the Project); and

(d)Agreement by the Members upon the final budget for the development of the Project (the “Development Budget”) as a Major Decision pursuant to Section 2.02 below; provided, however, that each Member shall not withhold their consent to the final Development Budget if the final Development Budget does not exceed more than twenty-five percent (25%) of the Preliminary Development Budget and is consistent with the approved Construction Contract. For avoidance of doubt, it shall be a Major Decision to approve the Development Budget if the Development Budget would be more than twenty-five percent (25%) of the Preliminary Development Budget or is inconsistent with the approved Construction Contract.

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1.09.Development of the Project. The Development Budget and Development Plan to be approved by the Members is expected to provide for three distinct phases for the development of the Project: (i) the “Permitting Phase,” to commence after the Property Closing and expire upon the receipt of all required building permits for the vertical construction of the Project, and satisfaction of the Mortgage Loan conditions for the disbursement of funds for the construction of the Project (including the fully executed Construction Contract for the Project); (ii) the “Construction Phase,” to commence following the Permitting Phase and to expire following completion of construction of all aspects of the Project, issuance of all necessary certificates of occupancy or similar permits, and opening of the Project (“Completion”); and (iii) the “Operations Phase,” to commence following the Construction Phase. Notwithstanding the foregoing, the Members intend to authorize the commencement of demolition activities prior to the end of the Permitting Phase, subject to the obtaining of all necessary demolition permits and approvals and approval by both Members of the demolition contract and the demolition contractor.

ARTICLE II
MANAGEMENT OF THE COMPANY

2.01.Management of the Company.

(a)Generally. JV Member is hereby designated as the managing member (the “Managing Member”) of the Company and shall serve as the Managing Member of the Company unless and until it resigns or is removed pursuant to Section 2.06. Subject to the restrictions set forth in this Agreement, Managing Member shall manage and administer the day-to-day business and affairs of the Company and its Subsidiaries. Managing Member shall at all times faithfully perform its duties and responsibilities in compliance with all applicable laws, the Business Plan (as defined below), the Development Budget, the Annual Budget (as defined below) and this Agreement, devoting such time, efforts and managerial resources to the business of the Company and its Subsidiaries as it reasonably deems necessary for the operation of the day-to-day business and affairs of the Company and its Subsidiaries. In the performance of its duties under this Agreement, Managing Member shall regularly consult with the Co-Managing Member. Managing Member and Co-Managing Member may each engage in business efforts and affairs which are not related to the Company or the Property, and will not be precluded from owning and operating other businesses and/or real estate projects (which may compete with this project) and neither the Company nor the other Members shall have any interest in such businesses or real estate projects.

(b)Specific Day to Day Duties. Without limiting the generality of the foregoing, Managing Member shall perform the following duties with respect to the Property, all to be carried out in accordance with this Agreement, the Annual Budget and the Business Plan:

(i)During the Permitting Phase, use commercially reasonable diligent efforts to obtain all permits, approvals and entitlements from all applicable Governmental Authorities for the Project, and after Completion of the Project, cause to be maintained all governmental and agency approvals, permits and other entitlements necessary for ownership, operation, management and leasing of the Property.

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(ii)During the Construction Phase, use commercially reasonable diligent efforts to perform those duties and services that are reasonably necessary to commence and complete the Project in accordance with the Development Plan, the Development Budget and the Construction Plans.

(iii)Coordinate the services of all employees, supervisors, architects, engineers, contractors, construction or development managers, accountants, attorneys, real estate brokers, advertising personnel and other persons necessary or appropriate for the development and construction of the Project and the ownership, operation, management and leasing of the Property after Completion of the Project.

(iv)Supervise the performance of all work in connection with the Project and the ownership, operation, management and leasing of the Property after Completion the Project.

(v)Except to the extent such action is a Major Decision, use commercially reasonable efforts to enforce all of the Company’s and its Subsidiaries’ rights and cause performance of all of the Company’s obligations arising in connection with any contract or agreement entered into in connection with the Property, excluding de minimis obligations where the cost to pursue the obligation exceeds the benefit to be gained.

(vi)Deliver to the Members promptly copies of any written notices or other written materials received by Managing Member in connection with any material dispute or material claims relating to the Property or the Project.

(vii)Otherwise use commercially reasonable efforts to perform those duties and services that are reasonably necessary in order to acquire, own, operate, manage and lease the Property in accordance with the Business Plan and the Annual Budget.

(c)Additional Duties. Without limiting the generality of the foregoing, Managing Member shall have the following additional duties with respect to the overall operation of the Company and its Subsidiaries and the ownership of the Property, all to be carried out in accordance with this Agreement:

(i)Provide operating reports and financial statements in accordance with Article IX.

(ii)Notify Co-Managing Member of such matters and render such reports to Co-Managing Member from time to time as Co-Managing Member may reasonably request in writing, including, without limitation, at all times and in each event no less frequently than monthly, keeping Co-Managing Member informed of material information relating to the Property by (1) notifying Co-Managing Member in advance of public hearings and other proceedings relating to any existing or proposed entitlements, mapping, subdivision or material permits for the Property and (2) notifying Co-Managing Member within five (5) business days and promptly delivering to Co-Managing Member copies of any written offers to purchase or otherwise acquire the Property, or any interest therein, and of any written indications of interest, written invitations to deal, written solicitations of sales which represent bona fide offers regarding the Property.

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(iii)Comply with the Development Budget, as it may be modified in accordance with this Agreement. With respect to the Development Budget, Managing Member may (i) to the extent covered by contingency funds in the Development Budget, with respect to any line item in the Development Budget, allocate from such contingency funds in an amount not to exceed the lesser of 10% of such line item and $25,000, and (ii) if after the completion of any item, as certified by Managing Member to Co-Managing Member, there remains an excess undisbursed balance, reallocate from such excess balance to any other line item in the Development Budget whose funds are insufficient to complete such item, so long as such amount does not exceed the lesser of 10% of such line item and $25,000.

(iv)After Completion of the Project, comply with the Annual Budget, as it may be modified in accordance with this Agreement. Except for expenditures made and obligations incurred, in each case as previously approved pursuant to the Annual Budget and the Permitted Budget Variance (as hereinafter defined) or in writing by the Co-Managing Member, the Managing Member shall have no authority to make any expenditure or incur any obligation or liability on behalf of the Company or any Subsidiary. Subject to the Annual Budget and the Permitted Budget Variance or as may be approved in writing by the Co-Managing Member, the Managing Member shall not expend on behalf of the Company or any Subsidiary more than what it in good faith believes to be the fair and reasonable market value at the time and place of contracting or any goods purchased or services engaged on behalf of the Company or any Subsidiary. Subject to Section 2.02(d) below, Managing Member may enter into any such contracts on behalf of the Company or any Subsidiary for goods purchased or services contemplated by the Annual Budget, if any, provided that such contracts shall be terminable by the Company or any applicable Subsidiary upon thirty (30) days’ notice without penalty or if such contracts are not contemplated by the Annual Budget they shall be for an amount not to exceed (A) the sum of $5,000 as to any single expenditure, and (B) the sum of $25,000 annually (in each case, such expenditures may hereinafter be referred to as the “De Minimis Expenditures”). Any such contract (other than contracts that are for De Minimis Expenditures) that is either (x) not terminable by the Company or the applicable Subsidiary upon thirty (30) days’ notice or (y) are not contemplated by the Annual Budget shall in each case require the prior written approval of the Co-Managing Member. As used in this Agreement, the term “Permitted Budget Variance” means, with respect to any Annual Budget, any disbursement of funds in any amount that would not result in a particular line item being exceeded 10% of such line item for the year in question or the total Annual Budget being exceeded by more than 5% in the aggregate.

(d)Affiliate Agreements; Special Powers of KBS Regarding Affiliate Agreements.

(i)JV Member, in its capacity as Managing Member, shall not cause the Company or any of its Subsidiaries to enter any agreement or other arrangement for the furnishing to or by the Company or any Subsidiary of goods or services or for any other contract or agreement pursuant to which the JV Member or any Affiliate or Related Person (defined below) will receive any benefit with, or pay any fees or compensation to, itself or any Person that is an Affiliate of the JV Member or a Related Person (an “Affiliate Agreement”), unless such agreement or arrangement has been previously approved in writing by Co-Managing Member. JV Member shall not amend,

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modify or terminate any such Affiliate Agreement after the entry by the Company, or any Subsidiary, into such Affiliate Agreement without the prior consent of Co-Managing Member. As used in this agreement, the term “Related Person” shall mean any JV Member Principal (defined below) and such JV Member Principal’s spouse and the ancestors, descendants, aunts, uncles or first cousins of such JV Member Principal, whether by birth or adoption.

(ii)Notwithstanding anything to the contrary contained herein but subject to Section 2.06(d) below, Co-Managing Member shall have the right, in its sole discretion upon prior written notice to JV Member, to take all actions on behalf of the Company or any Subsidiary with respect to: (A) the determination of the existence of any default by any Affiliate of JV Member under any agreement made between the Company or any Subsidiary and any Affiliate of JV Member (each an “Affiliate Agreement” and collectively, the “Affiliate Agreements”), (B) the enforcement of all rights and remedies of the Company under any Affiliate Agreements made between the Company or any Subsidiary and any Affiliate of any JV Member, and (C) termination of any Affiliate Agreements made between the Company or any Subsidiary and any Affiliate of any JV Member (subject to the terms and conditions set forth therein for notice of defaults and applicable cure periods). All Affiliate Agreements shall be terminated upon sale of the portion of the Property to which they relate and in the event of other circumstances or defaults (including, without limitation, any Removal Event (as defined below)) as more particularly set forth therein or herein. JV Member will cooperate in good faith with Co-Managing Member in the exercise by Co-Managing Member of the foregoing rights and actions hereunder.

(iii)As used in this Agreement, the term “Affiliate” means any person or entity which, directly or indirectly through one (1) or more intermediaries, controls or is controlled by or is under common control with another person or entity. The term “control” as used herein (including the terms “controlling,” “controlled by,” and “under common control with”) means the possession, direct or indirect, of the power (i) to vote 51% or more of the outstanding voting securities of such person or entity, or (ii) to otherwise direct management policies of such person by contract (at commercially reasonable rates) or otherwise. John Saraceno Jr. and Jonathan Schultz (each a “JV Member Principal” and collectively, the “JV Member Principals”) and their Related Persons and Affiliates shall be deemed “Affiliates” of JV Member. Any reference in this Agreement to a “Person and an Affiliate” shall be deemed to refer to such Person and an Affiliate of such Person and any references in this Agreement to a “Person or an Affiliate” shall be deemed to refer to such Person or an Affiliate of such Person.

2.02.Major Decisions. Notwithstanding anything contained in this Agreement to the contrary, Managing Member shall not take, or cause or permit the Company or any Subsidiary to enter into any agreement to take, any of the following actions on behalf of the Company or any Subsidiary (in each case the taking of which hereinafter shall be referred to as a “Major Decision”) without the prior written consent of Co-Managing Member, which consent may be given or withheld in Co-Managing Member’s sole and absolute discretion.

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(a)Purchase Agreement. Except as expressly set forth in Section 1.05 above, enter into, amend, modify, terminate, or expressly waive any material rights of the Property Owner Subsidiary under, the Purchase Agreement.

(b)Development Plan. Except as expressly set forth in Section 1.08 above, approve the Development Plan, or after approval, cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Development Plan.

(c)Development Budget. Except as expressly set forth in Section 1.08 above, approve the Development Budget, or after approval, subject to Section 2.01(c)(iii) above, cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Development Budget.

(d)Construction Plans. Except as expressly set forth in Section 1.08 above, approve the Construction Plans, or after approval, cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Construction Plans.

(e)Construction Contract. General construction services for the Project will be provided by a general contractor, on market terms and conditions with all major subcontracts competitively bid pursuant to a guaranteed maximum price construction contract (the “Construction Contract”) in a form and substance acceptable to the Members. The selection of the general contractor shall be a Major Decision, and the Construction Contract to be entered into with such general contractor shall also be a Major Decision. Managing Member shall not cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Construction Contract unless approved as a Major Decision.

(f)Annual Budget; Business Plan. Subject to Section 2.01(c)(iv) cause the Company or its Subsidiaries to deviate from, amend, update or replace the Business Plan or deviate from, amend, update or replace the Annual Budget (subject to the Permitted Variance), except as provided in Section 2.10 below.

(g)Sale of the Company. Subject to Articles VI and VII and to the limitation on the Override Right (as defined below), sell, convey, exchange, hypothecate, pledge, encumber or otherwise transfer any portion of or any interest in the Company or any Subsidiary or all or any portion of the Property, or enter into any agreement to sell, convey, exchange, hypothecate, pledge, encumber or otherwise transfer any portion or any interest in the Company or any Subsidiary or all or any portion of the Property.

(h)Pre-Approved Affiliate Agreements. Amend, modify, terminate, or waive any rights under, the any of the Pre-Approved Affiliate Agreements (as such term is defined below), or enter into any agreements that would replace any of the Pre-Approved Affiliate Agreements. For avoidance of doubt, each Pre-Approved Affiliate Agreement is an Affiliate Agreement.

(i)Acquire Real Property. Purchase or otherwise acquire any interest in real property other than the Company’s indirect ownership interest in the Property.

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(j)Financing. Without limiting Section 1.06 above, cause the Company or any Subsidiary to enter into (or commit to enter into) to finance or refinance the operations of the Company or any Subsidiary and/or any of the Company’s or any Subsidiary’s assets (including, without limitation, any acquisition, development, construction, interim and long-term financing or refinancing in connection with the Property (or any portion thereof) or the improvement or expansion thereof) (each a “Financing”) or retain any mortgage bankers or brokers on behalf of the Company or any Subsidiary in connection therewith or enter into any modifications, amendments, extensions, substitutions or other agreements regarding any Financing. Notwithstanding the foregoing, the Members agree that (1) it shall not be a Major Decision (and shall only require the consent of KBS and not of JV Member), for the Property Owner Subsidiary to enter into the Mortgage Loan and any interest rate swap agreement, interest rate cap agreement, or any other similar agreement (collectively, “Interest Rate Protection Agreements”) regarding the Mortgage Loan or any other Financing, and (2) if necessary to amend the Mortgage Loan or any future Financing in order to allow the Property Owner Subsidiary to enter into any Interest Rate Protection Agreements that KBS determines in its sole discretion is necessary or desirable. In the event the Property Owner Subsidiary enters into any Interest Rate Protection Agreements in accordance with the preceding sentence, the Members shall each pay their pro rata share of the costs and expenses incurred by the Property Owner Subsidiary in connection therewith (including reasonable attorneys’ fees and expenses) in accordance with their Percentage Interests (as defined below).

(k)Indemnity. Make, execute or deliver on behalf of the Company or any Subsidiary any indemnity bond or surety bond or obligate the Company, any Subsidiary or any other Member as a surety, guaranty, guarantor or accommodation party to any obligation or grant any lien or encumbrance on any of the assets of the Company or any Subsidiary, including the Property, other than with respect to any Financing that has been approved as a Major Decision.

(l)Loans. Lend funds belonging to the Company or any Subsidiary to any Member or its Affiliate or to any third party, or extend any person, firm or corporation credit on behalf of the Company or cause any Member Loan (as defined below) to be made to the Company as provided in Section 3.03.

(m)Expenditures. After Completion, except for De Minimis Expenditures and other amounts contemplated by the Annual Budget (subject to the Permitted Budget Variance), cause the Company or any Subsidiary to take any action or make any expenditure or incur any obligation by or on behalf of the Company or any Subsidiary which is not included in the Annual Budget (including, without limitation, obligating the Company or any Subsidiary to pay for any goods or services in excess of the foregoing), in addition, in the event that the then current Loan or Refinance is within ninety (90) days of its stated maturity, or after its term has expired, or is in default, Managing Member may not reallocate any excess funds among line items or make any expenditures from any reserves without Co-Managing Member’s consent.

(n)Duties. Delegate any of the duties of Managing Member set forth herein except as set forth in Section 2.11(a), the Property Management Agreement or the Leasing Agreement or any other approved contract with an Affiliate under the terms of this Agreement or to the officers and employees of Managing Member.

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(o)Assignment Benefiting Creditors. Make, execute or deliver on behalf of the Company or any Subsidiary an assignment for the benefit of creditors; file, consent to or cause the Company or any Subsidiary, a Member’s Interest, or the Property, or any part thereof or interest therein, to be subject to the authority of any trustee, custodian or receiver or be subject to any proceeding for bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, relief of debtors, dissolution or liquidation or similar proceedings.

(p)Partition of Company Assets. Partition all or any portion of the assets of the Company or any Subsidiary, or file any complaint or institute any proceeding at law or in equity seeking such partition.

(q)Governmental Proposals. Make application to, or enter into any agreements with, any government officials relating to mapping, development, zoning, subdivision, environmental or other land use or entitlement matters which may affect the Property or any portion thereof.

(r)Purchase Assets. Except as may be provided in the then-applicable Annual Budget, cause the Company or any Subsidiary to purchase any automobiles or vehicular equipment on behalf of or in the name of the Company or any Subsidiary or purchase any fixed assets on behalf of or in the name of the Company or any Subsidiary.

(s)Commence Future Renovations. After Completion of the Project, commence any renovations of or changes or upgrades to the completed Project, or significant construction on the Property (including, without limitation, any tenant improvements), or any significant off-site improvement work, or any environmental remediation on the Property.

(t)Confess Judgments; Legal Actions. Confess a judgment against the Company or any Subsidiary; settle or adjust any claims against the Company or any Subsidiary; or commence, negotiate and/or settle any legal actions or proceedings brought by the Company or any Subsidiary against unaffiliated third parties; provided however that Managing Member may settle or adjust any claim which is not the subject of a legal action or proceeding of $10,000 or less.

(u)Dissolve the Company. Except as provided in this Agreement, dissolve, terminate or liquidate the Company or any Subsidiary prior to the expiration of the term.

(v)Acts Making Business Impossible. Do any act that would make it impossible to carry on the business of the Company or any Subsidiary.

(w)Material Agreements. Except as provided in the Annual Budget or in the express terms of this Agreement, cause the Company or any Subsidiary to enter into any agreement obligating the Company or any Subsidiary to pay an amount of more than a De Minimis Expenditure and any amendment, modification or termination of any such agreement, including, without limitation, any agreement providing for the payment of any commission, fee or other compensation payable in connection with the sale of all or any portion of the Property or any portion thereof.

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(x)Limited Liability Company Act. Take any other action for which the consent of the Members is required under the Act (and such consent is not waivable under the Act) or this Agreement.

(y)Leasing Agreement. The Members have agreed that the Property Owner Subsidiary shall retain a third party leasing agent (the “Leasing Agent”) to manage the initial lease-up of the Project and thereafter the ongoing leasing of the Project. The selection of the Leasing Agent shall be a Major Decision, and the leasing services agreement (the “Leasing Agreement”) to be entered into with such Leasing Agent shall also be a Major Decision. Managing Member shall not cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Leasing Agreement unless approved as a Major Decision. The Members agree that Newmark and Jones Lang LaSalle would each be acceptable to the Members to serve as the initial Leasing Agent for the Project.

(z)Leases. Cause or permit the Company or any Subsidiary to enter into any new space or other lease affecting the Property, or amend, modify, terminate, or waive rights under any existing leases with the Company or any Subsidiary, for space in any of the Property, excluding, however, non-material equipment leases.

(aa)Insurance. Change the insurance program for the Company, any Subsidiary or the Property in a manner inconsistent with the Business Plan (or during construction of the Project, the Development Plan) or inconsistent with the insurance requirements set forth in Section 2.05 below.

(bb)Employees. Employ any individual as an employee of the Company or any Subsidiary.

(cc)Awards and Proceeds. Settle, apply or dispose of any casualty insurance proceeds in excess of $25,000 or any condemnation award, from any insurance company or any condemning authority, as applicable.

(dd)No REIT Prohibited Transactions. Take, or permit to be taken, any action that is or results in a REIT Prohibited Transaction (as defined below).

(ee)Pledge and Assignment. Subject to the provisions of Article VI below, sell, transfer or pledge JV Member’s interests in the Company or any Subsidiary.

(ff)Consultants. Retain or dismiss on behalf of the Company or any Subsidiary any accountants, auditors, property managers or leasing agents. Ernst & Young is hereby approved as the approved audit and tax firm for the Company and its Subsidiaries.

(gg)Additional Capital Contributions. Except as expressly (1) set forth in Section 3.01 below, (2) set forth in the approved Annual Budget or (3) otherwise approved by the Members in writing, require any additional capital contributions of the Members.

(hh)Member Loans. Except as expressly set forth in Section 3.03 or otherwise approved by the Members in writing, require or request any Member Loan.

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(ii)Certificated Interests. Elect to have the Members interests in the Company become certificated interests.

(jj)Accounting. Alter or change the reporting, accounting and/or auditing systems and/or procedures for the Company, any Subsidiary or the Property.

(kk)Amendment to this Agreement. Except as contemplated by Section 2.06(e) or Section 6.03 or as otherwise approved by the Members, amend or supplement this Agreement.

(ll)Amendment to Subsidiary Documents. Except as necessary to consummate a Financing permitted by this Agreement or as otherwise approved by the Members, amend or supplement any formation documents or governing agreements of any Subsidiary.

In the event the Co-Managing Member does not respond to any Major Decision in writing within ten (10) days after Co-Managing Member’s receipt of a request therefor from Managing Member, then the Major Decision shall be deemed disapproved. Nothing in this Agreement shall limit or prevent the Co-Managing Member from requesting that Managing Member initiate a Major Decision. If, however, Managing Member does not to implement the Major Decision requested by the Co-Managing Member, the Co-Managing Member shall have the right to cause the Company and any of its Subsidiaries to undertake such Major Decision notwithstanding Managing Member’s position (the “Override Right”); provided, however, that for so long as no Removal Event (as defined below) shall have occurred, (x) Co-Managing Member shall not be entitled to use the Override Right with respect to the Major Decision listed in Section 2.02(g) above, and (y) the provisions of Article VII below shall govern Co-Managing Member’s right to cause a sale of the Project; provided, further, however, that prior to the removal of JV Member as Managing Member pursuant to Section 2.06, the Co-Managing Member shall not have the right to cause the Company or any of its Subsidiaries to undertake any action with respect to a Fundamental Decision (defined below) without JV Member’s prior written consent; provided, further, however, that after any such removal with respect to Fundamental Decisions, (A) Section 2.06(c)(i)(3) shall govern if such removal was for cause, and (B) Section 2.06(d)(ii) shall govern if such removal was without cause.

If, during the Construction Phase, the Members are not able to reach agreement on a proposed Major Decision, then, unless the Members mutually agree otherwise, then such Major Decision shall not be approved and the Managing Member shall continue to develop the Project in accordance with the then-current Development Budget and Development Plan; provided that neither Member shall unreasonably withhold or delay its approval of a Major Decision during the Construction Phase if such Major Decision is necessary to implement and/or continue the construction and development of the Project and, complete the construction thereof and/or to comply with the terms of the Mortgage Loan, as a result of changes in law or requirements of Governmental Authorities applicable to the Project; provided that the forgoing shall not require any Member to reasonably consent to a Major Decision that would result in additional Capital Contributions.

2.03.Company Funds. No Company funds, assets, credit or other resources of any kind or description shall be paid to, or used for, the benefit of any Member, except as specifically provided in this Agreement or the Annual Budget or after the written approval of all the Members has been obtained. All funds of the Company shall be deposited only in such federally insured checking and

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savings accounts of the Company in the Company name with banks and other financial institutions having not less than $1,000,000,000 in assets as the Co-Managing Member shall approve in writing, shall not be commingled with funds of any other person or entity, and shall be withdrawn only upon such signature or signatures as may be designated in writing from time to time by Managing Member after receiving approval of the Co-Managing Member.

2.04.Employees. The Company and its Subsidiaries shall not have employees. Except as may be otherwise provided for in the Property Management Agreement, each Member shall be solely responsible for all wages, benefits, insurance and payroll taxes with respect to any of its employees or those of its Affiliates. Each Member agrees to perform its duties under this Agreement as an independent contractor and not as the agent, employee or servant of the Company. Each Member shall be solely responsible for its own acts and those of its subordinates, employees and agents during the term of this Agreement and, subject to, and without the waiver of the benefits of, the provisions of Section 2.09, each Member hereby indemnifies and holds harmless the Company and each other Member from any liabilities, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees) arising from the acts of any such subordinates, employees and agents of such Member or those of its Affiliates.

2.05.Insurance.

(a)Company Policies. Managing Member shall purchase and maintain, or shall cause to be purchased and maintained, for and at the expense of the Company, policies of insurance (i) for the Company’s and its Subsidiaries' operations, (ii) for the protection of the Company’s and its Subsidiaries' assets (including the Property), and (iii) as may be reasonably required to comply with third-party requirements in accordance with guidelines approved by Co-Managing Member, and shall provide the Members upon request with the certificates or other evidence of insurance coverage as provided therein.

(b)Contractor’s Insurance Obligations. Managing Member shall require the Property’s general contractors and all subcontractors retained by the Company and any Subsidiary working at the Property, or any portion thereof, to obtain and maintain at all times during performance of work for the Company or any Subsidiary an occurrence form commercial general liability policy with a minimum of $1,000,000 each occurrence/$1,000,000 annual aggregate, or in such other amounts as may be approved by the Co-Managing Member, on which the Company or any Subsidiary is named as an additional insured on a primary and non-contributing basis. In addition, Managing Member shall require that the Property’s general contractors and all subcontractors retained by the Company and any Subsidiary carry workers’ compensation coverage as required by law, and including a waiver of subrogation in favor of the Company.

(c)D&O Insurance. Managing Member may purchase and maintain insurance on behalf of the executive officers of Managing Member (and if requested by Co-Managing Member, executive officers of Co-Managing Member) against liability asserted against such Person and incurred by such Person arising out of such Person’s actions on behalf of Managing Member (or Co-Managing Member, as applicable) under this Agreement; provided that the cost of such insurance is included in the approved Annual Budget for the applicable year and such coverage is available at commercially reasonable rates.

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2.06.Election, Removal, Resignation of Managing Member.

(a)Number, Term and Qualifications of Managing Member. The Company shall have one Managing Member, which shall initially be JV Member.

(b)Removal of Managing Member for Cause. Co-Managing Member may, but shall not be obligated to, exercise any of the remedies provided in Section 2.06(c) below under any of the following circumstances (each, a “Removal Event”):

(i)if JV Member, or any principal, officer, executive or employee of JV Member engages in fraud, misappropriation of funds, intentional misrepresentation or willful misconduct with respect to the Company, any Subsidiary or the Property. Notwithstanding the foregoing, if such fraud, misappropriation of funds, intentional misrepresentation or willful misconduct (a) is committed by an individual other than a JV Member Principal without the knowledge of a JV Member Principal, and (b) (1) is susceptible of cure by the payment of money so that the Company and the applicable Subsidiary can be “made whole”, as reasonably determined by KBS in its good faith discretion, and JV Member makes the necessary “make whole” payment within ten (10) business days after KBS notifies JV Member of its determination of the necessary “make whole” payment, or (2) is not susceptible of cure by the payment of money but JV Member commences such actions as shall be reasonably required in order to cure or ameliorate (and provide for financial compensation for any actual losses suffered for) any damage suffered by the Company or the applicable Subsidiary within ten (10) business days after the date on which JV Member obtained actual knowledge of such event (or, if such default is not susceptible of cure within such ten (10) business day period, within such period as is required to effect such cure so long as JV Member has commenced such cure within such ten (10) business day period and thereafter prosecutes such cure to completion with diligence, not to exceed ninety (90) additional days in the aggregate), then such payment and/or such curative actions shall be deemed to have cured such event and the initial occurrence of such event shall not be a Removal Event;

(ii)if JV Member, or any principal, officer, executive or employee of JV Member is convicted or pleads guilty or nolo contendere to (1) any felony that involves the Company, any Subsidiary or the Property, and/or (2) any crime involving moral turpitude or breach of trust that involves the Company, any Subsidiary or the Property. Notwithstanding the foregoing, if such felony, crime or breach of trust (a) is committed by an individual other than a JV Member Principal without the knowledge of a JV Member Principal, and (b) (1) is susceptible of cure by the payment of money so that the Company and the applicable Subsidiary can be “made whole”, as reasonably determined by KBS in its good faith discretion, and JV Member makes the necessary “make whole” payment within ten (10) business days after KBS notifies JV Member of its determination of the necessary “make whole” payment, or (2) is not susceptible of cure by the payment of money but JV Member commences such actions as shall be reasonably required in order to cure or ameliorate (and provide for financial compensation for any actual losses suffered for) any damage suffered by the Company or the applicable Subsidiary within ten (10) business days after the date on which JV Member obtained actual knowledge of such event (or, if such default is not susceptible of cure within such ten (10) business day period, within such period as is required to effect such cure so long as JV Member has commenced such cure within such ten (10) business day period and thereafter

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prosecutes such cure to completion with diligence, not to exceed ninety (90) additional days in the aggregate), then such payment and/or such curative actions shall be deemed to have cured such event and the initial occurrence of such event shall not be a Removal Event;

(iii)the affairs of JV Member cease to be principally controlled by a JV Member Principal (the “Key Man Event”);

(iv)JV Member has breached its material obligations as Managing Member under this Agreement or breached any representation or warranty in this Agreement in any material respect. Notwithstanding the foregoing, if such material breach (a) is committed by an individual other than a JV Member Principal without the knowledge of a JV Member Principal, and (b) (1) is susceptible of cure by the payment of money so that the Company and the applicable Subsidiary can be “made whole”, as reasonably determined by KBS in its good faith discretion, and JV Member makes the necessary “make whole” payment within ten (10) business days after KBS notifies JV Member of its determination of the necessary “make whole” payment, or (2) is not susceptible of cure by the payment of money but JV Member commences such actions as shall be reasonably required in order to cure or ameliorate (and provide for financial compensation for any actual losses suffered for) any damage suffered by the Company or the applicable Subsidiary within ten (10) business days after the date on which JV Member obtained actual knowledge of such event (or, if such default is not susceptible of cure within such ten (10) business day period, within such period as is required to effect such cure so long as JV Member has commenced such cure within such ten (10) business day period and thereafter prosecutes such cure to completion with diligence, not to exceed ninety (90) additional days in the aggregate), then such payment and/or such curative actions shall be deemed to have cured such event and the initial occurrence of such event shall not be a Removal Event;

(v)Bankruptcy of the Company or any Subsidiary filed by the Managing Member without the written approval of Co-Managing Member;

(vi)Bankruptcy of JV Member or any JV Member Principal;

(vii)if any default under any Financing is declared by the lender and lender has elected to accelerate the loan and has either instituted legal action and/or made a claim under any Required Guaranty (defined below) (for which there are no notice and cure rights or for which such rights have expired and the lender has not otherwise waived such default in accordance with the terms of any Financing document) occurs, if such default is caused by JV Member or any Affiliate thereof; provided that it shall not be a Removal Event if the event of default in question is a result of the Company having insufficient funds or revenues due to the performance of the Property, if the default was caused by the Co-Managing Member or an Affiliate of the Co-Managing Member, or if Co-Managing Member approved the action of the JV Member or its Affiliate;

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(viii)[intentionally omitted];

(ix)JV Member resigns as Managing Member without the prior written consent of Co-Managing Member; and

(xi)    JV Member or the Affiliate of the JV Member that is the construction manager under the Construction Management Agreement has materially breached its obligations as construction manager under the Construction Management Agreement if such breach is not cured within the notice and cure periods provided under the Construction Management Agreement and Co-Managing Member elects to terminate the Construction Management Agreement as a result of such material breach. Notwithstanding the foregoing, if such material breach (a) is committed by an individual other than a JV Member Principal without the knowledge of a JV Member Principal, and (b) (1) is susceptible of cure by the payment of money so that the Company and the applicable Subsidiary can be “made whole”, as reasonably determined by KBS in its good faith discretion, and JV Member makes the necessary “make whole” payment within ten (10) business days after KBS notifies JV Member of its determination of the necessary “make whole” payment, or (2) is not susceptible of cure by the payment of money but JV Member commences such actions as shall be reasonably required in order to cure or ameliorate (and provide for financial compensation for any actual losses suffered for) any damage suffered by the Company or the applicable Subsidiary within ten (10) business days after the date on which JV Member obtained actual knowledge of such event (or, if such default is not susceptible of cure within such ten (10) business day period, within such period as is required to effect such cure so long as JV Member has commenced such cure within such ten (10) business day period and thereafter prosecutes such cure to completion with diligence, not to exceed ninety (90) additional days in the aggregate), then such payment and/or such curative actions shall be deemed to have cured such event and the initial occurrence of such event shall not be a Removal Event.

(c)Remedies Upon Removal Event.

(i)Generally Applicable Remedies. Upon the occurrence of a Removal Event, as determined by Co-Managing Member, at the option of Co-Managing Member (and in addition to any other remedy available to Co-Managing Member at law or in equity), Co-Managing Member may, but shall not be obligated to, exercise any or all of the following remedies:

1)terminate any or all of the Affiliate Agreements, in each case, without penalty or payment of termination fees, but any fees earned under any Affiliate Agreement prior to such termination shall be paid through the applicable termination date, but not thereafter;

2)replace JV Member as Managing Member by delivering written notice of removal (“Removal Notice”) to JV Member, and designate a new Managing Member (which may be Co-Managing Member or one of its Affiliates); and/or

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3)terminate JV Member’s right to participate in Major Decisions, other than the Fundamental Decisions set forth in Section 2.06(d)(ii)(1) through (14), inclusive (but not (15) through (17)).

(ii)Further Remedies Upon Certain Removal Events. In addition to and not in limitation of the rights of KBS pursuant to Section 2.06(c)(i) above, upon the occurrence of a Removal Event identified in Sections 2.06(b)(i), (ii), (iii) (but not if the Key Man Event is caused by death or incapacitation),(iv), (v), (vi), (ix), (x) or (xi) (but not any other Removal Event), at the option of KBS (and in addition to any other remedy available to KBS at law or in equity), KBS may, but shall not be obligated to, exercise any or all of the following remedies:

1)terminate distributions of Net Cash (defined below) of the Company in accordance with Section 5.01 below and have any and all Net Cash of the Company thereafter distributed in accordance with the provisions of Section 5.02 (i.e., JV Member shall lose its “promote” and Net Cash shall be thereafter distributed pro rata to the Members in accordance with their Percentage Interests in accordance with Section 5.02); and/or

2)terminate JV Member’s Purchase Election set forth in Section 7.01 below and JV Member’s right to initiate a sale of Interests as set forth in Section 7.02 below.

If, after a Removal Event but prior to the date JV Member cures the underlying default that caused the Removal Event, the Co-Managing Member desires to exercise any or all of the foregoing remedies, the Co-Managing Member may do so at any time thereafter and from time to time, by delivering written notice to JV Member, which notice shall specify the effective date of the election of its remedies and which remedies the Co-Managing Member is electing. The Co-Managing Member shall not be required to exercise all of the foregoing remedies at one time and no delay in or decision not to exercise all of the foregoing remedies at one time shall limit or impair the Co-Managing Member’s right to exercise any other remedy at a later time or be construed as a waiver thereof provided that the Co-Managing Member delivers written notice to Managing Member or its decision to exercise such subsequent remedies.

As used in this Agreement, the term “Net Cash” shall mean the gross cash receipts of the Company from all sources as of any applicable date of determination, less the portion thereof used to pay (i) all cash disbursements (inclusive of any guaranteed payment within the meaning of Section 707(c) of the Code (as defined below) paid to any Member, including, without limitation, any reimbursements made to any Member and any amounts applied to repay any Member Loans (as defined below), of the Company prior to that date); and (ii) all reserves, established by the Annual Budget or any Financing or otherwise approved by Co-Managing Member for anticipated cash disbursements that will have to be made before additional cash receipts from third parties will provide the funds therefor, including for payment of debt service, capital improvements and other anticipated contingencies and expenses of the Company.

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(d)Removal of Managing Member Without Cause. JV Member may be removed as Managing Member for any reason or no reason upon thirty (30) days’ prior written notice by Co-Managing Member. If Co-Managing Member elects, in its sole discretion, to remove the Managing Member under this Section 2.06(d) and no Removal Event has occurred, then:

(i)Co-Managing Member may elect to: (1) cause the Company to terminate any and all Affiliate Agreements as provided in Section 2.06(c)(i)(4) above, provided that (x) the Company shall pay the Termination Fee to Managing Member within twenty (20) days after the effective date of any such termination, and (y) Co-Managing Member shall only be entitled to enter into a replacement property management agreement with a replacement property manager that is in the business of providing third-party property management services; (2) replace the Managing Member with a new Managing Member as provided in Section 2.06(c)(i)(2) above; and/or (3) terminate JV Member’s right to participate in Major Decisions as provided in Section 2.06(c)(i)(3) above (but not as to Fundamental Decisions), but in no event shall Co-Managing Member have the remedies in Section 2.06(c)(ii) (terminate JV Member’s “promote” or terminate JV Member’s Purchase Election). For purposes of this Section 2.06(d)(i), the “Termination Fee” payable to JV Member shall be an amount equal to: (i) fifty percent (50%) of the remaining amount of the construction management fees that would have been payable to Construction Manager under the Construction Management Agreement if the Construction Management Agreement had not been terminated by Co-Managing Member, and (ii) $250,000, which is intended to compensate JV Member for the lost opportunity of receiving future property management fees under the Property Management Agreement. The Termination Fee shall be determined by KBS using its good faith reasonable judgment, which determination shall be final and conclusive absent manifest error.

(ii)Notwithstanding the provisions of Section 2.06(d)(i)(3) above, in no event shall the Co-Managing Member, without the written consent of JV Member (each, a “Fundamental Decision” and collectively, the “Fundamental Decisions”):

1)amend or supplement this Agreement; provided, however, that the prior written consent of JV Member shall not be required to the extent such amendment or supplement is expressly contemplated herein to effect an otherwise approved decision or action pursuant to this Agreement;

2)amend or supplement any Subsidiary Documents; provided, however, that the prior written consent of JV Member shall not be required to the extent such amendment or supplement is expressly contemplated herein to effect an otherwise approved decision or action pursuant to this Agreement;

3)(A) cause the Company or any Subsidiary to enter any Financing, or (B) to enter into any modifications, amendments, extensions, of any existing Financing; provided, however, that, in each case, the prior written consent of JV Member shall not be required if: (1) the Financing is with a lender that is not an Affiliate of the Co-Managing Member or the KBS Credit Party (as defined below); and (2) the Financing or the modification, amendments or extension of an existing Financing would not require (A)

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additional Capital Contributions from JV Member, or (B) a guaranty from JV Member or an Affiliate of JV Member;

4)cause the Company or any Subsidiary to issue any securities (debt or equity) which would have rights to distributions prior to the rights of JV Member;

5)admit a new member to the Company or any Subsidiary if and only if such new member would have rights to distributions that dilute the distribution to JV Member;

6)cause the Company or any Subsidiary to acquire (directly or indirectly) any real property other than the Property;

7)cause the Company or any Subsidiary to enter into or modify any agreement or transaction with any Affiliate of the Co-Managing Member; provided, however, that the prior written consent of JV Member shall not be required if such agreement is on terms at least as favorable to the Company or any Subsidiary as it would receive pursuant to similar agreement with a third party;

8)any action or decision that would reasonably be expected to cause liability under any of the Required Guaranties;

9)the filing on behalf of the Company or any Subsidiary (where the Company or a Subsidiary is the debtor) of any petition, or consent to the appointment of a trustee or receiver or any judgement or order, under state or federal bankruptcy laws;

10)a loan by the Company or any Subsidiary to any Member or any other person or entity;

11)making a tax election that is disproportionately adverse to the tax position of JV Member after taking into account the Members' different Percentage Interests;

12)any action that would reasonably be expected to result in JV Member or the JV Member Principals to have any civil or criminal liability;

13)any action by the Company or any Subsidiary that would reasonably be expected to result in a violation of any law; or

14)the use of the name Onyx in any press release or otherwise;

15)distribution of any property in kind;

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16)exercise any rights under Section 2.02(c) (Sale of the Company or the Property) other than in accordance with the provisions of Section 7.01; or

17)the merger or consolidation of the Company or any Subsidiary with any other entity.

(e)Attorney-in-Fact. If Co-Managing Member elects to remove JV Member as Managing Member pursuant to Section 2.06(c) or Section 2.06(d), Co-Managing Member shall deliver written notice to Managing Member and JV Member, which notice shall specify the effective date of the removal of JV Member as Managing Member in accordance with said Sections. Upon the occurrence of the removal of JV Member as Managing Member, JV Member hereby appoints Co-Managing Member as its attorney in fact (such power of attorney coupled with an interest and irrevocable) for the purpose of executing, delivering and filing such documents that are necessary (including, without limitation, any amendment to the Certificate or this Agreement) for the purpose of effecting the remedies selected by Co-Managing Member, but only to the extent such documents and remedies are consistent with this Agreement.

(f)Effect of Removal of JV Member as Managing Member - Guaranties. If JV Member is removed as Managing Member in accordance with this Section 2.06: (i) KBS shall use commercially reasonable efforts to have any Guarantor (as hereinafter defined) that is an Affiliate of JV Member replaced or removed as a guarantor(s) under any Required Guaranties (as hereinafter defined), for liabilities arising from conduct, actions, inactions or events first occurring or arising after the date on which JV Member is removed as Managing Member (but such Guarantor(s) shall not be replaced with respect to conduct, actions, inactions, or events first occurring or arising on or before the date of such removal) and (ii) to the extent that the Guarantor is an Affiliate of JV Member and is not replaced or removed as guarantor under the Required Guaranties as provided in clause (i), KBS shall indemnify, defend and hold harmless such Guarantor(s) for any liabilities arising from conduct, actions, inactions or events first occurring or arising from and after the date that JV Member is removed as Managing Member, except for any liabilities arising from the conduct, actions or inactions of JV Member, its Affiliates or the Guarantor shall continue to be governed by Section 3.07 below. The KBS Credit Party shall guaranty KBS’s indemnity obligations under this Section 2.06(f). In negotiating the Mortgage Loan with Lender and any future Financing, KBS agrees to use commercially reasonably efforts to have the applicable lender pre-approve KBS Credit Party as a replacement guarantor, subject to typical conditions protecting the lender for matters such as material and adverse changes in the KBS Credit Party.

2.07.Members Have No Managerial Authority. The Members shall have no power to participate in the management of the Company, except as expressly authorized by this Agreement.

2.08.Meetings. The Company shall not be required to hold regular meetings of Members. Any Member may call a meeting of Members for the purpose of discussing Company business. Unless otherwise approved by the Members, any meeting of Members shall be held during normal business hours either telephonically or in person at the Company's principal office on such day and at such time as are reasonably convenient for the Members.

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2.09.Liability and Indemnity. No Member (nor any officer, director, member, manager, constituent partner, agent or employee of the Company or a Member) shall be liable or accountable in damages or otherwise to the Company or to any other Member for any good faith error of judgment or any good faith mistake of fact or law in connection with this Agreement, or the services provided to the Company, except in the case of willful misconduct or gross negligence. To the maximum extent permitted by law, the Company does hereby indemnify, defend and agree to hold each Member and its Affiliates (and each such officer, director, member, manager, constituent partner, agent or employee) wholly harmless from and against any loss, expense or damage (including, without limitation, attorneys’ fees and costs) suffered by such Member and its Affiliates (and/or such officer, director, member, manager, constituent partner, agent or employee) by reason of anything which such Member and its Affiliates (and/or such officer, director, member, manager, constituent partner, agent or employee) may do or refrain from doing hereafter for and on behalf of the Company and in furtherance of its interest, except in the case of willful misconduct or gross negligence. To the maximum extent permitted by law, each Member does hereby indemnify, defend and agree to hold the Company and each other Member wholly harmless from and against any loss, expense or damage (including, without limitation, attorneys’ fees and costs) suffered by the Company or such other Member as a result of such indemnifying Member’s willful misconduct or gross negligence in performing or failing to perform such indemnifying Member’s duties hereunder. No person shall be entitled to indemnification under this Section 2.09 to the extent any losses arise directly or indirectly our of such Indemnitee’s gross negligence, willful misconduct, fraud, intentional misrepresentation or criminal conduct.

2.10.Business Plan and Budget. No later than sixty (60) days before the projected date of Completion of the Project, Managing Member shall prepare and deliver to Co-Managing Member a plan which sets forth the general description of the overall business plan of the Company with respect to the management and operation of the Property (the “Business Plan”). The approval of the Business Plan is a Major Decision underSection 2.02(f). In the event of any conflict or inconsistency between any provision of the Business Plan and any provision of this Agreement, the provisions of this Agreement shall control and supersede the provisions of the Business Plan. On or before the Update Date (defined below) in any year after Completion of the Project, Managing Member shall prepare an update and any other necessary modifications to the Business Plan for Co-Managing Member’s review and approval.

(a)Annual Budget. No later than sixty (60) days before the projected date of Completion of the Project, Managing Member shall prepare and deliver to Co-Managing Member the initial annual operating budget for the Property after Completion of the Project (the “Annual Budget”) that sets forth, by category, the estimated costs that are projected to be incurred in connection with the ownership and operation of the Property. On or before the last business day of November of each year after the initial Annual Budget is approved (each an “Update Date”), Managing Member shall prepare a new Annual Budget for the upcoming calendar year which shall be required to be approved by the Co-Managing Member as a Major Decision under Section 2.02(f), which shall set forth, by individual category, the costs and expenses projected to be incurred by the Company for the ensuing fiscal year. In the event the Co-Managing Member does not respond to the proposed Annual Budget within fifteen (15) business days after receipt of such budget, the proposed Annual Budget shall be deemed disapproved.

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(b)Interim Annual Budget. If any Annual Budget, or any category thereof, is not approved as a Major Decision under Section 2.02(f) for any fiscal year as of the commencement of such fiscal year (or other period), then the approved categories of the proposed Annual Budget shall be in effect, but as to the categories which were disapproved, one hundred five percent (105%) of the last approved Annual Budget line items, shall be in effect until the new Annual Budget as to such categories is approved as a Major Decision under Section 2.02(f). Adjustments to the last approved Annual Budget shall automatically be made to reflect actual increases in real property taxes, insurance premiums, utility charges and payments required under contracts to which the Company is a party at the time of the expiration of the Annual Budget, and shall not require approval under Section 2.02(f).

(c)Emergency Expenditures; Reallocation. After Completion of the Project, Managing Member shall have the right, power and authority, without approval of Co-Managing Member pursuant to Section 2.02, to cause the Company to incur emergency expenditures not included in the Annual Budget to the extent Managing Member reasonably believes that such expenditures are necessary following a casualty or other comparable event to prevent imminent damage to persons or property on or about the Property, or the imposition of imminent civil or criminal liability against the Company, and Subsidiary, or any member, partner, officer, director, shareholder, agent, employee or representative of any of them (and shall notify the Members prior to making or authorizing such expenditures to the extent reasonably possible under the circumstances).

2.11.Pre-Approved Affiliate Agreements. The Members contemplate that the Company shall cause Property Owner Subsidiary to execute the following agreements (individually a “Pre-Approved Affiliate Agreement” and collectively, the “Pre-Approved Affiliate Agreements”), but no fees or other amounts payable by the Property Owner Subsidiary thereunder shall accrue prior to the applicable effective date of each such agreement:

(a)Property Management Agreement. Prior to Completion of the Project, Property Owner Subsidiary shall enter into a property management agreement substantially in the form of Exhibit D attached hereto (the “Property Management Agreement”) with Onyx Management Group, LLC (the “Property Manager”) or such other entity approved by the Members. The fee payable to Property Manager shall be as set forth in the Property Management Agreement. The Property Management Agreement is an Affiliate Agreement and the Co-Managing Member hereby approves the entering into of the Property Management Agreement by the Property Owner Subsidiary. If Property Manager is unable to deliver all of the reports set forth in Section 6.2 of the Property Management Agreement shall enter into a sub-management agreement acceptable to Co-Managing Member with an entity acceptable to Co-Managing Member that is qualified to prepare such reports. Transwestern would be acceptable to Co-Managing Member to serve as a sub-manager for this purpose. The cost and expense of retaining such sub-manager would be borne by the Company.

(b)Construction Management Agreement. At the Property Closing, Property Owner Subsidiary shall enter into a Construction Management Agreement in a form agreed to by the Members in their reasonable discretion (the “Construction Management Agreement”) with Onyx Management Group LLC (the “Construction Manager”) or such other entity approved by the Members. The fee payable to Construction Manager shall be equal to three percent (3%) of the

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hard costs of construction of the Project as set forth in the Development Budget (the “Construction Management Fee”), shall be earned and payable in monthly installments over the period to be established in the Construction Management Agreement. The Construction Management Agreement will be an Affiliate Agreement. Construction Manager may enter into a sub-construction management agreement with a third party so long as such sub-construction manager and the form of the sub-construction management agreement are reasonably acceptable to Co-Managing Member and the Construction Management Fee is allocated between Construction Manager and such sub-construction manager so that there shall be no additional fees, costs or expenses to the Property Owner Subsidiary or the Company as a result of the engagement of the sub-construction manager.

2.12.Reimbursements and Fees.

(a)Reimbursements. Except as otherwise provided by this Agreement, none of the Members (or their respective Affiliates and/or other representatives) shall be paid any compensation for rendering services to the Company. Each Member shall be reimbursed for any costs and/or expenses incurred by such Member on behalf of the Company that relate to the business and affairs of the Company to the extent such Member had authority to act on behalf of the Company (without reduction to such Member’s capital account in the Company maintained in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv) (each a “Capital Account”)); provided, however, that except as otherwise provided in this Agreement or in the Annual Budget no Member shall be reimbursed for any such costs and/or expenses that exceed an aggregate amount of $10,000 during any calendar year without the consent of the Co-Managing Member. As used in this Agreement, the term: “Treasury Regulation” means any proposed, temporary, and/or final federal income tax regulation promulgated by the United States Department of the Treasury as heretofore and hereafter amended from time to time (and/or any corresponding provisions of any superseding revenue law and/or regulation).

(b)Reimbursement for Pre-Formation Costs. Subject to the prior approval of Co-Managing Member, at or within five (5) business days after the date of the Property Closing, the Company shall reimburse KBS and JV Member (but not Seller, which is an Affiliate of JV Member) for any and all reasonable legal and accounting fees, organizational costs and any other formation and due diligence costs incurred by KBS and JV Member (and/or any Affiliate or representative thereof, other than Seller) in connection with the formation of the Company, the negotiation and documentation of this Agreement and the acquisition of the Property by the Property Owner Subsidiary. The foregoing reimbursements shall not be debited to or otherwise reduce any Member’s Capital Account. KBS and JV Member shall use good faith commercially reasonable efforts to cause all such amounts approved by Co-Managing Member to be reimbursed hereunder to be included in the Company’s final escrow closing statement for the acquisition of the Property. Notwithstanding the foregoing, the Members acknowledge that an Affiliate of JV Member is the Seller and has incurred costs prior to the Effective Date to design and create and/or obtain, as applicable, the concept of the Project, the Preliminary Development Plan, the Preliminary Construction Plans, the Preliminary Budget, the due diligence materials delivered to KBS and the various other plans, surveys, studies, reports and investigations pertaining to the Property and the Project (the “Project Work Product”) and that such costs, and the benefit of the Project Work Product, were factored into the purchase price payable to Seller for the Property pursuant to the

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Purchase Agreement so that none of such costs are to be reimbursed by the Company pursuant to this Section.

2.13.Limited Liability. Except as otherwise provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Members shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member of the Company.

2.14.Representations, Warranties and Covenants.

(a)By the Members. Each Member hereby represents and warrants to the Company and the other Member as follows:

(i)Such Member is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.

(ii)Such Member has all requisite power, authority and capacity to enter into and perform its obligations under this Agreement.

(iii)Such Member has duly authorized the execution and delivery of this Agreement, and this Agreement constitutes a binding obligation of such Member, enforceable against such Member in accordance with its terms.

(iv)The execution, delivery and performance of this Agreement by such Member will not violate any agreement to which such Member or any of its Affiliates is a party or order of a governmental body.

(v)Such Member is otherwise duly qualified to purchase and hold its Interest and to execute and deliver this Agreement and all other instruments executed and delivered on behalf of it in connection with the acquisition of its Interest.

(b)By JV Member. JV Member, as the owner of the 20% Ground Lease Interest (as defined below), hereby makes each of the representations and warranties set forth in Section 4.1(a) of the Purchase Agreement to the Company and the Co-Managing Member as if each of such representations and warranties were set forth herein. The representations and warranties of JV Member in this Section 2.14(b) are subject to the survival period set forth in Section 5.2 of the Purchase Agreement and any claims will be aggregated with the claims arising under the Purchase Agreement, if any, and subject to the same monetary limitations applied in the aggregate set forth in Section 15 of the Purchase Agreement.

ARTICLE III
MEMBERS' CONTRIBUTIONS TO COMPANY

3.01.Initial Capital Commitments.

(a)JV Member. JV Member shall commit to contribute to the capital of the Company, as follows:

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(i)Within two (2) Business Days after the Effective Date (or such earlier date as may be required by the Purchase Agreement), an amount in cash equal to 20% of the Purchase Deposit (i.e., $600,000.00);

(ii)Prior to the date required by the Purchase Agreement, an amount in cash equal to 20% of any additional deposits to be made under Section 8.1 of the Purchase Agreement, as applicable;

(iii)JV Member’s execution of the assignment of the Ground Lease in the form attached as Exhibit 8.4(a) of the Purchase Agreement (the “Ground Lease Assignment”) at the Property Closing to transfer a twenty percent (20%) tenant-in-common interest in the Ground Lease (the “20% Ground Lease Interest”) to the Property Owner Subsidiary or the Company as a capital contribution shall be deemed to a contribution to the Company of capital in the amount of $9,600,000.00, plus or minus an amount equal to twenty-five percent (25%) of the prorations and adjustments described in the Purchase Agreement (the “Adjustments”) depending upon whether the Adjustments increase or decrease the Purchase Price under the Purchase Agreement. By way of example, if the Adjustment under the Purchase Agreement (based on an 80% assignment of the Ground Lease) results in a $800.00 increase, then the adjustment to JV Member’s capital contribution would be a $200.00 increase. For avoidance of doubt, JV Member is not assigning the other interests in the Ground Lease that it holds and will hold on the Property Closing Date and the remaining thirty percent (30%) tenant-in-common interest in the Ground Lease that JV Member will own on the Property Closing Date will be conveyed to the Property Owner Subsidiary pursuant to the Purchase Agreement at the Property Closing) and

(iv)within ten (10) Business Days after demand from Managing Member, an amount equal to the product of the JV Member’s Percentage Interest and the equity needed to complete the Project as set forth in the Development Plan, including Cost Overruns (unless JV Member is solely responsible for such Cost Overrun pursuant to Section 3.07(c)(iii)(1) below); provided, however, that the additional capital for the Project may be requested and funded in monthly intervals if the Development Budget contemplates such monthly funding (instead of a lump sum capital call) and the Lender allows such monthly funding of such capital.

(b)KBS. KBS shall commit to contribute to the capital of the Company, in cash, as follows:

1 JV Member will own a fifty percent (50%) tenant in common interest in the Ground Lease immediately prior to the Property Closing: sixty percent (60%) of which, representing a 30% tenant in common interest in the Ground Lease, will be assigned for cash pursuant to the Purchase Agreement, and forty percent (40%) of which, representing a 20% tenant in common interest in the Ground Lease, will be assigned as a capital contribution to the Company in exchange for the Membership Interest hereunder.

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(i)Within two (2) Business Days after the Effective Date (or such earlier date as may be required by the Purchase Agreement), an amount equal to 80% of the initial equity necessary to fund the Purchase Deposit (i.e., $2,400,000.00);

(ii)Prior to the date required by the Purchase Agreement, an amount in cash equal to 80% of any additional deposits to be made under Section 8.1 of the Purchase Agreement, as applicable;

(iii)at or prior to the Property Closing, an amount equal to 100% of the cash necessary to consummate the Property Closing and capitalize the Company as set forth in the sources and uses schedule attached hereto Exhibit E; and

(iv)within ten (10) Business Days after demand from Managing Member, an amount equal to the product of the KBS’s Percentage Interest and the equity needed to complete the Project as set forth in the Development Plan, including Cost Overruns (unless JV Member is solely responsible for such Cost Overrun pursuant to Section 3.07(c)(iii)(1) below); provided, however, that the additional capital for the Project may be requested and funded in monthly intervals if the Development Budget contemplates such monthly funding (instead of a lump sum capital call) and the Lender allows such monthly funding of such capital.

(c)Failure to Close Property Closing. The Members acknowledge that upon execution of this Agreement, (i) the Property Owner Subsidiary will have funded (or may be obligated to fund) the Earnest Money under the Purchase Agreement and (ii) the Members shall be obligated to fund their respective initial capital contributions set forth in this Section 3.01. In the event a Member fails to fund the portion of its initial capital contribution required to be funded at or prior to the Property Closing pursuant to Section 3.01(a) or (b), as applicable, or otherwise refuses to allow the Property Owner Subsidiary to close the Property Closing under the Purchase Agreement and such failure to fund or close results in or would result in a default under the Purchase Agreement, then in addition to any other remedy set forth in this Agreement, the non-defaulting Member shall have the unilateral authority and without the consent of the defaulting Member to cause the Company and the Property Owner Subsidiary to close the Property Closing, in which event the defaulting Member shall be no longer be a Member of the Company and shall receive no return of its capital to the extent such defaulting Member had previously funded any part of its capital under this Section 3.01. In the event a Member fails to fund the portion of its initial capital contribution required to be funded at or prior to the Property Closing pursuant to Section 3.01(a) or (b), as applicable, or otherwise refuses to allow the Property Owner Subsidiary to close the Property Closing under the Purchase Agreement and such failure to fund or close results in or would result in a default under the Purchase Agreement and the non-defaulting member elects not to close the Property Closing, the defaulting Member shall be liable for the non-defaulting Member’s share of the Earnest Money that is not returned to the non-defaulting Member and for all costs and expenses incurred by such non-defaulting Member incurred in connection with this Agreement and the Property, including all costs to negotiate this Agreement, to the extent such costs and expenses have not previously been reimbursed to such non-defaulting Member (the lost Earnest Money and such costs and expenses, collectively, the “Reimbursable Expenses”). The defaulting Member shall pay to the non-defaulting Member such reimbursement within ten (10) days of the non-defaulting Member’s written request therefor, which request shall reasonably substantiate the costs and expenses incurred. If

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the defaulting Member is (i) Co-Managing Member then KBS SOR US Properties II LLC (the “KBS Credit Party”) shall guaranty the payment of the Reimbursable Expenses incurred by JV Member, or (ii) JV Member then Onyx Equities, LLC, a New Jersey limited liability company (the “JV Member Credit Party”) shall guaranty the Reimbursable Expenses incurred by Co-Managing Member. Except as provided in Section 1.05 above, if the Property Closing does not otherwise occur and the Earnest Money is returned to the Property Owner Subsidiary, then the Company shall be dissolved pursuant to Article VIII.

(d)JV Member’s Property Closing Deliveries. To effectuate the contribution of the 20% Ground Lease Interest, JV Member shall execute and deliver the following at the Property Closing: (1) the Ground Lease Assignment, (2) an certificate updating the representations and warranties of JV Member in Section 2.14(b) above in the form described in Section 8.4(o) of the Purchase Agreement, and (3) each of the other closing documents and deliveries listed in Section 8.4 of the Purchase Agreement as and to the extent applicable to the assignment of the 20% Ground Lease Interest (e.g., Bill of Sale, Assignment of Service Contracts, title affidavits, tax affidavits, other instruments reasonably requested by the Title Company, etc.). In addition, JV Member shall pay all transfer taxes, recording fees and charges necessary or required for the Ground Lease Assignment to be recorded pursuant to Section 8.6 of the Purchase Agreement, and if JV Member desires to claim the “mere change of identity” exemption described in said Section 8.6, the provisions of said Section 8.6 shall apply, including the indemnification in favor of the Company and Co-Managing Member as described therein. The purpose of this Section 3.01(d) and the intent of the Members is that the Company and the Co-Managing Member should be in the same position as they would, and the JV Member should have the same obligations and liabilities (including deliveries at the Property Closing), as it would as if JV Member were to assign one hundred percent (100%) of the leasehold estate under the Ground Lease pursuant to the Purchase Agreement and that the JV Member should have the same obligations as the Seller under the Purchase Agreement as to the 20% Ground Lease Interest; it being agreed, however, that the 20% Ground Lease Interest is being conveyed to Property Owner Subsidiary as a contribution pursuant to this Agreement as described herein and intended to qualify as a contribution to capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended. The Members to agree to report, and cause the Company to report, these transactions consistent with this intent for all tax purposes.

3.02.Default in Capital Commitment. If JV Member or KBS (as applicable, the “Defaulting Member”) shall fail to contribute (a “Contribution Failure”) its share of any capital required to be contributed pursuant to Section 3.01 or any approved additional capital contributions pursuant to Section 3.06 (the “Defaulted Amount”) and such Contribution Failure shall continue for at least five (5) business days following notice to the Defaulting Member (provided that no notice or cure period shall apply to a Member’s failure to fund its share of the required capital to the Company for the Property Closing pursuant to the Purchase Agreement), KBS or JV Member, as applicable, (the “Non-Defaulting Member(s)”) may, but shall not be obligated to, contribute some or all of the Defaulted Amount as a capital contribution to the Company or as a loan to the Defaulting Member (a “Default Loan”). If the Non-Defaulting Member elects to contribute some or all of the Defaulted Amount as a capital contribution to the Company, the Percentage Interests of Co-Managing Member and the JV Member shall be adjusted as follows:

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(a)with respect to the first two (2) Contribution Failures by a Defaulting Member occurring between the Effective Date and the second (2^nd) anniversary of the Effective Date (the “Initial Contribution Period”): (x) the amount which the Non-Defaulting Member elects to contribute to fund the Defaulted Amount shall be deemed to be equal to 150% of the amount that the Non-Defaulting Member actually funds (the “Deemed Capital”); (y) the Non-Defaulting Member’s Percentage Interest shall be equal to the percentage equivalent of a fraction, the numerator of which is equal to the aggregate capital contributed by the Non-Defaulting Member, exclusive of the amount funded to replace the Defaulted Amount, plus the Deemed Capital, and the denominator of which is the total capital contributed by all Members, other than the amount contributed to replace the Defaulted Amount, plus the Deemed Capital; and (z) the Defaulting Member’s Percentage Interest shall equal 100% minus the recomputed Percentage Interest of the Non-Defaulting Member;

(b)if there have been two Contribution Failures by a Defaulting Member during the Initial Contribution Period, then the following shall apply to future Default Loans by the Non-Defaulting Member during the Initial Contribution Period: (x) the Deemed Capital contributed by the Non-Defaulting Member shall be deemed to be equal to 300% of the amount that the Non-Defaulting Member actually funds; (y) the Non-Defaulting Member’s Percentage Interest shall be equal to the percentage equivalent of a fraction, the numerator of which is equal to the aggregate capital contributed by the Non-Defaulting Member, exclusive of the amount funded to replace the Defaulted Amount, plus such Deemed Capital, and the denominator of which is the total capital contributed by all Members, other than the amount contributed to replace the Defaulted Amount, plus such Deemed Capital; and (z) the Defaulting Member’s Percentage Interest shall equal 100% minus the recomputed Percentage Interest of the Non-Defaulting Member;

(c)if there have been two or less Contribution Failures by a Defaulting Member during the Initial Contribution Period, then with respect to the first two (2) Contribution Failures by such Defaulting Member occurring after the Initial Contribution Period, (x) the Deemed Capital contributed by the Non-Defaulting Member shall be deemed to be equal to 150% of the amount that the Non-Defaulting Member actually funds; (y) the Non-Defaulting Member’s Percentage Interest shall be equal to the percentage equivalent of a fraction, the numerator of which is equal to the aggregate capital contributed by the Non-Defaulting Member, exclusive of the amount funded to replace the Defaulted Amount, plus such Deemed Capital, and the denominator of which is the total capital contributed by all Members, other than the amount contributed to replace the Defaulted Amount, plus such Deemed Capital; and (z) the Defaulting Member’s Percentage Interest shall equal 100% minus the recomputed Percentage Interest of the Non-Defaulting Member; and

(d)if there have been more than two Contribution Failures by a Defaulting Member during the Initial Contribution Period, then with respect to any subsequent Contribution Failures by such Defaulting Member occurring after the Initial Contribution Period: (x) the Deemed Capital contributed by the Non-Defaulting Member shall be deemed to be equal to 200% of the amount that the Non-Defaulting Member actually funds; (y) the Non-Defaulting Member’s Percentage Interest shall be equal to the percentage equivalent of a fraction, the numerator of which is equal to the aggregate capital contributed by the Non-Defaulting Member, exclusive of the amount funded to replace the Defaulted Amount, plus such Deemed Capital, and the denominator of which

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is the total capital contributed by all Members, other than the amount contributed to replace the Defaulted Amount, plus such Deemed Capital; and (z) the Defaulting Member’s Percentage Interest shall equal 100% minus the recomputed Percentage Interest of the Non-Defaulting Member.

If the Non-Defaulting Member elects to provide the Default Loan, then it shall pay the proceeds directly to the Company. A Default Loan shall not be considered a capital contribution by the Non-Defaulting Member and shall not increase the Capital Account balance or the Percentage Interest of the Non-Defaulting Member, but instead shall be treated as a non-recourse loan by the Non-Defaulting Member to the Defaulting Member (and a capital contribution by the Defaulting Member) and shall bear interest at the lesser of (x) the Default Loan Rate (as defined below) or (y) the maximum amount permitted by law. To the extent not repaid directly by the Defaulting Member, a Default Loan, together with any accrued and unpaid interest thereon, shall be repaid out of any subsequent distributions of Net Cash or any other payment from the Company to which the Defaulting Member would otherwise be entitled (but such distributions actually paid to the lending Members shall nonetheless constitute a distribution to the Defaulting Member for purposes of this Agreement), and such payments shall be applied first to the payment of accrued but unpaid interest on each such obligation and then to the payment of the outstanding principal until the Default Loan is paid in full. “Default Loan Rate” is defined as a cumulative annual rate equal to eighteen percent (18%), compounded quarterly (pro-rated for periods of less than one year), on the daily average outstanding balance during each fiscal year of the Member’s aggregate unreturned Default Loan.

3.03.Member Loans. In the event Managing Member determines, in its reasonable discretion, that funds in addition to those otherwise obtained pursuant to Section 3.01 are necessary for the Company or any Subsidiary to meet the Annual Budget, Business Plan, then Managing Member shall deliver written notice of such actual or projected cash deficit to the Members requesting that they agree that a loan (a “Member Loan”) should be made to the Company, which notice shall specify the term and interest rate of the requested Member Loan. Within 10 business days following the effective date of such notice, each such Member shall notify Managing Member (a) whether or not such Member agrees that Member Loan(s) to the Company should be made in the amount specified in Managing Member’s notice, and (b) whether such Member elects, in its sole and absolute discretion, to make such Member Loan. If all Members (y) agree that a Member Loan in the amount specified in Managing Member’s notice should be made, and (z) elect to advance such funds by the Company, such funds shall be advanced by Members in proportion to their respective percentage set forth opposite such Member's name under the column labeled “Percentage Interest” on Exhibit A attached hereto, as such Percentage Interests may adjusted under this Agreement (the “Percentage Interests”) (or as such Members otherwise agree). Notwithstanding the foregoing, if the Co-Managing Member elects that the Member Loan should be made but the JV Member does not, the Co-Managing Member may elect to make the entire Member Loan or such portion as it may so elect. Any and all advances made by any Member to the Company pursuant to this Section 3.03 shall be treated as a Member Loan with recourse only to the assets of the Company (and not to the assets of any Member), and shall bear annual interest as set forth in Managing Member’s notice. Furthermore, the Company and the Co-Managing Member shall structure any Member Loan from the Co-Managing Member such that the Member Loan is, at all times, a “real estate asset” under Section 856(c) of the Code. If, from any circumstances whatsoever, the Company ever receives as interest under a Member Loan in an amount which would exceed the

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highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due under such Member Loan and not to the payment of interest. Any and all Member Loans shall be due and payable from the first available funds of the Company and in any event upon the liquidation of the Company. The repayment of any Member Loan shall be made prior to any distributions of Net Cash or other cash proceeds to the Members. Accordingly, notwithstanding the provisions of Articles V and VIII, until any and all Member Loans are repaid in full, the Members shall draw no further distributions from the Company and all cash or property otherwise distributable with respect to the Interests of the Members shall be paid to the Member(s) making Member Loan(s) in proportion to, and as a reduction of, the outstanding balance(s) of such Member Loan(s), with such funds being applied first to reduce any interest accrued thereon, and then to reduce the principal amount thereof. As used in this Agreement, the term “Interest” means in respect to any Member, all of such Member’s right, title and interest in and to the Net Profits, Net Losses, Net Cash, and capital of the Company, and any and all other interests therein in accordance with the provisions of this Agreement and the Act. As used in this Agreement, the terms “Net Profits” and “Net Losses” mean, for each fiscal year or other period, an amount equal to the Company’s taxable income or loss, as the case may be, for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss and deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss); provided, however, for purposes of computing such taxable income or loss, (i) such taxable income or loss shall be adjusted by any and all adjustments required to be made in order to maintain Capital Account balances in compliance with Treasury Regulation Section 1.704-1(b), and (ii) any and all items of gross income or gain and/or partnership and/or partner “nonrecourse deductions” specially allocated to any Member pursuant to Section 4.02 shall not be taken into account in calculating such taxable income or loss. If Co-Managing Member does not approve a Member Loan, such disapproval shall be deemed final and conclusive for all purposes.

3.04.Determination of IRR Returns. The IRR Return described inSection 5.01 below shall be determined based upon internal rate of return of KBS. As used in this Agreement, the term “IRR Return” means for each of KBS the annual discount rate that when compounded quarterly results in a net present value equal to zero when the discount rate is applied to all capital contributions by Co-Managing Member and all distributions made by the Company to Co-Managing Member pursuant to this Agreement. The IRR Return shall be calculated using the XIRR function provided in Microsoft Office Excel or any replacement software issued by Microsoft to compute internal rate of return. It is understood by the Members that the achievement of a particular IRR Return requires both a return of all capital contributions plus a cumulative return on such capital contributions at the applicable percentage IRR Return.

3.05.Capital Contributions in General. Except as otherwise expressly provided in this Agreement or as otherwise agreed to by all Members in writing (i) no Member may withdraw all or any portion of any contribution that such Member may have made to the capital of the Company without each other Member’s consent, (ii) no Member shall be entitled to receive interest on such Member’s contributions to the capital of the Company, and (iii) no Member shall be required or entitled to contribute additional capital to the Company

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3.06.Additional Capital Contributions.Following the contribution of all the amounts described in Section 3.01, either Member shall have the right to make a capital call by delivering written notice to the other Member under this Section 3.06 if and only if such additional capital was either: (1) set forth in the approved Annual Budget or Interim Annual Budget, as applicable, (2) otherwise approved as a Major Decision pursuant toSection 2.02, or (3) Cost Overruns (other than any Cost Overruns governed by Section 3.07(c)(iii)(1)). Each Member shall contribute its share of the additional capital contributions required to be contributed under this Section 3.06 (in accordance with its Percentage Interest) in cash on or before the due date specified in the written notice, which due date shall be no less than ten (10) business days from the date of this written notice. If a Member fails to make its share of the additional capital contributions required to be contributed on or before the due date specified in Managing Member’s written notice, the Non-Defaulting Member shall have the right (but not the obligation and without waiving any remedies hereunder as a result of such failure) to receive a return of all or part of the additional Capital Contribution made by the Non-Defaulting Member, to make a Default Loan or to make a capital contribution to the Company of some or all of the Defaulted Amount pursuant to Section 3.02.

3.07.Guaranties.

(a)Required Guaranties. Except as set forth in Section 1.06 or Section 3.07(a)(ii) below, if in connection with any Financing of the Property, including the Mortgage Loan, a lender requires a guaranty of (each a “Required Guaranty” and collectively, the “Required Guaranties”): (i) standard non-recourse carve outs, (ii) certain environmental conditions, (iii) a completion guaranty with respect to the Project (a “Completion Guaranty”), (iv) an operating guaranty (a “Carry Guaranty”), and/or (v) a guaranty of the Member’s future capital commitments to the Company (“Future Funding Guaranty”), such Required Guaranties shall be from the Company and/or JV Member or an entity affiliated with JV Member (individually and collectively, the “Guarantor”). The Guarantor shall not receive any fees or other compensation for making a Required Guaranty. The form, amount and terms and conditions of any Required Guaranty shall be approved by the Members. Notwithstanding the foregoing, KBS agrees to cause the KBS Credit Party to execute a Carry Guaranty in favor of lender and a Future Funding Guaranty in favor of lender, each in a form and substance reasonably acceptable to KBS and the KBS Credit Party.

(b)Proportionate Guaranty Obligations of the Members. Except to the extent Section 3.07(c) provides otherwise, if a Guarantor shall deliver a Required Guaranty and if such Guarantor shall make, or be required to make, any payment under any such Required Guaranty, each Member hereby covenants and agrees to satisfy, or cause to be satisfied, its Proportionate Guaranty Obligation (as defined below) with respect to any and all of the Required Guaranties and each Member’s payment or its Proportionate Guaranty Obligation shall be treated as an additional capital contribution to the Company by each Member for all purposes of this Agreement. If and to the extent a Member (or its Affiliate) has failed to fully satisfy its Proportionate Guaranty Obligation within thirty (30) days following the date such Member is notified that such Guarantor has made, or is required to make, such payment under the applicable Required Guaranty, the other Member may exercise its rights under Section 3.07(d) below. “Proportionate Guaranty Obligation” means with respect to any Required Guaranty which any Guarantor shall provide to a lender, the obligation of each Member pursuant to this Section 3.07(b) to make payments (to a third party lender, the

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Company, to any other Member or the Guarantor) in an amount equal to the product of (x) the aggregate amount paid and/or due and payable under any and all such Required Guaranties multiplied by (y) the Percentage Interest of such Member. The KBS Credit Party shall guaranty KBS’s obligations under this Section 3.07(b). The JV Member Credit Party shall guaranty JV Member’s obligations under this Section 3.07(b).

(c)Exceptions to Proportionate Guaranty Obligations. Notwithstanding anything to the contrary in Section 3.07(b):

(i)Conduct By KBS. Any and all amounts paid by a Guarantor with respect to any Required Guaranty as a result of any conduct or action that KBS (or its Affiliates) shall have taken in violation of this Agreement or which is a result of any gross negligence, fraud or intentional misconduct of KBS (and/or its Affiliates) shall be funded solely by KBS (subject to the rights of indemnification set forth in Section 3.07(e)), JV Member (or its Affiliate) shall have no Proportionate Guaranty Obligation with respect to such payments, such amounts funded by KBS (or its Affiliates) shall not be considered a capital contribution by KBS, and KBS (or its Affiliate) shall reimburse the applicable Guarantor for such amount within thirty (30) days of written demand. If KBS (or its Affiliate) fails to make such payment, JV Member shall, as its sole remedy, be entitled to exercise its rights set forth in Section 3.07(d) hereof;

(ii)Conduct by JV Member. Any and all amounts paid by a Guarantor with respect to any Required Guaranty as a result of any conduct or action that the JV Member (or its Affiliates) shall have taken in violation of this Agreement or which is a result of any gross negligence, fraud or intentional misconduct of JV Member (or its Affiliates) shall be funded solely by the JV Member (subject to the rights of indemnification set forth in Section 3.07(e)), KBS (or its Affiliate) shall have no Proportionate Guaranty Obligation with respect to such payments, such amounts funded by the JV Member (or its Affiliates) shall not be considered a capital contribution by the JV Member, the JV Member (or its Affiliate) shall reimburse the applicable Guarantor for such amount within thirty (30) days of written demand. If the JV Member (or its Affiliate) fails to make such payment, KBS shall, as its sole remedy, be entitled to exercise its rights set forth in Section 3.07(d) hereof; and

(iii)Cost Overruns Pertaining to the Project. At such times as either Member determines that the Project reasonably requires additional funds to cover costs and expenses in excess of the amounts for either hard costs or soft costs included in the approved Development Budget (each, a “Cost Overrun”), after application of all available contingencies, and taking into account all actual cost savings for completed work (so long as such savings or contingency application is permitted under the Mortgage Loan), the following shall apply:

(1)Each Cost Overrun that results from a breach by Managing Member under this Agreement or a breach by Construction Manager under the Construction Management Agreement shall be paid solely by JV Member and such amounts shall not be considered as capital contributions to the Company.

(2)If the applicable Cost Overrun is not governed by Section 3.07(c)(iii)(1) above, the amount of the Cost Overrun shall be provided to the Company in cash prorata by the Members in accordance with their respective Percentage Interests as Capital Contributions to

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the Company, and Managing Member shall have the right to make a capital call to call such amounts pursuant to Section 3.06.

(d)Failure to Pay Portion of Guaranty Payment by a Member. If any Member fails to pay (A) its Proportionate Guaranty Obligation in accordance with Section 3.07(b) or (B) the amounts such Member is required to pay under Section 3.07(c)(iii)(2), as applicable, the non-defaulting Member affiliated with such guarantor may elect to either (X) contribute some or all of the amount incurred by the Guarantor that should have been repaid by the defaulting Member as a capital contribution to the Company (so the Company can reimburse the Guarantor), then, in accordance with Section 3.02, the Percentage Interests of the Members shall be adjusted as if the non-defaulting Member contributed 150% of the amount of capital actually contributed by the non-defaulting Member, or (Y) treat such amount incurred by the Guarantor that should have been repaid by the defaulting Member as a Default Loan made to the defaulting Member. If KBS is the defaulting Member under Sections 3.07(b) or (c)(iii)(2), then the KBS Credit Party shall guaranty KBS’s payment obligations under these sections. If the JV Member is the defaulting Member under Sections 3.07(b) or (c)(iii)(2), then the JV Member Credit Party shall guaranty JV Member’s payment obligations under these sections.

(e)Indemnification. The Company shall indemnify, defend and hold harmless each Guarantor for any and all losses suffered under any Required Guaranty, provided that no such indemnification shall be made (and a Guarantor shall reimburse any funds advanced to them in connection with a defense of a claim and indemnify the Company and the other Member) to the extent a court of competent jurisdiction determines that the Member affiliated with such Guarantor is solely liable for the losses suffered under any Required Guaranty pursuant to Section 3.07(c). The KBS Credit Party shall guaranty KBS’s indemnification obligations under this Section 3.07(e). The JV Member Credit Party shall guaranty JV Member’s indemnification obligations under this Section 3.07(e).

ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES

4.01.In General.

(a)Net Profits and Net Losses shall be allocated among the Members in such a manner so as, to the maximum extent possible, to make each Member’s Capital Account as of the close of each year (increased by the Member’s share of “partnership minimum gain” as defined in Treasury Regulation Section 1.704-2(b)(2) and “partner nonrecourse debt minimum gain” as defined in Treasury Regulation Section 1.704-2(i)(5)) equal the amount that the Member would receive if, as of the close of such year, all the assets of the Company were sold for their Deemed Book Values (as determined immediately before such deemed sale), the proceeds were applied to pay all Company liabilities and the remaining net proceeds were distributed to the Members in accordance with Section 5.01 or 5.02, as then applicable at the time of such allocations. As used in this Agreement, the term “Deemed Book Value” means the book value of the Company’s assets as determined under Treasury Regulation Section 1.704-1(b)(2)(iv) (i.e., the adjusted tax basis of such assets unless the asset was contributed to the capital of the Company or there has been a revaluation of book value

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under Treasury Regulation Section 1.704-1(b)(2)(iv)(f) and in such latter case the fair market value of such assets on the revaluation date).

(b)The Company shall maintain “Capital Accounts” for each Member in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv). The Company shall make all adjustments required under Treasury Regulation Section 1.704-1(b)(2)(iv), including the adjustments contained in Section 1.704-1(b)(2)(iv)(g), relating to Section 704(c) property as set forth in Section 4.03, below.

4.02.Special Allocations.

(a)Minimum Gain Chargeback. Notwithstanding any other provision of this Agreement, if there is a net decrease in partnership minimum gain for a Company taxable year, each Member shall be allocated, before any other allocation of Company items for the taxable year, items of gross income and gain for the year (and, if necessary, for subsequent years) in proportion to, and to the extent of, the amount of the Member’s share of the net decrease in minimum gain during the year as provided in Treasury Regulation Section 1.704-2(f). The income allocated under this Section 4.02(a) in any taxable year shall consist first of gains recognized from the disposition of property subject to one or more nonrecourse liabilities of the Company, and any remainder shall consist of a pro rata portion of other items of income or gain of the Company. The allocation otherwise required by this Section 4.02(a) shall not apply to a Member to the extent not required, as provided in Treasury Regulation Section 1.704-2(f)(2) through (5).

(b)Qualified Income Offset. Notwithstanding any other provision of this Agreement, if a Member unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes or increases an Adjusted Capital Account Deficit with respect to the Member, items of Company gross income and gain shall be specially allocated to the Member in an amount and manner sufficient to eliminate such Adjusted Capital Account Deficit as quickly as possible.

(c)Gross Income Allocation. If at the end of any Company taxable year, a Member has an Adjusted Capital Account Deficit, the Member shall be specially allocated items of Company income or gain in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly as possible.

(d)Nonrecourse Deductions. Any “nonrecourse deductions” (as defined in Treasury Regulation Section 1.704-2(b)(1)) shall be allocated among the Members in accordance with their Percentage Interests.

(e)Partner Nonrecourse Debt. Notwithstanding any other provision of this Agreement, any “partner nonrecourse deductions” (as defined in Treasury Regulation Section 1.704-2(i)(2)) shall be allocated to those Members that bear the economic risk of loss for the applicable partner nonrecourse debt, and among those Members in accordance with the ratios in which they share the economic risk, determined in accordance with Treasury Regulation Section 1.704-2(i). If there is a net decrease for a Company taxable year in any partner nonrecourse debt minimum gain, each Member with a share of such partner nonrecourse debt minimum gain as of

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the beginning of such year shall be allocated items of gross income and gain in the manner and to the extent provided in Treasury Regulation Section 1.704-2(i)(4).

(f)Adjusted Capital Account Deficit. As used in this Agreement, “Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in the Member’s Capital Account as of the end of the relevant taxable year, after giving effect to the following adjustments: (i) crediting thereto (A) the amount of the Member’s shares of partnership minimum gain and partner nonrecourse debt minimum gain, and (B) the amount of Company liabilities allocated to the Member under Section 752 of the Code with respect to which the Member bears the economic risk of loss (as defined in Treasury Regulation Section 1.752-2(a)), to the extent such liabilities do not constitute partner nonrecourse debt under Treasury Regulation Section 1.752-2 and (ii) reduced by all reasonably expected adjustments, allocations and distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

(g)Interpretation. The foregoing provisions of this Section 4.02 are intended to comply with Treasury Regulation Sections 1.704-1(b) and 1.704-2 and shall be interpreted consistently with this intention. Any terms used in such provisions that are not specifically defined in this Agreement shall have the meaning, if any, given such terms in the Regulations cited above.

4.03.Differing Tax Basis; Tax Allocation.

(a)Except as otherwise provided in this Section 4.03, items of income, gain, loss and deduction of the Company to be allocated for income tax purposes shall be allocated among the Members on the same basis as the corresponding book items are allocated under Sections 4.01 and 4.02.

(b)Depreciation and/or cost recovery deductions and gain or loss with respect to each item of property treated as contributed to the capital of the Company or revalued under Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall be allocated among the Members for federal income tax purposes in accordance with the principles of Section 704(c) of the Code and the Treasury Regulations promulgated thereunder, and for state income tax purposes in accordance with comparable provisions of the applicable law in the state in which the property is located and the regulations promulgated thereunder using the co-called “traditional method”, so as to take into account the variation, if any, between the adjusted tax basis of such property and its book value (as determined for purposes of the maintenance of Capital Accounts in accordance with this Agreement and Treasury Regulation Section 1.704-1(b)(2)(iv)(g)). For purposes of this Agreement, the term “Code” means the Internal Revenue Code of 1986, as heretofore and hereafter amended from time to time (and/or any corresponding provision of any superseding revenue laws).

ARTICLE V
DISTRIBUTION OF CASH FLOW

5.01.Distribution of Net Cash Prior to Removal of JV Member as Managing Member for Cause. The determination of whether there is sufficient Net Cash so that distributions may be made to the Members in accordance with this Agreement (including, without limitation, pursuant to this Article V) shall be at the reasonable discretion of KBS. Prior to any removal of the JV Member as

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Managing Member for Cause pursuant toSection 2.06 of this Agreement), Net Cash shall be determined and distributed quarterly (or at such other times as are determined in the reasonable discretion of Co-Managing Member, taking into account the reasonable business needs of the Company) in the following order of priority:

(a)First, 100% to KBS and JV Member, pari passu in proportion to their Percentage Interests (“Pari Passu”), until KBS has received an IRR Return of 12%;

(b)Second, after KBS has received an IRR Return of 12% and until distributions under this Section 5.01 have resulted in KBS having received an IRR Return of 17%, (i) 65% to KBS, and (ii) 35% to JV Member;

(c)Third, after KBS has received an IRR Return of 17% and thereafter, (i) 50% to KBS, and (ii) 50% to JV Member.

(d)Notwithstanding the foregoing, if JV Member is not a Defaulting Member, then upon the first Financing of the Company secured by the Property, prior to any distributions pursuant to Sections 5.01(a), (b), or (c) above, the Company shall cause the Property Owner Subsidiary to distribute the Required Amount (as hereinafter defined) to the Company which shall be immediately distributed solely to the JV Member. As used herein, the “Required Amount” shall be the amount by which the Capital Account of the JV Member (prior to such distribution) exceeds the product of (A) 20% and (B) the total amount of capital (or deemed value of capital) contributed by both Members, including the value attributed to JV Member’s in kind contribution of the 20% Ground Lease Interest.  The purpose of this Section 5.01(d) is to create a distribution to JV Member so that JV Member’s Capital Account will not exceed 20% of the aggregate Capital Accounts of the Members, after taking into account the proceeds from the Financing, since JV Member’s Capital Account without such distribution would otherwise be disproportionate.

5.02.Distribution of Net Cash After Removal of the JV Member for Cause. After the removal of the JV Member as Managing Member for Cause pursuant to Section 2.06(b) of this Agreement, Co-Managing Member shall determine on a quarterly basis whether there is sufficient Net Cash so that distributions may be distributed quarterly (or at such other times as are determined in the reasonable discretion of Co-Managing Member, taking into account the reasonable business needs of the Company) to the Members in accordance with their Percentage Interests.

5.03.Limitation on Distributions. Notwithstanding any other provision contained in this Agreement, the Company shall not make any distributions of Net Cash (or other proceeds) to any Member if such distribution would violate the Act or other applicable law.

5.04.In-Kind Distribution. Subject to Section 10.06, assets of the Company (other than cash) shall not be distributed in kind to the Members without approval of the Co-Managing Member. In the event of any distribution of real property in kind, each Member hereby waives any right of partition in respect thereof.

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5.05.Tax Distributions. Unless this provision is waived by KBS notwithstanding anything to the contrary in Sections 5.01 or 5.02 but to the fullest extent possible consistent with the distribution provisions of this Article V, the Managing Member shall use commercially reasonable efforts to cause the Company to distribute cash to KBS by the end of each fiscal year in an amount not less than 100% of the taxable income (including any net capital gain) allocated, directly or indirectly, to KBS for federal income tax purposes for each such fiscal year so that KBS or any owner of KBS that is a REIT may satisfy the requirements of Section 857(a)(1) of the Code for its taxable year with respect to the income and gain allocated to that owner from KBS for the taxable year, and otherwise distribute 100% of its taxable income and net capital gain. In addition, notwithstanding anything to the contrary in Sections 5.01 or 5.02 but subject to the distribution to KBS in the immediately preceding sentence and to the fullest extent possible consistent with the distribution provisions of this Article V, Managing Member shall have the right to cause Company to distribute cash to JV Member by the end of each fiscal year in an amount not less than 100% of the taxable income (including any net capital gain) allocated, directly or indirectly, to JV Member for federal income tax purposes for each such fiscal year, and otherwise distribute 100% of its taxable income and net capital gain. Any cash distributed to a Member under this Section 5.05 shall be applied against and reduce the next distributions of Net Cash that would otherwise be made to the Member under Section 5.01 or Section 5.02 (as may apply), as if the cash distributed under this Section 5.05 were actually distributed under Section 5.01 or Section 5.02 (as may apply).

ARTICLE VI
RESTRICTIONS ON TRANSFERS OF COMPANY INTERESTS

6.01.Limitations on Transfer. Except as set forth in Section 6.02 below, no Member shall be entitled to sell, exchange, assign, transfer or otherwise dispose of, pledge, hypothecate, encumber or otherwise grant a security interest in, directly or indirectly (collectively, a “Transfer”), all or any part of such Member’s Interest, without the prior written consent of the non-transferring Member (which consent may be withheld in such Member’s sole and absolute discretion). Any attempted Transfer in violation of the restrictions set forth in this Article VI shall be null and void ab initio and of no force or effect. Each Member shall indemnify, defend and hold the other Member and the Company harmless from and against any and all costs, expenses and losses associated with any Transfer (including any Permitted Transfer (as defined below)), including without limitation any transfer taxes and any increase in real estate or other taxes incurred as a result of such transfer.

6.02.Permitted Transfers. Any Member and/or any direct or indirect constituent owner of any Member may transfer all or any portion of such Member’s Interest and/or such constituent owner’s direct or indirect ownership interest in such Member as follows (each a “Permitted Transfer”) to a person or entity described below (a “Permitted Transferee”) without complying with the provisions of Section 6.01:

2 NTD: DLA had questions about transfer taxes, which may or may not translate into comments. We will circle back on our end, but wanted to note this.

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(a)Transfer Between Members. Notwithstanding anything stated to the contrary in this Article VI or elsewhere in this Agreement, any Member may sell, assign or otherwise transfer all or any part of its Interest to any other Member on such terms as are agreed to by both Members.

(b)KBS Indirect Transfers. Notwithstanding anything stated to the contrary in this Article VI or elsewhere in the Agreement, any Transfer of equity interests or other interests in KBS, or in any of the direct or indirect owners of KBS (including, without limitation, KBS SOR II Acquisition VI, LLC, KBS SOR US Properties II, LLC, KBS Strategic Opportunity Limited Partnership II or KBS Strategic Opportunity REIT II, Inc.) shall not be prohibited (and shall be expressly permitted) provided that KBS Strategic Opportunity REIT II, Inc. continues to control and own, either directly or indirectly, at least fifty-one percent (51%) of the ownership interests in KBS. All such transfers permitted pursuant to this Section 6.02(b) shall be at the sole cost and expense of KBS or a KBS Affiliate (defined below) and none of the Managing Member, JV Member or the Company nor any Subsidiary or Affiliate of the Company shall bear any cost with respect thereto.

(c)KBS Transfers. Notwithstanding anything stated to the contrary in this Article VI or elsewhere in this Agreement, KBS shall have the right to Transfer all of its Interest (a) to a KBS Affiliate (defined below) without JV Member’s approval, and (b) to another entity that is not a KBS Affiliate with JV Member’s approval, which approval may be withheld in JV Member’s reasonable discretion. JV Member’s failure to respond to KBS’s request for the approval of a Transfer within five (5) business days following delivery of KBS’s written request for such consent shall be deemed to constitute JV Member’s consent. A “KBS Affiliate” is any entity in which at least fifty-one percent (51%) of the ownership interests is owned, directly or indirectly, through one or more intermediaries, by KBS Strategic Opportunity REIT II, Inc. All such transfers permitted pursuant to this Section 6.02(c) shall be at the sole cost and expense of KBS or a KBS Affiliate and none of the Managing Member, JV Member or the Company nor any Subsidiary or Affiliate of the Company shall bear any cost with respect thereto. Notwithstanding anything to the contrary contained herein, in the event KBS elects to transfer KBS’s Interest to an entity that is not a KBS Affiliate, JV Member may, during the Consent Period, require, as a condition of its consent to the transaction (which KBS hereby agrees is a condition precedent to the consummation of the transaction) that the third-party also purchase all of JV Member’s Interest on the same terms, including the same purchase price (adjusted for the different percentages of Interest) as those offered to KBS.

(d)JV Member Transfers. Notwithstanding anything stated to the contrary in this Article VI or elsewhere in the Agreement, any direct or indirect constituent owner of JV Member may transfer all or any portion of such constituent owner’s direct or indirect ownership interest in JV Member so long as at least one JV Member Principal continues to directly or indirectly have the power to direct management decisions of the JV Member and such JV Member Principal (or their respective heirs or estates) continue to own, directly or indirectly, at least twenty five percent (25%) of the ownership interests in JV Member. All such transfers permitted pursuant to this Section 6.02(d) shall be at the sole cost and expense of JV Member and none of KBS, the Company nor any Subsidiary or Affiliate of the Company shall bear any cost with respect thereto.

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In the event of any Permitted Transfer, any such Permitted Transferee shall receive and hold such Interest, such ownership interest or portion thereof subject to the terms of this Agreement and to the obligations hereunder of the transferor and there shall be no further transfer of such Interest, such ownership interest or portion thereof except to a person or entity to whom such Permitted Transferee could have transferred such Interest, such ownership interest or portion thereof in accordance with this Section 6.02 had such Permitted Transferee originally been a Member or a constituent owner of a Member as of the date hereof or otherwise in accordance with the terms of this Agreement. Notwithstanding any provision of this Agreement to the contrary, no Member and/or any direct or indirect constituent owner of any Member shall transfer all or any portion of such Member’s Interest or permit the transfer of any direct or indirect ownership interest in such Member if such transfer would be a default under the Loan or any Refinance.

6.03.Admission of Substituted Members. If any Member transfers such Member’s Interest to a transferee in accordance with Sections 6.01 or 6.02, then such transferee shall only be entitled to be admitted into the Company as a substituted Member if (i) the Members approve such admission in writing and this Agreement is amended to reflect such admission; (ii) the non-transferring Member approves the form and content of the instrument of transfer, such approval not to be unreasonably withheld; (iii) the transferor and transferee named therein execute and acknowledge such other instruments as the non-transferring Member may deem reasonably necessary to effectuate such admission; (iv) the transferee in writing accepts and adopts all of the terms and conditions of this Agreement, as the same may have been amended; (v) the transferor pays, as the non-transferring Member may reasonably determine, all reasonable expenses incurred in connection with such admission, including, without limitation, legal fees and costs; and (vi) to the extent required the lender under any Financing has consented to such transfer. To the maximum extent permitted by applicable law, any transferee of an Interest who does not become a substituted Member shall have no right to require any information or account of the Company’s transactions, to inspect the Company books, or to vote on any of the matters as to which a Member would be entitled to vote under this Agreement. Any such transferee shall only be entitled to share in such Net Profits and Net Losses, to receive such distributions, and to receive such allocations of income, gain, loss, deduction or credit or similar items to which the transferor was entitled, to the extent transferred. A Member that transfers such Member’s Interest pursuant to Section 6.02 shall not cease to be a Member of the Company until the admission of the transferee as a substituted Member in accordance with this Agreement and, except as provided in the preceding sentence, shall continue to be entitled to exercise, and shall continue to be subject to, all of the other rights, duties and obligations of such Member under this Agreement.

6.04.Election; Allocations Between Transferor and Transferee. Upon the transfer of the Interest of any Member or the distribution of any property of the Company to a Member, the Company shall file, in the reasonable discretion of the Members, an election in accordance with applicable Treasury Regulations, to cause the basis of the Company property to be adjusted for federal income tax purposes as provided by Sections 734 and 743 of the Code. Upon the transfer of all or any part of the Interest of a Member as hereinabove provided, Net Profits and Net Losses shall be allocated between the transferor and transferee on the basis of a computation method that is in conformity with the methods prescribed by Section 706 of the Code and Treasury Regulation Section 1.706-1(c)(2) and approved by the Members affected by the method.

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6.05.Waiver of Withdrawal and Purchase Rights. In accordance with the Act, each Member acknowledges and agrees that such Member may not voluntarily withdraw, resign or retire from the Company without the prior written consent of each other Member, which consent may be withheld in each such other Member’s sole and absolute discretion. Each Member further acknowledges and agrees that such Member shall not be entitled to receive the fair market value of such Member’s Interest in the Company pursuant to the Act.

ARTICLE VII
MEMBER’S RIGHT TO CAUSE SALE OF THE PROPERTY OR INTERESTS

7.01.KBS’s Right to Sell Property.

(a)At any time after the second anniversary of the date the Project is completed and leasing has commenced (as such date is determined by Co-Managing Member, the “REIT Hold Completion Date”), Co-Managing Member (the “Offering Member”) shall have the continuing right (exercisable no more frequently than twice in any 24 month period) to elect to sell the Property; provided that prior to retaining a broker and/or soliciting offers from third parties the Offering Member shall provide written notice (a “Sale Notice”) to the JV Member (the “Purchasing Member”) of its intent to solicit offers for the Property. For ten (10) business days following receipt of a Sale Notice, the Purchasing Member may elect to offer to buy the Offering Member’s Interest in the Company (a “Purchase Election”) in lieu of having the Property sold by delivering written notice to Offering Member (the “Offer Notice”). The Offer Notice shall set forth the proposed sales price for the Property (the “Proposed Project Value”) on which Purchasing Member’s offer is based. If a Purchase Election is timely made, the purchase price for the Offering Member’s Interest shall be the amount the Offering Member would receive if the Property were to be sold for the Proposed Property Value and the proceeds distributed upon a liquidation of the Company had the Property been sold for the Proposed Property Value as provided in this Agreement. The Offering Member shall have thirty (30) days to decide whether to (1) accept the Purchasing Member’s Purchase Election, or (2) reject the Purchasing Member’s Purchase Election and proceed to market the Property for sale. A failure by the Offering Member to accept the Purchasing Member’s Purchase Election shall be deemed to be a rejection of the Purchase Election under clause (2).

(b)If the Offering Member elects to accept the Purchasing Member’s Purchase Election, the closing of the purchase and sale of the Offering Member’s Interest in the Company shall take place on a date agreed upon by the Members, which date may not be later than sixty (60) days following the date of the Purchase Election (the “Purchase Closing Date”). Within five (5) days of Offering Member’s written acceptance of the Purchase Election, Purchasing Member must deliver (a) a non-refundable (but applicable to the purchase price) cash deposit (the “Member Deposit”) to an escrow agent appointed by the Purchasing Member equal to five percent (5%) of the Proposed Property Value, and (b) a draft sales agreement (“Member Purchase Agreement”) to be executed by the Offering Member and the Purchasing Member containing such terms to which such parties may agree that are consistent with the provisions of this Section 7.01 and that provides for the transfer of the Offering Member’s Interest in the Company to such Purchasing Member free and clear of all liens, encumbrances and similar claims. The Offering Member and the Purchasing Member shall use their good faith diligent efforts to execute the Member Purchase Agreement within

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thirty (30) days thereafter. Notwithstanding anything stated to the contrary herein, if the Members are unable to agree upon the Member Purchase Agreement within sixty (60) days after the Purchase Election after good faith and diligent efforts to do so then each Member shall have the right to terminate the Purchase Election, and upon the return of the Member Deposit to the Purchasing Member, the Offering Member shall have the right to cause the Company to sell the Property pursuant to this Section 7.01. In the event Purchasing Member fails to close the purchase of the Offering Member's Interests on or before the Purchase Closing Date (other than by reason of a default by the Offering Member) (a “Purchase Default Event”), the Offering Member shall have the right to terminate the Member Purchase Agreement and retain the Member Deposit as liquidated damages, and the Member Purchase Agreement shall so provide, and thereafter, the Offering Member shall have the right to cause the Company to sell the Property pursuant to this Section 7.01 subject to the restriction’s set forth in Sections 7.01(c).

(c)If a Purchase Election is not timely made or Offering Member elects to reject the Purchase Election (the earlier of such dates, the “Trigger Date”), then the Co-Managing Member shall have the right to retain brokers on behalf of the Company and to advertise the Property for sale at a price no less than 95% of the Proposed Project Value; provided however, such sale must be consummated within two hundred forty (240) days of the Trigger Date or the Co-Managing Member must comply with the provisions of Section 7.01(a) again. Co-Managing Member shall keep JV Member informed of the progress of the sale of the Property. Managing Member shall cooperate with Co-Managing Member in connection with the sale of the Property and shall execute such documents (in its capacity as a Member in the Company, and/or as the Managing Member, as applicable) as may be reasonably required to effectuate the sale of the Property; provided that the Members shall not be exposed to any personal liability. Member hereby irrevocably constitutes and appoints Co-Managing Member as its agent and attorney-in-fact, coupled with an interest, for the purpose of executing and delivering any documents required to be executed and delivered by Managing Member (in its capacity as a member in the Company and, so long as it is the Managing Member, as the Managing Member of the Company) pursuant to this Section 7.01 in the event Managing Member fails or refuses to execute the same upon the request of Co-Managing Member. Notwithstanding the foregoing and provided that a Purchase Default Event has not occurred, if as a result of the Offering Member’s marketing efforts, the Offering Member receives a bona fide offer from a third party purchaser and desires to sell the Property in a sale that will result in a purchase price that is less than ninety-five percent (95%) of the Proposed Property Value, the Offering Member shall deliver a revised Sale Notice to the Purchasing Member, which shall set forth the new proposed sales price for the Property, and the Purchasing Member shall have twenty (20) business days following receipt of the revised Sale Notice to make a Purchase Election based on the new Proposed Property Value in the manner described in Section 7.01(a) above in lieu of having the Property sold. If a Purchase Election with respect to the revised Sale Notice is not timely made, the Offering Member shall have the right to cause the Company and its Subsidiary to sell the Property pursuant to this Section 7.01(c). If a Purchase Election is timely made with respect to the revised Sale Notice, the Members shall follow the procedures set forth in Section 7.01(a) above; provided, however, that references to Proposed Property Value shall instead refer to the Proposed Property Value set forth in the revised Sale Notice. If a Purchase Election is timely made and a Purchase Default Event occurs, the Offering Member shall be entitled to retain the Member Deposit, and Offering Member

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shall be thereafter be entitled to sell the Property pursuant to this Section 7.01 without further restriction.

7.02.JV Member’s Right to Initiate Sale of Interests.

(a)At any time after the later of (i) the fourth (4th) anniversary of the date of this Agreement, or (ii) the REIT Hold Completion Date, the JV Member (the “Initiating Member”) shall have the continuing right to deliver written notice to KBS (the “Non-Initiating Member”) of its desire to liquidate its investment in the Company (the “Call Notice”) by either purchasing KBS’s entire Interest in the Company or KBS acquiring JV Member’s Interest in accordance with the provisions of this Section 7.02. Notwithstanding the foregoing, the JV Member shall not be permitted to send a Call Notice if KBS has previously sent a Sale Notice under Section 7.01 and the procedures of Section 7.01 remain in effect, including that KBS is authorized to sell the Property under Section 7.01 and the Company has retained a broker to advertise the sale of the Property. Upon the delivery of a Call Notice, the Members shall be required to comply with the terms of Section 7.02(b).

(b)The Call Notice shall make reference to this Section 7.02(b) and shall state (i) the purchase price that the Initiating Member would be willing to pay for the purchase of all of the Company’s assets (the “Purchase Price”), (ii) that the Initiating Member thereby offers to purchase the Non-Initiating Member’s Interest in the Company for the Call Purchase Price (as defined in Section 7.02(c)), and (iii) a specified date for such purchase, which such date shall be not less than sixty (60) days and not more than one hundred twenty (120) days after the delivery of the Call Notice.

(c)In the event that the Initiating Member delivers the Call Notice as aforesaid, the Non-Initiating Member shall, by delivery of written notice (the “Call Response Notice”) to the Initiating Member within thirty (30) days following the receipt of the Call Notice (time being of the essence) choose either to: (A) accept the Initiating Member’s offer to purchase the Non-Initiating Member’s interest in the Company for a sum equal to the amount that the Non-Initiating Member would be entitled to receive if the Company sold its assets at the Purchase Price, including the payment of all existing Company debts and liabilities and any prepayment penalties actually incurred (pursuant to the terms of any mortgage encumbering all or any portion of the assets without further negotiations with the holder of such mortgage) in connection with the exercise of the right contained in this Section 7.02 and distributed the net proceeds (i.e., net of reasonable and customary closing costs) to the Members in liquidation of the Company pursuant to Section 8.02 (the “Call Purchase Price”), on the date set forth in the Call Notice; or (B) purchase the Initiating Member’s Interest for the Initiating Member Call Purchase Price (as hereinafter defined), and on the date set forth in the Call Notice. Failure to deliver the Call Response Notice within said thirty (30) day period shall be deemed to constitute an acceptance by the Non-Initiating Member of the Initiating Member’s offer to purchase the Non-Initiating Member’s Interest for the Call Purchase Price, on the date set forth in the Call Notice. In the event the Non-Initiating Member shall choose to purchase the Initiating Member’s interest in the Company pursuant to the terms of this Section, the Initiating Member shall be obligated to sell its Interest to the Non-Initiating Member for the Initiating Member Call Purchase Price, on the date set forth in the Call Notice. For purposes of this Section, the term

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“Initiating Member Call Purchase Price” shall mean a sum equal to the amount that Initiating Member would be entitled to receive if the Company of the Company sold its assets at the Purchase Price, including the payment of all existing Company debts and liabilities and any prepayment penalties actually incurred (pursuant to the terms of any mortgage encumbering all or any portion of the assets without further negotiations with the holder of such mortgage) in connection with the exercise of the right contained in this Section 7.02 and distributed the net proceeds (i.e., net of reasonable and customary closing costs) to the Members in liquidation of the Company pursuant to Section 8.02. Once the Buy/Sell Purchaser (as hereinafter defined) is determined, the Buy/Sell Purchaser shall post a deposit in escrow with First American Title Insurance Company or Fidelity National Title Insurance Company (“Buy/Sell Escrow Agent”) a deposit equal to five percent (5%) of the Call Purchase Price or the Initiating Member Call Purchase Price, as applicable (the “Deposit”).

(d)The closing of the purchase and sale of the Interests of the Company of the Member selling its Interests in the Company pursuant to the terms of this Section (the “Buy/Sell Seller”) shall be held on or before the date provided in the Call Notice, at the office of the Company, or at such other location as the parties shall find mutually agreeable. At the closing: (A) the Buy/Sell Seller shall receive, by wire transfer of immediately available federal funds to an account designated by the Buy/Sell Seller, an amount equal to the Call Purchase Price or the Initiating Member Call Purchase Price, as the case may be; (B) the Buy/Sell Seller shall deliver to the Member purchasing the Seller’s Interest (the “Buy/Sell Purchaser”) a duly executed and acknowledged instrument assigning to the Buy/Sell Purchaser the Buy/Sell Seller’s Interest, which assignment shall be accompanied by such other documents and instruments, including, without limitation, corporate resolutions, as may be reasonably requested by the Buy/Sell Purchaser and the Company in the exercise of their reasonable judgment or any other documents requested by any title company; (C) Buy/Sell Purchaser shall deliver to the Buy/Sell Seller a duly executed and acknowledged instrument assuming the Buy/Sell Seller’s Interest and releasing Buy/Sell Seller from all claims pertaining to the Interests or the Company other than claims for breach of the representations and warranties of Buy/Sell Seller described in the following sentence or a breach of any of the assignment documents executed by Buy/Sell Seller and delivered to Buy/Sell Purchaser in connection with the transfer contemplated in this Section; (D) on the effective date of such assignment, the Company shall deliver a release to the Buy/Sell Seller releasing the Buy/Sell Seller from all liabilities and obligations of the Company arising from and after the date of such assignment; and (E) the Company shall use good faith commercially reasonable efforts to cause the Buy/Sell Seller or its Affiliates to be released from any liabilities under any guaranties for the benefit of the Company executed by the Buy/Sell Seller or its Affiliates, and if the beneficiaries of any such guaranty will not agree to such a release, the Buy/Sell Purchaser (or if reasonably required by Buy/Sell Seller, a creditworthy Affiliate of Buy/Sell Purchaser) shall indemnify and hold harmless the Buy/Sell Seller or its Affiliates who are guarantors of such liabilities in a form reasonably acceptable to Buy/Sell Seller. Such assignment shall be free and clear of all liens and encumbrances, and the Buy/Sell Seller shall deliver a written representation and warranty to such effect at the closing, which representation and warranty shall survive for a period of six (6) months following the closing. Each Member shall pay its legal fees in connection with the conveyance of the Interest pursuant to this Section, and all other costs and expenses (including, without limitation, transfer taxes) shall be shared by the Members in accordance with their Interests. In the event that the Buy/Sell Purchaser defaults in its

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obligation to purchase the Buy/Sell Seller’s Interests pursuant to this Section 7.02, the Deposit shall be forfeited by the Buy/Sell Purchaser. In the event that the Buy/Sell Seller defaults in its obligation to sell the Buy/Sell Seller’s Interests pursuant to this Section 7.02, the Buy/Sell Purchaser may elect either to avail itself of the remedy of specific performance or direct Buy/Sell Escrow Agent to return the Deposit to it.

ARTICLE VIII
DISSOLUTION AND WINDING UP OF THE COMPANY

8.01.Events Causing Dissolution of the Company. Upon any Member’s bankruptcy, retirement, resignation, expulsion or other cessation to serve or the admission of any new member into the Company, the Company shall not dissolve, but the business of the Company shall continue without interruption and without any break in continuity. The Company shall be dissolved and its affairs wound up upon the first to occur of: (i) the sale, transfer or other disposition by the Company of all or substantially all of its assets and the collection by the Company of any and all Net Cash derived therefrom; (ii) the agreement of the Members to dissolve the Company; or (iii) the entry of a decree of judicial dissolution pursuant to the Act.

8.02.Winding Up of the Company. Upon the Liquidation of the Company caused by other than the termination of the Company under Code Section 708(b)(1)(B) (in which latter case the Company shall remain in existence in accordance with the provisions of such Section of the Code), the Managing Member shall proceed to the winding up of the affairs of the Company. During such winding up process, the Net Profits, Net Losses and Net Cash distributions shall continue to be shared by the Members in accordance with this Agreement. The assets shall be liquidated as promptly as consistent with obtaining a fair value therefor, and the proceeds therefrom, to the extent available, shall be applied and distributed by the Company on or before the end of the taxable year of such Liquidation or, if later, within ninety (90) days after such Liquidation, in the following order: (i) first, to creditors of the Company (including Members who are creditors in the order of priority as provided by law including, without limitation, any Members that have made Member Loans); (ii) second, to the setting up of any reserves which Co-Managing Member determines, in its reasonable discretion, are necessary for any contingent, conditional or unmatured liabilities or obligations of the Company (which shall be distributed at such time as is determined in the reasonable discretion of Co-Managing Member); and (iii) the balance, if any, to the Members in accordance with the distribution schedule ofSection 5.01 orSection 5.02, as then applicable at the time of such Liquidation. Such distribution shall be made by the date specified in Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2). As used in this Agreement, the term “Liquidation” means (i) in respect to the Company the earlier of the date upon which the Company is terminated under Code Section 708(b)(1)(A) or the date upon which the Company ceases to be a going concern (even though it may continue in existence for the purpose of winding up its affairs, paying its debts and distributing any remaining balance to its Members), and (ii) in respect to a Member wherein the Company is not in Liquidation, means the liquidation of a Member’s interest in the Company under Treasury Regulation Section 1.761-1(d).

8.03.Negative Capital Account Restoration. No Member shall have any obligation whatsoever upon the Liquidation of such Member’s Interest, the Liquidation of the Company or in

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any other event, to contribute all or any portion of any negative balance standing in such Member’s Capital Account to the Company, to each other Member or to any other person or entity.

ARTICLE IX
BOOKS AND RECORDS

9.01.Books of Account and Bank Accounts. The fiscal year and taxable year of the Company shall be the year ending December 31. Managing Member shall keep accurate records of all transactions entered into with respect to the Company and shall maintain full and accurate books and records of the Company on an accrual basis in accordance with generally accepted accounting principles, consistently applied with respect to the management and operation of the Company, which books and accounts shall accurately reflect all income and expenses of the Company, all payments on any indebtedness secured by the assets of the Company, all payments on other Company indebtedness and all capital expenditures with respect to the Company. Manager Member shall provide by the fifteenth (15th) day of each succeeding calendar month (i)operating reports and financial statements to the Members not less frequently than once each month summarizing the operating activities of the Company during the immediately preceding calendar month and on a year-to-date basis, any material deviations from the Business Plan or the Annual Budget during such preceding calendar month, (ii) an unaudited balance sheet of the Company dated as of the end of such calendar month, (iii) an unaudited related income statement of the Company for such calendar month, (iv) an unaudited detailed job cost report of the Project for such calendar month and latest supporting general contractor invoice, (v) an unaudited trial balance of the Company, (vi) bank reconciliations for all bank accounts of the Company including bank statement and support for reconciling items, (vii) an unaudited statement of each Member’s Capital Account showing the detail of each Member’s contributions and distributions for such calendar month, and (viii) an unaudited statement of cash flow of the Company for such calendar month. and (ix) such other information as is reasonably requested by any Member. During normal business hours at the Property, on not less than three (3) business days prior notice, all of the following shall be made available for inspection and copying by all of the Members at their own expense for any purpose reasonably related to each such Member’s Interest in the Company: (i) all books and records relating to the business and financial condition of the Company, (ii) a current list of the name and last known business, residence or mailing address of each Member, (iii) a copy of this Agreement, the Certificate of Formation and all amendments thereto, together with executed copies of any written powers-of-attorney pursuant to which this Agreement, the Certificate of Formation and all amendments thereto have been executed, (iv) the amount of cash and a description and statement of the agreed value of any other property or services contributed by each Member to the capital of the Company and which each Member has agreed to contribute in the future, and (v) the date upon which each Member became a Member of the Company.

9.02.Audits. KBS is indirectly owned by a non-traded public REIT. As such, KBS is obligated to make disclosures to the Securities and Exchange Commission and to maintain its books and records and establish certain controls and test such controls for its investments. KBS shall have the right to conduct audits of the books and records and operations of the Company and its Subsidiaries from time to time, which may be on a regular basis or on a periodic basis as the KBS determines may be necessary. Such audits may be performed by KBS personnel and its outside auditors, which is currently Ernst & Young. The costs of such audits incurred by KBS shall be

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borne by KBS. Managing Member shall cooperate with each such audit and shall cause Property Manager to cooperate with such audit, which cooperation shall include, without limitation, making the materials and information requested available to KBS and the necessary personnel available to KBS to answer questions and inquiries and to provide any follow-up information or materials in response to such questions or inquiries.

(a)Sarbanes-Oxley Compliance. Managing Member shall provide Co-Managing Member’s internal audit team (A) reasonable access to Managing Member’s personnel and books and records to facilitate the completion of the Co-Managing Member’s annual Sarbanes-Oxley Compliance Plan, (B) copies reasonably requested by Co-Managing Member of current internal control documentation, (C) availability to discuss, review and provide comments on process flow diagrams, narratives, walkthroughs and testing of controls to ensure that those documents accurately reflect Managing Member’s processes in connection with its obligation to Co-Managing Member, (D) timely response to internal control recommendations and observations, reasonably agree to remedial action plans (if any), and timely implement those plans in order to ensure compliance with Co-Managing Member’s annual Sarbanes-Oxley Compliance Plan, and (E) copies of SOC I Type II and bridge letters for key applications used to record business and accounting transactions. To the extent the Property Manager or a sub-property manager is performing any of these functions on behalf of the Company, Co-Managing Member’s internal audit team shall have reasonable access to the personnel and books and recorded of such entity(ies) and the right to have the discussions with and receive responses and copies from such entity(ies) described in clause (A) through (E), and Managing Member shall cooperate with such matters.

(b)SOC 1 Report. If Managing Member preforms accounting services, Managing Member will deliver to Co-Managing Member, at Managing Member’s sole cost and expense, Managing Member’s Service Organization Control 1 Type 2 report (the “SOC 1 Type 2 Report”) prepared by a qualified independent audit firm with respect to the Statement on Standards for Attestation Engagements 16, Reporting on Controls at a Service Organization (“SSAE 16”) as promulgated by the Auditing Standard Board of the American Institute of Certified Public Accountants, as same may be amended, from time to time.  The SOC 1 Type 2 Report must be issued by December 1st of each calendar year and cover the entire preceding Fiscal Year. Additionally, Manager must deliver a "Bridge Letter" to Co-Managing Member stating that the Managing Member’s control environment relevant to SSAE 16 has not changed since the end of the effective date of the audited SOC 1 Type 2 Report (or equivalent report) and must cover through Managing Member’s fiscal year end. Notwithstanding the foregoing, Managing Member may delegate any or all of these functions and obligations to the Property Manager or a sub-property manager so long as Managing Member shall cause such reports and deliveries to be delivered to Co-Managing Member by the Property Manager or sub-property manager under the applicable agreement.

9.03.Tax Returns. Managing Member shall cause to be prepared and timely filed and distributed to each Member, at the expense of the Company (and prepared by an accounting firm approved pursuant to Section 2.02(bb) above), all required federal and state Company tax returns, which shall be delivered to the Members by no later than March 31 each year; provided however, in the event that it is not possible for Managing Member to have such materials by said date using best efforts to meet the deadline, Managing Member shall: (i) notify the other Members by March

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15 that such materials will not be available, (ii) deliver estimated drafts of such information to the other Members by March 31, and (iii) deliver all such information to the other Members by June 30 of said year. Managing Member shall not file any tax return on behalf of the Company without the prior written approval of KBS; provided that if the Co-Managing Member shall not respond to a written request to approve a tax return within fifteen (15) days the Co-Managing Member shall be deemed to have disapproved such tax return.

9.04.Tax Matters.

(a)Tax Matters Partner. JV Member is designated as the initial “Tax Matters Partner” of the Company as provided in Section 6231(a)(7) of the Code and corresponding provisions of applicable state law. This designation is effective only for the purpose of activities performed pursuant to the Code, corresponding provisions of applicable state law, the applicable laws of any non-U.S. jurisdiction (and political subdivisions thereof), and under this Agreement. The Tax Matters Partner shall inform the Members before making any material decision or taking any material action. In addition, the Tax Matters Partner shall (a) provide the Internal Revenue Service with the information required to provide the notices contemplated in Section 6223(a) of the Code, and (b) keep the Members informed of all material information pertaining to all administrative and judicial proceedings involving taxes and provide timely notice of all administrative adjustments with respect thereto. The Tax Matters Partner shall be reimbursed by the Company for any reasonable out-of-pocket expenses incurred in its capacity as Tax Matters Partner. KBS may replace the Tax Matters Partner with any entity appointed by KBS, including itself or a KBS Affiliate, at any time after the occurrence of a Removal Event.

(b)Partnership Representative. JV Member is designated as the “partnership representative” of the Company under section 6223 of the Code (as modified by the Bipartisan Budget Act of 2015, as amended (and any comparable provisions of state or local tax law) (the “BB Act”)) (the “Partnership Representative”); provided, however, the Partnership Representative shall consult with KBS and obtain KBS’s consent (not to be unreasonably withheld, conditioned or delayed) before taking any binding action with respect to this clause (b) or otherwise with respect to any tax matters that either (A) could reasonably be expected to adversely impact KBS or its direct or indirect owners or (B) is material and made pursuant to tax audit provisions of the BB Act (other than an election to apply sections 6226 of the Code to the Company). Furthermore, to the maximum extent permitted by applicable law, the Partnership Representative shall have the same obligations, be subject to the same restrictions and limitations, and granted the rights and protections in each case, as imposed on or granted to the Tax Matters Partner pursuant to this Section 9.04. In addition, unless the KBS provides otherwise, the Partnership Representative shall make an election on behalf of the Company to treat a “Partnership Adjustment” as an adjustment to be taken into account by each Member in accordance with Section 6226(b) of the Code as modified by the BB Act. KBS may replace the Partnership Representative with any entity appointed by KBS, including KBS itself or a KBS Affiliate, at any time after the occurrence of a Removal Event.

(c)In the event the Company incurs any liability for taxes, interest or penalties pursuant to the BB Act (provided, however, that the Partnership Representative shall elect to cause any income adjustment to occur at the member level rather than at the Partnership level): (A) each Member (including any former Member, it being understood that this Section 9.04(c) shall survive

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the transfer by any Member of its Interest) shall pay the amount attributable to such Member (or former Member) as determined in good faith by KBS, and such payment shall not be treated as a capital contribution hereunder for any purpose; (B) any amount not paid within five (5) days following request from the Partnership Representative shall accrue interest at the rate of ten percent (10%) per annum, compounded quarterly, until paid, and such Member (or former Member) shall also be liable to the Company for any damages resulting from a delay in making such payment beyond the date such payment is requested by the Partnership Representative (for this purpose the fact that the Company could have paid this amount with other funds shall not be taken into account in determining such damages); (C) without reduction in a Member’s (or former Member’s) obligation under clauses (A) or (B) of this Section 9.04(c), any amount paid by the Company that is attributable to a Member (or former Member), and that is not paid by such Member pursuant to clauses (A) or (B) of this Section 9.04(c), shall be treated for purposes of Article V as a distribution to such Member (or former Member) (including for purposes of maintaining Capital Accounts), and the Company may deduct from, and set off against, any distribution or other amount otherwise due or payable to a Member (or former Member) by the Company pursuant to this Agreement or otherwise, the payment obligations of such Member (or former Member) under clauses (A) or (B) of this Section 9.04(c).

ARTICLE X
MISCELLANEOUS

10.01.Notices. All notices or other communications required or permitted hereunder shall be in writing, and shall be delivered or sent, as the case may be, by any of the following methods: (i) personal delivery, (ii) overnight commercial carrier, (iii) registered or certified mail, postage prepaid, return receipt requested, or (iv) telecopy or facsimile. Any such notice or other communication shall be deemed received and effective upon the date of acceptance or rejection of delivery. Any notice or other communication sent by cable, telex, or telecopy must be confirmed within 48 hours by letter mailed or delivered in accordance with the foregoing. Any reference herein to the date of receipt, delivery, or giving, or effective date, as the case may be, of any notice or communication shall refer to the date such communication becomes effective under the terms of this Section 10.01. Any such notice or other communication so delivered shall be addressed to the party to be served at the address for such party set forth on Exhibit A attached hereto, with a copy (which shall not constitute notice) in the case of the JV Member to Jordan Metzger, Esq, at Cole Schotz PC. Such addresses may be changed by giving written notice to the other parties in the manner set forth in this Section 10.01. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to constitute receipt of notice or other communication sent.

10.02.Construction of Agreement. This Agreement contains the entire understanding between the parties hereto and supersedes any prior or contemporaneous understanding, correspondence, negotiations or agreements between them respecting the within subject matter. No alteration, modification or interpretation hereof shall be binding unless in writing signed by all of the Members (and the KBS Credit Party and the JV Member Credit Party, as applicable, if such modification would affect such credit party’s obligations under the Agreement). The Article and Section headings of this Agreement are used herein for reference purposes only and shall not govern, limit, or be used in construing this Agreement or any provision hereof. Any Exhibit attached hereto

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is incorporated herein by this reference and expressly made a part of this Agreement for all purposes. Time is of the essence of this Agreement. The provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, and all rights, duties, obligations and remedies shall be governed by the Act without regard to principles of conflict of laws. If any legal action is brought by any Member against any other Member that arises out of this Agreement, then the prevailing Member in such legal action shall be entitled to recover reasonable attorneys’ fees and costs. Subject to the restrictions set forth in Articles VI and VII, and Section 10.04, this Agreement shall inure to the benefit of and shall bind the parties hereto and their respective personal representatives, successors, and assigns. Any agreement to pay any amount and any assumption of liability herein contained, express or implied, shall be only for the benefit of the Members and their respective successors and assigns, and such agreements and assumptions shall not inure to the benefit of the obligees of any indebtedness or any other party, whomsoever, deemed to be a third-party beneficiary of this Agreement. Each of the Exhibits attached hereto is incorporated herein by this reference and expressly made a part of this Agreement for all purposes. References to any Exhibit made in this Agreement shall be deemed to include this reference and incorporation. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original Agreement, but all of which shall constitute a single Agreement, binding on the parties hereto. Where the context so requires, the use of the neuter gender shall include the masculine and feminine genders, the masculine gender shall include the feminine and neuter genders, and the singular number shall include the plural and vice versa. The signature of any party hereto to any counterpart hereof shall be deemed a signature to, and may be appended to, any other counterpart. Every provision of this Agreement is intended to be severable. Each Member acknowledges that (i) each Member is of equal bargaining strength and (ii) each Member has actively participated in the drafting, preparation and negotiation of this Agreement. The Recitals set forth at the beginning of this Agreement are a material part of this Agreement and are incorporated into this Agreement.

10.03.Partnership Intended Solely for Tax Purposes. The Members have formed the Company as a Delaware limited liability company under the Act, and do not intend to form a corporation or a general or limited partnership under Delaware or any other state law. The Members do not intend to be shareholders and/or partners to one another or to any third party. The Members intend the Company to be classified and treated as a partnership solely for federal and state income taxation purposes. Each Member agrees to act consistently with the foregoing provisions of this Section 10.03 for all purposes, including, without limitation, for purposes of reporting the transactions contemplated herein to the Internal Revenue Service and all state and local taxing authorities.

10.04.Investment Representations. Each Member agrees as follows with respect to investment representations:

(a)Each Member understands:

(i)That the Interests in the Company evidenced by this Agreement have not been registered under the Securities Act of 1933, 15 U.S.C. § 15b et seq., or any state securities laws (collectively, the “Securities Acts”) because the Company is issuing Interests in the Company in reliance upon the exemptions from the registration requirements of the Securities Acts providing for issuance of securities not involving a public offering;

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(ii)That the Company has relied upon the representation made by each Member that such Member’s Interest in the Company is to be held by such Member for investment; and

(iii)That exemption from registration under the Securities Acts would not be available if any Interest in the Company was acquired by a Member with a view to distribution. Each Member agrees that the Company is under no obligation to register the Interests in the Company or to assist the Members in complying with any exemption from registration under the Securities Acts if the Member should at a later date wish to dispose of such Member’s Interest in the Company.

(b)Each Member hereby represents to the Company that such Member is acquiring such Member’s Interest in the Company for such Member’s own account, for investment and not with a view to the resale or distribution of such Interest (except for any transfers made in accordance with the provisions of Article VI).

(c)Each Member recognizes that no public market exists with respect to the Interests and no representation has been made that such a public market will exist at a future date.

(d)Each Member hereby represents that such Member has not received any advertisement or general solicitation with respect to the sale of the Interests.

(e)Each Member acknowledges that such Member has a preexisting personal or business relationship with the Company or its officers or principal Interest holders, or, by reason of such Member’s business or financial experience or the business or financial experience of such Member’s financial advisors (who are not affiliated with the Company), could be reasonably assumed to have the capacity to protect such Member’s own interest in connection with the purchase of such Member’s Interest. Each Member further acknowledges that such Member is familiar with the financial condition and prospects of the Company’s business, and has discussed with each other Member the current activities of the Company. Each Member believes that the Interests are securities of the kind such Member wishes to purchase and hold for investment, and that the nature and amount of the Interests to be acquired by such Member is consistent with such Member’s investment program.

(f)Before acquiring any Interest in the Company, each Member has investigated the Company and its business and the Company has made available to each Member all information necessary for the Member to make an informed decision to acquire an Interest in the Company. Each Member considers itself to be a person possessing experience and sophistication as an investor adequate for the evaluation of the merits and risks of the Member’s investment in the Company.

(g)Each Member understands the meaning and consequences of the representations, warranties and covenants made by such Member set forth herein and that the Company has relied upon such representations, warranties and covenants. Each Member hereby indemnifies, defends, protects and holds wholly free and harmless the Company and each other Member from and against any and all losses, damages, expenses or liabilities arising out of the breach and/or inaccuracy of any such representation, warranty and/or covenant. All representations, warranties and covenants contained herein and the indemnification contained in this Section 10.04

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(g) shall survive the execution of this Agreement, the formation of the Company, and the liquidation of the Company.

10.05.Waiver of Conflict of Interest. The Company is not represented by separate counsel; provided, however, in connection with the formation of the Company and the drafting and negotiation of this Agreement, JV Member and the Company (and not KBS) have been represented by Cole Schotz PC, Attention, Jordan Metzger, and KBS (and not JV Member or the Company) has been represented by Sheppard Mullin Richter & Hampton, LLP, Attention, Scott Morehouse. To the extent that the foregoing representation constitutes a conflict of interest, the Company and each Member hereby expressly waive any such conflict of interest. Upon creation of the Company, the Company shall only be represented by counsel in accordance with Section 2.02 above.

10.06.Section 1031 Exchange. Subject to the provisions of this Section 10.06, each Member agrees to take any and all actions reasonably necessary to accommodate each other Member in effectuating a like-kind exchange pursuant to Section 1031 of the Code prior to the negotiation of or in connection with any proposed sale of all or any portion of the Property and any purchase and sale of a Member’s Interest pursuant to Article VII or otherwise including, without limitation, allowing any Member to cause the Company to make an in-kind distribution of a portion of the Property to such Member (and/or any Affiliate thereof). In furtherance of the foregoing, each Member hereby agrees to execute any and all deeds, documents and/or other instruments that may be required to distribute and vest an undivided interest in the Property in such Member and/or otherwise necessary to effect such Code Section 1031 exchange, provided that (i) the distribution and exchange of such portion of the Property does not reduce the cash proceeds that otherwise would be distributed to any non-exchanging Member from the sale of the Property; (ii) the distribution and exchange does not materially delay or otherwise adversely affect the closing of any such sale of the Property; (iii) the exchanging Member pays any and all additional costs, fees, and/or expenses, including, without limitation, attorneys’ fees and costs incurred as a result of the proposed distribution and exchange; and (iv) there is no additional loss, cost or damage incurred (or which may be incurred) by the Company or any non-exchanging Member as a direct consequence of the distribution and exchange. In addition, nothing contained herein shall obligate any Member to offer to any other Member any interest in any particular Code Section 1031 exchange structured by the exchanging Member.

10.07.Outside Activities. Any Member may engage in business efforts and affairs which are not related to the Company, and will not be precluded from owning and operating other businesses and/or real estate projects and neither the Company nor the other Members shall have any interest in such business or real estate projects. No Member shall have any obligations (fiduciary or otherwise) with respect to the Company or the other Members insofar as making other investment opportunities available to the Company or to the other Members. Except as provided above, the Members may, notwithstanding the existence of this Agreement, engage in whatever activities they may choose, whether the same are competitive with the Company or otherwise, without having or incurring any obligation to offer any interest in such activities to the Company or to the other Members. Neither this Agreement nor any activities undertaken pursuant hereto shall prevent a Member from engaging in such activities.

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10.08.Tax Consequences. Each Member acknowledges and agrees that it has relied fully upon the advice of its own legal counsel and/or accountant in determining the tax consequences of this Agreement and the transactions contemplated hereby and not upon the representations or advice by any other Member.

ARTICLE XI
REIT PROTECTION

11.01.Certain Definitions. For the purposes of this Article XI, the following terms shall have the following meanings:

(a)“KBS” shall mean KBS as defined in the recitals hereto and KBS Strategic Opportunity REIT, Inc., a Maryland corporation that has elected to be taxable for federal income tax purposes as a real estate investment trust under the Code (herein, a “REIT”); and/or any subsidiary or affiliate of KBS.

(b)“REIT Prohibited Transactions” shall mean any action specified in Section 11.02.

11.02.Prohibited Transactions. Unless expressly defined herein, all capitalized terms used herein shall have the meaning ascribed to such terms in this Agreement. Notwithstanding anything to the contrary contained in this Agreement, during the time KBS is a Member of the Company, neither the Company nor any Subsidiary nor the Managing Member nor any other Member of the Company, shall take any of the following actions:

(a)Entering into any lease or permitting any sublease that provides for rent based in whole or in part on the income or profits of any person, excluding for this purpose a lease that provides for rent based in whole or in part on a fixed percentage or percentages of gross receipts or gross sales of any person without reduction for any sublessor costs;

(b)Leasing personal property, excluding for this purpose a lease of personal property that is entered into in connection with a lease of real property where the rent attributable to the personal property is less than 15% of the total rent provided for under the lease, determined as set forth in Section 856(d)(1) of the Code;

(c)Acquiring or holding debt (other than Member Loans and Default Loans) unless (a) the amount of interest income received or accrued by the Company under such loan does not, directly or indirectly, depend in whole or in part on the income or profits of any person, and (b) the debt is fully secured by mortgages on real property or on interests in real property;

(d)Acquiring or holding more than 10% of the outstanding voting securities of any one issuer other than a corporation that has properly elected to be a “taxable REIT subsidiary” of KBS;

(e)Acquiring or holding more than 10% of the total value of the outstanding securities (debt or equity) of any one issuer other than a corporation that has properly elected to be a “taxable REIT subsidiary” of the REIT;

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(f)Making an election or taking any action that would cause the Company to be treated as (i) an entity that is not classified as a partnership for federal income tax purposes or (ii) a publicly traded partnership as defined in Section 7704 of the Code;

(g)Entering into any agreement where the Company receives amounts, directly or indirectly, for rendering services to the tenants of the properties that are owned, directly or indirectly, by the Company other than (i) amounts received for services that are customarily furnished or rendered in connection with the rental of real property of a similar class in the geographic areas in which the properties are located where such services are either provided by (a) an Independent Contractor (as defined in Section 856(d)(3) of the Code) who is adequately compensated for such services and from which the Company does not, directly or indirectly, derive revenue or (b) a taxable REIT subsidiary of KBS (as defined in Section 856(l) of the Code) who is adequately compensated for such services or (ii) amounts received for services that are customarily furnished or rendered in connection with the rental of space for occupancy only (as opposed to being rendered primarily for the convenience of the Company’s Subsidiary’s tenants);

(h)Holding cash of the Company or any Subsidiary for operations or distribution in any manner other than a traditional bank checking or savings account, or money market account; or

(i)Entering into any agreement where income or gain, as applicable, received or accrued by the Company under such agreement, directly or indirectly, (a) does not qualify as “rents from real property” within the meaning of Section 856 of the Code, (b) does not qualify as “interest on obligations secured by mortgages on real property or on interests in real property” within the meaning of Section 856 of the Code or (c) constitutes income from a sale of “inventory” or “stock in trade” or property held “primarily for sale to customers” in the ordinary course of trade or business of the Company within the meaning of Section 1221(a)(1) of the Code other than a sale that would qualify under the Section 857(b)(6)(C) “safe harbor” with respect to KBS.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written.

“JV MEMBER”

ONYX 31^ST STREET, LLC,

a Delaware limited liability company

By:     /s/ John Saraceno        
Name:    John Saraceno          Title:     Managing Principal        

Solely as to express its agreement in Sections 3.01 and 3.07:

“JV MEMBER CREDIT PARTY”

ONYX EQUITIES, LLC
a New Jersey limited liability company

By:     /s/ John Saraceno        
Name:     John Saraceno          
Title:      Managing Principal        

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“KBS”

KBS SOR II 210 WEST 31^ST STREET JV, LLC,
a Delaware limited liability company

By:    KBS SOR II ACQUISITION VI, LLC,

a Delaware limited liability company,

its sole member

By:     KBS SOR US PROPERTIES II, LLC,

a Delaware limited liability company,

its sole member

By:    KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP II,

a Delaware limited partnership,

its sole member

By:     KBS STRATEGIC OPPORTUNITY REIT II, INC.,

a Maryland corporation,        its sole general partner

By:    /s/ Jeffrey K. Waldvogel        

Jeffrey K. Waldvogel

Chief Financial Officer

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Solely as to express its agreement in Sections 2.06(f), 3.01 and 3.07

“KBS CREDIT PARTY”

KBS SOR US PROPERTIES II, LLC,
a Delaware limited liability company

By:     KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP II,

a Delaware limited partnership,

its sole member

By:     KBS STRATEGIC OPPORTUNITY REIT II, INC.,

a Maryland corporation,

its sole general partner

By:    /s/ Jeffrey K. Waldvogel                Jeffrey K. Waldvogel        Chief Financial Officer

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EXHIBITS:

Exhibit A	NAMES AND ADDRESSES AND PERCENTAGE INTERESTS OF THE MEMBERS
Exhibit B	ORGANIZATIONAL CHART OF THE COMPANY
Exhibit C	PRELIMINARY DEVELOPMENT PLAN
Exhibit C-1	LIST OF PRELIMINARY CONSTRUCTION PLANS
Exhibit C-2	PRELIMINARY DEVELOPMENT BUDGET
Exhibit D	FORM OF PROPERTY MANAGEMENT AGREEMENT
Exhibit E	SCHEDULE OF SOURCES AND USES OF FUNDS

SMRH:479330698.9

EXHIBIT A

NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS OF THE MEMBERS

Names and Addresses of the Members:	Percentage Interest	Projected Initial Capital Account at Closing*
KBS SOR II 210 West 31st Street JV, LLC 620 Newport Center Drive, Suite 1300 Newport Beach, CA 92660	80%	$38,400,000.00**
ONYX 31ST Street, LLC c/o Onyx Equities, LLC  900 Route 9 North, Suite 400 Woodbridge, New Jersey 07095	20%	$10,200,000.00***

*The amounts of the Member’s respective Capital Accounts set forth in this Exhibit A lists the Capital Accounts of the Members that will result after the funding of their capital contributions set forth in Section 3.01(a)(i) and (iii) as to the JV Member, and Section 3.01(b)(i) and (iii) as to KBS; provided, however, that amount amounts do not reflect the additional amounts that may be payable under Section 3.01(a)(ii) and Section 3.01(b)(ii) to cover any additional deposits made under the Purchase Agreement, transaction costs that are not sufficiently known as of the Effective Date, Adjustments at the Property Closing, and costs to capitalize the Company pursuant to the sources and uses in Exhibit E attached hereto.

** This amount equals the Purchase Price under the Purchase Agreement (for 80% of the Ground Lease). This amount will be adjusted as noted above to an actual 80%/20% allocation to reflect the Member’s Percentage Interests as a result of the Financing as described in Section 3.01 and Section 5.01(d) above.

*** This amount equals the $9,600,000 value attributed to the 20% Ground Lease Interest plus the $600,000 in cash to be paid pursuant to Section 3.01(a)(i). This amount will be adjusted as noted above to an 80%/20% allocation to reflect the Member’s Percentage Interests as a result of the Financing as described in Section 3.01 and Section 5.01(d) above.

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EXHIBIT B

ORGANIZATIONAL CHART

(Attached)

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EXHIBIT C

PRELIMINARY DEVELOPMENT PLAN

See Attached:

SMRH:479330698.9C-1

Preliminary Development Plan

The proposed project is to redevelop the building located at 210 West 31^st Street, New York, NY (“Property”). The Property is currently a 3-story building with a basement located on the south side of West 31^st Street. It previously served as a Friary and Sacristy for the priests of the Capuchin Order.

The business plan to redevelop the Property includes: (1) finalizing the permitting and ultimately demolishing the existing 3-story building (2) erecting a new 2-story retail building with a cellar and rooftop deck, and (3) leasing the new building to a single or multiple retail tenants who will provide traditional retail and/or food and beverage services.

The implementation of the plan is comprised of four major steps. The first is completing construction drawings (“CD’s”). The second step is finalizing the permitting of the asbestos abatement, demolition, and construction of the proposed redeveloped building. The third stage is to construct the physical building. The Venture will begin marketing the building for lease at the day of Closing and will either prelease the Property if leasing options are attractive or wait to lease space midway through construction.

The projected timeline from closing on the transaction to the last tenant taking occupancy at the Property is projected to be approximately three years (see timeline).

SMRH:479330698.9C-1

SMRH:479330698.9C-1

EXHIBIT C-1

LIST OF PRELIMINARY CONSTRUCTION PLANS

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EXHIBIT C-2

PRELIMINARY DEVELOPMENT BUDGET

C-2-1

40000/0153-13662267v3

October 10, 2016

Error! Unknown document property name.

C-2-1

40000/0153-13662267v3

October 10, 2016

Error! Unknown document property name.

EXHIBIT D

FORM OF MANAGEMENT AGREEMENT

PROPERTY MANAGEMENT AGREEMENT

This Agreement is made as of __________________ (the “Effective Date”) between 210 WEST 31^st STREET OWNER, LLC,a Delaware limited liability company ("Owner"), and ONYX MANAGEMENT GROUP, LLC,a New Jersey limited liability company ("Manager"),with reference to the following facts:

A.    Owner is the owner of certain the land and improvements commonly known as 210 West 31^st Street, New York, New York (collectively, the "Premises").

B.     Manager represents that it is in the business of managing properties similar to the Premises and possesses the skills and experience necessary for the efficient first class management of the Premises

Now, Therefore, Owner and Manager agree as follows:

ARTICLE I

BASIC TERMS

1.1Appointment. Manager's appointment under Article III shall become effective as of the Effective Date.

1.2Term. The initial term of this Agreement (the "Initial Term")commences on the Effective Date and continues through and until the day immediately preceding the first (1st) anniversary of the Effective Date, subject to the rights of termination set forth in Article X below. The Initial Term shall be deemed renewed for successive periods of one (1) year, subject at all times to the rights of termination set forth in Section 10.1 (the Initial Term, and, to the extent renewed, all applicable renewal periods are hereinafter collectively referred to as the "Term").

1.3Role of Owner's Representative. ________________ ("Owner's Representative")is the duly authorized representative of Owner for the purpose of this Agreement and all powers and rights of Owner under this Agreement shall be exercised by Owner's Representative and all communications, remittances and things of any kind required to be delivered to Owner shall be delivered to Owner's Representative. Owner may from time to time designate a different Owner's Representative by written notice.

1.4Limit on Amount Authorized For Non-Emergency Purchase and Repairs and Contract Amount Requiring Owner Approval. The limit on the amount Manager may incur for non-emergency purchases or repairs not contemplated under the Budget approved by Owner without Owner's consent is $5,000.00 in any one instance.

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1.5Bank. Manager shall designate a bank (the "Bank")in which the rents and other revenues from the Premises shall be deposited pursuant to Section 5.10, subject to Owner's written approval, not to be unreasonably withheld, conditioned or delayed. The account or accounts shall be named as follows: ________________________ as Agent of ___________________, LLC (the "Bank Account").The Owner may designate a different bank or a different account name at any time upon at least thirty (30) days' prior written notice to Manager.

1.6Manager's Commercial Crime Insurance Policy. See Section 5.16.

1.7Address of Owner. Unless changed by notice to Manager, the address of Owner for notices under Section 11.2 shall be:

c/o Onyx Equities, LLC

900 Route 9 North, Suite 400

Woodbridge, New Jersey 07095

Attn: John A. Saraceno, Jr.

and

c/o KBS Capital Advisors LLC

800 Newport Center Drive, Suite 800

Newport Beach, California 92603

Attn: Shep Wainwright

1.8Address of Manager. Unless changed by notice to Owner, the address of Manager for notices under Section 11.2 shall be.

Onyx Management Group, LLC

900 Route 9 North, Suite 400

Woodbridge, New Jersey 07095

Attn: Samuel Giordano

1.9Management Fee. Subject to Article IX, the Management Fee payable to Manager for its services under this Agreement shall be an amount per month equal to the greater of (1) three percent (3%) of Operating Receipts (as hereinafter defined), or (2) $8,500.

ARTICLE II

INDEX OF DEFINED TERMS AND EXHIBITS

Term	Where Defined
Bank	Section 1.5
Bank Account	Section 1.5

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Budget	Section 6.1(a)
Effective Date	Section 1.1
Emergencies	Section 5.4(a)
Hazardous Wastes	Section 5.17(a)
Initial Term	Section 1.2
Management Fee	Sections 1.9 and 9.1
Manager	Introductory paragraph of Agreement
Operating Receipts	Section 9.1
Owner	Introductory paragraph of Agreement
Owner’s Representative	Section 1.3
PPR	Section 6.2(a)(ii)
Premises	Recital A
Term	Section 1.2

Exhibit	Title	Reference
A	Schedule of Employees	Section 5.3
B	List and Forms of Receipts	Section 6.2

ARTICLE III

APPOINTMENT

Owner hereby appoints Manager as the manager for the Premises as of the Effective Date, and hereby authorizes Manager to exercise such powers with respect to the Premises as may be necessary for the performance of Manager's obligations under Article V. Manager hereby accepts such appointment on the terms and conditions hereinafter set forth for the Term of this Agreement. Manager shall have no right or authority, express or implied, to commit or otherwise obligate Owner in any manner whatsoever, except to the extent expressly provided in this Agreement.

ARTICLE IV

LEASING

Manager shall not be responsible for leasing services for the Premises unless Manager enters into a separate leasing agreement with Owner.

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ARTICLE V

DUTIES OF MANAGER

5.1General Duties.

Manager, on behalf of Owner, shall use its diligent, commercially reasonable good faith efforts to comply with this Agreement and with instructions as set forth herein or as may from time to time be provided by Owner to Manager. Manager shall perform its duties in a professional, diligent, careful and vigilant manner and shall manage, operate, repair, maintain and service the Premises comparable to similar properties. In connection therewith, Manager shall conduct the ordinary and usual business affairs of Owner relating to the Premises as provided in this Agreement and shall implement, or cause to be implemented, the Owner's decisions. Manager shall at all times conform to the policies and programs established by Owner provided such policies and programs are provided to Manager, and the scope of Manager's authority shall be limited thereby. Manager shall afford Owner the full benefit of the judgment, experience and advice of Manager and Manager's organization with respect to the policies to be pursued in management, and the execution of its responsibilities in a first class, professional, diligent, careful and vigilant manner. In particular, Manager shall have the duties and obligations set forth hereafter in this Article V. In no event shall Manager be obligated under this Agreement to provide any service or incur any obligations if Owner does not approve the Budget or otherwise provide funds sufficient therefor.

5.2Utility and Service Contracts. Manager shall negotiate contracts on behalf of Owner for gas, electricity, water, telephone, trash collection, sewer, elevator service, janitorial service, security service and such other services for terms of not greater than one (1) year, unless otherwise approved by Owner in writing in its reasonable discretion. All such service contracts entered into after the Effective Date shall be in the name of Owner and shall be terminable on thirty (30) days’ notice or less without penalty unless otherwise approved by Owner in writing. Manager agrees to provide to Owner a form or forms of such contracts for pre-approval. Manager shall have the authority to execute contracts that comply with this Agreement, including without limitation this Section 5.2, as agent for Owner, provided that such contracts do not materially deviate from the pre-approved form of such contracts. Notwithstanding the foregoing, upon written notice to Manager, Owner or Owner's consultants shall have the right to negotiate a master agreement for any and/or all utilities at the Premises.

5.3Employment of Personnel. All persons employed in connection with the operation and maintenance of the Premises shall either be employees of Manager or be independent contractors and shall not be employees of Owner. Subject to reimbursement pursuant to Section 8.2, Manager shall select, employ, pay, supervise, direct and discharge all employees necessary for the operation and maintenance of the Premises and use reasonable care in the selection and supervision of such employees. Manager shall be responsible for complying with all laws, regulations and collective bargaining agreements affecting such employment. Manager will be and will continue throughout the Term of this Agreement to be an Equal Opportunity Employer. Before employing anyone pursuant to this Section 5.3, Manager shall submit to Owner, for approval by Owner not to be unreasonably withheld, conditioned or delayed, a list in the form of Exhibit A attached hereto,

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(which shall update any such list previously submitted) showing the number of employees and the wages Manager proposes to pay such employees.

5.4Maintenance.

(a)Manager shall be responsible for coordinating the operational activities of the Premises to keep the Premises maintained in a clean and sightly condition and, subject to the terms of this Section 5.4, manage all repairs, alterations, replacements, installations, decorating and landscaping, and purchase all supplies necessary for (i) the proper operation of the Premises, (ii) the fulfillment of Owner's obligations under any lease of space in the Premises provided Owner gives Manager a copy of all such leases, (iii) the fulfillment of Owner's obligations under any mortgage encumbering the Premises, provided Owner gives Manager written notice of such mortgage obligations, (iv) compliance with covenants, conditions and restrictions affecting the Premises, provided Owner gives Manager written notice of such covenants, conditions and restrictions, and (v) compliance with all governmental and standard insurance requirements, provided Owner gives Manager a copy of such insurance requirements, and provided Manager shall not make any purchase or order any work costing more than the limit on the amount authorized for non-emergency purchases and repairs set forth in Section 1.4 without Owner's prior written approval (which approval may be obtained in the approved Budget or approved otherwise by Owner), except in circumstances reasonably deemed by Manager to be an emergency requiring immediate action for the protection of the Premises or tenants or other persons or to avoid the suspension of necessary services ("Emergencies").Manager shall promptly notify Owner of the necessity for the nature of and the cost of such emergency repairs or compliance. If Owner shall require, Manager shall submit a list of contractors and subcontractors who are performing any work, repairs, alterations, replacements or services on the Premises under Manager's direction in excess of Five Thousand and 00/100 Dollars ($5,000.00). All repairs, alterations and replacements shall be of at least equal quality and workmanship to the original work.

(b)Manager shall obtain all necessary receipts, releases, waivers, discharges and assurances necessary to keep the Premises free of any mechanics', laborers', materials suppliers' or vendors' liens in connection with the maintenance or operation of the Premises in connection with work performed at the Premises on behalf of Owner. All such documentation shall be in such form as required by Owner. Upon request from Owner, Manager shall make available for inspection or provide copies of such documentation to Owner, at Owner's expense.

5.5Contracts with Third Parties.

(a)Manager shall supervise and be responsible for all employees, independent contractors, suppliers and other persons and entities engaged in the operation, repair, maintenance and servicing of the Premises on behalf of Owner or in any other activity within the scope of this Agreement. Excluding service agreements specifically referenced in an annual budget approved by Owner, all of such contractors, suppliers, persons and entities, and all contracts in excess of $5,000.00, shall be subject to Owner's prior written approval. Manager shall assure that any party performing work on the Premises maintains insurance satisfactory to Owner, including, but not

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limited to, Worker's Compensation Insurance (and, when required by law, compulsory non-Occupational Disability Insurance) and insurance against liability for injury to persons and property arising out of all such contractor's operations naming Manager, Owner and Owner's representatives as additional insureds on a primary and non-contributory basis and containing a waiver of subrogation rights against Owner and Property Manager. Manager shall obtain certificates of insurance for all such insurance before the work begins. Manager shall furnish copies of the certificates to Owner if requested by Owner. Manager shall require that all contractors engaged by Manager or Owner and brought onto the Premises have insurance coverage at the contractor's expense, in the following minimum amounts:

Worker's Compensation:	Statutory Amount
Employer’s Liability:	$1,000,000.00 minimum
Commercial General Liability	$1,000,000.00 each occurrence, $2,000,000.00 aggregate for Bodily Injury and Property Damage
Commercial Automobile Liability	$1,000,000.00 per accident for bodily injury and property damage
Umbrella Excess Liability	$3,000,000 minimum

(b)    Manager shall not execute, or otherwise enter into or bind Owner with respect to any contract or agreement for equipment, supplies, services or any other item without obtaining (i) two competitive written bids with respect to each purchase in excess of $25,000.00 (provided qualified contractors can be reasonably identified to do so), and (ii) three competitive written bids with respect to each purchase in excess of $100,000.00 (provided qualified contractors can be reasonably identified to do so). Manager shall not enter into any contract or agreement for more than the amount specified in Section 1.4 without Owner's prior written approval. Unless otherwise approved by Owner, all contracts, agreements or other arrangements made pursuant to this Agreement shall be in the name of Owner and shall be terminable without penalty on thirty (30) days' notice or less, with or without cause, and upon Owner's sale or transfer of the Premises.

5.6Purchase of Supplies and Materials. Manager shall purchase all equipment, tools, appliances, materials and supplies reasonably necessary or desirable for the maintenance and operation of the Premises. All such purchases shall be subject to the prior review and written approval of Owner if such purchases are not included in the current Budget. Such purchases shall be used solely in connection with the operation and maintenance of the Premises. In connection with the performance of its duties pursuant to this Section 5.6, Manager shall use its diligent, commercially reasonable, good faith efforts to qualify for any cash and trade discounts, refunds, credits, concessions or other incentives. All such discounts, refunds, credits, concessions and other

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incentives received by Manager shall inure and belong to Owner, and shall be deposited in the Bank Account when they are in the form of cash. If Owner is entitled to discounts from contractors and suppliers under any national or regional agreements, Manager shall avail itself of such national or regional agreements whenever possible.

5.7Contracts with Affiliated Entities. Manager shall not purchase materials, tools or supplies or contract for repair, construction or any other service for the Premises pursuant to Sections 5.2, 5.4 or 5.6 with a party in which Manager (or any subsidiary, affiliate or related entity) holds a beneficial interest, without the prior written approval of Owner.

5.8Complaints and Notices.

(a)Manager shall handle promptly complaints and requests from tenants, concessionaires and licensees. Manager shall notify Owner promptly of: (i) any notice received by Manager or known to Manager of violation of any governmental requirements (and make recommendations regarding compliance therewith); (ii) any notice received by Manager or known to Manager of any defect or unsafe condition in the Premises; (iii) any notice received by Manager or known to Manager of violation of covenants, conditions and restrictions affecting the Premises or noncompliance with loan documents affecting the Premises, if any; (iv) any notice received by Manager or known to Manager of any fire, accident or other casualty or damage to the Premises; (v) any notice received by Manager or known to Manager of any condemnation proceedings, rezoning or other governmental order, lawsuit or threat thereof involving the Premises; (vi) any notice received by Manager or known to Manager of any violations relative to the leasing, use, repair and maintenance of the Premises under governmental laws, rules, regulations, ordinances or like provisions; (vii) any notice received by Manager or known to Manager of any defaults under any leases or other agreements affecting the Premises; or (viii) any notice received by Manager or known to Manager of any violation of any insurance requirement. Manager shall promptly deliver to Owner copies of any documentation in its possession relating to such matters. Manager shall keep Owner reasonably informed of the status of the particular matter through the final resolution thereof. In the case of any fire or other damage to the Premises or violation or alleged violation of laws respecting Hazardous Wastes, Manager shall immediately give telephonic notice thereof to Owner. Manager shall complete all necessary and customary loss reports in connection with any fire or other damage to the Premises. Manager shall retain in the records it maintains for the Premises copies of all supporting documentation with reference to such notices.

(b)Manager shall promptly notify Owner and any insurance agent Owner may designate of any personal injury or property damage occurring to or claimed by any tenant or third party on or with respect to the Premises. Manager shall promptly forward to Owner with copies to any insurance agent Owner may designate any summons, subpoena or other legal document served upon Manager relating to the actual or alleged potential liability of Owner, of Manager or of the Premises.

(c)Should any claim, demand, suit or other legal proceeding be made or instituted by any third party against Owner which arises out of any matters relating to the Premises, this Agreement or Manager's performance hereunder, Manager shall promptly notify Owner thereof

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and shall give Owner all pertinent information, and reasonable assistance, in the defense or other disposition thereof.

5.9Tenant Insurance Certificates. Manager shall endeavor to secure from all tenants ACORD certificates of insurance and renewals thereof required to be furnished by the terms of their leases. Manager shall forward copies of the certificates to Owner if requested by Owner. Manager shall establish systems and procedures to enforce lease requirements that such policies of insurance do not lapse and that all persons required to be named as additional insureds are listed thereon.

5.10Enforcement of Leases and Deposit of Revenue.

(a)Manager shall take all necessary and proper actions to enforce the terms of all leases, concessions and licenses and to receive and collect all rents, including percentage rents, and all other revenues payable to Owner from the Premises as the same become due and payable. Manager shall deposit the rents and other revenues promptly in the Bank Account. The Bank Account shall be used exclusively for funds derived from the operation of the Premises. Owner may supply Manager with written instructions to notify promptly third parties of such deposits, to enable transfer of Owner's monies to other bank accounts. The Bank Account shall be opened by Manager and shall name as signatories only such employees of Manager as are from time to time approved in writing by Owner for such purpose and such other persons as Owner may designate in writing. All withdrawals from the Bank Account shall require two signatures. At Owner's option, the Bank Account may be comprised of two accounts, a checking account in which the funds on deposit shall be kept to the minimum practicable to pay day to day expenses and a money market account or other interest bearing account. Manager shall receive and collect all tenant security deposits payable to Owner by tenants of the Premises and deposit the same promptly in the Bank Account. To the extent tenants are entitled to interest on such security deposits or a refund of such deposits upon vacating the Premises, Manager shall pay such interest and refund such deposits from the Bank Account to the tenants entitled thereto. In the event state law requires that tenant security deposits be held in a separate account, such separate account shall be established by Owner. Checks drawn to refund security deposits to tenants shall be drawn only upon the signatures of an authorized employees of the Manager and Owner's Representative. Manager shall cooperate with Owner to satisfy such conditions as Owner may place on the release of a security deposit from the Bank Account. Manager shall maintain detailed records of all security deposits and allow Owner and its designees access to such records.

(b)Upon prior notice and written approval of Owner, Manager shall institute on Owner's behalf and defend, at Owner's expense, through legal counsel approved by Owner all necessary legal proceedings to: (i) collect rent or other income from tenants, concessionaires and licensees on the Premises; (ii) oust or dispossess any tenants or other persons from the Premises; and (iii) address any other matters requiring legal attention. Owner reserves the right to change the approved counsel to be used by Manager and to otherwise control litigation of any character affecting or arising out of the operation of the Premises.

5.11Compliance with Laws and Other Requirements.

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(a)Manager shall supervise compliance of the Premises with all applicable laws, ordinances, rules, regulations, requirements and orders of all federal, state and municipal governments, courts, departments, commissions, boards and offices, any national or local Board of Fire Underwriters or Insurance Services offices having jurisdiction, or anybody exercising functions similar to those of any of the foregoing which may be applicable to the Premises and the operations and management thereof.

(b)Manager shall comply or supervise compliance with the provisions of any insurance policy or policies insuring Owner in relation to the Premises of which Manager is provided a copy (so as not to decrease the insurance coverage or increase the insurance premiums).

(c)Manager shall be responsible for the performance by Owner under all leases of space in the Premises and any other lease, sublease, license agreement, easement agreement, covenant, condition, restriction, document of record, use permit, development agreement, operating agreement, mortgage or other similar document governing or applicable to the title, operation, management, occupancy, promotion and leasing of the Premises known to Manager.

5.12Property Review. Tax Review and Other Programs.

(a)Manager shall participate in Owner's property review programs to the extent requested by Owner. Such review shall include asset, investment, financial and strategy profiles in form and substance satisfactory to Owner and such assistance as Owner may request in connection with appraisals of the Premises. Manager shall respond, within 10 days, to Owner's management evaluation reports concerning reasonable actions to be taken by Manager to correct or modify its management standards for the operations or financial services provided for the Premises.

(b)Manager shall participate in Owner's tax review program. Manager shall check tax assessments and assist Owner, when requested by Owner, in efforts to reduce such taxes. Manager shall promptly furnish Owner with copies of all assessment notices and receipted tax bills received by Manager.

(c)Manager shall comply with Owner's reasonable energy conservation and Hazardous Wastes policies and submit energy consumption and Hazardous Wastes reports for the Premises in accordance with Owner's program for energy and Hazardous Wastes audits and reviews.

5.13Permits and Authorizations.

(a)Manager shall obtain and keep in full force and effect all licenses, permits, consents and authorizations as may be necessary for the maintenance, operation, management, repair, servicing or occupancy of the Premises. All of such licenses, permits, consents and authorizations shall be in the name of Owner.

(b)Manager shall obtain and keep in full force and effect all licenses, permits, consents and authorizations as may be necessary for the proper performance by Manager of its duties and obligations under this Agreement (including, without limitation, qualification to do

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business) or as may be required under any lease covering any portion of the Premises. All such licenses, permits, consents and authorizations shall be in the name of Manager.

5.14Other Duties. Manager shall, at Owner's expense, perform all other services which are customary, necessary and appropriate to manage, operate and maintain the Premises.

5.15Confidentiality. Manager and all persons retained or employed by Manager in performing its services shall hold in confidence and not use or disclose to others any confidential or proprietary information of Owner heretofore or hereafter disclosed to Manager, including but not limited to any data, information, plans, programs, processes, costs, operations or tenants which may become known to Manager in the performance of, or as a result of, its services, except (i) where Owner specifically authorizes Manager in writing to disclose any of the foregoing to others, (ii) such disclosure reasonably results from the performance of Manager's duties hereunder, (iii) any of the foregoing is generally available to the public, or (iv) to the extent disclosure thereof is required by any applicable law or governmental authority.

5.16Manager's Insurance. Manager shall obtain a Commercial Crime Insurance Policy covering the activities of Manager and its employees who may handle or be responsible for monies or other property of Owner. The Commercial Crime Insurance Policy shall be in such form and amount and written with insurers authorized to do business in the State of New York and shall be rated at least A-VII by A.M. Best's Rating Service. The form, amount and insurer initially approved by Owner are subject to Owner’s prior approval, in Owner’s reasonable discretion. Manager shall maintain the Commercial Crime Insurance Policy in an amount equal to the greater of (i) three (3) months’ worth of gross rental income and (ii) $1,000,000.00. Such Commercial Crime Insurance Policy shall contain a loss payee endorsement in favor of Owner as its interest may appear. Manager shall furnish a certificate evidencing such Commercial Crime Insurance Policy to Owner prior to the Effective Date and thereafter immediately upon renewing or replacing such Commercial Crime Insurance Policy.

(a)Manager shall maintain the following insurance in Manager's name applicable to Manager's activities under this Agreement:

(i)Commercial General Liability Insurance, in an amount equal to not less than $3,000,000, each occurrence.

(ii)Automobile Liability Insurance, covering both owned (if any) and non-owned vehicles, in an amount equal to not less than $1,000,000, per accident.

(iii)Workers’ Compensation Insurance, as required by law covering all Manager's employees (and, when required by law, compulsory Non­ Occupational Disability Insurance).

Such insurance shall be underwritten by reputable, financially sound companies. Manager shall furnish Owner with ACORD certificates of insurance evidencing such insurance prior to the Effective Date and thereafter upon renewing or replacing such insurance. Any such bond or insurance

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required under this Agreement shall provide that the insurer shall endeavor to provide thirty (30) days prior written notice to the certificate holder upon cancellation or material modification.

5.17Hazardous Wastes.

(a)Manager shall not place or cause to be placed on the Premises, other than in the ordinary course of performing its obligations under this Agreement and in compliance with applicable law, any hazardous or toxic wastes or substances, as such terms are defined by federal, state or municipal statutes or regulations promulgated thereunder (collectively, "Hazardous Wastes"), other than usual and customary janitorial, maintenance and cleaning supplies which are kept, used, stored and disposed of in reasonable quantities and in compliance with applicable laws. If Manager discovers the existence of any Hazardous Wastes on the Premises, Manager shall immediately notify Owner. If such Hazardous Wastes were placed or caused to be placed on the Premises by Manager (other than in the ordinary course of performing its obligations under this Agreement and in compliance with applicable law), Manager shall, at its cost, diligently arrange for and complete the immediate removal thereof in accordance with applicable laws and Owner's directions. Manager shall not be responsible for any Hazardous Wastes present on the Premises prior to the Effective Date hereof, nor shall Manager be responsible for any Hazardous Wastes brought onto the Premises by a person other than Manager, its agents, or employees. Manager shall promptly notify Owner of any notice received by Manager from any governmental authority of any actual or threatened violation of any applicable laws, regulations or ordinances governing the use, storage or disposal of any Hazardous Wastes and shall cooperate with Owner in responding to such notice and correcting or contesting any alleged violation at Owner's expense.

(b)Subject to the prior written review and approval of Owner, Manager shall provide its employees, agents, consultants, governmental entities and the public with any notices or disclosures concerning Hazardous Wastes associated with the Premises required to be delivered by Manager under any applicable laws, including without limitation, any notices or disclosures concerning Hazardous Waste which Manager has received from Owner. Owner shall have the right to review such notices and disclosures before their distribution or submission by Manager and shall have the right, but not the obligation, to prescribe the form and content of any such notices or disclosures as long as the form and content prescribed by Owner comply with all applicable laws relating to such notices or disclosures. Owner shall provide Manager with any notices or disclosures concerning Hazardous Waste associated with the Premises required to be delivered by Owner under any applicable laws.

(c)Without limiting any other indemnification obligations provided by law or specified in this Agreement, Manager shall indemnify, defend (as Manager's sole cost and expense and with legal counsel approved by Owner which approval shall not be unreasonably withheld) and hold harmless the Owner, its affiliates, agents and employees from and against any and all third party claims, demands, losses, damage, disbursements, liabilities, obligations, fines, penalties, actions, causes of action, suits, costs and expenses, including without limitation, reasonable attorneys' fees and costs, and all other professionals' or consultants' expenses incurred in investigating, preparing for, serving as a witness in, or defending any action or proceeding, or in removing or remediating any Hazardous Wastes on, under, from or about the Premises, arising out

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of or relating to, directly or indirectly, Manager's breach of any of the terms of Section 5.17. This indemnity shall survive termination of this Agreement.

(d)Notwithstanding anything to the contrary contained herein, Manager shall have no liability to Owner whatsoever in connection with any Hazardous Wastes brought upon the Premises by Owner or any other party not under Manager’s direct control.

5.18Asbestos and Similar Compliance Matters. If the Premises are subject to the Occupational Safety and Health Administration's regulations relating to asbestos, or to any state law or regulation relating to asbestos or to any state law or regulation relating to carcinogenic or toxic chemicals, Manager shall, at Owner's expense, comply with such laws and regulations as they relate to the Premises.

5.19Owner's Insurance. Throughout the Term of this Agreement, Owner, or Manager at Owner's request and at Owner's cost and expense, shall obtain and maintain the insurance described below:

(a)Property insurance (including boiler & machinery coverage) on an estimated full replacement cost basis covering the Premises on an ISO “Causes of Loss – Special Form.”

(b)Commercial general liability insurance on an occurrence basis with limits of not less than Ten Million and Noll 00 Dollars ($10,000,000.00) in annual policy limits. Owner's insurance shall be primary and non-contributory to any insurance otherwise carried by Manager. Owner shall be the insured on such liability policy, with Manager included as an insured property manager.

Should Owner elect to place such insurance coverage directly, Owner shall provide Manager with a duplicate copy of the original policy and, if requested by Owner, Manager shall duly and punctually pay on behalf of Owner all premiums with respect thereto, before the policy's lapse due to nonpayment.

5.20Intentionally Omitted.

5.21Waiver of Subrogation. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, OWNER AND MANAGER HEREBY WAIVE ANY AND ALL RIGHTS OF RECOVERY, CLAIM, ACTION OR CAUSE OF ACTION AGAINST THE OTHER, ITS AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, PARTNERS, MEMBERS, SERVANTS OR SHAREHOLDERS FOR ANY LOSS OR DAMAGE TO PROPERTY OF THE WAIVING PARTY BY REASON OF FIRE, THE ELEMENTS, OR ANY OTHER CAUSE WHICH IS COVERED OR COULD BE COVERED BY STANDARD "ALL-RISKS" PROPERTY INSURANCE (INCLUDING COMPREHENSIVE BOILER AND MACHINERY COVERAGE), REGARDLESS OF CAUSE OR ORIGIN, INCLUDING NEGLIGENCE OF THE OTHER PARTY HERETO, ITS AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, PARTNERS, MEMBERS, SERVANTS OR SHAREHOLDERS. EACH PARTY'S PROPERTY INSURANCE POLICIES SHALL CONTAIN PROVISIONS WHERE THE

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INSURER WAIVES THEIR RIGHT OF SUBROGATION AGAINST SUCH OTHER PARTY. THIS SECTION 5.21 SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.

ARTICLE VI

BUDGETS, REPORTS, AND OTHER FINANCIAL MATTERS

6.1Budgets and Business Plans.

(a)Manager shall prepare and submit to Owner a proposed operating and capital budget (the "Budget")for the operation, repair and maintenance of the Premises for the remainder of the calendar year in which the Effective Date occurs, no later than thirty (30) days after the Effective Date. Thereafter, on or before the date specified each year by Owner (but not later than October 1), Manager shall prepare and submit to Owner an updated Budget for the remainder of the current calendar year and a preliminary Budget for the next calendar year. Thereafter, Manager shall prepare and submit to Owner the final Budget for the next calendar year, incorporating any changes requested by Owner. Such Budgets shall: (i) be prepared utilizing the Kardin software, (ii) be prepared on a cash and/or accrual basis, as directed by Owner, and (ii) show a month by month projection of income, expenses, capital expenditures and reserves. Owner shall have final approval over the Budget, provided Owner may not disapprove the payments required to be made to Manager hereunder. If a Budget is not agreed to prior to the commencement of the next succeeding calendar year, beginning on January 1st of such year until a Budget is approved, Manager shall operate the Premises in accordance with the Budget for the immediately preceding calendar year (subject to an increase of ten percent (10%) in any line items over such line items for the prior calendar year subject to (a) an aggregate limitation for all line items of a five percent (5%) increase, and (b) such provisions of the Budget which have been approved); provided, however, Manager shall be permitted to make such expenditures in excess of the amounts set forth in the last approved Budget for taxes and other governmental charges, insurance premiums, utility charges, union wage and work rule cost increases, amounts required to be paid pursuant to existing leases and contracts, and amounts required to be paid in the event of an emergency to preserve the value of the Premises until a Budget for the current calendar year is approved.

(b)After written approval of each such Budget by Owner, Manager shall (i) implement the Budget and shall be authorized, without the need for further approval by Owner, to make expenditures and incur the obligations provided for in the approved Budget subject to the limitations set forth in Section 5.4 for non-emergency purchases and repairs, and (ii) use commercially reasonable efforts to ensure that the actual cost of operating the Premises shall not exceed the approved Budget, however in no event is Manager guarantying that the Premises can be managed in accordance with such Budget.

(c)Within 30 days following Owner’s written request, which request shall not be made more often than once per calendar year, Manager shall provide Owner with a draft of a business plan for the Premises, containing such information as Owner may reasonably request, including (i) a list of all properties competitive with the Premises, a list of the tenants of each and

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all other reasonably available information respecting each, and (ii) basic demographic data relating to the market area of the Premises, including population growth, major employers, employment and unemployment levels and, if the Premises is a retail property, retail sales and housing starts.

6.2Reports.

(a)Manager shall, during the Term of this Agreement, deliver the following reports to Owner relating to the management and operation of the Premises in form and substance reasonably determined by Owner. All accounting shall be done using the MRI accounting software currently used by Owner, and Owner shall pay the associated setup and monthly costs relating thereto as a recoverable property expense.

(i)Monthly Property Performance Report ("PPR"): On or before the 10^th day of each calendar month, the Manager shall deliver monthly PPR, in format provided by Owner, which will include, among other things, current and prospective lease status reports and occupancy summaries, status of capital and leasing improvements, projected capital requirements, status of outstanding accounts receivable, explanation of cash basis budget to actual variances on a year-to-date basis, and any other significant property events/issues.

(ii)Monthly U.S. GAAP Financial Statements: As soon as practicable, and in any event within 5 working days of the 20th of each month, the Manager shall deliver monthly accrual basis financial statements for the prior month prepared in accordance with US GAAP which shall include straightening of rent and maintenance of depreciation and amortization on both a GAAP, tax, and E&P basis. Such financial statements shall be prepared in such form as approved by Owner, which shall include, among other things, balance sheet, 13 month income statement with year-to-date actual to budget comparison, depreciation and amortization schedule generated through BNA software, FAS 13 schedules generated through MRI software and supporting schedules for significant balance sheet items such as accounts payable accruals, property taxes, insurance, prepaid, and allowance for doubtful accounts. See Exhibit B for GAAP Report Table of Contents and Accrual Basis Report Checklist for a complete listing of required reports. The Accrual Basis Report Checklist is required to be signed by both the preparer of the financial statements and their supervisor as representation that the reports are accurate and complete. The Monthly U.S. GAAP Financial Statements shall be signed by Manager’s Chief Financial Officer as representation that the statements are accurate and complete.

(iii)Reserved.

(iv)Annual U.S. GAAP Financial Statements: For Annual U.S. GAAP Financial Statements, cash cutoff date at year-end (December) shall be the last day of the month. As soon as practicable, and in any event within seven (7) working days of December 31st, the Manager shall deliver annual accrual basis financial statements prepared in a manner and form consistent with item (ii) above. In addition, Manager shall provide any information as reasonably required to complete the Owner's annual audited financial statements and 10-K.

(v)Other information: From time to time, upon Owner's request, such other information with regard to property as may reasonably be requested, including without

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limitation such information and forms as are attached hereto as Exhibit B and incorporated herein by this reference.

(b)To ensure the reliability of all reports required by this section, Manager shall for all months other than year-end (December) on or before the 20th of each month: pay all charges, fees, bills and invoices which are normally and customarily incurred monthly in connection with the operation of the Premises and any other amounts which are payable that month, provided that if any charges, fees, bills and invoices for that month cannot be paid by the 20th, Manager shall accrue such items. If due to extraordinary circumstances, Manager incurs any expense after the 20th day of the month which is not reflected on the statements required by this section, Manager shall immediately notify Owner of said expense. At year end, an additional check funding shall be made by Owner as needed to pay charges and expenses required before the end of the year.]

6.3Remittance of Funds to Owner. No later than the 10th day of each calendar month Manager shall remit to Owner all funds collected as part of Manager's obligations hereunder in excess of (i) anticipated expenditures for the calendar month that Manager is authorized to make pursuant to the Budget, (ii) any reserves approved by Owner and (iii) the Management Fee payable pursuant to Section 9.1. Owner shall have the right to require the transfer to Owner at any time of funds in the Bank Account considered by Owner to be in excess of an amount reasonably required by Manager for disbursement and compensation purposes in connection with the operation and management of the Premises.

6.4Records. Manager agrees to keep proper records with respect to the management and operation of the Premises, and to retain those records for periods specified by Owner. Such books, records and accounts shall include, without limitation, vouchers, statements, receipted bills and invoices, employment records, documents, notices, agreements, contracts, correspondence, leases, permits, licenses, authorizations, all collections and disbursements related to the Premises, the deposits to the Bank Account and other business and affairs of the Premises within the responsibility of Manager pursuant to this Agreement. Owner shall have the right, during the Term of this Agreement, to inspect such records and audit the reports required by Section 6.2 during normal business hours upon reasonable prior notice to Manager at such location as Manager shall maintain such records and in a manner so as to not unreasonably interfere with Manager’s normal day-to-day business operations. All such records, data, information and documents shall at all times be the property of Owner and shall be delivered to Owner without demand upon termination of this Agreement.

6.5Duty of Care. Manager shall exercise such control over accounting and financial transactions as is reasonably required to protect Owner's assets from loss or diminution due to error, negligence, recklessness, willful misconduct, fraud or criminal acts on the part of Manager or its employees, but shall have no such responsibility with respect to actions taken by independent contractors, consultants, etc.. Losses caused by such error or activity shall be borne by Manager, to the extent such losses are not paid to Owner pursuant to the insurance required by Section 5.16. In no event shall Manager be responsible for any loss of investments or other losses as the result of the failure of any financial institution or the choice of investments made by Owner.

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6.6Sarbanes-Oxley Compliance.

(a)Compliance Services. Manager shall provide Owner’s internal audit team (A) reasonable access to Manager’s personnel and books and records to facilitate the completion of the Owner’s annual Sarbanes-Oxley Compliance Plan, (B) copies reasonably requested by Owner of current internal control documentation, (C) availability to discuss, review and provide comments on process flow diagrams, narratives, walkthroughs and testing of controls to ensure that those documents accurately reflect Manager’s processes in connection with its obligation to Owner, (D) timely response to internal control recommendations and observations, reasonably agree to remedial action plans (if any), and timely implement those plans in order to ensure compliance with Owner’s annual Sarbanes-Oxley Compliance Plan, and (E) copies of SOC I Type II and bridge letters for key applications used to record business and accounting transactions.

(b)SOC 1 Report. If Manager preforms accounting services, Manager will deliver to Owner, at Manager’s sole cost and expense, Manager’s Service Organization Control 1 Type 2 report (the “SOC 1 Type 2 Report”) prepared by a qualified independent audit firm with respect to the Statement on Standards for Attestation Engagements 16, Reporting on Controls at a Service Organization (“SSAE 16”) as promulgated by the Auditing Standard Board of the American Institute of Certified Public Accountants, as same may be amended, from time to time.  The SOC 1 Type 2 Report must be issued by December 1st of each calendar year and cover the entire preceding Fiscal Year. Additionally, Manager must deliver a "Bridge Letter" to Owner stating that the Manager’s control environment relevant to SSAE 16 has not changed since the end of the effective date of the audited SOC 1 Type 2 Report (or equivalent report) and must cover through Owner’s fiscal year end.

(c)Delegation of Duties. Manager may, at Manager’s cost and expense, engage a reputable third-party accounting services firm reasonably acceptable to Owner to perform the services required of Manager under this Section 6.6. Any such engagement shall be pursuant to a written agreement (an “Accounting Services Agreement”)acceptable to Owner in Owner’s reasonable discretion.

ARTICLE VII

INDEMNIFICATION

7.1Without limiting any indemnity provided elsewhere in this Agreement, Manager shall indemnify, defend, protect and hold harmless Owner and Owner's Representative and their officers, directors, partners, members and employees from and against all third party claims, losses and liabilities (including all reasonable expenses and attorneys' fees) resulting from property damage (including, but not limited to, damage to the property of Owner and its agents, affiliates and employees, but only to the extent such property damage is not covered by the proceeds of the insurance policies required to be carried by Owner pursuant to Section 5.19 above), personal injury, death, defamation or false arrest which arise out of (a) any material breach of this Agreement by Manager, or (b) the gross negligence, recklessness, willful misconduct, fraud or criminal acts of Manager, its agents or employees.

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7.2Owner shall indemnify, defend, protect and hold harmless Manager and its officers, directors and employees from and against all third party claims, losses and liabilities (including all reasonable expenses and attorneys' fees) resulting from property damage (including, but not limited to, damage to the property of Manager and its agents and employees, but with respect to damage to property of Manager only to the extent such property damage is not covered by the proceeds of the insurance policies required to be carried by Manager under Section 5.16 above), personal injury, death, defamation or false arrest which arise out of (a) any material breach of this Agreement by Owner, or (b) the gross negligence, recklessness, willful misconduct, fraud or criminal acts of Owner or its employees or agents.

7.3All indemnities contained in this Agreement shall survive the expiration or termination of this Agreement.

ARTICLE VIII

COSTS AND EXPENSES

8.1Costs and Expenses of Manager. Except as otherwise expressly provided herein, all costs and expenses incurred by or on behalf of Manager in performing its obligations hereunder shall be borne solely by Manager, including, without limitation, the following expenses or costs in connection with the operation and management of the Premises:

(a)Cost of gross salary and wages, payroll taxes, insurance, worker's compensation, pension benefits and any other benefits of Manager's supervisory and home and regional office personnel;

(b)General accounting and reporting services, as such services are considered to be within the reasonable scope of Manager's responsibilities to Owner;

(c)Cost of forms, stationery, ledgers and other supplies and equipment used in Manager's home office or regional home office;

(d)Cost or pro rata cost of telephone and general office expenses incurred on the Premises by Manager for the operation and management of properties other than the Premises;

(e)Cost or pro rata cost of data-processing equipment located at Manager's home or regional office;

(f)Cost or pro rata cost of data processing provided by computer service companies;

(g)Cost of all bonuses, incentive compensation, profit sharing or any pay advances to employees employed by Manager in connection with the operation and management of the Premises, except for payments to individuals specifically approved in the Budget or other writing by Owner in advance;

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(h)Cost of automobile purchases and/or rentals, unless the automobile is being provided by Owner;

(i)Costs attributable to claims, losses and liabilities arising from (i) any breach of this Agreement by Manager or (ii) the gross negligence, recklessness, willful misconduct, fraud or criminal acts of Manager's agents or employees;

(j)Cost of comprehensive crime insurance purchased by Manager for its own account;

(k)Costs for meals, travel and hotel accommodations for Manager's home or regional office personnel who travel to and from the Premises, unless expressly authorized by Owner; and

(l)Cost of obtaining and maintaining such licenses, permits, consents and authorizations as are required by Section 5.13(b).

8.2Reimbursement by Owner. The following expenses or costs incurred by or on behalf of Manager in connection with the operation and management of the Premises shall be reimbursable monthly by Owner by disbursement from the Bank Account to the extent they are (i) expressly listed in the Budget, (ii) exceed approved Budgets but which result from Emergencies, or (iii) approved in writing by Owner or otherwise specifically provided in this Agreement and are supported by proper documentation from Manager:

(a)Cost of the gross salary, bonuses and other employee benefits and burdens for those employees of Manager providing services to the Premises; if any such employees provide direct management services to properties other than the Premises, costs of the gross salary and employee benefits and burdens for such employees shall be allocated among such properties;

(b)cost of accounting, financial and tax reporting services (prorated if off-site) which are within the reasonable scope of Manager's responsibility to Owner and all other financial reporting requested by Owner, including, but not limited to salary and compensation of accounting, financial and tax reporting staff and the costs, fees and charges, but excluding all costs, fees, and charges due or to become due under any Accounting Services Agreement;

(c)cost of software, forms, paper, ledgers and other supplies and equipment used in Manager's office, including license fees for software used on site and in required offices;

(d)cost of procuring and providing insurance permitted or required to be maintained by Manager pursuant to Section 5.19 of this Agreement and cost of ownership risk mitigation programs;

(e)cost to correct any violation of federal, state and municipal laws, ordinances, regulations and order relative to the leasing, use, repair and maintenance of the Premises, or related to the rules, regulations or order of the local board of fire underwriters or other similar body;

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(f)cost of collection of delinquent rentals;

(g)cost of legal fees of attorneys, provided such attorneys have been designated or approved in advance by Owner;

(h)cost of service contracts and cost of on-site utilities used by Manager in connection herewith;

(i)costs of leasing commissions for leasing space within the Premises payable to third party brokers;

(j)cost of capital expenditures;

(k)cost of professional dues and professional development;

(l)costs of printed checks for each bank account required by Owner;

(m)costs of personal computers, computer software and other technology and equipment used by Manager in connection with the Premises and the cost of connections to Manager's computer network;

(n)costs of a management office, including necessary furnishings and equipment;

(o)actual costs of making all repairs, decorations and alterations to the Premises;

(p)the Management Fee payable as provided in Sections 1.9 and 9.1;

(q)cost of audits as required by leases and other outside audits as may be requested by Owner;

(r)political or charitable contributions specifically approved by Owner;

(s)costs and expenses associated with the lease and operation of the conference center in the Premises;

(t)all other costs and expenses reasonably incurred by Manager in performing its duties hereunder

(u)all other costs and expenses for which Owner is obligated to reimburse Manager as provided in this Agreement; and

(v)any and all other costs necessary to the management, operation and maintenance of the Premises.

8.3Payment of Other Costs. Manager may make the expenditures set forth in the approved Budget, provided, the Manager shall not issue a check for any purchase or work in excess of the limit on the amount authorized in the approved Budget or otherwise allowed hereunder without Owner's approval except in Emergencies as authorized in Section 5.4.

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8.4Payment of Certain Charges Affecting the Premises. If instructed by Owner in the Budget or otherwise in writing, Manager shall pay from the Bank Account all taxes, special assessments, ground rents, insurance premiums and mortgage payments affecting the Premises as they become due and before any delinquency date. Owner reserves the right, at its option, to make any such payments directly, upon written notice to Manager.

8.5Insufficient Funds in Bank Account. Manager shall not be required to expend any of its own funds for disbursements chargeable to Owner. If there are insufficient funds in the Bank Account for a disbursement, Manager may, after notifying Owner of such insufficiency in writing, defer making any disbursement until Owner has furnished the funds necessary for such disbursement.

8.6     Nonpayment. If Manager fails to make any payment when required or fails to perform any act required under this Agreement, then Owner, after 10 days' written notice to Manager (or, in the case of any emergency, without notice) and without waiving or releasing Manager from any of its obligations hereunder, may (but shall not be required to) make such payment or perform such act, and may exercise such other rights and remedies as are available under this Agreement, at law and/or in equity in connection with such breach by Manager.

ARTICLE IX

COMPENSATION

9.1Management Fee. Owner shall pay Manager as compensation for the management services rendered hereunder a management fee (the "Management Fee") at the rate specified in Section 1.9. Such Management Fee shall be payable monthly in arrears, on the 1^st day of each calendar month. Manager shall withdraw such Management Fee from the Bank Account and shall account for it as required by Section 6.2. The term "Operating Receipts" shall mean all revenues received by or for the benefit of Owner during the Term hereof in connection with the leasing, ownership, use or occupancy of the Premises, including, but not limited to, rents (office, storage, garage, retail and percentage), billings to tenants for services, proceeds of business interruption and rent loss insurance, amounts received in settlement of leases, and payments by tenants for capital improvements; however, Operating Receipts shall exclude (i) fire loss or other insurance proceeds (other than business interruption or rent loss insurance proceeds), (ii) security deposits except for the portion forfeited and applied to rent, (iii) prepaid rents except for the portion applied to the then current month; (iv) sums collected or paid for sales, excise or use taxes, (v) any amount paid for, or in connection with, the termination of leases or other agreements with tenants, or (vi) reimbursement by any tenant (other than rent) in a lump sum for expenditures made by Owner for tenant improvements for which tenant is responsible.

9.2Owner-Occupied Space. Manager shall not be entitled to any Management Fee with respect to Owner occupied space in the Premises unless a Management Fee for such space is specifically provided for in Section 1.9. In no event shall Manager be entitled to any Management Fee for any space occupied or used by it in the Premises.

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ARTICLE X

TERMINATION

10.1Termination.

(a)Termination by Manager Without Cause. Manager, in Manager's sole discretion, shall have the power to terminate this Agreement on sixty (60) days' notice to Owner for any reason or no reason.

(b)Termination by Owner Without Cause. Owner, in Owner’s sole discretion, shall have the power to terminate this Agreement on thirty (30) days’ notice to Manager for any reason or no reason.

(c)Sale of the Premises. Owner shall have the power to terminate this Agreement upon the sale of the Premises (but not a pledge or mortgage) to a third party which is unaffiliated with Owner in a bona fide transaction, such termination to be effective as of the date of the sale. Owner shall use reasonable efforts to give Manager not less than thirty (30) days' written notice of such anticipated event.

(d)Termination by Owner With Cause. Owner shall have the power to terminate this Agreement upon five (5) days' written notice to Manager if any of the following shall occur:

(i)Manager fails to timely pay any sum owed or due and such sum remains unpaid for more than ten (10) days after notice from Owner or another third party;

(ii)Manager commits any fraud, willful misconduct, or breach of trust, makes any material misrepresentation or misappropriates funds in the performance of its obligations under this Agreement;

(iii)Manager, or any principal of Manager is convicted or pleads guilty or nolo contendere to any felony that involves the Premises;

(iv)Manager files, or there shall be filed against Manager a petition in bankruptcy;

(v)Manager makes an assignment for the benefit of creditors;

(vi)the Premises are damaged or destroyed and Owner decides not to rebuild or restore the Premises;

(vii)a substantial portion of the Premises is taken by condemnation or similar proceedings; and

(viii)Manager shall be in material breach of any other non­monetary obligations contained in this Agreement, and such material breach shall continue for thirty (30) days after written notice thereof from Owner to Manager specifying the particulars of such breach (plus,

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with respect to breaches which Manager commences diligent efforts to cure within such period, but which cannot reasonably be cured within thirty (30) days, such additional period as is reasonably necessary to cure such breach).

(e)Termination by Manager With Cause. Manager shall have the power to terminate this Agreement upon five (5) days' written notice to Owner if any of the following events occurs:

(i)Owner fails to timely pay any sum owed to Manager which remains unpaid for more than ten (10) days after notice from Manager; or

(ii)Owner commits a material violation or breach of any other obligation of Owner under this Agreement which remains uncured for more than thirty (30) days after notice from Manager (plus, with respect to breaches which cannot reasonably be cured within thirty (30) days, such additional time as is reasonably necessary to cure such breach).

(f)    Effect of Termination. In the event that this Agreement is terminated, Manager shall be entitled to all fees and reimbursements earned or accrued through the date of termination, which obligation shall survive such termination. In addition to or in lieu of terminating this Agreement, if Manager or Owner defaults under this Agreement beyond applicable notice and cure periods, Owner or Manager (as applicable) may pursue such other rights and remedies as may be available under applicable law. This Section 10.1(f) shall survive the expiration or termination of this Agreement.

10.2Obligations Upon Termination.

(a)Upon termination of this Agreement for any reason, Manager shall deliver the following to Owner on or before thirty (30) days following the termination date:

(i)A final accounting, reflecting the balance of income and expenses for the Premises as of the date of termination;

(ii)Any monies due to Owner and any tenant security deposits held by Manager with respect to the Premises; and

(iii)All keys, property, supplies, records, contracts, drawings, leases and correspondence, in existence at the time of termination and all other papers or documents pertaining to the Premises (except that Manager may keep copies of such documents as Manager is required by law to retain). All data, information and documents shall at all times be the property of Owner.

Manager shall remove all signs that it may have placed at the Premises containing its name and repair any resulting damage.

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(b)Upon the effective date of the termination of this Agreement for any reason, Manager's right to withdraw funds from the Bank Account or any other account which contains funds collected in connection with the Premises shall terminate.\

(c)Within 30 days after termination of this Agreement, Owner shall reimburse Manager for all expenses incurred by Manager and properly reimbursable by Owner under Section 8.2 and pay all fees properly payable to Manager for services rendered up to the date of such termination.

(d)Upon the expiration or earlier termination of this Agreement in its entirety, neither party shall have any further rights or obligations under the Agreement (other than those obligations which accrued prior to the expiration or termination of this Agreement or which by the terms hereof expressly survive, or expressly provide for obligations to be performed following, such expiration or termination).

ARTICLE XI

MISCELLANEOUS

11.1Status of Manager. It is the intention of the parties to create a relationship wherein Manager is an independent contractor in the management, operation and maintenance of the Premises, and Owner is the beneficiary of such management, operation and maintenance. Nothing herein contained shall be construed as creating the relationship of employer-employee, principal-agent or establishing any partnership or joint venture arrangement between Owner and Manager. Manager shall afford Owner the full benefit of the judgment, experience and advice of Manager and Manager's organization with respect to the policies to be pursued in management, and the execution of its responsibilities in a diligent, careful and vigilant manner.

11.2Notices. Any statement, notice recommendation, request, demand, consent or approval under this Agreement must be in writing and personally delivered or sent by overnight courier service, such as Federal Express or sent by United States, registered or certified mail, postage prepaid, return receipt requested, and shall be deemed to have been given upon receipt or refusal of delivery, provided that in the case of communications sent by overnight courier service or United States registered or certified mail, the communication is addressed as set forth in Section 1.7 if sent to the Owner's Representative and as set forth in Section 1.8 if sent to Manager. Either party may, by written notice, designate a different address.

11.3Ownership of Fixtures and Personal Property. Manager acknowledges that Owner owns all fixtures and personal property situated on or about the Premises and used in or necessary for the operation, maintenance and occupancy of the Premises (including, without limitation, any personal property purchased by Manager pursuant to Section 5.6).

11.4Intentionally omitted.

11.5Assignment by Manager. Manager shall not transfer or assign this Agreement or any part thereof or any of its rights or obligations hereunder without the prior written consent of Owner.

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11.6Severability. Each provision of this Agreement is intended to be severable. If any term or provision hereof or the application thereof to any entity or circumstance shall be determined by a court of competent jurisdiction to be illegal or unenforceable for any reason whatsoever, such term, provision or application thereof shall be severed from this Agreement and shall not affect the validity of the remainder of this Agreement or the application of such term or provision to any other entity or circumstance.

11.7Costs of Suit. If Owner or Manager shall institute any action or proceeding against the other relating to this Agreement, the unsuccessful party shall reimburse the successful party for its disbursements incurred in connection therewith and for its reasonable attorneys' fees, as fixed by the court.

11.8Waiver. No consent or waiver, express or implied, by either party to or of any breach or default by the other party in the performance of its obligations hereunder, shall be valid unless in writing. No such consent or waiver shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other party of any other obligations of such party hereunder. The failure of any party to declare the other party in default shall not constitute a waiver by such party of its rights hereunder, irrespective of how long such failure continues. The granting of any consent or approval in any one instance by or on behalf of Owner shall not be construed to waive or limit the need for such consent in any other or subsequent instance.

11.9Remedies Cumulative. No remedy herein contained or otherwise conferred upon or reserved to Owner or Manager shall be considered exclusive of any other remedy, but such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter existing at law, in equity or by statute. Every power and remedy given by this Agreement to Owner or Manager may be exercised from time to time and as often as occasion may arise or as may be deemed expedient.

11.10Entire Agreement. This Agreement contains the entire agreement between the parties and supersedes all prior oral or written agreements, understandings, representations and covenants, to the extent that they are inconsistent with this Agreement.

11.11Amendment. This Agreement may not be amended or modified except by an agreement in writing signed by the party against whom enforcement of such change or modification is sought.

11.12Governing Law; Exclusive Venue. This Agreement and the obligations of Owner and Manager shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, and the parties agree that any dispute amongst them shall be exclusively heard and decided before the courts of appropriate jurisdiction located within the Supreme Court of the State of New York, County of New York, the Civil Court of the City of New York, County of New York and the United States District Court for the Southern District of New York.

11.13Gifts. Manager shall not accept any gift from vendors employed in connection with the Project, other than gratuities of nominal value received in the ordinary course of business.

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Manager shall not, on Owner's behalf or in connection with the services being rendered under this Agreement, provide any gift to or otherwise entertain any public official. The term "public official" means every member, officer, employee or consultant of a state or local agency. The term "gift," as used herein, includes any service or merchandise of any kind, discounts on merchandise or services, meals and any other item of value. Under no circumstance shall Owner be deemed to have waived the provisions of this Section as to a specific gift unless the waiver is in writing and signed by two authorized officers of Owner.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW.]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

OWNER:

_________________________________,

a ________________________________

By:    ___________________________

Name:    ___________________________

Title:    ___________________________

MANAGER:

_________________________________,

a ________________________________

By:    ___________________________

Name:    ___________________________

Title:    ___________________________

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EXHIBIT A

SCHEDULE OF EMPLOYEES

This Exhibit A is attached to and incorporated by reference into that certain Property Management Agreement (the "Agreement")dated as of _________________, executed between KBS SOR II ______________________, LLC,a Delaware limited liability company ("Owner"),and ___________________________, a ___________________ ("Manager").

This schedule is to be updated and submitted for Owner's approval pursuant to Section 5.3 of the Agreement prior to any of the following events occurring: (i) employment of new personnel, (ii) any change in compensation and/or fringe benefits or employee burden, (iii) annually upon approval of the operating budget for the next year, or (iv) any change in the onsite cost allocation percentage (personnel or otherwise) between the Premises and other properties managed by any of the onsite staff.

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SCHEDULE

Staffing Schedule

[Reimbursement of personnel will be at the flat rate fee of TBD cents per rentable square foot excluding any overtime required to manage the asset due to emergencies or after hours maintenance requirements.]

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EXHIBIT B

REQUIRED FORMS AND INFORMATION

1.	Obtain and review prior month PPR for changes in leasing activity(as noted in Tenant tab of PPR) and other issues or property activity (as noted in Asset Summary tab of PPR) or other sections of PPR, consider impact of these changes on expected trends on the income statement when reviewing 12 month income statement. Consider among other things: *Increases in occupancy or new leases, correlate with an increase in revenues *Decreases in occupancy or expiring leases, correlate with a decrease in revenues *Early terminations, correlate with lease termination income, decrease in revenues in the future, and consideration for write-off of intangible assets, accounts receivable and deferred rent *Early renewals, access whether rental rate decreased, possible lease concessions, and corresponding decrease in revenues, consider impact, if any on intangible assets and s/l rent *Review manual billing query (MANUALREV) and consider impact on s/l rent and correctness of billings
2.	Based on review of prior month PPR and updated PPR information provided in monthly report package, consider appropriateness of capital accruals (acct 2023), work in progress ("WIP"), and assets that are currently not being depreciated against status of improvement jobs. Consider among other things: * capital accrual should be based on % complete * once job completed or substantially complete, should be reclassed out of WIP * depreciation should begin once work is completed or substantially complete and be depreciated over its useful life (Bldg Improvements may not necessarily be deprec over 39 years depending on type of improvement, eg. roof replacement generally 10 to 15 years, useful life should be based on estimate provided by property manager or asset manager. LC/TI's depreciated over life of lease).
3.	Based on review of prior month PPR, consider early vacating tenants and comments in A/R table, in considering adequacy and appropriateness of Allowance for Doubtful Accounts against both A/R and Deferred Rent (s/l rent asset based on base rent only).

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4.

Review comparative balance sheet (current month a year ago, year end, prior month, current month) for reasonableness of trend. Considering among other things: * Appropriateness of changes in balances. For instance, in general, real estate would go up unless property was sold. A decrease may be an indication of a journal entry accrual reversal that may need to be reset up or an item that has been overaccrued for in which case no adjustment may be needed. Also consider reasonableness of increases based on current improvement and leasing activity. *Appropriateness of cyclical accruals such as property taxes against accrual same time previous year *Reasonableness of Allowance for Doubtful Accounts based on PPR review and in relation to change and size of A/R balance *Appropriateness of static balances. Eg. Utility deposits are generally static and might be ok; while a static balance in other assets should be investigated.

5.

Review 12 month income statement for appropriateness of trends over 12 months, considering impact of leasing activity above and items subject to seasonality such as utility expenses and related reimbursement income. Compare Total YTD column on 12 month income statement to Total Budget column and review significant variances for reasonableness. Consider comments in prior month PPR and included in monthly accrual package

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EXHIBIT E

SCHEDULE OF SOURCES AND USES OF FUNDS

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LIMITED LIABILITY COMPANY AGREEMENT
OF KBS SOR II 210 WEST 31ST STREET, LLC

THIS AGREEMENT HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, 15 U.S.C. § 15b ET SEQ., AS AMENDED (THE “FEDERAL ACT”), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL ACT. IN ADDITION, THE ISSUANCE OF THIS SECURITY HAS NOT BEEN QUALIFIED UNDER THE DELAWARE SECURITIES ACT OR ANY OTHER STATE SECURITIES LAWS (COLLECTIVELY, THE “STATE ACTS”), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM THE REGISTRATION PROVISIONS OF THE STATE ACTS. IT IS UNLAWFUL TO CONSUMMATE A SALE OR OTHER TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN TO, OR TO RECEIVE ANY CONSIDERATION THEREFOR FROM, ANY PERSON OR ENTITY WITHOUT THE OPINION OF COUNSEL FOR THE COMPANY THAT THE PROPOSED SALE OR OTHER TRANSFER OF THIS SECURITY DOES NOT AFFECT THE AVAILABILITY TO THE COMPANY OF SUCH EXEMPTIONS FROM REGISTRATION AND QUALIFICATION, AND THAT SUCH PROPOSED SALE OR OTHER TRANSFER IS IN COMPLIANCE WITH ALL APPLICABLE STATE AND FEDERAL SECURITIES LAWS. THE TRANSFER OF THIS SECURITY IS FURTHER RESTRICTED UNDER THE TERMS OF THE LIMITED LIABILITY COMPANY AGREEMENT GOVERNING THE COMPANY, A COPY OF WHICH IS ON FILE WITH THE COMPANY.

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EX-10.46

Exhibit 10.46

PURCHASE AND SALE AGREEMENT

TO ASSIGN EIGHTY PERCENT (80%) OF GROUND LEASE

BY AND BETWEEN

ONYX 31^ST STREET, LLC

AND

210 WEST 31^ST STREET OWNER, LLC

DATED AS OF October 28, 2016

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THIS PURCHASE AND SALE AGREEMENT TO ASSIGN EIGHTY PERCENT (80%) OF GROUND LEASE (this "AGREEMENT") is made as of this 28^th day of October, 2016 (the “EFFECTIVE DATE”), by and between ONYX 31^ST STREET, LLC, a Delaware limited liability company (“Onyx”), having an address at c/o Onyx Equities, LLC, 900 Route 9 North, Suite 400, Woodbridge, New Jersey 07095, and such other entities as join as sellers (collectively, "SELLER") and 210 WEST 31^ST STREET OWNER, LLC, a Delaware limited liability company, having an address at c/o Onyx Equities, LLC, 900 Route 9 North, Suite 400, Woodbridge, NJ 07095 ("PURCHASER"). The term “SELLER” shall also include the TIC Holders that will join this Agreement as sellers prior to Closing by executing a Joinder pursuant to Section 8.4(h) below (as such capitalized terms are defined below).

W I T N E S S E T H:

WHEREAS, THE PROVINCE OF ST. MARY OF THE CAPUCHIN ORDER, a New York religious corporation, with an address at 30 Gedney Park Drive, White Plains, New York 10605 ("GROUND LESSOR"), as landlord, and Onyx, as tenant, entered into that certain Amended and Restated Lease Agreement dated as of December 30, 2014, as modified by Second Amendment to Option Agreement and First Amendment to Lease dated December 30, 2014 (collectively, the "GROUND LEASE"), whereby Onyx leased that certain land situate and lying in the Borough of Manhattan, County and State of New York (the "LAND") and all improvements existing thereon (which together with the Land, herein referred to as the “PROPERTY”) known as 210 West 31^st Street, New York, New York and more particularly described in EXHIBIT A annexed hereto;

    WHEREAS, Seller desires to assign, and Purchaser desires to assume all of Seller’s right, title and interest in and to the Ground Lease, subject to the terms and conditions set forth herein; provided that Onyx shall retain a 20% interest in the Ground Lease and contribute that retained interest to the Joint Venture (as defined) in a transaction subject to Section 721 of the Internal Revenue Code of 1986, as amended.

WHEREAS, following the acquisition of the Property, Purchaser proposes to redevelop the Property from its current, vacant use into two-story retail building with basement and rooftop deck (the “PROPOSED REDEVELOPMENT”).

NOW, THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.    SUBJECT OF THE ASSIGNMENT

Subject to the terms and conditions set forth in this Agreement, Seller hereby agrees to assign, and Purchaser hereby agrees to assume, all of the Seller’s right, title and interest, as tenant, in and to the Ground Lease, which leasehold interest shall be deemed to include eighty percent (80%) of Seller’s right, title and interest in and to the following:

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(a)     all right, title and interest of Seller, if any, in, to and under the Land;

(b)    all the right, title and interest of Seller in and to the buildings, structures and improvements, together with, all and singularly, the tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, now erected or situate on or in the Land, or now situate on or appurtenant to such buildings, structures and improvements (collectively, the “BUILDING”);

(c)    The fixtures, equipment, machinery, inventory and personal property at the Building owned by Seller or its affiliates (collectively, the “PERSONAL PROPERTY”)

(d)    any and all easements, rights of way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, and all estates, rights, titles, interests, privileges, liberties, tenements, hereditaments and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Property and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Property, to the center line thereof (collectively, the "EASEMENTS");

(e)     any and all approvals, permits, licenses, entitlements, governmental approvals and agreements, including but not limited to environmental permits, subdivision approvals, development agreements, development approvals, building permits, site plans and approvals relating to the development and use of the Property, and specifically including, without limitation, any approvals required under any declaration of covenants, conditions and restrictions or any other private agreement affecting the Property, any and all plans, specifications, architectural and engineering drawings, warranties, and guaranties in connection with the Planned Redevelopment (collectively, the "PERMITS AND LICENSES"), and any additional grants of rights to SELLER (the "INTANGIBLE PROPERTY");

        (f)    any and all awards or payments, including interest thereon, which may heretofore and hereafter be made with respect to the Property, whether from the exercise of the right of eminent domain or for a change of grade or for any other injury to or decrease in the value of the Property;

1 Subject to the retention by Onyx of twenty percent (20%) of Seller’s interest in the Ground Lease (“Contributed Interest”) which shall be contributed by Onyx pursuant to Section 721 of the Internal Revenue Code of 1986, as amended, in consideration for a twenty percent (20%) membership interest in KBS SOR II 210 West 31^st Street, LLC, a Delaware limited liability company (the “JOINT VENTURE”), in accordance with the terms of the Joint Venture Limited Liability Company Agreement attached hereto as Exhibit 1 (“JOINT VENTURE AGREEMENT”).

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    (h)    all right, title and interest of Seller, if any, in, to and under that certain License and Access Agreement dated January 20, 2016, by and between Seller and Church of St. John the Baptist; and

(i)all other rights, interests and privileges (if any) held by Seller in any way related to the rights and interests described above in this Section.

Eighty percent (80%) of the Building, Personal Property, Easements, the Intangible Property, and all other interests in the Property held by Seller, together with the Ground Lease, shall hereinafter be collectively referred to as the "LEASE".

2. CONSIDERATION FOR THE ASSIGNMENT

2.1 (a) As consideration for the assignment (the "CONSIDERATION"), Purchaser shall pay to Seller the sum of Thirty-Eight Million Four Hundred Thousand Dollars ($38,400,000.00)(the “PURCHASE PRICE”), as adjusted pursuant to Article 9 below, for the assignment of all of Seller’s right, title and interest in and to the Lease as follows:

(i)Within two (2) Business Days (as hereinafter defined) following the Effective Date, Three Million Dollars ($3,000,000.00)(the "DEPOSIT") by wire transfer or good, unendorsed, certified or bank teller’s check (or checks), payable to the order of First American Title Insurance Company, 18500 Von Karman Avenue, Suite 600, Irvine, CA 92612, Attn: Ms. Patty Beverly, Telephone: (949) 885-2465, Fax: (877) 372-0260, Email: pbeverly@firstamerican.com, as Escrow Agent ("ESCROW AGENT");

(ii)On the Closing Date (as hereinafter defined), TIME BEING OF THE ESSENCE with respect to such date, subject to the adjustments provided in Article 9 below, the balance of the Purchase Price payable by federal electronic wire transfer of immediately available funds or by good, unendorsed, certified check, or by bank teller’s check to the order of Escrow Agent.

(b) In the event that the check (or checks) comprising the Deposit is (or are) not paid when the check (or checks) is (or are) presented for payment, such non-payment shall constitute a material default of Purchaser hereunder for which Seller shall have the option to terminate this Agreement and if Seller shall elect to terminate this Agreement, neither party shall have any further rights or obligations under this Agreement, except that Seller shall have the right to pursue its rights and remedies to collect the proceeds of said check, checks or payment.

(c) All checks being given by Purchaser under this Agreement must be drawn on a member bank of the New York Clearing House Association.

3. TITLE MATTERS TO WHICH THE ASSIGNMENT IS SUBJECT

3.1 The Lease shall be assigned to Purchaser subject to the following (collectively, the "PERMITTED ENCUMBRANCES"):

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(a)all presently existing and future liens for real estate taxes, personal property taxes, water charges, and sewer charges not yet due and payable as of the Closing Date, subject to adjustment as hereinafter provided;

(b)all present and future zoning, building, environmental and other laws, statutes, ordinances, codes, rules, regulations, requirements, or executive mandates affecting the Property including, without limitation, landmark designation and all zoning variances and special exceptions, if any, provided that they are not violated by the existing buildings and improvements erected on the Land or their use;

(c)the following state of facts shown by that certain survey #64514-4 dated October 14, 2016, prepared by Montrose Surveying Co, LLP (the “SURVEY”);

(d)any current certificate of occupancy, whether permanent or temporary;

(e)Memorandum of Lease, dated January 26, 2015, recorded in CRFN 2015000085718, as amended and restated by Memorandum of Amended and Restated Lease, dated July 6, 2015, recorded in CRFN 2015000236984;

(f)all violations of building, fire, sanitary, environmental, housing and similar laws and regulations whether or not noted or issued at the date hereof or at the date of Closing and any liens which have attached to the Property prior to the Closing pursuant to the Administrative Code of the City of New York, if applicable, shall be removed or complied with by Seller and Seller shall pay or cause to be paid any fines or penalties imposed by reason of any such violations;

(g)Rights and Easements recited in the deed recorded in Liber 4925 Page 319, as modified by Termination of Easement Agreement recorded in CRFN 2015000085721;

(h)Easement Agreement, dated February 26, 2015, recorded in CRFN 2015000085719;

(i)Encroachment Agreement, dated February 26, 2015, recorded in CRFN 2015000085720;

(j)Zoning Lot Certificate, dated May 26, 2015, recorded in CRFN 2015000257585;

(k)Zoning Lot Development Agreement, dated July 3, 2015, recorded in CRFN 2015000257586;

(l)Declaration of Zoning Lot Restrictions, dated July 3, 2015, recorded in CRFN 2015000257857; and

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(m)Waiver of Execution of Declaration of Zoning Lot Restrictions, Consent and Subordination to Zoning Lot Development Agreement, dated July 2, 2015, recorded in CRFN 2015000257588.

3.2 Purchaser shall cause First American Title Insurance Company, 18500 Von Karman Avenue, Suite 600, Irvine, CA 92612, Attn: Ms. Jill Bertea, Telephone: (949) 885-2461, Fax: (714) 913-6806, Email: jbertea@firstamerican.com, as Title Company (“TITLE COMPANY”) to prepare a title search and commitment for a leasehold insurance policy (the "TITLE COMMITMENT") and shall cause a copy of the same to be delivered to counsel for Seller and Purchaser as soon as reasonably practicable. At Seller’s option, Seller may coordinate all title matters directly with Christine Monti, Esq. of Advantage Title, 201 Old Country Road, Suite 200, Melville, NY 11747, Telephone: (631) 424-6100, Email: cmonti@advantagetitle.com, as agent for Stewart Title Company (the “SELLER’S TITLE COMPANY”). Seller’s Title Company and Title Company shall enter into a sharing agreement pursuant to which they shall share all title insurance premiums payable in connection with the issuance of the Title Policy (as defined below) so that Title Company receives seventy-five percent (75%) of the title premiums and Seller’s Title Company receives twenty-five percent (25%) of the title insurance premiums. Purchaser and Seller agree that Title Company shall be the lead title company. To the extent Seller’s Title Company:

(i)    requires from Seller or Purchaser anything not required by Title Company in connection with the issuance of the Title Policy and/or any endorsements issued in connection therewith, or

(ii)    is unwilling to insure over or indorse over any title exceptions that Title Company is willing to indorse or insure over,

then Title Company shall be the only title company issuing the Title Policy unless Seller selects an alternative Seller’s Title Company that is willing to provide the same title coverage provided by, and is willing to accept the same documentation provided to, Title Company.

If any defects, objections or exceptions in the title to the Property appear in the Title Commitment (other than the Permitted Encumbrances) which Purchaser is not required to accept under the terms of this Agreement, Seller agrees to use good faith efforts to cure the same prior to the Closing, and in any event to cure, at its expense, the following: (a) judgments against Seller, (b) leasehold mortgages by Seller and other liens which can be satisfied by the payment of a liquidated amount, and (c) defects, objections or exceptions which can be removed by payments not to exceed, in the aggregate, the sum of $100,000.00. Seller, in its discretion, may adjourn the Closing for up to sixty (60) days in order to eliminate unacceptable defects, objections or exceptions. If, after complying with the foregoing requirements, Seller is unable to eliminate all unacceptable defects, objections or exceptions in accordance with the terms of this Agreement on or before such adjourned date for the Closing, Purchaser shall elect either (x) to terminate this Agreement by notice given to the Seller, in which event the provisions of Section 3.4 shall apply, or (y) to assume the

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Lease subject to such unacceptable defects, objections or exceptions with a credit against or reduction in the Purchase Price. Seller agrees and covenants that it shall not voluntarily place or consent to or acquiesce in a third party placing any defects, objections or exceptions to title to the Property from and after the date of the first issuance of the Title Commitment for the Lease. However, nothing herein shall require Seller to start any lawsuit or other proceeding, or incur any expense in excess of an aggregate of $100,000.00, to clear from title any matter pursuant to clause (c) above.

3.3     It shall be a condition to Purchaser’s obligation to close that:

(a)(1) Seller assign its eighty percent (80%) interest in the Ground Lease pursuant to Section 8.4(a) below, (2) Seller assign its twenty percent (20%) interest in the Ground Lease to Purchaser pursuant to the Joint Venture Agreement, and (3) the Title Company insure, at a standard rate for such insurance, one hundred percent (100%) of the leasehold interest in the Property equal to the amount of $48,000,000.00 (which represents the sum of the Purchase Price paid for the 80% interest in the Ground Lease and the $9,600,000 value attributable to the twenty percent (20%) interest in the Ground Lease assigned pursuant to the Joint Venture Agreement) in the name of Purchaser or its designees, after execution and delivery of the Ground Lease Assignment as defined in and pursuant to Section 8.4(a), by a standard leasehold fee insurance policy substantially in the form of EXHIBIT 3.3(a) attached hereto, with endorsements as may be available and are required by Purchaser, including a non-imputation endorsement(s) as each entity assigning the one hundred percent (100%) interest in the Ground Lease, free and clear of all liens, encumbrances and other matters, other than the Permitted Encumbrances (the "TITLE POLICY").

    (b) Seller shall provide such affidavits (including title affidavits and survey affidavits of no change) and undertakings as the Title Company may reasonably require, including to customary affidavit(s) to enable Title Company to issue a non-imputation endorsement in favor of KBS affiliate member of the Joint Venture as to the knowledge of each of the entities assigning the one hundred percent (100%) of the Ground Lease. In addition, if the Title Commitment discloses judgments, bankruptcies or other returns against other persons having names the same as or similar to that of Seller, Seller shall, upon request, deliver to the Title Company affidavits showing that such judgments, bankruptcies or other returns are not against Seller or any of its affiliates. Upon request by Purchaser, Seller shall deliver any affidavits and documentary evidence as reasonably required by the Title Company to eliminate the standard or general exceptions in the Title Policy.

    (c) The words "insurable title" and "insurable" as used in this Agreement are hereby defined to mean title, which is insurable at standard rates (without special premium) by the Title Company without exception other than the Permitted Encumbrances and the standard printed 2006 ALTA policy and survey exceptions.

3.4 If Purchaser and Seller mutually determine that it is not possible for Seller to assign and/or cause to be assigned one hundred percent (100%) of the leasehold estate of the Ground Lease to Purchaser at Closing in accordance with the terms of this Agreement and the Joint Venture Agreement, then Purchaser shall have the right to terminate this Agreement, in which event the Escrow Agent shall immediately return the Deposit to Purchaser. In such event, neither party shall

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have any further rights or obligations hereunder other than those which are expressly stated herein to survive any such termination.

4. REPRESENTATIONS AND WARRANTIES OF SELLER; PURCHASER’S DUE DILIGENCE INVESTIGATIONS

4.1     In order to induce Purchaser to perform as required hereunder, Seller represents and warrants the following:

(a) Seller is a duly organized and validly existing limited liability company organized under the laws of the State of Delaware, and has all requisite power and authority to execute and deliver this Agreement and all other documents and instruments to be executed and delivered by it hereunder, and to perform its obligations hereunder and under such other documents and instruments in order to assign the Lease in accordance with the terms and conditions hereof. Seller is qualified to do business and in good standing in the State of New York. All necessary actions of the members of Seller to confer such power and authority upon the person(s) executing this Agreement and all documents, which are contemplated by this Agreement on its behalf, have been taken.

(b) This Agreement, when duly executed and delivered, shall be the legal, valid and binding obligation of Seller, enforceable in accordance with the terms of this Agreement. The performance by Seller of its duties and obligations under this Agreement and the documents and instruments to be executed and delivered by it hereunder will not conflict with, or result in a breach of, or default under, any provision of any of the organizational documents of Seller or any agreements, instruments, decrees, judgments, injunctions, orders, writs, laws, rules or regulations, or any determination or award of any court or arbitrator to which Seller is a party or by which its assets are or may be bound.

    (c) The Ground Lease is a valid and bona fide obligation of Seller and, to Seller's knowledge, of Ground Lessor, and is in full force and effect. No defaults exist thereunder and Ground Lessor has not issued to Seller any outstanding notices of default. To Seller's knowledge, no condition exists which, with the passage of time or the giving of notice or both, shall become a default. As of the date hereof, the Ground Lease constitutes the only lease, tenancy or occupancy affecting the Property, there are no other agreements which confer upon any tenant or any other person or entity any rights with respect to the Property, and there are no tenants or any other person in occupancy of the Property. Seller has delivered a true, correct and complete copy of the Ground Lease to Purchaser.

(d) Seller has performed all of the obligations and observed all of the covenants required of it as tenant under the Ground Lease. Any and all work which may be performed at the Property from the date hereof to the Closing Date shall be in accordance with the rules, laws and regulations of all applicable authorities. Any bills and claims for labor performed and materials furnished to or for the benefit of the Property shall be paid in full by Seller on or prior to the Closing Date.

(e) There are no actions, suits, labor disputes, litigation or proceedings currently pending or, to the knowledge of Seller, threatened against or related to Seller or to all or any part of the

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Property, the environmental condition thereof, or the operation thereof, nor does Seller know of any basis for any such action.

(f) To Seller’s knowledge, there are no outstanding requirements or recommendations by (i) the insurance company(s) currently insuring the Property; (ii) any board of fire underwriters or other body exercising similar functions, or (iii) the holder of any leasehold mortgage encumbering any of the Property, which require or recommend any repairs or work to be done on the Property.

(g) Seller has received no written notice and has no actual knowledge of (i) any pending or contemplated annexation or condemnation proceedings, or private purchase in lieu thereof, affecting or which may affect the Property or any part thereof, (ii) any proposed or pending proceeding to change or redefine the zoning classification of all or any part of the Property, (iii) any proposed or pending special assessments affecting the Property or any portion thereof, (iv) any penalties or interest due with respect to real estate taxes assessed against the Property, and (v) any proposed change(s) in any road or grades with respect to the roads providing a means of ingress and egress to the Property. Seller agrees to furnish Purchaser with a copy of any such notice received within two (2) business days after its receipt.

(h) Seller has provided Purchaser with all reports, including, without limitation, the Property Documents as defined in Section 4.2, in Seller's possession or under its control related to the physical condition of the Property.

(i) There are no obligations in the nature of a leasing commission due and owing from Seller with respect the Ground Lease or any amendments thereto or with respect to any past or current lease of space at the Property entered into from and after the date of the Ground Lease.

(j) Seller has not made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by Seller's creditors, suffered the appointment of a receiver to take possession of all or substantially all of Seller's assets, suffered the attachment or other judicial seizure of all or substantially all of Seller's assets, admitted in writing its inability to pay its debts as they come due or made an offer of settlement, extension or composition to its creditors generally.

(k) No other person or entity has any purchase option, right of first refusal or right of first offer with respect to any sale of the Ground Lease or Property.

(l) Neither Seller nor any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities.

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(m) Seller has provided or made available to Purchaser all Property Documents in Seller’s possession or control.

(n) The service contracts listed on EXHIBIT 4.1(n) attached hereto (the “SERVICE CONTRACTS”) are all of the service contracts affecting the Property that Purchaser shall assume pursuant to the provisions of SECTION 4.5 hereof. Except for the Service Contracts and the contracts or agreements executed by Seller in connection with the Planned Redevelopment (collectively, the “REDEVELOPMENT CONTRACTS”), there shall not be any Service Contracts or contracts or agreements of any type pertaining the Property, the obligation or liability for which Purchaser or the Property could be liable after the Closing.

(o) To Seller’s knowledge, except as disclosed in the Property Information: (i) none of the Property, including subsurface oil and groundwater, contains any substance including, but not limited to, any radioactive substance, hydrocarbons, industrial solvents, oil, petroleum byproducts, metals, flammables, or other hazardous substances or toxic materials, which would presently, or at any time in the future, cause a health, safety or environmental hazard on the Property or to any Person who may enter or use the Property or which may require remediation at the request of any governmental authority (collectively, “HAZARDOUS MATERIALS”), excluding any asbestos or asbestos containing materials whether or not disclosed in any report, including, without limitation, the Property Information; (ii) the ownership, operation, use or condition of all of the Property is not in violation of any federal, state or local law, ordinance or regulation relating to Hazardous Materials, industrial hygiene, hazardous or toxic materials (or similarly defined substances, materials or wastes) or environmental protection; (iii) no person has generated, manufactured, stored, treated or disposed of Hazardous Materials on, into or under the Property or transported any Hazardous Materials to, from or across the Property; and (iv) none of the Property contains any underground treatment or storage tanks. As used herein, the phrase “to Seller’s knowledge” shall mean to the actual knowledge of Seller’s managing principal, John Saraceno, Jr.

4.2    (a) During the term of this Agreement, Purchaser shall have reasonable access to the Property at all reasonable times during normal business hours, upon appropriate notice to Seller, for the purpose of conducting reasonable inspections and investigations of the Property and its environs as Purchaser deems necessary or desirable, which shall expressly include the right to conduct a Phase I environmental investigation of the Property; provided that (i) Purchaser must give Seller not less than twenty-four (24) hour prior telephone or written notice of any such inspection and, with respect to any intrusive inspection or investigations, including, without limitation, any Phase II environmental investigation, that Purchaser must obtain Seller’s prior written consent, which consent may be granted or withheld in Seller’s sole discretion, (ii) prior to performing any inspection or test, Purchaser must deliver a certificate of insurance to Seller evidencing that Purchaser and its contractors, agents and representatives have in place reasonable amounts of comprehensive general liability insurance and workers compensation insurance for its activities at the Property on terms and in amounts reasonably satisfactory to Seller covering any accident arising in connection with the presence of Purchaser, its contractors, agents and representatives on the Property, which insurance shall name, by endorsement, Seller as additional insured thereunder, and (iii) all such tests shall be conducted by Purchaser in compliance with the Purchaser’s responsibilities set forth in Section 4.2(e) below.

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(b)If this Agreement terminates for any reason other than Seller’s default hereunder, Purchaser shall promptly return and/or deliver to Seller all Property Documents and copies thereof, provided that Purchaser shall be permitted to retain copies of the Property Documents in connection with Purchaser’s internal record retention policies. The term “PROPERTY DOCUMENTS” shall mean all documents or other information relating to the Property, which Seller provides or has provided to Purchaser, including, without limitation, all documents set forth on Exhibit 4.2(b) attached hereto, together with all documents, plans, budgets, submissions and other documents in connection with the Proposed Redevelopment. Additionally, if this Agreement terminates for any reason other than Seller’s default, Seller may request that Purchaser deliver to Seller copies of all third party reports, investigations and studies, other than economic analyses, privileged or confidential materials, or Purchaser’s internally prepared reports and memoranda (collectively, the “REPORTS” and, individually, a “REPORT”) prepared for Purchaser in connection with its due diligence review of the Property provided Seller reimburse Purchaser all reasonable out-of-pocket costs associated with the Reports. The Reports shall be delivered to Seller without any representation or warranty as to the completeness or accuracy of the Reports or any other matter relating thereto, and Seller shall have no right to relay on any Report without the written consent of the party preparing the same. Purchaser’s obligation to deliver the Property Documents and the Reports to the Seller shall survive the termination of this Agreement.

(c)Purchaser acknowledges that the Property Documents are proprietary and confidential and will be delivered to Purchaser solely in connection with its evaluation of the potential purchase and financing of the Property. Subject to the confidentiality provisions of Article 14 below, (i) Purchaser shall not use the Property Documents for any purpose other than as set forth in the preceding sentence, and (ii) Purchaser shall not disclose the content of the Property Documents to any person other than to those persons who are responsible for assisting Purchaser with Purchaser’s potential acquisition and financing of the Property and who have agreed, in writing, to preserve the confidentiality of such information as required hereby (collectively, “PURCHASER’S REPRESENTATIVES”). For the avoidance of doubt, the term “Purchaser’s Representatives” shall expressly include any lender or potential lender (and their counsel) evaluating providing financing to the Property and/or any financing broker engaged by Purchaser in connection with the same. At any time and from time to time, within two (2) Business Days after Seller’s request, Purchaser shall deliver to Seller a list of all parties to whom Purchaser has provided any Property Documents. Purchaser shall not divulge the content of the Property Documents and other information, except in strict compliance with the confidentiality standards set forth in this Section 4.2(c) and Article 14 below. In permitting Purchaser to review the Property Documents or any other information, Seller has not waived any privilege or claim of confidentiality with respect thereto, and no third party benefits or relationships of any kind, either express or implied, have been offered, intended or created.

(d)Purchaser acknowledges that, except as expressly set forth in this Agreement,

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Seller has not made and does not make any warranty or representation regarding the truth, accuracy or completeness of the Property Documents or the source (s) thereof. Purchaser further acknowledges that some, if not all, of the Property Documents were prepared by third parties other than Seller. Seller expressly disclaims any and all liability for representations or warranties, express or implied, statements of facts and other matters contained in such information, or for omissions from the Property Documents, or in any other written or oral communications transmitted or made available to Purchaser. Purchaser shall rely solely upon its own investigation with respect to the Property, including, without limitation, the Property’s physical, environmental and economic condition, compliance or lack of compliance with any ordinances, order, permit or regulation or any other attribute or matter relating thereto. Seller has not undertaken any independent investigation as to the truth, accuracy or completeness of the Property Documents and is providing the Property Documents solely as an accommodation to Purchaser.

(e)In conducting any inspections, investigations or tests of the Property or any other part of the Property, and/or the Property Documents, Purchaser and its agents and representatives shall: (i) not unreasonably interfere with the operation and maintenance of the Property; (ii) not damage any part of the Property or any Personal Property owned or held by the Seller or any third party, including subtenants; (iii) not intentionally injure or otherwise cause bodily harm to Seller or any third party, or their respective agents, guests, invitees, contractors and employees, (iv) comply with all applicable laws, rules and regulations; (e) promptly pay when due the costs of all tests, investigations, and examinations done with regard to the Property or any other part of the Property; (v) not permit any liens to attach the Property by reason of the exercise of its rights hereunder; (vi) immediately repair any damage to the Property resulting directly from any such inspection or tests; and (vii) subject to the confidentiality provisions of Article 14 below, not reveal or disclose prior to Closing any information obtained during its inspection concerning the Property and/or the Property Documents to anyone other than the Purchaser’s Representatives, in accordance with the confidentiality standards set forth in Section 4.2(e) above and Article 14 below, or except as may be otherwise required by law.

(f)Purchaser shall indemnify and hold harmless Seller from and against any and all liens, claims, causes of action, damages, liabilities and expenses (including reasonable attorneys’ fees and disbursements) arising out of Purchaser’s inspections or tests permitted under this Agreement or any violation of the provisions of Section 4.2 and all subsections hereof; provided, however, that the foregoing indemnity shall not extend to protect Seller from, and Purchaser shall have no obligation to indemnify Seller for, any pre-existing liabilities for matters merely discovered by Purchaser (e.g., latent environmental contamination). Purchaser’s obligations under this Section 4.2(f) shall survive the termination of this Agreement and shall survive the Closing.

(g)Intentionally omitted.

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4.3 All representations and warranties made by Seller in this Agreement shall be true and correct as of the date hereof, shall be deemed restated on and shall be true and correct as of the Closing Date. The representations, warranties or covenants made by Seller in this Agreement shall not be merged in the delivery of the Ground Lease Assignments and shall survive the Closing for a period of nine (9) months following the Closing Date, except (and only to the extent) expressly provided otherwise herein.

    4.4 Purchaser acknowledges and agrees that, except as provided in this Agreement, Seller has not made any representations or warranties of any kind or character whatsoever, whether express or implied, with respect to the Property and that, except as provided in this Agreement, Purchaser accepts the Property in its "AS IS" condition. Purchaser acknowledges that it is not in a significantly disparate bargaining position with respect to Seller in connection with the transaction contemplated by this Agreement and that Purchaser was represented by legal counsel in connection with this transaction.

4.5 Purchaser shall be required to assume at Closing, the Service Contracts and all Redevelopment Contracts of which Purchaser received written notice from Seller prior to Closing. Purchaser will assume the obligations first accruing and arising from and after the Closing Date under those Service Contracts that are not in default as of the Closing Date and which Purchaser has elected to assume. Seller shall terminate at Closing, and Purchaser shall not assume, any property management or leasing agreement affecting the Property.

5. REPRESENTATIONS AND WARRANTIES OF PURCHASER

5.1     In order to induce Seller to perform as required hereunder, Purchaser hereby warrants and represents the following:

(a) Purchaser is a duly organized and validly existing limited liability company organized under the laws of the State of Delaware and is authorized to do business in the State of New York,has all requisite power and authority to execute and deliver this Agreement and all other documents and instruments to be executed and delivered by it hereunder, and to perform its obligations hereunder and under such other documents and instruments in order to purchase the Ground Lease in accordance with the terms and conditions hereof. All necessary actions of Purchaser to confer such power and authority upon the person(s) executing this Agreement and all documents, which are contemplated by this Agreement on its behalf, have been taken.

(b) This Agreement, when duly executed and delivered, will be the legal, valid and binding obligation of Purchaser, enforceable in accordance with the terms of this Agreement. The performance by Purchaser of its duties and obligations under this Agreement and the documents and instruments to be executed and delivered by it hereunder will not conflict with, or result in a breach of, or default under, any provision of any of the organizational documents of Purchaser or any agreements, instruments, decrees, judgments, injunctions, orders, writs, laws, rules or regulations, or any determination or award of any court or arbitrator, to which Purchaser is a party or by which its assets are or may be bound.

(c) Neither Purchaser nor any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners (other than any shareholder of any REIT that owns an indirect

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interest in Purchaser), and none of their respective employees, officers, directors, representatives or agents is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of OFAC of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such persons or entities.

(d) KBS Strategic Opportunity REIT, Inc. (“KBS”) (an indirect owner of Purchaser) has received board approval authorizing it to consummate the transactions contemplated hereby.

5.2     All representations and warranties made by Purchaser in this Agreement shall not be merged in the delivery of the Ground Lease Assignments and shall survive the Closing Date for a period of nine (9) months.

6. COVENANTS OF SELLER

6.1 Seller covenants and agrees that between the date hereof and the Closing Date, it shall perform or observe the following:

(a) Seller shall not defer taking any actions or spending any of its funds or otherwise manage the Property differently (other than in the ordinary course of business) on account of the pending assignment of its leasehold interest to Purchaser. Seller shall continue to manage, operate and maintain the Property in substantially the same manner heretofore managed, operated and maintained by Seller and perform tenant’s obligations under the Ground Lease. All insurance policies carried by Seller with respect to the Property and in effect as of the Effective Date shall remain in effect until Closing.

(b) Seller shall not enter into any new agreements, leases or subleases of any nature whatsoever with respect to the Property or terminate, amend, modify, extend, renew or assign the Ground Lease without Purchaser’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed.

(c) Seller shall not cause or permit its leasehold interest in the Property to be alienated, further mortgaged, licensed, encumbered or otherwise transferred.

(d) Purchaser shall have the right to cooperate with Seller in connection with the pursuit of the Planned Redevelopment, including the right to review and approve all plans, specifications, and submissions prior to the submission of same to Governmental Authorities (as defined below) and other third parties. Seller shall promptly provide Purchaser with advanced written notice of all meetings with architects, contractors, and engineers, and all hearings and meetings with Governmental Authorities including, without limitation, city staff meetings and other meetings related to the approval of applications or submissions in connection with the Planned Redevelopment (collectively, the “DEVELOPMENT APPROVALS”). Seller agrees to use good faith efforts to

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cause Ground Lessor to execute such plats, including any necessary lot splits, and make such dedications as may be required whereby the Property shall be a “legal lot” under all applicable ordinances, laws, and regulations, and to cause Ground Lessor to provide easements, in form and substance reasonably satisfactory to Purchaser, for access and utilities as may be required in connection with the Development Approvals and as required by utility companies or any Governmental Authorities with respect to the Proposed Redevelopment. Seller shall use good faith efforts to cause Ground Lessor to make and grant such plats and dedications at such times as may be required by the applicable Governmental Authority.

(e) Seller shall make all required payments under any mortgage affecting its leasehold interest in the Property within any applicable grace period but without reimbursement by Purchaser therefor.

(f) In addition to the foregoing, Seller shall:

(i)    promptly notify Purchaser of, and promptly deliver to Purchaser, a certified true and complete copy of any notice which Seller may receive, on or before the Closing Date, from any agency, board, bureau, commission, department, office or body of any municipal, county, state or federal governmental unit, or any subdivision thereof, having asserting or acquiring jurisdiction over all or any part of the Property or the management, operation, use or improvement thereof (each a “GOVERNMENTAL AUTHORITY,” and collectively, the “GOVERNMENTAL AUTHORITIES”) concerning a violation of any government regulation, law, or ordinance, any notice of default and other material notices affecting the Property or the Ground Lease;

(ii) without any cost or expense to Seller, including but not limited to any attorneys’ fees, cooperate with Purchaser in all reasonable respects in connection with any financing sought by Purchaser in connection with its acquisition of the Ground Lease to the Property including any request by Purchaser for Seller to cause Seller’s lender to consent to an assignment of Seller’s mortgage to Purchaser’s lender, provided, however, Purchaser hereby agrees and acknowledges that (A) this agreement and the Closing shall not be subject to or conditioned upon Purchaser obtaining any commitment for such financing or receiving the proceeds of any such financing, (B) the Closing shall not be delayed due to the requirements of the lender giving such financing, and (C) that satisfaction of any and all requirements of such lender shall be the sole responsibility of Purchaser, at its sole cost and expense. The reasonableness of any such lender requirements shall be judged by local New York City lender standards.

(g)    From and after the Effective Date, Seller shall not market, solicit, negotiate or enter into any agreement with any party other than Purchaser for the sale or transfer of any interest in the Property, unless this Agreement shall be terminated for any reason.

7. AS-IS

(a) Purchaser hereby agrees to accept the Ground Lease Assignments from Seller and accept the Property in its "as is, where-is" condition on the date hereof, subject to reasonable use, wear, tear and natural deterioration between the date hereof and the Closing Date. Furthermore, Purchaser acknowledges that it shall accept the assignment of the leasehold interest of the Property in strict accordance with the Ground Lease, and that this Agreement in no way modifies or supersedes any of the provisions of the Ground Lease.

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(b) Subject to Section 4.2 and except as otherwise provided in this Agreement, Purchaser has investigated, and is satisfied with, the Property and the physical condition, including expenses and operations and environmental matters, and all other matter or things affecting or relating to the Property and Purchaser is fully familiar with the Property. Purchaser accepts the Property in its "as-is, where-is" condition, including without limitation, all environmental conditions and all latent and patent defects. Purchaser expressly acknowledges that it is fully familiar with the physical condition of the Property as of the date hereof, Purchaser hereby accepts the condition of the Property with all personalty, fixtures, trash, debris, if any, and Purchaser further expressly acknowledges that Seller has no obligation whatsoever with respect to the delivery of the Property at Closing or the condition thereof and that Seller has no obligation whatsoever to do any work in connection with the Property including, without limitation, no obligation whatsoever to remove governmental violations or related liens, if any, if such removal is the responsibility of a subtenant pursuant to a sublease. Except as expressly provided in this Agreement, neither Seller, nor the employees, agents, representatives, accountants or attorneys of Seller, have made any verbal or written representations or warranties whatsoever with respect to the Property, or the physical condition or operation of the Property, or any building systems thereof or personal property therein, the revenues and expenses generated by and associated with the Property, the zoning and other laws, regulations and rules applicable thereto or the compliance by the Property therewith. Purchaser has not and will not rely on any representations or warranties made by Seller, and Purchaser acknowledges that no such representations or warranties have been made by Seller except to the extent expressly provided in this Agreement.

(c) IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT, EXCEPT AS PROVIDED HEREIN, SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESSED OR IMPLIED, WITH RESPECT TO THE COMMERCIAL PREMISES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL OR ENVIRONMENTAL CONDITIONS, UTILITIES, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PREMISES WITH GOVERNMENTAL LAWS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE PREMISES, DOCUMENTS OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE PREMISES. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING PURCHASER SHALL ACCEPT THE PREMISES "AS IS", "WHERE IS", WITH "ALL FAULTS." PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PREMISES OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, PREMISES INFORMATION PACKAGES DISTRIBUTED WITH RESPECT TO THE PREMISES) MADE OR FURNISHED BY SELLER, THE MANAGER OF THE PREMISES, OR ANY REAL ESTATE BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT SELLER, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING. PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS CONDUCTED, OR WILL

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CONDUCT, SUCH INVESTIGATIONS OF THE PREMISES, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE PREMISES AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS MATERIALS ON OR DISCHARGED FROM THE PREMISES, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF PURCHASER OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO. UPON CLOSING, AND PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER’S INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL BE DEEMED TO HAVE WAIVED AND RELINQUISHED AS AGAINST SELLER (AND SELLER’S OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES AND COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED AGAINST SELLER (AND SELLER OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL LAWS) AND ANY AND ALL OTHER ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS REGARDING THE PREMISES UNLESS PROVIDED OTHERWISE HEREIN, EXCEPT TO THE EXTENT THAT ANY SUCH CLAIM, DEMAND, CAUSE OF ACTION, LOSS, DAMAGE, LIABILITY, COST OR EXPENSE IS THE RESULT OF SELLER’S FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

(d) All documents and information regarding the Property of whatever nature made available to Purchaser or its representatives or otherwise obtained by Purchaser or its representatives, including the results of all studies, reports and plans of the Property commissioned by Seller or Purchaser or a third party other than documents and information that is in the public records or which has been made publicly available (collectively, the "PROPRIETARY INFORMATION") are proprietary and confidential. The term “Proprietary Information” shall not include, and shall expressly exclude information that: (i) is or subsequently becomes publicly available without Purchaser’s breach of this Agreement, (ii) is or becomes known to Purchaser, its affiliates, and/or their respective Representatives prior to Seller’s disclosure of such information to Purchaser, its affiliates and/or their respective Representatives, (iii) is or becomes known to Purchaser, its affiliates and/or their respective Representatives from a source other than Seller who, to the knowledge of Purchaser, did not disclose such information in violation of an obligation of confidentiality, or (iv) is independently developed by Purchaser, its affiliates, and/or their respective Representatives. Subject to the confidentiality provisions of Section 4.2 above and Article 14 below, Purchaser shall not disclose and shall cause Purchaser’s Representatives not to disclose any Proprietary Information or any information concerning the terms within and the possible ground lease assignment of the Property to any other person (except in connection with Purchaser’s financing of the acquisition herein). Upon the termination of this Agreement for any reason other than Seller’s default, Purchaser

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shall return to Seller all Proprietary Information, provided that Purchaser shall have the right to retain copies of such Proprietary Information in connection with Purchaser’s internal record retention policies. Subject to the confidentiality provisions of Section 4.2 above and Article 14 below, if requested or required (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the Proprietary Information, and in connection therewith Purchaser shall (a) provide Seller with written notice of such requirement of which Purchaser is aware as soon as reasonably practicable, (b) furnish only that portion of the Proprietary Information that Purchaser is advised by counsel is legally required to furnish, (c) use commercially reasonable efforts to obtain assurance that confidential treatment will be accorded such Proprietary Information to the extent possible, and (d) use commercially reasonable efforts to assist Seller in any efforts it undertakes to seek a protective order or other appropriate remedy. All obligations of Purchaser under this paragraph shall be referred to as the "CONFIDENTIALITY OBLIGATIONS." The Confidentiality Obligations shall survive any termination or expiration of this Agreement.

(e) Purchaser shall indemnify, defend and hold Seller, Seller’s affiliates, subsidiaries, shareholders, officers, directors, trustees, agents, members, managers and partners and their affiliates, subsidiaries, shareholders, officers, directors, trustees, agents, members, managers and partners free and harmless from any loss, injury damage, claim, lien, cost or expenses, including attorneys’ fees and costs, arising from or out of a breach by Purchaser of the Confidentiality Obligations, except to the extent that any alleged breach by Purchaser of the Confidentiality Provisions is due to the fraud, gross negligence or willful misconduct of Seller. This provision shall survive the termination or expiration of this Agreement.

8. CLOSING

    8.1 The closing of the transaction contemplated hereby (the “CLOSING”) shall occur on December 10, 2016 (such date, as the same may be adjourned by Seller pursuant to Section 3.2 hereof, being herein referred to as the “CLOSING DATE”). Notwithstanding the foregoing, Purchaser shall have the right to adjourn the Closing Date to a date no later than December 28, 2016, by delivering written notice of the exercise of such right of adjournment and an additional deposit in the sum of One Million Dollars ($1,000,000.00) at least one (1) Business Day prior to the original Closing Date, which additional deposit shall be added to, and become part of, the Deposit. TIME SHALL BE OF THE ESSENCE with respect to Purchaser’s obligations to pay the additional deposit and perform its obligations on the Closing Date, as same may be adjourned pursuant to Section 3.2 and this Section 8.1. Notwithstanding anything to the contrary in this Agreement, in the event Purchaser’s Lender (as defined below), fails to finance the transaction on the Closing Date (whether as a result of a failed closing condition or lender’s decision not to proceed with the financing), Purchaser shall have the further right to adjourn the Closing Date to a date not later than January 27, 2017, by delivering written notice of the exercise of such right of adjournment and an additional deposit in the sum of One Million Five Hundred Thousand Dollars ($1,500,000.00) at least one (1) Business Day prior to the Closing Date. TIME SHALL BE OF THE ESSENCE with respect to Purchaser’s obligations to pay the additional deposit and perform its obligations on the Closing Date, as same may be adjourned pursuant to Section 3.2 and this Section 8.1 and in the event Purchaser so extends the Closing Date, the Adjustment Date (hereinafter defined) shall nevertheless be December 28, 2016, and not January 27, 2017.

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8.2 The Closing will occur through an escrow with the Escrow Agent on the Closing Date.

8.3 Except as otherwise provided in this Agreement, Purchaser expressly agrees and acknowledges that Purchaser’s obligations hereunder are not in any way conditioned upon or qualified by Purchaser’s ability to obtain financing of any type or nature whatsoever (i.e., whether by way of debt financing or equity investment, or otherwise) to consummate the transaction contemplated hereby. Seller, at Purchaser’s sole cost and expense, shall reasonably cooperate with a prospective lender of Purchaser in granting such lender access to the Property for the purpose of inspecting the Property upon reasonable notice and at a reasonable time and obtaining an appraisal of the Property. As between the members of Purchaser, KBS shall have exclusive control over the process used in obtaining any financing desired to consummate the transaction contemplated hereby, provided all of the members of Purchaser use good faith efforts to cooperate with KBS and its agents in such process. Notwithstanding anything to the contrary in this Agreement, in the event Ground Lessor fails or refuses to provide to Purchaser’s lender (which is currently contemplated to be PCCP, LLC, SL Green or their respective affiliates) (“PURCHASER’S LENDER”) (1) an acknowledgement of Purchaser’s Lender’s status as a Leasehold Mortgagee (as defined in the Ground Lease) entitled to all Mortgagee Protections as required by Section 19.4, and 19.6 of the Ground Lease, (2) any modifications to the Ground Lease requested by Purchaser’s Lender in accordance with Section 19.5 of the Ground Lease, and (3) an estoppel certificate from Ground Lessor in favor of Purchaser’s Lender pursuant to Section 22.1 of the Ground Lease, and Purchaser’s Lender refuses to close on a Leasehold Mortgage by reason of such failure or refusal, then, upon receipt of notice of such refusal from Purchaser’s Lender (which may be in the form of an email from Purchaser’s Lender or counsel stating that any or all of the documents described in clauses (1), (2) and (3) are conditions to the closing of the Mortgage Loan as opposed to a formal notice from Purchaser’s Lender), either Purchaser or Seller may extend the Closing Date for up to sixty (60) days upon written notice to the other given one (1) business day following receipt of such notice from Purchaser’s Lender, during which time the parties shall together (a) seek to enforce Tenant’s rights under Sections 19.4, 19.5, 19.6 and 22.1 of the Ground Lease, and (b) pursue financing with (x) SL Green or its affiliate (“SL Green Lender”) and (y) any other lender selected by Purchaser. If by the end of such sixty (60) day period Ground Lessor has not delivered the documents required by Sections 19.4, 19.5, 19.6 and 22.1 of the Ground Lease and SL Green Lender (or other lender selected by Purchaser) has not closed on its financing by reason of such failure or refusal, either Purchaser or Seller may terminate this Agreement on written notice to the other at any time following the expiration of such sixty (60) day period, the Deposit shall be refunded to Purchaser by Escrow Agent, and neither party shall have any further rights or obligations hereunder other than those expressly stated to survive such termination.

8.4 On or before the Closing Date, Seller shall, at its sole cost and expense, deliver or cause to be delivered to Escrow Agent the following:

(a) the following assignments of Seller’s eighty percent (80%) interest in the Ground Lease (each a “GROUND LEASE ASSIGNMENT” and collectively, the "GROUND LEASE ASSIGNMENTS”): (1) an Assignment and Assumption of Ground Lease in the form annexed hereto as EXHIBIT 8.4(a), duly executed and acknowledged by Seller with respect to its thirty percent

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(30%) interest of the Ground Lease; and (2) such additional Assignment and Assumption of Ground Leases in the form annexed hereto as EXHIBIT 8.4(a) (but revised to reflect the actual assignor and the actual percentage interest in the Ground Lease being assigned), duly executed and acknowledged by each TIC Holder with respect to the New TIC Interests so that 50% of the Ground Lease (in the aggregate) is assigned to Purchaser pursuant to the Ground Lease Assignments referenced in this clause (2). For avoidance of doubt, the Ground Lease Assignments to be executed and delivered pursuant to this Section 8.4(a) will assign an aggregate eighty percent (80%) interest in the Ground Lease to Purchaser at Closing. The remaining twenty percent (20%) of the Ground Lease will be assigned to Purchaser pursuant to a Ground Lease Assignment being delivered at the Closing in accordance with the Joint Venture Agreement by virtue of an in kind contribution of such twenty percent (20%) interest being made by Onyx pursuant to the Joint Venture Agreement;

(b) all books and records within the actual possession or control of Seller, not constituting Seller’s Proprietary Information, and related to and reasonably required for the operation maintenance of the Property and/or the Proposed Redevelopment, including originals (or certified copies if originals are not in possession or control of Seller) of the Ground Lease, plans, specifications, surveys, lease files, licenses, permits, warranties, guaranties, insurance policies assigned to Purchaser at Closing (if any), certificates of occupancy and any amendments and/or agreements thereto, Service Contracts, and Redevelopment Contracts, duly executed and acknowledged;

(c) a Bill of Sale in the form annexed hereto as Exhibit 8.4(c);

(d) an assignment of all assignable licenses and permits in the form annexed hereto as Exhibit 8.4(d);

(e) an assignment (the “ASSIGNMENT OF SERVICE CONTRACTS”) of (i) all Service Contracts that Purchaser has elected to assume pursuant to Section 4.5 above, and (ii) all Redevelopment Contracts, in the form annexed hereto as Exhibit 8.4(e), duly executed by Seller;

(f)    keys and combination to locks at the Property to the extent within the actual possession or control of Seller;

(g) an affidavit, and such other document or instruments required by the Title Company, executed by Seller certifying (i) against any work done for Seller or supplies delivered to Seller for the Property which might be grounds for a materialman's or mechanic's lien under or pursuant to the laws of the State of New York, in form sufficient to enable the Title Company to affirmatively insure Purchaser against any such lien, (ii) that the signature(s) on each Ground Lease Assignment is/are sufficient to bind Seller and assign eighty percent (80%) of the Ground Lease to Purchaser and (iii) any other provisions reasonable required by the Title Company;

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(h) affidavits, consents, resolutions and other instruments (including but not limited to all organizational documents of Seller, including operating agreements, filed copies of limited liability certificates, articles of organization, and good standing certificates) reasonably requested by the Title Company evidencing the power and authority of Seller to enter into this Agreement and any documents to be delivered hereunder, and the enforceability of the same;

(i) a certificate signed by an authorized signatory of Seller to the effect that Seller is not a "foreign person" as such term is defined in Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended (the "CODE"), in order to avoid the imposition of the withholding tax payment pursuant to Section 1445 of the Code;

(j) all such transfer and other tax declarations and returns and information returns, duly executed and sworn to by Seller, as may be required of Seller by law in connection with the assignment of eighty percent (80%) of the Ground Lease to Purchaser, including but not limited to Internal Revenue Service forms; NYC Department of Finance Real Property Transfer Tax Return, New York State Combined Real Estate Transfer Tax Return and Credit Line Mortgage Certificate (TP-584), New York State Real Property Transfer Report (RP5217-NYC);

(k) information for Real Estate 1099-S Reporting Filing;

(l) the ground lessor estoppel required under Section 10.2 of this Agreement;

(m) notice to Ground Lessor of the assignment of one hundred percent (100%) of the Ground Lease to Purchaser and directing Ground Lessor to address all future notices and communications thereunder to Purchaser or as Purchaser may direct;

(n) if the Property is subject to a declaration of covenants, conditions and restrictions or similar instrument (“CC&R”) governing or affecting the use, operation, maintenance, management or improvement of the Property, then to the extent provided for under such CC&R, (i) estoppel certificates, in form and substance satisfactory to Purchaser, from the declarant, association, committee, agent and/or other person or entity having governing or approval rights under such CC&R, and (ii) a recordable assignment, in form and substance satisfactory to Purchaser, assigning any and all developer, declarant or other related rights or interests of Seller (or any affiliate of Seller) in or under such CC&R, if Seller (or such affiliate) holds such rights or interests;

(o) a certificate indicating that the representations and warranties of Seller made in this Agreement are true and correct as of the Closing Date, or if there have been any changes, a description thereof;

(p) the JV LLC Agreement executed by Onyx;

(q) the duly executed joinder agreements to this Agreement by the TIC Holders; and

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(r) such other documents as may be reasonably required or appropriate to effectuate the consummation of the transaction contemplated by this Agreement.

8.5 On or before the Closing Date (unless a different day is specified below), Purchaser shall, at its sole cost and expense, deliver or cause to be delivered to Escrow Agent the following:

(a) the balance of Purchase Price set forth in Section 2.1 of this Agreement (the cash must be by direct deposit or by wire transfer of funds actually made in Escrow Holder’s depository bank account by 12:00 PM (California time) on the Closing Date);

(b) the Ground Lease Assignments, duly executed and acknowledged by Purchaser;

(c) the Assignment of Service Contracts, duly executed by Purchaser;

(d) a certificate indicating that the representations and warranties of Purchaser made in this Agreement are true and correct as of the Closing Date, or if there have been any changes, a description thereof;

(e ) the JV LLC Agreement executed by all members of the Joint Venture other than Onyx; and

(f) such other documents as may be reasonably required or appropriate to effectuate the consummation of the transaction contemplated by this Agreement.

8.6 Seller shall pay all transfer taxes, recording fees and charges necessary or required in order for the Ground Lease Assignments to be recorded in the appropriate county register's or recorder's office, including, without limitation, the New York City transfer tax, if applicable, provided, however, Purchaser acknowledges that Seller may be entitled to a “mere change of identity” exemption for twenty (20%) percent of transfer taxes due. In the event Seller is not entitled to such exemptions Seller shall indemnify and hold Purchaser harmless from any such taxes that may be assessed against Purchaser (the parties acknowledging that Seller is primarily liable for the payment of any such taxes). Purchaser shall pay all title insurance premiums and examination fees and the costs (if any) of its due diligence investigations, except as may specifically be provided for herein. Each party shall be responsible for its own attorney's fees. The provisions of this Section 8.6 shall survive the Closing.

9. ADJUSTMENTS

9.1 Eighty percent (80%) of the following are to be apportioned or adjusted at the Closing as of 11:59 PM of the day immediately preceding the Closing (the “ADJUSTMENT DATE”):

(a) Rent and additional rent, if any, under the Ground Lease;

(b) Real property taxes on the basis of the fiscal year for which assessed (including, without limitation, taxes, business improvement district taxes and/or assessments and any other governmental taxes, charges or assessments levied or assessed against the Property). If the Closing

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shall occur before the tax rate or assessment is fixed, the apportionment of such real property taxes and personal property taxes, if any, at the Closing shall be upon the basis of the tax rate for the immediately preceding tax year applied to the latest assessed valuation; however, adjustment will be made upon the actual tax amount, when determined.

(c) Water charges and sewer rents on the basis of the fiscal year, but if there be water meters on the Property, Seller shall obtain a meter reading thereof effective through the Adjustment Date, or if not feasible to so read, to a date not more than thirty (30) days before the Adjustment Date, and the unfixed meter charges based thereon for the intervening period shall be apportioned on the basis of such last reading. Upon the taking of a subsequent actual reading, such apportionment shall be readjusted and Seller or Purchaser, as the case may be, will promptly deliver to the other the amount determined to be so due upon such readjustment. If Seller is unable to furnish such a meter reading prior to Closing, then any meter reading obtained by Purchaser after the Closing shall be used to calculate the meter charges on a per diem basis and the resultant per diem amount used to calculate the charges due by Seller for the period from the date of the last meter reading prior to the Closing up to the date of Closing, which charges Seller shall pay. Unpaid water meter bills which are the direct obligations of subtenants in accordance with the terms of their Subleases shall not be adjusted nor shall the same be deemed an objection to title and Seller will take title subject thereto to the extent such subtenants remain in possession under valid Subleases.

(d) Utility charges, including, but not limited to, electricity, gas, steam, all prorated based upon the most current bill unless actual readings are obtained as of the Adjustment Date, in which case such actual readings shall govern and such party shall pay the amount billed to it.

(e) Fuel on the Property (if any) on the Adjustment Date based upon a reading made by Seller’s supplier as close as obtainable to the Adjustment Date (reasonably adjusted to the quantity present on the Adjustment Date). The value thereof shall be calculated at Seller’s last cost (including sales tax), as evidenced by a paid invoice from such supplier.

(f) If Seller has engaged consultants for the purpose of protesting the amount of taxes or the assessed valuation for certain tax periods for the Property (“PROTEST PROCEEDING”) any cash refunds or proceeds actually distributed (collectively, “CASH REFUNDS”) will be apportioned as described below. Any Cash Refunds (including interest thereon) on account of a favorable determination, after deduction of costs and expenses incurred for such Protest Proceedings and payment of any reimbursements owing to tenants, shall be: (i) the property of Seller to the extent such Cash Refunds were for taxes paid by Seller applicable to a period prior to the Closing Date, (ii) prorated between Purchaser and Seller for taxes paid for a period during which the Closing Date occurred, and (iii) the property of Purchaser for taxes for a period after the Closing Date. Seller shall have the obligation to refund to any tenants in good standing as of the date of such Cash Refund, any portion of such Cash Refund paid to it which may be owing to such tenants, which payment shall be paid to Purchaser within fifteen (15) business days of delivery to Seller by Purchaser of written confirmation of such tenants’ entitlement to such Cash Refunds. Purchaser shall have the obligation to refund to tenants in good standing as of the date of such Cash Refund, any portion of such Cash Refund paid to it which may be owing to such tenants. Seller and Purchaser agree to notify the other in writing of any receipt of a Cash Refund within fifteen (15) business days of

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receipt of such Cash Refund. To the extent either party obtains a Cash Refund, a portion of which is owed to the other party, the receiving party shall deliver the Cash Refund to the other party within fifteen (15) business days of its receipt.

(g) Such other apportionments and adjustments as are customarily apportioned in similar types of property in the county in which the Property is situated.

9.2 Except as otherwise provided in this Agreement, the adjustments shall be made in accordance with the customs in respect to title closings in the State of New York. Any errors in calculations or adjustments shall be corrected or adjusted as soon as practicable after the Closing. Any such correction or adjustment shall be paid in cash to the appropriate party within fifteen (15) Business Days of the correction or adjustment. Notwithstanding anything to the contrary in this Section 9.2, any right to a correction or adjustment shall terminate one (1) year after the Closing Date, except with respect to any Protest Proceedings.

9.3 The provisions of this Section 9 shall survive the Closing Date.

10. CONDITIONS PRECEDENT TO CLOSING

10.1 The obligations of Seller under this Agreement to assign eighty percent (80%) of the Ground Lease and to perform the other covenants and obligations to be performed by Seller on or before the Closing Date shall be subject to the following conditions (all or any of which may be waived, in whole or in part, by Seller):

(a) The representations and warranties made by Purchaser herein shall be true and correct in all material respects with the same force and effect as though such representations and warranties had been made on and as of the Closing Date;

(b) Purchaser shall have performed all covenants and obligations undertaken by Purchaser herein in all respects and complied with all conditions required by this Agreement to be performed or complied with by it on or before the Closing Date; and

(c) Purchaser shall have delivered to Seller all of the documents provided herein for said delivery.

10.2 The obligations of Purchaser to assume the eighty percent (80%) of the Ground Lease and to perform the other covenants and obligations to be performed by Purchaser on or before the Closing Date shall be subject to the following conditions (all or any of which may be waived, in whole or in part, by Purchaser):

(a) Ground Lessor shall have duly executed, acknowledged and delivered to Purchaser a landlord estoppel certificate substantially in the form attached hereto as Exhibit 10.2(a);

(b) Intentionally omitted;

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(c) The representations and warranties made by Seller herein shall be true and correct in all material respects with the same force and effect as though such representations and warranties had been made on and as of the Closing Date;

(d) Seller shall have performed all covenants and obligations undertaken by Seller herein in all respects and complied with all conditions required by this Agreement to be performed or complied with by it on or before the Closing Date;

(e) Seller shall have delivered to Purchaser all of the documents provided herein for said delivery;

(f) Intentionally omitted;

(g) At Closing, the Property shall be vacant and there shall be no leases, agreements or contracts permitting any person or entity to occupy all any portion of the Property, other than the Ground Lease. Seller shall be responsible, at Seller’s cost and expense, for ensuring that all tenants and occupants, if any, have vacated the Property prior to Closing; and

(h) At or prior to the Closing, Onyx shall cause the following to occur: (i) Onyx shall redeem the interests of Phalanx Fund II, LP, Onyx EP 31^st Street, LLC, and LMB II, LLC, which as of the date of this Agreement collectively, together with Onyx, own one hundred percent (100%) of the membership interests (collectively, the “TIC HOLDERS”) in Onyx in exchange for their proportionate ownership of tenant in common interests in the Lease (the “NEW TIC INTERESTS”) representing 50% of the Lease, and (ii) cause the TIC Holders to sign joinders to the this Agreement, in a form reasonably satisfactory to Purchaser (each a “JOINDER”), as additional sellers to transfer their New TIC Interests to Purchaser in accordance with the terms hereof for their proportional share of the Purchase Price. The parties hereto acknowledge that the transfers contemplated by this provision shall not be restricted by, or constitute a breach of, any provision of this Agreement and the TIC Holders shall be each treated as a Seller for all purposes of this Agreement, mutatis mutantis.

10.3 Except in those instances where escrow automatically terminates under the terms of this Agreement, if any condition is not satisfied or waived within the time period and in the manner set forth in this Agreement, then the party for whose benefit the condition exists (as provided in Sections 10.1 and 10.2 above) may terminate this Agreement by delivering written notice to the other party and to Escrow Agent after the end of the applicable time period but prior to the Closing.

11. ASSIGNMENT OF THIS AGREEMENT

Except as otherwise expressly set forth herein, neither this Agreement nor any of the rights of Purchaser hereunder may be assigned or transferred by Purchaser without Seller’s prior written consent, in Seller’s sole discretion, and any purported assignment or encumbrance without Seller’s prior written consent shall be null and void, and shall constitute a default hereunder, which is not capable of being cured.

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12. BROKER

Purchaser and Seller represent that they have not dealt with any brokers, finders or salesmen in connection with this transaction other than Newmark Grubb Knight Frank (“Broker”) and agree to indemnify, defend and hold the other party harmless from and against any and all loss, cost, damage, liability or expense (including reasonable attorneys' fees) which either party may sustain, incur or be exposed to by reason of any claim for fees or commissions made by a broker (other than Broker) through the other party. Purchaser shall pay Broker its fees and commissions in connection with this Agreement pursuant to a separate agreement by and between Purchaser and Broker. The provisions of this Section shall survive the Closing or other termination of this Agreement.

13. CONDEMNATION/CASUALTY

13.1 In the event that, prior to the Closing, Seller shall become aware of the institution or threatened institution of any proceeding (judicial, administrative or otherwise), by eminent domain or otherwise (“EMINENT DOMAIN PROCEEDING”), which proposes to affect all or a material portion of the Property, Seller shall give notice (the "CONDEMNATION NOTICE") to Purchaser promptly thereafter. Within fifteen (15) Business Days following receipt of the Condemnation Notice, Purchaser shall have the right and option, in its sole discretion, to terminate this Agreement by giving Seller written notice thereof. If Seller has not received Purchaser’s termination within such fifteen (15) Business Day period, then Purchaser shall be deemed to have elected to proceed with the transactions contemplated by this Agreement.

13.2 In the event that, prior to Closing, all or any material portion of the Property is damaged or destroyed in a manner that will not be repaired prior to Closing (collectively, a “CASUALTY”), Seller shall give notice (the “CASUALTY NOTICE”) to Purchaser promptly thereafter. Within fifteen (15) Business Days following receipt of the Casualty Notice, Purchaser shall have the right and option, in its sole discretion, to terminate this Agreement by giving Seller written notice thereof. If Seller has not received Purchaser’s termination within such fifteen (15) Business Day period, then Purchaser shall be deemed to have elected to proceed with the transactions contemplated by this Agreement.

13.3 For purposes hereof, a Casualty of all or any portion of the Property or any Eminent Domain Proceeding with respect to all or any portion of the Property shall be deemed “material” for purposes of this Article 13 if: (i)(x) as to any Casualty, the cost to repair such damage exceeds five percent (5%) of the Purchase Price and Seller, at its sole option, does not elect to repair the same prior to Closing, and (y) as to an Eminent Domain Proceeding, such Eminent Domain Proceeding might result the taking of all or any part of the Building and/or five percent (5%) or more of the Land, (ii) it causes access to or parking on the Property to be adversely affected, (iii) it results in the Property violating any laws or failing to comply with zoning or any CC&R affecting the Property, (iv) it gives the Ground Lessor the right to terminate the Ground Lease, or (v)it otherwise materially impairs the value of the Property in Purchaser’s reasonable discretion.

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13.4 In the event that Purchaser shall elect to terminate this Agreement in accordance with this Article 13, the Escrow Agent shall immediately return the Deposit to Purchaser and thereafter neither party shall have any further rights or obligations hereunder other than those which are expressly stated herein to survive any such termination. In the event that Purchaser shall not elect to terminate this Agreement, Seller shall promptly assign all proceeds of such Casualty and/or taking to Purchaser, the same shall be Purchaser’s sole property, and Purchaser shall have the sole right to settle any claim in connection with the Property.

14. PUBLICATION; CONFIDENTIALITY

14.1 Neither party shall have the right to make such public announcements or filings with respect to the transaction contemplated by this Agreement without the prior written consent of the other party. Further, neither party shall issue any such announcement without the prior approval of the other party as to the text of the announcement, which approval shall not be unreasonably withheld or delayed. Notwithstanding the foregoing and anything to the contrary in this Agreement, nothing contained herein shall impair Purchaser’s (or its affiliates’) right to disclose information relating to this Agreement or the Property (a) to any due diligence representatives and/or consultants that are engaged by, work for or are acting on behalf of, any securities dealers and/or broker dealers evaluating Purchaser and/or its affiliates, (b) in connection with any filings (including any amendment or supplement to any S-11 filing) with governmental agencies (including the SEC) by any REIT holding an interest (direct or indirect) in Purchaser, and (c) to any broker/dealers in the REIT’s broker/dealer network and any of the REIT’s investors.

14.2 Subject to the provisions of Section 14.1 above, without the prior written consent of the other party, until Purchaser shall make a public announcement as provided in Section 14.1, neither Purchaser nor Seller shall disclose, and Seller and Purchaser will direct their respective representatives, employees, agents and consultants not to disclose, to any person or entity the fact that Purchaser and Seller have entered into an agreement to assign the Lease or any of the terms, conditions or other facts with respect to this Agreement. Notwithstanding the foregoing, either party may disclose those terms and conditions which are required to be disclosed pursuant to law or in order to comply with this Agreement; PROVIDED, HOWEVER, that the disclosing party (i) shall use its best efforts to limit the disclosure to the information necessary, (ii) shall advise any party to whom disclosure is made that said terms and conditions are subject to a confidentiality requirement, and (iii) shall obtain the agreement of said party to keep any information disclosed to it as confidential; PROVIDED, FURTHER, HOWEVER, that the foregoing limitation shall not apply to any disclosure by Purchaser that is expressly authorized pursuant to the provisions of Section 14.1 above, and Purchaser shall be permitted to make any such disclosure in accordance with the terms thereof. In the event of a breach of the provisions of this Section 14, the non-breaching party shall be entitled to all of its rights and remedies under this Agreement, at law and/or in equity.

15. REMEDIES

15.1 In the event the Closing of the transactions contemplated herein do not occur as a result of willful default on the part of Purchaser, then Seller shall be entitled to compensation as a result thereof. Seller and Purchaser acknowledge that it is extremely difficult and impractical to ascertain

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the extent of the detriment, and therefore, Seller and Purchaser agree that, so long as Seller is not then in default under this Agreement, if Purchaser defaults, Seller shall be entitled to receive the Deposit from the Escrow Agent as liquidated damages and as Seller’s sole and exclusive remedy, which amount represents a bona fide good faith estimate of damages that Seller would suffer in such event. Upon Seller’s receipt of the Deposit, this Agreement shall be terminated, and, thereupon, the parties shall have no further obligations one to the other under this Agreement (except those obligations expressly provided herein to survive the termination of this Agreement). The parties agree that Seller’s receipt of the Deposit as liquidated damages shall be the sole and exclusive relief to which Seller might otherwise be entitled as a result of Purchaser’s default, Seller hereby specifically waiving any and all other rights which it may have to damages, specific performance or any other remedy as a result of Purchaser’s default.

15.2 (a) If, after complying with the terms of this Agreement, Seller and Purchaser mutually agree that it is not possible for Seller to assign the Lease in accordance with the terms of this Agreement, then the sole obligation and liability of Seller shall be to perform in accordance with Section 3.4, following which this Agreement shall be deemed canceled and the parties hereto shall be released of all obligations and liabilities under this Agreement, except for those provisions which are expressly stated to survive the cancellation or termination of this Agreement.

(b)     (i) Except as set forth in Section 15.2(b)(ii) below, in the event of any willful default on the part of Seller or Seller's failure to comply with any agreement by Seller in any material respect, Purchaser shall be entitled (x) to terminate this Agreement upon notice to Seller, in which event (1) Escrow Agent shall return the Deposit to Purchaser, (2) Seller shall reimburse Purchaser for Purchaser’s out-of-pocket costs and expenses (including reasonable attorney’s fees and expenses), as supported by documentation reasonably satisfactory to Seller, incurred in connection with Purchaser’s due diligence investigations and negotiation and execution of this Agreement, not to exceed $150,000.00 in the aggregate, and (3) neither party shall thereafter have any other further obligations under this Agreement, except as otherwise provided herein, or (y) to commence an action against Seller within ninety (90) days of such default seeking specific performance of Seller's obligations under this Agreement; provided, however, that if the remedy of specific performance is not available because Seller willfully assigned the Ground Lease to a third party in contravention of this Agreement, Purchaser shall be entitled to seek compensatory damages not to exceed $3,000,000.00 in the aggregate.

(ii) Notwithstanding anything to the contrary set forth in this Agreement, in the event of any breach or default on the part of Seller of the representations and warranties made by Seller in this Agreement (which shall survive the Closing as provided in Section 4.3 below)(collectively, the “LIMITED SURVIVING CLOSING OBLIGATIONS”), Purchaser shall be entitled to exercise all rights and remedies available at law or in equity including, without limitation, the right to bring an action for damages (excluding special, indirect, consequential or punitive damages); provided, however, that in no event shall Purchaser bring any action for damages against Seller with respect to any Limited Surviving Closing Obligations where the aggregate total of such damages is less than $50,000.00, and further provided that Seller’s liability, if any, with respect to any Limited Surviving Closing Obligations shall in no event exceed $500,000.00 in the aggregate.

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15.3 The acceptance of the Ground Lease Assignments by Purchaser shall be deemed a full performance and discharge of every agreement and obligation of Seller required to be performed under this Agreement, except those provisions which are expressly stated in this Agreement to survive the Closing or which, by their terms, cannot be performed or complied with until after the Closing.

15.4 The provisions of this Section 15 shall survive the Closing or earlier termination of this Agreement.

16. NOTICES

16.1 All notices, demands, requests, or other writings (individually, a "NOTICE" and collectively, "NOTICES") required to be given or made or sent under this Agreement, or which may be given or made or sent, by either party hereto to the other, shall be in writing, signed by the party giving the same or by its attorneys, and shall be delivered by: (i) using any nationally-recognized overnight delivery service with all transmittal fees prepaid, properly addressed; (ii) personal delivery; or (iii) transmitted by facsimile or email, provided that such facsimile or e-mail transmission is confirmed within one (1) Business Day thereafter in the manner set forth in either clause (i) or (ii) of this sentence, to the other party at the address of such other party set forth below or at such other address within the continental United States as such other party may designate by written notice specifically designated as a notice of change of address and given in accordance herewith; provided, however, that the time period in which a response to any such notice, election, demand or request must be given shall commence on the date of receipt thereof. Delivery or attempted delivery to a party or to any officer, partner, member, agent or employee of such party at said address shall constitute receipt. Rejection or other refusal to accept or inability to deliver because of changed address of which no written notice has been received shall also constitute receipt. Any such notice, election, demand, request or response shall be addressed as follows:

IF TO PURCHASER:

c/o KBS Capital Advisors 800 Newport Center Drive, Suite 800 Newport Beach, CA 92660 Attn: Brian Ragdsale Email: bragsdale@kbs.com Attn: Shep Wainwright Email: swainwright@kbs.com	Sheppard Mullin Richter & Hampton LLP 650 Town Center Drive, 4th Floor Costa Mesa, CA 92626 Attn: Scott A. Morehouse, Esq. Email: smorehouse@sheppardmullin.com
c/o Onyx Equities, LLC 900 Route 9 North, Suite 400	Jordan J. Metzger, Esq. Cole Schotz P.C.

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Woodbridge, New Jersey 07095 Attn: John A. Saraceno, Jr. E-mail:jsaraceno@onyxequities.com 1325 Avenue of the Americas, 19th Floor New York, New York 10019 Tel: (646) 563-8941 Fax: (646) 563-7941 E-mail: jmetzger@coleschotz.com

IF TO SELLER:	Onyx 31st Street, LLC c/o Onyx Equities, LLC 900 Route 9 North, Suite 400 Woodbridge, New Jersey 07095 Attn: John A. Saraceno, Jr. E-mail: jsaraceno@onyxequities.com
with a copy to:	Jordan J. Metzger, Esq. Cole Schotz P.C. 1325 Avenue of the Americas, 19th Floor New York, New York 10019 Tel: (646) 563-8941 Fax: (646) 563-7941 E-mail: jmetzger@coleschotz.com

Notices given by overnight or personal delivery service as aforesaid shall be deemed given and effective when received or when delivery is refused, and the records of the delivery service shall be conclusive with respect to the date of receipt or refusal of delivery. Notices by facsimile or e-mail shall be deemed given and effective upon transmission of such facsimile or e-mail. Notices may be given by counsel for the parties described above, and such Notices shall be deemed given by said party for all purposes hereunder.

17. MISCELLANEOUS

17.1 If any instrument or deposit is necessary in order to obviate a defect in or objection or exception to title, the following shall apply: (a) any such instrument shall be in such form and shall contain such terms and conditions as may be required by the Title Company to omit any defect, objection or exception to title, (b) any such deposit shall be made with the Title Company, and (c) Seller agrees to execute, acknowledge and deliver any such instrument and to make any such reasonable deposit on terms reasonable to Seller where Seller maintains an obligation to cure before such deposit shall be applicable.

17.2 This Agreement (a) constitutes the entire agreement between the parties, (b) cannot be amended, waived or terminated orally, but only amended, waived, or terminated by an agreement in writing signed by the party to be charged, (c) shall be interpreted and governed by the laws of the State of New York, and (d) shall be binding upon the parties hereto and their respective successors and assigns.

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17.3 The caption headings in this Agreement are for convenience only, are not intended to be part of this Agreement, and shall not be construed to modify, explain or alter any of the terms, covenants or conditions herein contained. If any term, covenant or condition of this Agreement is held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision.

17.4 From time to time, each party shall execute, acknowledge and deliver such further instruments, and perform such additional acts, as the other party may reasonably request in order to effectuate the intent of this Agreement, and the foregoing requirement shall survive the Closing. Nothing contained in this Agreement shall be deemed to create any rights or obligations of partnership, joint venture or similar association between Seller and Purchaser. This Agreement shall be given a fair and reasonable construction in accordance with the intentions of the parties hereto, and without regard to or aid of canons requiring construction against Seller, Purchaser or the party whose counsel drafted this Agreement.

17.5 This Agreement shall not be effective or binding until such time as it has been executed and delivered by all parties hereto. This Agreement may be executed in one or more counterparts, each of which when so executed and delivered shall be deemed an original, but all of which when taken together shall constitute but one and the same instrument.

17.6 All references herein to any section, Schedule or Exhibit shall be to the sections of this Agreement and to the schedules and exhibits annexed hereto unless the context clearly dictates otherwise. All of the Schedules and Exhibits annexed hereto are, by this reference, incorporated herein.

17.7 In the event of any litigation or alternative dispute resolution between Seller and Purchaser in connection with this Agreement or the transaction contemplated herein, the non-prevailing party in such litigation or alternative dispute resolution shall be responsible for the payment of all expenses and reasonable attorneys' fees incurred by the prevailing party.

17.8 Purchaser shall not be permitted to record this Agreement except to the extent required by applicable law to maintain an action for specific performance, and any purported recording of this Agreement in contravention of the foregoing shall be immediately canceled by Purchaser, upon demand, and shall constitute a default hereunder, which is not capable of being cured.

17.9    As used herein, “BUSINESS DAY” means any day of the year on which banks are not required or authorized by law to close in New York City or in California.

17.10    This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing this Agreement to be drafted.

17.11 Unless otherwise specified, in computing any period of time described herein, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is not a Business Day, in which event the period shall run until the end of the next Business Day. Unless otherwise

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expressly provided herein, the last day of any period of time described herein shall be deemed to end at 5:00 PM (California time).

17.12     (a) Purchaser shall indemnify, defend, and hold harmless Seller and Seller’s employees, partners, subsidiaries, parents, affiliates, shareholders, officers, directors, attorneys, agents, and affiliates, and its predecessors, successors and assigns, from and against all liabilities, claims, losses, actions, damages, fines, costs, expenses, causes of action and demands arising out of Purchaser’s failure to perform or satisfy any of its contractual or legal obligations arising from the ownership, operation, and leasing of the Property to the extent such obligations relate and are applicable to periods on or after the Closing Date.

(b) Seller shall indemnify, defend, and hold harmless Purchaser and Purchaser’s employees, partners, subsidiaries, parents, affiliates, shareholders, officers, directors, attorneys, agents, and affiliates, and their predecessors, successors and assigns, from and against all liabilities, claims, losses, actions, damages, fines, costs, expenses, causes of action and demands arising out of Seller’s failure to perform or satisfy any of its contractual or legal obligations arising from the ownership, operation, and leasing of the Property to the extent such obligations relate and are applicable to periods prior to the Closing Date.

17.13 This Agreement is for the sole and exclusive benefit of Purchaser and Seller, and their respective successors and assigns, and no third parties are intended to or shall have any rights under this Agreement, including, without limitation, any Brokers.

18. Escrow Provisions.

18.1 The parties hereto have mutually requested that the Escrow Agent act as escrow agent for the purpose of holding the Deposit in accordance with the terms of this Agreement.

18.2 The Deposit and all interest accruing thereon shall be deposited by the Escrow Agent in an interest bearing account for the benefit of Purchaser.

18.3 The Deposit shall be released or delivered to Seller at Closing or upon termination of this Agreement due to Purchaser’s failure to close when Purchaser is otherwise obligated to do so, except as expressly provided in Section 13.4 hereof. The Deposit shall be released or delivered to the party entitled thereto pursuant to this Agreement with reasonable promptness after the Escrow Agent shall have received written notice:

(a) from Purchaser authorizing release of the Deposit to Seller; or

(b) from Seller authorizing the return of the Deposit to Purchaser; or

(c) from either Seller or Purchaser stating that an event has occurred under this Agreement entitling the party delivering such notice to the Deposit, whereupon the Escrow Agent shall deliver written notice (the “DEFAULT NOTICE”) thereof to the other party and, unless such other party shall have delivered a written notice of objection to the Escrow Agent within ten (10) Business Days following receipt by

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such other party of the Default Notice, the Escrow Agent shall deliver the Deposit to the party initially requesting the Deposit.

18.4 The Escrow Agent is to be considered as a depository only, shall not be deemed to be a party to any document other than this Agreement, and shall not be responsible or liable in any manner whatsoever for the sufficiency, manner of execution, or validity of any written instructions, certificates or any other documents received by it, nor as to the identity, authority or rights of any persons executing the same. The Escrow Agent shall be entitled to rely at all times on written instructions given by Seller and/or Purchaser, or their respective attorney, as the case may be and as required hereunder, without any necessity of verifying the authority therefor.

18.5 It is further understood by Seller and Purchaser that if, as a result of any disagreement between them or adverse demands and claims being made by any of them upon the Escrow Agent, or if the Escrow Agent otherwise shall become involved in litigation with respect to this Agreement, the Escrow Agent may deposit the Deposit with a court of competent jurisdiction in New York and/or in accordance with the order of a court of competent jurisdiction in New York, and in any such event, Seller and Purchaser agree that they, jointly and severally, are and shall be liable to the Escrow Agent and shall reimburse the Escrow Agent on demand for all costs, expenses and reasonable counsel fees it shall incur or be compelled to pay by reason of any such litigation. Seller and Purchaser agree between themselves that each shall be responsible to advance one-half of all amounts due the Escrow Agent pursuant to this Section 18.5 provided that any such advance by Seller or Purchaser as a result of any dispute or litigation between them shall be without prejudice to their right to recover such amount as damages from the breaching party.

18.6 In taking or omitting to take any action whatsoever hereunder, the Escrow Agent shall be protected in relying upon any written notice, paper, or other document reasonably believed by it to be genuine, or upon evidence reasonably deemed by it to be sufficient, and in no event shall the Escrow Agent be liable hereunder for any act performed or omitted to be performed by it hereunder in the absence of gross negligence or willful misconduct.

18.7 Upon the satisfaction of the mutual obligations of the parties hereunder, the Title Company shall promptly submit for recording or filing, as applicable, all appropriate instruments delivered to it at the Closing. If necessary, Title Company and/or Escrow Agent are authorized to insert the Closing Date in any blanks in the closing documents.

18.8 The Escrow Agent shall have no right or obligation to approve any amendment to this Agreement unless such amendment purports to affect the Escrow Agent’s rights or obligations hereunder.

18.9 The Escrow Agent hereby agrees to serve as the “real estate reporting person” (as such term is defined in Section 6045(e) of the Code). This Agreement shall constitute a designation agreement, the name and address of the transferor and transferee of the transaction contemplated hereby appear in Section 16 hereof, and Seller. The provisions of this Section shall survive the Closing.  The duties of Escrow Agent are only as herein specifically provided, and are purely ministerial in nature.  Escrow  Agent shall neither be responsible for, or under, nor chargeable with knowledge of, the terms and conditions of any other agreement, instrument or document in

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connection herewith, and shall be required to act in respect to  disbursement of the Deposit only as provided in this Agreement.  This Agreement sets forth all the obligations of Escrow Agent with respect to any and all matters pertinent to the escrow contemplated hereunder and no additional obligations of Escrow Agent shall be implied from the terms of this Agreement or any other Agreement.  Escrow Agent shall incur no liability in connection with the discharge of its obligations under this Agreement or otherwise in connection therewith, except such liability as may arise from the willful misconduct or gross negligence of Escrow Agent.

This Article 18 shall be governed by, interpreted under, and construed and enforced in accordance with, the laws of the State of New York without regard to its internal conflicts of law principles (other than Section 5-1401 of the General Obligations Law).

18.10    Seller and Purchaser must provide completed W9 forms for the Deposit to be deposited into an interest bearing account.

18.11 The Escrow Agent shall notify Seller and Purchaser promptly upon its receipt at any time of the Deposit or any portion of the Deposit.

18.12 Escrow Agent, by signing this Agreement at the end hereof where indicated, signifies its agreement to hold the Deposit for the purpose as provided in this Agreement. In the event of any dispute, Escrow Agent shall have the right to deposit the Deposit in court to await the resolution of such dispute. In any event, Escrow Agent shall not be personally liable so long as it acts in good faith.

18.13 Escrow Agent shall not incur any liability by reasons of any action or non-action taken by it in good faith or pursuant to the judgment or order of a court of competent jurisdiction. Escrow Agent shall have the right to rely upon the genuineness of all certificates, notices and instruments delivered to it pursuant hereto, and all the signatures thereto or to any other writing received by Escrow Agent purporting to be signed by any party hereto, and upon the trust of the contents thereof. Before making paying or delivery of any moneys or documents held by Escrow Agent pursuant thereto, Escrow Agent shall have the right to require delivery to it of an executed and acknowledged receipt for the subject matter of the delivery to be made by Escrow Agent. In the event of any dispute between the parties as to whether either party is in default hereunder or as to any other material fact, Escrow Agent shall have the right to refrain from taking any further action with respect to the subject matter of the escrow until it is reasonably satisfied that such dispute is resolved or action by Escrow Agent is required by an order or judgment of a court of competent jurisdiction. Escrow Agent shall be entitled to consult with other counsel in connection with its duties hereunder. Seller and Purchaser jointly and severally agree to reimburse Escrow Agent for its reasonable costs and expenses, including reasonable attorneys’ fees incurred as a result of any dispute or litigation arising hereunder.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

SELLER:

ONYX 31^ST STREET, LLC,

a Delaware Limited Liability Company

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.

Authorized Signatory

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PURCHASER:

210 WEST 31^ST STREET OWNER, LLC,

a Delaware limited liability company

By:    KBS SOR II 210 West 31^st Street, LLC

a Delaware limited liability company,

Sole Member

By:    Onyx 31^st Street, LLC

a Delaware limited liability company,

Managing Member

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.

Authorized Signatory

By:    KBS SOR II 210 WEST 31ST STREET JV, LLC,        a Delaware limited liability company,

Co-Managing Member

By:    KBS SOR II ACQUISITION VI, LLC,            a Delaware limited liability company,            its sole member

By:     KBS SOR US PROPERTIES II, LLC,                a Delaware limited liability company,                its sole member

By:    KBS STRATEGIC OPPORTUNITY LIMITED

PARTNERSHIP II,                    a Delaware limited partnership,                    its sole member

By:     KBS STRATEGIC OPPORTUNITY

REIT II, INC.,                        a Maryland corporation,                        its sole general partner

By:     /s/ Jeffrey K. Waldvogel                                    Jeffrey K. Waldvogel                            Chief Financial Officer

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ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By: /s/ Patty Beverly            

Name: Patty Beverly            

Title:     Vice President            

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LIST OF EXHIBITS

EXHIBIT A        -    Legal Description

EXHIBIT 1        -    Joint Venture Limited Liability Company Agreement

EXHIBIT 4.1(n)    -    Service Contracts

EXHIBIT 4.2(b)    -    List of Property Information

EXHIBIT 4.3(a)    -    Form of Title Policy

EXHIBIT 8.4(a)    -    Form of Assignment and Assumption of Ground Lease

EXHIBIT 8.4(c)    -    Form of Bill of Sale

EXHIBIT 8.4(d)    -    Form of Assignment of Licenses and Permits

EXHIBIT 8.4(e)    -    Form of Assignment of Service Contracts

EXHIBIT 10.2(a)    -    Form of Ground Lessor Estoppel Certificate

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EXHIBIT A

LEGAL DESCRIPTION

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EXHIBIT 4.1(n)

SERVICE CONTRACTS

Mueser Rutledge - Preconstruction Survey and Test Pits

Mueser Rutledge - SOE and Underpinning Design Phase Services

SBLM - Architect Contract

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EXHIBIT 4.2(b)

LIST OF PROPERTY DOCUMENTS

1. A copy of the Ground Lease and, if applicable, all other leases relating to the Property, if any.

2. Copies of all licenses, permits, approvals, variances and similar rights and obligations relating to the Land, whether assignable or unassignable.

3. A copy of any and all service or maintenance agreements or contracts affecting the Property, if any.

4. A copy of all Phase I and Phase II Environmental Site Assessments for the Land, along with a copy of any other reports relating to the Land including, but not limited to, any soils or geological reports.

5. A copy of all surveys of or depicting or relating to the Property, or portions thereof.

6. A copy of any owner’s or lender’s title commitment(s) or insurance policy(s) relating to the Land for the benefit of Seller or Seller’s lender, if applicable.

7. Copies of any Flood Plain Studies, Site Plans, or other such governmental license and permits for the improvement of the Property.

8. A copy of any governmental notices, demands or complaints related to any hazardous materials present on or otherwise affecting the Land.

9. A copy of all tax bills affecting the Property for 2015, 2016 and 2017.

10. A copy of any other agreement, document, or restriction that affect title to, the development of, or the future development of the Property that are not otherwise reflected in the Title Commitment or contained within the title documents referenced therein.

11. A copy of any building plans for any current structures located on the Property

12. A copy of any other unrecorded agreement by and between Seller, or its predecessor(s), and any third party related to the Property, its use or its development

13. Copies of all documents related to the Proposed Redevelopment including, without limitation all Redevelopment Contracts.

14. Copies of any other documents and other items reasonably requested by Purchaser.

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EXHIBIT 4.3(a)

FORM OF TITLE POLICY

(Attached)

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EXHIBIT 8.4(a)

ASSIGNMENT AND ASSUMPTION OF GROUND LEASE

THIS ASSIGNMENT dated ______________, 2016 (the “Agreement”) is entered into by and between [ONYX 31^ST STREET, LLC, a Delaware limited liability company,] having an address of c/o Onyx Equities, LLC, 900 Route 9 North, Suite 400, Woodbridge, New Jersey 07095 (“Assignor”), and ___________________, a __________________, having an address of _______________ (“Assignee”).

W I T N E S S E T H:

WHEREAS, Assignor is the tenant in common as to [thirty percent (30%)] of the leasehold estate under that certain Amended and Restated Lease Agreement dated December 30, 2014 with THE PROVINCE OF ST. MARY OF THE CAPUCHIN ORDER, a New York religious corporation, as landlord (as amended, the “Lease”) with respect to that certain tract, piece or parcel of land, situate in the Borough of Manhattan, County and State of New York (the “Property”), which Property is described on Exhibit A attached hereto, and

WHEREAS, Assignor desires to assign its interest in the Lease and Assignee desires to accept the assignment thereof.

NOW, THEREFORE, in consideration of the promises and conditions contained herein, the parties hereby agree as follows:

1.Assignor hereby assigns to Assignee all of its right, title and interest in and to the Lease.

2.Assignor warrants and represents that as of the date hereof there are no assignments of or agreements to assign the Lease by Assignor to any other party.

3.Assignor hereby agrees to indemnify and defend Assignee against and hold Assignee harmless from any and all cost, liability, loss, damage or expense, including without limitation, reasonable attorney’s fees, originating prior to the date hereof arising out of the tenant’s obligations under the Lease.

4.Assignee agrees to indemnify and defend Assignor against and hold Assignor harmless from any and all cost, liability, loss, damage or expense, including without limitation, reasonable attorney’s fees, originating on or after the date hereof arising out of the tenant’s obligations under the Lease.

2 Bracketed items in this form to be modified pursuant to Section 8.4(a).

SMRH:479720967.5 58

5.Assignee hereby accepts the foregoing assignment and assumes and agrees to perform all of Assignor’s obligations, liabilities, covenants, duties and agreements under the Lease which accrue on or after the date hereof.

[Remainder of page left blank intentionally]

SMRH:479720967.5 59

IN WITNESS WHEREOF, the Assignor and Assignee have executed this Agreement the day and year first above written.

ASSIGNOR:

ONYX 31^ST STREET, LLC, a Delaware limited liability company

By:_____________________________
Name:___________________________
Title:    Authorized Signatory

ASSIGNEE:

210 WEST 31^st STREET OWNER, LLC,

a Delaware limited liability company

By:_____________________________
Name:___________________________Title:    Authorized Signatory

SMRH:479720967.5 60

EXHIBIT “A”

SMRH:479720967.5 61

EXHIBIT 8.4(c)

BILL OF SALE

KNOW ALL PERSONS BY THESE PRESENTS that on this ___ day of _________________ 2016, the undersigned, ONYX 31^ST STREET, LLC, a Delaware limited liability company (“Seller”), pursuant to the terms of that certain Purchase and Sale Agreement to Assign Eighty Percent (80%) of Ground Lease, dated as of October __, 2016 (the “Purchase Agreement”) between Seller and [_________________], a [_____________________] (“Purchaser”), and in consideration for the purchase price set forth in the Purchase Agreement and other good and valuable consideration all as more particularly set forth in the Purchase Agreement, the receipt and sufficiency of which is hereby acknowledged, Seller has concurrently with the execution of this Bill of Sale conveyed to Purchaser its interest in the Ground Lease (as such term is defined in the Purchase Agreement), and does hereby sell, assign, transfer, convey and deliver unto Purchaser absolutely, free and clear of any and all liens, encumbrances or security interests, all of Seller’s right, title, and interest in and to all of Seller’s Personal Property (as such term is defined in the Purchase Agreement).

TO HAVE AND TO HOLD the same unto the said Purchaser, its successors and assigns, forever.

Seller does hereby agree to execute and deliver such further instruments of conveyance, transfer and assignment reasonably acceptable to Seller, and to take such other and further action without further consideration as Purchaser reasonably may request, to evidence conveyance, transfer and assignment of the Personal Property conveyed hereunder, and to assist Purchaser in exercising all rights with regard thereto.

Purchaser acknowledges and agrees that, except as expressly provided in, and subject to the limitations contained in, the Purchase Agreement, Seller has not made, does not make and specifically disclaims any representations, warranties, promises, covenants, agreements or guaranties of any kind or character whatsoever, whether express or implied, oral or written, past, present or future, of, as to, concerning or with respect to (a) the nature, quality or conditions of the Personal Property, (b) the income to be derived from the Personal Property, (c) the suitability of the Personal Property for any and all activities and uses by Assignee thereof, (d) the compliance of or by the Personal Property or its operation with any laws, rules, ordinances or regulations of any applicable governmental authority or body, (e) the quality, habitability, merchantability or fitness for a particular purpose of any of the Personal Property, or (f) any other matter with respect to the Personal Property. Purchaser further acknowledges and agrees that, having been given the opportunity to inspect the Personal Property, Purchaser is relying solely on its own investigation

SMRH:479720967.5 62

of the Personal Property and not on any information provided or to be provided by Assignor, except as specifically provided in the Purchase Agreement. Purchaser further acknowledges and agrees that: (i) any information provided or to be provided with respect to the Personal Property was obtained from a variety of sources and that Seller has not made any independent investigation or verification of such information; and (ii) the sale of the Personal Property as provided for herein is made on an “as is, where is” condition and basis “with all faults,” except as specifically provided in, and subject to the limitations contained in, the Purchase Agreement.

The obligations of Seller are intended to be binding only on the property of Seller and shall not be personally binding upon, nor shall any resort be had to, the private properties of any of its trustees, officers, beneficiaries, directors, members, partners or shareholders, or the general partners, officers, directors, members, or shareholders thereof, or any employees or agents of Seller.

This Bill of Sale shall be binding upon the successors and assigns of Seller and shall inure to the benefit of the successors and assigns of Purchaser.

IN WITNESS WHEREOF, Seller has executed this Bill of Sale on the date set forth above.

SELLER:

ONYX 31^ST STREET, LLC, 
a Delaware limited liability company

By:_____________________________

Name:

Title:

SMRH:479720967.5 63

EXHIBIT 8.4(d)

ASSIGNMENT OF LICENSES AND PERMITS

This Assignment of Licenses and Permits (“Assignment”) is made as of _________________, 20___ (“Effective Date”) between ONYX 31^st STREET, LLC, a Delaware limited liability company (“Assignor”), and _________________________________________ (“Assignee”), who agree as follows:

RECITALS

A.    Assignor is a party to the licenses and permits (the “Licenses and Permits”) more particularly described on the attached Exhibit “1”.

B.    Assignor desires to assign all of its right, title and interests in the Licenses and Permits to Assignee.

1.    Assignment and Assumption. For value received, Assignor assigns to Assignee all of Assignor’s right, title and interests under the Licenses and Permits. Assignee accepts the assignment and assumes and agrees to perform all of Assignor’s obligations under the Licenses and Permits to the extent any of such obligations first accrue and are applicable to periods on or after the Effective Date of this Assignment.

2.    Purchase Agreement. This Assignment is made pursuant to that certain Purchase and Sale Agreement to Assign Eighty Percent (80%) of Ground Lease dated October ___, 2016, between Assignor and Assignee (the “Purchase Agreement”).

3.    Assignee’s Indemnification. Assignee shall indemnify, defend and hold harmless Assignor and Assignor’s employees, partners, subsidiaries, parents, affiliates, shareholders, officers, directors, attorneys, agents, and affiliates, and their predecessors, successors and assigns, from and against all liabilities, claims, losses, actions, damages, fines, costs, expenses, causes of actions and demands against them or any of them arising out of, or in any way connected with, Assignee’s obligations under the Licenses and Permits to the extent they first accrue and are applicable to a period on or after the Effective Date of this Assignment.

4.    Assignor’s Indemnification. Assignor shall indemnify, defend and hold harmless Assignee and Assignee’s employees, partners, subsidiaries, parents, affiliates, shareholders, officers, directors, attorneys, agents, and affiliates and their predecessors, successors and assigns, from and against all liabilities, claims, losses, actions, damages, fines, costs, expenses, causes of actions and demands against them or any of them arising out of or in any way connected with Assignor’s obligations under the Licenses and Permits to the extent they first accrue and are applicable to a period before the Effective Date of this Assignment.

5.Attorneys’ Fees. In any action between the parties to enforce any of the terms or provisions of this Assignment, the prevailing party in the action shall be entitled to recover from the non-prevailing party, in addition to damages, injunctive relief or other relief, its reasonable costs and expenses, including, without limitation, costs and reasonable attorneys’ fees.

SMRH:479720967.5 64

6.    Successors and Assigns. This Assignment shall inure to the benefit of the parties and their respective successors and assigns.

7.    Severability. If any provision of this Assignment shall be held invalid or unenforceable for any reason and to any extent, the remainder of this Assignment shall not be affected, but shall be enforced to the greatest extent permitted by law.

8.    Merger. This Assignment and the Purchase Agreement contain the entire understanding between the parties relating to their subject matter. All prior and contemporaneous agreements and understandings, whether oral or written, are superseded by this Assignment and the Purchase Agreement. This Assignment may only be modified in writing executed by both Assignor and Assignee. Nothing contained in this Paragraph 8 is intended to terminate or affect the validity of any of the representations or warranties contained in the Purchase Agreement which shall survive the closing under the Purchase Agreement.

9.    Governing Jurisdiction; Counterparts. This Assignment shall be governed by the laws of the State of New York. This Assignment shall be effective even if signed in counterparts.

“ASSIGNOR” , a	“ASSIGNEE” , a
By: (Print Name) (Title)	By:   (Print Name) (Title)

SMRH:479720967.5 65

EXHIBIT 8.4(e)

FORM OF ASSIGNMENT OF SERVICE CONTRACTS

ASSIGNMENT OF CONTRACTS

This Assignment of Contracts (“Assignment”) is made as of _________________, 20___ (“Effective Date”) between ONYX 31^st STREET, LLC, a Delaware limited liability company (“Assignor”), and _________________________________________ (“Assignee”), who agree as follows:

RECITALS

A.    Assignor is a party to the service contracts (the “Service Contracts”) more particularly described on the attached Exhibit “1”.

B.    Assignor desires to assign all of its right, title and interests in the Service Contracts to Assignee.

1.    Assignment and Assumption. For value received, Assignor assigns to Assignee all of Assignor’s right, title and interests under the Service Contracts. Assignee accepts the assignment and assumes and agrees to perform all of Assignor’s obligations under the Service Contracts to the extent any of such obligations first accrue and are applicable to periods on or after the Effective Date of this Assignment.

2.    Purchase Agreement. This Assignment is made pursuant to that certain Purchase and Sale Agreement to Assign Eighty Percent (80%) of Ground Lease dated October ___, 2016, between Assignor and Assignee (the “Purchase Agreement”).

3.    Assignee’s Indemnification. Assignee shall indemnify, defend and hold harmless Assignor and Assignor’s employees, partners, subsidiaries, parents, affiliates, shareholders, officers, directors, attorneys, agents, and affiliates, and their predecessors, successors and assigns, from and against all liabilities, claims, losses, actions, damages, fines, costs, expenses, causes of actions and demands against them or any of them arising out of, or in any way connected with, Assignee’s obligations under the Service Contracts to the extent they first accrue and are applicable to a period on or after the Effective Date of this Assignment.

4.    Assignor’s Indemnification. Assignor shall indemnify, defend and hold harmless Assignee and Assignee’s employees, partners, subsidiaries, parents, affiliates, shareholders, officers, directors, attorneys, agents, and affiliates and their predecessors, successors and assigns, from and against all liabilities, claims, losses, actions, damages, fines, costs, expenses, causes of actions and demands against them or any of them arising out of or in any way connected with Assignor’s obligations under the Service Contracts to the extent they first accrue and are applicable to a period before the Effective Date of this Assignment.

5.    Attorneys’ Fees. In any action between the parties to enforce any of the terms or provisions of this Assignment, the prevailing party in the action shall be entitled to recover from

SMRH:479720967.5 66

the non-prevailing party, in addition to damages, injunctive relief or other relief, its reasonable costs and expenses, including, without limitation, costs and reasonable attorneys’ fees.

6.    Successors and Assigns. This Assignment shall inure to the benefit of the parties and their respective successors and assigns.

7.    Severability. If any provision of this Assignment shall be held invalid or unenforceable for any reason and to any extent, the remainder of this Assignment shall not be affected, but shall be enforced to the greatest extent permitted by law.

8.    Merger. This Assignment and the Purchase Agreement contain the entire understanding between the parties relating to their subject matter. All prior and contemporaneous agreements and understandings, whether oral or written, are superseded by this Assignment and the Purchase Agreement. This Assignment may only be modified in writing executed by both Assignor and Assignee. Nothing contained in this Paragraph 8 is intended to terminate or affect the validity of any of the representations or warranties contained in the Purchase Agreement which shall survive the closing under the Purchase Agreement.

9.    Governing Jurisdiction; Counterparts. This Assignment shall be governed by the laws of the State of New York. This Assignment shall be effective even if signed in counterparts.

“ASSIGNOR” , a	“ASSIGNEE” , a
By:   (Print Name) (Title)	By:   (Print Name) (Title)

SMRH:479720967.5 67

EXHIBIT 10.2(a)

GROUND LESSOR ESTOPPEL CERTIFICATE

_______ , 2016

ONYX 31^ST STREET, LLC

c/o Onyx Equities, LLC

900 Route 9 North, Suite 301

Woodbridge, New Jersey 07095

and to

[Purchaser]

Re: Amended and Restated Lease Agreement dated December 30, 2014 (the "Ground Lease") between THE PROVINCE OF ST. MARY OF THE CAPUCHIN ORDER (the "Ground Lessor") and ONYX 31^ST STREET, LLC (the "Ground Tenant"), with regard to certain real property known as 210 West 31^st Street, New York, New York (the "Property."). Capitalized terms used in this Ground Lessor Estoppel and not otherwise defined herein shall have the meaning given such term in the Ground Lease.

Ladies and Gentlemen:

The undersigned, as Ground Lessor, hereby warrants, represents, agrees and certifies to any purchaser of Ground Tenant's interest under the Ground Lease, and any prospective holder of a mortgage on Ground Tenant's interest or such purchaser’s interest under the Ground Lease and their successors and/or assigns as follows, as of the date hereof:

1.Ground Lessor is the fee owner of the Property and is the landlord under the Ground Lease. To the best of Ground Lessor's actual knowledge, Ground Tenant is the tenant under the Ground Lease and the owner of the leasehold estate in the Property.

2.The Ground Lease is in full force and effect. There are no other agreements other than the Ground Lease, whether oral or written, between Ground Lessor and Ground Tenant concerning the Property, other than: Easement Agreement dated February 26, 2015 by and between Ground Lessor, Church of St John the Baptist and Ground Tenant; Encroachment Agreement dated February 26, 2015 by and between Ground Lessor, Church of St. John the Baptist and Ground Tenant; Zoning Lot Development Agreement dated July 3, 2015 by and between Ground Lessor and Church of St. John the Baptist; and License and Access Agreement dated January 20, 2016 by and between Ground Tenant and Church of St. John the Baptist.

3.There have been no amendments, assignments or modifications of the Ground Lease, except as set forth above.

4.The current Annual Fixed Rent (as defined in the Ground Lease) payable under the Ground Lease is $[___________] per annum, payable in equal monthly installments of $[__________], and has been paid in full through [___________]. The Rent Commencement Date is [____________]. All other items of additional rent and/or other charges payable to Ground Lessor accrued to date under the Ground Lease, including, without limitation, (i) the Vacate Payment, and (ii) the payment due by Ground Tenant to Ground

SMRH:479720967.5 68

Lessor in connection with the delivery of the Court Order and the ZLDA, have been paid in full through [____________].

5.The term of the Ground Lease commenced on December 30, 2014 and expires on January 31, 2114, subject to the right to extend the term of the Ground Lease for one additional period of 25 years.

6.To the best of Ground Lessor’s knowledge, each of the obligations on Ground Tenant's part to be performed to date under the Ground Lease have been performed. To the best of Ground Lessor’s knowledge, there exists no default on the part of either Ground Lessor or Ground Tenant, nor any event that the passage of time or the giving of notice would constitute a default under the Ground Lease by either Ground Lessor or Ground Tenant.

7.There are currently no mortgages or other security interests encumbering Ground Lessor's fee interest in the Property and no third party has an option or preferential right to purchase all or any part of the Property.

8.Ground Lessor has not received written notice of any pending eminent domain proceedings or other governmental actions of any kind against the Property.

9.To the best of Ground Lessor’s actual knowledge, the Property and the Premises are currently exempt from Real Estate Taxes.

10.Ground Lessor acknowledges and agrees that the phrase “certificate of occupancy” as used in Section 13.1 of the Ground Lease shall be deemed to mean either a temporary or permanent certificate of occupancy.

11.This estoppel has been duly and properly executed by an authorized officer of the Ground Lessor.

12.To the best of Ground Lessor's actual knowledge (without independent inquiry or investigation), Ground Tenant has not asserted any claimed offsets, counterclaims, defenses, deduction or credits with respect to the Ground Lease.

13.This estoppel shall be binding on the Ground Lessor, its successors and assigns, and shall inure to the benefit of any purchaser of Ground Tenant's interest under the Ground Lease, or any prospective holder of a mortgage on Ground Tenant's interest under the Ground Lease and its successors and/or assigns.

14.For and with respect to any notices being sent to the undersigned pursuant to the Ground Lease, said notices are to be sent to 30 Gedney Park Drive, White Plains, New York 10605.

SMRH:479720967.5 69

IN WITNESS WHEREOF, the undersigned has caused this estoppel to be executed as of the day and year first above written.

GROUND LESSOR:

THE PROVINCE OF ST. MARY OF THE CAPUCHIN ORDER

By: _________________________________

Name:

Title:

SMRH:479720967.5 70

EX-10.47

Exhibit 10.47

FIRST AMENDMENT TO
LIMITED LIABILITY COMPANY AGREEMENT OF KBS SOR II 210 WEST 31^st STREET, LLC

This FIRST AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT OF KBS SOR II 210 WEST 31^st STREET, LLC ("Amendment") is entered into as of December 1, 2016 (the “Amendment Date”), by ONYX 31^st STREET, LLC, a Delaware limited liability company ("JV Member"), and KBS SOR II 210 WEST 31^st STREET JV, LLC, a Delaware limited liability company ("Co-Managing Member"). Except as otherwise provided herein, the capitalized terms used in this Amendment shall have the respective meanings assigned to such terms in, and the Article and Section references contained herein shall refer to, the Agreement (as such term is defined in Recital A below).

R E C I T A L S:

A.    KBS SOR II 210 WEST 31^st STREET, LLC, a Delaware limited liability company (the "Company"), is governed by that certain Limited Liability Company Agreement of KBS SOR II 210 WEST 31^st STREET, LLC dated as of October 28, 2016 ("Agreement").

B.    The parties hereto desire to make such changes to the Agreement as they deem appropriate by amending the Agreement upon such terms and conditions as are hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree to amend the Agreement as follows:

A G R E E M E N T:

1.Recitals. The Recitals set forth above are hereby incorporated herein by reference as if the same were fully set forth herein.

2.Representations, Warranties and Covenants. Section 2.14(b) of the Agreement is hereby amended by inserting the following after the first sentence of such Section 2.14(b):

"In addition, JV Member hereby represents and warrants to the Company and to the Co-Managing Member that, as of the Amendment Date, neither JV Member nor Seller has received written notice from Ground Lessor of any pending eminent domain proceedings or other governmental actions of any kind against the Property."

3.KBS Guarantor. Section 3.07(a) of the Agreement is hereby amended by adding the following to the last sentence thereof:

“and, accordingly, KBS Credit Party shall be deemed to be a “Guarantor” for purposes of this Agreement with respect to such Required Guaranties.”

SMRH:479990510.1 1

4.Miscellaneous.

(a)Force and Effect. Except as expressly modified hereby, all other terms and provisions of the Agreement shall remain in full force and effect, are incorporated herein by this reference, and shall govern the conduct of the parties hereto; provided, however, the provisions of this Amendment shall control to the extent of any inconsistency between the provisions of the Agreement and the provisions of this Amendment.

(b)Entire Agreement. The Agreement (as hereby amended), contains and constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, if any, with respect thereto.

(c)Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which, taken together, shall constitute one and the same instrument. The signature page or any counterpart may be detached therefrom without impairing the legal effect of the signature thereon so long as such signature page is attached to any other counterpart of this Amendment identical thereto. Delivery of an executed signature page of this Amendment by facsimile transmission of electronic “PDF” transmission shall be effective as delivery of a manually executed counterpart hereof.

Signatures Attached

SMRH:479990510.1 2

IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the date first set forth above.

“JV MEMBER”

ONYX 31^st STREET, LLC,

a Delaware limited liability company

By:     /s/ John A. Saraceno    Jr.    

Name:     John A. Saraceno Jr.        

Title:     Authorized Signatory    

“JV MEMBER CREDIT PARTY”

ONYX EQUITIES, LLC,

a New Jersey limited liability company

By:     /s/ John A. Saraceno    Jr.    

Name:     John A. Saraceno Jr.        

Title:     Authorized Signatory    

SMRH:479990510.1 3

“KBS”

KBS SOR II 210 WEST 31^ST STREET JV, LLC,

a Delaware limited liability company

By:    KBS SOR II ACQUISITION VI, LLC,

a Delaware limited liability company,

its sole member

By:    KBS SOR US PROPERTIES II, LLC,

a Delaware limited liability company,

its sole member

By:    KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP II,

a Delaware limited partnership,

its sole member

By:    KBS STRATEGIC OPPORTUNITY REIT II, INC.,

a Maryland corporation,

its sole general partner

By:    /s/ Jeffrey K. Waldvogel        

Jeffrey K. Waldvogel,

Chief Financial Officer

SMRH:479990510.1 4

“KBS CREDIT PARTY”

KBS SOR US PROPERTIES II, LLC,

a Delaware limited liability company,

its sole member

By:    KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP II,

a Delaware limited partnership,

its sole member

By:    KBS STRATEGIC OPPORTUNITY REIT II, INC.,

a Maryland corporation,

its sole general partner

By:    /s/ Jeffrey K. Waldvogel        

Jeffrey K. Waldvogel,

Chief Financial Officer

SMRH:479990510.1 5

EX-10.48

Exhibit 10.48

AMENDED AND RESTATED ACQUISITION LOAN PROMISSORY NOTE SECURED BY MORTGAGE

$32,650,000.00	December 1, 2016
	New York, New York

FOR VALUE RECEIVED, the undersigned, 210 WEST 31^ST STREET OWNER, LLC, a Delaware limited liability company, having a principal place of business at c/o Onyx Equities, LLC, 900 Route 9 North, Suite 400, Woodbridge, NJ 07095 (“Borrower”), promises to pay to the order of PACIFICCAL PC CORE LENDER, LLC, a Delaware limited liability company (“Lender”), c/o PCCP, LLC, 10100 Santa Monica Blvd., Suite 1000, Los Angeles, CA 90067, or at such other place as Lender may designate to Borrower in writing from time to time, the principal sum of up to THIRTY TWO MILLION SIX HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($32,650,000.00), or so much thereof as may from time to time be owing hereunder by reason of advances made by Lender to or for the account of Borrower, together with interest on so much thereof as is from time to time outstanding and unpaid, from the date of the advance of the principal evidenced hereby, at the Applicable Interest Rate (as such term is defined in Section 1.1(b) below) in lawful money of the United States of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private. Initially capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Project Loan Agreement (as defined in Section 1.4 below).

This Amended and Restated Acquisition Loan Promissory Note Secured by Mortgage (this “Note”) amends, restates and supersedes in its entirety the terms and provisions of the Existing Note secured by the Existing Mortgage (as such terms are defined in the Acquisition Loan Mortgage). This Note evidences the same indebtedness evidenced by the Existing Note (the “Existing Indebtedness”) and shall not operate to discharge, satisfy, cancel, release or repay, or be deemed to be a substitution or novation of the Existing Indebtedness heretofore evidenced by the Existing Note. The Existing Indebtedness is hereby preserved and confirmed, except that Borrower and Lender agree that the Existing Indebtedness is increased by $22,650,000.00and there is now owing on the Existing Note the principal sum of this Note, together with interest thereon in accordance with this Note.

ARTICLE I - TERMS AND CONDITIONS

1.1    Accrual and Calculation of Interest.

(a)    Interest shall accrue on the outstanding principal balance of this Note based on a rate of interest per annum (the “Applicable Interest Rate”) in effect from time to time equal to the sum of (i) (A) five and one-half percent (5.50%), (B) in the event the First Extension Option is timely exercised by Borrower in strict accordance with the terms and conditions of Section 2.9 of the Project Loan Agreement, five and eighty three-one hundredths of a percent (5.83%) during

the First Extended Term, or (C) in the event the Second Extension Option is timely exercised by Borrower in strict accordance with the terms and conditions of Section 2.9 of the Project Loan Agreement, six and sixteen-one hundredths of a percent (6.16%) during the Second Extended Term; plus (ii) the rate designated as “LIBOR” for U.S. dollar deposits with one (1) month maturities as quoted by a national bank (“Bank”) from Reuters LIBOR01 (as defined below) or any successor thereto, which shall be that one-month LIBOR rate in effect two (2) New York Banking Days (as defined below) prior to the beginning of each calendar month, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation, such rate to be reset at the beginning of each succeeding month; provided, however, that, notwithstanding anything to the contrary contained in this Note, in no event shall the LIBOR portion of the Applicable Interest Rate (under clause (ii) above) be less than 0.60561% per annum (or the daily equivalent thereof). As used herein, the term “New York Banking Day” means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York. If the initial advance under this Note occurs other than on the first day of the month, the initial one-month LIBOR rate shall be that one-month LIBOR in effect two (2) New York Banking Days prior to the date of the initial advance, which one-month LIBOR rate plus five and one-half percent (5.50%) shall be in effect as the Applicable Interest Rate for the remaining days of the month of the initial advance; such one-month LIBOR (and the Applicable Interest Rate) to be reset at the beginning of each succeeding month. Lender’s internal records of Applicable Interest Rates shall be determinative in the absence of manifest error. As used herein, the term “Reuters LIBOR01” means Reuters Screen LIBOR01 Page (or such other page as may replace Reuters Screen LIBOR01 Page for the purpose of displaying London interbank offered rates of major banks for United States dollar deposits).

(b)    Interest shall be computed hereunder based on a 360-day year, and shall accrue for each and every day (365 days per year, 366 days per leap year) on which any indebtedness remains outstanding hereunder. In computing the number of days during which interest accrues, the day on which funds are initially advanced shall be included regardless of the time of day such advance is made, and the day on which funds are repaid shall be included unless repayment is credited prior to close of business. Payments in federal funds immediately available in the place designated for payment made by Borrower prior to 12:00 noon, Los Angeles Time, shall be credited prior to close of business, while other payments may, at the option of Lender, not be credited until immediately available to Lender in federal funds in the place designated for payment prior to 11:00 a.m., Los Angeles Time, at such place of payment on a day on which Lender is open for business.

1.2    Payments of Principal and Interest.

(a)    Borrower shall make monthly payments of interest accruing under this Note, as follows: on the first (1^st) New York Banking Day of the first calendar month following the date of this Note, and on the first (1^st) New York Banking Day of each calendar month thereafter (each, a “Payment Date”) until the Maturity Date (as defined in Section 1.2(c) below), Borrower shall pay to Lender all interest accrued under this Note at the Applicable Interest Rate during the immediately preceding calendar month; provided, however, that if the Loan is funded on a date which is within the last ten (10) days of a calendar month, Borrower’s first monthly interest payment shall be on the first day of the second (2^nd) calendar month following the date of this Note (and Lender shall

ny-1258297

collect in advance at Loan closing the interest due hereunder for the period between the date of this Note and the end of the calendar month in which the Loan is funded).

(b)    In addition to any monthly payments of interest due pursuant to Section 1.2(a)above, if the First Extension Option and/or the Second Extension Option are timely exercised by Borrower in strict accordance with the terms and conditions of Section 2.9 of the Project Loan Agreement, during the applicable Extension Term Borrower shall, on each Payment Date, pay the Monthly Amortization Payment. As used herein, the term “Monthly Amortization Payment” shall mean a monthly payment, determined by Lender, that is sufficient to fully amortize the Loan over a 25-year amortization schedule using an assumed interest rate equal to the Applicable Interest Rate in effect as of the first day of the Extension Term.

(c)    As used herein, the term “Maturity Date” shall mean, initially, the Original Maturity Date, which shall be subject to extension to the Extended Maturity Date on the terms and conditions set forth in Section 2.9 of the Project Loan Agreement.

(d)    On the Maturity Date, the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, shall be due and payable in full.

(e)    All payments due under this Note shall be payable without setoff, counterclaim or any other deduction whatsoever.

1.3    Prepayment.

(a)    The principal indebtedness evidenced by this Note may not be prepaid, in whole or in part, except as expressly set forth in the Project Loan Agreement.

(b)    In the event that Borrower shall, for any reason, prepay all or any portion of the principal evidenced by this Note, Borrower shall provide revocable written notice at least ten (10) Business Days, but no more than one hundred twenty (120) days prior to the proposed date of prepayment. If the prepayment occurs other than on the first (1^st) New York Banking Day of a calendar month, then Borrower shall pay, in addition to all other amounts required to be paid hereunder or under the Loan Documents (including, without limitation, the Exit Fee and, if applicable, the Minimum Loan Interest Payment), a prepayment premium equal to the amount of any LIBOR breakage fee (or similar charge) incurred by Lender as a result of prepaying the corresponding LIBOR contract (the “Breakage Prepayment Premium”). The Breakage Prepayment Premium provided for herein shall be due under any and all circumstances where all or any portion of this Note is paid prior to the Maturity Date on any day other than on the first (1^st) New York Banking Day of a calendar month, whether such prepayment is voluntary or involuntary, even if such prepayment results from Lender’s exercise of its rights upon Borrower’s default and acceleration of the Maturity Date of this Note (irrespective of whether foreclosure proceedings have been commenced), and shall be in addition to any other sums due hereunder or under any of the other Loan Documents. No tender of a prepayment of this Note with respect to which a prepayment fee is due shall be effective unless such prepayment is accompanied by the applicable Breakage Prepayment Premium.

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(c)    TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER APPLICABLE STATE LAW TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT PAYMENT OF A PREPAYMENT FEE, UPON ACCELERATION OF THE MATURITY DATE, AND (ii) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THIS NOTE IS MADE UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE BY LENDER ON ACCOUNT OF ANY DEFAULT BY BORROWER INCLUDING, WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED OR RESTRICTED BY THE LOAN DOCUMENTS, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY WITH SUCH PREPAYMENT (AND IN ADDITION TO THE EXIT FEE AND BREAKAGE PREPAYMENT PREMIUM (IF APPLICABLE), THE MINIMUM LOAN INTEREST PAYMENT SPECIFIED IN THE PROJECT LOAN AGREEMENT (IF APPLICABLE). BY INITIALING THE PROVISION IN THE SPACE PROVIDED BELOW, BORROWER HEREBY DECLARES THAT THE AGREEMENT TO MAKE THE LOAN EVIDENCED BY THIS NOTE AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER FOR THIS WAIVER AND AGREEMENT. FURTHER, BY INITIALING BELOW, BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NOTWITHSTANDING ANY APPLICABLE LAW TO THE CONTRARY, PURSUANT TO THE TERMS OF THE PROJECT LOAN AGREEMENT AND OF THIS NOTE, BORROWER HAS AGREED THAT BORROWER HAS NO RIGHT TO REPAY THIS NOTE WITHOUT PAYMENT OF THE APPLICABLE PREPAYMENT FEES, AND THAT BORROWER SHALL BE LIABLE FOR THE REPAYMENT OF THIS NOTE DUE TO THE ACCELERATION OF THIS NOTE IN ACCORDANCE WITH ITS TERMS AND/OR THE TERMS OF THE PROJECT LOAN AGREEMENT. FURTHERMORE, BY INITIALING BELOW, BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT LENDER HAS MADE THE LOAN IN RELIANCE ON THESE AGREEMENTS OF BORROWER AND THAT LENDER WOULD NOT HAVE MADE THE LOAN WITHOUT SUCH AGREEMENTS OF BORROWER.

Borrower’s Initials: __________

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1.4    Security. The Loan and the obligations created hereby are secured by, among other things, that certain Consolidated, Amended and Restated Acquisition Loan Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the date hereof, by Borrower in favor of Lender (the “Mortgage”). The Mortgage, together with this Note, that certain Acquisition and Project Loan Agreement of even date herewith between Borrower and Lender (as the same may be modified, supplemented, extended and in effect from time to time, the “Project Loan Agreement”) and all other documents to or of which Lender is a party or beneficiary now or hereafter evidencing, securing, guarantying, modifying or otherwise relating to the indebtedness evidenced hereby, are herein referred to collectively as the “Loan Documents”. All of the terms and provisions of the Loan Documents are incorporated herein by reference. Some of the Loan Documents are to be filed for record on or about the date hereof in the appropriate public records.

1.5    Late Charge. If any sum (other than the outstanding principal balance of the Note upon the Maturity Date or an acceleration thereof) payable under this Note or the other Loan Documents is not paid prior to the date that is five (5) business days after the date such sum is due, then, subject to the provisions hereof limiting interest to the maximum amount allowed by applicable law, Borrower shall pay to Lender on demand an amount equal to five percent (5.00%) of such past due sum to defray the expenses incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of use of such delinquent payment, and such amount shall be secured by the Mortgage and the other Loan Documents.

1.6    Default; Default Interest Rate. Lender and Borrower hereby expressly agree that should any payment of principal or interest required under this Note not be made within five (5) business days after such payment is due (it being understood and agreed, however, that no grace period is provided for the payment of principal and interest due on the Maturity Date or earlier acceleration thereof), should an Event of Default occur under any of the Loan Documents, which Event of Default is not cured or waived within any applicable grace or cure period, then a default shall exist hereunder, and in such event the indebtedness evidenced hereby, including all sums advanced or accrued hereunder or under any other Loan Document, and all unpaid interest accrued thereon, shall, at the option of Lender and without notice to Borrower, at once become due and payable and may be collected forthwith, whether or not there has been a prior demand for payment and regardless of the stipulated date of maturity. So long as any Event of Default exists hereunder and is continuing, regardless of whether or not there has been an acceleration of the indebtedness evidenced hereby, and at all times after maturity of the indebtedness evidenced hereby (whether by acceleration or otherwise), interest shall accrue on the outstanding principal balance of this Note at a rate per annum (the “Default Interest Rate”) equal to five percent (5.00%) plus the Applicable Interest Rate, or if such increased rate of interest may not be collected under applicable law, then at the maximum rate of interest, if any, which may be collected from Borrower under applicable law. Any interest that accrues at the Default Interest Rate shall be due and payable on the first day of each month. Borrower acknowledges that it would be extremely difficult or impracticable to determine Lender’s actual damages resulting from any late payment or default, and such late charges and default interest are reasonable estimates of those damages and do not constitute a penalty. The remedies of Lender in this Note or in the Loan Documents, or at law or in equity, shall be cumulative and concurrent, and may be pursued singly, successively or together in Lender’s discretion. In the event that this Note,

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or any part hereof, is collected by or through an attorney-at-law, Borrower agrees to pay all costs of collection, including, but not limited to, attorneys’ fees and expenses.

1.7    Increased Cost. If any Regulatory Change (as defined below):

(a)    shall subject Lender to any tax, duty or other charge with respect to its loans with respect to which the interest rate is determined by reference to LIBOR (“LIBOR Loans”) or its obligation to make LIBOR Loans, or shall change the basis of taxation of payment to Lender of the principal of or interest on LIBOR Loans or any other amounts due in respect of such loans or its obligation to make such loans (except for changes in the rate of tax on the overall net income of Lender imposed by the jurisdiction in which Lender’s principal office is located); or

(b)    shall impose, modify or deem applicable any reserve, special deposit, capital or similar requirement (including, without limitation, any such requirement imposed by the Board, but excluding any such requirement to the extent included in calculating the then applicable LIBOR under this Note) against assets of, deposits with or for the account of, or credit extended by, Lender or shall impose on Lender or on the interbank LIBOR market any other condition affecting its LIBOR Loans or its obligation to make such loans,

and the result of any of the foregoing is to actually increase the out-of-pocket cost to Lender of making or maintaining any such loans, or to reduce the amount of any sum received or receivable by Lender under any such loans, so that the spread between Lender’s cost of funds and the amounts received by Lender with respect to any such loans is actually reduced, then, within thirty (30) days after written demand by Lender, Borrower shall pay to Lender such additional amount or amounts as would compensate Lender, dollar for dollar, for such increased cost or reduction on a LIBOR Loan in the outstanding principal amount of, and having the same terms as the Loan during the period commencing on a date ninety (90) days prior to the date of said demand and continuing until the date on which this Note is paid in full (“Decreased Net Yield”). A certificate of Lender claiming compensation under this Section, setting forth the additional amount or amounts to be paid to it hereunder and stating in reasonable detail the basis for the charge and the method of computation, shall be conclusive in the absence of error. In determining such amount, Lender may use any reasonable averaging and attribution methods. Failure on the part of Lender to demand compensation for any Decreased Net Yield with respect to any disbursement under this Note shall not constitute a waiver of Lender’s right to demand compensation for any Decreased Net Yield with respect to any other disbursement under this Note.

1.8    Illegality. If any Regulatory Change shall make it unlawful or impossible for Lender to make, maintain or fund LIBOR Loans, Lender shall notify Borrower in writing, whereupon the accrual of interest hereunder based upon LIBOR shall be suspended until Lender notifies Borrower in writing that the circumstances giving rise to such suspension no longer exist. If Lender reasonably determines that such suspension must become effective prior to the end of the applicable calendar month, the Applicable Interest Rate under this Note shall be automatically converted, effective as of the date of Lender’s notice to Borrower, to a varying rate per annum equal to the Prime Rate (as defined below) plus a percentage necessary to cause the Applicable Interest Rate following the conversion based on the Prime Rate to be equal to the Applicable Interest Rate under this Note immediately prior to such conversion. As used herein, the term “Prime Rate” shall mean the rate

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of interest from time to time publicly announced by Bank as its “prime rate” or “reference rate”. Lender may lend to its customers at rates that are at, above or below the Prime Rate. For the purpose of determining the foregoing interest rate based on the Prime Rate, such interest rate shall change as and when the Prime Rate shall change.

1.9    Interest Rate Not Ascertainable, Etc. If, on or prior to the date for Lender’s determination of LIBOR in respect of any calendar month, Lender shall have reasonably determined (which determination shall be conclusive and binding, absent manifest error) that:

(a)    deposits in dollars (in the applicable amount) are not being made available to Lender in the relevant market for a period or periods of one month, or

(b)    LIBOR will not adequately and fairly reflect the cost to Lender of funding or maintaining LIBOR Loans for such calendar month at such rate,

Lender shall forthwith give written notice to Borrower of such determination, whereupon the accrual of interest hereunder, based upon LIBOR shall be suspended until Lender notifies Borrower in writing that the circumstances giving rise to such suspension no longer exist. While any such suspension continues, the converted interest rate set forth in Section 1.8 above shall be applicable. No such suspension shall affect the Applicable Interest Rate then in effect during the applicable calendar month for any principal amount of this Note outstanding at the time such suspension is imposed.

1.10    Funding Losses. Borrower shall compensate Lender, upon its written request, for all actual losses, expenses and liabilities (including any interest paid by Lender to lenders of funds borrowed by it to make or carry the Loan to the extent not recovered by Lender in connection with the reemployment of such funds) which Lender may sustain if for any reason, other than a default by Lender, a funding under this Note does not occur on the date specified therefor in the Project Loan Agreement.

1.11    Discretion of Lender as to Manner of Funding. Lender shall be entitled to fund and maintain its funding under this Note in any manner it may elect, it being understood, however, that for the purposes of this Note, all such determinations hereunder (excluding determinations that Lender may elect to make from the Reuters screen and determinations of Lender’s damages) shall be made as if Lender had actually funded and maintained amounts disbursed under this Note during each calendar month through the purchase of deposits having a maturity corresponding to a period of one month and bearing an interest rate equal to LIBOR for such calendar month.

1.12    Regulatory Change. As used herein, the term “Regulatory Change” shall mean any change after the date of this Note in United States federal, state or foreign laws or regulations or the adoption or making after such date of any interpretations, directives or requests applying to a class of lenders, including Lender, under any United States federal, state or foreign laws or regulations (whether or not having the force of law) or any governmental or monetary authority charged with the interpretation or administration thereof.

ARTICLE II - GENERAL CONDITIONS

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2.1    No Waiver; Amendment. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a partial or past due payment, or indulgences granted from time to time shall be construed (a) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of Lender thereafter to insist upon strict compliance with the terms of this Note, or (b) to prevent the exercise of such right of acceleration or any other right granted hereunder or by any applicable laws; and Borrower hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. No extension of the time for the payment of this Note or any installment due hereunder, made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part unless Lender agrees otherwise in writing. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

2.2    Waivers. Presentment for payment, notice of intention to accelerate, notice of acceleration, demand, protest and notice of demand, protest and nonpayment and all other notices are hereby waived by Borrower. Borrower hereby further waives and renounces, to the fullest extent permitted by law, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, redemption, appraisement, exemption and homestead now or hereafter provided by the Constitution and laws of the United States of America and of each state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement and collection of the obligations evidenced by this Note or the other Loan Documents.

2.3    Limit of Validity. The provisions of this Note and of all agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the amount paid, or agreed to be paid to Lender for the use, forbearance or detention of the money loaned under this Note exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, performance or fulfillment of any provision hereof or of any agreement between Borrower and Lender shall, at the time performance or fulfillment of such provision shall be due, exceed the limit for interest prescribed by law or otherwise transcend the limit of validity prescribed by applicable law, then ipso facto the obligation to be performed or fulfilled shall be reduced to such limit and if, from any circumstance whatsoever, Lender shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance owing under this Note in the inverse order of its maturity (whether or not then due) or at the option of Lender be paid over to Borrower, and not to the payment of Interest. All interest (including any amounts or payments deemed to be interest) paid or agreed to be paid to Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal balance of this Note so that the interest thereof for such full period will not exceed the maximum amount permitted by applicable law. This Section 2.3 will control all agreements between Borrower and Lender.

2.4    Use of Funds. Borrower hereby warrants, represents and covenants that all funds disbursed

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hereunder shall be used for business or commercial purposes and that no funds disbursed hereunder shall be used for personal, family or household purposes.

2.5     Unconditional Payment. Borrower is and shall be obligated to pay principal, interest and any and all other amounts which become payable hereunder or under the other Loan Documents absolutely and unconditionally and without any abatement, postponement, diminution or deduction and without any reduction for counterclaim or setoff. In the event that at any time any payment received by Lender hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to Borrower and shall not be discharged or satisfied with any prior payment thereof or cancellation of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment shall be immediately due and payable upon demand. This Section 2.5 shall survive any cancellation or satisfaction of this Note or return of this Note to Borrower.

2.6    Savings Clause. This Note is subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by applicable law to contract or agree to pay. If by the terms of this Note, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of such maximum rate, the Applicable Interest Rate or the Default Interest Rate, as the case may be, shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of this Note until payment in full so that the rate or amount of interest on account of the Loan does not exceed the maximum lawful rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

2.7    SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

(a)    THIS NOTE WAS NEGOTIATED IN WHOLE OR IN PART IN THE STATE OF NEW YORK, AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE

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AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) AND ANY LEGAL REQUIREMENTS OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF BORROWER, AND, BY ACCEPTANCE OF THIS NOTE, LENDER, HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS NOTE AND THE PROJECT LOAN AGREEMENT, AND THIS NOTE AND THE PROJECT LOAN AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THIS CHOICE OF GOVERNING LAW IS MADE PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401.

(b)    ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST BORROWER OR LENDER ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OTHER LOAN DOCUMENT MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, AND, IN EITHER INSTANCE, EACH OF BORROWER AND LENDER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH OF BORROWER AND LENDER, BY ACCEPTANCE OF THIS NOTE, HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. THIS CHOICE OF FORUM IS MADE PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402.

(c)    EACH OF THE BORROWER AND, BY ACCEPTANCE OF THIS NOTE, THE LENDER, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS NOTE, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE (AS NOW OR HEREAFTER MODIFIED) OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND THE BORROWER HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

2.8    Secondary Market Transactions. The terms and provisions of Article XIII of the Project Loan Agreement are hereby incorporated herein by this reference.

2.9    Attorneys’ Fees. If any legal action is brought by any party to enforce or defend any provision of this Note, or as a consequence of any default under this Note, the prevailing party in such legal action shall be entitled to recover its reasonable attorneys’ fees and costs of the proceeding

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2.10    Miscellaneous. This Note shall be interpreted, construed and enforced according to the substantive laws of the State of New York without giving effect to its principles of choice of law or conflicts of law. The terms and provisions hereof shall be binding upon and inure to the benefit of Borrower and Lender and their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. As used herein, the terms “Borrower” and “Lender” shall be deemed to include their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. If Borrower consists of more than one person or entity, each shall be jointly and severally liable to perform the obligations of Borrower under this Note. All personal pronouns used herein, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. Titles of articles and sections are for convenience only and in no way define, limit, amplify or describe the scope or intent of any provisions hereof. Time is of the essence with respect to all provisions of this Note. This Note and the other Loan Documents contain the entire agreements between the parties hereto relating to the subject matter hereof and thereof, and any and all prior written agreements and any and all prior and contemporaneous oral agreements relative hereto and thereto which are not contained herein or therein are terminated.

2.11    Existing Note.  This Note amends and restates the Existing Note in its entirety and, from and after the date hereof, the Existing Note shall be of no further force or effect.

2.12    Liability Limitation. Except as to the Guarantors as set forth in the Guaranties and the Environmental Indemnity Agreement, Lender shall have no recourse against, nor shall there by any personal liability to, the members of Borrower, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Borrower (except for Guarantors as provided in the Guaranties and the Environmental Indemnity Agreement, but including the members of Borrower, LMB Phalanx LLC, KBS SOR II Acquisition VI, LLC, KBS SOR US Properties II LLC, KBS Strategic Opportunity Limited Partnership II, or KBS Strategic Opportunity REIT II, Inc.) with respect to the obligations of Borrower and Guarantors under the Loans. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Borrower’s liability or obligations under the Loan Documents, the Guarantors’ liability under the Guaranties and the Environmental Indemnity Agreement to which they are a party, or Lender’s right to exercise any rights or remedies against any collateral securing the Loans.

[SIGNATURES APPEAR ON THE FOLLOWING PAGES]

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IN WITNESS WHEREOF, Borrower has executed this Note as of the date first above written.

BORROWER:

210 WEST 31^ST STREET OWNER, LLC,

a Delaware limited liability company

By:    KBS SOR II 210 WEST 31^st STREET, LLC,

a Delaware limited liability company,

its sole member

By:    ONYX 31^st STREET, LLC,

a Delaware limited liability company,

its Managing Member

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.

Authorized Signatory

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LENDER:

PACIFICCAL PC CORE LENDER, LLC,

a Delaware limited liability company

By:     /s/ Steve Towle            

Name:     Steve Towle                

Title:     Authorized Signatory            

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EX-10.49

Exhibit 10.49

Section: 3

Block: 780

Lots: 45 (f/k/a 45, 49 and 51)

Premises: 210 West 31^st Street, New York, New York

CONSOLIDATED, AMENDED AND RESTATED ACQUISITION LOAN MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING

(this “Mortgage”)

FROM

210 WEST 31^ST STREET OWNER, LLC,

a limited liability company organized and existing under the laws of Delaware

(“Mortgagor”)

Address of Mortgagor:

c/o Onyx Equities, LLC

900 Route 9 North, Suite 400

Woodbridge, New Jersey 07095

Attention: John A. Saraceno, Jr.

TO

PACIFICCAL PC CORE LENDER, LLC,

a Delaware limited liability company,

(“Mortgagee”)

Address of Mortgagee:

c/o PCCP, LLC

10100 Santa Monica Blvd., Suite 1000

Los Angeles, CA 90067

Attn: Legal Notices

THIS ACQUISITION LOAN MORTGAGE IS NOT A ''BUILDING LOAN MORTGAGE'' AS DEFINED IN NEW YORK LIEN LAW (THE ''LIEN LAW'') § 2(14) AND DOES NOT SECURE REPAYMENT OF A LOAN MADE PURSUANT TO A ''BUILDING LOAN CONTRACT'' AS DEFINED IN LIEN LAW § 2(13).

Mortgage Amount: $32,650,000.00

This instrument prepared by, and after recording please return to:

MORRISON & FOERSTER LLP

250 West 55^th Street

New York, New York 10019

Attention: Jeffrey J. Temple, Esq.

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CONSOLIDATED, AMENDED AND RESTATED ACQUISITION LOAN

MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

THIS CONSOLIDATED, AMENDED AND RESTATED ACQUISITION LOAN MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (“Mortgage”) is made as of December 1, 2016, by 210 WEST 31^ST STREET OWNER, LLC, a Delaware limited liability company (“Mortgagor”), having an office at c/o Onyx Equities, LLC, 900 Route 9 North, Suite 400, Woodbridge, New Jersey 07095, Attention: John A. Saraceno, Jr., for the benefit of PACIFICCAL PC CORE LENDER, LLC, a Delaware limited liability company, as Mortgagee (together with its successors and/or assigns, “Mortgagee”), having an office at c/o PCCP, LLC, 10100 Santa Monica Blvd., Suite 1000, Los Angeles, CA 90067, Attn: Legal Notices.

W I T N E S S E T H:

A.Mortgagor and Mortgagee have entered into that certain (i) Acquisition and Project Loan Agreement (such agreement, together with any and all amendments, supplements, renewals, modifications, consolidations and extensions thereof from time to time, is hereinafter referred to as the “Project Loan Agreement”) and (ii) Building Loan Agreement (such agreement, together with any and all amendments, supplements, renewals, modifications, consolidations and extensions thereof from time to time, is hereinafter referred to as the “Building Loan Agreement”; together with the project Loan Agreement, collectively, the “Loan Agreements”), both of even date herewith, whereby Mortgagee has agreed to make a loan (the “Acquisition Loan”) available to Mortgagor in the principal amount of up to $32,650,000.00 for the purposes set forth in the Loan Agreements.

B.Mortgagee is the present owner and holder of the note described on Schedule I attached hereto and made a part hereof (the “Existing Note”), which Existing Note evidences an indebtedness of Mortgagor to Mortgagee in the aggregate principal amount of $10,000,000.00 (the “Existing Indebtedness”).

C.The Existing Note is secured by the mortgage described on Schedule II attached hereto (the “Existing Mortgage”), which Existing Mortgage constitutes a first priority lien on the Real Property (as hereinafter defined) securing the Existing Indebtedness.

D.To evidence the Acquisition Loan, Mortgagor has executed and delivered to Mortgagee, that certain Consolidated, Amended and Restated Acquisition Loan Promissory Note Secured By Mortgage, of even date herewith, in the aggregate principal sum of $32,650,000.00 (as the same may be severed, amended, modified, restated, replaced, consolidated or supplemented from time to time, the “AcquisitionLoan Note” or the “Note”), in and by which Mortgagor promises to pay said principal sum, or so much thereof as has been advanced, together with interest at the rate or rates and in installments as provided in the Acquisition Loan Note, and which Acquisition Loan Note (a) amends and restates the Existing Note in its entirety and (b) increases

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the indebtedness evidenced by the Existing Note by an amount equal to $22,650,000.00 (the “Additional Indebtedness”).

E.In connection with the foregoing, Mortgagor and Mortgagee desire to, on the terms and conditions hereinafter set forth, amend, modify and restate in its entirety the terms and provisions of the Existing Mortgage, to (a) secure all amounts payable under the Acquisition Loan Note, including the Additional Indebtedness and (b) continue the first priority mortgage lien upon the Real Property in the principal sum of the Acquisition Loan Note as security for the Acquisition Loan.

F.Mortgage recording tax in the amount of $280,000.00 was paid in connection with the recording of the Existing Mortgage. On the date hereof, additional mortgage recording tax in the amount of $634,420.00 is being paid with respect to the Additional Indebtedness.

G.The execution and delivery of this Mortgage by Mortgagor is a condition precedent to the performance by Mortgagee of its obligations under the Loan Agreements.

H.Capitalized terms not otherwise defined herein shall have the meaning ascribed to such term in the Project Loan Agreement or by reference therein.

ARTICLE 1. GRANT

1.1 GRANT. For the purposes of and upon the terms and conditions in this Mortgage, Mortgagor irrevocably grants, conveys and assigns to Mortgagee, with right of entry and possession, the leasehold interest in the real property located in the City of New York, County of New York, State of New York, described on Exhibit A attached hereto (the “Real Property”) held by Mortgagor pursuant to that certain ground lease located at the Real Property and described in Schedule III attached hereto (the “Ground Lease”), together with all after acquired title in respect of the Real Property, and all right, title, interest and privileges of Mortgagor in and to all streets, ways, roads and alleys used in connection with or pertaining to the Real Property, and together with all development rights or credits, air rights, water, water rights and water stock related to such real property, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances, easements, rights and rights of way appurtenant or related thereto; all buildings, other improvements and fixtures now or hereafter located on the Real Property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the “Improvements”); all interest or estate which Mortgagor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing (all of the foregoing being collectively referred to as the “Property”). The listing of specific rights or property shall not be interpreted as a limit of general terms.

PROVIDED, ALWAYS, that if Mortgagor shall pay unto Mortgagee the principal of and interest on the Note, when and as the same shall become due and payable whether by

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acceleration or otherwise, and shall pay all Secured Obligations (as hereinafter defined), and perform all obligations on its behalf contained in this Mortgage, the Project Loan Agreement and all of the other documents evidencing any of the Secured Obligations, then and in that case, the Property and the Collateral (as hereinafter defined) hereby conveyed and all rights and interests therein and thereto shall revert to Mortgagor and the estate, right, title and interest of Mortgagee therein shall thereupon cease, determine and become void and in such case Mortgagee shall execute and deliver to Mortgagor, pursuant to Section 5.14 hereof, at Mortgagor’s cost, an appropriate release, assignment or discharge of this Mortgage in form to be recorded.

ARTICLE 2. OBLIGATIONS SECURED

2.1 OBLIGATIONS SECURED. Mortgagor makes this Mortgage for the purpose of securing the following obligations (“Secured Obligations”):

(a) Payment to Mortgagee of all sums at any time owing under that certain Acquisition Loan Note;

(b) Payment and performance of all covenants and obligations of Mortgagor under this Mortgage;

(c) Payment and performance of all covenants and obligations on the part of Mortgagor under (i) the Project Loan Agreement and (ii) each other Loan Document (as defined in the Project Loan Agreement) to which Mortgagor is a party relating to the Acquisition Loan Note, but expressly excluding the Environmental Indemnity Agreement, Carveout Guaranty, Payment Guaranty and the Completion Guaranty (as each such term is defined in the Project Loan Agreement); and

(d) All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest.

2.2 OBLIGATIONS. The term “obligations” is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges, late charges and loan fees at any time accruing or assessed on any of the Secured Obligations.

2.3 INCORPORATION. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. Capitalized terms not specifically defined herein have the meaning given such terms in the Project Loan Agreement. All persons who may have or acquire an interest in the Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Project Loan Agreement may permit borrowing, repayment and reborrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time.

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ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS

3.1 ASSIGNMENT. Mortgagor hereby irrevocably assigns to Mortgagee all of Mortgagor's right, title and interest in, to and under: (a) all leases of the Property or any portion thereof, all licenses and agreements relating to the management, leasing or operation of the Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Property or any portion thereof, whether now existing or entered into after the date hereof (“Leases”); and (b) the rents, issues, deposits and profits of the Property, including, without limitation, all amounts payable and all rights and benefits accruing to Mortgagor under the Leases (“Payments”). The term Leases shall also include all guarantees of and security for the lessees' performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Mortgagee's right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Property.

3.2 GRANT OF LICENSE. Subject to the terms and conditions of that certain Cash Management Agreement of even date herewith among Mortgagor, Mortgagee and Property Manager (“Cash Management Agreement”), Mortgagee confers upon Mortgagor a license (“License”) to collect and retain the Payments as they become due and payable, until the occurrence of an Event Default (as hereinafter defined). Upon the occurrence of an Event of Default, the License shall be automatically revoked and Mortgagee may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Property. Mortgagor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Mortgagee for the payment to Mortgagee of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees' undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Event of Default has actually occurred or is then existing hereunder. Mortgagor hereby relieves the lessees from any liability to Mortgagor by reason of relying upon and complying with any such notice or demand by Mortgagee.

3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Property; or for any negligence in the management, upkeep, repair or control of the Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of: (i) the exercise or failure to exercise any of the rights, remedies or powers granted to Mortgagee hereunder; or (ii) the failure or refusal of Mortgagee to perform or discharge any obligation, duty or liability of Mortgagor arising under the Leases.

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3.4 REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that: (a) prior to the date of this Mortgage, Mortgagor delivered to Mortgagee a true, accurate and complete list of all Leases, if any; (b) all existing Leases, if any, are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach of default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent under or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessor's interests under any of the Leases has been transferred or assigned.

3.5 COVENANTS. Subject to the terms of the Project Loan Agreement, Mortgagor shall use commercially reasonable efforts to cause the Property to be leased at all times. Mortgagor (a) shall not enter into any Leases at the Property except in accordance with the terms and conditions of the Project Loan Agreement or (b) execute any other assignment relating to any of the Leases. Mortgagor shall timely perform all obligations that are required to be performed by the landlord under the Leases and give Mortgagee prompt written notice of any default which occurs with respect to any of the Leases following Mortgagor becoming aware of such default, whether the default be that of the lessee or of the lessor respectively thereunder. Without in any way limiting the requirement of Mortgagee’s consent hereunder, if the provisions of the Cash Management Agreement shall be in effect, any sums received by Mortgagor in consideration of any termination (or the release or discharge of any lessee) modification or amendment of any Lease shall be applied as provided in the Cash Management Agreement.

3.6 ESTOPPEL CERTIFICATES. Within fifteen (15) days after written request by Mortgagee, Mortgagor shall use commercially reasonable efforts to deliver to Mortgagee and to any party designated by Mortgagee estoppel certificates executed by Mortgagor and by each of the lessees certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessee's most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Mortgagor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Mortgagee. The foregoing obligation shall be deemed satisfied if Mortgagor delivers an estoppel certificate executed by a tenant that complies with the requirements of such tenant’s Lease.

ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING

4.1 SECURITY INTEREST. Mortgagor hereby grants and assigns to Mortgagee as of the Effective Date (as defined in the Project Loan Agreement) a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Mortgagor now or at any time hereafter owns or has any interest (collectively, the “Collateral”):

All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property, embedded software therein, wherever situated, which are or are to be incorporated into, used in connection with,

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or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements (which real property and Improvements are collectively referred to herein as the Property); all after acquired title, and all right, title, interest and privileges of Mortgagor in and to all streets, ways, roads and alleys used in connection with or pertaining to such real property, and together with all development rights or credits, air rights, water, water rights and water stock related to such real property, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances, easements, rights and rights of way appurtenant or related thereto; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property; together with all rents, issues, deposits and profits of the Property (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, general intangibles, chattel paper (whether electronic or tangible), instruments, documents, notes, drafts, letters of credit, letter of credit rights, supporting obligations insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Property or any business now or hereafter conducted thereon by Mortgagor; all rights of Mortgagor under any interest rate hedge, cap, swap or similar agreement; all permits consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Property; all deposits or other security now or hereafter made with or given to utility companies by Mortgagor with respect to the Property; all advance payments of insurance premiums made by Mortgagor with respect to the Property; all plans, drawings and specifications relating to the Property; all loan funds held by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee or another depository pursuant to the Project Loan Agreement or any other Loan Documents; all reserves, deferred payments, deposits, accounts, refunds and payments of any kind related to the Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files relating to any of the foregoing.

As to all of the above described personal property which is or which hereafter becomes a “fixture” under applicable law, this Mortgage constitutes a fixture filing under the New York Uniform Commercial Code, as amended or recodified from time to time (“UCC”); and is to be recorded in the real estate records of the county in which the Property is located.

4.2 REPRESENTATIONS AND WARRANTIES.  Mortgagor represents and warrants that: (a) Mortgagor has, or will have, marketable title to the Collateral; (b) Mortgagor has not previously assigned or encumbered the Collateral, and Mortgagor has not delivered or authorized any other person to deliver any financing statement covering any of the Collateral to any other person or entity; and (c) Mortgagor's principal place of business is located at the address shown in Section 7.11.

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4.3 RIGHTS OF MORTGAGEE. In addition to Mortgagee’s rights as a “Secured Party” under the UCC, Mortgagee may, but shall not be obligated to, at any time without notice and at the expense of Mortgagor: (a) give notice to any person of Mortgagee's rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Mortgagee therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Mortgagor under or from the Collateral. Notwithstanding the above, in no event shall Mortgagee be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express written election of said remedy under UCC §9-621 as amended or recodified from time to time, or other applicable law.

4.4 RIGHTS OF MORTGAGEE UPON EVENT OF DEFAULT. Upon the occurrence and during the continuance of an Event of Default under this Mortgage, then in addition to all of Mortgagee's rights as a Secured Party under any Loan Document, the UCC or otherwise at law:

(a) Mortgagee may (i) upon written notice, require Mortgagor to assemble any or all of the Collateral and make it available to Mortgagee at a place designated by Mortgagee; (ii) upon prior written notice, enter upon the Property or other place where any of the Collateral may be located and take possession of, collect, sell, and dispose of any or all of the Collateral, and store the same at locations acceptable to Mortgagee at Mortgagor's expense; (iii) sell, assign and deliver at any place and in any lawful manner all or any part of the Collateral and bid and become purchaser at any such sales; and

(b) Mortgagee may, for the account of Mortgagor and at Mortgagor's expense: (i) operate, use, consume, sell or dispose of the Collateral as Mortgagee deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Mortgagee may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Mortgagor in connection with or on account of any or all of the Collateral.

(c) Notwithstanding any other provision hereof, Mortgagee shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagor shall make an express written election of said remedy under UCC §9-621 as amended or recodified from time to time, or other applicable law.

4.5 POWER OF ATTORNEY. During the continuance of any Event of Default, Mortgagor hereby irrevocably appoints Mortgagee as Mortgagor’s attorney‑in‑fact (such agency being coupled with an interest), and as such attorney-in-fact Mortgagee may, without the obligation to do so, in Mortgagee's name, or in the name of Mortgagor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Mortgagee's security interests and rights in or to any of the Collateral, and take any other action required of Mortgagor herein;

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provided, however, that Mortgagee as such attorney-in-fact shall be accountable only for such funds as are actually received by Mortgagee.

4.6 EFFECTIVE AS A FINANCING STATEMENT. This Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including said fixtures) is situated. This Mortgage shall also be effective as a financing statement covering as-extracted collateral (including oil and gas), accounts and general intangibles under the New York UCC, as in effect from time to time, and the UCC, as in effect from time to time, in any other state where the Property is situated which will be financed at the wellhead or minehead of the wells or mines located on the Property and is to be filed for record in the real estate records of each county where any part of the Property is situated. This Mortgage shall also be effective as a financing statement covering any other Property and may be filed in any other appropriate filing or recording office. The mailing address of Mortgagor and the Mortgagee are set forth in the preamble of this Mortgage and the address of Mortgagee from which information concerning the security interests hereunder may be obtained is the address of Mortgagee set forth at the end of this Mortgage. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section.

ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES

5.1 TITLE. Mortgagor represents and warrants that Mortgagor lawfully holds and possesses, or will hold and possess, leasehold title to the Property without limitation on the right to encumber, and this Mortgage is a first and prior Lien on the Property.

5.2 TAXES AND ASSESSMENTS. Unless Mortgagee is reserving funds for such payments pursuant to the terms of the Loan Agreement, Mortgagor shall pay or caused to be paid prior to delinquency (i) all taxes, assessments, levies and charges imposed by any public or quasi‑public authority or utility company which are or which may become a Lien upon or cause a loss in value of the Property or any interest therein, and (ii) all taxes, assessments, levies and charges imposed by any public authority upon Mortgagee by reason of its interest in any Secured Obligation or in the Property, or by reason of any payment made to Mortgagee pursuant to any Secured Obligation; provided, however, Mortgagor shall have no obligation to pay taxes which may be imposed from time to time upon Mortgagee and which are measured by and imposed upon Mortgagee's net income.

5.3 TAX AND INSURANCE IMPOUNDS. Mortgagor shall, until all Secured Obligations have been paid in full, pay to Mortgagee the Tax and Insurance Monthly Installment as and when required (and as defined in) Section 12.2 of the Project Loan Agreement.

5.4 PERFORMANCE OF SECURED OBLIGATIONS. Mortgagor shall promptly pay and perform each Secured Obligation when due. By its execution hereof, Mortgagor hereby acknowledges its receipt of the fully executed Project Loan Agreement and Mortgagor hereby agrees to be bound by all terms and conditions contained in the Project Loan Agreement respecting the Property.

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5.5 LIENS, ENCUMBRANCES AND CHARGES. Subject to Mortgagor’s rights under Section 8.3 of the Project Loan Agreement, Mortgagor shall (i) immediately discharge any Lien not approved by Mortgagee in writing that has or may attain priority over this Mortgage and (ii) pay when due all obligations secured by or reducible to Liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Property or any interest therein, whether senior or subordinate hereto.

5.6 DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS.

(a) The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee, shall be paid directly to Mortgagee: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Property; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Property; (iii) all proceeds of any insurance policies payable by reason of loss sustained to all or any part of the Property; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law, Mortgagee may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and shall release the balance of any insurance proceeds Mortgagee receives to Mortgagor upon the conditions Mortgagee set forth in Sections 5.7 and 5.8 of the Project Loan Agreement, unless such casualty and/or release would materially impair Mortgagee’s security, in which case Mortgagee may apply the balance to the Secured Obligation. Mortgagee may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Mortgagee; provided, however, in no event shall Mortgagee be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Mortgagee or its employees or agents.

(b) Subject to the terms and conditions set forth in the Project Loan Agreement, Mortgagee may permit insurance proceeds held by Mortgagee to be used for repair or restoration.

5.7 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Mortgagor covenants: (a) to insure the Property against such risks as Mortgagee may require pursuant to the Project Loan Agreement and, at Mortgagee's request, to provide evidence of such insurance to Mortgagee, and to comply with the requirements of any insurance companies insuring the Property; (b) to keep the Property in good condition and repair; (c) not to remove or demolish the Property or any part thereof, not to alter, restore or add to the Property without Mortgagee’s prior written consent, (d) not to initiate or acquiesce in any change in any zoning or other land classification which affects the Property without Mortgagee's prior written consent; (e) to complete or restore promptly and in good and workmanlike manner the Property, or any part thereof which may be damaged or destroyed as provided for in the Project Loan Agreement; (f) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Property and pertain to acts committed or

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conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (g) not to commit or permit waste of the Property or Collateral; and (h) to do all other acts which from the character or use of the Property may be reasonably necessary to maintain and preserve its value.

5.8 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Mortgagor's sole expense, Mortgagor shall protect, preserve and defend the Property and Collateral and title to and right of possession of the Property and Collateral, the security hereof and the rights and powers of Mortgagee hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Property or Collateral and of any condemnation offer or action.

5.9 [INTENTIONALLY OMITTED.]

5.10 COMPENSATION; EXCULPATION; INDEMNIFICATION.

(a) Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of (i) the proper exercise of the rights, remedies or powers granted to Mortgagee in this Mortgage; (ii) the failure or refusal of Mortgagee to perform or discharge any obligation or liability of Mortgagor under any agreement related to the Property or under this Mortgage; or (iii) any loss sustained by Mortgagor or any third party resulting from Mortgagee's failure to lease the Property after an Event of Default or from any other act or omission of Mortgagee in managing the Property after an Event of Default unless the loss is caused by the gross negligence or willful misconduct of Mortgagee and no such liability shall be asserted against or imposed upon Mortgagee, and all such liability is hereby expressly waived and released by Mortgagor.

(b) Mortgagor indemnifies Mortgagee (and its successors, assigns and participants) against, and holds Mortgagee (and its successors, assigns and participants) harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys' fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which either may suffer or incur: (i) by reason of this Mortgage; (ii) by reason of the performance of any act required or permitted hereunder or required by law; (iii) as a result of any failure of Mortgagor to perform Mortgagor's obligations; (iv) by reason of any alleged obligation or undertaking on Mortgagee's part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations of Mortgagor contained in any other document related to the Property; or (v) as a result of any proceeding instituted by any claimant alleging a violation of the Lien Law. The above obligation of Mortgagor to indemnify and hold harmless Mortgagee (and its successors, assigns and participants) shall survive the release and cancellation of the Secured Obligations and the release and reconveyance or partial release and reconveyance of this Mortgage.

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(c) Mortgagor shall pay all amounts and indebtedness arising under this Section 5.10 immediately after demand by Mortgagee (or its successors, assigns or participants) together with interest thereon from the date of such demand at the rate of interest then applicable to the principal balance of the Note as specified therein.

5.11 [INTENTIONALLY OMITTED.]

5.12 DUE ON SALE OR ENCUMBRANCE. If the Property or any interest therein, or if any portion of the corporate stock, general partnership interests or limited liability company interests in Mortgagor (except as otherwise expressly permitted in Section 8.14 of the Project Loan Agreement), shall be sold, transferred, mortgaged, assigned, encumbered or leased, whether directly or indirectly, whether voluntarily, involuntarily or by operation of law, without the prior written consent of Mortgagee, THEN Mortgagee, in its sole discretion, may declare all Secured Obligations immediately due and payable.

5.13 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Property or in any manner obligated under the Secured Obligations (“Interested Parties”), Mortgagee may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement with Mortgagor or the applicable obligor extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Property and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the Lien of this Mortgage upon the Property and Collateral.

5.14 RELEASES. If the Secured Obligations are paid, performed and discharged in full in accordance with the terms of this Mortgage, the Note, and the other Loan Documents, then this Mortgage shall be released or assigned (without any representations or warranties) by Mortgagee at Mortgagor’s request; provided, Mortgagor shall pay any filing fees in connection with the recordings of the assignment of mortgage and any expenses of Mortgagee incurred in connection with such release or assignment. In connection therewith, at the request and sole expense of Mortgagor, Mortgagee shall execute and deliver to Mortgagor all releases, assignments or other documents, including, without limitation, reconveyances and termination statements, reasonably necessary or desirable for the release of such lien.

5.15 SUBROGATION. Mortgagee shall be subrogated to the Lien of all encumbrances, whether released of record or not, paid in whole or in part by Mortgagee pursuant to this Mortgage or by the proceeds of any loan secured by this Mortgage.

5.16 RIGHT OF INSPECTION. Mortgagee, its agents and employees, may enter the Property at any reasonable time, after reasonable notice to Mortgagor, for the purpose of inspecting the Property and ascertaining Mortgagor's compliance with the terms hereof.

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ARTICLE 6. DEFAULT PROVISIONS

6.1 EVENT OF DEFAULT. For all purposes hereof, the term “Event of Default” shall mean the existence of any Event of Default, as defined in the Project Loan Agreement.

6.2 RIGHTS AND REMEDIES. At any time after the occurrence and during the continuance of an Event of Default, Mortgagee shall have all the following rights and remedies:

(a) Upon written notice to Mortgagor, to declare all Secured Obligations immediately due and payable;

(b) Upon written notice to Mortgagor, and without releasing Mortgagor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any Event of Default of Mortgagor and, in connection therewith, to enter upon the Property and do such acts and things as Mortgagee deems necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii) to pay, purchase, contest or compromise any encumbrance, charge, Lien or claim of Lien which, in the sole judgment of Mortgagee, is or may be senior in priority to this Mortgage, the judgment of Mortgagee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Mortgage; or (v) to employ counsel, accountants, contractors and other appropriate persons.

(c) To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Mortgagor waives the defense of laches and any applicable statute of limitations;

(d) To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, and Mortgagor hereby consents to such appointment;

(e) To enter upon, possess, manage and operate the Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Mortgagor or the then owner of the Property, to make, terminate, enforce or modify Leases of the Property upon such terms and conditions as Mortgagee deems proper, to make repairs, alterations and improvements to the Property as necessary, in Mortgagee’s sole judgment, to protect or enhance the security hereof;

(f) [reserved];

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(g) To resort to and realize upon the security hereunder and any other security now or later held by Mortgagee concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non‑judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Mortgagee determines in its sole discretion.

(h) Upon sale of the Property at any judicial foreclosure, Mortgagee may credit bid (as determined by Mortgagee in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Mortgagee may, but is not obligated to, take into account all or any of the following: (i) appraisals of the Property as such appraisals may be discounted or adjusted by Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Mortgagee with respect to the Property prior to foreclosure; (iii) expenses and costs which Mortgagee anticipates will be incurred with respect to the Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Property prior to resale, costs of resale (e.g. commissions, attorneys' fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Mortgagee; (iv) declining trends in real property values generally and with respect to properties similar to the Property; (v) anticipated discounts upon resale of the Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Mortgagee (in its sole and absolute discretion) deems appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w) Mortgagee is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Mortgagee any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Mortgagee's credit bid need not have any relation to any loan-to-value ratios previously discussed between Mortgagor and Mortgagee; and (z) Mortgagee's credit bid may be (at Mortgagee's sole and absolute discretion) higher or lower than any appraised value of the Property.

6.3 APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, fees and expenses of Mortgagee, including, without limitation, cost of evidence of title and attorneys' fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, Mortgagee shall apply all proceeds of any foreclosure sale: (a) to payment of all sums expended by Mortgagee under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto.

6.4 APPLICATION OF OTHER SUMS. All sums received by Mortgagee under Section 6.2 or Section 3.2, less all costs and expenses incurred by Mortgagee or any receiver under Section 6.2, including, without limitation, attorneys' fees, shall be applied in payment of the Secured Obligations in such order as Mortgagee shall determine in its sole discretion;

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provided, however, Mortgagee shall have no liability for funds not actually received by Mortgagee.

6.5 NO CURE OR WAIVER. Neither Mortgagee's nor any receiver's entry upon and taking possession of all or any part of the Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Mortgagee or any receiver shall cure or waive any breach, Event of Default or notice of default under this Mortgage, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Mortgagor has cured all other defaults), or impair the status of the security, or prejudice Mortgagee in the exercise of any right or remedy, or be construed as an affirmation by Mortgagee of any tenancy, lease or option or a subordination of the Lien of this Mortgage.

6.6 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Mortgagor agrees to pay to Mortgagee, within ten (10) days after demand, all costs and expenses incurred by Mortgagee pursuant to Section 6.2 (including, without limitation, court costs and attorneys' and paralegals' fees, whether internal or external, whether incurred in litigation or not) with interest from the date of notice of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein.

ARTICLE 7. MISCELLANEOUS PROVISIONS

7.1 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Mortgagee and contain further agreements and affirmative and negative covenants by Mortgagor which apply to this Mortgage and to the Property and such further rights and agreements are incorporated herein by this reference.

7.2 MERGER. No merger shall occur as a result of Mortgagee's acquiring any other estate in, or any other Lien on, the Property unless Mortgagee consents to a merger in writing.

7.3 OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one person has executed this Mortgage as “Mortgagor”, the obligations of all such persons hereunder shall be joint and several.

7.4 [INTENTIONALLY OMITTED.]

7.5 WAIVER OF MARSHALING RIGHTS. Mortgagor, for itself and for all parties claiming through or under Mortgagor, and for all parties who may acquire a Lien on or interest in the Property, hereby waives all rights to have the Property and/or any other property, including, without limitation, the Collateral, which is now or later may be security for any Secured Obligation (“Other Property”) marshaled upon any foreclosure of this Mortgage or on a foreclosure of any other security for any of the Secured Obligations. Mortgagee shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have

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the right to order a sale of, the Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Mortgagee may designate.

7.6 RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term “Property” means all and any part of the Property and any interest in the Property.

7.7 SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 5.12.

7.8 EXECUTION IN COUNTERPARTS. This Mortgage may be executed in any number of counterparts, each of which, when executed and delivered to Mortgagee, will be deemed to be an original and all of which, taken together, will be deemed to be one and the same instrument.

7.9 CHOICE OF LAW. THIS MORTGAGE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY NEW YORK LAW AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH AND PURSUANT TO THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW, EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK ARE GOVERNED BY THE LAWS OF SUCH OTHER JURISDICTION.

7.10 INCORPORATION. Exhibit A as attached, is hereby incorporated into this Mortgage by this reference.

7.11 NOTICES. All notices or other communications required or permitted to be given pursuant to the provisions of this Mortgage shall be in writing and shall be considered as properly given if delivered personally or sent by first class U.S. mail, postage prepaid, except that notice of an Event of Default may be sent by certified mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective three (3) days after mailing, if mailed by first class mail, and otherwise upon receipt at the addresses set forth below; provided, however, that non-receipt of any communication as a result of any change of address of which the sending party was not notified or as a result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the addresses of the parties shall be:

Mortgagor:    210 West 31^st Street Owner, LLC

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c/o Onyx Equities, LLC

900 Route 9 North, Suite 400

Woodbridge, New Jersey 07095

Attention: John A. Saraceno, Jr.

With a copy to: c/o KBS Capital Advisors

800 Newport Center Drive, Suite 700

Newport Beach, CA 92660

Attention: Brian Ragsdale

Attention: Shep Wainwright

and to:

Cole Schotz P.C.

1325 Avenue of the Americas, 19^th Floor

New York, NY 10019
Attention: Jordan J. Metzger, Esq.

and to:

Sheppard Mullin Richter & Hampton LLP

650 Town Center Drive, 4^th Floor

Costa Mesa, CA 92626

Attention: Scott A. Morehouse, Esq.

Mortgagee: PacificCal PC Core Lender, LLC

c/o PCCP, LLC10100 Santa Monica Blvd., Suite 1000

Los Angeles, CA 90067

Attn: Legal Notices

With a copy to: Morrison & Foerster LLP250 West 55^th Street
New York, New York 10019
Attn: Jeffrey Temple, Esq.

Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days’ notice to the other party in the manner set forth hereinabove. Mortgagor shall forward to Mortgagee, without delay, any notices, letters or other communications delivered to the Property or to Mortgagor naming Mortgagee, “Lender” or any similar designation as addressee, or which is reasonably likely to affect the ability of Mortgagor to perform its obligations to Mortgagee under the Note or the Project Loan Agreement.

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7.12 SECONDARY MARKET TRANSACTIONS. The terms and provisions of Article XIII of the Project Loan Agreement are hereby incorporated herein by this reference.

7.13 EXISTING MORTGAGE. This Mortgage amends and restates the Existing Mortgage in its entirety and, from and after the date hereof, the Existing Mortgage shall be of no further force or effect.

7.14 LIMITED RECOURSE PROVISION. Except as to the Guarantors as set forth in the Guaranties and the Environmental Indemnity Agreement, Lender shall have no recourse against, nor shall there by any personal liability to, the members of Borrower, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Borrower (except for Guarantors as provided in the Guaranties and the Environmental Indemnity Agreement, but including the members of Borrower, LMB Phalanx LLC, KBS SOR II Acquisition VI, LLC, KBS SOR US Properties II LLC, KBS Strategic Opportunity Limited Partnership II, or KBS Strategic Opportunity REIT II, Inc.) with respect to the obligations of Borrower and Guarantors under the Loans. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Borrower’s liability or obligations under the Loan Documents, the Guarantors’ liability under the Guaranties and the Environmental Indemnity Agreement to which they are a party, or Lender’s right to exercise any rights or remedies against any collateral securing the Loans.

ARTICLE 8. GROUND LEASE

8.1 Mortgagor shall perform all of the covenants contained in Section 8.27 of the Project Loan Agreement with respect to the Ground Lease. Mortgagor shall enforce the obligations of the lessor under the Ground Lease (the “Ground Lessor”) to the end that Mortgagor may enjoy all of the rights granted to it under the Ground Lease, and shall promptly notify Mortgagee of any default beyond any applicable grace, notice or cure period by the Ground Lessor that Mortgagor becomes aware of, in the performance or observance of any of the terms, covenants and conditions on the part of the Ground Lessor to be performed or observed under the Ground Lease, and Mortgagor shall promptly advise Mortgagee of the occurrence of any event of default beyond any applicable grace, notice or cure period under the Ground Lease. Mortgagor hereby assigns to Mortgagee, as further security for the payment and performance of the Secured Obligations and observance of the terms, covenants and conditions of this Mortgage, all of the rights, privileges and prerogatives of Mortgagor, as tenant under the Ground Lease, to surrender the leasehold estate created by the Ground Lease or to terminate, cancel, modify, change, supplement, alter or amend the Ground Lease, and any such surrender of the leasehold estate created by the Ground Lease or termination, cancellation, modification, change, supplement, alteration or amendment of the Ground Lease not permitted pursuant to the foregoing terms of this Section 8.1, Section 8.27 of the Loan Agreement or not otherwise approved by Mortgagee shall be void and of no force and effect.

8.2 If Mortgagor shall default beyond any applicable notice and/or grace period in the performance or observance of any term, covenant or condition of the Ground Lease on the part of Mortgagor, as tenant thereunder, to be performed or observed, then, without limiting

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the generality of the other provisions of this Mortgage, and without waiving or releasing Mortgagor from any of its obligations hereunder, Mortgagee shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all of the terms, covenants and conditions of the Ground Lease on the part of Mortgagor, as tenant thereunder, to be performed or observed or to be promptly performed or observed on behalf of Mortgagor, to the end that the rights of Mortgagor in, to and under the Ground Lease shall be kept unimpaired and free from default. If Mortgagee shall make any payment or perform any act or take action in accordance with the preceding sentence, Mortgagee will give Mortgagor prompt written notice thereof; provided that Mortgagee's failure to give such notice prior to making such payment or performing or taking such action shall not affect its rights hereunder. In any such event, Mortgagee and any Person designated by Mortgagee shall have, and are hereby granted, the right to enter upon the Mortgaged Property at any time and from time to time for the purpose of taking any such action. If the Ground Lessor shall deliver to Mortgagee a copy of any notice of default sent by Ground Lessor to Mortgagor, as lessee under the Ground Lease, Mortgagee may take or omit to take any action in good faith, in reliance thereon.

8.3 So long as any portion of the Secured Obligations shall remain unpaid, the leasehold estate created in the Real Property pursuant to the Ground Lease shall not merge but shall always be kept separate and distinct, notwithstanding the union of such estates in any Person by purchase, operation of law or otherwise. Mortgagee reserves the right, at any time, to release portions of the Property from the lien of this Mortgage with or without consideration, at Mortgagee's election, without waiving or affecting any of its rights hereunder or under the Note, the Project Loan Agreement or the other Loan Documents and any such release shall not affect Mortgagee's rights in connection with the portion of the Property not so released.

8.4 In the event of the bankruptcy, reorganization or insolvency of Mortgagor, any attempt by Mortgagor to surrender its leasehold estate, or any portion thereof, under the Ground Lease, or any attempt by Mortgagor to terminate, cancel or acquiesce in the rejection of the Ground Lease without the consent of Mortgagee shall be null and void. Mortgagor hereby expressly releases, assigns, relinquishes and surrenders unto Mortgagee all of its right, power and authority to terminate, cancel, acquiesce in the rejection of, modify, change, supplement, alter or amend the Ground Lease in any respect, either orally or in writing, in the event of the bankruptcy, reorganization or insolvency of Mortgagor, and any attempt on the part of Mortgagor to exercise any such right without the consent of Mortgagee shall be null and void.

8.5 Notwithstanding anything to the contrary contained in this Mortgage with respect to the Ground Lease, as security for the Loan, but subject to the Loan Documents, the Mortgagor unconditionally assigns, transfers and sets over unto Mortgagee all of its claims and rights to the payment of damages that may hereafter arise as a result of any rejection or disaffirmance of the Ground Lease by the Ground Lessor or its successors and assigns, or by ant trustee of any such party, pursuant to the Bankruptcy Code. Mortgagee shall have and is hereby granted the right to approve prior to the filing or commencement thereof by Borrower of any claim, suit, action or proceeding relating to the Ground Lessor’s attempt

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to reject or disaffirm, or the rejection or disaffirmance of, the Ground Lease (including, without limitation, the right to file and prosecute, any proofs of claim, complaints, motions, objections, applications, notices and other documents) in any case in respect of Ground Lessor or any of its successors and assigns, under the Bankruptcy Code. This assignment constitutes a present, irrevocable and unconditional assignment of the foregoing claims, rights and remedies, and shall continue in effect until the Secured Obligations shall have been satisfied and discharged in full.

8.6 Mortgagee hereby agrees to deliver to Ground Lessor (simultaneously with the delivery thereof to Mortgagor) copies of any notice of default or nonperformance given to Mortgagor hereunder. The terms of this Section 8.6 are adopted in order to comply with certain provisions required in order to qualify this Mortgage as a “Recognized Mortgage” under the Ground Lease.

ARTICLE 9. STATE SPECIFIC PROVISIONS

9.1 CONFLICTS WITH PRECEDING ARTICLES. In the event of any conflict between the provisions of this Article 9 and any provision in the preceding Articles, then the provisions of this Article 9 shall control.

9.2 NEW YORK PROVISIONS. Notwithstanding anything to the contrary elsewhere in this Mortgage:

(a) MAXIMUM PRINCIPAL SUM. THE PARTIES HERETO INTEND THAT THIS MORTGAGE SHALL SECURE UNPAID BALANCES OF THE DEBT SECURED HEREBY. THE MAXIMUM PRINCIPAL AMOUNT OF INDEBTEDNESS WHICH IS OR UNDER ANY CONTINGENCY MAY BE SECURED AT THE DATE OF EXECUTION HEREOF OR AT ANY TIME THEREAFTER BY THIS MORTGAGE IS $32,650,000.00.

(b) Trust Fund for Advances. In compliance with Section 13 of the Lien Law of the State of New York, the Mortgagor will receive the advances secured hereby and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the “cost of improvement” (as such quoted term is defined in the New York Lien Law), and will apply the same first to the payment of such costs before using any part of the total of the same for any other purpose and, will comply with Section 13 of the New York Lien Law. Mortgagor will indemnify and hold Mortgagee harmless against any loss or liability, cost or expense, including, without limitation, any judgments, attorney’s fees, costs of appeal bonds and printing costs, arising out of or relating to any proceeding instituted by any claimant alleging a violation by Mortgagor of any applicable lien law including, without limitation, any section of Article 3-A of the New York Lien Law.

(c) New York Real Property Law Article 4-A. If this Mortgage shall be deemed to constitute a “mortgage investment” as defined by New York Real Property Law Section 125, then this Mortgage shall and hereby does (i) confer upon the Mortgagee the powers

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and (ii) impose upon the Mortgagee the duties of trustees set forth in New York Real Property Law Section 126.

(d) Statement in Accordance with Section 253.1-a.(a) of the New York Tax Law. This Mortgage does not cover real property principally improved or to be improved by one or more structures containing in the aggregate not more than six (6) residential dwelling units, each having separate cooking facilities.

(e) Statement in Accordance with Section 274-a of the New York Real Property Law. The Mortgagee shall, within fifteen (15) days after written request, provide the Mortgagor with the statement required by Section 274-a of the New York Real Property Law.

(f) Section 291-f of New York Real Property Law. Mortgagee shall have all of the rights set forth in Section 291-f of the Real Property Law of New York. For purposes of Section 291-f of the New York Real Property Law, all existing tenants and every tenant or subtenant who after the recording of this Mortgage, enters into a Lease upon the premises of any of the Property or who acquires by instrument of assignment or by operation of law a leasehold estate upon the Property is hereby notified that Mortgagor shall not, without obtaining Mortgagee’s prior consent in each instance, cancel, abridge or otherwise modify any Leases or accept prepayments for more than thirty (30) days of installments of rent to become due with respect to any Lease thereof having an unexpired term on the date of this Mortgage of five (5) years or more, except as expressly permitted under the Project Loan Agreement, and that any such cancellation, abridgement, modification or prepayment made by any such tenant or subtenant without either being expressly permitted under this Mortgage or receiving Mortgagee’s prior consent shall be voidable by Mortgagee at its option.

(g) Sections 254, 271, 272 and 291-f of New York Real Property Law. All covenants of the Mortgagor herein contained shall be construed as affording to Mortgagee rights additional to and not exclusive of the rights conferred under the provisions of Sections 254, 271, 272 and 291-f of the Real Property Law of New York.

(h) Real Property Law. In the event of any conflict, inconsistency or ambiguity between (i) the provisions of the Note, this Mortgage or the other Loan Documents and (ii) the provisions of subsection 4 of Section 254 of the Real Property Law of New York covering the insurance of buildings against loss by fire, the provisions of the Note, this Mortgage and the other Loan Documents shall control.

(i) RPAPL. If an Event of Default shall occur and be continuing, Mortgagee may elect to sell (and, in the case of any default of any purchaser, resell) the Property or any part thereof by exercise of the power of foreclosure or of sale granted to Mortgagee by Articles 13 of the New York Real Property Actions and Proceedings Law (the “RPAPL”). In such case, Mortgagee may commence a civil action to foreclose this Mortgage pursuant to Article 13 of the RPAPL to satisfy the Note and all other amounts secured hereby.

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(j) Certain Waivers. Mortgagor hereby waives and releases all benefit that might accrue to Mortgagor by virtue of any present or future law exempting the Property, or any part of the proceeds arising from any sale thereof, from attachment, levy or sale on execution, or providing for any stay of execution, exemption from civil process or extension of time for payment, or any right of marshalling in the event of any sale hereunder of the Property, and, unless specifically required herein, all notices of Mortgagor’s default or of Mortgagee’s election to exercise, or Mortgagee’s actual exercise of any option under this Mortgage or any other Loan Documents. Mortgagor waives all rights or defenses arising by reason of any “one action” or “anti-deficiency” law, or any other law which may prevent Mortgagee from bringing any action against Mortgagor, including a claim for deficiency to the extent Mortgagee is otherwise entitled to a claim for deficiency, before or after Mortgagee’s commencement or completion of any foreclosure action or any other action to exercise its remedies hereunder or otherwise available at a law or in equity.

(k) Application of Insurance Proceeds. In no event shall the provisions of Section 254 of the Real Property Law of the State of New York with respect to the application of insurance proceeds apply to this Mortgage.

(l) Assignment. Upon the repayment of this Mortgage, Mortgagee shall cooperate with Mortgagor in effecting an assignment, without representation or warranty (except that Mortgagee shall represent that it has not assigned or encumbered this Mortgage or the other Loan Documents), and without recourse to Mortgagee, of this Mortgage, provided all Lenders’ costs and attorneys’ fees in connection therewith are paid by Mortgagor, and Mortgagee shall have no liability to Mortgagor for the loss of the Note or any original document evidencing and securing the Loan, but shall provide Mortgagor with a lost document affidavit describing the circumstances thereof and such other instruments as may be reasonably requested to effectuate such assignment (which shall not include any indemnification agreements).

(m) Relation to Building and Project Loan Mortgages. This Mortgage is intended to be senior and prior in lien to the (i) Building Loan Mortgage and (ii) Project Loan Mortgage, each executed by Mortgagor in favor of Mortgagee and each dated as of the date hereof, securing repayment of Project Loans and Building Loans, as applicable, or so much thereof as shall have been advanced thereunder, the proceeds of which are to be disbursed and advanced from time to time after the date hereof.

(n) Loan Proceeds. As of the time of recording of this Mortgage, the entire principal amount secured or to be secured by this Mortgage has been advanced in full and no improvements (as defined in Lien Law § 2(4)) have commenced or are underway on or at the Property, except improvements for which all costs of improvement which are currently due and payable have been paid. No part of the Acquisition Loan is intended to be applied for costs of improvement.

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[SIGNATURE APPEARS ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the day and year set forth above.

MORTGAGOR:

210 WEST 31^ST STREET OWNER, LLC,

a Delaware limited liability company

By:    KBS SOR II 210 WEST 31^ST STREET, LLC,

a Delaware limited liability company,

its sole member

By:    ONYX 31^st STREET, LLC,

a Delaware limited liability company,

its Managing Member

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.,

Authorized Signatory

(ALL SIGNATURES MUST BE ACKNOWLEDGED)

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MORTGAGEE:

PACIFICCAL PC CORE LENDER, LLC,

a Delaware limited liability company

By:     /s/ Steve Towle            

Name:     Steve Towle                

Title:     Authorized Signatory            

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NOTARY ACKNOWLEDGMENT

STATE OF NEW YORK    )

) ss.:

COUNTY OF NEW YORK    )

On the 29thday of November      , 2016, before me, the undersigned, personally appeared     John Saraceno        , personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity and that by his signature on the instrument the individual or the person upon behalf of which the individual acted executed the instrument.

/s/ Tierra James                
Signature and Office of individual
taking acknowledgment

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NOTARY ACKNOWLEDGMENT

STATE OF CALIFORNIA        )

) ss.:

COUNTY OF LOS ANGELES    )

On the 28thday of November     , 2016, before me, the undersigned, personally appeared     Steve Towle        , personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity and that by his signature on the instrument the individual or the person upon behalf of which the individual acted executed the instrument.

/s/ Cindy Karina Recinos                
Signature and Office of individual
taking acknowledgment

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EXHIBIT A
DESCRIPTION OF PROPERTY

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE BOROUGH OF MANHATTAN, CITY, COUNTY AND STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE SOUTHERLY SIDE OF 31ST STREET, DISTANT 104 FEET 3 INCHES WESTERLY FROM THE CORNER FORMED BY THE INTERSECTION OF SAID SOUTHERLY SIDE OF 31ST STREET WITH THE WESTERLY SIDE OF SEVENTH AVENUE;

RUNNING THENCE SOUTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 37 FEET 9 INCHES;

THENCE WESTERLY PARALLEL WITH THE SOUTHERLY SIDE OF 31ST STREET, 61 FEET 4-1/2 INCHES;

THENCE SOUTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 1 FOOT 11-1/2 INCHES;

THENCE WESTERLY PARALLEL WITH THE SOUTHERLY SIDE OF 31ST STREET, 2 FEET 7 INCHES;

THENCE SOUTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 59 FEET 1/2 INCH;

THENCE WESTERLY PARALLEL WITH THE SOUTHERLY SIDE OF 31ST STREET, 64 FEET 3-1/2 INCHES;

THENCE NORTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 98 FEET 9 INCHES TO THE SOUTHERLY SIDE OF 31ST STREET;

THENCE EASTERLY ALONG THE SOUTHERLY SIDE OF 31ST STREET, 128 FEET 3 INCHES TO THE POINT OR PLACE OF BEGINNING.

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SCHEDULE I

EXISTING NOTE

Consolidated Mortgage Loan Note made by Onyx 31^st Street, LLC (predecessor in interest to 210 West 31^st Street Owner, LLC) in favor of ConnectOneBank, dated September 30, 2016, in the original principal amount of $10,000,000.00, which Consolidated Mortgage Loan Note was assigned to PacificCal PC Core Lender, LLC by Allonge on the date hereof.

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SCHEDULE II

EXISTING MORTGAGE

1. Leasehold Mortgage, dated July 14, 2015, made by ONYX 31^ST STREET, LLC to ConnectOne Bank in the principal sum of $6,000,000.00 and interest, and duly recorded in the Office of the City Register of the New York Department of Finance (the “Register's Office”) on August 4, 2015, in the Register’s Office, under CRFN 2015000266474 upon which there remains an unpaid principal balance of $6,000,000.00 (upon which a mortgage tax of $168,000.00 was paid); and

2. Leasehold Mortgage dated February 5, 2016 made by ONYX 31^ST STREET, LLC to ConnectOne Bank, a New Jersey Banking Corporation in the principal sum of $1,000,000.00 and interest, and duly recorded in the Register’s Office on February 29, 2016, in the Register’s Office, under CRFN 2016000067710 upon which a mortgage tax of $ 28,000.00 was paid.

3. Mortgage Consolidation, Modification and Extension Agreement made by ONYX 31^st Street, LLC to ConnectOne Bank dated as of February 5, 2016 and recorded February 29, 2016 in CRFN 2016000067711 in the Register’s Office which consolidated Mortgages 1 & 2 above to form a single lien in the amount of $7,000,000.00.

4. Gap Leasehold Mortgage dated September 30, 2016 made by ONYX 31^ST STREET, LLC to ConnectOne Bank, a New Jersey Banking Corporation in the principal sum of $3,000,000.00 and interest, and recorded October 5, 2016 in CRFN 2016000349683 in the Register’s Office upon which a mortgage tax of $84,000.00 was paid.

5. Mortgage Consolidation, Modification and Extension Agreement made by ONYX 31^st Street, LLC to ConnectOne Bankdated as ofSeptember 30, 2016 and recorded October 5, 2016 in CRFN 2016000349684 in the Register’s Office which consolidated Mortgages 3 & 4 above to form a single lien in the amount of $10,000,000.00.

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EX-10.50

Exhibit 10.50

PROJECT LOAN PROMISSORY NOTE SECURED BY MORTGAGE

$7,050,000.00 December 1, 2016New York, New York

FOR VALUE RECEIVED, the undersigned, 210 WEST 31^ST STREET OWNER, LLC, a Delaware limited liability company, having a principal place of business at c/o Onyx Equities, LLC, 900 Route 9 North, Suite 400, Woodbridge, NJ 07095 (“Borrower”), promises to pay to the order of PACIFICCAL PC CORE LENDER, LLC, a Delaware limited liability company (“Lender”), c/o PCCP, LLC, 10100 Santa Monica Blvd., Suite 1000, Los Angeles, CA 90067, or at such other place as Lender may designate to Borrower in writing from time to time, the principal sum of up to SEVEN MILLION FIFTY THOUSAND AND 00/100 DOLLARS ($7,050,000.00), or so much thereof as may from time to time be owing hereunder by reason of advances made by Lender to or for the account of Borrower, together with interest on so much thereof as is from time to time outstanding and unpaid, from the date of the advance of the principal evidenced hereby, at the Applicable Interest Rate (as such term is defined in Section 1.1(b) below) in lawful money of the United States of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private. Initially capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Project Loan Agreement (as defined in Section 1.4 below).

ARTICLE I - TERMS AND CONDITIONS

1.1    Accrual and Calculation of Interest.

(a)    Interest shall accrue on the outstanding principal balance of this Project Loan Promissory Note Secured by Mortgage (this “Note”) based on a rate of interest per annum (the “Applicable Interest Rate”) in effect from time to time equal to the sum of (i) (A) five and one-half percent (5.50%), (B) in the event the First Extension Option is timely exercised by Borrower in strict accordance with the terms and conditions of Section 2.9 of the Project Loan Agreement, five and eighty three-one hundredths of a percent (5.83%) during the First Extended Term, or (C) in the event the Second Extension Option is timely exercised by Borrower in strict accordance with the terms and conditions of Section 2.9 of the Project Loan Agreement, six and sixteen-one hundredths of a percent (6.16%) during the Second Extended Term; plus (ii) the rate designated as “LIBOR” for U.S. dollar deposits with one (1) month maturities as quoted by a national bank (“Bank”) from Reuters LIBOR01 (as defined below) or any successor thereto, which shall be that one-month LIBOR rate in effect two (2) New York Banking Days (as defined below) prior to the beginning of each calendar month, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation, such rate to be reset at the beginning of each succeeding month; provided, however, that, notwithstanding anything to the contrary contained in this Note, in no event shall the LIBOR portion of the Applicable Interest Rate (under clause (ii) above) be less than 0.60561% per annum (or the daily equivalent thereof). As used herein, the term “New York Banking Day” means any day (other than a Saturday or Sunday) on which commercial

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banks are open for business in New York, New York. If the initial advance under this Note occurs other than on the first day of the month, the initial one-month LIBOR rate shall be that one-month LIBOR in effect two (2) New York Banking Days prior to the date of the initial advance, which one-month LIBOR rate plus five and one-half percent (5.50%) shall be in effect as the Applicable Interest Rate for the remaining days of the month of the initial advance; such one-month LIBOR (and the Applicable Interest Rate) to be reset at the beginning of each succeeding month. Lender’s internal records of Applicable Interest Rates shall be determinative in the absence of manifest error. As used herein, the term “Reuters LIBOR01” means Reuters Screen LIBOR01 Page (or such other page as may replace Reuters Screen LIBOR01 Page for the purpose of displaying London interbank offered rates of major banks for United States dollar deposits).

(b)    Interest shall be computed hereunder based on a 360-day year, and shall accrue for each and every day (365 days per year, 366 days per leap year) on which any indebtedness remains outstanding hereunder. In computing the number of days during which interest accrues, the day on which funds are initially advanced shall be included regardless of the time of day such advance is made, and the day on which funds are repaid shall be included unless repayment is credited prior to close of business. Payments in federal funds immediately available in the place designated for payment made by Borrower prior to 12:00 noon, Los Angeles Time, shall be credited prior to close of business, while other payments may, at the option of Lender, not be credited until immediately available to Lender in federal funds in the place designated for payment prior to 11:00 a.m., Los Angeles Time, at such place of payment on a day on which Lender is open for business.

1.2    Payments of Principal and Interest.

(a)    Borrower shall make monthly payments of interest accruing under this Note, as follows: on the first (1^st) New York Banking Day of the first calendar month following the date of this Note, and on the first (1^st) New York Banking Day of each calendar month thereafter (each, a “Payment Date”) until the Maturity Date (as defined in Section 1.2(c) below), Borrower shall pay to Lender all interest accrued under this Note at the Applicable Interest Rate during the immediately preceding calendar month; provided, however, that if the Loan is funded on a date which is within the last ten (10) days of a calendar month, Borrower’s first monthly interest payment shall be on the first day of the second (2^nd) calendar month following the date of this Note (and Lender shall collect in advance at Loan closing the interest due hereunder for the period between the date of this Note and the end of the calendar month in which the Loan is funded).

(b)    In addition to any monthly payments of interest due pursuant to Section 1.2(a)above, if the First Extension Option and/or the Second Extension Option are timely exercised by Borrower in strict accordance with the terms and conditions of Section 2.9 of the Project Loan Agreement, during the applicable Extension Term Borrower shall, on each Payment Date, pay the Monthly Amortization Payment. As used herein, the term “Monthly Amortization Payment” shall mean a monthly payment, determined by Lender, that is sufficient to fully amortize the Loan over a 25-year amortization schedule using an assumed interest rate equal to the Applicable Interest Rate in effect as of the first day of the Extension Term.

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(c)    As used herein, the term “Maturity Date” shall mean, initially, the Original Maturity Date, which shall be subject to extension to the Extended Maturity Date on the terms and conditions set forth in Section 2.9 of the Project Loan Agreement.

(d)    On the Maturity Date, the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, shall be due and payable in full.

(e)    All payments due under this Note shall be payable without setoff, counterclaim or any other deduction whatsoever.

1.3    Prepayment.

(a)    The principal indebtedness evidenced by this Note may not be prepaid, in whole or in part, except as expressly set forth in the Project Loan Agreement.

(b)    In the event that Borrower shall, for any reason, prepay all or any portion of the principal evidenced by this Note, Borrower shall provide revocable written notice at least ten (10) Business Days, but no more than one hundred twenty (120) days prior to the proposed date of prepayment. If the prepayment occurs other than on the first (1^st) New York Banking Day of a calendar month, then Borrower shall pay, in addition to all other amounts required to be paid hereunder or under the Loan Documents (including, without limitation, the Exit Fee and, if applicable, the Minimum Loan Interest Payment), a prepayment premium equal to the amount of any LIBOR breakage fee (or similar charge) incurred by Lender as a result of prepaying the corresponding LIBOR contract (the “Breakage Prepayment Premium”). The Breakage Prepayment Premium provided for herein shall be due under any and all circumstances where all or any portion of this Note is paid prior to the Maturity Date on any day other than on the first (1^st) New York Banking Day of a calendar month, whether such prepayment is voluntary or involuntary, even if such prepayment results from Lender’s exercise of its rights upon Borrower’s default and acceleration of the Maturity Date of this Note (irrespective of whether foreclosure proceedings have been commenced), and shall be in addition to any other sums due hereunder or under any of the other Loan Documents. No tender of a prepayment of this Note with respect to which a prepayment fee is due shall be effective unless such prepayment is accompanied by the applicable Breakage Prepayment Premium.

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(c)    TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER APPLICABLE STATE LAW TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT PAYMENT OF A PREPAYMENT FEE, UPON ACCELERATION OF THE MATURITY DATE, AND (ii) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THIS NOTE IS MADE UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE BY LENDER ON ACCOUNT OF ANY DEFAULT BY BORROWER INCLUDING, WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED OR RESTRICTED BY THE LOAN DOCUMENTS, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY WITH SUCH PREPAYMENT (AND IN ADDITION TO THE EXIT FEE AND BREAKAGE PREPAYMENT PREMIUM (IF APPLICABLE), THE MINIMUM LOAN INTEREST PAYMENT SPECIFIED IN THE PROJECT LOAN AGREEMENT (IF APPLICABLE). BY INITIALING THE PROVISION IN THE SPACE PROVIDED BELOW, BORROWER HEREBY DECLARES THAT THE AGREEMENT TO MAKE THE LOAN EVIDENCED BY THIS NOTE AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER FOR THIS WAIVER AND AGREEMENT. FURTHER, BY INITIALING BELOW, BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NOTWITHSTANDING ANY APPLICABLE LAW TO THE CONTRARY, PURSUANT TO THE TERMS OF THE PROJECT LOAN AGREEMENT AND OF THIS NOTE, BORROWER HAS AGREED THAT BORROWER HAS NO RIGHT TO REPAY THIS NOTE WITHOUT PAYMENT OF THE APPLICABLE PREPAYMENT FEES, AND THAT BORROWER SHALL BE LIABLE FOR THE REPAYMENT OF THIS NOTE DUE TO THE ACCELERATION OF THIS NOTE IN ACCORDANCE WITH ITS TERMS AND/OR THE TERMS OF THE PROJECT LOAN AGREEMENT. FURTHERMORE, BY INITIALING BELOW, BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT LENDER HAS MADE THE LOAN IN RELIANCE ON THESE AGREEMENTS OF BORROWER AND THAT LENDER WOULD NOT HAVE MADE THE LOAN WITHOUT SUCH AGREEMENTS OF BORROWER.

Borrower’s Initials:     /s/ J.S. Jr.    

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1.4    Security. The Loan and the obligations created hereby are secured by, among other things, that certain Project Loan Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the date hereof, by Borrower in favor of Lender (the “Mortgage”). The Mortgage, together with this Note, that certain Acquisition and Project Loan Agreement of even date herewith between Borrower and Lender (as the same may be modified, supplemented, extended and in effect from time to time, the “Project Loan Agreement”) and all other documents to or of which Lender is a party or beneficiary now or hereafter evidencing, securing, guarantying, modifying or otherwise relating to the indebtedness evidenced hereby, are herein referred to collectively as the “Loan Documents”. All of the terms and provisions of the Loan Documents are incorporated herein by reference. Some of the Loan Documents are to be filed for record on or about the date hereof in the appropriate public records.

1.5    Late Charge. If any sum (other than the outstanding principal balance of the Note upon the Maturity Date or an acceleration thereof) payable under this Note or the other Loan Documents is not paid prior to the date that is five (5) business days after the date such sum is due, then, subject to the provisions hereof limiting interest to the maximum amount allowed by applicable law, Borrower shall pay to Lender on demand an amount equal to five percent (5.00%) of such past due sum to defray the expenses incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of use of such delinquent payment, and such amount shall be secured by the Mortgage and the other Loan Documents.

1.6    Default; Default Interest Rate. Lender and Borrower hereby expressly agree that should any payment of principal or interest required under this Note not be made within five (5) business days after such payment is due (it being understood and agreed, however, that no grace period is provided for the payment of principal and interest due on the Maturity Date or earlier acceleration thereof), should an Event of Default occur under any of the Loan Documents, which Event of Default is not cured or waived within any applicable grace or cure period, then a default shall exist hereunder, and in such event the indebtedness evidenced hereby, including all sums advanced or accrued hereunder or under any other Loan Document, and all unpaid interest accrued thereon, shall, at the option of Lender and without notice to Borrower, at once become due and payable and may be collected forthwith, whether or not there has been a prior demand for payment and regardless of the stipulated date of maturity. So long as any Event of Default exists hereunder and is continuing, regardless of whether or not there has been an acceleration of the indebtedness evidenced hereby, and at all times after maturity of the indebtedness evidenced hereby (whether by acceleration or otherwise), interest shall accrue on the outstanding principal balance of this Note at a rate per annum (the “Default Interest Rate”) equal to five percent (5.00%) plus the Applicable Interest Rate, or if such increased rate of interest may not be collected under applicable law, then at the maximum rate of interest, if any, which may be collected from Borrower under applicable law. Any interest that accrues at the Default Interest Rate shall be due and payable on the first day of each month. Borrower acknowledges that it would be extremely difficult or impracticable to determine Lender’s actual damages resulting from any late payment or default, and such late charges and default interest are reasonable estimates of those damages and do not constitute a penalty. The remedies of Lender in this Note or in the Loan Documents, or at law or in equity, shall be cumulative and concurrent, and may be pursued singly, successively or together in Lender’s discretion. In the event that this Note,

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or any part hereof, is collected by or through an attorney-at-law, Borrower agrees to pay all costs of collection, including, but not limited to, attorneys’ fees and expenses.

1.7    Increased Cost. If any Regulatory Change (as defined below):

(a)    shall subject Lender to any tax, duty or other charge with respect to its loans with respect to which the interest rate is determined by reference to LIBOR (“LIBOR Loans”) or its obligation to make LIBOR Loans, or shall change the basis of taxation of payment to Lender of the principal of or interest on LIBOR Loans or any other amounts due in respect of such loans or its obligation to make such loans (except for changes in the rate of tax on the overall net income of Lender imposed by the jurisdiction in which Lender’s principal office is located); or

(b)    shall impose, modify or deem applicable any reserve, special deposit, capital or similar requirement (including, without limitation, any such requirement imposed by the Board, but excluding any such requirement to the extent included in calculating the then applicable LIBOR under this Note) against assets of, deposits with or for the account of, or credit extended by, Lender or shall impose on Lender or on the interbank LIBOR market any other condition affecting its LIBOR Loans or its obligation to make such loans,

and the result of any of the foregoing is to actually increase the out-of-pocket cost to Lender of making or maintaining any such loans, or to reduce the amount of any sum received or receivable by Lender under any such loans, so that the spread between Lender’s cost of funds and the amounts received by Lender with respect to any such loans is actually reduced, then, within thirty (30) days after written demand by Lender, Borrower shall pay to Lender such additional amount or amounts as would compensate Lender, dollar for dollar, for such increased cost or reduction on a LIBOR Loan in the outstanding principal amount of, and having the same terms as the Loan during the period commencing on a date ninety (90) days prior to the date of said demand and continuing until the date on which this Note is paid in full (“Decreased Net Yield”). A certificate of Lender claiming compensation under this Section, setting forth the additional amount or amounts to be paid to it hereunder and stating in reasonable detail the basis for the charge and the method of computation, shall be conclusive in the absence of error. In determining such amount, Lender may use any reasonable averaging and attribution methods. Failure on the part of Lender to demand compensation for any Decreased Net Yield with respect to any disbursement under this Note shall not constitute a waiver of Lender’s right to demand compensation for any Decreased Net Yield with respect to any other disbursement under this Note.

1.8    Illegality. If any Regulatory Change shall make it unlawful or impossible for Lender to make, maintain or fund LIBOR Loans, Lender shall notify Borrower in writing, whereupon the accrual of interest hereunder based upon LIBOR shall be suspended until Lender notifies Borrower in writing that the circumstances giving rise to such suspension no longer exist. If Lender reasonably determines that such suspension must become effective prior to the end of the applicable calendar month, the Applicable Interest Rate under this Note shall be automatically converted, effective as of the date of Lender’s notice to Borrower, to a varying rate per annum equal to the Prime Rate (as defined below) plus a percentage necessary to cause the Applicable Interest Rate following the conversion based on the Prime Rate to be equal to the Applicable Interest Rate under this Note immediately prior to such conversion. As used herein, the term “Prime Rate” shall mean the rate

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of interest from time to time publicly announced by Bank as its “prime rate” or “reference rate”. Lender may lend to its customers at rates that are at, above or below the Prime Rate. For the purpose of determining the foregoing interest rate based on the Prime Rate, such interest rate shall change as and when the Prime Rate shall change.

1.9    Interest Rate Not Ascertainable, Etc. If, on or prior to the date for Lender’s determination of LIBOR in respect of any calendar month, Lender shall have reasonably determined (which determination shall be conclusive and binding, absent manifest error) that:

(a)    deposits in dollars (in the applicable amount) are not being made available to Lender in the relevant market for a period or periods of one month, or

(b)    LIBOR will not adequately and fairly reflect the cost to Lender of funding or maintaining LIBOR Loans for such calendar month at such rate,

Lender shall forthwith give written notice to Borrower of such determination, whereupon the accrual of interest hereunder, based upon LIBOR shall be suspended until Lender notifies Borrower in writing that the circumstances giving rise to such suspension no longer exist. While any such suspension continues, the converted interest rate set forth in Section 1.8 above shall be applicable. No such suspension shall affect the Applicable Interest Rate then in effect during the applicable calendar month for any principal amount of this Note outstanding at the time such suspension is imposed.

1.10    Funding Losses. Borrower shall compensate Lender, upon its written request, for all actual losses, expenses and liabilities (including any interest paid by Lender to lenders of funds borrowed by it to make or carry the Loan to the extent not recovered by Lender in connection with the reemployment of such funds) which Lender may sustain if for any reason, other than a default by Lender, a funding under this Note does not occur on the date specified therefor in the Project Loan Agreement.

1.11    Discretion of Lender as to Manner of Funding. Lender shall be entitled to fund and maintain its funding under this Note in any manner it may elect, it being understood, however, that for the purposes of this Note, all such determinations hereunder (excluding determinations that Lender may elect to make from the Reuters screen and determinations of Lender’s damages) shall be made as if Lender had actually funded and maintained amounts disbursed under this Note during each calendar month through the purchase of deposits having a maturity corresponding to a period of one month and bearing an interest rate equal to LIBOR for such calendar month.

1.12    Regulatory Change. As used herein, the term “Regulatory Change” shall mean any change after the date of this Note in United States federal, state or foreign laws or regulations or the adoption or making after such date of any interpretations, directives or requests applying to a class of lenders, including Lender, under any United States federal, state or foreign laws or regulations (whether or not having the force of law) or any governmental or monetary authority charged with the interpretation or administration thereof.

ARTICLE II - GENERAL CONDITIONS

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2.1    No Waiver; Amendment. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a partial or past due payment, or indulgences granted from time to time shall be construed (a) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of Lender thereafter to insist upon strict compliance with the terms of this Note, or (b) to prevent the exercise of such right of acceleration or any other right granted hereunder or by any applicable laws; and Borrower hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. No extension of the time for the payment of this Note or any installment due hereunder, made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part unless Lender agrees otherwise in writing. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

2.2    Waivers. Presentment for payment, notice of intention to accelerate, notice of acceleration, demand, protest and notice of demand, protest and nonpayment and all other notices are hereby waived by Borrower. Borrower hereby further waives and renounces, to the fullest extent permitted by law, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, redemption, appraisement, exemption and homestead now or hereafter provided by the Constitution and laws of the United States of America and of each state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement and collection of the obligations evidenced by this Note or the other Loan Documents.

2.3    Limit of Validity. The provisions of this Note and of all agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the amount paid, or agreed to be paid to Lender for the use, forbearance or detention of the money loaned under this Note exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, performance or fulfillment of any provision hereof or of any agreement between Borrower and Lender shall, at the time performance or fulfillment of such provision shall be due, exceed the limit for interest prescribed by law or otherwise transcend the limit of validity prescribed by applicable law, then ipso facto the obligation to be performed or fulfilled shall be reduced to such limit and if, from any circumstance whatsoever, Lender shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance owing under this Note in the inverse order of its maturity (whether or not then due) or at the option of Lender be paid over to Borrower, and not to the payment of Interest. All interest (including any amounts or payments deemed to be interest) paid or agreed to be paid to Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal balance of this Note so that the interest thereof for such full period will not exceed the maximum amount permitted by applicable law. This Section 2.3 will control all agreements between Borrower and Lender.

2.4    Use of Funds. Borrower hereby warrants, represents and covenants that all funds disbursed

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hereunder shall be used for business or commercial purposes and that no funds disbursed hereunder shall be used for personal, family or household purposes.

2.5     Unconditional Payment. Borrower is and shall be obligated to pay principal, interest and any and all other amounts which become payable hereunder or under the other Loan Documents absolutely and unconditionally and without any abatement, postponement, diminution or deduction and without any reduction for counterclaim or setoff. In the event that at any time any payment received by Lender hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to Borrower and shall not be discharged or satisfied with any prior payment thereof or cancellation of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment shall be immediately due and payable upon demand. This Section 2.5 shall survive any cancellation or satisfaction of this Note or return of this Note to Borrower.

2.6    Savings Clause. This Note is subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by applicable law to contract or agree to pay. If by the terms of this Note, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of such maximum rate, the Applicable Interest Rate or the Default Interest Rate, as the case may be, shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of this Note until payment in full so that the rate or amount of interest on account of the Loan does not exceed the maximum lawful rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

2.7    SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

(a)    THIS NOTE WAS NEGOTIATED IN WHOLE OR IN PART IN THE STATE OF NEW YORK, AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE

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AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) AND ANY LEGAL REQUIREMENTS OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF BORROWER, AND, BY ACCEPTANCE OF THIS NOTE, LENDER, HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS NOTE AND THE PROJECT LOAN AGREEMENT, AND THIS NOTE AND THE PROJECT LOAN AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THIS CHOICE OF GOVERNING LAW IS MADE PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401.

(b)    ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST BORROWER OR LENDER ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OTHER LOAN DOCUMENT MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, AND, IN EITHER INSTANCE, EACH OF BORROWER AND LENDER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH OF BORROWER AND LENDER, BY ACCEPTANCE OF THIS NOTE, HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. THIS CHOICE OF FORUM IS MADE PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402.

(c)    EACH OF THE BORROWER AND, BY ACCEPTANCE OF THIS NOTE, THE LENDER, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS NOTE, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE (AS NOW OR HEREAFTER MODIFIED) OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND THE BORROWER HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

2.8    Secondary Market Transactions. The terms and provisions of Article XIII of the Project Loan Agreement are hereby incorporated herein by this reference.

2.9    Attorneys’ Fees. If any legal action is brought by any party to enforce or defend any provision of this Note, or as a consequence of any default under this Note, the prevailing party in such legal action shall be entitled to recover its reasonable attorneys’ fees and costs of the proceeding

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2.10    Miscellaneous. This Note shall be interpreted, construed and enforced according to the substantive laws of the State of New York without giving effect to its principles of choice of law or conflicts of law. The terms and provisions hereof shall be binding upon and inure to the benefit of Borrower and Lender and their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. As used herein, the terms “Borrower” and “Lender” shall be deemed to include their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. If Borrower consists of more than one person or entity, each shall be jointly and severally liable to perform the obligations of Borrower under this Note. All personal pronouns used herein, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. Titles of articles and sections are for convenience only and in no way define, limit, amplify or describe the scope or intent of any provisions hereof. Time is of the essence with respect to all provisions of this Note. This Note and the other Loan Documents contain the entire agreements between the parties hereto relating to the subject matter hereof and thereof, and any and all prior written agreements and any and all prior and contemporaneous oral agreements relative hereto and thereto which are not contained herein or therein are terminated.

2.11    Reserved. 

2.12    Liability Limitation. Except as to the Guarantors as set forth in the Guaranties and the Environmental Indemnity Agreement, Lender shall have no recourse against, nor shall there by any personal liability to, the members of Borrower, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Borrower (except for Guarantors as provided in the Guaranties and the Environmental Indemnity Agreement, but including the members of Borrower, LMB Phalanx LLC, KBS SOR II Acquisition VI, LLC, KBS SOR US Properties II LLC, KBS Strategic Opportunity Limited Partnership II, or KBS Strategic Opportunity REIT II, Inc.) with respect to the obligations of Borrower and Guarantors under the Loans. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Borrower’s liability or obligations under the Loan Documents, the Guarantors’ liability under the Guaranties and the Environmental Indemnity Agreement to which they are a party, or Lender’s right to exercise any rights or remedies against any collateral securing the Loans.

[SIGNATURES APPEAR ON THE FOLLOWING PAGES]

ny-1260292

IN WITNESS WHEREOF, Borrower has executed this Note as of the date first above written.

BORROWER:

210 WEST 31^ST STREET OWNER, LLC,

a Delaware limited liability company

By:    KBS SOR II 210 WEST 31^st STREET, LLC,

a Delaware limited liability company,

its sole member

By:    ONYX 31^st STREET, LLC,

a Delaware limited liability company,

its Managing Member

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.

Authorized Signatory

ny-1260292

EX-10.51

Exhibit 10.51

Section: 3

Block: 780

Lots: 45 (f/k/a 45, 49 and 51)

Premises: 210 West 31^st Street, New York, New York

PROJECT LOAN MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

(this “Mortgage”)

FROM

210 WEST 31^ST STREET OWNER, LLC,

a limited liability company organized and existing under the laws of Delaware

(“Mortgagor”)

Address of Mortgagor:

c/o Onyx Equities, LLC

900 Route 9 North, Suite 400

Woodbridge, New Jersey 07095

Attention: John A. Saraceno, Jr.

TO

PACIFICCAL PC CORE LENDER, LLC,

a Delaware limited liability company,

(“Mortgagee”)

Address of Mortgagee:

c/o PCCP, LLC

10100 Santa Monica Blvd., Suite 1000

Los Angeles, CA 90067

Attn: Legal Notices

THIS PROJECT LOAN MORTGAGE IS NOT A ''BUILDING LOAN MORTGAGE'' AS DEFINED IN NEW YORK LIEN LAW (THE ''LIEN LAW'') § 2(14) AND DOES NOT SECURE REPAYMENT OF A LOAN MADE PURSUANT TO A ''BUILDING LOAN CONTRACT'' AS DEFINED IN LIEN LAW § 2(13).

Mortgage Amount: $7,050,000.00

This instrument prepared by, and after recording please return to:

MORRISON & FOERSTER LLP

250 West 55^th Street

New York, New York 10019

Attention: Jeffrey J. Temple, Esq.

PROJECT LOAN MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

THIS PROJECT LOAN MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (“Mortgage”) is made as of December 1, 2016, by 210 WEST 31^ST STREET OWNER, LLC, a Delaware limited liability company (“Mortgagor”) , having an office at c/o Onyx Equities, LLC, 900 Route 9 North, Suite 400, Woodbridge, New Jersey 07095, Attention: John A. Saraceno, Jr., for the benefit of PACIFICCAL PC CORE LENDER, LLC, a Delaware limited liability company, as Mortgagee (together with its successors and/or assigns, “Mortgagee”), having an office at c/o PCCP, LLC, 10100 Santa Monica Blvd., Suite 1000, Los Angeles, CA 90067, Attn: Legal Notices.

W I T N E S S E T H:

A.Mortgagor and Mortgagee have entered into that certain (i) Acquisition and Project Loan Agreement (such agreement, together with any and all amendments, supplements, renewals, modifications, consolidations and extensions thereof from time to time, is hereinafter referred to as the “Project Loan Agreement”) and (ii) Building Loan Agreement (such agreement, together with any and all amendments, supplements, renewals, modifications, consolidations and extensions thereof from time to time, is hereinafter referred to as the “Building Loan Agreement”; together with the project Loan Agreement, collectively, the “Loan Agreements”), both of even date herewith, whereby Mortgagee has agreed to make a loan (the “Project Loan”) available to Mortgagor in the principal amount of up to $7,050,000.00 for the purposes set forth in the Loan Agreements.

B.To evidence the Project Loan, Mortgagor has executed and delivered to Mortgagee, that certain Project Loan Promissory Note Secured By Mortgage, of even date herewith, in the aggregate principal sum of $7,050,000.00 (as the same may be severed, amended, modified, restated, replaced, consolidated or supplemented from time to time, the “ProjectLoan Note” or the “Note”), in and by which Mortgagor promises to pay said principal sum, or so much thereof as has been advanced, together with interest at the rate or rates and in installments as provided in the Project Loan Note.

C.The execution and delivery of this Mortgage by Mortgagor is a condition precedent to the performance by Mortgagee of its obligations under the Loan Agreements.

D.Capitalized terms not otherwise defined herein shall have the meaning ascribed to such term in the Project Loan Agreement or by reference therein.

ARTICLE 1. GRANT

1.1 GRANT. For the purposes of and upon the terms and conditions in this Mortgage, Mortgagor irrevocably grants, conveys and assigns to Mortgagee, with right of entry and possession, the leasehold interest in the real property located in the City of New York, County of New York, State of New York, described on Exhibit A attached hereto (the “Real Property”) held by Mortgagor pursuant to that certain ground lease located at the Real Property and

described in Schedule III attached hereto (the “Ground Lease”), together with all after acquired title in respect of the Real Property, and all right, title, interest and privileges of Mortgagor in and to all streets, ways, roads and alleys used in connection with or pertaining to the Real Property, and together with all development rights or credits, air rights, water, water rights and water stock related to such real property, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances, easements, rights and rights of way appurtenant or related thereto; all buildings, other improvements and fixtures now or hereafter located on the Real Property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the “Improvements”); all interest or estate which Mortgagor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing (all of the foregoing being collectively referred to as the “Property”). The listing of specific rights or property shall not be interpreted as a limit of general terms.

PROVIDED, ALWAYS, that if Mortgagor shall pay unto Mortgagee the principal of and interest on the Note, when and as the same shall become due and payable whether by acceleration or otherwise, and shall pay all Secured Obligations (as hereinafter defined), and perform all obligations on its behalf contained in this Mortgage, the Project Loan Agreement and all of the other documents evidencing any of the Secured Obligations, then and in that case, the Property and the Collateral (as hereinafter defined) hereby conveyed and all rights and interests therein and thereto shall revert to Mortgagor and the estate, right, title and interest of Mortgagee therein shall thereupon cease, determine and become void and in such case Mortgagee shall execute and deliver to Mortgagor, pursuant to Section 5.14 hereof, at Mortgagor’s cost, an appropriate release, assignment or discharge of this Mortgage in form to be recorded.

ARTICLE 2. OBLIGATIONS SECURED

2.1 OBLIGATIONS SECURED. Mortgagor makes this Mortgage for the purpose of securing the following obligations (“Secured Obligations”):

(a) Payment to Mortgagee of all sums at any time owing under that certain Project Loan Note;

(b) Payment and performance of all covenants and obligations of Mortgagor under this Mortgage;

(c) Payment and performance of all covenants and obligations on the part of Mortgagor under (i) the Project Loan Agreement and (ii) each other Loan Document (as defined in the Project Loan Agreement) to which Mortgagor is a party relating to the Project Loan Note, but expressly excluding the Environmental Indemnity Agreement, Carveout Guaranty, Payment Guaranty and the Completion Guaranty (as each such term is defined in the Project Loan Agreement);

(d) Payment and performance of all future advances and other obligations that the then record owner of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, as evidenced by this Mortgage and the other Loan Documents; and

(e) All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes.

2.2 OBLIGATIONS. The term “obligations” is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges, late charges and loan fees at any time accruing or assessed on any of the Secured Obligations.

2.3 INCORPORATION. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. Capitalized terms not specifically defined herein have the meaning given such terms in the Project Loan Agreement. All persons who may have or acquire an interest in the Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Project Loan Agreement may permit borrowing, repayment and reborrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time.

ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS

3.1 ASSIGNMENT. Mortgagor hereby irrevocably assigns to Mortgagee all of Mortgagor's right, title and interest in, to and under: (a) all leases of the Property or any portion thereof, all licenses and agreements relating to the management, leasing or operation of the Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Property or any portion thereof, whether now existing or entered into after the date hereof (“Leases”); and (b) the rents, issues, deposits and profits of the Property, including, without limitation, all amounts payable and all rights and benefits accruing to Mortgagor under the Leases (“Payments”). The term Leases shall also include all guarantees of and security for the lessees' performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Mortgagee's right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Property.

3.2 GRANT OF LICENSE. Subject to the terms and conditions of that certain Cash Management Agreement of even date herewith among Mortgagor, Mortgagee and Property Manager (“Cash Management Agreement”), Mortgagee confers upon Mortgagor a license (“License”) to collect and retain the Payments as they become due and payable, until the

occurrence of an Event Default (as hereinafter defined). Upon the occurrence of an Event of Default, the License shall be automatically revoked and Mortgagee may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Property. Mortgagor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Mortgagee for the payment to Mortgagee of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees' undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Event of Default has actually occurred or is then existing hereunder. Mortgagor hereby relieves the lessees from any liability to Mortgagor by reason of relying upon and complying with any such notice or demand by Mortgagee.

3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Property; or for any negligence in the management, upkeep, repair or control of the Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of: (i) the exercise or failure to exercise any of the rights, remedies or powers granted to Mortgagee hereunder; or (ii) the failure or refusal of Mortgagee to perform or discharge any obligation, duty or liability of Mortgagor arising under the Leases.

3.4 REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that: (a) prior to the date of this Mortgage, Mortgagor delivered to Mortgagee a true, accurate and complete list of all Leases, if any; (b) all existing Leases, if any, are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach of default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent under or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessor's interests under any of the Leases has been transferred or assigned.

3.5 COVENANTS. Subject to the terms of the Project Loan Agreement, Mortgagor shall use commercially reasonable efforts to cause the Property to be leased at all times. Mortgagor (a) shall not enter into any Leases at the Property except in accordance with the terms and conditions of the Project Loan Agreement or (b) execute any other assignment relating to any of the Leases. Mortgagor shall timely perform all obligations that are required to be performed by the landlord under the Leases and give Mortgagee prompt written notice of any default which occurs with respect to any of the Leases following Mortgagor becoming aware of such default, whether the default be that of the lessee or of the lessor respectively thereunder. Without in any way limiting the requirement of Mortgagee’s consent hereunder, if the provisions of the Cash Management Agreement shall be in effect, any sums received by Mortgagor in consideration of any termination (or the release or discharge of any lessee)

modification or amendment of any Lease shall be applied as provided in the Cash Management Agreement.

3.6 ESTOPPEL CERTIFICATES. Within fifteen (15) days after written request by Mortgagee, Mortgagor shall use commercially reasonable efforts to deliver to Mortgagee and to any party designated by Mortgagee estoppel certificates executed by Mortgagor and by each of the lessees certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessee's most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Mortgagor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Mortgagee. The foregoing obligation shall be deemed satisfied if Mortgagor delivers an estoppel certificate executed by a tenant that complies with the requirements of such tenant’s Lease.

ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING

4.1 SECURITY INTEREST. Mortgagor hereby grants and assigns to Mortgagee as of the Effective Date (as defined in the Project Loan Agreement) a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Mortgagor now or at any time hereafter owns or has any interest (collectively, the “Collateral”):

All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property, embedded software therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements (which real property and Improvements are collectively referred to herein as the Property); all after acquired title, and all right, title, interest and privileges of Mortgagor in and to all streets, ways, roads and alleys used in connection with or pertaining to such real property, and together with all development rights or credits, air rights, water, water rights and water stock related to such real property, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances, easements, rights and rights of way appurtenant or related thereto; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property; together with all rents, issues, deposits and profits of the Property (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, general intangibles, chattel paper (whether electronic or tangible), instruments, documents, notes, drafts, letters of credit, letter of credit rights, supporting obligations insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership,

management, leasing or operation of the Property or any business now or hereafter conducted thereon by Mortgagor; all rights of Mortgagor under any interest rate hedge, cap, swap or similar agreement; all permits consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Property; all deposits or other security now or hereafter made with or given to utility companies by Mortgagor with respect to the Property; all advance payments of insurance premiums made by Mortgagor with respect to the Property; all plans, drawings and specifications relating to the Property; all loan funds held by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee or another depository pursuant to the Project Loan Agreement or any other Loan Documents; all reserves, deferred payments, deposits, accounts, refunds and payments of any kind related to the Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files relating to any of the foregoing.

As to all of the above described personal property which is or which hereafter becomes a “fixture” under applicable law, this Mortgage constitutes a fixture filing under the New York Uniform Commercial Code, as amended or recodified from time to time (“UCC”); and is to be recorded in the real estate records of the county in which the Property is located.

4.2 REPRESENTATIONS AND WARRANTIES.  Mortgagor represents and warrants that: (a) Mortgagor has, or will have, marketable title to the Collateral; (b) Mortgagor has not previously assigned or encumbered the Collateral, and Mortgagor has not delivered or authorized any other person to deliver any financing statement covering any of the Collateral to any other person or entity; and (c) Mortgagor's principal place of business is located at the address shown in Section 7.11.

4.3 RIGHTS OF MORTGAGEE. In addition to Mortgagee’s rights as a “Secured Party” under the UCC, Mortgagee may, but shall not be obligated to, at any time without notice and at the expense of Mortgagor: (a) give notice to any person of Mortgagee's rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Mortgagee therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Mortgagor under or from the Collateral. Notwithstanding the above, in no event shall Mortgagee be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express written election of said remedy under UCC §9-621 as amended or recodified from time to time, or other applicable law.

4.4 RIGHTS OF MORTGAGEE UPON EVENT OF DEFAULT. Upon the occurrence and during the continuance of an Event of Default under this Mortgage, then in addition to all of Mortgagee's rights as a Secured Party under any Loan Document, the UCC or otherwise at law:

(a) Mortgagee may (i) upon written notice, require Mortgagor to assemble any or all of the Collateral and make it available to Mortgagee at a place designated by Mortgagee; (ii) upon prior written notice, enter upon the Property or other place where any of the

Collateral may be located and take possession of, collect, sell, and dispose of any or all of the Collateral, and store the same at locations acceptable to Mortgagee at Mortgagor's expense; (iii) sell, assign and deliver at any place and in any lawful manner all or any part of the Collateral and bid and become purchaser at any such sales; and

(b) Mortgagee may, for the account of Mortgagor and at Mortgagor's expense: (i) operate, use, consume, sell or dispose of the Collateral as Mortgagee deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Mortgagee may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Mortgagor in connection with or on account of any or all of the Collateral.

(c) Notwithstanding any other provision hereof, Mortgagee shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagor shall make an express written election of said remedy under UCC §9-621 as amended or recodified from time to time, or other applicable law.

4.5 POWER OF ATTORNEY. During the continuance of any Event of Default, Mortgagor hereby irrevocably appoints Mortgagee as Mortgagor’s attorney‑in‑fact (such agency being coupled with an interest), and as such attorney-in-fact Mortgagee may, without the obligation to do so, in Mortgagee's name, or in the name of Mortgagor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Mortgagee's security interests and rights in or to any of the Collateral, and take any other action required of Mortgagor herein; provided, however, that Mortgagee as such attorney-in-fact shall be accountable only for such funds as are actually received by Mortgagee.

4.6 EFFECTIVE AS A FINANCING STATEMENT. This Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including said fixtures) is situated. This Mortgage shall also be effective as a financing statement covering as-extracted collateral (including oil and gas), accounts and general intangibles under the New York UCC, as in effect from time to time, and the UCC, as in effect from time to time, in any other state where the Property is situated which will be financed at the wellhead or minehead of the wells or mines located on the Property and is to be filed for record in the real estate records of each county where any part of the Property is situated. This Mortgage shall also be effective as a financing statement covering any other Property and may be filed in any other appropriate filing or recording office. The mailing address of Mortgagor and the Mortgagee are set forth in the preamble of this Mortgage and the address of Mortgagee from which information concerning the security interests hereunder may be obtained is the address of Mortgagee set forth at the end of this Mortgage. A carbon, photographic or other reproduction of this Mortgage or of any financing

statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section.

ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES

5.1 TITLE. Mortgagor represents and warrants that Mortgagor lawfully holds and possesses, or will hold and possess, leasehold title to the Property without limitation on the right to encumber, and this Mortgage is a first and prior Lien on the Property.

5.2 TAXES AND ASSESSMENTS. Unless Mortgagee is reserving funds for such payments pursuant to the terms of the Loan Agreement, Mortgagor shall pay or caused to be paid prior to delinquency (i) all taxes, assessments, levies and charges imposed by any public or quasi‑public authority or utility company which are or which may become a Lien upon or cause a loss in value of the Property or any interest therein, and (ii) all taxes, assessments, levies and charges imposed by any public authority upon Mortgagee by reason of its interest in any Secured Obligation or in the Property, or by reason of any payment made to Mortgagee pursuant to any Secured Obligation; provided, however, Mortgagor shall have no obligation to pay taxes which may be imposed from time to time upon Mortgagee and which are measured by and imposed upon Mortgagee's net income.

5.3 TAX AND INSURANCE IMPOUNDS. Mortgagor shall, until all Secured Obligations have been paid in full, pay to Mortgagee the Tax and Insurance Monthly Installment as and when required (and as defined in) Section 12.2 of the Project Loan Agreement.

5.4 PERFORMANCE OF SECURED OBLIGATIONS. Mortgagor shall promptly pay and perform each Secured Obligation when due. By its execution hereof, Mortgagor hereby acknowledges its receipt of the fully executed Project Loan Agreement and Mortgagor hereby agrees to be bound by all terms and conditions contained in the Project Loan Agreement respecting the Property.

5.5 LIENS, ENCUMBRANCES AND CHARGES. Subject to Mortgagor’s rights under Section 8.3 of the Project Loan Agreement, Mortgagor shall (i) immediately discharge any Lien not approved by Mortgagee in writing that has or may attain priority over this Mortgage and (ii) pay when due all obligations secured by or reducible to Liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Property or any interest therein, whether senior or subordinate hereto.

5.6 DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS.

(a) The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee, shall be paid directly to Mortgagee: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Property; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Property; (iii) all proceeds of any insurance policies payable by reason of loss sustained to all or any part of the Property; and (iv) all interest which may accrue on any of the foregoing. Subject to

applicable law, Mortgagee may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and shall release the balance of any insurance proceeds Mortgagee receives to Mortgagor upon the conditions Mortgagee set forth in Sections 5.7 and 5.8 of the Project Loan Agreement, unless such casualty and/or release would materially impair Mortgagee’s security, in which case Mortgagee may apply the balance to the Secured Obligation. Mortgagee may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Mortgagee; provided, however, in no event shall Mortgagee be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Mortgagee or its employees or agents.

(b) Subject to the terms and conditions set forth in the Project Loan Agreement, Mortgagee may permit insurance proceeds held by Mortgagee to be used for repair or restoration.

5.7 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Mortgagor covenants: (a) to insure the Property against such risks as Mortgagee may require pursuant to the Project Loan Agreement and, at Mortgagee's request, to provide evidence of such insurance to Mortgagee, and to comply with the requirements of any insurance companies insuring the Property; (b) to keep the Property in good condition and repair; (c) not to remove or demolish the Property or any part thereof, not to alter, restore or add to the Property without Mortgagee’s prior written consent, (d) not to initiate or acquiesce in any change in any zoning or other land classification which affects the Property without Mortgagee's prior written consent; (e) to complete or restore promptly and in good and workmanlike manner the Property, or any part thereof which may be damaged or destroyed as provided for in the Project Loan Agreement; (f) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Property and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (g) not to commit or permit waste of the Property or Collateral; and (h) to do all other acts which from the character or use of the Property may be reasonably necessary to maintain and preserve its value.

5.8 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Mortgagor's sole expense, Mortgagor shall protect, preserve and defend the Property and Collateral and title to and right of possession of the Property and Collateral, the security hereof and the rights and powers of Mortgagee hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Property or Collateral and of any condemnation offer or action.

5.9 [INTENTIONALLY OMITTED.]

5.10 COMPENSATION; EXCULPATION; INDEMNIFICATION.

(a) Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of (i) the proper exercise of the rights, remedies or powers granted to Mortgagee in this Mortgage; (ii) the failure or refusal of Mortgagee to perform or discharge any obligation or liability of Mortgagor under any agreement related to the Property or under this Mortgage; or (iii) any loss sustained by Mortgagor or any third party resulting from Mortgagee's failure to lease the Property after an Event of Default or from any other act or omission of Mortgagee in managing the Property after an Event of Default unless the loss is caused by the gross negligence or willful misconduct of Mortgagee and no such liability shall be asserted against or imposed upon Mortgagee, and all such liability is hereby expressly waived and released by Mortgagor.

(b) Mortgagor indemnifies Mortgagee (and its successors, assigns and participants) against, and holds Mortgagee (and its successors, assigns and participants) harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys' fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which either may suffer or incur: (i) by reason of this Mortgage; (ii) by reason of the performance of any act required or permitted hereunder or required by law; (iii) as a result of any failure of Mortgagor to perform Mortgagor's obligations; (iv) by reason of any alleged obligation or undertaking on Mortgagee's part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations of Mortgagor contained in any other document related to the Property; or (v) as a result of any proceeding instituted by any claimant alleging a violation of the Lien Law. The above obligation of Mortgagor to indemnify and hold harmless Mortgagee (and its successors, assigns and participants) shall survive the release and cancellation of the Secured Obligations and the release and reconveyance or partial release and reconveyance of this Mortgage.

(c) Mortgagor shall pay all amounts and indebtedness arising under this Section 5.10 immediately after demand by Mortgagee (or its successors, assigns or participants) together with interest thereon from the date of such demand at the rate of interest then applicable to the principal balance of the Note as specified therein.

5.11 [INTENTIONALLY OMITTED.]

5.12 DUE ON SALE OR ENCUMBRANCE. If the Property or any interest therein, or if any portion of the corporate stock, general partnership interests or limited liability company interests in Mortgagor (except as otherwise expressly permitted in Section 8.14 of the Project Loan Agreement), shall be sold, transferred, mortgaged, assigned, encumbered or leased, whether directly or indirectly, whether voluntarily, involuntarily or by operation of law, without the prior written consent of Mortgagee, THEN Mortgagee, in its sole discretion, may declare all Secured Obligations immediately due and payable.

5.13 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Property or in any manner obligated under the Secured Obligations (“Interested Parties”), Mortgagee may, from time to time, release any person

or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement with Mortgagor or the applicable obligor extending the maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Property and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the Lien of this Mortgage upon the Property and Collateral.

5.14 RELEASES. If the Secured Obligations are paid, performed and discharged in full in accordance with the terms of this Mortgage, the Note, and the other Loan Documents, then this Mortgage shall be released or assigned (without any representations or warranties) by Mortgagee at Mortgagor’s request; provided, Mortgagor shall pay any filing fees in connection with the recordings of the assignment of mortgage and any expenses of Mortgagee incurred in connection with such release or assignment. In connection therewith, at the request and sole expense of Mortgagor, Mortgagee shall execute and deliver to Mortgagor all releases, assignments or other documents, including, without limitation, reconveyances and termination statements, reasonably necessary or desirable for the release of such lien.

5.15 SUBROGATION. Mortgagee shall be subrogated to the Lien of all encumbrances, whether released of record or not, paid in whole or in part by Mortgagee pursuant to this Mortgage or by the proceeds of any loan secured by this Mortgage.

5.16 RIGHT OF INSPECTION. Mortgagee, its agents and employees, may enter the Property at any reasonable time, after reasonable notice to Mortgagor, for the purpose of inspecting the Property and ascertaining Mortgagor's compliance with the terms hereof.

ARTICLE 6. DEFAULT PROVISIONS

6.1 EVENT OF DEFAULT. For all purposes hereof, the term “Event of Default” shall mean the existence of any Event of Default, as defined in the Project Loan Agreement.

6.2 RIGHTS AND REMEDIES. At any time after the occurrence and during the continuance of an Event of Default, Mortgagee shall have all the following rights and remedies:

(a) Upon written notice to Mortgagor, to declare all Secured Obligations immediately due and payable;

(b) Upon written notice to Mortgagor, and without releasing Mortgagor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any Event of Default of Mortgagor and, in connection therewith, to enter upon the Property and do such acts and things as Mortgagee deems necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii) to pay, purchase, contest or compromise any encumbrance, charge, Lien or claim of Lien which, in the sole judgment of Mortgagee, is or may be senior in priority to this Mortgage, the judgment of Mortgagee being

conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Mortgage; or (v) to employ counsel, accountants, contractors and other appropriate persons.

(c) To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Mortgagor waives the defense of laches and any applicable statute of limitations;

(d) To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, and Mortgagor hereby consents to such appointment;

(e) To enter upon, possess, manage and operate the Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Mortgagor or the then owner of the Property, to make, terminate, enforce or modify Leases of the Property upon such terms and conditions as Mortgagee deems proper, to make repairs, alterations and improvements to the Property as necessary, in Mortgagee’s sole judgment, to protect or enhance the security hereof;

(f) [reserved];

(g) To resort to and realize upon the security hereunder and any other security now or later held by Mortgagee concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non‑judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Mortgagee determines in its sole discretion.

(h) Upon sale of the Property at any judicial foreclosure, Mortgagee may credit bid (as determined by Mortgagee in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Mortgagee may, but is not obligated to, take into account all or any of the following: (i) appraisals of the Property as such appraisals may be discounted or adjusted by Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Mortgagee with respect to the Property prior to foreclosure; (iii) expenses and costs which Mortgagee anticipates will be incurred with respect to the Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Property prior to resale, costs of resale (e.g. commissions, attorneys' fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Mortgagee; (iv) declining

trends in real property values generally and with respect to properties similar to the Property; (v) anticipated discounts upon resale of the Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Mortgagee (in its sole and absolute discretion) deems appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w) Mortgagee is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Mortgagee any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Mortgagee's credit bid need not have any relation to any loan-to-value ratios previously discussed between Mortgagor and Mortgagee; and (z) Mortgagee's credit bid may be (at Mortgagee's sole and absolute discretion) higher or lower than any appraised value of the Property.

6.3 APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, fees and expenses of Mortgagee, including, without limitation, cost of evidence of title and attorneys' fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, Mortgagee shall apply all proceeds of any foreclosure sale: (a) to payment of all sums expended by Mortgagee under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto.

6.4 APPLICATION OF OTHER SUMS. All sums received by Mortgagee under Section 6.2 or Section 3.2, less all costs and expenses incurred by Mortgagee or any receiver under Section 6.2, including, without limitation, attorneys' fees, shall be applied in payment of the Secured Obligations in such order as Mortgagee shall determine in its sole discretion; provided, however, Mortgagee shall have no liability for funds not actually received by Mortgagee.

6.5 NO CURE OR WAIVER. Neither Mortgagee's nor any receiver's entry upon and taking possession of all or any part of the Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Mortgagee or any receiver shall cure or waive any breach, Event of Default or notice of default under this Mortgage, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Mortgagor has cured all other defaults), or impair the status of the security, or prejudice Mortgagee in the exercise of any right or remedy, or be construed as an affirmation by Mortgagee of any tenancy, lease or option or a subordination of the Lien of this Mortgage.

6.6 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Mortgagor agrees to pay to Mortgagee, within ten (10) days after demand, all costs and expenses incurred by Mortgagee pursuant to Section 6.2 (including, without limitation, court costs and attorneys' and paralegals' fees, whether internal or external, whether incurred in litigation or not) with

interest from the date of notice of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein.

ARTICLE 7. MISCELLANEOUS PROVISIONS

7.1 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Mortgagee and contain further agreements and affirmative and negative covenants by Mortgagor which apply to this Mortgage and to the Property and such further rights and agreements are incorporated herein by this reference.

7.2 MERGER. No merger shall occur as a result of Mortgagee's acquiring any other estate in, or any other Lien on, the Property unless Mortgagee consents to a merger in writing.

7.3 OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one person has executed this Mortgage as “Mortgagor”, the obligations of all such persons hereunder shall be joint and several.

7.4 [INTENTIONALLY OMITTED.]

7.5 WAIVER OF MARSHALING RIGHTS. Mortgagor, for itself and for all parties claiming through or under Mortgagor, and for all parties who may acquire a Lien on or interest in the Property, hereby waives all rights to have the Property and/or any other property, including, without limitation, the Collateral, which is now or later may be security for any Secured Obligation (“Other Property”) marshaled upon any foreclosure of this Mortgage or on a foreclosure of any other security for any of the Secured Obligations. Mortgagee shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Mortgagee may designate.

7.6 RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term “Property” means all and any part of the Property and any interest in the Property.

7.7 SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 5.12.

7.8 EXECUTION IN COUNTERPARTS. This Mortgage may be executed in any number of counterparts, each of which, when executed and delivered to Mortgagee, will be deemed to be an original and all of which, taken together, will be deemed to be one and the same instrument.

7.9 CHOICE OF LAW. THIS MORTGAGE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY NEW YORK LAW AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH AND PURSUANT TO THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW, EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK ARE GOVERNED BY THE LAWS OF SUCH OTHER JURISDICTION.

7.10 INCORPORATION. Exhibit A as attached, is hereby incorporated into this Mortgage by this reference.

7.11 NOTICES. All notices or other communications required or permitted to be given pursuant to the provisions of this Mortgage shall be in writing and shall be considered as properly given if delivered personally or sent by first class U.S. mail, postage prepaid, except that notice of an Event of Default may be sent by certified mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective three (3) days after mailing, if mailed by first class mail, and otherwise upon receipt at the addresses set forth below; provided, however, that non-receipt of any communication as a result of any change of address of which the sending party was not notified or as a result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the addresses of the parties shall be:

Mortgagor: 210 West 31^st Street Owner, LLC

c/o Onyx Equities, LLC

900 Route 9 North, Suite 400

Woodbridge, New Jersey 07095

Attention: John A. Saraceno, Jr.

With a copy to: c/o KBS Capital Advisors

800 Newport Center Drive, Suite 700

Newport Beach, CA 92660

Attention: Brian Ragsdale

Attention: Shep Wainwright

and to:

Cole Schotz P.C.

1325 Avenue of the Americas, 19^th Floor

New York, NY 10019
Attention: Jordan J. Metzger, Esq.

and to:

Sheppard Mullin Richter & Hampton LLP

650 Town Center Drive, 4^th Floor

Costa Mesa, CA 92626

Attention: Scott A. Morehouse, Esq.

Mortgagee: PacificCal PC Core Lender, LLC

c/o PCCP, LLC10100 Santa Monica Blvd., Suite 1000

Los Angeles, CA 90067

Attn: Legal Notices

With a copy to: Morrison & Foerster LLP250 West 55^th Street
New York, New York 10019
Attn: Jeffrey Temple, Esq.

Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days’ notice to the other party in the manner set forth hereinabove. Mortgagor shall forward to Mortgagee, without delay, any notices, letters or other communications delivered to the Property or to Mortgagor naming Mortgagee, “Lender” or any similar designation as addressee, or which is reasonably likely to affect the ability of Mortgagor to perform its obligations to Mortgagee under the Note or the Project Loan Agreement.

7.12 SECONDARY MARKET TRANSACTIONS. The terms and provisions of Article XIII of the Project Loan Agreement are hereby incorporated herein by this reference.

7.13 RESERVED.

7.14 LIMITED RECOURSE PROVISION. Except as to the Guarantors as set forth in the Guaranties and the Environmental Indemnity Agreement, Lender shall have no recourse against, nor shall there by any personal liability to, the members of Borrower, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Borrower (except for Guarantors as provided in the Guaranties and the Environmental Indemnity Agreement, but including the members of Borrower, LMB Phalanx LLC, KBS SOR II Acquisition VI, LLC, KBS SOR US Properties II LLC, KBS Strategic Opportunity Limited Partnership II, or KBS Strategic Opportunity REIT II, Inc.) with respect to the obligations of Borrower and Guarantors under the Loans. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Borrower’s liability or obligations under the Loan Documents, the Guarantors’ liability under the Guaranties and the Environmental Indemnity Agreement to which they are a party, or Lender’s right to exercise any rights or remedies against any collateral securing the Loans.

ARTICLE 8. GROUND LEASE

8.1 Mortgagor shall perform all of the covenants contained in Section 8.27 of the Project Loan Agreement with respect to the Ground Lease. Mortgagor shall enforce the obligations of the lessor under the Ground Lease (the “Ground Lessor”) to the end that Mortgagor may enjoy all of the rights granted to it under the Ground Lease, and shall promptly notify Mortgagee of any default beyond any applicable grace, notice or cure period by the Ground Lessor that Mortgagor becomes aware of, in the performance or observance of any of the terms, covenants and conditions on the part of the Ground Lessor to be performed or observed under the Ground Lease, and Mortgagor shall promptly advise Mortgagee of the occurrence of any event of default beyond any applicable grace, notice or cure period under the Ground Lease. Mortgagor hereby assigns to Mortgagee, as further security for the payment and performance of the Secured Obligations and observance of the terms, covenants and conditions of this Mortgage, all of the rights, privileges and prerogatives of Mortgagor, as tenant under the Ground Lease, to surrender the leasehold estate created by the Ground Lease or to terminate, cancel, modify, change, supplement, alter or amend the Ground Lease, and any such surrender of the leasehold estate created by the Ground Lease or termination, cancellation, modification, change, supplement, alteration or amendment of the Ground Lease not permitted pursuant to the foregoing terms of this Section 8.1, Section 8.27 of the Loan Agreement or not otherwise approved by Mortgagee shall be void and of no force and effect.

8.2 If Mortgagor shall default beyond any applicable notice and/or grace period in the performance or observance of any term, covenant or condition of the Ground Lease on the part of Mortgagor, as tenant thereunder, to be performed or observed, then, without limiting the generality of the other provisions of this Mortgage, and without waiving or releasing Mortgagor from any of its obligations hereunder, Mortgagee shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all of the terms, covenants and conditions of the Ground Lease on the part of Mortgagor, as tenant thereunder, to be performed or observed or to be promptly performed or observed on behalf of Mortgagor, to the end that the rights of Mortgagor in, to and under the Ground Lease shall be kept unimpaired and free from default. If Mortgagee shall make any payment or perform any act or take action in accordance with the preceding sentence, Mortgagee will give Mortgagor prompt written notice thereof; provided that Mortgagee's failure to give such notice prior to making such payment or performing or taking such action shall not affect its rights hereunder. In any such event, Mortgagee and any Person designated by Mortgagee shall have, and are hereby granted, the right to enter upon the Mortgaged Property at any time and from time to time for the purpose of taking any such action. If the Ground Lessor shall deliver to Mortgagee a copy of any notice of default sent by Ground Lessor to Mortgagor, as lessee under the Ground Lease, Mortgagee may take or omit to take any action in good faith, in reliance thereon.

8.3 So long as any portion of the Secured Obligations shall remain unpaid, the leasehold estate created in the Real Property pursuant to the Ground Lease shall not merge but shall always be kept separate and distinct, notwithstanding the union of such estates in any Person by

purchase, operation of law or otherwise. Mortgagee reserves the right, at any time, to release portions of the Property from the lien of this Mortgage with or without consideration, at Mortgagee's election, without waiving or affecting any of its rights hereunder or under the Note, the Project Loan Agreement or the other Loan Documents and any such release shall not affect Mortgagee's rights in connection with the portion of the Property not so released.

8.4 In the event of the bankruptcy, reorganization or insolvency of Mortgagor, any attempt by Mortgagor to surrender its leasehold estate, or any portion thereof, under the Ground Lease, or any attempt by Mortgagor to terminate, cancel or acquiesce in the rejection of the Ground Lease without the consent of Mortgagee shall be null and void. Mortgagor hereby expressly releases, assigns, relinquishes and surrenders unto Mortgagee all of its right, power and authority to terminate, cancel, acquiesce in the rejection of, modify, change, supplement, alter or amend the Ground Lease in any respect, either orally or in writing, in the event of the bankruptcy, reorganization or insolvency of Mortgagor, and any attempt on the part of Mortgagor to exercise any such right without the consent of Mortgagee shall be null and void.

8.5 Notwithstanding anything to the contrary contained in this Mortgage with respect to the Ground Lease, as security for the Loan, but subject to the Loan Documents, the Mortgagor unconditionally assigns, transfers and sets over unto Mortgagee all of its claims and rights to the payment of damages that may hereafter arise as a result of any rejection or disaffirmance of the Ground Lease by the Ground Lessor or its successors and assigns, or by ant trustee of any such party, pursuant to the Bankruptcy Code. Mortgagee shall have and is hereby granted the right to approve prior to the filing or commencement thereof by Borrower of any claim, suit, action or proceeding relating to the Ground Lessor’s attempt to reject or disaffirm, or the rejection or disaffirmance of, the Ground Lease (including, without limitation, the right to file and prosecute, any proofs of claim, complaints, motions, objections, applications, notices and other documents) in any case in respect of Ground Lessor or any of its successors and assigns, under the Bankruptcy Code. This assignment constitutes a present, irrevocable and unconditional assignment of the foregoing claims, rights and remedies, and shall continue in effect until the Secured Obligations shall have been satisfied and discharged in full.

8.6 Mortgagee hereby agrees to deliver to Ground Lessor (simultaneously with the delivery thereof to Mortgagor) copies of any notice of default or nonperformance given to Mortgagor hereunder. The terms of this Section 8.6 are adopted in order to comply with certain provisions required in order to qualify this Mortgage as a “Recognized Mortgage” under the Ground Lease.

ARTICLE 9. STATE SPECIFIC PROVISIONS

9.1 CONFLICTS WITH PRECEDING ARTICLES. In the event of any conflict between the provisions of this Article 9 and any provision in the preceding Articles, then the provisions of this Article 9 shall control.

9.2 NEW YORK PROVISIONS. Notwithstanding anything to the contrary elsewhere in this Mortgage:

(a) MAXIMUM PRINCIPAL SUM. THE PARTIES HERETO INTEND THAT THIS MORTGAGE SHALL SECURE UNPAID BALANCES OF THE DEBT SECURED HEREBY WHETHER ADVANCED TO MORTGAGOR ON THE DATE HEREOF OR AFTER THIS MORTGAGE IS DELIVERED FOR RECORDATION IN THE OFFICIAL RECORDS OF THE COUNTY IN WHICH THE PROPERTY IS LOCATED. THE MAXIMUM PRINCIPAL AMOUNT OF INDEBTEDNESS WHICH IS OR UNDER ANY CONTINGENCY MAY BE SECURED AT THE DATE OF EXECUTION HEREOF OR AT ANY TIME THEREAFTER BY THIS MORTGAGE IS $7,050,000.00.

(b) Trust Fund for Advances. In compliance with Section 13 of the Lien Law of the State of New York, the Mortgagor will receive the advances secured hereby and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the “cost of improvement” (as such quoted term is defined in the New York Lien Law), and will apply the same first to the payment of such costs before using any part of the total of the same for any other purpose and, will comply with Section 13 of the New York Lien Law. Mortgagor will indemnify and hold Mortgagee harmless against any loss or liability, cost or expense, including, without limitation, any judgments, attorney’s fees, costs of appeal bonds and printing costs, arising out of or relating to any proceeding instituted by any claimant alleging a violation by Mortgagor of any applicable lien law including, without limitation, any section of Article 3-A of the New York Lien Law.

(c) New York Real Property Law Article 4-A. If this Mortgage shall be deemed to constitute a “mortgage investment” as defined by New York Real Property Law Section 125, then this Mortgage shall and hereby does (i) confer upon the Mortgagee the powers and (ii) impose upon the Mortgagee the duties of trustees set forth in New York Real Property Law Section 126.

(d) Statement in Accordance with Section 253.1-a.(a) of the New York Tax Law. This Mortgage does not cover real property principally improved or to be improved by one or more structures containing in the aggregate not more than six (6) residential dwelling units, each having separate cooking facilities.

(e) Statement in Accordance with Section 274-a of the New York Real Property Law. The Mortgagee shall, within fifteen (15) days after written request, provide the Mortgagor with the statement required by Section 274-a of the New York Real Property Law.

(f) Section 291-f of New York Real Property Law. Mortgagee shall have all of the rights set forth in Section 291-f of the Real Property Law of New York. For purposes of Section 291-f of the New York Real Property Law, all existing tenants and every tenant or subtenant who after the recording of this Mortgage, enters into a Lease upon the premises of any of the Property or who acquires by instrument of assignment or

by operation of law a leasehold estate upon the Property is hereby notified that Mortgagor shall not, without obtaining Mortgagee’s prior consent in each instance, cancel, abridge or otherwise modify any Leases or accept prepayments for more than thirty (30) days of installments of rent to become due with respect to any Lease thereof having an unexpired term on the date of this Mortgage of five (5) years or more, except as expressly permitted under the Project Loan Agreement, and that any such cancellation, abridgement, modification or prepayment made by any such tenant or subtenant without either being expressly permitted under this Mortgage or receiving Mortgagee’s prior consent shall be voidable by Mortgagee at its option.

(g) Sections 254, 271, 272 and 291-f of New York Real Property Law. All covenants of the Mortgagor herein contained shall be construed as affording to Mortgagee rights additional to and not exclusive of the rights conferred under the provisions of Sections 254, 271, 272 and 291-f of the Real Property Law of New York.

(h) Real Property Law. In the event of any conflict, inconsistency or ambiguity between (i) the provisions of the Note, this Mortgage or the other Loan Documents and (ii) the provisions of subsection 4 of Section 254 of the Real Property Law of New York covering the insurance of buildings against loss by fire, the provisions of the Note, this Mortgage and the other Loan Documents shall control.

(i) RPAPL. If an Event of Default shall occur and be continuing, Mortgagee may elect to sell (and, in the case of any default of any purchaser, resell) the Property or any part thereof by exercise of the power of foreclosure or of sale granted to Mortgagee by Articles 13 of the New York Real Property Actions and Proceedings Law (the “RPAPL”). In such case, Mortgagee may commence a civil action to foreclose this Mortgage pursuant to Article 13 of the RPAPL to satisfy the Note and all other amounts secured hereby.

(j) Certain Waivers. Mortgagor hereby waives and releases all benefit that might accrue to Mortgagor by virtue of any present or future law exempting the Property, or any part of the proceeds arising from any sale thereof, from attachment, levy or sale on execution, or providing for any stay of execution, exemption from civil process or extension of time for payment, or any right of marshalling in the event of any sale hereunder of the Property, and, unless specifically required herein, all notices of Mortgagor’s default or of Mortgagee’s election to exercise, or Mortgagee’s actual exercise of any option under this Mortgage or any other Loan Documents. Mortgagor waives all rights or defenses arising by reason of any “one action” or “anti-deficiency” law, or any other law which may prevent Mortgagee from bringing any action against Mortgagor, including a claim for deficiency to the extent Mortgagee is otherwise entitled to a claim for deficiency, before or after Mortgagee’s commencement or completion of any foreclosure action or any other action to exercise its remedies hereunder or otherwise available at a law or in equity.

(k) Application of Insurance Proceeds. In no event shall the provisions of Section 254 of the Real Property Law of the State of New York with respect to the application of insurance proceeds apply to this Mortgage.

(l) Assignment. Upon the repayment of this Mortgage, Mortgagee shall cooperate with Mortgagor in effecting an assignment, without representation or warranty (except that Mortgagee shall represent that it has not assigned or encumbered this Mortgage or the other Loan Documents), and without recourse to Mortgagee, of this Mortgage, provided all Lenders’ costs and attorneys’ fees in connection therewith are paid by Mortgagor, and Mortgagee shall have no liability to Mortgagor for the loss of the Note or any original document evidencing and securing the Loan, but shall provide Mortgagor with a lost document affidavit describing the circumstances thereof and such other instruments as may be reasonably requested to effectuate such assignment (which shall not include any indemnification agreements).

(m) Relation to Acquisition and Building Loan Mortgages. This Mortgage is intended to be junior and subordinate in lien to the (i) Acquisition Loan Mortgage and (ii) Building Loan Mortgage, each executed by Mortgagor in favor of Mortgagee and each dated as of the date hereof, securing repayment of Acquisition Loans and Building Loans, as applicable, or so much thereof as shall have been advanced thereunder, the proceeds of which are to be disbursed and advanced from time to time after the date hereof.

(n) Loan Proceeds. As of the time of recording of this Mortgage, the entire principal amount secured or to be secured by this Mortgage has been advanced in full and no improvements (as defined in Lien Law § 2(4)) have commenced or are underway on or at the Property, except improvements for which all costs of improvement which are currently due and payable have been paid. No part of the Project Loan is intended to be applied for costs of improvement.

[SIGNATURE APPEARS ON FOLLOWING PAGE]

IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the day and year set forth above.

MORTGAGOR:

210 WEST 31^ST STREET OWNER, LLC,

a Delaware limited liability company

By:    KBS SOR II 210 WEST 31^ST STREET, LLC,

a Delaware limited liability company,

its sole member

By:    ONYX 31^st STREET, LLC,

a Delaware limited liability company,

its Managing Member

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.,

Authorized Signatory

(ALL SIGNATURES MUST BE ACKNOWLEDGED)

NOTARY ACKNOWLEDGMENT

STATE OF NEW YORK    )

) ss.:

COUNTY OF NEW YORK    )

On the 29th day of      November    , 2016, before me, the undersigned, personally appeared     John Saraceno        , personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity and that by his signature on the instrument the individual or the person upon behalf of which the individual acted executed the instrument.

/s/ Tierra James            
Signature and Office of individual
taking acknowledgment

EXHIBIT A
DESCRIPTION OF PROPERTY

EX-10.52

Exhibit 10.52

ACQUISITION AND PROJECT LOAN AGREEMENT

BY AND BETWEEN

PACIFICCAL PC CORE LENDER, LLC,
AS LENDER

AND

210 WEST 31^st STREET OWNER, LLC,

AS BORROWER

DATED AS OF DECEMBER 1, 2016

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TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS			1
	1.1	Defined Terms	1
	1.2	Exhibits	22
	1.3	Principals of Construction	23
ARTICLE II LOAN			23
	2.1	The Commitments, Loans and Notes	23
	2.2	Intentionally Omitted	24
	2.3	Loan Fee; Exit Fee; Minimum Lender Profit	24
	2.4	Intentionally Omitted	25
	2.5	Loan Documents; Guaranty Documents	25
	2.6	Effective Date	25
	2.7	Interest on Loan	25
	2.8	Loan Payments	25
	2.9	Maturity date	26
	2.10	Credit for Payments	28
	2.11	Full Repayment and Reconveyance	28
	2.12	Authorization	29
	2.13	Recourse to Borrower	29
	2.14	Prepayments	29
ARTICLE III CONDITIONS TO INITIAL DISBURSEMENT AND CASH MANAGEMENT			30
	3.1	Conditions to Initial Disbursement	30
	3.2	Loan Disbursements	34
	3.3	Cash Management	34
ARTICLE IV FUTURE DISBURSEMENTS OF THE LOANS			36
	4.1	Fees	36
	4.2	SNDA's and Estoppels	36
	4.3	Conditions for Disbursement	37
	4.4	Borrower Operating Accounts	38
	4.5	Credit Approval	38
	4.6	Allocation for Tenant Improvements	39

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	4.7	Direct Loan Advances by Lender	39
	4.8	No Waiver or Approval by Reason of Loan Advances	40
	4.9	Authorization to Make Loan Advances to Cure Borrower's Defaults	40
	4.10	Lender's Right to Make Loan Advances in Compliance with the Completion Guaranty	40
	4.11	No Third-Party Benefit	40
ARTICLE V INSURANCE; CASUALTY, CONDEMNATION AND RESTORATION			40
	5.1	Title Insurance	41
	5.2	Property Insurance	41
	5.3	Liability Insurance	41
	5.4	Umbrella or Excess Liability Insurance	41
	5.5	Builder's Risk Insurance	42
	5.6	General Insurance Requirements	42
	5.7	Restoration Proceeds	43
	5.8	Restoration	44
	5.9	Disbursement	45
	5.10	Change in Insurance Requirements	46
	5.11	Notification of Loss	46
ARTICLE VI REPRESENTATIONS AND WARRANTIES			46
	6.1	Organization; Power; Single Purpose Entity	46
	6.2	Authority; Enforceability	46
	6.3	Ownership of Borrower	47
	6.4	No Conflict	47
	6.5	Consents and Authorizations	47
	6.6	Financial Information	47
	6.7	Litigation; Adverse Effects; Condemnation	48
	6.8	Payment of Taxes	48
	6.9	Disclosure	48
	6.10	Requirements of Law and Other Covenants	49
	6.11	Deliveries; Purchase Price for Project; Outstanding Balance of Existing Loan	49

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Page

	6.12	Title to Assets; No Liens	49
	6.13	Utilities	49
	6.14	Leases	49
	6.15	Affiliate Fees	49
	6.16	Defects	50
	6.17	Patriot Act and Related Matters	50
	6.18	No Additional Liabilities of Guarantor Not Previously Disclosed in Writing to Lender	51
	6.19	ERISA	51
	6.20	Investment Company Act; Public Utility Holding Company Act	51
	6.21	Intentionally Omitted	51
	6.22	REOC Status	51
	6.23	Compliance with Law; Government Approvals	52
	6.24	Use of Project	53
	6.25	Project Documents	53
	6.26	Budget	53
	6.27	Ground Lease	53
ARTICLE VII REPORTING COVENANTS			54
	7.1	Financial Statements and Other Financial and Operating Information	54
	7.2	Environmental Notices	56
ARTICLE VIII OTHER COVENANTS			56
	8.1	Existence	57
	8.2	Compliance	57
	8.3	Payment of Taxes, Assessments and Charges	57
	8.4	Books and Records	57
	8.5	Entry and Inspection	57
	8.6	Construction	58
	8.7	Use of Proceeds	59
	8.8	Additional Liabilities	59
	8.9	Leases	59

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	8.10	Limitations on Distributions	60
	8.11	Subdivision Maps; Zoning; Joint Assessment	60
	8.12	ERISA Compliance	60
	8.13	Application of Gross Operating Income	60
	8.14	Transfers	61
	8.15	Management	61
	8.16	Special Purpose Entity	62
	8.17	Approved Budget	63
	8.18	Intentionally Omitted	64
	8.19	Initial Equity and Future Equity	64
	8.20	Maintenance of the Project; Alterations	64
	8.21	Interest Rate Protection Agreement	65
	8.22	Intentionally Omitted	65
	8.23	Compliance with ZLDA	65
	8.24	Performance of Project Documents and Easements	65
	8.25	Proceedings to Enjoin or Prevent Construction	66
	8.26	Construction Milestones	66
	8.27	Ground Lease	66
ARTICLE IX HAZARDOUS MATERIALS			66
	9.1	Special Representations and Warranties	66
	9.2	Hazardous Materials Covenants	67
	9.3	Inspection by Lender	68
	9.4	Hazardous Materials Indemnity	68
ARTICLE X APPLICATION OF CERTAIN FUNDS			68
	10.1	Priority of Application	68
	10.2	Security Deposit Account	69
	10.3	No Distributions to Borrower	69
ARTICLE XI EVENTS OF DEFAULT AND REMEDIES			69
	11.1	Events of Default	69
	11.2	Remedies upon Default	73

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	11.3	Remedies Cumulative	73
	11.4	Lender Appointed Attorney-In-Fact	73
	11.5	Lender's Right to Perform	73
	11.6	Lender's Right to Complete Construction	74
	11.7	Lender's Rights under the Completion Guaranty	74
	11.8	NO OBLIGATION WITH RESPECT TO COMPLETION OF THE IMPROVEMENTS	74
ARTICLE XII RESERVE ACCOUNTS			75
	12.1	Reserve Accounts Generally	75
	12.2	Tax and Insurance	75
	12.3	Interest on Reserve Accounts	75
ARTICLE XIII SECONDARY MARKET TRANSACTIONS			76
	13.1	General	76
	13.2	Reserved	76
	13.3	Dissemination of Information	76
	13.4	Change of Payment Date	76
	13.5	Appointment of Servicer and Delegation of Lender Rights	77
ARTICLE XIV MISCELLANEOUS			77
	14.1	Performance by Lender	77
	14.2	Actions	77
	14.3	Nonliability of Lender	77
	14.4	No Third Parties Benefited	79
	14.5	Indemnity	79
	14.6	Binding Effect; Assignment	79
	14.7	Execution in Counterparts	79
	14.8	Amendments; Waiver in Writing	80
	14.9	Costs, Expenses and Taxes	80
	14.10	Tax Service	81
	14.11	Survival	81
	14.12	Notices	81

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14.13	Further Assurances	82
14.14	Governing Law	82
14.15	Severability of Provisions	82
14.16	Headings	82
14.17	Time of the Essence; Delay Not a Waiver	82
14.18	Construction of Agreement	83
14.19	Brokers	83
14.20	Lender's Discretion	83
14.21	Preferences	83
14.22	Waiver of Notice	83
14.23	Offsets, Counterclaims and Defenses	84
14.24	Waiver of Marshalling of Assets Defense	84
14.25	Waiver of Right to Trial by Jury	84
14.26	Prior Acquisition Loan	84
14.27	Exculpation	85

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ACQUISITION AND PROJECT LOAN AGREEMENT

THIS ACQUISITION AND PROJECT LOAN AGREEMENT is made and entered into as of December 1, 2016, by and between 210 WEST 31^st STREET OWNER, LLC, a Delaware limited liability company (“Borrower”), and PACIFICCAL PC CORE LENDER, LLC, a Delaware limited liability company (together with its successors and/or assigns, “Lender”).

R E C I T A L S:

A.    Borrower is the owner of a ground leasehold interest in that certain tract of land located in the City, County and State of New York and being more fully described in Exhibit A attached hereto (the “Land”).

B.    Borrower has requested and applied to the Lender for loans (i) in the amount of $32,650,000.00 (the “Total Acquisition Loan Commitment”) for the purpose of financing a portion of Borrower’s cost of acquiring a portion of the Land and (ii) in the amount of $7,050,000.00 (the “Total Project Loan Commitment”) for the purpose of financing certain Soft Costs (as hereinafter defined) in connection with the development of the Project (as hereinafter defined). Lender is willing to make such loans on and subject to the terms and conditions hereinafter set forth.

C.    Borrower proposes to construct the Improvements (as hereinafter defined) on the Land and, in connection therewith, has also requested and applied to Lender for loans in an aggregate amount not to exceed $7,410,000.00 (the “Total Building Loan Commitment”) for the purposes of paying certain costs pertaining to the Project, including certain costs with respect to the construction and equipping of the Improvements on the Land and also certain Tenant Improvement Costs (as hereinafter defined), all of which costs constitute a Cost of Improvement (as hereinafter defined). Lender has agreed to make such loans pursuant to the Building Loan Agreement (as defined herein).

D.    The aggregate amount of all of Lender’s Commitments (as hereinafter defined) is $47,110,000.00.

NOW, THEREFORE, in consideration of the making of the Loan by Lender, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE I
DEFINITIONS

1.1Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth respectively after each:

“Account” means, collectively, the Collection Account and the Cash Management Account, together with any other accounts now or hereafter established by Borrower for the benefit of Lender hereto in connection with the Loan.

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“Acquisition Loan” has the meaning set forth in Section 2.1(1)(a).

“Acquisition Loan Commitment” means the obligation of Lender to make the Acquisition Loan in a principal amount up to but not exceeding the Total Acquisition Loan Commitment.

“Acquisition Loan Mortgage” shall mean the Consolidated, Amended and Restated Acquisition Loan Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing in the amount of the Total Acquisition Loan Commitment and executed, dated and delivered by Borrower to Lender on the Closing Date, securing the Acquisition Loan Note, as such mortgage may be modified, supplemented, amended and/or in effect from time to time.

“Acquisition Loan Note” shall mean the Amended and Restated Acquisition Loan Promissory Note Secured by Mortgage given to Lender in principal amount equal to the Total Acquisition Loan Commitment to be executed, dated and delivered by Borrower to Lender as of the Closing Date, secured by the Acquisition Loan Mortgage, as such note may be modified, supplemented, amended and/or in effect from time to time.

“Actual Lender Expenses” has the meaning given to such term in Exhibit D to this Agreement.

“ADA” means the Americans with Disabilities Act, 42 U.S.C. §§ 12101, etseq., as the same may be hereafter amended or modified.

“Affiliate” means (a) any Person which directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, Borrower, or any Guarantor, (b) any Person, five percent (5%) or more of the equity interest of which is held beneficially or of record by Borrower or any Guarantor, (c) any partner or member in Borrower or any Guarantor, and (d) any Guarantor.

“Affiliate Fees” has the meaning given to such term in Section 3.1(w) of this Agreement.

“Agreement” means this Loan Agreement.

“Applicable Interest Rate” has the meaning given to such term in the Notes.

“Applicable Law” means any statute, law (including Environmental Laws), regulation, ordinance, rule, judgment, rule of common law, order, decree, Government Approval, approval, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether now or hereinafter in effect and, in each case, as amended (including any thereof pertaining to land use, zoning and building ordinances and codes).

“Appraisal” means a written appraisal prepared by Leitner Group Inc., CBRE, Cushman & Wakefield or Integra, or such other reputable MAI certified appraiser acceptable to Lender in its reasonable discretion and prepared in compliance with applicable

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regulatory requirements, including, without limitation, the Financial Institutions Recovery, Reform and Enforcement Act of 1989, as amended from time to time, and subject to Lender’s customary independent appraisal requirements.

“Approved Budget” means (a) the Budget and (b) any improvement and operating budget for the Property delivered by Borrower and approved by Lender pursuant to Section 7.1(e), 8.6 and 8.17.

“Architect” means SBLM Architects PC or any other licensed architect to be engaged by Borrower to prepare plans and specifications for the design of the Improvements pursuant to a written architect’s contract, which Architect and architect’s contract shall be subject to the reasonable prior written approval of Lender.

“Architect’s Agreement” means that certain agreement entitled AIA Document B101 – 2007, dated March 6, 2015, between Borrower, as owner, and Architect, as architect.

“Assignment of Agreements” means that certain Assignment of Agreements, Licenses, Permits and Contracts of even date herewith, by Borrower in favor of Lender and consented to by Construction Manager.

“Assignment of Interest Rate Protection Agreement” means that certain Collateral Assignment of Interest Rate Protection Agreement, executed by Borrower, in favor of Lender, dated as of even date herewith, and consented to by the “Cap Bank” thereunder, as modified, amended and/or supplemented.

“Assignment of Leasing Agreement” means that certain Assignment and Subordination of Leasing Agreement, in form and substance satisfactory to Lender, executed by Borrower and Leasing Agent in favor of Lender in accordance with this Agreement.

“Assignment of Management Agreement” means that certain Assignment and Subordination of Property Management Agreement, in form and substance satisfactory to Lender, executed by Borrower and Property Manager in favor of Lender in accordance with this Agreement.

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, 11 U.S.C. §101-1330, as the same may be hereafter amended or modified.

“Borrower” has the meaning given to such term in the opening paragraph of this Agreement.

“Breakage Prepayment Premium” has the meaning given to such term in the Note.

“Budget” means the improvement and operating budget for the Project setting forth line items of all costs and expenses incurred or estimated to be incurred with respect to the Project and relevant assumptions, a copy of which is attached as Exhibit C-1 hereto and

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which Exhibit C-1 shall be updated in connection with the satisfaction of the terms of Section 8.6(d)(ii) hereof.

“Budget Line Items” has the meaning assigned to such term in Section 4.5.

“Building Loan” has the meaning assigned to such term in Section 1.1 of the Building Loan Agreement.

“Building Loan Agreement” means the Building Loan Agreement of even date herewith, to be entered into by Borrower and Lender, as such agreement may be modified, supplemented, amended and/or in effect from time to time.

“Building Loan Commitment” means the obligation of Lender to make Building Loans in an aggregate amount at any one time outstanding up to but not exceeding the Total Building Loan Commitment based on the Budget.

“Building Loan Mortgage” means the Building Loan Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing in the amount of the Total Building Loan Commitments and executed, dated and delivered by Borrower to Lender on the Closing Date, securing the Building Loan Note, as such mortgage may be modified, supplemented, amended and/or in effect from time to time.

“Building Loan Note” shall mean the Building Loan Promissory Note Secured by Mortgage given to Lender in principal amount equal to the Total Building Loan Commitment secured by the Building Loan Mortgage, as such note may be modified, supplemented, amended and/or in effect from time to time.

“Business Day” means (a) with respect to any borrowing, payment or rate determination with respect to LIBOR, a day, other than a Saturday or a Sunday, on which dealings in U.S. Dollars are carried on in the London interbank market, and (b) for all other purposes, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or the State of California, or which is a day on which banking institutions located in the State of New York or the State of California are required or authorized by law or other governmental action to close.

“Carveout Guaranty” means that certain Indemnity and Guaranty Agreement dated as of even date herewith executed and delivered by Onyx Guarantor collectively in favor of Lender pursuant to this Agreement.

“Cash Management Account” has the meaning given to such term in Section 3.3(b) of this Agreement.

“Cash Management Agreement” means that certain Cash Management Agreement dated as of even date herewith executed by and among Borrower, Lender and Property Manager.

“Cash Management Bank” has the meaning given to such term in Section 3.3(b) of this Agreement.

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“Casualty” has the meaning given to such term in Section 5.7 of this Agreement.

“Casualty Retainage” has the meaning given to such term in Section 5.9 of this Agreement.

“CERCLA” has the meaning given to such term in Section 9.1(b) of this Agreement.

“Change Order” has the meaning assigned to such term in Section 1.1 of the Building Loan Agreement.

“City” means the City of New York, located in the County of New York and State of New York.

“Clearing Bank” shall have the meaning given to such term in Section 3.3(a) of this Agreement.

“Closing Date” means the date on which all of the conditions precedent to Lender’s obligations set forth in Section 3.1 of this Agreement shall have been satisfied, as determined by Lender in its sole discretion.

“Code” means the Internal Revenue Code (Title 26 of the United States Code), as the same may be hereafter amended or modified.

“Collateral” means, collectively, the Project, the Personal Property and any other real or personal property now or hereafter acquired by Borrower in or upon which a Lien is granted by Borrower, or as to which an assignment for security purposes is made by Borrower, pursuant to this Agreement or the other Loan Documents.

“Collection Account” has the meaning given to such term in Section 3.3(a) of this Agreement.

“Collection Account Agreement” means that certain deposit account agreement to be entered into among Borrower, Lender and Clearing Bank in accordance with Section 3.3(a) hereof.

“Commencement Date” has the meaning given to such term in Section 8.26 of this Agreement.

“Commitment” means the aggregate Acquisition Loan Commitment, Project Loan Commitment and Building Loan Commitment.

“Completion Date” means the date which is fifteen (15) months after the Commencement Date.

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“Completion Guaranty” means that certain Completion Guaranty dated as of even date herewith executed and delivered by Onyx Guarantor in favor of Lender pursuant to this Agreement.

“Compliance Certificate” means a certificate in the form attached hereto as Exhibit K evidencing Guarantor’s compliance with the Net Worth Covenant.

“Condemnation Proceeds” has the meaning given to such term in Section 5.7 of this Agreement.

“Consent and Agreement” has the meaning assigned to such term in Section 1.1 of the Building Loan Agreement.

“Construction Completion” has the meaning given to such term in the Building Loan Agreement.

“Construction Consultant” means Newbanks and/or such other external consultant as Lender may engage to examine the Plans and Specifications, changes in the Plans and Specifications and cost breakdowns and estimates, to make periodic inspections of the work of construction of the Project on behalf of Lender, and to advise and render reports to Lender concerning the same and to provide such other advice in respect of the Project as Lender may from time to time request.

“Construction Manager” means Onyx Management Group LLC or another construction manager for the Construction Work reasonably acceptable to Lender.

“Construction Management Agreement” means the construction contract for the Improvements to be entered into between Borrower and the Construction Manager in accordance, and as reasonably approved by Lender, as the same may be modified, supplemented and/or amended from time to time in accordance with the terms of this Agreement. The Construction Management Agreement shall provide for a guaranteed maximum fixed price for the Construction Work for the Improvements consistent with the Budget, and shall provide that the Construction Management Fee shall be disbursed based upon percentage of completion with payments to be complete upon the issuance of all temporary certificates of occupancy and release of all liens by contractors, materialmen and suppliers.

“Construction Management Fee” means the general contractor fees agreed to by Borrower and Construction Manager as provided in the Construction Management Agreement and approved by Lender.

“Construction Schedule” means the schedule prepared and certified by Borrower and verified by the Construction Consultant establishing a timetable for commencement and completion of the Construction Work, showing, on a monthly basis, the anticipated progress of the Construction Work and showing that all of the Construction Work will be completed on or before the Completion Date.

“Construction Work” means all work and materials (including all labor, equipment and fixtures with respect thereto and including demolition and asbestos removal)

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necessary to construct the Improvements, all of which shall be performed and completed in accordance with and as contemplated by the Plans and Specifications and all Applicable Laws.

“Contingency Fund” has the meaning assigned to such term in Section 4.4.

“Contract” means any contract, subcontract, trade contract, material agreement or supply contract relating to the construction of the Improvements or a component thereof, whether enter into by Borrower directly, or by Construction Manager on behalf of Borrower.

“Contractor” means any contractor, subcontractor, tradesman, materialman or supplier under any Contract.

“Control” means the possession, directly or indirectly, of the power to cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, family relationship or otherwise; and the terms “controls”, “controlling” and “controlled” have the meanings correlative to the foregoing. For the avoidance of doubt, the granting by Affiliates of Borrower’s managing member of certain “major decision” rights in favor of the other members shall not be deemed to be a relinquishment of control.

“Cost of Improvement” shall have the meaning defined in Paragraph 5 of Section 2 of Article I of the Lien Law, as such term applies to the Improvements being financed with the proceeds of the Building Loans.

“Counterparty” shall have the meaning given to such term in Section 8.21.

“Date Down Endorsement” means any date down endorsements to the Title Policies or other evidence of date down of title acceptable toLender in its sole discretion covering disbursements of loan proceeds made or to be made subsequent to the date of the Title Policies.

“Debt Service” as of any date of determination, means the annual interest due on the outstanding principal balance of the Loan, as of such date, at the Applicable Interest Rate (as defined in the Notes) in effect as of such date, together with the principal reduction payment, if any, required on such date pursuant to the Notes and the other Loan Documents.

“Debt Service Coverage Ratio” means the ratio of the Net Operating Income to Deemed Debt Service, as determined by Lender in its reasonable discretion for the period in question.

“Deemed Debt Service” means the sum of (1) the product of (a) (i) the greatest of (x) an assumed constant interest rate under the Note equal to six percent (6.0%), (y) the Applicable Interest Rate per annum as of the date of determination or (z) the then ten-year interest rate for U.S. Government Treasury Securities plus two and one half percent (2.5%), multiplied by (b) the then current outstanding principal balance of the Loan on such date, plus

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(2) monthly payments of the principal amount of the Loan determined by Lender to be sufficient to fully amortize the Loan over a 30-year amortization period.

“Default Interest Rate” shall have the meaning given to such term in the Notes.

“Deficiency Deposit Account” has the meaning assigned to such term in Section 4.3(a)(ii).

“Deficiency Deposit” has the meaning assigned in Section 4.3(a)(ii).

“Demolition Work” means internal demolition and necessary asbestos removal, which shall be performed and completed in accordance with and as contemplated by the Plans and Specifications and all Applicable Laws.

“Design Professional” has the meaning assigned to such term in Section 1.1 of the Building Loan Agreement.

“Disbursement Budget” means the budget setting forth the purposes for which Borrower shall be entitled to use the proceeds of the Loans and the Borrower Equity, which is attached hereto as Exhibit C-2.

“Disbursement Plan” means the plan setting forth certain conditions to disbursement of certain proceeds of the Loans attached hereto as Exhibit D.

“Dollars” and “$” means lawful money of the United States of America.

“Effective Date” means the date described in Section 2.6 of this Agreement.

“Eligible Account” means a separate and identifiable account from all other funds held by the holding institution that is either (i) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (ii) a segregated trust account or accounts maintained with the corporate trust department of a federal depository institution or state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations §9.10(b), having in either case corporate trust powers, acting in its fiduciary capacity, and a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal and state authorities. An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

“Eligible Institution” meansa depository institution, approved by Lender in its reasonable discretion, insured by the Federal Deposit Insurance Corporation, the long term unsecured debt obligations of which are rated at least A S&P and A1 by Moody’s. It is understood and agreed that Wells Fargo Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A., Deutsche Genossenschafts-Hypothekenbank, AG, Investors Bank and Signature Bank and their respective successors and assigns are hereby approved as “Eligible Institutions”.

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“Engineer” means a licensed engineer to be engaged by Borrower pursuant to a written engineer’s contract to prepare surveys and drawings in connection with the construction of the Improvements, which Engineer and written engineer’s contract shall be subject to the reasonable prior written approval of Lender.

“Environmental Report” has the meaning set forth in Section 9.1 hereof.

“Equity Interests” means (a) partnership interests (general or limited) in a partnership; (b) membership interests in a limited liability company; (c) shares or stock interests in a corporation; and (d) the beneficial ownership interests in a trust.

“Environmental Indemnity Agreement” means that certain Environmental Indemnity Agreement dated as of even date herewith executed and delivered by Borrower and Guarantor collectively and jointly and severally in favor of Lender pursuant to this Agreement.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended or re-codified from time to time, and the regulations promulgated thereunder.

“ERISA Affiliate” has the meaning given to such term in Section 6.19 of this Agreement.

“Estimated Lender Expenses” has the meaning given to such term in Exhibit D to this Agreement.

“Event of Default” means each of those events so designated in Section 11.1 of this Agreement.

“Exit Fee” has the meaning given to such term in Section 2.3(b) of this Agreement.

“Extension Fee” means a fee in the amount of thirty three one hundredths of one percent (0.33%) of the outstanding principal balance of the Loans.

“Extension Term” means the First Extension Term and the Second Extension Term, as applicable.

“Financing Statements” means the UCC-1 financing statements granted by Borrower in favor of Lender pursuant to this Agreement in order to perfect Lender’s Lien on any of the Personal Property, one of which will be filed with the Secretary of State of the State of Delaware, and the other of which will be recorded in the Official Records.

“First Extension Notice” has the meaning given to such term in Section 2.9(b)(i) of this Agreement.

“First Extension Term” has the meaning given to such term in Section 2.9(b) of this Agreement.

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“Fiscal Year” means the 12-month period ending on December 31 of each year or such other fiscal year of Borrower as Borrower may select from time to time with the prior written consent of Lender, such consent not to be unreasonably withheld.

“Fitch” shall mean Fitch, Inc.

“Force Majeure Event” shall mean strikes, lock-outs, unavoidable casualties beyond Borrower’s control, unavailability of materials, war, civil disturbance, natural disaster (including hurricanes, tornadoes or flooding), acts of terrorism or acts of God or other matters beyond the control of a Person (including, without limitation, the failure of any other party hereto to timely perform its obligations under, or provide notice within the timeframes specified in, any of the Loan Documents) which cause a delay in such Person’s performance of its obligations or exercise of its rights under the Loan Documents.

“Future Equity” means an amount not less than $7,800,000. Borrower shall cause the Future Equity to be contributed to or applied in payment of the costs and expenses incurred by Borrower in connection with Borrower’s renovation and construction of the Improvements.

“Future Funding Guaranty” means that certain Future Funding Guaranty dated as of even date herewith executed and delivered by Guarantor in favor of Lender pursuant to this Agreement.

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accounts and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.

“Governmental Authority” means any national, federal, state, regional or local government, or any other political subdivision of any of the foregoing, in each case with jurisdiction over Borrower, the Project, or any Person with jurisdiction over Borrower or the Project exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Government Lists” has the meaning given to such term in Section 6.17 of this Agreement.

“Gross Operating Income” means all income from or in respect of the Project, including, without limitation, rental revenues, amounts, payments, fees, rentals, additional rentals, reimbursements (including all reimbursements of expenses or other reimbursements by tenants, licensees or other users of the Project, or by insurance or other reimbursement, recoupment, discount or credit to Borrower), income, interest and other monies directly or indirectly received by or on behalf of or credited to Borrower from any Person with respect to Borrower’s ownership, use, development, operation, leasing, franchising, marketing or licensing of the Project.

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“Ground Lease”meansthat certain Amended and Restated Lease Agreement dated as of December 30, 2014, between Borrower (as successor in interest to Seller), as ground lessee, and The Province of St. Mary of the Capuchin Order, a New York religious corporation, as ground lessor.

“Guarantor” or “Indemnitor” means, collectively, the Onyx Guarantor, the KBS Guarantor, and any other Person guaranteeing any of Borrower’s obligations under this Agreement or the other Loan Documents.

“Guaranty Documents” has the meaning given to such term in Section 2.5 of this Agreement.

“Hard Costs” has the meaning assigned to such term in Section 1.1 of the Building Loan Agreement.

“Hazardous Materials” has the meaning given to such term in Section 9.1(a) of this Agreement.

“Hazardous Materials Claims” has the meaning given to such term in Section 9.1(c) of this Agreement.

“Hazardous Materials Laws” has the meaning given to such term in Section 9.1(b) of this Agreement.

“Impositions” means all ground rents and all taxes (including, without limitation, all real estate, ad valorem or value added, sales (including those imposed on lease rentals), use, single business, gross receipts, intangible transaction privilege, privilege, license or similar taxes), assessments (including, without limitation, to the extent not discharged prior to the Closing Date, all assessments for public improvements or benefits, whether or not commenced or completed within the term of the Loan), water, sewer or other rents and charges, excises, levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character in respect of the Project, (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a Lien upon (a) Borrower (including, without limitation, all income, franchise, single business or other taxes imposed on Borrower for the privilege of doing business in the jurisdiction in which the Project is located) or Lender (including taxes resulting from future changes in law which impose upon Lender or any trustee an obligation to pay any property taxes or other taxes or which otherwise adversely affect Lender’s interests but excluding income taxes), (b) the Project or any part thereof, or (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Project or the leasing or use of the Project or any part thereof, or the acquisition or financing of the acquisition of the Project by Borrower.

“Improvements” means, collectively, (i) the buildings known as 210 West 31^st Street and all improvements and fixtures existing on the Land as of the date hereof, and (ii) any improvements and fixtures to be constructed pursuant to the Construction Work.

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“In-Balance” has the meaning given to such term in Section 4.3 of this Agreement.

“Indebtedness” means, at any given time, the outstanding principal indebtedness under the Note, together with all accrued and unpaid interest thereon and all other obligations and liabilities due or to become due to Lender pursuant hereto or any of the other Loan Documents.

“Indemnified Party” means each of Lender, each of its affiliates and their respective successors and assigns, any Person who is or will have been involved with the servicing of the Loans, Persons who may hold or acquire or will have held a full or partial interest in the Loans (including Investors, as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loans for the benefit of third parties) (including any other Person who holds or acquires or will have held a participation or other full or partial interest in the Loans or the collateral therefor), and the respective officers, directors, and employees, agents, affiliates, successors and assigns of any and all of the foregoing.

“Initial Equity” means an amount not less than $17,538,500. Upon the Effective Date, Borrower shall cause the Initial Equity to be contributed to or applied in payment of the costs and expenses incurred by Borrower in connection with Borrower’s acquisition of the Project, including the payment to Seller of a portion of the purchase price payable for the Project, concurrently with the disbursement of the proceeds of the Loan by Lender (none of which shall be removed as Borrower’s equity from the Project or utilized to pay any fees, costs, refunds or other charges for the Project or the Loan transaction except as may otherwise be approved by Lender in the exercise of its sole discretion).

“Insurance Proceeds” has the meaning given to such term in Section 5.7 of this Agreement.

“Interest Rate Protection Agreement” means an agreement reasonably acceptable to Lender, with a term to expire not less than the Maturity Date, which caps the one (1) month “LIBOR Rate” at a strike price of not more than three percent (3.0%) and which is in an amount not less than Lender’s Commitment.

“Interest Reserve” has the meaning assigned to such term in Section 4.3(a)(i).

“Investor” and “Investors” have the meaning given to such term in Section 13.3 of this Agreement.

“KBS Guarantor” means KBS SOR US Properties II, LLC, a Delaware limited liability company.

“Leases” means all leases and other agreements or arrangements affecting the use or occupancy of all or any portion of the Project now in effect or hereafter entered into (including all lettings, subleases, licenses, concessions, tenancies and other occupancy agreements covering or encumbering all or any portion of the Project), together with any guarantees, supplements, amendments, modifications, extensions and renewals of the same.

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“Leasing Commissions” means leasing commissions required to be paid by Borrower in connection with the leasing of space to tenants at the Project pursuant to Leases entered into by Borrower in accordance herewith and payable in accordance with third‑party/arm’s‑length written brokerage agreements or in accordance with the Property Management Agreement.

“Leasing Guidelines” means the guidelines and parameters set forth on Exhibit F attached hereto, as the same may be modified by Lender from time to time in accordance with Section 8.9 below.

“Legal Requirements” means (a) all statutes, laws, rules, orders, regulations, ordinances, judgments, orders, decrees and injunctions of Governmental Authorities affecting Borrower, the Loan Documents, the Project or any part thereof, and all permits and regulations relating thereto, (b) all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting the Project or any part thereof, (c) terms of any insurance policy maintained by or on behalf of Borrower, and (d) the organizational documents of Borrower.

“Lender” means, individually and collectively, PacificCal PC Core Lender, LLC, a Delaware limited liability company, and its successors and/or assigns.

“Liabilities and Costs” means any losses, actual damages, costs, fees, expenses, claims, suits, judgments, awards, liabilities (including strict liabilities), obligations, debts, fines, penalties, charges, costs of Remediation (whether or not performed voluntarily), amounts paid in settlement, litigation costs, reasonable attorneys’ fees, engineers’ fees, environmental consultants’ fees, and investigation costs (including costs for sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), of whatever kind or nature, and whether or not incurred in connection with any judicial or administrative proceedings, actions, claims, suits, judgments or awards.

“LIBOR Rate” has the meaning given to such term in the Notes.

“Lien” means any mortgage, deed to secure debt, lien pledge, easement, restrictive covenant, hypothecation, assignment, security interest, conditional sale or other title retention agreement, financing lease having substantially the same economic effect as any of the foregoing, or financing statement or similar instrument.

“Lien Law” means the Lien Law of the State of New York, as amended from time to time.

“Liquid Assets” means cash, marketable securities, certificates of deposit, partners’ unfunded commitments and availability under lines of credit including undrawn lines of credit.

“Loan” means the loans to be made by Lender to Borrower under this Agreement, the Building Loan Agreement and all other amounts evidenced or secured by the Loan Documents.

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“Loan Documents” means: (a) this Agreement, (b) the Building Loan Agreement, (c) the Notes, (d) the Guaranty Documents, (e) the Security Documents, (f) the Environmental Indemnity, (g) such assignments of management agreements, contracts and other rights as may be required by Lender, (h) all other documents evidencing, securing, governing or otherwise pertaining to the Loans and (i) all modifications, amendments or supplements of any of the foregoing.

“Loan Fee” has the meaning given to such term in Section 2.3(a) of this Agreement.

“Loan-to-Value Ratio” means the ratio of (a) the sum of (i) the outstanding principal amount of the Loan as of the date in question, and (ii) the committed and undisbursed portion of the Loan as of the date in question, to (b) the then applicable “as-is” appraised value as of such date, as determined by Lender in its sole but reasonable discretion.

“Lockout Date” means June 1, 2018.

“Major Contract” means any Contract in the amount of $50,000 or more.

“Major Contractor” means any Contractor who is a party to a Major Contract.

“Material Adverse Effect” means, as applicable, a material adverse effect upon (a) the business or financial position or results of operation of Borrower, (b) the ability of Borrower to perform, or of Lender to enforce, any of the Loan Documents or (c) the value of the Project.

“Maturity Date” means December 1, 2019, as the same may be extended pursuant to Section 2.9 hereof.

“Members” means the direct and/or indirect holders of Equity Interests in the Borrower.

“Minimum Counterparty Rating” means a long-term unsecured or counterparty rating “A-” or better by S&P and Fitch and “A3” or better from Moody’s.

“Minimum Lender Profit” has the meaning given to such term in Section 2.3(c) of this Agreement.

“Mold” has the meaning given to such in Section 9.1(a) of this Agreement.

“Monthly Amortization Payment” has the meaning ascribed thereto in the Notes.

“Moody’s” means Moody’s Investors Service, Inc.

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“Mortgages” means, collectively, the Acquisition Loan Mortgage, the Building Loan Mortgage and the Project Loan Mortgage.

“Net Operating Income” means, with respect to any date of determination, (a) the Gross Operating Income derived from Stabilized Tenants at the Project as set forth in the rent roll most recently delivered to Lender, less (b) (i) any Concessions (as defined below) and (ii) actual Operating Expenses (as defined below) during the immediately preceding twelve (12) calendar month period. For the purposes of this definition of Net Operating Income, “Operating Expenses” shall include (x) operating expenses of any kind and nature relating to the Project, as well as those operating expenses incurred in connection with maintenance, repairs, taxes, insurance, utilities, and other costs and expenses of ownership and operation, (y) an adjustment for vacancy/collection losses equal to the greater of (A) the then applicable actual vacancy percentage or (B) three percent (3.0%) of such Gross Operating Income derived from Stabilized Tenants. Further, ____ percent (__%) of the Gross Operating Income derived from Stabilized Tenants as an adjustment for property management fees payable to the Property Manager shall be included in the definition of Operating Expenses. For those Operating Expenses that are not paid on a monthly or quarterly basis, such as real property taxes and insurance premiums, and for Operating Expenses that have not been incurred but are expected to be incurred, Lender shall make an adjustment so that such Operating Expenses shall be deemed to have been incurred by Borrower during the period in question on a basis proportionate to the balance of the year in question. For the purposes of this definition of Net Operating Income, “Concessions” shall mean (1) those costs incurred or amounts paid by Borrower directly to or on behalf of any tenant for the purpose of inducing such tenant to enter into a Lease and/or (2) the aggregate amount of any free rent credited or granted by Borrower to tenants under Leases (other than to the extent any shortfall in Gross Operating Income resulting from such free rent is offset by available reserves, proceeds of the Loans, or equity contributions to the Project). Such Concessions shall be amortized over the full term of the applicable Lease with only the amortization for the period in question to be deducted from such calculation of Gross Operating Income derived from Stabilized Tenants for such period. Net Operating Income shall be evidenced by the operating statements, rent rolls and other operating information provided by Borrower to Lender under this Agreement, and such other evidence of income and expense as Lender shall reasonably require in order to evaluate Net Operating Income.

“Net Restoration Proceeds” has the meaning given to such term in Section 5.7 of this Agreement.

“Net Worth” shall mean, as of a given date, Guarantor’s total gross assets at cost (after adding back deductions for accumulated depreciation and amortization), including partners’ unfunded commitments, less total liabilities. The foregoing calculation may be supplemented, at Guarantor’s request, by substituting for the cost of any particular asset(s), a market valuation of such asset based on capitalization rates approved by Lender for assets which have achieved stabilization.

“Net Worth Covenant” means that, at all times, with respect to each applicable Guaranty Document, the Guarantor party thereto, in the aggregate, shall maintain (x) Net Worth equal to or in excess of $20,000,000, and (y) Liquid Assets having a market value equal to or in excess of $3,000,000.

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“New Payment Date” has the meaning given to such term in Section 13.4 of this Agreement.

“Notes” means, collectively, the Acquisition Loan Note, the Project Loan Note and the Building Loan Note.

“OFAC” has the meaning given to such term in Section 6.17 of this Agreement.

“Official Records” means the Official Records of New York County, New York.

“Onyx Guarantor” means, collectively, John Saraceno, an individual, Jonathan Schultz, an individual and Onyx Equities, LLC, a New Jersey limited liability company.

“Operating Guaranty” means that certain Carry Guaranty dated as of even date herewith executed and delivered by Guarantor in favor of Lender pursuant to this Agreement.

“Parcel” means each parcel within the Project that has been created by legal subdivision through recordation of the Subdivision Map, or has otherwise been created in accordance with all applicable Legal Requirements.

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may be amended from time to time, and corresponding provisions of future Legal Requirements.

“Patriot Act Offense” has the meaning given to such term in Section 6.17 of this Agreement.

“Payment Date” has the meaning given to such term in the Notes.

“Permitted Encumbrances” means, with respect to the Project, collectively, (a) the Lien created by the Loan Documents, (b) all Liens and other matters disclosed in the title insurance policy insuring the Mortgages, or any part thereof which have been approved by Lender, (c) Liens, if any, for Impositions imposed by any Governmental Authority not yet due or delinquent, and (d) such governmental, public utility and private restrictions, covenants, reservations, easements, licenses or other agreements of an immaterial nature which may be granted by Borrower after the Closing Date and which do not have a Material Adverse Effect.

“Permitted Transfers” means, (a) Transfers of equity interests or other interests in KBS SOR US Properties II LLC, or in any of the direct or indirect owners of KBS SOR US Properties II LLC (including, without limitation, KBS Strategic Opportunity Limited Partnership II, KBS Strategic Opportunity Holdings II, LLC, or KBS Strategic Opportunity REIT II, Inc.), provided that (i) KBS Strategic Opportunity REIT II, Inc., continues to own and control, either directly or indirectly and without being subject to any pledge or other encumbrance, not less than 51% of the ownership interests in Borrower; and (ii) notice of such

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Transfer, together with any revised organizational documents and organizational charts prepared in connection with any such Transfer, are provided to Lender within ten (10) days after such Transfer, (b) KBS SOR US Properties II LLC, KBS Strategic Opportunity Limited Partnership II, KBS Strategic Opportunity REIT II, Inc., and KBS Strategic Opportunity Holdings II, LLC shall each be permitted to execute guaranties and/or indemnity agreements for their respective subsidiaries, (c) KBS Strategic Opportunity Limited Partnership II, KBS Strategic Opportunity REIT II, Inc., and any of the other parties owning interests in KBS Strategic Opportunity Limited Partnership II, directly or indirectly, shall be permitted to obtain loans from, or incur indebtedness to, any third-party lender (each “Additional Indebtedness”) and pledge their respective interests (direct or indirect) in KBS Strategic Opportunity Limited Partnership II and KBS SOR US Properties II LLC as security for any such Additional Indebtedness so long as (i) the ownership interests of Borrower, Borrower’s sole member, KBS SOR II 210 West 31^st Street JV, LLC and KBS SOR II Acquisition VI, LLC are not pledged to secure such Additional Indebtedness; (ii) any default under the Additional Indebtedness resulting in a foreclosure of the pledged interest and a transfer of such interest to the lender of the Additional Indebtedness shall be deemed an Event of Default under the Loan Documents; and (iii) the Net Worth Covenant shall continue to be satisfied upon incurrence of any Additional Indebtedness, (d) Transfers of direct or indirect ownership interest in Borrower between Onyx 31^st Street, LLC and KBS SOR II 210 West 31^st Street JV, LLC pursuant to Sections 2.06, 6.02 and 7.02 of that certain Limited Liability Company Agreement of KBS SOR II 210 West 31^st Street, LLC dated as of October 28, 2016, by and between Onyx 31^st Street, LLC and KBS SOR II 210 West 31^st Street JV, LLC and (e) so long as any existing individual Onyx Guarantor maintains Control of Borrower, to members of the family of any such existing individual Onyx Guarantor or to limited liability companies or trusts, the members or beneficiaries of which are such existing individual Onyx Guarantors or members of their family; provided, that, in the case of clauses (a) through (e) above: (i) no Event of Default has occurred and is continuing, (ii) one or more of the individuals and/or entities constituting Guarantor shall continue to maintain Control of Borrower and own not less than 51% in the aggregate of all direct or indirect interest in Borrower, (iii) all of Lender’s “know your client” and Patriot Act requirements have been satisfied with respect to such Transfer and Lender has determined that such Transfer does not cause Borrower to breach any of the covenants contained in Section 6.17 hereof, (iv) if such Transfer would cause the transferee to increase its direct or indirect interest in Borrower to an amount which equals or exceeds twenty percent (20%) (and such transferee does not own a direct or indirect interest in Borrower in an amount of at least twenty percent (20%) immediately prior to the transfer), Lender shall have received Satisfactory Search Results with respect to such transferee and such other financial statements and other information reasonably requested by Lender, (v) except with respect to Transfers contemplated in clauses (a), (b) and (c) above, which shall be subject to the applicable notice requirements set for therein, Borrower shall give Lender notice of such Transfer together with copies of all instruments effecting such Transfer not less than ten (10) Business Days prior to the date of such Transfer, and (vi) the legal and financial structure of Borrower and the single-purpose nature and bankruptcy remoteness of Borrower after such Transfer shall remain unchanged.

“Person” means any individual, corporation, partnership, limited liability company, trust, unincorporated organization or other entity, and any Governmental Authority.

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“Personal Property” means any tangible and intangible personal property of Borrower in which Lender shall be granted a Lien pursuant to the Mortgages or any other Loan Document.

“Plans and Specifications” has the meaning given to such term in Section 1.1 of the Building Loan Agreement.

“Potential Default” means a condition or event which has occurred and which, after notice or lapse of time, or both, would constitute an Event of Default if that condition or event were not cured within any applicable cure period.

“Prior Lender” has the meaning assigned to such term in Section 14.26(a).

“Prior Loan” has the meaning assigned to such term in Section 14.26(a).

“Prior Loan Agreement” has the meaning assigned to such term in Section 14.26(a).

“Project” means, collectively, (a) the Real Property, (b) the Improvements, together with all fixtures and equipment required for the operation of the Improvements, (c) all Personal Property related to the foregoing and (d) all other items described in the granting clauses of the Mortgages.

“Project Costs” means, collectively, the Project Loan Costs, the Hard Costs and the Soft Costs.

“Project Documents” means any Interest Rate Protection Agreement, and any other material agreement relating to the ownership, financing, development or operation of the Improvements to which Borrower is a party or beneficiary, whether now existing or hereafter arising, including, without limitation the documents set forth on Exhibit J attached hereto; provided, however, that Project Documents shall not include the Loan Documents, the construction documents or any subcontract or trade contract relating to the construction of the Improvements, the Permitted Encumbrances or Borrower’s organizational documents.

“Project Loan” has the meaning assigned to such term in Section 2.1(1)(b).

“Project Loan Budget” shall mean the portion of the Budget designated as the Project Loan Budget, as the same be modified, supplemented and/or amended from time to time from time to time in accordance with the provisions of this Agreement.

“Project Loan Commitment” means the obligation of Lender to make Project Loans in a principal amount up to but not exceeding the Total Project Loan Commitment, based on the Budget.

“Project Loan Costs” shall mean any costs relating to the construction of the Project, which do not constitute a Cost of Improvement.

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“Project Loan Mortgage” means the Project Loan Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing in the amount of the Total Project Loan Commitment and executed, dated and delivered by Borrower to Lender on the Closing Date, securing the Project Loan Note, as such mortgage may be modified, supplemented, amended and in effect from time to time.

“Project Loan Note” shall mean the Project Loan Promissory Note Secured by Mortgage given to Lender in principal amount equal to the Total Project Loan Commitment to be executed, dated and delivered by Borrower to Lender as of the Closing Date, secured by the Project Loan Mortgage, as such note may be modified, supplemented, amended and/or in effect from time to time.

“Property Management Agreement” means a property management agreement entered into by Borrower and Property Manager in form attached hereto as Exhibit H (it being understood that any deviations from the attached form shall be subject to the approval of Lender) or any replacement property management agreement entered into with a replacement Property Manager in accordance with the Loan Documents in form and substance reasonably satisfactory to Lender.

“Property Manager” means Onyx Management Group, LLC, a New Jersey limited liability company or another property manager for the Project reasonably acceptable to Lender.

“Punch List Items” has the meaning assigned to term in Section 1.1 of the Building Loan Agreement.

“Purchase Agreement” means that certain Purchase and Sale Agreement to Assign Eighty Percent (80%) of Ground Lease, dated as of October 28, 2016, between Seller and Borrower.

“Rating Agencies” means Fitch, Inc., Moody’s Investors Service, Inc. or S&P or any successor thereto, and any other nationally recognized statistical rating organization to the extent that any of the foregoing have been or will be engaged by Lender or its designees in connection with or in anticipation of a Secondary Market Transaction (each, individually, a “Rating Agency”).

“Rating Agency Confirmation” means a confirmation by each of the applicable Rating Agencies which confirms that the taking of the action referenced therein will not result in any qualification, withdrawal or downgrading of any existing ratings of securities created in the applicable Secondary Market Transaction.

“Real Property” means that certain parcel of real property located in the City of New York, County of New York, State of New York and more particularly described in Exhibit A attached hereto and all appurtenances thereto.

“Release” means with respect to Hazardous Materials, but is not limited to, any presence, release, deposit, discharge, emission, leaking, leaching, spilling, seeping,

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migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials.

“Remediation” means, but is not limited to, any activity to (a) clean up, detoxify, decontaminate, disinfect, contain, treat, remove, respond to, correct, dispose of, transport, or otherwise remediate, prevent, cure or mitigate any Release of any Hazardous Materials; any action to comply with any Hazardous Materials Laws or with any permits issued pursuant thereto; or (b) inspect, investigate, study, monitor, assess, audit, sample, test, or evaluate any actual, potential or threatened Release of Hazardous Materials.

“Rents” means, with respect to the Project, all rents (whether denoted as advance rent, minimum rent, percentage rent, additional rent or otherwise), receipts, issues, income, royalties, profits, revenues, proceeds, bonuses, deposits (whether denoted as security deposits or otherwise), lease termination fees or payments, rejection damages, buy-out fees and any other fees made or to be made in lieu of rent, any award made hereafter to Borrower in any court proceeding involving any tenant, lessee, licensee or concessionaire under any of the Leases in any bankruptcy, insolvency or reorganization proceedings in any state or federal court, and all other payments, rights and benefits of whatever nature from time to time due under the Leases.

“REOC” has the meaning given to such term in Section 6.22 of this Agreement.

“Request” has the meaning given to such term in Exhibit E to this Agreement.

“Restoration” has the meaning given to such term in Section 5.8 of this Agreement.

“Restoration Proceeds” has the meaning given to such term in Section 5.7 of this Agreement.

“Restoration Proceeds Threshold” has the meaning given to such term in Section 5.7 of this Agreement.

“Retainage” has the meaning assigned to such term in Section 1.1 of the Building Loan Agreement.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc.

“Satisfactory Search Results” means the results of Lender’s customary “know your client”, credit history check, litigation, lien, bankruptcy, judgment and other similar searches with respect to the applicable transferee and its applicable affiliates, in each case yielding results showing that the proposed Transferee is creditworthy and does not have a history of litigation against lenders and is otherwise not a party that Lender has previously been involved in a dispute with. Borrower shall pay all of Lender’s costs, fees and expenses in connection with the foregoing.

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“Second Extension Notice” has the meaning given to such term in Section 2.9(c)(i) of this Agreement.

“Second Extension Term” has the meaning given to such term in Section 2.9(c) of this Agreement.

“Secondary Market Transaction” and “Secondary Market Transactions” have the meanings given to such terms in Section 13.1 of this Agreement.

“Security Deposit Account” has the meaning given to such term in Section 10.1 of this Agreement.

“Security Documents” means collectively, the Mortgages, the Assignment of Interest Rate Protection Agreement, the Financing Statements and any other Uniform Commercial Code financing statements required by any such agreement to be filed with respect to the applicable security interests.

“Seller” means Onyx 31^st Street, LLC, a Delaware limited liability company.

“Soft Costs” means interest payable on the principal amount of the Building Loans and all other costs in the Building Loan Budget which constitute a Cost of the Improvement, including Tenant Allowance Payments but excluding Hard Costs, which relate to the construction of the Improvements and the operation of the Project during the term of this Agreement.

“SPE” has the meaning given to such term in Section 8.16 of this Agreement.

“Stabilized Tenants” means each tenant under a Lease at the Project that (a) is in occupancy of the applicable space which has been demised to such tenant pursuant to such Lease and (b) has a term of at least twelve (12) months remaining under its respective Lease (or, if less than twelve (12) months are remaining, such tenant has exercised its right to renew such Lease for a period of at least twelve (12) months).

“Subdivision Map” has the meaning given to such term in Section 8.11 of this Agreement.

“Taking” has the meaning given to such term in Section 5.7 of this Agreement.

“Tax and Insurance Monthly Installment” has the meaning given to such term in Section 12.2 of this Agreement.

“Tax and Insurance Reserve Account” has the meaning given to such term in Section 12.1(a) of this Agreement.

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“Tenant Allowance Payment” means a tenant improvement allowance payment owing to a tenant under the terms of Leases.

“Tenant Improvement Costs”means Tenant Allowance Payments, and hard and soft costs forwork, labor and materials required for Borrower to complete tenant improvements on the Project pursuant to itsobligations under Leases, including, without limitation, those items identified as “Tenant Improvement Costs” on theApproved Budget.

“Tenant Redirect Letters” means, collectively, letters, in the form attached as Exhibit A to the Cash Management Agreement, and otherwise in a form and substance satisfactory to Lender, addressed to each tenant of the Project (and any new tenants with whom Borrower enters into leases after the date hereof for space at the Project in accordance with the Loan Documents) executed by Borrower, which letters shall require each tenant to deliver its respective rent (and all other sums owed by such tenant to Borrower under the applicable Lease) in accordance with the instructions contained in such letters to the Collection Account established and controlled by Lender to be held by Lender in accordance with Section 3.3 of this Agreement.

“Title Company” means, collectively, First American Title Insurance Company and Stewart Title Company.

“Title Policies” means the most current version of ALTA extended coverage lender’s title policies (with no creditors’ rights exception) issued by Title Company insuring the priority Lien of the Mortgages in the full maximum possible amount of the Loans subject only to such exceptions approved by Lender and including such endorsements as are required by Lender.

“Total Acquisition Loan Commitment” has the meaning assigned to such term in the Recitals.

“Total Building Loan Commitment” has the meaning assigned to such term in the Recitals.

“Total Project Loan Commitment” has the meaning assigned to such term in the Recitals.

“Transfer” means the sale, transfer, hypothecation, encumbrance, mortgage, conveyance, lease, alienation, assignment, disposition, divestment, or leasing with option to purchase, or assignment of the Project, or any portion thereof or interest therein (whether direct or indirect, legal or equitable, including the issuance, sale, assignment, alienation, conveyance, divestment, transfer, disposition, hypothecation, mortgage or encumbrance of any ownership interest in Borrower or in any entity having an ownership interest in Borrower, whether direct or indirect) (or entering into any agreement or contract to do any of the foregoing that is not conditioned on compliance with the terms of the Loan Documents), or undertaking, suffering or causing any of the foregoing to occur voluntarily, involuntarily or by operation of law.

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“ZLDA” means that certain Zoning Lot Development Agreement, dated July 3, 2015 and recorded in the Official Records on July 27, 2015 as CRFN 2015000257586.

1.2Exhibits. ExhibitsA, B, C, D, E, G, J and K, all as attached to this Agreement, are hereby incorporated into this Agreement.

1.3Principals of Construction. All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise. Unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.

ARTICLE II

LOAN

2.1The Commitments, Loans and Notes.

(1)    Loans.

(a)    Lender agrees, on the terms and conditions of this Agreement, to make a single loan (the “Acquisition Loan”) on a non-revolving, basis to Borrower in Dollars, on the Closing Date, in an amount equal to the Acquisition Loan Commitment. The Acquisition Loan shall be advanced for the purpose of financing a portion of Borrower’s cost of acquiring its interest in the Project in accordance with the Disbursement Budget.

(b)    Lender agrees, on the terms and conditions of this Agreement, to make loans (each such loan being a “Project Loan” and collectively, the “Project Loans”) on a non-revolving basis to Borrower in Dollars from time to time in amounts equal to the aggregate amount of Project Loans to be made at such time; provided, however, in no event shall the aggregate principal amount advanced by Lender in respect of Project Loans at any one time outstanding exceed Lender’s Project Loan Commitment. The Project Loans shall be advanced for the payment of Project Loan Costs in accordance with the Project Loan Budget and Disbursement Budget.

(c)    Lender agrees, on the terms and conditions of this Agreement and the Building Loan Agreement, to make a loan (the “Building Loan”) on a non-revolving, basis to Borrower in Dollars from time to time in amounts equal to the amount of the Building Loan to be made at such time; provided, however, in no event shall the aggregate principal amount advanced by Lender in respect of the Building Loan at any one time outstanding exceed the Building Loan Commitment. The Building Loan shall be advanced for the payment of Hard Costs and Soft Costs in accordance with the Building Loan Budget and Disbursement Budget.

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(d)    Notwithstanding anything to the contrary in this Agreement, in no event shall the aggregate principal amount of all Loans advanced by Lender at any one time outstanding exceed Lender’s Commitment. Lender’s Commitment shall be subject to reduction if Borrower proposes and Lender approves a revised Budget in accordance with Sections 7.1(e) and 8.17.

(2)    Changes of Commitments.

(a)    The respective Commitments shall reduce pro rata automatically by reason of any prepayment of the Loans applicable thereto in the amount of any such prepayment.

(b)    The Commitments, once terminated or reduced, may not be reinstated.

(3)    Notes.

(a)    Project Loan Note. The Project Loans to be made by Lender shall be evidenced by a single Project Loan Note of Borrower, payable to Lender in a principal amount equal to the amount of the Project Loan Commitment as originally in effect and otherwise duly completed.

(b)    Building Loan Note. The Building Loans to be made by Lender shall be evidenced by a single Building Loan Note of Borrower, payable to Lender in a principal amount equal to the amount of the Building Loan Commitment as originally in effect and otherwise duly completed.

(c)    Acquisition Loan Note. The Acquisition Loan made by Lender shall be evidenced by a single Acquisition Loan Note of Borrower, payable to Lender in a principal amount equal to the amount of the Acquisition Loan Commitment as originally in effect and otherwise duly completed.

(d)    Loss, Theft, Destruction or Mutilation of Notes. In the event of the loss, theft or destruction of any Note, upon Borrower’s receipt of a reasonably satisfactory indemnification agreement executed in favor of Borrower by the holder of such Note, or in the event of the mutilation of any Note, upon the surrender of such mutilated Note by the holder thereof to Borrower, Borrower shall execute and deliver to such holder a new replacement Note in lieu of the lost, stolen, destroyed or mutilated Note. In the event such lost, stolen or mutilated Note is subsequently located by Lender, Lender shall promptly mark it as “SUPERSEDED” and shall promptly return it to Borrower.

2.2Intentionally Omitted.

2.3Loan Fee; Exit Fee; Minimum Lender Profit.

(a) Loan Fee. Borrower shall pay to Lender, at Loan closing, a loan fee in the amount of one percent (1%) of the Lender’s Commitment (the “Loan Fee”). Borrower hereby authorizes Lender to disburse on the Effective Date a portion of the Loan in such amount

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directly to Lender in payment of the Loan Fee. The Loan Fee shall be deemed fully earned at closing even if Lender’s Commitment is reduced in accordance with Section 2.3(c).

(b) Exit Fee. On the Maturity Date, the earlier acceleration of the Loans or any repayment of the Loans, Borrower shall be obligated to pay Lender an additional fee (the “Exit Fee”) equal to one half of a percent (0.5%) of the Lender’s Commitment upon repayment. The Exit Fee shall be deemed earned when due pursuant to this Section 2.3(b), and shall not be subject to reduction or be refundable under any circumstances, including in the event Lender’s Commitment is reduced in accordance with Section 2.3(c) (if that occurs, the Exit Fee shall continue to be calculated based on the amount of Lender’s Commitment as of the date hereof). For any partial repayments, the applicable Exit Fee shall be paid with each partial principal repayment.

(c) Minimum Lender Profit. Prior to the release of the Mortgages or any other Collateral held by Lender to secure this Agreement or any other Loan Document, the sum of all interest (excluding penalty or default interest) received by Lender in connection with the Loan must not be less than $4,100,000 (the “Minimum Lender Profit”). Subject to the payment of any other amounts due hereunder (including, without limitation, the Exit Fee), upon payment in full of the Loan, Borrower shall be required to pay to Lender the amount by which the Minimum Lender Profit exceeds the amount of interest otherwise paid to Lender in connection with the Loans.

2.4Intentionally Omitted.

2.5Loan Documents; Guaranty Documents. Borrower shall deliver, or cause to be delivered to Lender concurrently with this Agreement, each of the documents, properly executed and in recordable form, as applicable, described in Exhibit B hereto as the “Loan Documents”, together with the other documents described in Exhibit B hereto which are listed as not Loan Documents (collectively, the “Guaranty Documents”).

2.6Effective Date. The dates of this Agreement and the other Loan Documents are for reference purposes only. The effective date of delivery and transfer to Lender of the security under the Loan Documents and of Borrower and Lender’s obligations under the Loan Documents (the “Effective Date”) shall be the date on which the Mortgages are recorded in the Official Records or the date upon which the Loan is deemed “closed” by Lender and Borrower; provided, however, that interest shall commence accruing under the Notes the date that the Loan funds are wired into escrow by Lender.

2.7Interest on Loan. Interest shall accrue on the Loan at the rate or rates provided for in the Notes, and shall be paid by Borrower in the amounts and at the times provided for in the Notes, all of the terms and provisions of which are fully incorporated into this Agreement. Lender shall provide Borrower with a monthly interest statement indicating the amount of interest payable for such month. The non-satisfaction of any condition to disbursement contained in Article III of this Agreement shall not release Borrower from any of Borrower’s obligations under this Agreement or the other Loan Documents, including the obligation to pay interest and other charges and payment under or with respect to the Loans when due from other funding sources of Borrower.

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2.8Loan Payments. Payments on the outstanding amount of the Loans shall be paid by Borrower in accordance with the terms of the Notes and this Loan Agreement.

2.9Maturity Date.

(a)Unless extended pursuant to Borrower’s timely exercise of an extension option set forth in clauses (b) and/or (c) below, the Maturity Date of the Loan shall be the date set forth in the definition of “Maturity Date” in Section 1.1 above, at which time (unless earlier accelerated upon an Event of Default) all sums due and owing under this Agreement and the other Loan Documents shall be repaid in full. All payments due to Lender under this Agreement, whether upon the Maturity Date or otherwise, shall be paid in immediately available funds.

(b)Notwithstanding the foregoing, Borrower shall have the right to extend the Maturity Date from December 1, 2019, to December 1, 2020 (such period, the “FirstExtension Term”), provided that:

(i)Borrower shall have given Lender its written notice of such extension (the “First Extension Notice”) not less than thirty (30) days nor more than one hundred twenty (120) days prior to the original Maturity Date (which First Extension Notice may be revoked within ten (10) Business Days after delivery thereof to Lender);

(ii)prior to or simultaneously with the delivery of the First Extension Notice, Borrower shall have paid to Lender the Extension Fee, which shall be fully earned and non-refundable upon such payment;

(iii)no Event of Default shall exist as of the date the First Extension Notice is delivered and as of the commencement of the First Extension Term;

(iv)all of the representations and warranties made by Borrower herein and in the other Loan Documents shall be true and correct as of the commencement of the First Extension Term except to the extent such representation or warranty is no longer true merely due to the passage of time, and Borrower shall have certified to same in writing to Lender;

(v)if Lender elects, Borrower shall have delivered or caused to be delivered to Lender an updated “as is” Appraisal (at Borrower’s expense) evidencing that the Loan-to-Value Ratio does not exceed 58.8%, it being understood that Borrower may prepay the Loan in accordance with the Loan Documents in order to cause compliance with the condition set forth in this clause (v);

(vi)the Debt Service Coverage Ratio, as determined as of the most recently completed calendar month shall be not less than 1.35:1.00, it being understood that Borrower may prepay the Loan in accordance with the Loan Documents in order to cause compliance with the condition set forth in this clause (vi);

(vii)Borrower shall have substantially completed the Construction Work in accordance with the Plans and Specifications;

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(viii)[reserved];

(ix)Borrower shall have extended the Interest Rate Protection Agreement to a date that is not earlier than the last day of the First Extension Term, or entered into a new Interest Rate Protection Agreement, upon the same terms and conditions of the existing Interest Rate Protection Agreement but with an expiration date of not earlier than the last day of the First Extension Term, and executed and delivered to Lender an Assignment of Interest Rate Protection Agreement with respect thereto;

(x)Borrower shall have reimbursed Lender for all reasonable costs and expenses incurred by Lender in connection with extending the term of the Loans; and

(xi)Borrower shall have delivered to Lender all items reasonably required by Lender in connection with Lender’s evaluation of Borrower’s request to extend the Maturity Date, all of which must be reasonably acceptable in form and substance to Lender, including, without limitation, current rent rolls, operating statements and financial statements.

(c)Notwithstanding the foregoing, Borrower shall have the right to extend the Maturity Date from December 1, 2020, to December 1, 2021 (such period, the “Second Extension Term”), provided that:

(i)Borrower shall have given Lender its written notice of such extension (the “Second Extension Notice”) not less than thirty (30) days nor more than one hundred twenty (120) days prior to the original Maturity Date (which Second Extension Notice may be revoked within ten (10) Business Days after delivery thereof to Lender);

(ii)prior to or simultaneously with the delivery of the Second Extension Notice, Borrower shall have paid to Lender the Extension Fee, which shall be fully earned and non-refundable upon such payment;

(iii)no Event of Default shall exist as of the date the Second Extension Notice is delivered and as of the commencement of the Second Extension Term;

(iv)all of the representations and warranties made by Borrower herein and in the other Loan Documents shall be true and correct as of the commencement of the Second Extension Term except to the extent such representation or warranty is no longer true merely due to the passage of time, and Borrower shall have certified to same in writing to Lender;

(v)if Lender elects, Borrower shall have delivered or caused to be delivered to Lender an updated “as is” Appraisal (at Borrower’s expense) evidencing that the Loan-to-Value Ratio does not exceed 58.8%%, it being understood that Borrower may prepay the Loan in accordance with the Loan Documents in order to cause compliance with the condition set forth in this clause (v);

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(vi)the Debt Service Coverage Ratio, as determined as of the most recently completed calendar month shall be not less than 1.35:1.0%, it being understood that Borrower may prepay the Loan in accordance with the Loan Documents in order to cause compliance with the condition set forth in this clause (vi);

(vii)[reserved];

(viii)Borrower shall have extended the Interest Rate Protection Agreement to a date that is not earlier than the last day of the Second Extension Term, or entered into a new Interest Rate Protection Agreement, upon the same terms and conditions of the existing Interest Rate Protection Agreement but with an expiration date of not earlier than the last day of the Second Extension Term, and executed and delivered to Lender an Assignment of Interest Rate Protection Agreement with respect thereto;

(ix)Borrower shall have reimbursed Lender for all reasonable costs and expenses incurred by Lender in connection with extending the term of the Loans; and

(x)Borrower shall have delivered to Lender all items reasonably required by Lender in connection with Lender’s evaluation of Borrower’s request to extend the Maturity Date, all of which must be reasonably acceptable in form and substance to Lender, including, without limitation, current rent rolls, operating statements and financial statements.

During each Extension Term (if any), the Monthly Amortization Payments provided for in the Notes shall become effective and upon the commencement of the First Extension Term Lender shall have no further obligation to make any additional advance of the Loan and any unfunded Commitments shall expire.

2.10Credit for Payments. Any payment made upon the outstanding principal balance of the Loan, or the accrued interest thereon, shall be credited as of the Business Day received, provided that such payment is made by Borrower no later than 12:00 p.m. (Pacific Standard Time or Pacific Daylight Time, as applicable) and constitutes immediately available funds. Any payment made after such time or which does not constitute immediately available funds shall be credited upon such funds having become unconditionally and immediately available to Lender.

2.11Full Repayment and Reconveyance. Upon receipt of all amounts owing and outstanding under the Loan Documents, Lender shall issue a full reconveyance of the Project from the Lien of the Mortgages (including any assignment of the Mortgage requested by Borrower at Borrower’s sole cost and expense); provided, however, that all of the following conditions shall be satisfied at the time of, and with respect to, such reconveyance: (a) Lender shall have received all escrow, closing and recording costs, the costs of preparing and delivering such reconveyance and any sums then due and payable under the Loan Documents; (b) Lender shall have received the entire Exit Fee and Minimum Lender Profit in accordance with Section 2.3 hereof and/or any Breakage Prepayment Premium payable hereunder and/or under the Notes; and (c) Lender shall have received a written release reasonably satisfactory to Lender of any set aside letter, letter of credit or other form of undertaking which Lender has issued to

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any surety, Governmental Authority or other Person in connection with the Loan and/or the Project. Lender’s obligation to make further disbursements under the Loan shall terminate as to any portion of the Loan undisbursed as of the date of issuance of such full reconveyance, and any commitment of Lender to lend any undisbursed portion of the Loan shall be cancelled.

2.12Authorization. Borrower shall act under this Agreement and the other Loan Documents only through such authorized representatives as Borrower shall designate to Lender in writing from time to time. Borrower hereby designates John Saraceno and Brian Ragsdale, collectively, as Borrower’s authorized representative for purposes of this Agreement and the other Loan Documents, and such Person shall continue as Borrower’s authorized representatives until such time as Borrower shall duly authorize other or additional Persons so to act on behalf of Borrower (the “Authorized Officer”). Lender shall be entitled to act on the instructions of any Person identifying himself or herself as one of the Authorized Officer, and Borrower shall be bound thereby in the same manner as if any such Person were actually so authorized. Borrower shall indemnify, defend and hold Lender harmless from and against any and all Liabilities and Costs arising out of or in any way connected with Lender’s acceptance of or acting upon any instructions or directions from the Authorized Officer.

2.13Recourse to Borrower. Subject to the provisions in Section 14.27 of this Agreement, the Loan shall be full recourse to Borrower. Further, Lender shall have the right to (a) proceed against Borrower or any applicable Guarantor under the Environmental Indemnity Agreement, or to proceed against any applicable Guarantor under the Carveout Guaranty, the Operating Guaranty, the Future Funding Guaranty or the Completion Guaranty; (b) name Borrower or any Guarantor in any foreclosure or similar legal action to the extent necessary to enforce Lender’s rights under the Loan Documents (it being acknowledged, however, that any such legal action shall be subject to the limitations on collection set forth in this Section); and/or (c) obtain injunctive relief against Borrower, any Guarantor, any Affiliate or other Person, or maintain any suit or action in connection with the preservation, enforcement or foreclosure of any Lien now or hereafter securing any Indebtedness or obligations of Borrower under this Agreement or the other Loan Documents.

2.14Prepayments. The Loan may not be prepaid in whole or in part at any time prior to the Lockout Date. For the period commencing from and after the Lockout Date through the Maturity Date of the Loan, Borrower may prepay the Loan in whole or in part, on a regularly scheduled monthly Payment Date (as defined in the Note) (or, subject to the terms of Section 1.3(b) of the Note, on a day which is not a Payment Date) upon not less than thirty (30) days’ (but no more than one hundred twenty (120) days’) prior written notice to Lender (which prepayment notice may be revoked within five (5) Business Days after delivery thereof to Lender) without the payment of any prepayment premium, by Borrower’s payment to Lender at the time of such prepayment of all outstanding principal and accrued but unpaid interest due under the Loan and all other amounts due hereunder and under the Note, this Agreement and the other Loan Documents (including, without limitation, the Exit Fee and any Breakage Prepayment Premium, if applicable). In the event that the Loan is evidenced by more than one Note, all prepayments of the Loan shall be applied to the Notes pro rata.

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ARTICLE IIICONDITIONS TO INITIAL DISBURSEMENT AND CASH MANAGEMENT

3.1Conditions to Initial Disbursement. Lender’s obligation to disburse the Total Acquisition Loan Commitment and a portion of the Total Project Loan Commitment on the Closing Date is subject to the satisfaction of each of the following conditions precedent on or before the Closing Date:

(a)    Borrower Loan Documents. Borrower (and any other party thereto) shall have executed, acknowledged (if appropriate) and delivered to Lender each of the following, in form and substance acceptable to Lender:

(i)    this Agreement;

(ii)    the Building Loan Agreement;

(iii)    the Notes;

(iv)    the Mortgages;

(v)    the Assignment of Agreements;

(vi)    the Assignment of Interest Rate Protection Agreement;

(vii)    the Cash Management Agreement;    

(viii)    the Financing Statements with respect to the Liens on the Personal Property granted under the Mortgages and the other Loan Documents; and

(ix)    each of the other Loan Documents and all other documents to be executed and/or delivered by or on behalf of Borrower pursuant to this Agreement or as Lender shall otherwise reasonably require.

(b)    Guaranty Loan Documents. Borrower (as applicable) and the applicable Guarantor, shall have executed and delivered to Lender each of the following, in form and substance acceptable to Lender:

(i) the Completion Guaranty;

(ii) the Operating Guaranty;

(iii) the Future Funding Guaranty;

(iv) the Carveout Guaranty;

(v) the Environmental Indemnity Agreement; and

(iv)    all other documents to be executed and/or delivered by or on behalf of Guarantor pursuant to this Agreement or as Lender shall otherwise reasonably require.

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(c)    Other Documents. Borrower (and/or any other party thereto) shall have executed, acknowledged (if appropriate) and delivered to Lender all other documents to be executed and/or delivered in connection with the Loan or as Lender shall otherwise reasonably require.

(d)    Property Documents. Lender shall have received the following documents with respect to the Project, in form and substance acceptable to Lender:

(i)an Appraisal of the Project, showing an “as-is” aggregate value for the Project of not less than $48,000,000, and an “as-stabilized” aggregate value for the Project of not less than $80,000,000, and otherwise acceptable to Lender in its sole discretion;

(ii)    the Title Policies in the amount of the Loans, insuring Lender of the validity and priority of the Liens of the Mortgages upon Borrower’s interest in the Project, subject only to Permitted Encumbrances, with such endorsements and otherwise in such form and substance as shall be acceptable to Lender and Lender’s counsel, and that such Title Policies shall at all times expressly insure against all mechanics’ liens;

(iii)    such environmental assessments, studies, reports and investigations on the Project, and/or the soils or groundwaters thereof, in each case addressed to Lender (or if not addressed to Lender, Borrower shall have delivered a reliance letter satisfactory to Lender) and dated no earlier than six (6) months prior to the Closing Date, prepared by environmental consultants reasonably satisfactory to Lender (provided that WCD Group, LLC is deemed to be satisfactory to Lender) and in form and substance acceptable to Lender and Lender’s counsel in the sole but reasonable discretion of such Persons;

(iv)    a current ALTA survey of the Project certified in favor of Lender and otherwise in a form reasonably acceptable to Lender and Lender’s counsel;

(v)    a construction feasibility study and cost review dated no earlier than six (6) months prior to the Closing Date, in form and substance acceptable to Lender;

(vi)    a Consent and Agreement from the Architect, attaching a copy of the Architect’s Agreement;

(vii)    a Consent and Agreement from the Construction Manager, attaching a copy of the Construction Management Agreement;

(viii)    an estoppel certificate from the ground lessor under the Ground Lease in favor of Lender, in form and substance acceptable to Lender; and

(ix)    such other documents with respect to the Project as are required pursuant to this Agreement or as Lender shall otherwise reasonably require.

(e)    Organizational Documents. Lender shall have received such corporate, partnership and limited liability company documents with respect to Borrower and its constituent entities and Guarantor as Lender shall reasonably require, including evidence of authorization and incumbency of all Persons executing the Loan Documents on behalf of Borrower;

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(f)    Performance. Borrower shall have performed, in all material respects, all agreements and covenants to be performed by Borrower under this Agreement or the other Loan Documents on or before the Closing Date;

(g)    Material Adverse Changes. No change in Borrower, any Guarantor, the Project or any other Collateral, as determined by Lender in its sole but reasonable discretion, shall have occurred which could have a Material Adverse Effect on the value of the Project or the other Collateral or Lender’s right or ability to receive payment in full of all amounts payable by Borrower to Lender under this Agreement or the other Loan Documents;

(h)    Litigation, Other Proceedings. There shall not have been instituted or threatened in writing any litigation or proceeding in any court or by or before any Governmental Authority affecting or threatening to affect Borrower, any Guarantor, the Project, or any other Collateral, as determined by Lender in its sole but reasonable discretion, which is reasonably expected to have a Material Adverse Effect on the value of the Project or any other Collateral or Lender’s right or ability to receive payment in full of all amounts payable by Borrower to Lender under this Agreement or the other Loan Documents;

(i)    Perfection of Liens. The Mortgages, the Financing Statements and any other recordable Loan Documents shall have been recorded or filed, as applicable, and Lender shall have a valid, perfected superior Lien on Borrower’s interest in the Project and on all of the Collateral subject to the Loan Documents;

(j)    No Event of Default. On the Closing Date, no Event of Default shall exist (including, without limitation, no Lien shall exist against the Project (or any portion thereof) in violation of the Loan Documents subject to Borrower’s right to contest the same pursuant to the Loan Documents);

(k)    Loan Fees. On the Closing Date, Lender shall have received the Loan Fee and any other fees or other amounts then due to Lender under this Agreement and the other Loan Documents, and all expenses of Lender incurred prior to the Closing Date (including without limitation all reasonable attorneys’ and appraisers’ fees, environmental review costs, cost engineering expenses, title insurance premiums and endorsement charges), shall have been paid by Borrower;

(l)    Consents and Approvals. Any licenses, permits, consents and approvals of Governmental Authorities, and all corporate, partnership and limited liability company action necessary to enable Borrower to enter into the financing transactions contemplated by this Agreement shall have been obtained and/or taken by Borrower (including, without limitation, any required consents of any Members);

(m)    Insurance. Lender shall have received evidence that Borrower has, with respect to the Project all insurance policies and associated coverage amounts required under Article V of this Agreement, in each case reasonably satisfactory to Lender and issued by insurance companies reasonably acceptable to Lender, and loss payable endorsements in form and substance reasonably satisfactory to Lender naming Lender as loss payee (as its interests

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may appear) shall have been delivered to Lender, together with such certificates of insurance and binders as Lender shall reasonably require;

(n)    Representations and Warranties. All representations and warranties of Borrower contained in this Agreement or the other Loan Documents shall be true and correct in all material respects;

(o)    Opinions of Counsel. Lender shall have received opinions of counsel for Borrower dated as of the Closing Date as to such matters as Lender shall reasonably require, in form and substance reasonably satisfactory to Lender and Lender’s counsel;

(p)    Intentionally Omitted.

(q)    Due Diligence. Lender shall have completed its review of the Project and the other Collateral, including, without limitation, any contracts and agreements relating to the Project, and Lender shall have completed such other real estate and legal due diligence investigations as Lender deems necessary, and such review and investigations shall provide Lender with resulting information which, in Lender’s sole but reasonable discretion, is satisfactory to permit Lender to enter into this Agreement and to make the Loan;

(r)    Intentionally Omitted.

(s)    Budget and Sources and Uses. Lender shall have reviewed and approved the Budget and sources and uses schedule;

(t)    Financial Statements. Lender shall have received such financial statements and other financial information and background checks on Borrower, Guarantor and Members as Lender shall reasonably require, and such financial statements and other financial information shall be in form and substance reasonably acceptable to Lender;

(u)    Initial Equity. Borrower shall have caused the entire Initial Equity to be applied to the payment by Borrower of the purchase price for the acquisition of a ground leasehold interest in the Land and certain costs and expenses related thereto;

(v)    Interest Rate Protection Agreement. Borrower shall have purchased an Interest Rate Protection Agreement or other hedging instrument acceptable to Lender in its sole but reasonable discretion, which Interest Rate Protection Agreement shall have been assigned to Lender in writing pursuant to an Assignment of Interest Rate Cap, which shall name Lender as payee thereunder and otherwise be in a form reasonably acceptable to Lender;

(w)    Patriot Act and Terrorism Requirements. Lender shall have received evidence of Borrower’s compliance with the Patriot Act and all applicable requirements of Governmental Authorities having jurisdiction of Borrower and the Project, including those relating to money laundering and terrorism;

(x)    Affiliate Fees. Borrower shall have disclosed to Lender, and Lender shall have approved (provided that the (1) construction management fee payable to Onyx Management Group LLC in an amount of 3% of total Hard Costs and (2) property management fee payable to Onyx Management Group LLC pursuant to the Property Management Agreement

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in an amount not to exceed the greater of (A) $8,500 per month or (B) 3% of gross receipts, shall each be deemed approved for purposes of this clause (x)), all fees and commissions (collectively, “Affiliate Fees”) which have been or will be reimbursed or paid to or paid on behalf of Borrower, any Guarantor or any Affiliate thereof in connection with the acquisition or financing of the Project, including, without limitation, amounts paid by the seller or any affiliate of the seller. All Affiliate Fees shall be deducted from the calculation of the capitalization costs of the financing transaction contemplated by this Agreement for determining the maximum principal amount of the Loan and Borrower’s required equity contribution; provided that Affiliate Fees at third-party market rates shall not be deducted. Without limitation on the foregoing, all Affiliate Fees shall be subordinate to the Loan and shall be terminable by Lender in the event of the occurrence of an Event of Default; and

(y)    Other Documents. Lender shall have received and approved such other documents, materials or information as Lender or its counsel shall reasonably require.

3.2Loan Disbursements. Subject to the conditions of this Agreement, including, without limitation, the conditions precedent contained in this Article III and in Article IV, the proceeds of the Loan shall be disbursed in accordance with the terms and conditions of the Disbursement Budget and the Disbursement Plan. All disbursements shall be held by Borrower in trust and applied by Borrower solely for the purpose for which the funds have been disbursed. Lender has no obligation to monitor or determine Borrower’s use or application of the disbursements. Notwithstanding anything to the contrary contained herein, Lender shall have no obligation to make any disbursements of Loan proceeds unless and until Borrower shall have caused the Initial Equity to be applied in payment of the costs and expenses set forth in Exhibit D attached hereto.

3.3Cash Management.

(a)A Collection Account (as defined below) shall be established not later than fifteen (15) days following Construction Completion pursuant to a Collection Account Agreement reasonably acceptable to Lender and Borrower, and thereafter all Gross Operating Income shall be deposited in the Collection Account pursuant to the terms hereof, the Collection Account Agreement and the Cash Management Agreement. Borrower hereby agrees that Borrower shall execute the Tenant Redirect Letters addressed to each existing (if any) and future tenant. Lender agrees to terminate such Tenant Redirect Letters on written request by Borrower after repayment of the Loan and all obligations secured by the Mortgages. In connection therewith, the “Collection Account” shall be a non-interest bearing demand deposit account in the name of Borrower with a bank approved by Lender in writing (the “Clearing Bank”). Borrower shall cause all Gross Operating Income to be deposited into the Collection Account within two (2) Business Days following Borrower’s receipt thereof.

(b)After the Collection Account has been established, funds deposited in the Collection Account shall be swept by the Clearing Bank on a daily basis into the Borrower’s operating account at Clearing Bank, unless an Event of Default shall be continuing, in which event such funds shall be swept on a daily basis into a non-interest bearing Eligible Account (the “Cash Management Account”) designated by (and controlled by) Lender at a bank selected by

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Lender (the “Cash Management Bank”). Such funds in the Cash Management Account may be commingled with other funds of Lender (or its servicer, if applicable). Funds in the Cash Management Account shall be subsequently disbursed by Lender to fund the Tax and Insurance Reserve Accounts and to pay Debt Service on the Loan. During the continuance of an Event of Default (or Events of Default), no funds in the Cash Management Account shall be distributed to Borrower and all funds in the Cash Management Account shall be applied and utilized in Lender’s sole and absolute discretion. In the event the Event of Default is cured and no other Event of Default has occurred and is continuing, Lender shall give notice to the Clearing Bank that the sweeping of funds into the Cash Management Account shall cease.

(c)Funds held in the Leasing and Operations Reserve Account pursuant to Section 8.19 hereof, shall be disbursed by Lender for payment of any leasing costs and operating expenses incurred in accordance with the terms and conditions of the Budget pursuant to a written request for payment submitted by Borrower to Lender specifying the applicable leasing costs and/or operating expenses in a form reasonably acceptable to Lender and accompanied by evidence of such leasing costs and/or operating expenses Expenditures as reasonably required by Lender.

(d)If and to the extent that Lender shall determine that (x) Borrower shall have failed to cause any Gross Operating Income or funds in the Collection Account to be applied in the manner required hereunder, or (y) Borrower did not use such funds as required hereunder, then within two (2) Business Days following written notice thereof from Lender to Borrower, Borrower shall cause such misapplied Gross Operating Income or funds in the Collection Account to be restored into the Collection Account and/or applied in the manner required under this Agreement, as directed by Lender. Notwithstanding anything to the contrary contained in this section, Borrower shall have no right to receive any funds from the Collection Account at any time while an Event of Default shall be continuing, or at any time following maturity or acceleration of the Loan. As additional security for Borrower’s performance under this Agreement and the other Loan Documents, Borrower hereby irrevocably pledges to Lender, and grants Lender a Lien on, the Collection Account, the Cash Management Account, the Leasing and Operations Reserve Account, all funds on deposit in such accounts at any time and all proceeds and products thereof to secure all of Borrower’s obligations hereunder and under the Loan Documents.

(e)As additional security for Borrower’s performance under the Loan Documents, Borrower hereby irrevocably pledges and assigns to Lender, and grants to Lender a security interest in, the Collection Account, the Cash Management Account and the Leasing and Operations Reserve Account and all monies at any time on deposit in the Collection Account, the Cash Management Account and the Leasing and Operations Reserve Account Reserve Account.

ARTICLE IV

FUTURE DISBURSEMENTS OF THE LOANS

4.1General Conditions.

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(a)    Subject to (i) Borrower’s satisfaction of the applicable conditions precedent set forth in Exhibit G attached hereto and (ii) Borrower’s compliance with the applicable provisions of this Article IV, Lender shall disburse the proceeds of each Loan within twelve (12) Business Days after Lender’s receipt of all of the documents and items to be delivered or received pursuant to Exhibit G and this Article IV; provided, however, that at no time shall Lender be obligated to:

(i)    advance to Borrower more than the amount that Borrower has funded from its own monies or are then required to fund to the party seeking payment or, in the case of reimbursement, to the party seeking reimbursement (subject to Retainage, if applicable);

(ii)    make an advance if the Loans are not In-Balance in accordance with Section 4.3;

(iii)    make an advance if Borrower has not contributed a portion of the Future Equity in an amount equal to 35% of the amount due to the party seeking payment or reimbursement in accordance with the Budget; or

(iv)    subject to possible reallocation in accordance with Section 4.4 and Section 4.5, advance proceeds of a Loan in an amount in excess of the Budget Line Items set forth in the Budget, as the same may be adjusted in accordance with the terms of this Agreement.

(b)    Notwithstanding anything to the contrary contained in this Agreement, Lender shall have no obligation to advance any Loan unless Lender (in its reasonable discretion) is, at all times, satisfied that the Improvements (or tenant improvements, as applicable) can be constructed Lien free (subject to Permitted Encumbrances), substantially in accordance with the Plans and Specifications for the sums set forth in the Budget (or, if more, Borrower has furnished the difference in cash or cash equivalents, subject to the provisions of Section 4.3, Section 4.4 and Section 4.5), by the Completion Date.

4.2Procedure for Making Disbursements of Loan Proceeds.

(a)    After the Closing Date, disbursements shall be made from time to time as construction progresses pursuant to a Request in the applicable form attached hereto, but no more frequently than once in each calendar month.

(b)    Each Request with respect to Loans or disbursements shall (a) be duly executed by an Authorized Officer on behalf of Borrower, (b) be submitted to Lender and the Construction Consultant not less than twelve (12) Business Days prior to the proposed disbursement date for such Loans, (c) specify the items to be paid or reimbursed with the proceeds of the requested Loans, and (d) include the documentation required to be included therewith under Exhibit G.

(c)    All advances of the Loans and disbursements shall be made for the payment of Project Costs in accordance with the Budget upon Borrower’s satisfaction of the applicable conditions set forth in this Article IV and Exhibit G, as applicable.

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(d)    [Reserved].

(e)    In connection with each requested disbursement of the Loans, (i) at Lender’s option, the Construction Consultant shall perform an inspection of the Project and (ii) Borrower shall pay a draw fee equal to (x) $1,250 for disbursements of Loans to pay Hard Costs and (y) $500 for disbursements of Loans to pay Soft Costs.

4.3Loan Balancing.

(a)    Borrower represents that the Budget sets forth all anticipated costs as of the date hereof to be incurred by Borrower in connection with the ownership, development, construction, financing, marketing, maintenance and leasing of the Improvements, from time to time through the Maturity Date. Borrower further agrees as follows:

(i)    If at any time, the projected costs anticipated to be incurred for any Construction Work included in any individual Budget Line Item exceeds the amount set forth in the Budget for such individual Budget Line Item (as the same may be adjusted in accordance with the terms of this Agreement) after, to the extent permitted herein, applying any cost savings from other Budget Line Items or amounts in the Contingency Fund as set forth herein, as determined by Lender and the Construction Consultant in their reasonable discretion (including any such determination that the undisbursed Loan proceeds allocated for the payment of future interest on Loans to be advanced from the Commitments (such line items in the Budget being referred to herein as the “Interest Reserve”) is insufficient) based on any reasonable factors, including (1) Lender’s projections of interest rates for period(s) up to and including the full remaining term of the Loan (and permitted extensions); (2) the effect of any Interest Rate Protection Agreement; or (3) cost overruns or Change Orders, then the Loans shall be deemed not “In-Balance.”

(ii)    If the Loans are deemed not “In-Balance,” then Borrower shall, at Lender’s option, within fifteen (15) Business Days after written notice from Lender, deposit with the Lender an amount sufficient to cover such deficiency (a “Deficiency Deposit”), which Deficiency Deposit shall be deposited with Lender in the Controlled Account (the “Deficiency Deposit Account”), or including contributions to pay future interest; provided, however, at Borrower’s request, Lender may, in its sole discretion, permit Borrower to pay any such deficiency directly to the applicable supplier or contractor in place of making such Deficiency Deposit. Lender shall not be required to authorize any disbursement of any Loans before receiving payment of any such Deficiency Deposit into the Deficiency Deposit Account and the prior application of such Deficiency Deposit to the payment of Project Costs so as to bring the Loans In-Balance; provided, however that Lender, may, in its sole discretion elect to fund the net difference between the amount requested for disbursement and such Deficiency Deposit amount. The Deficiency Deposit shall be allocated to the Project Loan Budget and the Building Loan Budget, as applicable, and shall be applied to the payment of Project Costs on account of the Improvements (or tenant improvements, as applicable) prior to any further disbursement of the Loans.

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(b)    If an Event of Default shall occur and be continuing, Lender may, at its option, in addition to exercising any other rights or remedies available under the Loan Documents, (A) apply any unexpended Deficiency Deposit to the costs of completion of the Improvements (or the tenant improvements, as applicable) and/or (B) apply any unexpended Deficiency Deposit to the immediate reduction of any amounts due under the Notes and the other Loan Documents.

4.4Budget Contingencies. The Budget contains line items designated for contingency for Project Loan Costs (the “Project Loan Costs Contingency Fund”), Hard Costs (the “Hard Costs Contingency Fund”) and Soft Costs (the “Soft Costs Contingency Fund” and together with the Project Loan Costs Contingency Fund and the Hard Costs Contingency Funds, the “Contingency Fund”) which represent amounts necessary to provide reasonable assurances to Lender that funds are available within the Budget if additional costs, expenses and/or delays are incurred or additional interest accrues on the Loans, or other unanticipated events or problems occur. Lender may, in its reasonable discretion, re-allocate the required amount of the Contingency Fund to other Budget Line Items from time to time. Subject to Lender’s prior reasonable consent, Borrower may (but shall not be obligated to do so), from time to time, reallocate the Contingency Fund or portions thereof to Borrower (thereby reducing the amount of the same) for use under the Budget Line Items to which they are re-allocated (subject to the provisions of the preceding sentence). Subject to the foregoing, Borrower agrees that the decisions with respect to utilizing any portion of the Contingency Fund shall be made by Lender in its reasonable discretion and that if the Loans are not In-Balance, Borrower may be required to make a Deficiency Deposit, even if funds remain in the Contingency Fund.

4.5Budget Line Items. The Budget includes as line items (collectively, “Budget Line Items”) the cost of all labor, materials, equipment, fixtures and furnishings needed for the completion of all Construction Work, and all other costs, fees and expenses relating in any way whatsoever to the Construction Work and the operation of the Project. Borrower agrees that all Loans shall be used only for the Budget Line Items for which such Loans are made (as re-allocated from time to time in accordance with the terms of this Agreement). Lender shall not be obligated to authorize the disbursement of any amount for any category of costs set forth as a Budget Line Item which is greater than the amount set forth for such category in the applicable Budget Line Item. Subject to Lender’s prior reasonable consent, Borrower may apply savings from one Budget Line Item to cost overruns in another Budget Line Item or to the Contingency Fund, or to any other unbudgeted Project Cost provided (a) there are no Events of Defaults existing, (b) all costs to be paid out of the Budget Line Item from which funds are being re-allocated have been paid or sufficient sums remain in said line item to pay such costs when the same become due, (c) said savings are actual savings and are documented to the reasonable satisfaction of Lender and the Construction Consultant in their reasonable discretion, and (d) such reallocation will not violate the provisions of the Lien Law or affect the priority of the Mortgages on the Project.

4.6Interest; Fees; and Expenses.

(a)    Included in the Budget are projected amounts for (a) interest on the Loans, (b) the fees and expenses of the Construction Consultant, Lender’s counsel and the Title

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Company and (c) the fees and expenses related to the recording of the Mortgages. Subject to Borrower’s compliance with all of the conditions set forth in Exhibit G and this Article IV, Borrower may in any Request request advances for the purpose of paying the aforesaid items due at such time, in which event Lender shall be authorized and is hereby directed to disburse the amount thereof to the Persons entitled to such payments.

(b)    Borrower hereby authorizes Lender to disburse the proceeds of any Loan to pay (a) interest accrued on the Notes, (b) the fees and expenses of the Construction Consultant, Lender’s counsel and the Title Company, and (c) any expenses to be reimbursed by Borrower to Lender under the Loan Documents, notwithstanding that Borrower may not have requested a disbursement of such amounts.

(c)    Lender in its sole and absolute discretion may (but shall not be obligated to do so) make such Loans for disbursements authorized under this Section 4.6 notwithstanding that the Loans are not In-Balance or that an Event of Default exists under the terms of this Agreement or any other Loan Document. Such disbursements shall constitute a Loan and be added to the principal balance of the Notes. The authorization hereby granted is irrevocable, and no further direction, authorization or Request from Borrower is necessary for Lender to make such disbursements. Nothing contained in this Section 4.6 shall require Lender to make Loans for payment of any of the items set forth in subsection (2) above if the other conditions set forth in this Agreement for Loans are not satisfied.

4.7Direct Loan Advances by Lender. Lender shall advance all or any part of any particular Loan to Borrower for disbursement in accordance with a Request, or at any time during the continuance of an Event of Default, Lender may make such Loan Advances directly to the Construction Manager, a Contractor or other party any costs payable to such party, or at Borrower’s expense, to the Title Company which shall pay said monies to the parties as so instructed by Lender. In addition, Lender may make Advances as contemplated by Section 4 of the Completion Guaranty (whether the applicable work is being performed by the Guarantor or Lender). The execution of this Agreement by Borrower shall, and hereby does, constitute an irrevocable authorization to Lender to make such direct advances provided for above and no further authorization from Borrower shall be necessary to warrant such direct advances, and all such direct advances shall be secured by the Security Documents as fully as if made directly to Borrower, regardless of the disposition thereof by any party so paid. At Lender’s request, any advance of Loan proceeds made by and through the Title Company may be made pursuant to the provisions of a construction escrow agreement in the form then in use by such company with such modifications or amendments thereto as are reasonably required by Lender. Borrower agrees to join as a party to such escrow agreement and to comply with the requirements set forth therein (which shall be in addition to and not in substitution for the requirements contained in this Agreement) and to pay the fees and expenses of the Title Company charged in connection with the performance of its duties under such construction escrow agreement.

4.8No Waiver or Approval by Reason of Loan Advances. The making of any Loans by Lender shall not be deemed an acceptance or approval by Lender (for the benefit of Borrower or any third party) of the Construction Work or other work theretofore done or constructed or to the Lender’s obligations to make further Loans, nor, in the event Borrower is

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unable to satisfy any condition, shall any such failure to insist upon strict compliance have the effect of precluding Lender from thereafter declaring such inability to be an Event of Default as herein provided. Lender’s waiver of, or failure to enforce, any conditions to or requirements associated with any Loans in any one or more circumstances shall not constitute or imply a waiver of such conditions or requirements in any other circumstances.

4.9Authorization to Make Loan Advances to Cure Borrower’s Defaults. If an Event of Default shall occur and be continuing, Lender may (but shall not be required to) perform any of such covenants and agreements with respect to such Event of Default. Any amounts expended by Lender in so doing shall constitute a Loan and be added to the outstanding principal balance of the Loans, and Lender shall make the applicable Loans to fund any such disbursements. The authorization hereby granted is irrevocable, and no prior notice to or further direction or authorization from Borrower is necessary for Lender to make such disbursements.

4.10Lender’s Right to Make Loan Advances in Compliance with the Completion Guaranty. Any Loan proceeds disbursed by Lender as contemplated by Section 4 of the Completion Guaranty (whether the applicable work is being performed by the Guarantor or Lender) shall constitute a Loan and be added to the outstanding principal balance of the Loans, and Lender shall make the applicable Loans to fund any such disbursements. The authorization hereby granted is irrevocable and no prior notice to or further direction or authorization from Borrower is necessary for Lender to make such disbursements.

4.11No Third-Party Benefit. This Agreement is solely for the benefit of the Lender, Borrower and Guarantor. All conditions of the obligations of Lender to make advances hereunder are imposed solely and exclusively for the benefit of Lender and may be freely waived, modified or supplemented in whole or in part by Lender at any time if in its sole discretion it deems it advisable to do so, and no Person other than Borrower (provided, however, that all conditions have been satisfied) shall have standing to require Lender to make any Loan advances or shall be a beneficiary of this Agreement or any advances to be made hereunder.

ARTICLE VINSURANCE; CASUALTY, CONDEMNATION AND RESTORATION

Borrower covenants and agrees that, on or after the date hereof, until payment in full of the Loan and the other amounts payable under the Loan Documents, Borrower shall obtain and maintain in effect, at Borrower’s sole expense, the following policies of insurance in form and substance reasonably satisfactory to Lender, each of which, except for the insurance required in Section 5.1 below, shall have claims paying ability ratings of at least “A-IX” by A.M. Best Company.

5.1Title Insurance. The Title Policies, together with any endorsements, reinsurance and co-insurance agreements which Lender may reasonably require, insuring Lender, in the principal amount of the Loan, of the validity and priority of the Lien of the Mortgages on the Real Property, subject only to matters approved by Lender in writing. During the term of the Loan, Borrower shall deliver to Lender, within five (5) days of Lender’s written request, such other endorsements to the Title Policies as Lender may reasonably require, provided such

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endorsement(s) can be obtained at commercially reasonable rates; provided, further, notwithstanding the foregoing, Lender shall always be entitled to require a monthly Date Down Endorsement.

5.2Property Insurance. An “All Risk” property insurance policy, including, but not limited to, coverage for wind, hail, earthquake, flood, collapse, sinkhole and terrorism for an amount not less than one hundred percent (100%) of the estimated replacement cost of the Project (exclusive of costs for foundations, underground utilities and footings) without deduction for physical depreciation. Such “All Risk” property insurance policy shall contain a Lenders Loss Payable Endorsement, and not less than the following: (a) an agreed amount endorsement waiving any coinsurance provisions; (b) a deductible not to exceed Fifty Thousand and No/100 Dollars ($50,000.00) except wind, earthquake and flood; (c) ordinance or law coverage including (i) loss in value to the undamaged portion of the building(s) to full replacement value, (ii) demolition costs with a limit per loss of ten percent (10%) of the value of the building(s) affected by loss, and (iii) increased costs of construction with a limit per loss of ten percent (10%) of the value of the building(s) affected by loss; (d) machinery and equipment breakdown with coverage including, but not limited to, loss or damage from electrical injury, machinery and equipment breakdown, and explosion of steam boilers, air conditioning equipment, high pressure piping, pressure vessels or similar apparatus; and (e) when applicable, business income and loss rents coverage in amount equal to the estimated Gross Operating Income for the property for a period of eighteen (18) months, with 365 Day Extended Period of Indemnity.

5.3Liability Insurance. A Commercial General Liability policy insuring against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the property, to be on “occurrence” form with limits not less than One Million and No/100 Dollars ($1,000,000.00) each occurrence and Two Million and No/100 Dollars ($2,000,000.00) general aggregate. A Non-Owned and Hired Commercial Automobile Liability policy with a Limit of not less than One Million and No/100 Dollars ($1,000,000.00) per accident. To the extent required by Applicable Law, a Workers’ Compensation and Employers’ Liability policy with limits not less than Statutory Limits for Workers Compensation and One Million and No/100 Dollars ($1,000,000.00) per occurrence and Two Million and No/100 Dollars ($2,000,000.00) general aggregate for Employer’s Liability. The Commercial General Liability policy shall contain a per location general aggregate if covering multiple locations.

5.4Umbrella or Excess Liability Insurance. A commercial umbrella or excess liability policy with limits not less than Twenty Million and No/100 Dollars ($20,000,000.00) (the “Umbrella Policy”); provided however, during the period commencing with the Commencement Date and ending upon completion of the Improvements, so long as the umbrella or excess policy maintained by the Construction Manager has limits not less than Twenty Five Million and No/100 Dollars ($25,000,000.00) and is otherwise reasonably satisfactory to Lender, Borrower may maintain the Umbrella Policy with limits not less than Ten Million and No/100 Dollars ($10,000,000.00). This policy shall schedule the following policies as “underlying”: Commercial General Liability, Automobile Liability and Employer’s Liability.

5.5Builder’s Risk Insurance. A policy of builder’s risk insurance including, without limitation, Delay in Use coverage, on an “all risks” basis as described in Section 5.2

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above for one hundred percent (100%) of the insurable value of all construction work in place or in progress from time to time, insuring the Improvements and any tenant improvements where Borrower has an insurable interest, including materials in storage and while in transit. To the extent there are any construction activities at the Project, the Commercial General Liability insurance required under Section 5.3 above shall include “X”, “C” and “U” coverage. The policy shall also contain a permission of occupancy endorsement.

5.6General Insurance Requirements. The following additional requirements are also applicable:

(a)    Insurance premiums on all policies must be paid annually, or in installments otherwise acceptable to Lender, in advance;

(b)    No insurance policy required hereunder shall be permitted to provide for premium assessments to be made against Lender;

(c)    Borrower shall provide the following prior to the Effective Date: (i) an ACORD or equivalent certificate of liability insurance and (ii) an ACORD or equivalent certificate of property insurance;

(d)    On the certificates of insurance listed above, the following wording must be stricken: “endeavor to” and “but failure to mail notice shall impose no obligation of liability of any kind upon the company, its agents or representatives.”

(e)    Each policy shall contain not less than a thirty (30) day notice to Lender of written cancellation or non-renewal and not less than ten (10) days prior notice to Lender of cancellation for non-payment of premium;

(f)    Lender to be named (i) the first mortgagee and loss payee with respect to the property insurance coverage, and (ii) an additional insured with respect to general liability and umbrella or excess liability insurances, as follows:

PacificCal PC Core Lender, LLC
Its successors and/or assigns
c/o PCCP, LLC
Attention: Servicing10100 Santa Monica Blvd, Suite 1000

Los Angeles, California 90067

(g)    A waiver of subrogation shall be provided on all policies of insurance waiving rights of recovery against Lender; and

(h)    The limits of insurance contained herein are minimum limits established by Lender and shall not be construed to mean that Lender represents or warrants that the required limits contained herein are adequate for protection to Borrower.

5.7Restoration Proceeds.

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Any and all awards, compensation, reimbursement, damages, proceeds, settlements, and other payments or relief paid or to be paid with respect to the Property, together with all rights and causes of action relating to or arising from, (i) any insurance policy maintained by or on behalf of Borrower with respect to the Property following any damage, destruction, casualty or loss to all or any portion of the Project (a “Casualty”, and such proceeds, “Insurance Proceeds”) or (ii) any temporary or permanent taking or voluntary conveyance of all or part of the Project, or any interest therein or right accruing thereto or use thereof, as the result of, or in settlement of, any condemnation or other eminent domain proceeding by any Governmental Authority whether or not the same shall have actually been commenced (a “Taking”, and such proceeds, “Condemnation Proceeds”, and together with Insurance Proceeds, collectively, “Restoration Proceeds”) are hereby assigned to Lender as additional collateral security hereunder subject to the Lien of the Mortgages, to be applied in accordance with this Article V. Lender shall be entitled to receive and collect all Restoration Proceeds, and Borrower shall instruct and cause the issuer of each policy of insurance described herein and any applicable Governmental Authority to deliver to Lender all Restoration Proceeds. Borrower shall execute such further assignments of the Restoration Proceeds as Lender may from time to time reasonably require. Notwithstanding the foregoing, if the Restoration Proceeds, less the amount of Lender’s costs and expenses (including attorneys’ fees and costs) incurred in collecting the same (the “Net Restoration Proceeds”), are Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) or less (the “Restoration Proceeds Threshold”), provided no Event of Default then exists, Lender shall make such Net Restoration Proceeds available to Borrower. All Insurance Proceeds received by Borrower or Lender with respect to the Property in respect of business interruption coverage, and all Condemnation Proceeds received with respect to a temporary Taking available to Borrower, shall be deposited in a segregated escrow account with Lender or its servicer, as applicable, and Lender shall estimate the number of months required for Borrower to restore the damage caused such Casualty or replace cash flow interrupted by such temporary Taking, as applicable, and shall divide the aggregate proceeds by such number of months, and, provided no Event of Default then exists, shall disburse a monthly installment thereof to Borrower each such month. Subject to Lender’s rights under this Section 5.7, provided no Event of Default has occurred and is continuing and the Restoration has been completed in accordance with this Agreement, any Net Restoration Proceeds available to Borrower for Restoration, to the extent not used by Borrower in connection with, or to the extent they exceed the cost of such Restoration and any costs incurred by Lender, shall be paid to Borrower.

Lender shall be entitled at its option to participate in any compromise, adjustment or settlement in connection with (i) any insurance policy claims relating to any Casualty, and (ii) any Taking in an amount in controversy, in either case, in excess of the Restoration Proceeds Threshold, and Borrower shall within ten (10) Business Days after request therefor reimburse Lender for all reasonable out‑of‑pocket expenses (including reasonable attorneys’ fees and disbursements) incurred by Lender in connection with such participation. Borrower shall not make any compromise, adjustment or settlement in connection with any such claim in excess of the Restoration Proceeds Threshold or if an Event of Default then exists without the prior written approval of Lender. Borrower shall not make any compromise, adjustment or settlement in connection with any claim unless same is commercially reasonable as determined by Borrower in its reasonable discretion.

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If and to the extent Restoration Proceeds are not required to be made available to Borrower to be used for the Restoration of the Improvements affected by the Casualty or Taking, as applicable, pursuant to this Agreement, Lender shall be entitled, without Borrower’s consent, to apply such Restoration Proceeds or the balance thereof, at Lender’s option either (i) to the full or partial payment or prepayment of the Indebtedness; provided that such payment or prepayment shall be without payment of any Exit Fee and shall not require any defeasance of the Loan, or (ii) to the Restoration of all or any part of such Improvements affected by the Casualty or Taking, as applicable.

5.8Restoration. Borrower shall restore and repair the Improvements and Equipment or any part thereof now or hereafter damaged or destroyed by any Casualty or affected by any Taking; provided, however, that if the Casualty is not insured against or insurable, Borrower shall so restore and repair even though no Insurance Proceeds are received. Notwithstanding anything to the contrary set forth in Section 5.7, Lender agrees that Lender shall make the Net Restoration Proceeds (other than business interruption insurance proceeds, which shall be held and disbursed as provided in Section 5.7) available to Borrower for Borrower’s restoration and repair of the Improvements affected by the Casualty or Taking (a “Restoration”), as applicable, on the following terms and subject to Borrower’s satisfaction of the following conditions; provided, that Lender shall have the right to waive any of the following conditions in its discretion:

(a)    At the time of such Casualty or Taking, as applicable, and at all times thereafter there shall exist no Event of Default;

(b)    The Improvements affected by the Casualty or Taking, as applicable, shall be capable of being restored (including replacements) to substantially the same condition, utility, quality and character, as existed immediately prior to such Casualty or Taking, as applicable, in all material respects with a fair market value and projected cash flow of the Project equal to or greater than prior to such Casualty or Taking, as applicable;

(c)    Borrower shall demonstrate to Lender’s reasonable satisfaction Borrower’s ability to pay the Indebtedness coming due during such repair or restoration period (after taking into account proceeds from business interruption insurance carried by Borrower), the following:

(d)    (i) in the event of a Casualty, the Casualty resulted in an actual or constructive loss of less than thirty percent (30%) of the fair market value of the Project and less than thirty percent (30%) of the rentable area of the Project, (ii) in the event of a Taking, the Taking resulted in an actual or constructive loss of less than fifteen percent (15%) of the fair market value of the Project and less than fifteen percent (15%) of the rentable area of the Project, less than fifteen percent (15%) of the land constituting the Project is taken, such land is located along the perimeter or periphery of the Project, and no portion of the Improvements is the subject of such Taking and (iii) in any event, (A) Leases covering at least sixty-five percent (65%) of the rentable square footage of the Project and (B) all Leases will remain in full force and effect during and after the Restoration.

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(e)    Borrower shall have provided to Lender all of the following, and collaterally assigned the same to Lender pursuant to assignment documents acceptable to Lender: (i) an architect’s contract with an architect reasonably acceptable to Lender and complete plans and specifications for the Restoration of the Improvements lost or damaged to the condition, utility and value prior to the applicable Casualty; (ii) fixed-price or guaranteed maximum cost construction contracts with contractors reasonably acceptable to Lender for completion of the Restoration work in accordance with the aforementioned plans and specifications; (iii) such additional funds (if any) as are necessary from time to time, in Lender’s reasonable opinion, to complete the Restoration (which funds shall be held by Lender as additional collateral securing the Indebtedness and shall be disbursed, if at all, pursuant to this Article V); and (iv) copies of all permits and licenses necessary to complete the Restoration in accordance with the plans and specifications and all Legal Requirements.

(f)    Borrower shall commence such work within one hundred twenty (120) days after such Casualty or Taking, as applicable, and shall diligently pursue such work to completion;

(g)    Lender shall be satisfied that the Restoration and Construction Completion will be completed on or before the earliest to occur of (i) the date six (6) months prior to the Maturity Date, (ii) such time as may be required under applicable Legal Requirements in order to repair and restore the Project to the condition it was in immediately prior to such Casualty or such Taking, as applicable, (iii) the expiration of the business interruption insurance coverage referred to above, and (iv) earliest date required pursuant to the terms of any Lease; and

(h)    the Project and the use thereof after the Restoration will be in compliance with all applicable Legal Requirements.

5.9Disbursement.

Each disbursement by Lender of such Restoration Proceeds shall be funded subject to conditions and in accordance with disbursement procedures which a commercial construction lender would typically establish in the exercise of sound banking practices, including requiring lien waivers and any other documents, instruments or items which may be reasonably required by Lender.

In no event shall Lender be obligated to make disbursements of Restoration Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as determined by Lender, less, as to each contractor, subcontractor or materialman engaged in a Restoration, an amount equal to the greater of (i) ten percent (10%) of the costs actually incurred for work in place as part of such Restoration, as reasonably determined by Lender, and (ii) the amount actually withheld by Borrower (the “Casualty Retainage”). The Casualty Retainage shall not be released until Lender reasonably determines that the Restoration has been completed in accordance with the provisions of this Agreement and that all approvals necessary for the re-occupancy and use of the Project have been obtained from all appropriate Governmental Authorities, and Lender receives evidence satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage.

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5.10Change in Insurance Requirements. Lender may at any time amend these insurance requirements due to (a) new information not known by Lender on the Effective Date which poses a material risk to the Project or (b) changed circumstances after the Effective Date which in the reasonable judgment of Lender makes such change necessary, provided such amended insurance requirements are available at commercially reasonable rates and is customarily required of similar properties in the prevailing market. Promptly following the receipt of a notice from Lender, Borrower will make such modifications to the terms of any insurance policy as Lender specifies.

5.11Notification of Loss. Borrower shall promptly notify Lender if Borrower becomes aware of any single loss for an amount in excess of Fifty Thousand and No/100 Dollars ($50,000.00) covered by any insurance policies with respect to the Property required hereunder.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES

In order to induce Lender to execute this Agreement and make the Loan, Borrower hereby represents and warrants to Lender as follows:

6.1Organization; Power; Single Purpose Entity. Borrower (a) is duly organized and validly existing in good standing under the laws of the State of its formation, (b) is duly qualified to do business in each jurisdiction in which the nature of its business or any of the Project makes such qualification necessary, (c) has the requisite power and authority to carry on its business as now being conducted, and (d) has the requisite power to execute and deliver, and perform its obligations under, the Loan Documents. Borrower is a “registered organization” within the meaning of the Uniform Commercial Code in effect in the State where Borrower is organized, and Borrower’s organizational identification number issued by such State is set forth under its signature hereto. Borrower is now, and shall at all times remain, an SPE (as defined in Section 8.16 below) and in full compliance with all the terms and conditions contained in Section 8.16 below.

6.2Authority; Enforceability. Borrower has the requisite legal power and authority to execute, deliver and perform each of the Loan Documents. The execution, delivery and performance thereof, and the consummation of the transactions contemplated thereby, have been duly authorized by all requisite action of Borrower, and no other proceedings or authorizations on the part of Borrower are necessary to consummate such transactions. The Loan Documents executed by Borrower in connection with the Loan are the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their terms, subject only to bankruptcy, insolvency and other limitations on creditors’ rights generally and to equitable principles. Such Loan Documents are, as of the Closing Date, not subject to any right of rescission, set-off, counterclaim or defense by Borrower, including the defense of usury.

6.3Ownership of Borrower. Borrower has heretofore provided to Lender an organizational chart setting forth the Members and their respective ownership percentages, and the shareholders, partners or members in the Members and their respective ownership percentages. Except as may be expressly permitted pursuant to Section 8.14 below, without the

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prior written consent of Lender, Borrower shall not cause or permit any change in the Members or in the shareholders, partners or members in the Members, or in the relative ownership interests of such Members or such shareholders, partners or members in the Members.

6.4No Conflict. The execution, delivery and performance by Borrower of the Loan Documents, and each of the transactions contemplated thereby, do not and will not (a) conflict with or violate Borrower’s partnership agreement, articles of organization, operating agreement or other organizational documents, as the case may be, or (b) to Borrower’s knowledge, conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under any (i) contractual obligation to which Borrower, the Project or the other Collateral is subject, (ii) statute, ordinance, rule or regulation of any Governmental Authority applicable to Borrower, the Project or the other Collateral or (iii) court or Governmental Authority order, or (c) result in or require the creation or imposition of any Lien upon any of the properties or assets of Borrower (other than Liens in favor of Lender arising pursuant to the Loan Documents).

6.5Consents and Authorizations. Borrower has obtained all consents and authorizations required under its organizational documents or pursuant to its contractual obligations with any other Person, and has obtained all consents and authorizations of, and effected all notices to and filings with, any Governmental Authority as may be necessary to allow Borrower to lawfully execute, deliver and perform its obligations under the Loan Documents and the Environmental Indemnity Agreement. Guarantor has obtained all consents and authorizations required under its organizational documents or pursuant to its contractual obligations with any other Person, and has obtained all consents and authorizations of, and effected all notices to and filings with, any Governmental Authority as may be necessary to allow Borrower to lawfully execute, deliver and perform its obligations under the Guaranty Documents.

6.6Financial Information. All financial statements and other financial information heretofore delivered by Borrower to Lender, including, without limitation, information relating to the financial condition of Borrower, Guarantor, or the Project (including, without limitation, constructions schedules and budgets for construction work done a the Project prior to the Effective Date), or the Members in Borrower, are true and correct in all material respects, fairly and accurately reflect the financial condition of the subject thereof and have been prepared in accordance with GAAP, or another accounting method approved by Lender. There has been no change that would have a Material Adverse Effect on Borrower or Guarantor, or the ability of Borrower or Guarantor to perform its respective obligations under the Loan Documents, since the date of such financial statements or other financial information. Neither Borrower nor any Guarantor has filed or been the subject of any bankruptcy, insolvency, reorganization, dissolution or similar proceeding or any proceeding for the appointment of a receiver or trustee for all or any substantial part of their respective property. Neither Borrower nor any Guarantor has admitted in writing its inability to pay its debts when due, made an assignment for the benefit of creditors or taken other similar action.

6.7Litigation; Adverse Effects; Condemnation.

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(a)    There is no action, suit, proceeding, governmental investigation or arbitration, at law or in equity, or before or by any Governmental Authority, pending against and served upon or, to best of Borrower’s knowledge, threatened against and not served upon Borrower, any Guarantor, the Project or any other Collateral which could (i) result in a Material Adverse Effect on such Person, the Project or the other Collateral, or (ii) materially and adversely affect the ability of Borrower to perform its obligations under the Loan Documents and the Environmental Indemnity Agreement (as applicable) or any Guarantor to perform its respective joint and several obligations under Guaranty Documents (as applicable).

(b)    Borrower is not (i) in violation of any applicable Legal Requirements, which violation could have a Material Adverse Effect on Borrower, Guarantor, the Project or any other Collateral, or (ii) subject to or in default with respect to any court or Governmental Authority order which could have a Material Adverse Effect on Borrower, Guarantor, the Project or any other Collateral. There are no governmental or administrative proceedings pending or, to the best of Borrower’s knowledge, threatened against Borrower, the Project or any other Collateral, which, if adversely decided, would have a Material Adverse Effect on Borrower, Guarantor, the Project or any other Collateral.

(c)    There are no known, pending or, to the best of Borrower’s knowledge, threatened eminent domain or condemnation proceedings affecting the Project (or any portion thereof).

(d)    There are no known, pending or to the best of Borrower’s knowledge, threatened claims outstanding against Borrower or the Project (or any portion thereof) in respect of any work done on or prior to the date hereof at, on or around the Project by any contractor or third party claimant not covered by applicable insurance.

6.8Payment of Taxes. All tax returns and reports to be filed by Borrower have been timely filed, and all taxes, assessments, fees and other governmental charges shown on such returns or otherwise payable by Borrower have been paid when due and payable, except such taxes, if any, as are being contested in good faith by appropriate proceedings, and subject to such extensions of the filing and/or due date thereof as Borrower shall have obtained. Borrower has no knowledge of any proposed tax assessment against Borrower that will have a Material Adverse Effect on Borrower, which is not being actively contested in good faith by Borrower or Seller.

6.9Disclosure. The representations and warranties of Borrower contained in this Agreement, the other Loan Documents and the Guaranty Documents and all certificates, financial statements and other documents delivered to Lender in connection therewith, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. All organizational documents, financial statements, Leases, agreements and other documents and instruments delivered by Borrower to Lender pursuant to this Agreement, the other Loan Documents and the Environmental Indemnity Agreement are, in all material respects, true, correct and complete copies of the originals. All organizational documents, financial statements, Leases, agreements and other documents and instruments delivered by Guarantor to Lender pursuant to this Agreement and the Guaranty Documents are,

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in all material respects, true, correct and complete copies of the originals. The foregoing representations and warranties with respect to any documents, Leases or instruments relating to the Project and not prepared by or on behalf of Borrower are made to the best of Borrower’s knowledge. Borrower has not withheld any material fact from Lender in regard to any matter addressed in or material to the Loan Documents.

6.10Requirements of Law and Other Covenants. Borrower and, to the best of Borrower’s knowledge, the Project and the use thereof comply with (i) all statutes, ordinances, rules and regulations of Governmental Authorities applicable to Borrower or the Project (including, without limitation, the ADA and all Hazardous Materials Laws), and (ii) any restrictive covenants or other title matters affecting the Project or any portion thereof. Borrower shall be responsible for all ADA and Hazardous Materials Laws compliance costs. The Project consists of legal and separate lot(s) for tax assessment purposes. All requisite permits, easements and rights of way necessary for the occupancy, operation, ownership and use of the Project have been or will be obtained by or on behalf of Borrower and those that have been obtained are in full force and effect.    

6.11Deliveries; Purchase Price for Project; Outstanding Balance of Existing Loan. Borrower has heretofore delivered to Lender true, complete and correct copies of the Purchase Agreement, all Leases at the Project, as well as the other documents, materials and information delivered to Borrower or otherwise obtained by or prepared for Borrower with respect to the acquisition, ownership or operation of the Project by Borrower. No such documents, materials or information disclosed, and Borrower has not otherwise discovered in the course of its due diligence investigations, any facts, matters or circumstances that could have a Material Adverse Effect on Borrower, the Project or any other Collateral, the transactions contemplated by this Agreement or the other Loan Documents.

6.12Title to Assets; No Liens. On the Effective Date, Borrower has good and marketable leasehold title to the Project, free and clear of all Liens, except for any Permitted Encumbrances and subject to Borrower’s right to contest the same pursuant to Section 8.3 below.

6.13Utilities. All utility services, including, without limitation, gas, water, sewage, electrical and to the best of Borrower’s knowledge, telephone, necessary for the use and occupancy of the Project are or will be available at or within the boundaries of the Project and have been or will be connected or are or will be available for connection by Borrower upon completion of Construction and payment of all required connection or hook-up fees.

6.14Leases. There are no Leases affecting any portion of the Project as of the Closing Date.

6.15Affiliate Fees. As of the Closing Date, Borrower is not obligated to pay any Affiliate Fees to any Affiliate in connection with the acquisition, financing, operation or management of the Project (except for property management fees payable to the Property Manager and construction management fees payable to the Construction Manager, in each case in accordance with the Loan Documents). Notwithstanding anything to the contrary contained herein, all Affiliate Fees shall at all times be subordinate to the Loan (and Borrower’s operating agreement shall contain an express statement to such effect).

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6.16Defects. Except as set forth in any third party reports obtained by Lender or delivered to Lender by Borrower, there are no defects, facts or conditions affecting the Project or any portion thereof that would make the Project unsuitable for the occupancy, use or sale thereof or the construction of the Improvements. There are no surface or subsurface soils conditions adversely affecting the Project, including, without limitation, unstable soil or landfills.

6.17Patriot Act and Related Matters. Borrower complies and will comply at all times with the Patriot Act and all applicable requirements of Governmental Authorities having jurisdiction of Borrower and the Project, including those relating to money laundering and terrorism and each of Borrower and Guarantor have in place customary procedures to ensure that they have done appropriate diligence in that regard with respect to their investors. Lender shall have the right to audit Borrower’s compliance with the Patriot Act and all applicable requirements of Governmental Authorities having jurisdiction of Borrower and the Project, including those relating to money laundering and terrorism. In the event that Borrower fails to comply with the Patriot Act or any such requirements of Governmental Authorities, then Lender may, at its option, cause Borrower to comply therewith and any and all costs and expenses incurred by Lender in connection therewith shall be secured by the Mortgages and the other Loan Documents and shall be immediately due and payable.

None of Borrower, any Guarantor, or any direct member in Borrower (a) is listed on any Government Lists (as defined below), (b) is a person who has been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC (as defined below) or in any enabling legislation or other Presidential Executive Orders in respect thereof, (c) has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any Patriot Act Offense (as defined below), or (d) is not currently under investigation by any Governmental Authority for alleged criminal activity. For purposes hereof, the term “Patriot Act Offense” means any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (a) the criminal laws against terrorism; (b) the criminal laws against money laundering, (c) the Bank Secrecy Act, as amended, (d) the Money Laundering Control Act of 1986, as amended, or the (e) Patriot Act. “Patriot Act Offense” also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense. For purposes hereof, the term “Government Lists” means (i) the Specially Designated Nationals and Blocked Persons Lists maintained by Office of Foreign Assets Control (“OFAC”), (ii) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC that Lender notified Borrower in writing is now included in Government Lists, or (iii) any similar lists maintained by the United States Department of State, the United States Department of Commerce or any other government authority or pursuant to any Executive Order of the President of the United States of America that Lender notified Borrower in writing is now included in Government Lists.

6.18No Additional Liabilities of Guarantor Not Previously Disclosed in Writing to Lender. Notwithstanding anything to the contrary contained hereunder or under any

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of the other Loan Documents, Guarantor has no material obligation which was not previously disclosed to Lender in writing, which obligation would have a Material Adverse Effect on any of (a) Borrower’s ability to perform hereunder or under any of the other Loan Documents, (b) Borrower’s ability to timely and fully repay the Loan (and all amounts due in connection therewith) as required under the Notes, this Agreement and the other Loan Documents, (c) Borrower’s ability now or in the future to operate and renovate the Project (as required hereunder) and/or (d) upon any Guarantor’s respective ability to perform their joint and several obligations under the Guaranty Documents to which such Guarantor is a party.

6.19ERISA. Neither Borrower nor any ERISA Affiliate (as defined below) maintains, contributes to, has any obligation to contribute to, or has any direct or indirect liability with respect to any “employee benefit plan,” “multiemployer plan,” or any other “plan” (each as defined in ERISA). Borrower is not an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, a “plan,” as defined in Section 4975(e)(1) of the Code, subject to Code Section 4975, or a “governmental plan” within the meaning of Section 3(32) of ERISA. None of the assets of Borrower constitutes “plan assets” of one or more of any such plans under 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of the Code. Transactions contemplated by the Loan Documents and the Environmental Indemnity Agreement by or with Borrower do not violate state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans and such state statutes do not in any manner affect the ability of the Borrower to perform its obligations under the Loan Documents or the ability of Lender to enforce any and all of its rights under this Agreement. If an investor or direct or indirect equity owner in Borrower is a plan that is not subject to Title I of ERISA or Section 4975 of the Code, but is subject to the provisions of any federal, state, local, non-U.S. or other laws or regulations that are similar to those portions of ERISA or the Code, the assets of the Borrower do not constitute the assets of such plan under such other laws. “ERISA Affiliate” means any corporation or trade or business that is a member of any group of organizations (a) described in Section 414(b) or (c) of the Code, of which Borrower is a member, and (b) solely for purposes of potential liability under Section 302(b)(2) of ERISA and Section 412(b)(2) of the Code and the lien created under Section 303(k) of ERISA and Section 430(k) of the Code, described in Section 414(m) or (o) of the Code, of which Borrower is a member.

6.20Investment Company Act; Public Utility Holding Company Act. Borrower is not (i) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

6.21Intentionally Omitted.

6.22REOC Status. Borrower has, at all times since the date of its first investment, satisfied all of the requirements set forth in 29 C.F.R. § 2510.3-101(e) to qualify as a “real estate operating company,” as defined in such regulation (a “REOC”).

6.23Compliance with Law; Government Approvals.

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(a)    Borrower and the Project, as applicable, and the contemplated use thereof and operations thereat, shall, upon completion of the Construction Work, comply with all Applicable Law.

(b)    To Borrower’s knowledge, other than those Government Approvals to be obtained after the date this representation is given, all material Government Approvals necessary in connection with the construction and operation of the Project as contemplated by the Loan Documents and the Project Documents, have been duly obtained, were validly issued, are in full force and effect, are not subject to appeal, are held in the name of Borrower (in the case of the Project), are free from conditions or requirements except where the failure to comply with which could not reasonably be expected to have a Material Adverse Effect or with which Borrower does not reasonably expect will be able to be satisfied in the ordinary course of business, and are assignable to and assumable by the successors in interest and transferees of Borrower and run with the land.

(c)    There is no proceeding pending or, to Borrower’s knowledge, threatened that seeks, or may reasonably be expected, to rescind, terminate, modify, amend or suspend any such Government Approval.

(d)    The information set forth in each application and other written material submitted by Borrower and, to Borrower’s knowledge, to the applicable Governmental Authority in connection with each such Government Approval is accurate and complete in all material respects.

(e)    The Government Approvals to be obtained after the date this representation is given are required solely in connection with later stages of development, construction or operation of the Improvements and are not customarily obtained until a later stage of development or construction or after commercial operation is about to commence within the Project, and shall be obtained on or prior to the date when so required. Borrower has no reason to believe that any Government Approval that has not yet been obtained by Borrower, but which will be required in the future, will not be granted in due course, on or prior to the date when required and free from any condition or requirement, compliance with which could reasonably be expected to have a Material Adverse Effect or which Borrower does not reasonably expect will be able to be satisfied in the ordinary course of business.

(f)    The Project (if constructed in accordance with the Plans and Specifications and the Project Documents) will conform to and comply with all covenants, conditions, restrictions and reservations in the Government Approvals and all Applicable Law, except where the failure so to comply could not reasonably be expected to have a Material Adverse Effect.

(g)    Borrower has no reason to believe that Lender will not be entitled, without undue expense or delay, to the benefit of each such Government Approval with respect to the Project upon the exercise of remedies under the Security Documents.

(h)    Borrower has delivered to Lender a true and complete copy of each Government Approval heretofore obtained with respect to the Project, as the same shall be

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supplemented during the course of obtaining additional Government Approvals as the Construction Work proceeds.

6.24Use of Project. The Project, upon completion of the construction of the Improvements, will be used exclusively for retail purposes.

6.25Project Documents. Borrower has heretofore delivered to Lender a true and complete copy of each Project Document and, subject to the terms of Section 9.7 of the Building Loan Agreement, none of the Project Documents has been further modified, supplemented and/or amended. The Project Documents then in effect are in full force and effect and Borrower has not received written notice of any default under or with respect to any such Project Document. To the best of Borrower’s knowledge, no other party to any such Project Document is in default under any material covenant or obligation set forth therein.

6.26Budget. The amounts and allocations set forth in the Budget (including the Project Costs), as it may be amended in accordance with the terms of this Agreement, present a full, complete and good faith estimation of all costs, expenses and fees required to acquire and develop the Project, complete the Construction Work, and pay interest on the Loans, the carrying and operating costs for the Project, and costs in connection with the leasing of the Project. Borrower is not aware of any other such costs, expenses or fees which are material and are not included within the Budget.

6.27Ground Lease.

(a)    Recording; Modification. A memorandum of the Ground Lease has been duly recorded. The Ground Lease permits the interest of Borrower to be encumbered by the Mortgages. There have not been amendments or modifications to the terms of the Ground Lease since the recordation of such memorandum, with the exception of written instruments which have been recorded. The Ground Lease may not be canceled, terminated, surrendered or amended without the prior written consent of Lender, which consent may be withheld in Lender’s sole and absolute discretion.

(b)    No Liens. Except for the Permitted Encumbrances, Borrower’s interest in the Ground Lease is not subject to any Liens or encumbrances superior to, or of equal priority with, the Mortgage other than the ground lessor’s related fee interest.

(c)    Ground Lease Assignable. Borrower’s interest in the Ground Lease is assignable to Lender upon notice to, but without the consent of, the ground lessor (or, if any such consent is required, it has been obtained prior to the date hereof). The Ground Lease is further assignable by Lender, its successors and assigns without the consent of the ground lessor except as otherwise expressly provided in the Ground Lease.

(d)    Default. As of the date hereof, the Ground Lease is in full force and effect and no default has occurred under the Ground Lease and, to Borrower’s knowledge, there is no existing condition which, but for the passage of time or the giving of notice, could result in a default under the terms of the Ground Lease.

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(e)    Notice. The Ground Lease requires the ground lessor to give notice of any default by Borrower to Lender. The Ground Lease, or estoppel letters received by Lender from the ground lessor, further provides that notice of termination given under the Ground Lease is not effective against Lender unless a copy of the notice has been delivered to Lender in the manner described in the Ground Lease.

(f)    Cure. Lender is permitted the opportunity (including, where necessary, sufficient time to gain possession of the interest of Borrower under the Ground Lease) to cure any default under the Ground Lease, which is curable after the receipt of notice of any of the default before the ground lessor thereunder may terminate the Ground Lease.

(g)    New Lease. The Ground Lease requires the ground lessor to enter into a new lease with Lender upon termination of the Ground Lease for any reason, including rejection of the Ground Lease in a bankruptcy proceeding.

(h)    Insurance Proceeds. Under the terms of the Ground Lease and the Mortgage, taken together, any Insurance Proceeds will be applied either (y) to the repair or restoration of all or part of the Project, with Lender having the right to hold and disburse the proceeds as the repair or restoration progresses, or (z) to the payment of the outstanding principal balance of the Loan together with any accrued interest thereon.

(i)    Subleasing. The Ground Lease does not impose any restrictions on subleasing except for the use restrictions expressly set forth therein.

ARTICLE VII

REPORTING COVENANTS

Borrower covenants and agrees that, on and after the date hereof, until payment in full of the Loan and other amounts payable under the Loan Documents:

7.1Financial Statements and Other Financial and Operating Information. Borrower shall keep and maintain or shall cause to be kept and maintained, on a calendar year basis, in accordance with GAAP or other accounting method approved by Lender, consistently applied, books, records and accounts reflecting in reasonable detail all of the financial affairs of Borrower and all items of income and expense in connection with the operation of the Project. Borrower shall deliver or cause to be delivered to Lender:

(a)    Monthly Leasing Report and Operating Statements. Within thirty (30) days following the end of each month during the Loan term, a year-to-date operating statement and a leasing report for such month in such forms as Lender shall reasonably require, together with an updated rent roll and delinquency report.

(b)    Quarterly Financial Statements. Within forty-five (45) days following the end of each calendar quarter (excluding the fourth (4^th) calendar quarter) during the Loan term, Borrower and Guarantor shall provide unaudited financial statements for the Project for such quarter in such form as Lender shall reasonably require, including a balance sheet, income statement and cash flow statement, together with related schedules and supporting reports, when applicable. Such financial statements shall be prepared on the basis of GAAP, Federal tax basis,

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or another accounting method approved by Lender, and shall be accompanied by a certificate executed by Borrower or Guarantor, certifying the completeness, fairness and consistency thereof. In addition, Borrower shall also submit a summary of all Gross Operating Income received during such prior quarter, and how such funds were expended.

(c)    Annual Financial Statements. Within one hundred twenty (120) days after the end of each calendar year, annual unaudited financial statements of Borrower and Guarantor, consisting of a balance sheet, income statement and cash flow statement, together with related schedules and supporting reports, when applicable. Such financial statements shall be prepared on the basis of GAAP, or another accounting method approved by Lender, and shall be accompanied by a certificate executed by Borrower or Guarantor, certifying the completeness, fairness and consistency thereof. Borrower and Guarantor shall have its respective annual financial statements reviewed and certified by an independent, reputable accounting firm reasonably acceptable to Lender (provided that Ross, Rosenthal & Company LLP shall be deemed acceptable to Lender); provided that the KBS Guarantor shall only be required to provide internally-prepared financial statements to include a balance sheet, an income statement and a cash flow statement, none of which shall be required to be certified by an independent accounting firm. If an Event of Default has occurred then the Lender, at its option, may require such financial statements to be audited; provided, however, such audited financial statements shall not be required for any Onyx Guarantor and, with respect to KBS Guarantor, such audited financial statements may be those of KBS Strategic Opportunity REIT II, Inc., a Maryland corporation.

(d)    [reserved].

(e)    Budgets. Not later than November 30^th of each calendar year, projections of Borrower detailing expected sources and uses of funds for the Project for the next year, including projected capital expenditures and projected operating budgets for the immediately succeeding twelve (12) month period, in each case subject to Lender’s review and approval. With respect to the foregoing Approved Budget, Borrower shall provide such additional supporting details as Lender shall reasonably request.

(f)    Annual Net Worth Covenant Compliance Certificates. In accordance with the terms and conditions of the Guaranty Documents, within one hundred twenty (120) days after the end of each calendar year, each Guarantor shall provide Lender with an executed Compliance Certificate which, when taken together with the Compliance Certificates delivered by each of the other Guarantors, evidences Guarantor’s compliance, in the aggregate, with the Net Worth Covenant for the calendar year just ended.

(g)    Knowledge of Event of Default. Promptly upon Borrower obtaining actual knowledge of (i) any condition or event which constitutes an Event of Default, or (ii) any condition or event which has or is reasonably expected to have a Material Adverse Effect on Borrower, the Project or construction of the Improvements, written notice specifying the nature and period of existence of any such condition or event, or specifying the notice given or action taken by Borrower and the nature of such claimed Event of Default or other event or condition, and what action Borrower has taken, is taking and proposes to take with respect thereto.

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(h)    Litigation, Arbitration or Government Investigation. Promptly upon Borrower obtaining actual knowledge of (i) the institution of, or threat of, any action, suit, proceeding, governmental investigation or arbitration against or affecting Borrower, the Project or any other Collateral not previously disclosed in writing by Borrower to Lender pursuant to this section, including any eminent domain or other condemnation proceedings affecting the Project, or (ii) any material development in any action, suit, proceeding, governmental investigation or arbitration already disclosed, which, in either case, is reasonably expected to have a Material Adverse Effect on Borrower, Guarantor, the Project or any other Collateral, written notice thereof to Lender and such other information as may be available to it to enable Lender and its counsel to evaluate such matters.

(i)    Organizational Documents. Pursuant to Section 6.1 above, a true, correct and complete copy of Borrower’s limited partnership or limited liability company operating agreement; and promptly following the date thereof, any amendments or modifications thereof entered into in accordance with and as may be expressly permitted under, this Agreement and the other Loan Documents.

(j)    Insurance Coverage; Taxes. Within thirty (30) days of the end of each calendar year during the Loan term, Borrower shall deliver documents verifying, to Lender’s reasonable satisfaction, that any insurance required under Article V is in effect and that all property taxes have been paid in full.

(j)    Other Information. Such other information, reports, contracts, schedules, lists, documents, agreements and instruments in the possession or control of Borrower with respect to (i) the Collateral, or (ii) the business, assets, condition (financial or otherwise), income of Borrower as Lender may from time to time reasonably request, at no cost to Borrower, including, without limitation, annual information with respect to cash flow projections, budgets, operating statements (current year and immediately preceding year), rent rolls, lease expiration reports, leasing status reports, equity funding requirements, contingent liability summaries, projections of leasing fees and overhead budgets.

7.2Environmental Notices. Borrower shall promptly and in any event within five (5) Business Days, notify Lender, in writing, after Borrower’s learning thereof of any of the following: (a) a discovery of any Hazardous Materials on, under or about the Project, other than Hazardous Materials temporarily in transit through the Project; (b) any knowledge by Borrower that the Project does not comply with any Hazardous Materials Laws; and/or (c) any Hazardous Materials Claims.

ARTICLE VIII

OTHER COVENANTS

Borrower covenants and agrees that, on and after the date hereof, until payment in full of the Loans and other amounts payable under the Loan Documents:

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8.1Existence. Borrower shall at all times maintain its partnership or limited liability company existence, and shall do or cause to be done all things necessary to preserve and keep in full force and effect its rights to do business in, and shall remain in good standing in, each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary.

8.2Compliance. Borrower shall comply with all covenants, conditions, restrictions, Leases, easements, reservations, rights and rights-of-way and all applicable Legal Requirements relating to the Project (including, without limitation, all Hazardous Materials Laws applicable to the Project and the ADA), and Borrower shall obtain and maintain in full force and effect all necessary approvals, consents, licenses and permits of any Governmental Authority. Borrower shall notify Lender promptly of any written notice or order that Borrower receives from any Governmental Authority relating to Borrower’s failure to comply with such applicable Legal Requirements.

8.3Payment of Taxes, Assessments and Charges. Except to the extent that Lender is obligated to pay Impositions and insurance premiums from the Tax and Insurance Reserve Account pursuant to the terms of Section 12.2, Borrower shall pay all Impositions and insurance premiums with respect to itself and the Project in accordance with the terms hereof. Borrower may, at its expense, after prior notice to Lender, contest by appropriate proceedings conducted in good faith and with due diligence, the validity or application of any Legal Requirements, Imposition, or any claims of mechanics, materialmen, suppliers or vendors, and may withhold payment of the same pending such proceedings if permitted by law, as long as (i) in the case of any Impositions or claims of mechanics, materialmen, suppliers or vendors, such proceedings shall suspend the collection thereof from the Project, (ii) neither the Project nor any part thereof or interest therein will be sold, forfeited or lost if Borrower pays the amount or satisfies the condition being contested, and Borrower would have the opportunity to do so, in the event of Borrower’s failure to prevail in such contest, (iii) Lender would not, by virtue of such permitted contest, be exposed to any risk of civil or criminal liability, and neither the Project nor any part thereof or any interest therein would be subject to the imposition of any Lien for which Borrower has not furnished additional security as provided in clause (iv) below, as a result of the failure to comply with any Legal Requirement of such proceeding which would not be released if Borrower pays the amount or satisfies the condition being contested, and Borrower would have the opportunity to do so, in the event of Borrower’s failure to prevail in the contest, and (iv) Borrower shall have furnished to Lender additional security in respect of the claim being contested or the loss or damage that may result from Borrower’s failure to prevail in such contest in the amount of one hundred percent (100%) of the amount of such claim.

8.4Books and Records. Borrower shall: (a) maintain full and complete books of account and other records reflecting the results of its operations in accordance with GAAP or another accounting method approved by Lender; and (b) permit Lender and its agents, at any time and from time to time during normal business hours, upon notice reasonable under the circumstances, which may be written or oral, to inspect and copy all of such books and records.

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8.5Entry and Inspection. Subject to the rights of tenants under the Leases, Lender and its authorized representatives shall, at all times, upon notice reasonable under the circumstances, which may be written or oral (except in the case of exigent circumstances, in which case no prior notice need be given), have the right of entry and free access to the Project to inspect the Project for any purpose including, without limitation, the evaluation of the existence, location, nature and magnitude of any Hazardous Materials, and Borrower’s compliance with Hazardous Materials Laws. Such entry shall be undertaken so as to minimize any interference with Borrower’s construction of any Improvements and tenants’ use of the Project to the extent reasonably possible and shall be subject to the rights of the tenants under the Leases. Lender shall not perform any invasive testing relating to Lender’s evaluation of Hazardous Materials unless an Event of Default shall have occurred and be continuing.

8.6Construction.

(a)Borrower shall commence the Demolition Work no later than the date set forth in Section 8.26 hereof.

(b)Borrower shall commence the Construction Work no later than the Commencement Date and shall complete the Construction Work by the Completion Date.

(c)Borrower shall deliver to Lender evidence satisfactory to Lender of all approvals, consents, licenses and permits of any Governmental Authority (including, without limitation, building permits and site plan approvals) necessary for the Improvements by August 1, 2017.

(d)Borrower shall deliver to Lender no later than twenty (20) days prior to the Commencement Date each of the following, which shall each be subject to the review and approval of Lender and Construction Consultant in their sole discretion (provided, however, Lender’s approval shall be in Lender’s reasonable discretion to the extent such deliverables are substantially similar to the preliminary versions approved by Lender as of the Closing Date):

(i)the final Plans and Specifications for the Improvements, sealed by the applicable Design Professionals;

(ii)the final Budget as reasonably approved by Lender;

(iii)a schedule of the identity of the Contractors for the Improvements representing at least 70% of the cost of the completion of the Construction Work (including the Major Contracts for the mechanical, electrical, plumbing, foundation, superstructure, sprinkler, carpentry and curtain wall work and any other Major Contractors deemed reasonably appropriate by Lender), and copies of the executed Contracts entered into with such Contractors and all material modifications, amendments and/or supplements with respect thereto, together with a certificate of an Authorized Officer of Borrower certifying that (A) the copies of the Contracts attached to such certificate are true, correct and complete in all material respects; (B) such Contracts attached to such certificate are in full force and effect; and (C) neither Borrower, nor, to Borrower’s knowledge, the Construction Manager nor the applicable Contractor is in default thereunder beyond notice and the expiration of applicable cure periods;

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(iv)a true and correct copy of the construction management agreement or general construction contract with respect to the Improvements certified as such by an Authorized Officer of Borrower and evidence that no term or condition of such contract shall have been modified, amended, supplemented and/or waived without the prior consent of Lender. The form and substance of the construction management agreement or general construction contract, as applicable, shall be satisfactory to Lender;

(v)the final Construction Schedule; and

(vi)evidence reasonably satisfactory to Lender that all items identified in the Environmental Report, including, without limitation, hydraulic fluids, waste, asbestos-containing materials and vapor encroachments, have been addressed or remediated.

8.7Use of Proceeds. Borrower shall use the proceeds of the Loan solely for the purposes permitted under this Agreement, including Exhibits CandD attached hereto, and the other Loan Documents.

8.8Additional Liabilities. Without the prior written consent of Lender, (a) Borrower shall not incur any indebtedness or obligations other than the indebtedness and obligations of Borrower under or by this Agreement and the other Loan Documents or any required Interest Rate Protection Agreement or unsecured trade payables relating to construction of the Improvements or the Project and incurred by Borrower in the ordinary course of its business not to exceed two percent (2%) of the outstanding principal balance of the Loan; (b) Borrower shall not cause or permit any additional Liens to encumber or otherwise affect title to the Project or the other Collateral, subject to Borrower’s right to contest the same pursuant to Section 8.3 above; and (c) Borrower shall not cause or permit any direct member of Borrower to mortgage, pledge, hypothecate or encumber such Person’s partnership, membership or other equity interest in Borrower.

8.9Leases.

(a)Borrower shall (i) observe and perform all of the material obligations imposed upon the lessor under the Leases; (ii) promptly send copies to Lender of all notices of default that Borrower shall send or receive under any Lease; (iii) promptly notify Lender of any tenant under a Lease which has vacated, or has given Borrower written notice of its intention to vacate, the premises leased to such tenant pursuant to the applicable Lease; and (iv) enforce the terms, covenants and conditions in the Leases to be observed by tenants in accordance with commercially reasonable practices for properties similar to the Project.

(b)Borrower shall obtain the prior written approval of Lender for any Lease, amendment thereto, assignment thereof, or subletting thereunder; provided, however, no such approval shall be required if such Lease (i) meets or exceeds the Leasing Guidelines, (ii) is documented using, with commercially reasonable revisions, the standard lease form approved by Lender in its reasonable discretion; (iii) [reserved]; (iv) is an arms-length transaction with a tenant that is not an Affiliate of Borrower, and (v) is subordinate to the Mortgages and the tenant thereunder agrees to attorn to Lender. Borrower shall promptly deliver to Lender a copy of each Lease entered into after the Closing Date, together with written certification from Borrower confirming that the copy delivered is a true, complete and correct copy of such Lease.

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(c)Borrower shall not (i) make any assignment or pledge of any Lease or Rents to anyone other than Lender until the Indebtedness is paid in full, (ii) collect any Rents under the Leases more than one (1) month in advance (except that Borrower may collect in advance such security deposits as are permitted pursuant to applicable Legal Requirements and are commercially reasonable in the prevailing market); (iii) terminate any Lease (provided, however, that Borrower may terminate any such Lease if the lessee thereunder is in material monetary default of such Lease); or (iv) execute or grant any modification of any Lease which in the aggregate would be reasonably likely to have a Material Adverse Effect, in each case without the prior written consent of the Lender, which approval may be granted or withheld in Lender’s reasonable discretion.

(d)Any letter of credit or other instrument that Borrower receives in lieu of a cash security deposit under any Lease shall, if permitted pursuant to applicable Legal Requirements, name Lender as payee or mortgagee thereunder (or, at Lender’s option, be fully assigned to and held by Lender).

8.10Limitations on Distributions. Upon the occurrence of an Event of Default and thereafter until such Event of Default is cured or waived, Borrower shall not distribute any money or other property to any Member or other Equity Interest holder in Borrower, whether in the form of earnings, income or other proceeds from the Project, provided that Borrower shall be permitted to make distributions to the extent required for the indirect owners of Borrower to comply with REIT tax rules; Borrower shall not repay any principal or interest on any loan or other advance made to Borrower by any Member in Borrower; and Borrower shall not loan or advance any funds to any such Member in Borrower.

8.11Subdivision Maps; Zoning; Joint Assessment. Borrower shall not record any final map, parcel map, lot line adjustment or other subdivision map of any kind covering any portion of the Project (or portion thereof) (collectively, “Subdivision Map”), or otherwise subdivide in any way, in each and every case, only with Lender’s prior written consent with respect thereto (which consent may be granted or withheld in Lender’s sole and absolute discretion). Borrower shall not materially change the Project’s use or initiate, join in or consent to any (a) change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting or defining the Project’s uses or any part thereof (including filing a declaration of condominium, map or any other document having the effect of subjecting the Project to the condominium or cooperative form of ownership), except those necessary in connection with the uses permitted pursuant to this Agreement, or (b) joint assessment of the Project with any other real or personal property.

8.12ERISA Compliance. Borrower shall take or refrain from taking, as the case may be, such actions as may be necessary to cause the representations and warranties in Section 6.19 to remain true and correct throughout the term of the Loans.

8.13Application of Gross Operating Income. To the extent required under the Cash Management Agreement during the continuance of an Event of Default, all Gross Operating Income deposited by Borrower into the Collection Account shall be applied by Lender pursuant to Section 3.3 hereof and the Cash Management Agreement.

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8.14Transfers. Except as expressly permitted as a Permitted Transfer, Borrower shall not Transfer the Project, any portion thereof or any interest therein, or allow a Transfer of any direct or indirect Equity Interests in Borrower or Guarantor, in each case, without the prior written consent of Lender. Except as expressly permitted in this Agreement, Borrower shall not cause or permit any direct or indirect Member or other Equity Interest holder in Borrower or any Guarantor to, directly or indirectly, Transfer, convey, assign, mortgage, pledge, hypothecate, encumber, alienate or grant a security interest in the partnership interest, membership interest or other equity interest of such partner, Member, other Equity Interest holder in Borrower without Lender’s prior written consent.

8.15Management.

(a)    Management of the Property. At all times after Construction Completion, the Project will be managed at all times by the Property Manager pursuant to a Lender-approved Property Management Agreement unless terminated as provided in the Loan Documents. Borrower shall diligently perform all terms and covenants of the Property Management Agreement. Borrower shall not (a) surrender, terminate, cancel, or materially modify the Property Management Agreement, (b) enter into any other agreement relating to the management or operation of the Project with Property Manager or any other Person, (c) consent to the assignment by Property Manager of its interest under the Property Management Agreement or (d) waive or release any of its rights and remedies under the Property Management Agreement, in each case, without the consent of Lender. Upon entering into any Property Management Agreement or, if at any time thereafter Lender consents to the appointment of a new property manager, Property Manager or such new property manager, as applicable, and Borrower shall, as a condition to Lender’s consent, execute a subordination of the new Property Management Agreement in form and substance satisfactory to Lender. With respect to any such new property manager (other than a property manager which is a nationally recognized third-party property manager subject to a Property Management Agreement on market terms), Lender’s consent may be conditioned upon Borrower delivering (or causing to be delivered) to Lender a Rating Agency Confirmation with respect to such new property manager and new Property Management Agreement. In no event shall property management fees payable by Property Manager in connection with its management of the Project exceed the greater of (i) $8,500 per month and (ii) 3.0% of gross revenue from the Project.

(b)    Leasing of the Project. At all times after Construction Completion, the Project will be leased at all times by a Lender-approved Leasing Agent pursuant to a Lender-approved Leasing Agreement unless terminated as provided in the Loan Documents. Borrower shall diligently perform all terms and covenants of the Leasing Agreement. Borrower shall not (a) surrender, terminate, cancel, or materially modify the Leasing Agreement, (b) enter into any other agreement relating to the leasing of the Project with Leasing Agent or any other Person, (c) consent to the assignment by Leasing Agent of its interest under the Leasing Agreement or (d) waive or release any of its rights and remedies under the Leasing Agreement, in each case, without the consent of Lender. If at any time Lender consents to the appointment of a new leasing agent, such new leasing agent and Borrower shall, as a condition to Lender’s consent, execute a subordination of the new Leasing Agreement in form and substance satisfactory to Lender.

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8.16Special Purpose Entity. Borrower, has been, shall be and shall remain at all times a special purpose bankruptcy remote entity (an “SPE”) and shall at all times comply with the following covenants:

(a)    The purpose for which Borrower is organized has always been and shall be limited to (i) owning, holding, selling, constructing, leasing, transferring, exchanging, operating and managing Borrower’s interest in the Project, (ii) entering into the Loan, (iii) refinancing the Project in connection with a permitted repayment of the Loan, and (iv) transacting any and all lawful business that is incident, necessary and appropriate to accomplish the foregoing.

(b)    Borrower has never owned, does not own and will not own any asset or property other than (i) the Project and (ii) incidental personal property necessary for and used in connection with the ownership or operation of the same.

(c)    Borrower has never and shall not engage in a business other than the ownership, operation and management of the Project and any other property which is hereafter acquired by Borrower with Lender’s prior written consent.

(d)    Borrower has not entered and will not enter into any contract or agreement with any Affiliate, any Guarantor, or any affiliate of any Guarantor other than the Property Management Agreement and the Construction Management Agreement, provided, however, that Borrower may enter into contracts with Affiliates with Lender’s prior written consent so long as such contracts relate to the Project and provide for payments at prevailing market rates.

(e)    Borrower has not incurred and will not incur any indebtedness, secured or unsecured, other than (i) the Loan and incidental costs and expenses associated therewith, (ii) indebtedness incurred in the ordinary course of business to vendors and suppliers of services to the Project (not more than thirty (30) days past due), (iii) non-delinquent property taxes and assessments, and (iv) any required Interest Rate Protection Agreement(s). No indebtedness other than the Loan may be secured (either subordinate or paripassu) by the Project, and no indebtedness may be secured, directly or indirectly, by any partnership, membership or other equity interest in Borrower.

(f)    Borrower has not made and will not make any loans or advances to any person or entity and shall not acquire obligations or securities of an Affiliate.

(g)    Borrower has always been, is and will remain solvent and Borrower will pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same shall become due.

(h)    Borrower has done or caused to be done and will do all things necessary to observe organizational formalities and preserve its existence, and Borrower will not materially amend, modify or otherwise change, in violation of the covenants of this Section 8.16, the partnership certificate, partnership agreement, articles of incorporation and bylaws, operating agreement, trust or other organizational documents of Borrower without the written consent of Lender.

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(i)    Borrower has always maintained and shall maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates. Borrower’s assets have not been and will not be listed as assets on the financial statement of any other Person. Borrower has always had and shall have its own separate financial statement, provided, however, that Borrower’s assets may be included in a consolidated financial statement of its parent companies if inclusion on such a consolidated statement is required to comply with the requirements of GAAP, and provided, further, that such consolidated financial statement shall contain a footnote to the effect that Borrower’s assets are owned by Borrower and that they are being included on the financial statement of its parent solely to comply with the requirements of GAAP. Borrower has always filed and will file its own tax returns and will not file a consolidated federal income tax return with any other corporation. Borrower has always maintained and shall maintain its books, records, resolutions and agreements as official records.

(j)    Borrower has always been, will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other person or entity, shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name and shall not identify itself or any of its Affiliates as a division or part of the other.

(k)    Borrower has always maintained and will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.

(l)    Neither Borrower nor any constituent party has ever sought or will seek the dissolution, winding up, liquidation, consolidation or merger, in whole or in part, or the sale of material assets of Borrower.

(m)    Borrower has never and will not commingle the funds and other assets of Borrower with those of any other Person, and will not participate in a cash management system with any such Person.

(n)    Borrower has never and will not commingle its assets with those of any other Person and will hold all of its assets in its own name.

(o)    Borrower has never and will not guarantee or become obligated for the debts of any other Person and does not and will not hold itself out as being responsible for the debts or obligations of any other Person.

(p)    Borrower has never and shall not pledge its assets for the benefit of any other Person, other than with respect to the Loan.

(q)    Borrower has never and shall not file a petition for relief under the Bankruptcy Code, or under any other present or future state of federal law regarding bankruptcy, reorganization or other debtor relief law.

8.17Approved Budget. Borrower shall cause the Project to be owned and operated in accordance with the Approved Budget, and shall make no changes (other than de minimis changes) to any such Approved Budget without the prior written consent of Lender.

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8.18Intentionally Omitted.

8.19Initial Equity and Future Equity. Borrower shall cause the Initial Equity to be contributed to or applied in payment of the costs and expenses incurred by Borrower in connection with Borrower’s acquisition of the Project on or prior to the Effective Date, including the payment to Seller of a portion of the purchase price payable for the Project. No Initial Equity shall be removed as Borrower’s equity from the Project or utilized to pay any fees, costs, refunds or other charges for the Project or the Loan transaction. Borrower shall cause the Future Equity to be contributed to or applied in payment of the costs and expenses incurred by Borrower in connection with Borrower’s construction, renovation and leasing of the Project in accordance with the Approved Budget. In the event all of the Future Equity has not been contributed in accordance with this Section 8.19 upon the later to occur of (x) the date which is thirty (30) months from the Closing Date and (y) substantial completion of the Project, Borrower shall cause all such unfunded Future Equity to be deposited into a Lender-controlled reserve account (the “Leasing and Operations Reserve Account”) to be held and disbursed in accordance with the terms of Section 3.3(c) hereof.

8.20Maintenance of the Project; Alterations.

(a)    Upon the Construction Completion, Borrower shall:

(i)    maintain or cause to be maintained the Improvements with the facilities and amenities as described in the definition of “Improvements,” in good condition and repair, in a manner consistent with retail property located in New York City, and make or cause to be made all reasonably necessary repairs or replacements thereto;

(ii)    not remove, demolish or structurally alter, or permit or suffer the removal, demolition or structural alteration of, any of the Improvements without the prior written consent of Lender except to the extent required pursuant to the development of the Project and in connection with the Construction Work or as permitted by this Agreement or required by Applicable Law;

(iii)    subject to the terms of the Loan Documents (including Lender’s release of the applicable funds pursuant to and in accordance with the terms hereof), promptly restore or cause to be restored in like manner any portion of the Improvements which may be damaged or destroyed from any cause whatsoever;

(iv)    not commit, or permit, any physical waste of the Project; and

(v)    subject to the terms of the Loan Documents, not remove or permit the removal of any item constituting part of the Project without replacing it with a comparable item of equal quality, value and usefulness; except that the foregoing provisions shall not prohibit the sale or disposition, in the ordinary course of business, of any property which is obsolete or such replacement is impracticable and in the sound business judgment of Borrower, all as subject to

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the consent of Lender, which consent shall not be unreasonably withheld, delayed or conditioned.

(b)    Upon Construction Completion, Borrower shall obtain Lender’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, to any structural alterations to any improvements that is reasonably likely to have a Material Adverse Effect on Borrower’s financial condition, the use, operation or value of the Project, the actual operating revenues with respect to the Project, other than alterations performed in connection with the restoration of the Project after the occurrence of a casualty in accordance with the terms and provisions of this Agreement and the other Loan Documents.

8.21Interest Rate Protection Agreement. At all times during the term of the Loan, Borrower shall maintain in effect an Interest Rate Protection Agreement with a counterparty (“Counterparty”) reasonably acceptable to Lender having a Minimum Counterparty Rating. In the event of any downgrade or withdrawal of the rating of such Counterparty by any Rating Agency below the Minimum Counterparty Rating, Borrower shall replace the Interest Rate Protection Agreement not later than thirty (30) days following receipt of notice from Lender of such downgrade or withdrawal with an Interest Rate Protection Agreement in form and substance reasonably satisfactory to Lender (and meeting the requirements set forth in this Section 8.21) from a Counterparty reasonably acceptable to Lender having a Minimum Counterparty Rating.

8.22Intentionally Omitted.

8.23Compliance with ZLDA. At all times during the term of the Loan, Borrower shall comply in all material respects with all covenants, conditions and restrictions set forth in the ZLDA, including, without limitation, section 4 thereof.

8.24Performance of Project Documents and Easements.

(a)    Borrower shall (i) perform and observe in all material respects all of its respective covenants and agreements contained in any of the Project Documents to which it is a party, (ii) take all reasonable and necessary action to prevent the termination of any such Project Document in accordance with the terms thereof or otherwise, (iii) enforce each material covenant or obligation of each such Project Document in accordance with its terms, (iv) promptly give Lender copies of any default or other material written notices given by or on behalf of Borrower received by or on behalf of Borrower from any other Person under the Project Documents and (v) take all such action to achieve the purposes described in clauses (i), (ii) and (iii) of this Section 8.24 as may from time to time be reasonably requested by Lender; provided, however, that Borrower shall be permitted, upon Lender’s reasonable approval, to contest the validity or applicability of any requirement under the Project Documents and provided further, that Borrower’s obligations under this Section 8.24(a) shall not apply to any Project Document unless the breach or termination thereof could result in a Material Adverse Effect upon the Project which would not be mitigated by a substitute or replacement Project Document.

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(b)    Borrower will comply with all restrictive covenants and easements affecting the Project (unless the Title Company has insured against the enforcement of same in the Title Policy). All covenants, easements, cross easements or operating agreements which may hereafter be acquired, entered into or amended by Borrower affecting the Project (it being understood that Borrower will use reasonable efforts to procure such of the foregoing items as Lender may reasonably deem appropriate) shall be submitted to Lender for Lender’s approval, which shall not be unreasonably withheld or delayed, prior to the execution thereof by Borrower, accompanied by a drawing or survey showing the location thereof.

8.25Proceedings to Enjoin or Prevent Construction. If any proceedings are filed seeking to enjoin or otherwise prevent or declare invalid or unlawful all or any part of the Construction Work, Borrower, at its sole cost and expense, will cause such proceedings to be vigorously contested in good faith, and in the event of an adverse ruling or decision, prosecute all allowable appeals therefrom, and will, without limiting the generality of the foregoing, resist the entry or seek the stay of any temporary or permanent injunction that may be entered, and use its best efforts to bring about a favorable and speedy disposition of all such proceedings.

8.26Construction Milestones. Borrower shall (i) commence Demolition Work after the earlier to occur of (x) thirty (30) days after receipt of all approvals, consents, licenses and permits of any Governmental Authority necessary to conduct such work and (y) one hundred eighty (180) days after the Closing Date and (ii) commence Construction Work within twelve (12) months after the Closing Date (the “Commencement Date”); provided that the foregoing time periods may be extended if a Force Majeure Event has occurred. Borrower shall at all times diligently pursue development of the Project.

8.27Ground Lease. Borrower shall (i) promptly perform and observe all of the covenants required to be performed and observed by it under the Ground Lease and do all things necessary to preserve and to keep unimpaired its rights thereunder; (ii) promptly notify Lender of any default under the Ground Lease of which it receives actual notice; (iii) promptly deliver to Lender a copy any written notice received by Borrower under the Ground Lease; and (iv) promptly enforce the performance and observance of all of the covenants required to be performed and observed by ground lessor under the Ground Lease. Without Lender’s prior written consent, Borrower shall not (a) surrender, terminate, cancel, extend or renew the Ground Lease; (b) modify, change, supplement, alter or amend in any respect, or waive or release any of its rights and remedies under, the Ground Lease; or (c) suffer or permit the occurrence and continuance of a default beyond any applicable cure period under the Ground Lease. In the event Borrower acquires or succeeds to the fee estate of the Project, with or without any outstanding intervening estates or interests, no merger of estates or interests shall be deemed to have occurred without Lender’s express written consent.

ARTICLE IX

HAZARDOUS MATERIALS

9.1Special Representations and Warranties. Without in any way limiting the other representations and warranties set forth in this Agreement, Borrower hereby expressly represents and warrants to Lender, to the best of Borrower’s knowledge and except as disclosed

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in that certain Phase I Environmental Site Assessment, prepared by WCD Group, LLC, dated as of November 11, 2016 (the “Environmental Report”), as follows:

(a)    Hazardous Materials. The Project is not and, during Borrower’s period of ownership, has not been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any oil; flammable explosives; asbestos; urea formaldehyde insulation; radioactive materials; fungi or bacterial matter which reproduces through the release of spores or the splitting of cells, including, without limitation, mold, mildew, and viruses, whether or not living (collectively, “Mold”); hazardous wastes; toxic or contaminated substances or similar materials, including, without limitation, any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “wastes,” “regulated substances,” “industrial solid wastes,” or “pollutants” under the Hazardous Materials Laws, as described below, and/or other applicable environmental laws, ordinances and regulations (collectively, “Hazardous Materials”). “Hazardous Materials” shall not include De Minimis Hazardous Materials (as defined in the Environmental Indemnity Agreement) or commercially reasonable amounts of such materials used in the ordinary course of operation of the Property which are used and stored in accordance with all Hazardous Material Laws, or Mold in amounts or concentrations not detectable by means such as those used in preparing a standard phase I mold survey..

(b)    Hazardous Materials Laws. The Project is in compliance with all laws, ordinances and regulations relating to Hazardous Materials (“Hazardous Materials Laws”), including, without limitation: the Clean Air Act, as amended, 42 U.S.C. Section 7401etseq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251etseq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901etseq.; the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986, “CERCLA”), 42 U.S.C. Section 9601etseq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601etseq.; the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C Section 11001etseq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801etseq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300fetseq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations.

(c)    Hazardous Materials Claims. There are no claims or actions pending or threatened against Borrower or, to the best of Borrower’s knowledge, the Project by any Governmental Authority or by any other Person relating to Hazardous Materials or pursuant to Hazardous Materials Laws (“Hazardous Materials Claims”).

9.2Hazardous Materials Covenants. Borrower agrees as follows:

(a)    No Hazardous Activities. Borrower shall not cause or permit the Project to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials.

(b)    Compliance. Borrower shall comply and cause the Project to comply with all Hazardous Materials Laws.

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(c)    Notices. Borrower shall promptly notify Lender in writing of: (i) the discovery of any Hazardous Materials on, under or about the Project; (ii) any knowledge by Borrower that the Project does not comply with any Hazardous Materials Laws; or (iii) any Hazardous Materials Claims.

(d)    Remedial Action. In response to the presence of any Hazardous Materials on, under or about the Project, Borrower shall immediately take, at Borrower’s sole cost and expense, all remedial action required by any Hazardous Materials Laws or any judgment, consent decree, settlement or compromise with respect to any Hazardous Materials Claims.

9.3Inspection by Lender. Lender, its employees and agents, may from time to time (whether before or after the commencement of a nonjudicial or judicial foreclosure proceeding) enter and inspect the Project during normal business hours for the purpose of determining the existence, location, nature and magnitude of any past or present Release or threatened Release of any Hazardous Materials into, onto, beneath or from the Project. In connection therewith, Lender shall not conduct any invasive testing of the Project unless an Event of Default shall have occurred and be continuing.

9.4Hazardous Materials Indemnity. Borrower hereby agrees to indemnify, defend and hold harmless Lender and the Indemnified Parties from and against any and all actual losses, damages, liabilities, claims, actions, judgments, costs and legal or other expenses (including, without limitation, reasonable attorneys’ fees and expenses) which Lender or any Indemnified Party actually incurs as a direct or indirect consequence of: (a) the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any Hazardous Materials which are found in, on, under or about the Project in violation of Hazardous Materials Laws; or (b) the breach of any covenant (or representation or warranty) of Borrower under this Article IX. Such indemnity shall include, without limitation: (i) the costs, whether foreseeable or unforeseeable, of any repair, cleanup or detoxification of the Project which is required by any governmental entity or is otherwise necessary to render the Project in compliance with all Hazardous Materials Laws; (ii) all other direct or indirect consequential damages (including, without limitation, any third party tort claims or governmental claims, fines or penalties against Lender or any Indemnified Party); (iii) injury to persons and property; and (iii) all reasonable court costs and attorneys’ fees and expenses paid or incurred by Lender or any Indemnified Party. Borrower’s duty and obligations to defend, indemnify and hold harmless Lender and the Indemnified Parties shall survive the cancellation of the Notes and the release, reconveyance or partial reconveyance of the Mortgages.

ARTICLE X

APPLICATION OF CERTAIN FUNDS

10.1Priority of Application. Borrower shall cause all Gross Operating Income to be applied on a monthly basis for the following purposes and in the following order of priority:

(a)    First, to the payment of the Lender-approved Operating Expenses pursuant to the Approved Budget;

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(b)    Next, the balance, if any to fund any reserves required hereunder or under the Cash Management Agreement;

(c)    Next, the balance, if any, to Lender to make the monthly interest payments due and payable on the Loan; and

(d)    Next, the balance, if any, to Borrower, to be applied as provided in (and subject to the limitations set forth in) Section 10.3 below.

IN THE EVENT THAT GROSS OPERATING INCOME SHALL NOT BE SUFFICIENT TO ENABLE BORROWER TO MAKE ANY OF THE PAYMENTS DESCRIBED IN SUBPARAGRAPHS (a), (b) AND/OR (c) ABOVE (OR THAT FUNDS ARE NOT SUFFICIENT IN THE INTEREST HOLDBACK TO MAKE THE PAYMENTS DESCRIBED IN (c) ABOVE), BORROWER SHALL BE AND REMAIN OBLIGATED TO MAKE SUCH PAYMENTS FROM OTHER SOURCES.

10.2Security Deposit Account. Borrower shall establish and maintain with a national financial institution reasonably acceptable to Lender an additional demand deposit account in the name of Borrower (together with any successor account, the “Security Deposit Account”), and such security deposits may be commingled with Borrower’s other funds so long as such commingling is in accordance with applicable law. Borrower shall promptly deliver to such Security Deposit Account a sum representing the aggregate liability of Borrower as of such date for security deposits made by tenants at the Project. From and after the Effective Date, Borrower shall promptly deliver to the Security Deposit Account (a) any cash security deposits thereafter received from tenants at the Project, and (b) the proceeds of any letter of credit posted by any tenant in lieu of a cash security deposit arising at such time, if any, as draws are made against such letter of credit. Interest on each tenant security deposit shall be accounted for by Lender in cases where interest is required to be paid to tenants. So long as no Event of Default under the Loan Documents has occurred and is continuing, all sums in the Security Deposit Account shall be utilized by Borrower in such Security Deposit Account to be used for the refund of the tenant security deposits which have been deposited in the Security Deposit Account or to pay Borrower to the extent Borrower is then entitled to retain any portion of such tenant security deposits pursuant to the terms of the tenant leases.

10.3No Distributions to Borrower. Borrower shall have no right to apply any Gross Operating Income for any purpose other than as expressly provided herein without Lender’s prior written approval, which approval may be granted or withheld in Lender’s sole and absolute discretion. Without limitation on the foregoing, in no event shall any such proceeds ever be paid to Borrower or any Member during the continuance of an Event of Default.

ARTICLE XI

EVENTS OF DEFAULT AND REMEDIES

11.1Events of Default. The occurrence of any one or more of the following, whatever the reason therefor, shall constitute an Event of Default hereunder:

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(a)    Payment. Borrower shall fail to pay any accrued interest on the Loans, any portion of the principal amount of the Loans, or any other amount payable by Borrower under the this Agreement or the other Loan Documents within five (5) days following the date when and as the same shall become due and payable, provided that the foregoing grace period shall not apply to amounts payable by Borrower on the Maturity Date.

(b)    Other Covenants. Borrower shall fail to perform any other covenant or agreement to be performed by Borrower under this Agreement or the other Loan Documents, and such failure shall continue for more than thirty (30) days after written notice thereof is given to Borrower by Lender (provided, however, that such 30-day cure period shall not apply to any of the occurrences set forth in clauses (a), or (c) – (s), inclusive, of this Section 11.1); provided, however, if any such failure cannot reasonably be cured within said thirty (30) day period, then Borrower shall have such additional time (not to exceed ninety (90) days) to cure such failure as may be reasonable under the circumstances and no Event of Default shall be deemed to exist hereunder so long as Borrower commences such cure within the initial thirty (30) day period and diligently and in good faith pursues such cure to completion within such additional period.

(c)    Liens, Attachments, Condemnation. (i) Subject to Borrower’s right to contest set forth in this Agreement, the recording of any mechanic’s lien or claim of lien against in the Project and the continuance of such lien or claim of lien for forty-five (45) days without discharge, satisfaction or provision for payment being made by Borrower in a manner satisfactory to Lender, or without provision of a bond to release such lien of record satisfactory to Lender; (ii) subject to Borrower’s right to contest set forth in this Agreement, the condemnation, seizure or appropriation of, or the occurrence of a material uninsured casualty with respect to, any material portion of the Project; or (iii) the sequestration or attachment of, or any levy or execution upon, any of the Project, any other Collateral, or any substantial portion of the other assets of Borrower, which sequestration, attachment, levy or execution is not released, expunged or dismissed prior to the earlier of sixty (60) days or the sale of the assets affected thereby.

(d)    Representations and Warranties. Any representation or warranty made by Borrower in this Agreement or any of the other Loan Documents or in any certificate, agreement, instrument or other document made or delivered pursuant to or in connection with any of the Loan Documents shall have been false or misleading in any material respect when made.

(e)    Dissolution. Borrower or Guarantor is terminated, dissolved or liquidated; or all or substantially all of the assets of Borrower or Guarantor are sold or otherwise transferred or disposed of without Lender’s written consent.

(f)    Insolvency. (i) Borrower or Guarantor is the subject of an order for relief by any bankruptcy court, or is unable or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or (ii) Borrower or Guarantor applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed

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without the application or consent of Borrower or Guarantor, as applicable, and the appointment continues undischarged or unstayed for sixty (60) days; or (iii) Borrower or Guarantor institutes or consents to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation, rehabilitation or similar proceedings relating to it or to all or any part of its property under the applicable Legal Requirements of any jurisdiction; or any similar proceeding is instituted without the consent of Borrower or Guarantor, as applicable, and continues undismissed or unstayed for ninety (90) days; or (iv) any judgment, writ, attachment, execution or similar process is issued or levied against all or any part of the property of Borrower or Guarantor and is not released, vacated or fully bonded within sixty (60) days after its issue or levy.

(g)    Material Adverse Change in Borrower or Guarantor. There shall occur a change in the financial condition of Borrower or any Guarantor from the financial condition of Borrower or Guarantor as of the date of this Agreement, and such change would be reasonably likely to have a Material Adverse Effect upon the right or ability of Lender to receive payment in full of all amounts payable by Borrower or any Guarantor to Lender under this Agreement or the other Loan Documents, and Borrower shall fail to present evidence satisfactory to Lender that such condition has been remedied within thirty (30) days after written notice by Lender to Borrower.

(h)    Other Default. The occurrence of any other event, circumstance or condition that constitutes an “Event of Default” under any of the other Loan Documents or a breach or default under any of the Guaranty Documents, beyond the expiration of any applicable grace or cure periods, if any, specified for such breach or default therein, as the case may be.

(i)    Retirement, Incapacity, Withdrawal or Death. In Lender’s sole discretion, the retirement, death or incapacity of any individual Guarantor or the withdrawal of Guarantor from active participation in Borrower’s business activities.

(j)    Transfers. Borrower shall fail to strictly comply with the provisions of Section 8.14 (Transfers; Management of Borrower);

(j)    Single Purpose Entity. Borrower shall fail to strictly comply with the provisions of Section 8.16 (Special Purpose Entity).

(k)    ERISA Compliance. Borrower shall fail to strictly comply with the provisions of Section 8.12 (ERISA Compliance).

(l)    Loss of Priority. The failure at any time of the Mortgages to be valid superior Liens upon the Project or any portion thereof, other than as a result of any release or reconveyance of the Mortgages with respect to any portion of Borrower’s interest in the Project pursuant to this Agreement.

(m)    Hazardous Materials. The discovery of any significant Hazardous Materials in, on, under or about the Project subsequent to the Effective Date that either are in amounts or concentrations which are in excess of the maximum levels permitted under applicable Hazardous Materials Laws, or which would otherwise have a Material Adverse Effect upon the use or value of the Project. Whether such Hazardous Materials are “significant” shall

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be determined by Lender in accordance with its then current underwriting practices. Notwithstanding the foregoing, the discovery of Hazardous Materials shall not be an Event of Default so long as, promptly after such discovery, Borrower commences and diligently pursues remediation of the Hazardous Materials in compliance with Hazardous Materials Laws.

(n)    Net Worth Covenant. Guarantor shall breach the Net Worth Covenant; provided that, in the event the Onyx Guarantor causes the breach of such covenant, Guarantor may replace such Onyx Guarantor with the KBS Guarantor or another guarantor approved by Lender in its reasonable discretion, provided such replacement guarantor would cause Guarantor to satisfy the Net Worth Covenant.

(o)    In-Balance. Borrower shall fail to strictly comply with the provisions of Section 4.3 of this Agreement.

(p)    Building Loan Agreement Default. An Event of Default shall occur under the Building Loan Agreement, which continues beyond notice and applicable grace periods provided therein.

(q)    Debt Service Coverage Ratio. If during any Extension Term, the Debt Service Coverage Ratio, as determined by Lender as of the end of any calendar month, shall be less than 1.35:1.00 and such requirement is not achieved within thirty (30) days after notice thereof by Lender.

(r)    Construction Milestones. Borrower shall fail to strictly comply with the provisions of Section 8.26; provided that no Event of Default shall occur as a result of such failure if Borrower shall have delivered or caused to be delivered to Lender an updated “as is” Appraisal (at Borrower’s expense) evidencing that the Loan-to-Value Ratio does not exceed 70.0%, it being understood that Borrower may prepay the Loan in accordance with the Loan Documents in order to cause compliance with the condition set forth in this proviso.

(s)    Ground Lease. Subject to any notice and cure rights benefitting Borrower as set forth in the Ground Lease, if (A) Borrower shall fail in the payment of any rent, additional rent or other charge mentioned in or made payable by the Ground Lease as and when such rent or other charge is payable (unless waived by the landlord under the Ground Lease), (B) there shall occur any default by Borrower, as tenant under the Ground Lease, in the observance or performance of any term, covenant or condition of the Ground Lease on the part of Borrower, to be observed or performed (unless waived by the landlord under the Ground Lease), (C) if any one or more of the events referred to in the Ground Lease shall occur which would cause the Ground Lease to terminate without notice or action by the landlord under the Ground Lease or which would entitle the landlord to terminate the Ground Lease and the term thereof by giving notice to Borrower, as tenant thereunder (unless waived by the landlord under the Ground Lease), (D) if the leasehold estate created by the Ground Lease shall be surrendered or the Ground Lease shall be terminated or canceled for any reason or under any circumstances whatsoever or (E) if any of the terms, covenants or conditions of the Ground Lease shall in any manner be modified, changed, supplemented, altered, or amended without the consent of Lender of if Borrower fails to exercise any renewal options under the Ground Lease.

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11.2Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers and other remedies available to Lender against Borrower under any Loan Document, or at law or in equity may be exercised by Lender at any time and from time to time (including the right to accelerate and declare the outstanding Indebtedness to be immediately due and payable), without notice or demand, whether or not all or any portion of the Indebtedness shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any portion of the Project. Notwithstanding anything contained to the contrary herein, the outstanding Indebtedness shall be accelerated and immediately due and payable, without any election by Lender upon the occurrence of an insolvency action described in Section 11.1(f).

11.3Remedies Cumulative. The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents executed by or with respect to Borrower, or existing at law or in equity or otherwise. Lender’s rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of any Event of Default shall not be construed to be a waiver of any subsequent Event of Default or to impair any remedy, right or power consequent thereon. Any and all of Lender’s rights with respect to the Project shall continue unimpaired, and Borrower shall be and remain obligated in accordance with the terms hereof, notwithstanding (a) the release or substitution of Project at any time, or of any rights or interest therein or (b) any delay, extension of time, renewal, compromise or other indulgence granted by Lender in the event of any Event of Default with respect to the Project or otherwise hereunder. Notwithstanding any other provision of this Agreement, Lender reserves the right to seek a deficiency judgment or preserve a deficiency claim, in connection with the foreclosure of the Mortgages on the Project, to the extent necessary to foreclose on other parts of the Project.

11.4Lender Appointed Attorney-In-Fact. Borrower hereby irrevocably and unconditionally constitutes and appoints Lender as Borrower’s true and lawful attorney-in-fact, with full power of substitution, at any time after the occurrence and during the continuance of an Event of Default to execute, acknowledge and deliver any documents, agreements or instruments and to exercise and enforce every right, power, remedy, option and privilege of Borrower under all Loan Documents, and do in the name, place and stead of Borrower, all such acts, things and deeds for and on behalf of and in the name of Borrower under any Loan Document, which Borrower could or might do or which Lender may deem necessary or desirable to more fully vest in Lender the rights and remedies provided for under the Loan Documents and to accomplish the purposes thereof. The foregoing powers of attorney are irrevocable and coupled with an interest.

11.5Lender’s Right to Perform. If Borrower fails to perform any covenant or obligation contained herein after the expiration of any applicable cure period, Lender may, but shall have no obligation to, perform, or cause performance of, such covenant or obligation, and

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the expenses of Lender incurred in connection therewith shall be payable by Borrower to Lender upon demand, together with interest thereon at the Default Interest Rate. Notwithstanding the foregoing, Lender shall have no obligation to send notice to Borrower of any such failure.

11.6Lender’s Right to Complete Construction. Lender may take possession of the Project and complete the construction and equipping of the Improvements pursuant to the Plans and Specifications and do anything in its reasonable judgment to fulfill the obligations of Borrower hereunder, including either the right to avail itself of and procure performance of existing contracts or let any contracts with the same contractors or others and to employ watchmen to protect the Project from injury. Without restricting the generality of the foregoing and for the purposes aforesaid, during the continuance of an Event of Default, Borrower hereby appoints and constitutes Lender its lawful attorney-in-fact with full power of substitution in the Project to complete construction of the Improvements in the name of Borrower; to use unadvanced funds remaining under the Commitments or which may be reserved, or escrowed or set aside for any purposes hereunder at any time, or to advance funds in excess of the face amount of the Notes (and all such amounts shall be payable by Borrower together with interest at the Default Interest Rate), to complete the Improvements; to make changes in the Plans and Specifications which shall be necessary to complete the Improvements in substantially the manner contemplated by the Plans and Specifications; to retain or employ new general contractors, subcontractors, architects, engineers and inspectors as shall be required for said purposes; to pay, settle, or compromise all existing bills and claims and Liens against the Project and take any other steps relating to clearing title to the Project from any Liens that are not Permitted Encumbrances, or to avoid such bills and claims becoming Liens against the Project or security interest against fixtures or equipment, or as may be necessary or desirable for the completion of the construction and equipping of the Improvements or for the clearance of title; to execute all applications and certificates in the name of Borrower which may be required by any of the contract documents; to do any and every act which Borrower might do in its own behalf; and to prosecute and defend all actions or proceedings in connection with the Project or fixtures or equipment; to take action and require such performance as it deems necessary under any bonds furnished in connection with the construction of the Improvements and to make settlements and compromises with surety or sureties thereunder, and in connection therewith, to execute instruments of release and satisfaction; it being understood and agreed that this power of attorney shall be a power coupled with an interest and cannot be revoked.

11.7Lender’s Rights under the Completion Guaranty. Lender may exercise its rights under the Completion Guaranty to require the applicable Guarantor to perform thereunder, in which case Borrower hereby (1) authorizes Lender to make advances of the Loans directly to the applicable Guarantor in accordance with the terms of the Completion Guaranty and this Agreement and (2) agrees that Borrower shall be liable to Lender for all such advances to the applicable Guarantor and such advances shall be deemed Loans under this Agreement and be evidenced by the Notes and secured by the Mortgages and the other Security Documents.

11.8NO OBLIGATION WITH RESPECT TO COMPLETION OF THE IMPROVEMENTS. WHETHER OR NOT LENDER ELECTS TO EMPLOY ANY OR ALL OF THE REMEDIES AVAILABLE UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, LENDER SHALL NOT BE LIABLE FOR THE CONSTRUCTION OF OR

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FAILURE TO CONSTRUCT, COMPLETE OR PROTECT THE IMPROVEMENTS OR FOR PAYMENT OF ANY EXPENSES INCURRED IN CONNECTION WITH THE EXERCISE OF ANY REMEDY AVAILABLE TO LENDER OR FOR THE PERFORMANCE OR NON-PERFORMANCE OF ANY OTHER OBLIGATION OF BORROWER.

ARTICLE XII

RESERVE ACCOUNTS

12.1Reserve Accounts Generally.

(a)Establishment. Prior to Construction Completion, Lender shall establish a “Tax and Insurance Reserve Account” for the purpose of holding the funds to be deposited by Borrower pursuant to this Article XII or in accordance with the Cash Management Agreement. The Tax and Insurance Reserve Account shall be a custodial account established by Lender and shall not constitute a trust fund. At Lender’s option, funds deposited into the Tax and Insurance Account may be commingled with other money held by Lender or its servicer. Borrower acknowledges and agrees that the Tax and Insurance Account is subject to the sole dominion, control and discretion of Lender, its authorized agents or designees, subject to the terms hereof. Borrower shall not have the right to make any withdrawal from the Tax and Insurance Account.

(b)Application upon Event of Default. Notwithstanding anything to the contrary contained herein, if an Event of Default has occurred and is continuing, (i) any amounts deposited into or remaining in the Tax and Insurance Account shall be for the account of Lender and may be withdrawn by Lender to be applied in any manner as Lender may elect in Lender’s discretion, and (ii) Borrower shall have no further right in respect of the Tax and Insurance Account.

12.2Tax and Insurance. Beginning on the first Payment Date occurring after Construction Completion and on each Payment Date thereafter, Borrower shall deliver to Lender the amount reasonably estimated by Lender to be one-twelfth (1/12th) of the annual amount of (A) Impositions, and (B) insurance premiums for policies required pursuant to this Agreement, (collectively, the “Tax and Insurance Monthly Installment”). If such amounts for the then current Fiscal Year or payment period are not ascertainable by Lender at the time a monthly deposit is required to be made, the Tax and Insurance Monthly Installment shall be Lender’s reasonable estimate based on one-twelfth (1/12th) of the aggregate Impositions and insurance premiums for the prior Fiscal Year or payment period, with adjustments reasonably determined by Lender. As soon as Impositions and insurance premiums are fixed for the then current Fiscal Year or period, the next ensuing Tax and Insurance Monthly Installment shall be adjusted to reflect any deficiency or surplus in prior Tax and Insurance Monthly Installments. Lender shall make payments of Impositions and insurance premiums out of the Tax and Insurance Reserve Account before the same shall be delinquent to the extent that there are funds available in the Tax and Insurance Reserve Account and Lender has received appropriate documentation to establish the amount(s) due and the due date(s) as and when provided above.

12.3Interest on Reserve Accounts. Borrower shall not be entitled to any earnings or interest on funds deposited into the Tax and Insurance Accounts.

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ARTICLE XIII

SECONDARY MARKET TRANSACTIONS

13.1General. Borrower hereby acknowledges that Lender may, at no cost or expense to Borrower, in one or more transactions (a) sell or securitize the Loan or portions thereof in one or more transactions through the issuance of securities, which securities may be rated by the Rating Agencies, (b) sell, pledge or otherwise transfer the Loan or any portion thereof one or more times (including selling or assigning its duties, rights or obligations hereunder or under any Loan Document in whole, or in part, to a servicer and/or a trustee), (c) sell participation interests in the Loan one or more times, (d) re-securitize the securities issued in connection with any securitization, and/or (e) further divide the Loan into two or more separate notes or components (the transactions referred to in clauses (a) through (e) above, each a “Secondary Market Transaction” and collectively “Secondary Market Transactions”). With respect to any Secondary Market Transaction described in clause (e) above, (i) such notes, note components may be assigned different principal amounts and interest rates, so long as at all times during the term of the Loan after the effective date of such modification, the aggregate amount of, and the weighted average of the interest rates payable under, the Loan and such component note(s), equal the outstanding Indebtedness and Applicable Interest Rate, respectively, immediately prior to such modification, and (ii) Borrower agrees (at no cost to Borrower other than de minimis costs and expenses) to execute and deliver to Lender such amendments to the Loan Documents, title insurance endorsements, legal opinions and other customary loan documentation as Lender may reasonably require in connection therewith), including, without limitation, delivery of a substantive non-consolidation legal opinion in form and substance reasonably satisfactory to Lender.

13.2Reserved.

13.3Dissemination of Information. If Lender determines at any time to participate in a Secondary Market Transaction, Lender may forward to each purchaser, transferee, assignee, servicer, participant or investor in such securities (individually, an “Investor” and collectively, the “Investors”), any Rating Agency rating such securities, any organization maintaining databases on the underwriting and performance of commercial loans, trustee, counsel, accountant, and each prospective Investor, all documents and information which Lender now has or may hereafter acquire relating to the Loan, Borrower, any direct or indirect equity owner of Borrower, any Guarantor, any Indemnitor and the Project, which shall have been furnished by Borrower, any Affiliate of Borrower, any Guarantor, any Indemnitor, or any party to any Loan Document, or otherwise furnished in connection with the Loan, as Lender in its discretion determines necessary or desirable; provided, however, Lender shall not share any confidential information of Borrower, any Affiliate of Borrower, any Guarantor or any Indemnitor with any potential loan participant or assignee without Borrower’s prior consent (not to be unreasonably withheld), which consent shall require execution of a confidentiality agreement or agreements in form and substance satisfactory to Borrower.

13.4Change of Payment Date. At any time prior to securitization of the Loan by Lender, Lender shall have the right to change the Payment Date to a date other than as set forth in the Notes (such new date, the “New Payment Date”) on thirty (30) days’ written notice to

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Borrower; provided, however, that any such change in the Payment Date: (i) shall not modify the amount of regularly scheduled monthly principal and interest payments, except that the first payment of principal and interest payable on the New Payment Date shall be accompanied by interest at the Applicable Interest Rate for the period from the Payment Date in the month in which the New Payment Date first occurs to the New Payment Date and (ii) shall extend the Maturity Date to the New Payment Date occurring in the calendar month set forth in the definition of Maturity Date.

13.5Appointment of Servicer and Delegation of Lender Rights.  Borrower acknowledges and agrees that at the option of Lender, the Loan may be serviced by a servicer/trustee (the “Servicer”) selected by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to the Servicer pursuant to a servicing agreement between Lender and Servicer; provided, however, such delegation will not release Lender from any of its obligations under the Loan Documents.  Borrower shall be responsible for paying to Servicer (on each payment date) Servicer’s monthly servicing fee, in an amount not to exceed 0.06% of the Loan per annum.  At Lender’s direction, Borrower shall pay amounts due hereunder to any third party servicer directly.

ARTICLE XIV

MISCELLANEOUS

14.1Performance by Lender. In the event that Borrower shall default in or fail to perform any of its obligations under the Loan Documents, Lender shall have right, but not the obligation, without limitation upon any of Lender’s rights pursuant thereto, to perform the same, and Borrower agrees to pay to Lender, on demand, all reasonable costs and expenses incurred by Lender in connection therewith, including reasonable attorneys’ fees, together with interest thereon from the date of expenditure at the Default Interest Rate (as defined in the Notes).

14.2Actions. Lender shall have the right, but not the obligation, to commence, appear in, and defend any action or proceeding purporting to affect the rights or duties of the parties hereunder or the payment of any funds, and in connection therewith Lender may pay necessary expenses, employ counsel, and pay reasonable attorneys’ fees and fees of expert witnesses. Borrower agrees to pay to Lender, on demand, all costs and expenses incurred by Lender in connection therewith, including, without limitation, reasonable attorneys’ fees and fees of expert witnesses, together with interest from the date of expenditure at the Default Interest Rate if not paid within ten (10) days after demand therefor.

14.3Nonliability of Lender. Borrower acknowledges and agrees that:

(a)    by accepting or approving anything required to be provided to Lender pursuant to the Loan Documents, including, without limitation, any certificate, financial statement, survey, appraisal or insurance policy, Lender shall not be deemed to have warranted or represented the sufficiency, effectiveness or legal effect of any term or provision thereof, and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by Lender;

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(b)    Lender neither undertakes nor assumes any responsibility or duty to Borrower to select, review, inspect, supervise, pass judgment upon or inform Borrower of any matter in connection with the Project;

(c)    the relationship of Borrower and Lender under the Loan Documents is, and shall at all times remain, solely that of borrower and lender, and Lender neither undertakes nor assumes any responsibility or duty to Borrower or to any other Person with respect to the Project or the Loan, except as expressly provided in the Loan Documents; and notwithstanding any other provision of the Loan Documents: (i) Lender is not, and shall not be construed as, a partner, joint venturer, alter ego, manager, controlling person or other business associate or participant of any kind of Borrower or any Affiliate, and Lender does not intend to ever assume such status; (ii)  Lender does not intend to ever assume any responsibility to any Person for the quality, suitability, safety or condition of the Project; and (iii) Lender shall not be deemed responsible for or a participant in any acts, omissions or decisions of Borrower or any Affiliate;

(d)    Lender shall not be directly or indirectly liable or responsible for any loss, claim, cause of action, liability, indebtedness, damage or injury of any kind or character to any Person or property arising from any construction on, or occupancy or use of, any of the Project, whether caused by, or arising from: (i) any defect in any building, structure, grading, fill, landscaping or other improvements thereon or in any on-site or off-site improvement or other facility therein or thereon; (ii) any act or omission of Borrower, any Affiliates, or any agents, employees, independent contractors, licensees or invitees of Borrower; (iii) any accident in or on any of the Project or any fire, flood or other casualty or hazard thereon; (iv) the failure of Borrower, any of Borrower’s licensees, employees, invitees, agents, independent contractors or other representatives to maintain any of the Project in a safe condition; and (v) any nuisance made or suffered on any part of the Project, except to the extent caused by Lender’s gross negligence or willful misconduct;

(e)    Borrower shall be solely responsible for all aspects of Borrower’s business and conduct in connection with the Project;

(f)    In the event that a claim or adjudication is made that Lender or its agents, has acted unreasonably or unreasonably delayed acting in any case where by law or under any Loan Document, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents, shall be liable for any monetary damages, and Borrower’s sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment. The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment;

(g)    Lender shall not be liable to Borrower or any other parties for (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which Borrower's transfers may be made or information received or transmitted, and no such entity shall be deemed an agent of the Lender, (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other

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events beyond Lender’s control, or (iii) any special, consequential, indirect or punitive damages, whether or not (A) any claim for these damages is based on tort or contract or (B) Lender or Borrower knew or should have known the likelihood of these damages in any situation. Lender makes no representations or warranties other than those expressly made in this Agreement, if any.

14.4No Third Parties Benefited. This Agreement is made for the purpose of setting forth certain rights and obligations of Borrower and Lender in connection with the Loan. It is made for the sole protection of Borrower and Lender, and Lender’s successors and assigns. No other person shall have any rights of any nature hereunder or by reason hereof.

14.5Indemnity. Borrower hereby agrees to indemnify, defend and hold Lender, PCCP, LLC, a Delaware limited liability company and each such entity’s respective directors, officers, agents and employees harmless from, any and all Liabilities and Costs which Lender or any such Person may suffer or incur as a direct consequence of: (a) Lender’s making of the Loan, except for violations of banking laws or regulations by Lender; (b) Borrower’s failure to perform any of Borrower’s obligations as and when required by this Agreement or any of the other Loan Documents, including, without limitation, any failure, at any time, of any representation or warranty of Borrower to be true and correct and any failure by Borrower to satisfy any condition; (c) any claim or cause of action of any kind by any Person to the effect that Lender is in any way responsible or liable for any act or omission by Borrower, whether on account of any theory of derivative liability, breach of fiduciary duty by Borrower or an Affiliate, breach of contract by Borrower or an Affiliate or otherwise, including, without limitation, any claim or cause of action for fraud, misrepresentation, tort or willful misconduct by Borrower or any Affiliate or any cause of action brought by Borrower’s direct or indirect investors; or (d) any claim or cause of action of any kind by any Person which would have the effect of denying Lender the full benefit or protection of any provision of this Agreement or the Loan Documents. Notwithstanding the foregoing, Borrower shall not be obligated to indemnify Lender with respect to any intentional tort or act of gross negligence which Lender is personally determined by the judgment of a court of competent jurisdiction (sustained on appeal, if any) to have committed. Borrower shall pay any indebtedness arising under this indemnity to Lender immediately upon written demand by Lender together with interest thereon from the date such indebtedness arises at the Default Interest Rate (as defined in the Notes) if not paid within ten (10) Business Days after demand therefor. Borrower’s duty to defend and indemnify Lender shall survive the release and cancellation of the Notes and release and reconveyance of the Mortgages.

14.6Binding Effect; Assignment. This Agreement shall be binding upon, and shall inure to the benefit of, Borrower and Lender and their respective successors and assigns, except that Borrower may not assign its rights or delegate any of its duties under this Agreement or any of the other Loan Documents without the prior written consent of Lender. Borrower recognizes that Lender would not make the Loan except in reliance upon Borrower’s expertise and reputation, Lender’s knowledge of Borrower.

14.7Execution in Counterparts. This Agreement and any other Loan Document, but specifically excluding the Notes, may be executed in any number of counterparts,

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each of which when executed and delivered will be deemed to be an original and all of which, taken together, will be deemed to be but one and the same instrument.

14.8Amendments; Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, the Notes or any other Loan Document, or consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on Borrower shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances.

14.9Costs, Expenses and Taxes. Borrower shall pay to Lender, on demand the following:

(a)    the reasonable attorneys’ fees and expenses incurred by Lender or its respective successors and assigns in connection with the negotiation, preparation, execution, delivery, modification, and administration of this Agreement and any other Loan Document and any matter related thereto; Lender shall inform Borrower of the attorneys’ fees and expenses incurred by Lender in connection with the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents on or before the Effective Date;

(b)    the costs and expenses of Lender or their respective successors and assigns in connection with the enforcement of this Agreement and any other Loan Document and any matter related thereto, including, without limitation, the fees and expenses of any legal counsel, independent public accountants and other outside experts retained by Lender; and

(c)    all costs, expenses, fees, premiums and other charges relating or arising with respect to the Loan Documents or any transactions contemplated thereby or in the compliance with any of the terms and conditions thereof, including but not limited to recording fees, filing fees, release or reconveyance fees, title insurance premiums, external or in‑house appraisal or cost engineering fees (including inspections), auditor fees and environmental consultant fees. Borrower recognizes and agrees that formal written Appraisals of the Project by a licensed independent appraiser may be required by Lender’s internal procedures and/or federal regulatory reporting requirements on an annual and/or specialized basis and that Lender may, at its option, require inspection of the Project (or any portion thereof) by an independent supervising architect and/or cost engineering specialist at least every eighteen (18) months, and Borrower shall promptly pay the costs and expenses of all such Appraisals and inspections.

All sums paid or expended by Lender or its successors and assigns in accordance with this Agreement and the other Loan Documents shall be considered to be a part of the Loan. All such sums, together with all amounts to be paid by Borrower to Lender pursuant to this Agreement and the other Loan Documents, shall bear interest from the date of expenditure at the Default Interest Rate (if not paid within ten (10) days of demand therefor), and shall be immediately due and payable by Borrower upon demand.

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14.10Tax Service. Lender is authorized to secure, at Borrower’s expense, a tax service contract which shall provide tax information on the Project to Lender for the term of the Loan.

14.11Survival. This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the execution and delivery of this Agreement and the execution and delivery by Borrower to Lender of the Notes, and shall continue in full force and effect so long as any portion of the Indebtedness is outstanding and unpaid; provided, however, that the representations, warranties and covenants set forth in Article IX shall survive in perpetuity. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All covenants, promises and agreements in this Agreement contained, by or on behalf of Borrower, shall inure to the benefit of the respective successors and assigns of Lender. Nothing in this Agreement or in any other Loan Document, express or implied, shall give to any Person other than the parties and the holder(s) of the Notes, the Mortgages and the other Loan Documents, and their legal representatives, successors and assigns, any benefit or any legal or equitable right, remedy or claim hereunder.

14.12Notices. All notices and other communications required or permitted under this Agreement or any other Loan Document must be in writing and must be personally delivered; mailed by U.S. registered or certified mail, return receipt requested, postage prepaid; sent by nationally recognized private courier service; or transmitted by telecopy (provided that a copy of such notice or other communication is also delivered by another permitted means of delivery), delivered or addressed to the appropriate party at its respective address set forth below:

If to Borrower: 210 West 31^st Street Owner, LLC

c/o Onyx Equities

900 Route 9 North, Suite 400

Woodbridge, New Jersey 07095

Attention: John A. Saraceno, Jr.

and to:

c/o KBS Capital Advisors

800 Newport Center Drive, Suite 700

Newport Beach, CA 92660

Attention: Brian Ragsdale

Attention: Shep Wainwright

with a copy to: Cole Schotz P.C.

1325 Avenue of the Americas, 19^th Floor

New York, NY 10019
Attention: Jordan J. Metzger, Esq.

and to:

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Sheppard Mullin Richter & Hampton LLP

650 Town Center Drive, 4^th Floor

Costa Mesa, CA 92626

Attention: Scott A. Morehouse, Esq.

If to Lender: PacificCal PC Core Lender, LLC
c/o PCCP, LLC
10100 Santa Monica Blvd, Suite 1000

Los Angeles, California 90067

Attn: Servicing                Telecopy No.: (310) 414-7872

with a copy to:        Morrison & Foerster LLP                250 West 55^th Street                New York, New York 10019                Attn: Jeffrey J. Temple, Esq.                Telecopy No.: (212) 468-7900

with a copy to:        PCCP, LLC                444 Madison Ave., 27^th Floor                New York, New York 10022                Telecopy No.: (646) 308-2130

Any party may change its address by giving written notice to the other party in accordance with this Section 14.12. If any notice or other communication is given by registered or certified mail it will be deemed effective seventy‑two (72) hours after it is deposited in the U.S. mail, postage prepaid; or if given by any other permitted means, when received at the address listed above.

14.13Further Assurances. Borrower shall, at its sole cost and expense, do such further acts and execute and deliver such further documents as Lender from time to time may require for the purpose of assuring and confirming to Lender the rights hereby created, for carrying out the intention or facilitating the performance of the terms of any Loan Document, or for assuring the validity of any Lien under any Loan Document.

14.14Governing Law. This Agreement and the other Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, except to the extent otherwise expressly stated therein.

14.15Severability of Provisions. Any provision in any Loan Document that is held by a court of competent jurisdiction to be inoperative, unenforceable or invalid shall be inoperative, unenforceable or invalid without affecting the remaining provisions, and to this end the provisions of all Loan Documents are declared to be severable.

14.16Headings. Article, section and subparagraph headings in this Agreement are included for convenience of reference only and are not part of this Agreement for any other purpose.

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14.17Time of the Essence; Delay Not a Waiver. Time is of the essence of this Agreement and each and every provision hereof. Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege under any Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under any Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under any Loan Document, or to declare a default for failure to effect prompt payment of any such other amount.

14.18Construction of Agreement. Both Borrower and Lender have cooperated in the drafting and negotiation of this Agreement, and any ambiguities which may be contained herein shall not be construed against either party.

14.19Brokers. Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement except for Newmark Knight Grubb Ellis (“Borrower’s Acquisition Broker”) in connection with Borrower’s acquisition of the Property. Borrower shall indemnify, defend and hold Lender harmless from and against any and all claims, liabilities, costs and expenses of any kind (including Lender’s reasonable attorneys’ fees and expenses) in any way relating to or arising from a claim by any Person that such Person acted on behalf of Borrower or Lender in connection with the transactions contemplated herein other than Borrower’s Acquisition Broker. The provisions of this Section 14.19 shall survive the expiration and termination of this Agreement and the payment of the Loan.

14.20Lender’s Discretion.Whenever pursuant to this Agreement or any other Loan Document, Lender exercises any right, option or election given to Lender to approve or disapprove, or consent or withhold consent, or any arrangement or term is to be satisfactory to Lender or is to be in Lender’s discretion, the decision of Lender to approve or disapprove, consent or withhold consent, or to decide whether arrangements or terms are satisfactory or not satisfactory or acceptable or not acceptable to Lender in Lender’s discretion, shall (except as is otherwise specifically herein provided) be in the sole but reasonable discretion of Lender.

14.21Preferences. Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder. To the extent Borrower makes a payment or payments to Lender for Borrower’s benefit, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.

14.22Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the

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other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents does not specifically and expressly provide for the giving of notice by Lender to Borrower.

14.23Offsets, Counterclaims and Defenses. Any assignee of Lender’s interest in and to the Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to the Loan, and the Loan Documents which Borrower may otherwise have against any assignor, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon, the Loan Documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

14.24Waiver of Marshalling of Assets Defense. To the fullest extent that Borrower may legally do so, Borrower waives all rights to a marshalling of the assets of Borrower, and of the Project, or to a sale in inverse order of alienation in the event of foreclosure of the interests hereby created, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Project for the collection of the Indebtedness without any prior or different resort for collection, or the right of Lender under the Mortgages to the payment of the Indebtedness in preference to every other claimant whatsoever.

14.25Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY.

14.26Prior Acquisition Loan.

(a)210 West 31^st Street Owner, LLC, as borrower, and ConnectOne Bank, as lender (“Prior Lender”), entered into a loan agreement (the “Prior Loan Agreement”), evidencing an acquisition loan (the “Prior Loan”) in the amount of $10,000,000.00. The parties

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acknowledge there is a remaining principal balance due under the Prior Loan Agreement in the amount of $10,000,000.00.

(b)Borrower hereby agrees that the Prior Loan Agreement been amended, restated and superseded in their entirety by the terms of this Agreement and the other Loan Documents and that Lender shall have no liability or obligations with respect to the Prior Loan.

14.27Exculpation. Without limiting the provisions of Section 2.13, Lender shall not pursue any action or proceeding wherein a money judgment or any deficiency judgment or other judgment establishing personal liability shall be sought to enforce the liability and obligation of any principal, director, officer, employee, shareholder, partner, member or agent of Borrower under this Agreement or any of the other Loan Documents.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

BORROWER:

210 WEST 31^ST STREET OWNER, LLC,

a Delaware limited liability company

By:    KBS SOR II 210 WEST 31^ST STREET, LLC,

a Delaware limited liability company,

its sole member

By:    ONYX 31^st STREET, LLC,

a Delaware limited liability company,

its Managing Member

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.,

Authorized Signatory

LENDER:

PACIFICCAL PC CORE LENDER, LLC,                    a Delaware limited liability company

By: /s/ Steve Towle                                    Name: Steve Towle                                    Title: Authorized Signatory            

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EXHIBIT A
LEGAL DESCRIPTION OF REAL PROPERTY

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE BOROUGH OF MANHATTAN, CITY, COUNTY AND STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE SOUTHERLY SIDE OF 31ST STREET, DISTANT 104 FEET 3 INCHES WESTERLY FROM THE CORNER FORMED BY THE INTERSECTION OF SAID SOUTHERLY SIDE OF 31ST STREET WITH THE WESTERLY SIDE OF SEVENTH AVENUE;

RUNNING THENCE SOUTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 37 FEET 9 INCHES;

THENCE WESTERLY PARALLEL WITH THE SOUTHERLY SIDE OF 31ST STREET, 61 FEET 4-1/2 INCHES;

THENCE SOUTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 1 FOOT 11-1/2 INCHES;

THENCE WESTERLY PARALLEL WITH THE SOUTHERLY SIDE OF 31ST STREET, 2 FEET 7 INCHES;

THENCE SOUTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 59 FEET 1/2 INCH;

THENCE WESTERLY PARALLEL WITH THE SOUTHERLY SIDE OF 31ST STREET, 64 FEET 3-1/2 INCHES;

THENCE NORTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 98 FEET 9 INCHES TO THE SOUTHERLY SIDE OF 31ST STREET;

THENCE EASTERLY ALONG THE SOUTHERLY SIDE OF 31ST STREET, 128 FEET 3 INCHES TO THE POINT OR PLACE OF BEGINNING.

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EXHIBIT B
LOAN DOCUMENTS

1. Loan Documents. The documents listed in this Section 1, and amendments, modifications and supplements thereto which have received the prior written consent of Lender, together with any documents executed in the future that are approved by Lender and that recite that they are “Loan Documents” for purposes of this Agreement are collectively referred to herein as the Loan Documents:

1.1 This Agreement.

1.2 Building Loan Agreement.

1.3 Acquisition Loan Note.

1.4 Acquisition Loan Mortgage.

1.5 Building Loan Note.

1.6 Building Loan Mortgage.

1.7 Project Loan Note.

1.8 Project Loan Mortgage.

1.9 Financing Statements.

1.10 Assignment of Agreements.

1.11 Assignment of Interest Rate Protection Agreement.

2. Other Documents (Which Are Not Loan Documents):

2.1 Completion Guaranty.

2.2 Operating Guaranty.

2.3 Future Funding Guaranty.

2.4 Carveout Guaranty.

2.5 Environmental Indemnity Agreement.

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EXHIBIT C-1
BUDGET

(See Attached)

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EXHIBIT C-2

DISBURSEMENT BUDGET

PROPERTY: 210 WEST 31ST STREET NEW YORK, NY	(A) TOTAL COSTS		(B) COSTS PAID BY BORROWER		(C) COSTS TO BE PAID BY BORROWER		(D) DISBURSEMENT BUDGET
Purchase Price		$48,000,000.00		$16,036,066.00				$31,963,934.00
Loan Fee		$471,100.00						$471,100.00
Closing Costs		$1,540,000.00		$1,540,000.00
Working Capital		$214,966.00						$214,966.00
Capital Improvements		$11,400,000.00				$3,990,000.00		$7,410,000.00
Tenant Improvements		$639,850.00				$223,947.50		$415,902.50
Leasing Commissions		$3,707,270.00				$1,297,544.50		$2,409,725.50
Interest / Operating Shortfall		$6,499,033.85				$2,274,661.85		$4,224,372.00
Totals	$72,472,219.85		$17,576,066.00			$7,786,153.85	$47,110,000.00

The foregoing Financial Requirement Analysis represents the total cost necessary in Borrower’s estimation to perform Borrower’s obligations under the Loan Documents. Column A, “Total Costs,” sets forth Borrower’s representation of the maximum cost for each item specified. Column B, “Costs paid by Borrower,” sets forth Borrower’s representation of costs that Borrower has paid or has caused to be paid from Borrower Equity for each item specified. Column C, “Costs to be paid by Borrower,” sets forth Borrower’s representation of costs that Borrower will pay or will cause to be paid from Borrower for each item specified. Column D, “Disbursement Budget,” sets forth the portion of the Loan which has been allocated for each item specified and will be disbursed pursuant to the terms, covenants, conditions and provisions, if any, of Exhibit D of this Agreement and the Loan Documents.

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EXHIBIT D
DISBURSEMENT PLAN

1.    Acquisition Cost. Lender shall disburse the portion of the Loan shown in the Disbursement Budget in the principal amount not to exceed $31,963,934.00 to or for the account of Borrower on the Effective Date for the sole purposes of paying a portion of the purchase price payable by Borrower to Seller for the Project pursuant to the Purchase Agreement. Without limiting any other disbursement condition contained in this Agreement, Lender shall not be obligated to disburse any portion of such amount unless and until Borrower shall first cause the Initial Equity to be applied in the manner required under this Agreement. Lender shall make such disbursement on the Effective Date directly to Seller through an escrow with a title company acceptable to Lender or another escrow or similar arrangement acceptable to Lender. Without limiting any other provision of this Agreement, interest shall commence to accrue on such disbursement (and on any other Loan proceeds deposited by Lender into such escrow) as of the date of Lender’s deposit of such proceeds in escrow, but such proceeds shall remain subject to Lender’s sole control and disposition and no Person (including Borrower or Seller) shall have any right in or to such funds unless and until all conditions precedent to Lender’s obligation to disburse such Loan proceeds shall have been satisfied, including, without limitation, Borrower’s concurrent acquisition of the Project pursuant to the Purchase Agreement.

2.    Loan Fee. Lender shall make a portion of the Loans shown in the Disbursement Budget in the principal amount of $471,100.00 available for disbursement to or for the account of Borrower on the Effective Date for the sole purposes of paying to Lender the Loan Fee. Borrower hereby authorizes Lender to disburse on the Effective Date such Loan proceeds directly to Lender in payment of the Loan Fee.

3.    Working Capital Disbursement. Lender shall make a portion of the Loans in the principal amount shown in the Disbursement Budget not to exceed $214,966.00, which shall be disbursed on the Effective Date to Borrower for working capital purposes (“Working Capital Disbursement”). Notwithstanding anything to the contrary contained in the Agreement or in this Exhibit D, in no event shall Borrower be entitled to draw any additional Loan proceeds from the Capital Improvements Reserve until such time, if ever, as Borrower has provided Lender with written documentation evidencing that all of the Working Capital Disbursement funds have been utilized in connection with the Property, as determined by Lender in the exercise of its sole but good faith discretion. The funds constituting such Working Capital Disbursement shall, for purposes of interest calculation, be deemed disbursed to Borrower as of the Effective Date.

4.    Capital Improvements. On the Effective Date, Lender shall make the Building Loan (i.e., a portion of the Loans shown in the Disbursement Budget in the principal amount not to exceed $7,410,000.00) available for disbursement to or for the benefit or account of Borrower for payment of costs and expenses of making certain Lender-approved immediate capital or other improvements to the Property as required and/or permitted under the Building Loan Agreement and the other Loan Documents.

5.    Leasing Commissions Holdback and Tenant Improvements Holdback. Lender shall make a portion of the Loan in the principal amount shown in the Disbursement Budget not to exceed $2,409,725.50 available for disbursement to or for the benefit or account of Borrower for

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payment of Leasing Commissions (“Leasing Holdback”) and a portion of the Loan in the principal amount shown in the Budget not to exceed $415,902.50 available for disbursement to or for the benefit or account of Borrower for payment of Tenant Improvement Costs (the “Tenant Improvements Holdback”). Lender shall disburse the Leasing Holdback and/or the Tenant Improvements Holdback, as applicable, for leasing as Borrower spends funds for Leasing Commissions and/or Tenant Improvement Costs for Leases permitted under this Agreement. For any new Lease, (i) Leasing Commissions shall not exceed an amount equal to the equivalent of seven and one half percent (7.5%) of the gross rent under such Lease (the “Leasing Commissions Cap”) and (ii) Tenant Improvement Costs shall not exceed the equivalent of $16.25 per square foot under such Lease (the “Tenant Improvements Cap”) (and Borrower agrees it shall contribute equity for any costs that exceed the Leasing Commissions Cap or the Tenant Improvements Cap, as applicable, prior to any amounts being disbursed from the Leasing Holdback or the Tenant Improvements Holdback, as applicable, unless Borrower has reallocated cost savings or contingency line items for payment of such excess in accordance with the Loan Documents). Lender shall disburse funds for Leasing Commissions fifty percent (50%) upon receipt of a fully executed Lease and fifty percent (50%) upon that tenant’s occupancy of the space.

6.    Interest/Operating Holdback. Lender shall make a portion of the Loan in the principal amount shown in the Disbursement Budget no to exceed $4,224,372.00, which shall be available and allocated as an interest/operating shortfall reserve (“Interest Holdback”). The Interest Holdback shall be periodically disbursed directly to Lender for the payment of interest which accrues and becomes due under the Note. Such sums shall bear interest from the date applied by Lender in accordance with the Note. Lender is hereby authorized to charge the Loan directly for such interest payments when due. Lender shall provide Borrower with a monthly interest statement. Depletion of the Interest Holdback shall not release Borrower from any of Borrower’s obligations under the Loan Documents including, without limitation, payment of all accrued interest from other sources. Notwithstanding the foregoing, any disbursements from the Interest Holdback shall be subject to the provisions of Article X of this Agreement which require that available Gross Operating Income be first applied for the purposes specified therein, including to the payment of accrued interest under the Note, before Borrower shall be entitled to any disbursements from the Interest Holdback.

7.    Conditions. Lender’s obligation to make available to or for the benefit or account of Borrower portions of the Loans in the amounts and for the purposes set forth in the Disbursement Budget shall be subject to the satisfaction of all conditions precedent to such disbursement set forth in this Agreement, including, without limitation, in Article III and IV hereof, this Disbursement Plan and the requirement that the Loan be in In-Balance. In addition, Lender shall have the right to reasonably require any other document, evidence or information that Lender may request under any provision of this Agreement or the other Loan Documents, or that Lender may otherwise reasonably require.

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EXHIBIT E
FORM OF DISBURSEMENT REQUEST

PacificCal PC Core Lender, LLC10100 Santa Monica Blvd, Suite 1000Los Angeles, CA 90067
Attention: Servicing

Re: 210 West 31^st Street Owner, LLC (“Borrower”)
Loan #_______________ (“Loan”)

Ladies and Gentlemen:

Pursuant to the terms of that certain Loan Agreement dated as of December 1, 2016 (the “Loan Agreement”), and the representations and warranties set forth therein and herein, Borrower hereby submits a disbursement request for the amount of $[__________]. Capitalized terms have the same meanings as in the Loan Agreement

This disbursement request (“Request”) shall be deemed to be a representation by Borrower and of the person/entity signing this Request (in the case of the person/entity signing this Request, to person’s/entity’s knowledge) that (A) no Event of Default has occurred or will exist upon the making of this requested disbursement; (B) each and every representation and warranty made by Borrower under the Loan Agreement and the other Loan Documents is deemed remade as of the date hereof (and accordingly, remains true, correct and complete subject to certain changes occurring from the date of the last certificate which would not result in a breach of any covenant under the Loan Agreement); (C) all information set forth in this Request; and on any exhibit attached hereto is true, correct and complete in all material respects; and (D) all conditions precedent to the disbursement to be made in connection with this Request as required under the Loan Agreement and the other Loan Documents, have been satisfied.

The following is an itemized statement of the costs incurred or due for which disbursement is requested with respect to Column C of the Disbursement Budget attached as Exhibit C-2 to the Loan Agreement.

ITEM	TOTAL AMOUNT INCURRED LESS PRIOR DISBURSEMENTS
1)
2)
TOTAL DISBURSEMENT REQUEST

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This Request is submitted as of _______________, 20__.

210 WEST 31^ST STREET OWNER, LLC,

a Delaware limited liability company

By:    KBS SOR II 210 WEST 31^ST STREET, LLC,

a Delaware limited liability company,

its sole member

By:    ONYX 31^st STREET, LLC,

a Delaware limited liability company,

its Managing Member

By:    ___________________________

John A. Saraceno, Jr.,

Authorized Signatory

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EXHIBIT F

LEASING GUIDELINES

1. Rent: Minimum gross rent of not less than:

i.Ground Floor: $300 per leasable square foot.

ii.Basement: $75 per leasable square foot.

iii.2^nd Floor: $100 per leasable square foot.

iv.Terrace: $100 per leasable square foot.

2. Term: Initial lease term of a minimum of 10 years

3. Tenant Improvement Allowance: Maximum Tenant Improvement allowance of no greater than $25.00 PSF

4. Leasing Commissions: Maximum of 5.75% of the gross rent under new leases

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EXHIBIT G

ADVANCE CONDITIONS

The obligation of Lender to make any Loans shall be subject to Lender’s receipt, review, approval and/or confirmation of the following, each in form and content satisfactory to Lender in its sole but good faith discretion:

1.There shall exist no Potential Event of Default or Event of Default both before and after giving effect to the requested advance.

2.The representations and warranties contained in this Agreement and in all other Loan Documents shall be true and correct in all material respects on and as of the date of the making of such Loan with the same force and effect as if made on and as of such date subject to changes resulting from changed circumstances or facts which do not constitute an Event of Default.

3.Such advance shall be secured by the Mortgages and the other Security Documents, subject only to the Permitted Encumbrances, as evidenced by a pending disbursements clause satisfactory to Lender.

4.Borrower shall have paid Lender’s reasonable costs and expenses in connection with such advance (including title charges and attorneys’ fees and expenses).

5.No proceeding with respect to condemnation, adverse possession, zoning change or usage change proceeding shall have occurred against the Project; the Project shall not have suffered any damage by fire or other casualty which has not been repaired or is not being restored in accordance with this Agreement; no Applicable Law or injunctive proceeding, restriction, litigation, action, citation or similar proceeding or matter shall have been enacted or adopted by any Governmental Authority, which would have, in the Lender’s judgment, a Material Adverse Effect on the Project or Borrower’s ability to perform its obligations under the Loan Documents.

6.The Construction Work (or such part thereof as may have been constructed at the time of any borrowing) shall have been constructed substantially in accordance with the Plans and Specifications (as may have been modified in accordance with this Agreement) and all applicable Government Approvals.

7.If required by Lender, the Construction Consultant shall have reviewed and approved the disbursement requested in the Request delivered by Borrower with respect to such Loan. Such Request shall include copies of all documents, contracts, invoices, bills, construction records, lien waivers, Change Orders, and drawings, plans and specifications as the Construction Consultant shall reasonably require, to enable the Construction Consultant to timely review each Request.

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8.Borrower shall have provided the Construction Consultant and the Lender, or their representatives, prompt and reasonable access to the Project, in order to inspect the Construction Work then completed.

9.Lender shall have received the following items in connection with each Loan:

(a)A Request as provided in Section  4.2 duly executed by an Authorized Officer of Borrower, together with the required attachments thereto;

(b)Such invoices, contracts and other supporting data as Lender may reasonably require to evidence that all Project Costs for which disbursement is sought have been incurred and are then due and payable;

(c)Except for Liens insured against pursuant to the Title Policies or Liens being contested by Borrower pursuant to the terms of the Loan Documents, (i) sworn unconditional waivers of lien from contractors, subcontractors, materialmen, suppliers and vendors, covering all work for which funds have been advanced pursuant to a prior disbursement and (ii) at Lender’s election, sworn conditional waivers of lien from contractors, subcontractors, materialmen, suppliers and vendors, covering all work of such Persons for which funds are being advanced pursuant to the then current Request, all in compliance with the Lien Law;

(d)Copies of any Change Orders which have not been previously furnished to Lender and the Construction Consultant, all of which shall be subject to Lender’s review and approval in accordance with this Agreement;

(e)Copies of all subcontracts and purchase orders which have been executed or modified, amended and/or supplemented since the last Loan, together with (i) any Bonds relating to such subcontracts (to the extent required under this Agreement or the Building Loan Agreement), (ii) a certificate by an Authorized Officer of Borrower certifying that the delivered items are true, accurate and complete copies of the originals thereof, and (iii) Consents and Agreements in the applicable form attached to the General Assignment from each Major Contractor who has entered into a Major Contract but has not previously delivered a Consent and Agreement;

(f)Copies of all Government Approvals (to the extent required as of such date) not previously delivered to Lender, certified by an Authorized Officer of Borrower;

(g)If any material dispute arises between or among Borrower, the Construction Manager or any Major Contractor, a written summary of the nature of such dispute;

(h)If the Budget shall have been modified, copies of all such modifications, all of which shall be subject to Lender’s review and approval in accordance with this Agreement;

(i)Copies of all amendments to the Construction Schedule not previously delivered to Lender, all of which shall be subject to Lender’s review and approval in accordance with this Agreement;

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(j)Promptly after the completion of the construction of the foundation or other support elements for the Construction Work, Borrower shall provide to Lender a current survey of the Real Property showing all improvements located thereon; and

(k)To the extent not previously delivered to Lender, evidence showing compliance with the insurance provisions of Article V.

10.All applicable conditions in Article IV shall have been satisfied.

11.The Loans shall be In-Balance.

12.To the extent not previously delivered to Lender, Borrower shall provide evidence of the payment of all costs, expenses and other charges covered by previous Requests for which advances of Loans have previously been made.

13.Lender has reasonably determined withholding such disbursement in whole or in part is not required by the Lien Law.

14.Such other documents and items as Lender may reasonably request.

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EXHIBIT HFORM OF PROPERTY MANAGEMENT AGREEMENT

(See Attached)

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EXHIBIT I
[INTENTIONALLY OMITTED]

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EXHIBIT J

PROJECT DOCUMENTS

None.

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EXHIBIT K

FORM OF COMPLIANCE CERTIFICATE

Dated: ______________________________ (Month Day, Year)

To: PACIFICCAL PC CORE LENDER, LLC, a Delaware limited liability company, and its successors and assigns (collectively “Lender”)

This Compliance Certificate is made with reference to (a) that certain Loan Agreement dated as of December 1, 2016 (“Loan Agreement”), by and between 210 West 31^st Street Owner, LLC, a Delaware limited liability company (“Borrower”) and Lender, (b) those certain Guaranty Documents described therein, executed and delivered by John Saraceno, an individual, Jonathan Schultz, an individual, Onyx Equities, LLC, a New Jersey limited liability and KBS SOR US Properties II, LLC, a Delaware limited liability company (each, a “Guarantor”). All initially capitalized terms used in this Compliance Certificate shall have the meanings set forth for such terms in the Loan Agreement.

The undersigned Guarantor hereby certifies to Lender as follows:

1.     As of the date first set forth above, Guarantor is in compliance with all covenants and obligations under the Guaranty applicable to Guarantor, and all of the representations and warranties respectively set forth therein are true and correct.

2.    As of the calendar year [or quarter] ending ____________________ (Month Day, Year), the Net Worth Covenant information with respect to Guarantor set forth on Schedule 1 attached hereto are true and accurate on and as of the date of this Compliance Certificate.

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IN WITNESS WHEREOF, Guarantor has executed this Compliance Certificate as of the day and year set forth above.

GUARANTOR: 1

[By: ______________________________

JOHN SARACENO]

[By: ______________________________

JONATHAN SCHULTZ]

[ONYX EQUITIES, LLC,
a New Jersey limited liability company

By: Name: Title:                         ]

[KBS SOR US PROPERTIES II LLC,

a Delaware limited liability company

By:    KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP II,

a Delaware limited liability company,

its sole member

By:    KBS STRATEGIC OPPORTUNITY REIT II, INC.,

a Maryland corporation,

its sole general partner

By:    __________________________________

Jeffrey K. Waldvogel,

Chief Financial Officer]

1 Include only the signature block of the applicable party(ies) delivering the certificate.

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SCHEDULE 1
to the Compliance Certificate
($ in 000’s)

Statement Date: _________ ___, 20___

1. Net Worth of Guarantor    $______________

Minimum Requirement    $______________

PASS/FAIL

2. Liquidity of Guarantor        $______________

Minimum Requirement    $______________

PASS/FAIL

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EX-10.53

Exhibit 10.53

BUILDING LOAN PROMISSORY NOTE SECURED BY MORTGAGE

$7,410,000.00 December 1, 2016New York, New York

FOR VALUE RECEIVED, the undersigned, 210 WEST 31^ST STREET OWNER, LLC, a Delaware limited liability company, having a principal place of business at c/o Onyx Equities, LLC, 900 Route 9 North, Suite 400, Woodbridge, NJ 07095 (“Borrower”), promises to pay to the order of PACIFICCAL PC CORE LENDER, LLC, a Delaware limited liability company (“Lender”), c/o PCCP, LLC, 10100 Santa Monica Blvd., Suite 1000, Los Angeles, CA 90067, or at such other place as Lender may designate to Borrower in writing from time to time, the principal sum of up to SEVEN MILLION FOUR HUNDRED TEN THOUSAND AND 00/100 DOLLARS ($7,410,000.00), or so much thereof as may from time to time be owing hereunder by reason of advances made by Lender to or for the account of Borrower, together with interest on so much thereof as is from time to time outstanding and unpaid, from the date of the advance of the principal evidenced hereby, at the Applicable Interest Rate (as such term is defined in Section 1.1(b) below) in lawful money of the United States of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private. Initially capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement (as defined in Section 1.4 below).

ARTICLE I - TERMS AND CONDITIONS

1.1    Accrual and Calculation of Interest.

(a)    Interest shall accrue on the outstanding principal balance of this Building Loan Promissory Note Secured by Mortgage (this “Note”) based on a rate of interest per annum (the “Applicable Interest Rate”) in effect from time to time equal to the sum of (i) (A) five and one-half percent (5.50%), (B) in the event the First Extension Option is timely exercised by Borrower in strict accordance with the terms and conditions of Section 2.9 of the Project Loan Agreement, five and eighty three-one hundredths of a percent (5.83%) during the First Extended Term, or (C) in the event the Second Extension Option is timely exercised by Borrower in strict accordance with the terms and conditions of Section 2.9 of the Project Loan Agreement, six and sixteen-one hundredths of a percent (6.16%) during the Second Extended Term; plus (ii) the rate designated as “LIBOR” for U.S. dollar deposits with one (1) month maturities as quoted by a national bank (“Bank”) from Reuters LIBOR01 (as defined below) or any successor thereto, which shall be that one-month LIBOR rate in effect two (2) New York Banking Days (as defined below) prior to the beginning of each calendar month, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation, such rate to be reset at the beginning of each succeeding month; provided, however, that, notwithstanding anything to the contrary contained in this Note, in no event shall the LIBOR portion of the Applicable Interest Rate (under clause (ii) above) be less than 0.60561% per annum (or the daily equivalent thereof). As used herein, the term

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“New York Banking Day” means any day (other than a Saturday or Sunday) on which commercial banks are open for business in New York, New York. If the initial advance under this Note occurs other than on the first day of the month, the initial one-month LIBOR rate shall be that one-month LIBOR in effect two (2) New York Banking Days prior to the date of the initial advance, which one-month LIBOR rate plus five and one-half percent (5.50%) shall be in effect as the Applicable Interest Rate for the remaining days of the month of the initial advance; such one-month LIBOR (and the Applicable Interest Rate) to be reset at the beginning of each succeeding month. Lender’s internal records of Applicable Interest Rates shall be determinative in the absence of manifest error. As used herein, the term “Reuters LIBOR01” means Reuters Screen LIBOR01 Page (or such other page as may replace Reuters Screen LIBOR01 Page for the purpose of displaying London interbank offered rates of major banks for United States dollar deposits).

(b)    Interest shall be computed hereunder based on a 360-day year, and shall accrue for each and every day (365 days per year, 366 days per leap year) on which any indebtedness remains outstanding hereunder. In computing the number of days during which interest accrues, the day on which funds are initially advanced shall be included regardless of the time of day such advance is made, and the day on which funds are repaid shall be included unless repayment is credited prior to close of business. Payments in federal funds immediately available in the place designated for payment made by Borrower prior to 12:00 noon, Los Angeles Time, shall be credited prior to close of business, while other payments may, at the option of Lender, not be credited until immediately available to Lender in federal funds in the place designated for payment prior to 11:00 a.m., Los Angeles Time, at such place of payment on a day on which Lender is open for business.

1.2    Payments of Principal and Interest.

(a)    Borrower shall make monthly payments of interest accruing under this Note, as follows: on the first (1^st) New York Banking Day of the first calendar month following the date of this Note, and on the first (1^st) New York Banking Day of each calendar month thereafter (each, a “Payment Date”) until the Maturity Date (as defined in Section 1.2(c) below), Borrower shall pay to Lender all interest accrued under this Note at the Applicable Interest Rate during the immediately preceding calendar month; provided, however, that if the Loan is funded on a date which is within the last ten (10) days of a calendar month, Borrower’s first monthly interest payment shall be on the first day of the second (2^nd) calendar month following the date of this Note (and Lender shall collect in advance at Loan closing the interest due hereunder for the period between the date of this Note and the end of the calendar month in which the Loan is funded).

(b)    In addition to any monthly payments of interest due pursuant to Section 1.2(a)above, if the First Extension Option and/or the Second Extension Option are timely exercised by Borrower in strict accordance with the terms and conditions of Section 2.9 of the Project Loan Agreement, during the applicable Extension Term Borrower shall, on each Payment Date, pay the Monthly Amortization Payment. As used herein, the term “Monthly Amortization Payment” shall mean a monthly payment, determined by Lender, that is sufficient to fully amortize the Loan over a 25-year amortization schedule using an assumed interest rate equal to the Applicable Interest Rate in effect as of the first day of the Extension Term.

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(c)    As used herein, the term “Maturity Date” shall mean, initially, the Original Maturity Date, which shall be subject to extension to the Extended Maturity Date on the terms and conditions set forth in Section 2.9 of the Project Loan Agreement.

(d)    On the Maturity Date, the entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, shall be due and payable in full.

(e)    All payments due under this Note shall be payable without setoff, counterclaim or any other deduction whatsoever.

1.3    Prepayment.

(a)    The principal indebtedness evidenced by this Note may not be prepaid, in whole or in part, except as expressly set forth in the Loan Agreement.

(b)    In the event that Borrower shall, for any reason, prepay all or any portion of the principal evidenced by this Note, Borrower shall provide revocable written notice at least ten (10) Business Days, but no more than one hundred twenty (120) days prior to the proposed date of prepayment. If the prepayment occurs other than on the first (1^st) New York Banking Day of a calendar month, then Borrower shall pay, in addition to all other amounts required to be paid hereunder or under the Loan Documents (including, without limitation, the Exit Fee and, if applicable, the Minimum Loan Interest Payment), a prepayment premium equal to the amount of any LIBOR breakage fee (or similar charge) incurred by Lender as a result of prepaying the corresponding LIBOR contract (the “Breakage Prepayment Premium”). The Breakage Prepayment Premium provided for herein shall be due under any and all circumstances where all or any portion of this Note is paid prior to the Maturity Date on any day other than on the first (1^st) New York Banking Day of a calendar month, whether such prepayment is voluntary or involuntary, even if such prepayment results from Lender’s exercise of its rights upon Borrower’s default and acceleration of the Maturity Date of this Note (irrespective of whether foreclosure proceedings have been commenced), and shall be in addition to any other sums due hereunder or under any of the other Loan Documents. No tender of a prepayment of this Note with respect to which a prepayment fee is due shall be effective unless such prepayment is accompanied by the applicable Breakage Prepayment Premium.

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(c)    TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER APPLICABLE STATE LAW TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT PAYMENT OF A PREPAYMENT FEE, UPON ACCELERATION OF THE MATURITY DATE, AND (ii) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THIS NOTE IS MADE UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE BY LENDER ON ACCOUNT OF ANY DEFAULT BY BORROWER INCLUDING, WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED OR RESTRICTED BY THE LOAN DOCUMENTS, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY WITH SUCH PREPAYMENT (AND IN ADDITION TO THE EXIT FEE AND BREAKAGE PREPAYMENT PREMIUM (IF APPLICABLE), THE MINIMUM LOAN INTEREST PAYMENT SPECIFIED IN THE LOAN AGREEMENT (IF APPLICABLE). BY INITIALING THE PROVISION IN THE SPACE PROVIDED BELOW, BORROWER HEREBY DECLARES THAT THE AGREEMENT TO MAKE THE LOAN EVIDENCED BY THIS NOTE AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER FOR THIS WAIVER AND AGREEMENT. FURTHER, BY INITIALING BELOW, BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NOTWITHSTANDING ANY APPLICABLE LAW TO THE CONTRARY, PURSUANT TO THE TERMS OF THE LOAN AGREEMENT AND OF THIS NOTE, BORROWER HAS AGREED THAT BORROWER HAS NO RIGHT TO REPAY THIS NOTE WITHOUT PAYMENT OF THE APPLICABLE PREPAYMENT FEES, AND THAT BORROWER SHALL BE LIABLE FOR THE REPAYMENT OF THIS NOTE DUE TO THE ACCELERATION OF THIS NOTE IN ACCORDANCE WITH ITS TERMS AND/OR THE TERMS OF THE LOAN AGREEMENT. FURTHERMORE, BY INITIALING BELOW, BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT LENDER HAS MADE THE LOAN IN RELIANCE ON THESE AGREEMENTS OF BORROWER AND THAT LENDER WOULD NOT HAVE MADE THE LOAN WITHOUT SUCH AGREEMENTS OF BORROWER.

Borrower’s Initials: __________

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1.4    Security. The Loan and the obligations created hereby are secured by, among other things, that certain Building Loan Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of the date hereof, by Borrower in favor of Lender (the “Mortgage”). The Mortgage, together with this Note, that certain Acquisition and Project Loan Agreement of even date herewith between Borrower and Lender (as the same may be modified, supplemented, extended and in effect from time to time, the “Project Loan Agreement”), that certain Building Loan Agreement of even date herewith between Borrower and Lender (as the same may be modified, supplemented, extended and in effect from time to time, the “Building Loan Agreement”; the Project Loan Agreement and the Building Loan Agreement, collectively, referred to herein as the “Loan Agreement”) and all other documents to or of which Lender is a party or beneficiary now or hereafter evidencing, securing, guarantying, modifying or otherwise relating to the indebtedness evidenced hereby, are herein referred to collectively as the “Loan Documents”. All of the terms and provisions of the Loan Documents are incorporated herein by reference. Some of the Loan Documents are to be filed for record on or about the date hereof in the appropriate public records.

1.5    Late Charge. If any sum (other than the outstanding principal balance of the Note upon the Maturity Date or an acceleration thereof) payable under this Note or the other Loan Documents is not paid prior to the date that is five (5) business days after the date such sum is due, then, subject to the provisions hereof limiting interest to the maximum amount allowed by applicable law, Borrower shall pay to Lender on demand an amount equal to five percent (5.00%) of such past due sum to defray the expenses incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of use of such delinquent payment, and such amount shall be secured by the Mortgage and the other Loan Documents.

1.6    Default; Default Interest Rate. Lender and Borrower hereby expressly agree that should any payment of principal or interest required under this Note not be made within five (5) business days after such payment is due (it being understood and agreed, however, that no grace period is provided for the payment of principal and interest due on the Maturity Date or earlier acceleration thereof), should an Event of Default occur under any of the Loan Documents, which Event of Default is not cured or waived within any applicable grace or cure period, then a default shall exist hereunder, and in such event the indebtedness evidenced hereby, including all sums advanced or accrued hereunder or under any other Loan Document, and all unpaid interest accrued thereon, shall, at the option of Lender and without notice to Borrower, at once become due and payable and may be collected forthwith, whether or not there has been a prior demand for payment and regardless of the stipulated date of maturity. So long as any Event of Default exists hereunder and is continuing, regardless of whether or not there has been an acceleration of the indebtedness evidenced hereby, and at all times after maturity of the indebtedness evidenced hereby (whether by acceleration or otherwise), interest shall accrue on the outstanding principal balance of this Note at a rate per annum (the “Default Interest Rate”) equal to five percent (5.00%) plus the Applicable Interest Rate, or if such increased rate of interest may not be collected under applicable law, then at the maximum rate of interest, if any, which may be collected from Borrower under applicable law. Any interest that accrues at the Default Interest Rate shall be due and payable on the first day of each month. Borrower acknowledges that it would be extremely difficult or impracticable to determine Lender’s actual damages resulting from any late payment or default, and such late charges and default interest are reasonable estimates of those damages and do not constitute a penalty. The remedies of Lender in

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this Note or in the Loan Documents, or at law or in equity, shall be cumulative and concurrent, and may be pursued singly, successively or together in Lender’s discretion. In the event that this Note, or any part hereof, is collected by or through an attorney-at-law, Borrower agrees to pay all costs of collection, including, but not limited to, attorneys’ fees and expenses.

1.7    Increased Cost. If any Regulatory Change (as defined below):

(a)    shall subject Lender to any tax, duty or other charge with respect to its loans with respect to which the interest rate is determined by reference to LIBOR (“LIBOR Loans”) or its obligation to make LIBOR Loans, or shall change the basis of taxation of payment to Lender of the principal of or interest on LIBOR Loans or any other amounts due in respect of such loans or its obligation to make such loans (except for changes in the rate of tax on the overall net income of Lender imposed by the jurisdiction in which Lender’s principal office is located); or

(b)    shall impose, modify or deem applicable any reserve, special deposit, capital or similar requirement (including, without limitation, any such requirement imposed by the Board, but excluding any such requirement to the extent included in calculating the then applicable LIBOR under this Note) against assets of, deposits with or for the account of, or credit extended by, Lender or shall impose on Lender or on the interbank LIBOR market any other condition affecting its LIBOR Loans or its obligation to make such loans,

and the result of any of the foregoing is to actually increase the out-of-pocket cost to Lender of making or maintaining any such loans, or to reduce the amount of any sum received or receivable by Lender under any such loans, so that the spread between Lender’s cost of funds and the amounts received by Lender with respect to any such loans is actually reduced, then, within thirty (30) days after written demand by Lender, Borrower shall pay to Lender such additional amount or amounts as would compensate Lender, dollar for dollar, for such increased cost or reduction on a LIBOR Loan in the outstanding principal amount of, and having the same terms as the Loan during the period commencing on a date ninety (90) days prior to the date of said demand and continuing until the date on which this Note is paid in full (“Decreased Net Yield”). A certificate of Lender claiming compensation under this Section, setting forth the additional amount or amounts to be paid to it hereunder and stating in reasonable detail the basis for the charge and the method of computation, shall be conclusive in the absence of error. In determining such amount, Lender may use any reasonable averaging and attribution methods. Failure on the part of Lender to demand compensation for any Decreased Net Yield with respect to any disbursement under this Note shall not constitute a waiver of Lender’s right to demand compensation for any Decreased Net Yield with respect to any other disbursement under this Note.

1.8    Illegality. If any Regulatory Change shall make it unlawful or impossible for Lender to make, maintain or fund LIBOR Loans, Lender shall notify Borrower in writing, whereupon the accrual of interest hereunder based upon LIBOR shall be suspended until Lender notifies Borrower in writing that the circumstances giving rise to such suspension no longer exist. If Lender reasonably determines that such suspension must become effective prior to the end of the applicable calendar month, the Applicable Interest Rate under this Note shall be automatically converted, effective as of the date of Lender’s notice to Borrower, to a varying rate per annum equal to the Prime Rate (as defined below) plus a percentage necessary to cause the Applicable Interest Rate following the

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conversion based on the Prime Rate to be equal to the Applicable Interest Rate under this Note immediately prior to such conversion. As used herein, the term “Prime Rate” shall mean the rate of interest from time to time publicly announced by Bank as its “prime rate” or “reference rate”. Lender may lend to its customers at rates that are at, above or below the Prime Rate. For the purpose of determining the foregoing interest rate based on the Prime Rate, such interest rate shall change as and when the Prime Rate shall change.

1.9    Interest Rate Not Ascertainable, Etc. If, on or prior to the date for Lender’s determination of LIBOR in respect of any calendar month, Lender shall have reasonably determined (which determination shall be conclusive and binding, absent manifest error) that:

(a)    deposits in dollars (in the applicable amount) are not being made available to Lender in the relevant market for a period or periods of one month, or

(b)    LIBOR will not adequately and fairly reflect the cost to Lender of funding or maintaining LIBOR Loans for such calendar month at such rate,

Lender shall forthwith give written notice to Borrower of such determination, whereupon the accrual of interest hereunder, based upon LIBOR shall be suspended until Lender notifies Borrower in writing that the circumstances giving rise to such suspension no longer exist. While any such suspension continues, the converted interest rate set forth in Section 1.8 above shall be applicable. No such suspension shall affect the Applicable Interest Rate then in effect during the applicable calendar month for any principal amount of this Note outstanding at the time such suspension is imposed.

1.10    Funding Losses. Borrower shall compensate Lender, upon its written request, for all actual losses, expenses and liabilities (including any interest paid by Lender to lenders of funds borrowed by it to make or carry the Loan to the extent not recovered by Lender in connection with the reemployment of such funds) which Lender may sustain if for any reason, other than a default by Lender, a funding under this Note does not occur on the date specified therefor in the Loan Agreement.

1.11    Discretion of Lender as to Manner of Funding. Lender shall be entitled to fund and maintain its funding under this Note in any manner it may elect, it being understood, however, that for the purposes of this Note, all such determinations hereunder (excluding determinations that Lender may elect to make from the Reuters screen and determinations of Lender’s damages) shall be made as if Lender had actually funded and maintained amounts disbursed under this Note during each calendar month through the purchase of deposits having a maturity corresponding to a period of one month and bearing an interest rate equal to LIBOR for such calendar month.

1.12    Regulatory Change. As used herein, the term “Regulatory Change” shall mean any change after the date of this Note in United States federal, state or foreign laws or regulations or the adoption or making after such date of any interpretations, directives or requests applying to a class of lenders, including Lender, under any United States federal, state or foreign laws or regulations (whether or not having the force of law) or any governmental or monetary authority charged with the interpretation or administration thereof.

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ARTICLE II - GENERAL CONDITIONS

2.1    No Waiver; Amendment. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a partial or past due payment, or indulgences granted from time to time shall be construed (a) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of Lender thereafter to insist upon strict compliance with the terms of this Note, or (b) to prevent the exercise of such right of acceleration or any other right granted hereunder or by any applicable laws; and Borrower hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. No extension of the time for the payment of this Note or any installment due hereunder, made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Borrower under this Note, either in whole or in part unless Lender agrees otherwise in writing. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

2.2    Waivers. Presentment for payment, notice of intention to accelerate, notice of acceleration, demand, protest and notice of demand, protest and nonpayment and all other notices are hereby waived by Borrower. Borrower hereby further waives and renounces, to the fullest extent permitted by law, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, redemption, appraisement, exemption and homestead now or hereafter provided by the Constitution and laws of the United States of America and of each state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement and collection of the obligations evidenced by this Note or the other Loan Documents.

2.3    Limit of Validity. The provisions of this Note and of all agreements between Borrower and Lender, whether now existing or hereafter arising and whether written or oral, are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the amount paid, or agreed to be paid to Lender for the use, forbearance or detention of the money loaned under this Note exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, performance or fulfillment of any provision hereof or of any agreement between Borrower and Lender shall, at the time performance or fulfillment of such provision shall be due, exceed the limit for interest prescribed by law or otherwise transcend the limit of validity prescribed by applicable law, then ipso facto the obligation to be performed or fulfilled shall be reduced to such limit and if, from any circumstance whatsoever, Lender shall ever receive anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive interest shall be applied to the reduction of the principal balance owing under this Note in the inverse order of its maturity (whether or not then due) or at the option of Lender be paid over to Borrower, and not to the payment of Interest. All interest (including any amounts or payments deemed to be interest) paid or agreed to be paid to Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of the principal balance of this Note so

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that the interest thereof for such full period will not exceed the maximum amount permitted by applicable law. This Section 2.3 will control all agreements between Borrower and Lender.

2.4    Use of Funds. Borrower hereby warrants, represents and covenants that all funds disbursed hereunder shall be used for business or commercial purposes and that no funds disbursed hereunder shall be used for personal, family or household purposes.

2.5     Unconditional Payment. Borrower is and shall be obligated to pay principal, interest and any and all other amounts which become payable hereunder or under the other Loan Documents absolutely and unconditionally and without any abatement, postponement, diminution or deduction and without any reduction for counterclaim or setoff. In the event that at any time any payment received by Lender hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to Borrower and shall not be discharged or satisfied with any prior payment thereof or cancellation of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment shall be immediately due and payable upon demand. This Section 2.5 shall survive any cancellation or satisfaction of this Note or return of this Note to Borrower.

2.6    Savings Clause. This Note is subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by applicable law to contract or agree to pay. If by the terms of this Note, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of such maximum rate, the Applicable Interest Rate or the Default Interest Rate, as the case may be, shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of this Note until payment in full so that the rate or amount of interest on account of the Loan does not exceed the maximum lawful rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

2.7    SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

(a)    THIS NOTE WAS NEGOTIATED IN WHOLE OR IN PART IN THE STATE OF NEW YORK, AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING MATTERS OF

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CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) AND ANY LEGAL REQUIREMENTS OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF BORROWER, AND, BY ACCEPTANCE OF THIS NOTE, LENDER, HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS NOTE AND THE LOAN AGREEMENT, AND THIS NOTE AND THE LOAN AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THIS CHOICE OF GOVERNING LAW IS MADE PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401.

(b)    ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST BORROWER OR LENDER ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OTHER LOAN DOCUMENT MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, AND, IN EITHER INSTANCE, EACH OF BORROWER AND LENDER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH OF BORROWER AND LENDER, BY ACCEPTANCE OF THIS NOTE, HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. THIS CHOICE OF FORUM IS MADE PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402.

(c)    EACH OF THE BORROWER AND, BY ACCEPTANCE OF THIS NOTE, THE LENDER, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS NOTE, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE (AS NOW OR HEREAFTER MODIFIED) OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND THE BORROWER HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

2.8    Secondary Market Transactions. The terms and provisions of Article XIII of the Project Loan Agreement are hereby incorporated herein by this reference.

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2.9    Attorneys’ Fees. If any legal action is brought by any party to enforce or defend any provision of this Note, or as a consequence of any default under this Note, the prevailing party in such legal action shall be entitled to recover its reasonable attorneys’ fees and costs of the proceeding

2.10    Miscellaneous. This Note shall be interpreted, construed and enforced according to the substantive laws of the State of New York without giving effect to its principles of choice of law or conflicts of law. The terms and provisions hereof shall be binding upon and inure to the benefit of Borrower and Lender and their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. As used herein, the terms “Borrower” and “Lender” shall be deemed to include their respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of the parties or by operation of law. If Borrower consists of more than one person or entity, each shall be jointly and severally liable to perform the obligations of Borrower under this Note. All personal pronouns used herein, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and vice versa. Titles of articles and sections are for convenience only and in no way define, limit, amplify or describe the scope or intent of any provisions hereof. Time is of the essence with respect to all provisions of this Note. This Note and the other Building Loan Documents contain the entire agreements between the parties hereto relating to the subject matter hereof and thereof, and any and all prior written agreements and any and all prior and contemporaneous oral agreements relative hereto and thereto which are not contained herein or therein are terminated.

2.11    Reserved. 

2.12    Liability Limitation. Except as to the Guarantors as set forth in the Guaranties and the Environmental Indemnity Agreement, Lender shall have no recourse against, nor shall there by any personal liability to, the members of Borrower, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Borrower (except for Guarantors as provided in the Guaranties and the Environmental Indemnity Agreement, but including the members of Borrower, LMB Phalanx LLC, KBS SOR II Acquisition VI, LLC, KBS SOR US Properties II LLC, KBS Strategic Opportunity Limited Partnership II, or KBS Strategic Opportunity REIT II, Inc.) with respect to the obligations of Borrower and Guarantors under the Loans. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Borrower’s liability or obligations under the Loan Documents, the Guarantors’ liability under the Guaranties and the Environmental Indemnity Agreement to which they are a party, or Lender’s right to exercise any rights or remedies against any collateral securing the Loans.

[SIGNATURES APPEAR ON THE FOLLOWING PAGES]

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IN WITNESS WHEREOF, Borrower has executed this Note as of the date first above written.

BORROWER:

210 WEST 31^ST STREET OWNER, LLC,

a Delaware limited liability company

By:    KBS SOR II 210 WEST 31^st STREET, LLC,

a Delaware limited liability company,

its sole member

By:    ONYX 31^st STREET, LLC,

a Delaware limited liability company,

its Managing Member

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.

Authorized Signatory

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EX-10.54

Exhibit 10.54

Section: 3

Block: 780

Lots: 45 (f/k/a 45, 49 and 51)

Premises: 210 West 31^st Street, New York, New York

BUILDING LOAN MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

(this “Mortgage”)

FROM

210 WEST 31^ST STREET OWNER, LLC,

a limited liability company organized and existing under the laws of Delaware

(“Mortgagor”)

Address of Mortgagor:

c/o Onyx Equities, LLC

900 Route 9 North, Suite 400

Woodbridge, New Jersey 07095

Attention: John A. Saraceno, Jr.

TO

PACIFICCAL PC CORE LENDER, LLC,

a Delaware limited liability company,

(“Mortgagee”)

Address of Mortgagee:

c/o PCCP, LLC

10100 Santa Monica Blvd., Suite 1000

Los Angeles, CA 90067

Attn: Legal Notices

THIS BUILDING LOAN MORTGAGE IS A ''BUILDING LOAN MORTGAGE'' AS DEFINED IN NEW YORK LIEN LAW (THE ''LIEN LAW'') § 2(14) AND SECURES REPAYMENT OF A LOAN MADE PURSUANT TO A ''BUILDING LOAN CONTRACT'' AS DEFINED IN LIEN LAW § 2(13).

Mortgage Amount: $7,410,000.00

This instrument prepared by, and after recording please return to:

MORRISON & FOERSTER LLP

250 West 55^th Street

New York, New York 10019

Attention: Jeffrey J. Temple, Esq.

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BUILDING LOAN MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

THIS BUILDING LOAN MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (“Mortgage”) is made as of December 1, 2016, by 210 WEST 31^ST STREET OWNER, LLC, a Delaware limited liability company (“Mortgagor”) , having an office at c/o Onyx Equities, LLC, 900 Route 9 North, Suite 400, Woodbridge, New Jersey 07095, Attention: John A. Saraceno, Jr., for the benefit of PACIFICCAL PC CORE LENDER, LLC, a Delaware limited liability company, as Mortgagee (together with its successors and/or assigns, “Mortgagee”), having an office at c/o PCCP, LLC, 10100 Santa Monica Blvd., Suite 1000, Los Angeles, CA 90067, Attn: Legal Notices.

W I T N E S S E T H:

A.Mortgagor and Mortgagee have entered into that certain (i) Acquisition and Project Loan Agreement (such agreement, together with any and all amendments, supplements, renewals, modifications, consolidations and extensions thereof from time to time, is hereinafter referred to as the “Project Loan Agreement”) and (ii) Building Loan Agreement (such agreement, together with any and all amendments, supplements, renewals, modifications, consolidations and extensions thereof from time to time, is hereinafter referred to as the “Building Loan Agreement”; together with the Project Loan Agreement, collectively, the “Loan Agreements”), both of even date herewith, whereby Mortgagee has agreed to make a loan (the “Building Loan”) available to Mortgagor in the principal amount of up to $7,410,000.00 for the purposes set forth in the Loan Agreements.

B.To evidence the Building Loan, Mortgagor has executed and delivered to Mortgagee, that certain Building Loan Promissory Note Secured By Mortgage, of even date herewith, in the aggregate principal sum of $7,410,000.00 (as the same may be severed, amended, modified, restated, replaced, consolidated or supplemented from time to time, the “Building Loan Note” or the “Note”), in and by which Mortgagor promises to pay said principal sum, or so much thereof as has been advanced, together with interest at the rate or rates and in installments as provided in the Building Loan Note.

C.The execution and delivery of this Mortgage by Mortgagor is a condition precedent to the performance by Mortgagee of its obligations under the Loan Agreements.

D.Capitalized terms not otherwise defined herein shall have the meaning ascribed to such term in the Loan Agreements or by reference therein.

ARTICLE 1. GRANT

1.1 GRANT. For the purposes of and upon the terms and conditions in this Mortgage, Mortgagor irrevocably grants, conveys and assigns to Mortgagee, with right of entry and possession, the leasehold interest in the real property located in the City of New York, County of New York, State of New York, described on Exhibit A attached hereto (the “Real Property”)

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held by Mortgagor pursuant to that certain ground lease located at the Real Property and described in Schedule III attached hereto (the “Ground Lease”), together with all after acquired title in respect of the Real Property, and all right, title, interest and privileges of Mortgagor in and to all streets, ways, roads and alleys used in connection with or pertaining to the Real Property, and together with all development rights or credits, air rights, water, water rights and water stock related to such real property, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances, easements, rights and rights of way appurtenant or related thereto; all buildings, other improvements and fixtures now or hereafter located on the Real Property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property (the “Improvements”); all interest or estate which Mortgagor may hereafter acquire in the property described above, and all additions and accretions thereto, and the proceeds of any of the foregoing (all of the foregoing being collectively referred to as the “Property”). The listing of specific rights or property shall not be interpreted as a limit of general terms.

PROVIDED, ALWAYS, that if Mortgagor shall pay unto Mortgagee the principal of and interest on the Note, when and as the same shall become due and payable whether by acceleration or otherwise, and shall pay all Secured Obligations (as hereinafter defined), and perform all obligations on its behalf contained in this Mortgage, the Loan Agreements and all of the other documents evidencing any of the Secured Obligations, then and in that case, the Property and the Collateral (as hereinafter defined) hereby conveyed and all rights and interests therein and thereto shall revert to Mortgagor and the estate, right, title and interest of Mortgagee therein shall thereupon cease, determine and become void and in such case Mortgagee shall execute and deliver to Mortgagor, pursuant to Section 5.14 hereof, at Mortgagor’s cost, an appropriate release, assignment or discharge of this Mortgage in form to be recorded.

ARTICLE 2. OBLIGATIONS SECURED

2.1 OBLIGATIONS SECURED. Mortgagor makes this Mortgage for the purpose of securing the following obligations (“Secured Obligations”):

(a) Payment to Mortgagee of all sums at any time owing under that certain Building Loan Note;

(b) Payment and performance of all covenants and obligations of Mortgagor under this Mortgage;

(c) Payment and performance of all covenants and obligations on the part of Mortgagor under (i) the Building Loan Agreement and (ii) each other Loan Document (as defined in the Project Loan Agreement) to which Mortgagor is a party relating to the Building Loan Mortgage, but expressly excluding the Environmental Indemnity Agreement, Carveout Guaranty, Payment Guaranty and the Completion Guaranty (as each such term is defined in the Project Loan Agreement);

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(d) Payment and performance of all future advances and other obligations that the then record owner of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, as evidenced by this Mortgage and the other Loan Documents; and

(e) All modifications, extensions and renewals of any of the obligations secured hereby, however evidenced, including, without limitation: (i) modifications of the required principal payment dates or interest payment dates or both, as the case may be, deferring or accelerating payment dates wholly or partly; or (ii) modifications, extensions or renewals at a different rate of interest whether or not in the case of a note, the modification, extension or renewal is evidenced by a new or additional promissory note or notes.

2.2 OBLIGATIONS. The term “obligations” is used herein in its broadest and most comprehensive sense and shall be deemed to include, without limitation, all interest and charges, prepayment charges, late charges and loan fees at any time accruing or assessed on any of the Secured Obligations.

2.3 INCORPORATION. All terms of the Secured Obligations and the documents evidencing such obligations are incorporated herein by this reference. Capitalized terms not specifically defined herein have the meaning given such terms in the Loan Agreements. All persons who may have or acquire an interest in the Property shall be deemed to have notice of the terms of the Secured Obligations and to have notice, if provided therein, that: (a) the Note or the Loan Agreements may permit borrowing, repayment and reborrowing so that repayments shall not reduce the amounts of the Secured Obligations; and (b) the rate of interest on one or more Secured Obligations may vary from time to time.

ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS

3.1 ASSIGNMENT. Mortgagor hereby irrevocably assigns to Mortgagee all of Mortgagor's right, title and interest in, to and under: (a) all leases of the Property or any portion thereof, all licenses and agreements relating to the management, leasing or operation of the Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Property or any portion thereof, whether now existing or entered into after the date hereof (“Leases”); and (b) the rents, issues, deposits and profits of the Property, including, without limitation, all amounts payable and all rights and benefits accruing to Mortgagor under the Leases (“Payments”). The term Leases shall also include all guarantees of and security for the lessees' performance thereunder, and all amendments, extensions, renewals or modifications thereto which are permitted hereunder. This is a present and absolute assignment, not an assignment for security purposes only, and Mortgagee's right to the Leases and Payments is not contingent upon, and may be exercised without possession of, the Property.

3.2 GRANT OF LICENSE. Subject to the terms and conditions of that certain Cash Management Agreement of even date herewith among Mortgagor, Mortgagee and Property Manager (“Cash Management Agreement”), Mortgagee confers upon Mortgagor a license (“License”) to collect and retain the Payments as they become due and payable, until the

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occurrence of an Event Default (as hereinafter defined). Upon the occurrence of an Event of Default, the License shall be automatically revoked and Mortgagee may collect and apply the Payments pursuant to Section 6.4 without notice and without taking possession of the Property. Mortgagor hereby irrevocably authorizes and directs the lessees under the Leases to rely upon and comply with any notice or demand by Mortgagee for the payment to Mortgagee of any rental or other sums which may at any time become due under the Leases, or for the performance of any of the lessees' undertakings under the Leases, and the lessees shall have no right or duty to inquire as to whether any Event of Default has actually occurred or is then existing hereunder. Mortgagor hereby relieves the lessees from any liability to Mortgagor by reason of relying upon and complying with any such notice or demand by Mortgagee.

3.3 EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall not cause Mortgagee to be: (a) a mortgagee in possession; (b) responsible or liable for the control, care, management or repair of the Property or for performing any of the terms, agreements, undertakings, obligations, representations, warranties, covenants and conditions of the Leases; or (c) responsible or liable for any waste committed on the Property by the lessees under any of the Leases or any other parties; for any dangerous or defective condition of the Property; or for any negligence in the management, upkeep, repair or control of the Property resulting in loss or injury or death to any lessee, licensee, employee, invitee or other person. Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of: (i) the exercise or failure to exercise any of the rights, remedies or powers granted to Mortgagee hereunder; or (ii) the failure or refusal of Mortgagee to perform or discharge any obligation, duty or liability of Mortgagor arising under the Leases.

3.4 REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants that: (a) prior to the date of this Mortgage, Mortgagor delivered to Mortgagee a true, accurate and complete list of all Leases, if any; (b) all existing Leases, if any, are in full force and effect and are enforceable in accordance with their respective terms, and no breach or default, or event which would constitute a breach of default after notice or the passage of time, or both, exists under any existing Leases on the part of any party; (c) no rent under or other payment under any existing Lease has been paid by any lessee for more than one (1) month in advance; and (d) none of the lessor's interests under any of the Leases has been transferred or assigned.

3.5 COVENANTS. Subject to the terms of the Loan Agreements, Mortgagor shall use commercially reasonable efforts to cause the Property to be leased at all times. Mortgagor (a) shall not enter into any Leases at the Property except in accordance with the terms and conditions of the Loan Agreements or (b) execute any other assignment relating to any of the Leases. Mortgagor shall timely perform all obligations that are required to be performed by the landlord under the Leases and give Mortgagee prompt written notice of any default which occurs with respect to any of the Leases following Mortgagor becoming aware of such default, whether the default be that of the lessee or of the lessor respectively thereunder. Without in any way limiting the requirement of Mortgagee’s consent hereunder, if the provisions of the Cash Management Agreement shall be in effect, any sums received by Mortgagor in consideration of any termination (or the release or discharge of any lessee)

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modification or amendment of any Lease shall be applied as provided in the Cash Management Agreement.

3.6 ESTOPPEL CERTIFICATES. Within fifteen (15) days after written request by Mortgagee, Mortgagor shall use commercially reasonable efforts to deliver to Mortgagee and to any party designated by Mortgagee estoppel certificates executed by Mortgagor and by each of the lessees certifying (if such be the case): (a) that the foregoing assignment and the Leases are in full force and effect; (b) the date of each lessee's most recent payment of rent; (c) that there are no defenses or offsets outstanding, or stating those claimed by Mortgagor or lessees under the foregoing assignment or the Leases, as the case may be; and (d) any other information reasonably requested by Mortgagee. The foregoing obligation shall be deemed satisfied if Mortgagor delivers an estoppel certificate executed by a tenant that complies with the requirements of such tenant’s Lease.

ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING

4.1 SECURITY INTEREST. Mortgagor hereby grants and assigns to Mortgagee as of the Effective Date (as defined in the Project Loan Agreement) a security interest, to secure payment and performance of all of the Secured Obligations, in all of the following described personal property in which Mortgagor now or at any time hereafter owns or has any interest (collectively, the “Collateral”):

All goods, building and other materials, supplies, work in process, equipment, machinery, fixtures, furniture, furnishings, signs and other personal property, embedded software therein, wherever situated, which are or are to be incorporated into, used in connection with, or appropriated for use on (i) the real property described on Exhibit A attached hereto and incorporated by reference herein (to the extent the same are not effectively made a part of the real property pursuant to Section 1.1 above) or (ii) the Improvements (which real property and Improvements are collectively referred to herein as the Property); all after acquired title, and all right, title, interest and privileges of Mortgagor in and to all streets, ways, roads and alleys used in connection with or pertaining to such real property, and together with all development rights or credits, air rights, water, water rights and water stock related to such real property, and all minerals, oil and gas, and other hydrocarbon substances in, on or under the real property, and all appurtenances, easements, rights and rights of way appurtenant or related thereto; all buildings, other improvements and fixtures now or hereafter located on the real property, including, but not limited to, all apparatus, equipment, and appliances used in the operation or occupancy of the real property, it being intended by the parties that all such items shall be conclusively considered to be a part of the real property, whether or not attached or affixed to the real property; together with all rents, issues, deposits and profits of the Property (to the extent, if any, they are not subject to Article 3); all inventory, accounts, cash receipts, deposit accounts, accounts receivable, contract rights, general intangibles, chattel paper (whether electronic or tangible), instruments, documents, notes, drafts, letters of credit, letter of credit rights, supporting obligations insurance policies, insurance and condemnation awards and proceeds, any other rights to the payment of money, trade names, trademarks and service marks arising from or related to the ownership, management, leasing or operation of the Property or any business now or hereafter conducted thereon by

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Mortgagor; all rights of Mortgagor under any interest rate hedge, cap, swap or similar agreement; all permits consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from, any governmental entity with respect to the Property; all deposits or other security now or hereafter made with or given to utility companies by Mortgagor with respect to the Property; all advance payments of insurance premiums made by Mortgagor with respect to the Property; all plans, drawings and specifications relating to the Property; all loan funds held by Mortgagee, whether or not disbursed; all funds deposited with Mortgagee or another depository pursuant to the Loan Agreements or any other Loan Documents; all reserves, deferred payments, deposits, accounts, refunds and payments of any kind related to the Property or any portion thereof; together with all replacements and proceeds of, and additions and accessions to, any of the foregoing; together with all books, records and files relating to any of the foregoing.

As to all of the above described personal property which is or which hereafter becomes a “fixture” under applicable law, this Mortgage constitutes a fixture filing under the New York Uniform Commercial Code, as amended or recodified from time to time (“UCC”); and is to be recorded in the real estate records of the county in which the Property is located.

4.2 REPRESENTATIONS AND WARRANTIES.  Mortgagor represents and warrants that: (a) Mortgagor has, or will have, marketable title to the Collateral; (b) Mortgagor has not previously assigned or encumbered the Collateral, and Mortgagor has not delivered or authorized any other person to deliver any financing statement covering any of the Collateral to any other person or entity; and (c) Mortgagor's principal place of business is located at the address shown in Section 7.11.

4.3 RIGHTS OF MORTGAGEE. In addition to Mortgagee’s rights as a “Secured Party” under the UCC, Mortgagee may, but shall not be obligated to, at any time without notice and at the expense of Mortgagor: (a) give notice to any person of Mortgagee's rights hereunder and enforce such rights at law or in equity; (b) insure, protect, defend and preserve the Collateral or any rights or interests of Mortgagee therein; (c) inspect the Collateral; and (d) endorse, collect and receive any right to payment of money owing to Mortgagor under or from the Collateral. Notwithstanding the above, in no event shall Mortgagee be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express written election of said remedy under UCC §9-621 as amended or recodified from time to time, or other applicable law.

4.4 RIGHTS OF MORTGAGEE UPON EVENT OF DEFAULT. Upon the occurrence and during the continuance of an Event of Default under this Mortgage, then in addition to all of Mortgagee's rights as a Secured Party under any Loan Document, the UCC or otherwise at law:

(a) Mortgagee may (i) upon written notice, require Mortgagor to assemble any or all of the Collateral and make it available to Mortgagee at a place designated by Mortgagee; (ii) upon prior written notice, enter upon the Property or other place where any of the Collateral may be located and take possession of, collect, sell, and dispose of any or all of the Collateral, and store the same at locations acceptable to Mortgagee at

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Mortgagor's expense; (iii) sell, assign and deliver at any place and in any lawful manner all or any part of the Collateral and bid and become purchaser at any such sales; and

(b) Mortgagee may, for the account of Mortgagor and at Mortgagor's expense: (i) operate, use, consume, sell or dispose of the Collateral as Mortgagee deems appropriate for the purpose of performing any or all of the Secured Obligations; (ii) enter into any agreement, compromise, or settlement, including insurance claims, which Mortgagee may deem desirable or proper with respect to any of the Collateral; and (iii) endorse and deliver evidences of title for, and receive, enforce and collect by legal action or otherwise, all indebtedness and obligations now or hereafter owing to Mortgagor in connection with or on account of any or all of the Collateral.

(c) Notwithstanding any other provision hereof, Mortgagee shall not be deemed to have accepted any property other than cash in satisfaction of any obligation of Mortgagor to Mortgagee unless Mortgagor shall make an express written election of said remedy under UCC §9-621 as amended or recodified from time to time, or other applicable law.

4.5 POWER OF ATTORNEY. During the continuance of any Event of Default, Mortgagor hereby irrevocably appoints Mortgagee as Mortgagor’s attorney‑in‑fact (such agency being coupled with an interest), and as such attorney-in-fact Mortgagee may, without the obligation to do so, in Mortgagee's name, or in the name of Mortgagor, prepare, execute and file or record financing statements, continuation statements, applications for registration and like papers necessary to create, perfect or preserve any of Mortgagee's security interests and rights in or to any of the Collateral, and take any other action required of Mortgagor herein; provided, however, that Mortgagee as such attorney-in-fact shall be accountable only for such funds as are actually received by Mortgagee.

4.6 EFFECTIVE AS A FINANCING STATEMENT. This Mortgage shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including said fixtures) is situated. This Mortgage shall also be effective as a financing statement covering as-extracted collateral (including oil and gas), accounts and general intangibles under the New York UCC, as in effect from time to time, and the UCC, as in effect from time to time, in any other state where the Property is situated which will be financed at the wellhead or minehead of the wells or mines located on the Property and is to be filed for record in the real estate records of each county where any part of the Property is situated. This Mortgage shall also be effective as a financing statement covering any other Property and may be filed in any other appropriate filing or recording office. The mailing address of Mortgagor and the Mortgagee are set forth in the preamble of this Mortgage and the address of Mortgagee from which information concerning the security interests hereunder may be obtained is the address of Mortgagee set forth at the end of this Mortgage. A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section.

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ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES

5.1 TITLE. Mortgagor represents and warrants that Mortgagor lawfully holds and possesses, or will hold and possess, leasehold title to the Property without limitation on the right to encumber, and this Mortgage is a first and prior Lien on the Property.

5.2 TAXES AND ASSESSMENTS. Unless Mortgagee is reserving funds for such payments pursuant to the terms of the Loan Agreement, Mortgagor shall pay or caused to be paid prior to delinquency (i) all taxes, assessments, levies and charges imposed by any public or quasi‑public authority or utility company which are or which may become a Lien upon or cause a loss in value of the Property or any interest therein, and (ii) all taxes, assessments, levies and charges imposed by any public authority upon Mortgagee by reason of its interest in any Secured Obligation or in the Property, or by reason of any payment made to Mortgagee pursuant to any Secured Obligation; provided, however, Mortgagor shall have no obligation to pay taxes which may be imposed from time to time upon Mortgagee and which are measured by and imposed upon Mortgagee's net income.

5.3 TAX AND INSURANCE IMPOUNDS. Mortgagor shall, until all Secured Obligations have been paid in full, pay to Mortgagee the Tax and Insurance Monthly Installment as and when required (and as defined in) Section 12.2 of the Project Loan Agreement.

5.4 PERFORMANCE OF SECURED OBLIGATIONS. Mortgagor shall promptly pay and perform each Secured Obligation when due. By its execution hereof, Mortgagor hereby acknowledges its receipt of the fully executed Loan Agreements and Mortgagor hereby agrees to be bound by all terms and conditions contained in the Loan Agreements respecting the Property.

5.5 LIENS, ENCUMBRANCES AND CHARGES. Subject to Mortgagor’s rights under Section 8.3 of the Project Loan Agreement, Mortgagor shall (i) immediately discharge any Lien not approved by Mortgagee in writing that has or may attain priority over this Mortgage and (ii) pay when due all obligations secured by or reducible to Liens and encumbrances which shall now or hereafter encumber or appear to encumber all or any part of the Property or any interest therein, whether senior or subordinate hereto.

5.6 DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS.

(a) The following (whether now existing or hereafter arising) are all absolutely and irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee, shall be paid directly to Mortgagee: (i) all awards of damages and all other compensation payable directly or indirectly by reason of a condemnation or proposed condemnation for public or private use affecting all or any part of, or any interest in, the Property; (ii) all other claims and awards for damages to, or decrease in value of, all or any part of, or any interest in, the Property; (iii) all proceeds of any insurance policies payable by reason of loss sustained to all or any part of the Property; and (iv) all interest which may accrue on any of the foregoing. Subject to applicable law, Mortgagee may at its discretion apply all or any of the proceeds it receives to its expenses in settling, prosecuting or defending any claim and shall release the balance

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of any insurance proceeds Mortgagee receives to Mortgagor upon the conditions Mortgagee set forth in Sections 5.7 and 5.8 of the Project Loan Agreement, unless such casualty and/or release would materially impair Mortgagee’s security, in which case Mortgagee may apply the balance to the Secured Obligation. Mortgagee may commence, appear in, defend or prosecute any assigned claim or action and may adjust, compromise, settle and collect all claims and awards assigned to Mortgagee; provided, however, in no event shall Mortgagee be responsible for any failure to collect any claim or award, regardless of the cause of the failure, including, without limitation, any malfeasance or nonfeasance by Mortgagee or its employees or agents.

(b) Subject to the terms and conditions set forth in the Loan Agreements, Mortgagee may permit insurance proceeds held by Mortgagee to be used for repair or restoration.

5.7 MAINTENANCE AND PRESERVATION OF THE PROPERTY. Mortgagor covenants: (a) to insure the Property against such risks as Mortgagee may require pursuant to the Loan Agreements and, at Mortgagee's request, to provide evidence of such insurance to Mortgagee, and to comply with the requirements of any insurance companies insuring the Property; (b) to keep the Property in good condition and repair; (c) not to remove or demolish the Property or any part thereof, not to alter, restore or add to the Property without Mortgagee’s prior written consent, (d) not to initiate or acquiesce in any change in any zoning or other land classification which affects the Property without Mortgagee's prior written consent; (e) to complete or restore promptly and in good and workmanlike manner the Property, or any part thereof which may be damaged or destroyed as provided for in the Loan Agreements; (f) to comply with all laws, ordinances, regulations and standards, and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character which affect the Property and pertain to acts committed or conditions existing thereon, including, without limitation, any work, alteration, improvement or demolition mandated by such laws, covenants or requirements; (g) not to commit or permit waste of the Property or Collateral; and (h) to do all other acts which from the character or use of the Property may be reasonably necessary to maintain and preserve its value.

5.8 DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Mortgagor's sole expense, Mortgagor shall protect, preserve and defend the Property and Collateral and title to and right of possession of the Property and Collateral, the security hereof and the rights and powers of Mortgagee hereunder against all adverse claims. Mortgagor shall give Mortgagee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding, of the occurrence of any damage to the Property or Collateral and of any condemnation offer or action.

5.9 [INTENTIONALLY OMITTED.]

5.10 COMPENSATION; EXCULPATION; INDEMNIFICATION.

(a) Mortgagee shall not directly or indirectly be liable to Mortgagor or any other person as a consequence of (i) the proper exercise of the rights, remedies or powers granted

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to Mortgagee in this Mortgage; (ii) the failure or refusal of Mortgagee to perform or discharge any obligation or liability of Mortgagor under any agreement related to the Property or under this Mortgage; or (iii) any loss sustained by Mortgagor or any third party resulting from Mortgagee's failure to lease the Property after an Event of Default or from any other act or omission of Mortgagee in managing the Property after an Event of Default unless the loss is caused by the gross negligence or willful misconduct of Mortgagee and no such liability shall be asserted against or imposed upon Mortgagee, and all such liability is hereby expressly waived and released by Mortgagor.

(b) Mortgagor indemnifies Mortgagee (and its successors, assigns and participants) against, and holds Mortgagee (and its successors, assigns and participants) harmless from, all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys' fees and other legal expenses, cost of evidence of title, cost of evidence of value, and other expenses which either may suffer or incur: (i) by reason of this Mortgage; (ii) by reason of the performance of any act required or permitted hereunder or required by law; (iii) as a result of any failure of Mortgagor to perform Mortgagor's obligations; (iv) by reason of any alleged obligation or undertaking on Mortgagee's part to perform or discharge any of the representations, warranties, conditions, covenants or other obligations of Mortgagor contained in any other document related to the Property; or (v) as a result of any proceeding instituted by any claimant alleging a violation of the Lien Law. The above obligation of Mortgagor to indemnify and hold harmless Mortgagee (and its successors, assigns and participants) shall survive the release and cancellation of the Secured Obligations and the release and reconveyance or partial release and reconveyance of this Mortgage.

(c) Mortgagor shall pay all amounts and indebtedness arising under this Section 5.10 immediately after demand by Mortgagee (or its successors, assigns or participants) together with interest thereon from the date of such demand at the rate of interest then applicable to the principal balance of the Note as specified therein.

5.11 [INTENTIONALLY OMITTED.]

5.12 DUE ON SALE OR ENCUMBRANCE. If the Property or any interest therein, or if any portion of the corporate stock, general partnership interests or limited liability company interests in Mortgagor (except as otherwise expressly permitted in Section 8.14 of the Project Loan Agreement), shall be sold, transferred, mortgaged, assigned, encumbered or leased, whether directly or indirectly, whether voluntarily, involuntarily or by operation of law, without the prior written consent of Mortgagee, THEN Mortgagee, in its sole discretion, may declare all Secured Obligations immediately due and payable.

5.13 RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY. Without notice to or the consent, approval or agreement of any persons or entities having any interest at any time in the Property or in any manner obligated under the Secured Obligations (“Interested Parties”), Mortgagee may, from time to time, release any person or entity from liability for the payment or performance of any Secured Obligation, take any action or make any agreement with Mortgagor or the applicable obligor extending the

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maturity or otherwise altering the terms or increasing the amount of any Secured Obligation, or accept additional security or release all or a portion of the Property and other security for the Secured Obligations. None of the foregoing actions shall release or reduce the personal liability of any of said Interested Parties, or release or impair the priority of the Lien of this Mortgage upon the Property and Collateral.

5.14 RELEASES. If the Secured Obligations are paid, performed and discharged in full in accordance with the terms of this Mortgage, the Note, and the other Loan Documents, then this Mortgage shall be released or assigned (without any representations or warranties) by Mortgagee at Mortgagor’s request; provided, Mortgagor shall pay any filing fees in connection with the recordings of the assignment of mortgage and any expenses of Mortgagee incurred in connection with such release or assignment. In connection therewith, at the request and sole expense of Mortgagor, Mortgagee shall execute and deliver to Mortgagor all releases, assignments or other documents, including, without limitation, reconveyances and termination statements, reasonably necessary or desirable for the release of such lien.

5.15 SUBROGATION. Mortgagee shall be subrogated to the Lien of all encumbrances, whether released of record or not, paid in whole or in part by Mortgagee pursuant to this Mortgage or by the proceeds of any loan secured by this Mortgage.

5.16 RIGHT OF INSPECTION. Mortgagee, its agents and employees, may enter the Property at any reasonable time, after reasonable notice to Mortgagor, for the purpose of inspecting the Property and ascertaining Mortgagor's compliance with the terms hereof.

ARTICLE 6. DEFAULT PROVISIONS

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6.1 EVENT OF DEFAULT. For all purposes hereof, the term “Event of Default” shall mean the existence of any Event of Default, as defined in the Project Loan Agreement.

6.2 RIGHTS AND REMEDIES. At any time after the occurrence and during the continuance of an Event of Default, Mortgagee shall have all the following rights and remedies:

(a) Upon written notice to Mortgagor, to declare all Secured Obligations immediately due and payable;

(b) Upon written notice to Mortgagor, and without releasing Mortgagor from any Secured Obligation, and without becoming a mortgagee in possession, to cure any Event of Default of Mortgagor and, in connection therewith, to enter upon the Property and do such acts and things as Mortgagee deems necessary or desirable to protect the security hereof, including, without limitation: (i) to appear in and defend any action or proceeding purporting to affect the security of this Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii) to pay, purchase, contest or compromise any encumbrance, charge, Lien or claim of Lien which, in the sole judgment of Mortgagee, is or may be senior in priority to this Mortgage, the judgment of Mortgagee being conclusive as between the parties hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with respect to insurance required to be carried under this Mortgage; or (v) to employ counsel, accountants, contractors and other appropriate persons.

(c) To commence and maintain an action or actions in any court of competent jurisdiction to foreclose this instrument as a mortgage or to obtain specific enforcement of the covenants of Mortgagor hereunder, and Mortgagor agrees that such covenants shall be specifically enforceable by injunction or any other appropriate equitable remedy and that for the purposes of any suit brought under this subparagraph, Mortgagor waives the defense of laches and any applicable statute of limitations;

(d) To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default, and Mortgagor hereby consents to such appointment;

(e) To enter upon, possess, manage and operate the Property or any part thereof, to take and possess all documents, books, records, papers and accounts of Mortgagor or the then owner of the Property, to make, terminate, enforce or modify Leases of the Property upon such terms and conditions as Mortgagee deems proper, to make repairs, alterations and improvements to the Property as necessary, in Mortgagee’s sole judgment, to protect or enhance the security hereof;

(f) [reserved];

(g) To resort to and realize upon the security hereunder and any other security now or later held by Mortgagee concurrently or successively and in one or several

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consolidated or independent judicial actions or lawfully taken non‑judicial proceedings, or both, and to apply the proceeds received upon the Secured Obligations all in such order and manner as Mortgagee determines in its sole discretion.

(h) Upon sale of the Property at any judicial foreclosure, Mortgagee may credit bid (as determined by Mortgagee in its sole and absolute discretion) all or any portion of the Secured Obligations. In determining such credit bid, Mortgagee may, but is not obligated to, take into account all or any of the following: (i) appraisals of the Property as such appraisals may be discounted or adjusted by Mortgagee in its sole and absolute underwriting discretion; (ii) expenses and costs incurred by Mortgagee with respect to the Property prior to foreclosure; (iii) expenses and costs which Mortgagee anticipates will be incurred with respect to the Property after foreclosure, but prior to resale, including, without limitation, costs of structural reports and other due diligence, costs to carry the Property prior to resale, costs of resale (e.g. commissions, attorneys' fees, and taxes), costs of any hazardous materials clean-up and monitoring, costs of deferred maintenance, repair, refurbishment and retrofit, costs of defending or settling litigation affecting the Property, and lost opportunity costs (if any), including the time value of money during any anticipated holding period by Mortgagee; (iv) declining trends in real property values generally and with respect to properties similar to the Property; (v) anticipated discounts upon resale of the Property as a distressed or foreclosed property; (vi) the fact of additional collateral (if any), for the Secured Obligations; and (vii) such other factors or matters that Mortgagee (in its sole and absolute discretion) deems appropriate. In regard to the above, Mortgagor acknowledges and agrees that: (w) Mortgagee is not required to use any or all of the foregoing factors to determine the amount of its credit bid; (x) this Section does not impose upon Mortgagee any additional obligations that are not imposed by law at the time the credit bid is made; (y) the amount of Mortgagee's credit bid need not have any relation to any loan-to-value ratios previously discussed between Mortgagor and Mortgagee; and (z) Mortgagee's credit bid may be (at Mortgagee's sole and absolute discretion) higher or lower than any appraised value of the Property.

6.3 APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all costs, fees and expenses of Mortgagee, including, without limitation, cost of evidence of title and attorneys' fees in connection with sale and costs and expenses of sale and of any judicial proceeding wherein such sale may be made, Mortgagee shall apply all proceeds of any foreclosure sale: (a) to payment of all sums expended by Mortgagee under the terms hereof and not then repaid, with accrued interest at the rate of interest specified in the Note to be applicable on or after maturity or acceleration of the Note; (b) to payment of all other Secured Obligations; and (c) the remainder, if any, to the person or persons legally entitled thereto.

6.4 APPLICATION OF OTHER SUMS. All sums received by Mortgagee under Section 6.2 or Section 3.2, less all costs and expenses incurred by Mortgagee or any receiver under Section 6.2, including, without limitation, attorneys' fees, shall be applied in payment of the Secured Obligations in such order as Mortgagee shall determine in its sole discretion; provided, however, Mortgagee shall have no liability for funds not actually received by Mortgagee.

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6.5 NO CURE OR WAIVER. Neither Mortgagee's nor any receiver's entry upon and taking possession of all or any part of the Property and Collateral, nor any collection of rents, issues, profits, insurance proceeds, condemnation proceeds or damages, other security or proceeds of other security, or other sums, nor the application of any collected sum to any Secured Obligation, nor the exercise or failure to exercise of any other right or remedy by Mortgagee or any receiver shall cure or waive any breach, Event of Default or notice of default under this Mortgage, or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and Mortgagor has cured all other defaults), or impair the status of the security, or prejudice Mortgagee in the exercise of any right or remedy, or be construed as an affirmation by Mortgagee of any tenancy, lease or option or a subordination of the Lien of this Mortgage.

6.6 PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Mortgagor agrees to pay to Mortgagee, within ten (10) days after demand, all costs and expenses incurred by Mortgagee pursuant to Section 6.2 (including, without limitation, court costs and attorneys' and paralegals' fees, whether internal or external, whether incurred in litigation or not) with interest from the date of notice of expenditure until said sums have been paid at the rate of interest then applicable to the principal balance of the Note as specified therein.

ARTICLE 7. MISCELLANEOUS PROVISIONS

7.1 ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate by reference the entire agreement of the parties with respect to matters contemplated herein and supersede all prior negotiations. The Loan Documents grant further rights to Mortgagee and contain further agreements and affirmative and negative covenants by Mortgagor which apply to this Mortgage and to the Property and such further rights and agreements are incorporated herein by this reference.

7.2 MERGER. No merger shall occur as a result of Mortgagee's acquiring any other estate in, or any other Lien on, the Property unless Mortgagee consents to a merger in writing.

7.3 OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL. If more than one person has executed this Mortgage as “Mortgagor”, the obligations of all such persons hereunder shall be joint and several.

7.4 [INTENTIONALLY OMITTED.]

7.5 WAIVER OF MARSHALING RIGHTS. Mortgagor, for itself and for all parties claiming through or under Mortgagor, and for all parties who may acquire a Lien on or interest in the Property, hereby waives all rights to have the Property and/or any other property, including, without limitation, the Collateral, which is now or later may be security for any Secured Obligation (“Other Property”) marshaled upon any foreclosure of this Mortgage or on a foreclosure of any other security for any of the Secured Obligations. Mortgagee shall have the right to sell, and any court in which foreclosure proceedings may be brought shall have the right to order a sale of, the Property and any or all of the Collateral or Other Property as a whole or in separate parcels, in any order that Mortgagee may designate.

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7.6 RULES OF CONSTRUCTION. When the identity of the parties or other circumstances make it appropriate the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. The term “Property” means all and any part of the Property and any interest in the Property.

7.7 SUCCESSORS IN INTEREST. The terms, covenants, and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto; provided, however, that this Section 7.7 does not waive or modify the provisions of Section 5.12.

7.8 EXECUTION IN COUNTERPARTS. This Mortgage may be executed in any number of counterparts, each of which, when executed and delivered to Mortgagee, will be deemed to be an original and all of which, taken together, will be deemed to be one and the same instrument.

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7.9 CHOICE OF LAW. THIS MORTGAGE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY NEW YORK LAW AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH AND PURSUANT TO THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW, EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK ARE GOVERNED BY THE LAWS OF SUCH OTHER JURISDICTION.

7.10 INCORPORATION. Exhibit A as attached, is hereby incorporated into this Mortgage by this reference.

7.11 NOTICES. All notices or other communications required or permitted to be given pursuant to the provisions of this Mortgage shall be in writing and shall be considered as properly given if delivered personally or sent by first class U.S. mail, postage prepaid, except that notice of an Event of Default may be sent by certified mail, return receipt requested, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid. Notices so sent shall be effective three (3) days after mailing, if mailed by first class mail, and otherwise upon receipt at the addresses set forth below; provided, however, that non-receipt of any communication as a result of any change of address of which the sending party was not notified or as a result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the addresses of the parties shall be:

Mortgagor: 210 West 31^st Street Owner, LLC

c/o Onyx Equities, LLC

900 Route 9 North, Suite 400

Woodbridge, New Jersey 07095

Attention: John A. Saraceno, Jr.

With a copy to: c/o KBS Capital Advisors

800 Newport Center Drive, Suite 700

Newport Beach, CA 92660

Attention: Brian Ragsdale

Attention: Shep Wainwright

and to:

Cole Schotz P.C.

1325 Avenue of the Americas, 19^th Floor

New York, NY 10019
Attention: Jordan J. Metzger, Esq.

and to:

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Sheppard Mullin Richter & Hampton LLP

650 Town Center Drive, 4^th Floor

Costa Mesa, CA 92626

Attention: Scott A. Morehouse, Esq.

Mortgagee: PacificCal PC Core Lender, LLC

c/o PCCP, LLC10100 Santa Monica Blvd., Suite 1000

Los Angeles, CA 90067

Attn: Legal Notices

With a copy to: Morrison & Foerster LLP250 West 55^th Street
New York, New York 10019
Attn: Jeffrey Temple, Esq.

Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days’ notice to the other party in the manner set forth hereinabove. Mortgagor shall forward to Mortgagee, without delay, any notices, letters or other communications delivered to the Property or to Mortgagor naming Mortgagee, “Lender” or any similar designation as addressee, or which is reasonably likely to affect the ability of Mortgagor to perform its obligations to Mortgagee under the Note or the Loan Agreements.

7.12 SECONDARY MARKET TRANSACTIONS. The terms and provisions of Article XIII of the Project Loan Agreement are hereby incorporated herein by this reference.

7.13 RESERVED.

7.14 LIMITED RECOURSE PROVISION. Except as to the Guarantors as set forth in the Guaranties and the Environmental Indemnity Agreement, Lender shall have no recourse against, nor shall there by any personal liability to, the members of Borrower, or to any shareholders, members, partners, beneficial interest holders or any other entity or person in the ownership (directly or indirectly) of Borrower (except for Guarantors as provided in the Guaranties and the Environmental Indemnity Agreement, but including the members of Borrower, LMB Phalanx LLC, KBS SOR II Acquisition VI, LLC, KBS SOR US Properties II LLC, KBS Strategic Opportunity Limited Partnership II, or KBS Strategic Opportunity REIT II, Inc.) with respect to the obligations of Borrower and Guarantors under the Loans. For purposes of clarification, in no event shall the above language limit, reduce or otherwise affect Borrower’s liability or obligations under the Loan Documents, the Guarantors’ liability under the Guaranties and the Environmental Indemnity Agreement to which they are a party, or Lender’s right to exercise any rights or remedies against any collateral securing the Loans.

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ARTICLE 8. GROUND LEASE

8.1 Mortgagor shall perform all of the covenants contained in Section 8.27 of the Project Loan Agreement with respect to the Ground Lease. Mortgagor shall enforce the obligations of the lessor under the Ground Lease (the “Ground Lessor”) to the end that Mortgagor may enjoy all of the rights granted to it under the Ground Lease, and shall promptly notify Mortgagee of any default beyond any applicable grace, notice or cure period by the Ground Lessor that Mortgagor becomes aware of, in the performance or observance of any of the terms, covenants and conditions on the part of the Ground Lessor to be performed or observed under the Ground Lease, and Mortgagor shall promptly advise Mortgagee of the occurrence of any event of default beyond any applicable grace, notice or cure period under the Ground Lease. Mortgagor hereby assigns to Mortgagee, as further security for the payment and performance of the Secured Obligations and observance of the terms, covenants and conditions of this Mortgage, all of the rights, privileges and prerogatives of Mortgagor, as tenant under the Ground Lease, to surrender the leasehold estate created by the Ground Lease or to terminate, cancel, modify, change, supplement, alter or amend the Ground Lease, and any such surrender of the leasehold estate created by the Ground Lease or termination, cancellation, modification, change, supplement, alteration or amendment of the Ground Lease not permitted pursuant to the foregoing terms of this Section 8.1, Section 8.27 of the Loan Agreement or not otherwise approved by Mortgagee shall be void and of no force and effect.

8.2 If Mortgagor shall default beyond any applicable notice and/or grace period in the performance or observance of any term, covenant or condition of the Ground Lease on the part of Mortgagor, as tenant thereunder, to be performed or observed, then, without limiting the generality of the other provisions of this Mortgage, and without waiving or releasing Mortgagor from any of its obligations hereunder, Mortgagee shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all of the terms, covenants and conditions of the Ground Lease on the part of Mortgagor, as tenant thereunder, to be performed or observed or to be promptly performed or observed on behalf of Mortgagor, to the end that the rights of Mortgagor in, to and under the Ground Lease shall be kept unimpaired and free from default. If Mortgagee shall make any payment or perform any act or take action in accordance with the preceding sentence, Mortgagee will give Mortgagor prompt written notice thereof; provided that Mortgagee's failure to give such notice prior to making such payment or performing or taking such action shall not affect its rights hereunder. In any such event, Mortgagee and any Person designated by Mortgagee shall have, and are hereby granted, the right to enter upon the Mortgaged Property at any time and from time to time for the purpose of taking any such action. If the Ground Lessor shall deliver to Mortgagee a copy of any notice of default sent by Ground Lessor to Mortgagor, as lessee under the Ground Lease, Mortgagee may take or omit to take any action in good faith, in reliance thereon.

8.3 So long as any portion of the Secured Obligations shall remain unpaid, the leasehold estate created in the Real Property pursuant to the Ground Lease shall not merge but shall always be kept separate and distinct, notwithstanding the union of such estates in any Person by

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purchase, operation of law or otherwise. Mortgagee reserves the right, at any time, to release portions of the Property from the lien of this Mortgage with or without consideration, at Mortgagee's election, without waiving or affecting any of its rights hereunder or under the Note, the Loan Agreements or the other Loan Documents and any such release shall not affect Mortgagee's rights in connection with the portion of the Property not so released.

8.4 In the event of the bankruptcy, reorganization or insolvency of Mortgagor, any attempt by Mortgagor to surrender its leasehold estate, or any portion thereof, under the Ground Lease, or any attempt by Mortgagor to terminate, cancel or acquiesce in the rejection of the Ground Lease without the consent of Mortgagee shall be null and void. Mortgagor hereby expressly releases, assigns, relinquishes and surrenders unto Mortgagee all of its right, power and authority to terminate, cancel, acquiesce in the rejection of, modify, change, supplement, alter or amend the Ground Lease in any respect, either orally or in writing, in the event of the bankruptcy, reorganization or insolvency of Mortgagor, and any attempt on the part of Mortgagor to exercise any such right without the consent of Mortgagee shall be null and void.

8.5 Notwithstanding anything to the contrary contained in this Mortgage with respect to the Ground Lease, as security for the Loan, but subject to the Loan Documents, the Mortgagor unconditionally assigns, transfers and sets over unto Mortgagee all of its claims and rights to the payment of damages that may hereafter arise as a result of any rejection or disaffirmance of the Ground Lease by the Ground Lessor or its successors and assigns, or by ant trustee of any such party, pursuant to the Bankruptcy Code. Mortgagee shall have and is hereby granted the right to approve prior to the filing or commencement thereof by Borrower of any claim, suit, action or proceeding relating to the Ground Lessor’s attempt to reject or disaffirm, or the rejection or disaffirmance of, the Ground Lease (including, without limitation, the right to file and prosecute, any proofs of claim, complaints, motions, objections, applications, notices and other documents) in any case in respect of Ground Lessor or any of its successors and assigns, under the Bankruptcy Code. This assignment constitutes a present, irrevocable and unconditional assignment of the foregoing claims, rights and remedies, and shall continue in effect until the Secured Obligations shall have been satisfied and discharged in full.

8.6 Mortgagee hereby agrees to deliver to Ground Lessor (simultaneously with the delivery thereof to Mortgagor) copies of any notice of default or nonperformance given to Mortgagor hereunder. The terms of this Section 8.6 are adopted in order to comply with certain provisions required in order to qualify this Mortgage as a “Recognized Mortgage” under the Ground Lease.

ARTICLE 9. STATE SPECIFIC PROVISIONS

9.1 CONFLICTS WITH PRECEDING ARTICLES. In the event of any conflict between the provisions of this Article 9 and any provision in the preceding Articles, then the provisions of this Article 9 shall control.

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9.2 NEW YORK PROVISIONS. Notwithstanding anything to the contrary elsewhere in this Mortgage:

(a) MAXIMUM PRINCIPAL SUM. THE PARTIES HERETO INTEND THAT THIS MORTGAGE SHALL SECURE UNPAID BALANCES OF THE DEBT SECURED HEREBY WHETHER ADVANCED TO MORTGAGOR ON THE DATE HEREOF OR AFTER THIS MORTGAGE IS DELIVERED FOR RECORDATION IN THE OFFICIAL RECORDS OF THE COUNTY IN WHICH THE PROPERTY IS LOCATED. THE MAXIMUM PRINCIPAL AMOUNT OF INDEBTEDNESS WHICH IS OR UNDER ANY CONTINGENCY MAY BE SECURED AT THE DATE OF EXECUTION HEREOF OR AT ANY TIME THEREAFTER BY THIS MORTGAGE IS $7,410,000.00.

(b) Trust Fund for Advances. In compliance with Section 13 of the Lien Law of the State of New York, the Mortgagor will receive the advances secured hereby and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the “cost of improvement” (as such quoted term is defined in the New York Lien Law), and will apply the same first to the payment of such costs before using any part of the total of the same for any other purpose and, will comply with Section 13 of the New York Lien Law. Mortgagor will indemnify and hold Mortgagee harmless against any loss or liability, cost or expense, including, without limitation, any judgments, attorney’s fees, costs of appeal bonds and printing costs, arising out of or relating to any proceeding instituted by any claimant alleging a violation by Mortgagor of any applicable lien law including, without limitation, any section of Article 3-A of the New York Lien Law.

(c) New York Real Property Law Article 4-A. If this Mortgage shall be deemed to constitute a “mortgage investment” as defined by New York Real Property Law Section 125, then this Mortgage shall and hereby does (i) confer upon the Mortgagee the powers and (ii) impose upon the Mortgagee the duties of trustees set forth in New York Real Property Law Section 126.

(d) Statement in Accordance with Section 253.1-a.(a) of the New York Tax Law. This Mortgage does not cover real property principally improved or to be improved by one or more structures containing in the aggregate not more than six (6) residential dwelling units, each having separate cooking facilities.

(e) Statement in Accordance with Section 274-a of the New York Real Property Law. The Mortgagee shall, within fifteen (15) days after written request, provide the Mortgagor with the statement required by Section 274-a of the New York Real Property Law.

(f) Section 291-f of New York Real Property Law. Mortgagee shall have all of the rights set forth in Section 291-f of the Real Property Law of New York. For purposes of Section 291-f of the New York Real Property Law, all existing tenants and every tenant or subtenant who after the recording of this Mortgage, enters into a Lease upon

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the premises of any of the Property or who acquires by instrument of assignment or by operation of law a leasehold estate upon the Property is hereby notified that Mortgagor shall not, without obtaining Mortgagee’s prior consent in each instance, cancel, abridge or otherwise modify any Leases or accept prepayments for more than thirty (30) days of installments of rent to become due with respect to any Lease thereof having an unexpired term on the date of this Mortgage of five (5) years or more, except as expressly permitted under the Loan Agreements, and that any such cancellation, abridgement, modification or prepayment made by any such tenant or subtenant without either being expressly permitted under this Mortgage or receiving Mortgagee’s prior consent shall be voidable by Mortgagee at its option.

(g) Sections 254, 271, 272 and 291-f of New York Real Property Law. All covenants of the Mortgagor herein contained shall be construed as affording to Mortgagee rights additional to and not exclusive of the rights conferred under the provisions of Sections 254, 271, 272 and 291-f of the Real Property Law of New York.

(h) Real Property Law. In the event of any conflict, inconsistency or ambiguity between (i) the provisions of the Note, this Mortgage or the other Loan Documents and (ii) the provisions of subsection 4 of Section 254 of the Real Property Law of New York covering the insurance of buildings against loss by fire, the provisions of the Note, this Mortgage and the other Loan Documents shall control.

(i) RPAPL. If an Event of Default shall occur and be continuing, Mortgagee may elect to sell (and, in the case of any default of any purchaser, resell) the Property or any part thereof by exercise of the power of foreclosure or of sale granted to Mortgagee by Articles 13 of the New York Real Property Actions and Proceedings Law (the “RPAPL”). In such case, Mortgagee may commence a civil action to foreclose this Mortgage pursuant to Article 13 of the RPAPL to satisfy the Note and all other amounts secured hereby.

(j) Certain Waivers. Mortgagor hereby waives and releases all benefit that might accrue to Mortgagor by virtue of any present or future law exempting the Property, or any part of the proceeds arising from any sale thereof, from attachment, levy or sale on execution, or providing for any stay of execution, exemption from civil process or extension of time for payment, or any right of marshalling in the event of any sale hereunder of the Property, and, unless specifically required herein, all notices of Mortgagor’s default or of Mortgagee’s election to exercise, or Mortgagee’s actual exercise of any option under this Mortgage or any other Loan Documents. Mortgagor waives all rights or defenses arising by reason of any “one action” or “anti-deficiency” law, or any other law which may prevent Mortgagee from bringing any action against Mortgagor, including a claim for deficiency to the extent Mortgagee is otherwise entitled to a claim for deficiency, before or after Mortgagee’s commencement or completion of any foreclosure action or any other action to exercise its remedies hereunder or otherwise available at a law or in equity.

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(k) Application of Insurance Proceeds. In no event shall the provisions of Section 254 of the Real Property Law of the State of New York with respect to the application of insurance proceeds apply to this Mortgage.

(l) Assignment. Upon the repayment of this Mortgage, Mortgagee shall cooperate with Mortgagor in effecting an assignment, without representation or warranty (except that Mortgagee shall represent that it has not assigned or encumbered this Mortgage or the other Loan Documents), and without recourse to Mortgagee, of this Mortgage, provided all Lenders’ costs and attorneys’ fees in connection therewith are paid by Mortgagor, and Mortgagee shall have no liability to Mortgagor for the loss of the Note or any original document evidencing and securing the Loan, but shall provide Mortgagor with a lost document affidavit describing the circumstances thereof and such other instruments as may be reasonably requested to effectuate such assignment (which shall not include any indemnification agreements).

(m) Relation to Acquisition Mortgage. This Mortgage is intended to be junior and subordinate in lien to the Acquisition Loan Mortgage executed by Mortgagor in favor of Mortgagee and dated as of the date hereof, securing repayment of Acquisition Loans

(n) Relation to Project Mortgage. This Mortgage is intended to be senior and prior in lien to the Project Loan Mortgage executed by Mortgagor in favor of Mortgagee and dated as of the date hereof, securing repayment of Project Loans, or so much thereof as shall have been advanced thereunder, the proceeds of which are to be disbursed and advanced from time to time after the date hereof.

(o) Loan Proceeds. Borrower intends and has agreed in the Building Loan Agreement to apply the Building Loan to pay for costs of improvement (and other items disclosed in the Section 22 Lien Law Affidavit attached to the Building Loan Agreement) incurred after the date hereof in the construction, renovation, and development of a commercial building, as described in the Building Loan Agreement.

(p) Filing. The Building Loan Agreement has been filed with the Clerk of the County of New York, New York before the recording of this Mortgage.

[SIGNATURE APPEARS ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the day and year set forth above.

MORTGAGOR:

210 WEST 31^ST STREET OWNER, LLC,

a Delaware limited liability company

By:    KBS SOR II 210 WEST 31^ST STREET, LLC,

a Delaware limited liability company,

its sole member

By:    ONYX 31^st STREET, LLC,

a Delaware limited liability company,

its Managing Member

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.,

Authorized Signatory

(ALL SIGNATURES MUST BE ACKNOWLEDGED)

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NOTARY ACKNOWLEDGMENT

STATE OF NEW YORK    )

) ss.:

COUNTY OF NEW YORK    )

On the 29thday of November    , 2016, before me, the undersigned, personally appeared     John Saraceno        , personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his capacity and that by his signature on the instrument the individual or the person upon behalf of which the individual acted executed the instrument.

/s/ Tierra James                
Signature and Office of individual
taking acknowledgment

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EXHIBIT A
DESCRIPTION OF PROPERTY

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EX-10.55

Exhibit 10.55

Section:    3

Block:    780

Lots:    45 (f/k/a 45, 49 and 51)

County:    New York

Premises: 210 West 31^st Street, New York, New York

BUILDING LOAN AGREEMENT

between

PACIFICCAL PC CORE LENDER, LLC,

AS LENDER

AND

210 WEST 31^st STREET OWNER, LLC,

AS BORROWER

Date: As of December 1, 2016

This Agreement was prepared by:

MORRISON & FOERSTER LLP

250 West 55^th Street

New York, New York 10019

Attention: Jeffrey J. Temple, Esq.

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TABLE OF CONTENTS

Page

ARTICLE 1 CERTAIN DEFINITIONS			1
	Section 1.1	Certain Definitions	1
ARTICLE 2 LOAN TERMS			4
	Section 2.1	The Commitments, Loans and Notes	4
	Section 2.2	Interest Rate	4
ARTICLE 3 CONDITIONS TO INITIAL DISBURSEMENT			4
	Section 3.1	Conditions to Initial Disbursement	5
ARTICLE 4 FUTURE DISBURSEMENTS OF THE BUILDING LOANS			5
	Section 4.1	General Conditions	5
	Section 4.2	Procedure for Making Disbursements of Building Loan Proceeds	7
	Section 4.3	Retainage	7
	Section 4.4	Stored Materials; Deposits	8
	Section 4.5	Tenant Improvement Costs	9
	Section 4.6	Unsatisfactory Work	10
	Section 4.7	Direct Loan Advances by Lender	10
	Section 4.8	No Waiver or Approval by Reason of Loan Advances	10
	Section 4.9	Construction Consultant	11
	Section 4.10	Authorization to Make Loan Advances to Cure Borrower's Defaults	11
	Section 4.11	Reserved	11
	Section 4.12	Lender's Right to Make Loan Advances in Compliance with the Completion Guaranty	11
	Section 4.13	No Third-Party Benefit	12
ARTICLE 5 INSURANCE, CONDEMNATION AND IMPOUNDS			12
	Section 5.1	Insurance, Condemnation, Impounds	12
ARTICLE 6 ENVIRONMENTAL MATTERS			12
ARTICLE 7 REPRESENTATIONS AND WARRANTIES			12
	Section 7.1	Cost of Improvement	12
	Section 7.2	Design Professionals' Certificates	12

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ARTICLE 8 FINANCIAL REPORTING			13
ARTICLE 9 COVENANTS			13
	Section 9.1	Payment for Labor and MAterials	13
	Section 9.2	Inspection	13
	Section 9.3	Project Construction and Completion	14
	Section 9.4	Proceedings to Enjoin or Prevent Construction	16
	Section 9.5	Lender's and Construction Consultant's Actions for their Own Protection Only	16
	Section 9.6	Sign and Publicity	16
	Section 9.7	Amendment of Project Documents and Government Approvals; Change Orders	17
	Section 9.8	Lien Law	18
ARTICLE 10 EVENTS OF DEFAULT			18
	Section 10.1	Project Loan Agreement	18
	Section 10.2	Access to Project	18
	Section 10.3	Termination of Contracts	18
	Section 10.4	Unsatisfactory Work	19
	Section 10.5	Construction Work	19
ARTICLE 11 REMEDIES			19
ARTICLE 12 RECOURSE LIABILITY			20
	Section 12.1	Recourse Liability	20
ARTICLE 13 MISCELLANEOUS			20
	Section 13.1	Incorporation by Reference	20

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LIST OF EXHIBITS AND SCHEDULES

Schedule 1	Licenses and Permits
Schedule 2	Trade List
Schedule 3	Plans and Specifications
Schedule 4	Advance Conditions
Exhibit A	Legal Description of Project
Exhibit B	Form of Section 22 Affidavit

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BUILDING LOAN AGREEMENT

THIS BUILDING LOAN AGREEMENT is made and entered into as of December 1, 2016, by and between 210 WEST 31^st STREET OWNER, LLC, a Delaware limited liability company (“Borrower”), and PACIFICCAL PC CORE LENDER, LLC, a Delaware limited liability company (together with its successors and/or assigns, “Lender”).

R E C I T A L S:

A.    Borrower is the owner of a ground leasehold interest in that certain tract of land located in the City, County and State of New York and being more fully described in Exhibit A attached hereto (the “Land”).

B.    Borrower proposes to construct the Improvements (as hereinafter defined) on the Land and, in connection therewith has requested and applied to Lender for a loan in the amount of $7,410,000.00 (the “Building Loan Commitment”) for the purposes of paying certain costs pertaining to the Project (as hereinafter defined) including certain costs with respect to the construction and equipping of the Improvements, all of which said costs constitute a Cost of Improvement (as hereinafter defined). The Lender has agreed to make such loans on and subject to the terms and conditions hereinafter set forth.

A.Borrower has also requested and applied to Lender for (i) a loan in the amount of $32,650,000.00for the purpose of acquiring its interest in the Land and (ii) a loan in the amount of $7,050,000.00for the purpose of paying certain costs pertaining to the Premises, which costs do not constitute a Cost of Improvement. Lender has agreed to make such loans pursuant to the Acquisition and Project Loan Agreement, dated as of the date hereof, entered into by Borrower and Lender (the “Project Loan Agreement”).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

CERTAIN DEFINITIONS

Section 1.1Certain Definitions. Unless separately defined in this Agreement, all capitalized terms used herein shall have the meaning assigned to such terms in the Project Loan Agreement. In addition, as used herein, the following terms have the meanings indicated:

“Agreement” means this Building Loan Agreement, as amended from time to time.

“Bond” means a Performance Bond and Labor and Material Payment Bond in the form approved by the American Institute of Architects and identified as Form AIA No. A‑311, and providing first dollar coverage, with the contractor or subcontractor (as the case may be) as principal, with a surety company licensed to do business in the state where the Project is located and reasonably acceptable to Lender and with Borrower and Lender listed as joint and several

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obligees. Bonds will be required from any contractor or subcontractor (a) with a contract or subcontract for a trade listed on Schedule 2 attached hereto (unless Lender in its reasonable discretion, upon advice from the Construction Consultant, agrees to waive such bonding requirement with respect to any contractor or subcontractor), which Schedule 2 shall be updated in connection with satisfaction of the terms of Section 8.6(d)(iii) of the Project Loan Agreement, or (b) required to be bonded pursuant to the Construction Management Agreement, prior to the funding of any Loans for the portion of the Construction Work to be performed by such contractors or subcontractors.

“Borrower” has the meaning assigned in the Preamble.

“Building Loan” and “Building Loans” have the meanings assigned in Section 2.1(1).

“Building Loan Commitment” has the meaning assigned in the Recitals.

“Building Loan Mortgage” means the Building Loan Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing in the amount of the Total Building Loan Commitments and executed, dated and delivered by Borrower to Lender on the Closing Date, securing the Building Loan Note, as such mortgage may be modified, supplemented, amended and/or in effect from time to time.

“Building Loan Notes” has the meaning assigned to such term in Section 1.1 of the Project Loan Agreement.

“Change Order” means any modification, amendment and/or supplement to (a) the Plans and Specifications, (b) the Approved Budget, (c) the Construction Schedule, (d) the Construction Management Agreement or (e) any Contract.

“Consent and Agreement” means the consent and agreement executed by the parties thereto in accordance with the Assignment of Construction Documents and substantially in the same form as attached thereto.

“Construction Completion” means the date that the following conditions shall be satisfied:

(a)Lender shall have reasonably determined that the Construction Work has been substantially completed in accordance with the Plans and Specifications, the Loan Documents and all Applicable Laws, subject only to the completion of Punch List Items, and Lender shall have received written certification from the Construction Consultant with respect to same; and

(b)the deliveries required by Schedule 4 – Part B shall have been received and approved by Lender.

“Design Professional” means, collectively, the Architect, the Engineer or any other structural engineer or mechanical engineer and, to the extent reasonably requested by Lender, other design professionalsrelating to the Construction Work, as reasonably approved by Lender, and any reference in this Agreement to a certification or other document to be executed

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by the applicable Design Professional shall mean one or more of such Design Professionals designated in writing by Lender as the Design Professionals to execute such certification or document, depending on the areas of expertise covered by such certification or document.

“Event of Default” has the meaning assigned to such term in Article 10.

“Hard Costs” means the aggregate costs of all labor, materials, equipment and fixtures necessary for completion of construction of the Improvements, as more particularly set forth in the Approved Budget, including Tenant Improvement Costs (other than Tenant Allowance Payments).

“Land” has the meaning assigned to such term in the Recitals.

“Lender” has the meanings assigned in the Preamble.

“Lien Law” shall mean the Lien Law of the State of New York, as amended from time to time.

“Plans and Specifications” means the final plans and specifications for the construction of the Construction Work prepared by Borrower’s Design Professionals and reasonably approved by Lender, the Construction Consultant and, to the extent then required, by any applicable Governmental Authority and such other parties whose approval or consent may be required under any law, regulation, prior agreement, this Agreement and all modifications, amendments and/or supplements thereof made by Change Orders permitted pursuant to the terms of this Agreement. A list of the preliminary Plans and Specifications is attached hereto as Schedule 3, which Schedule 3 shall be updated in connection with satisfaction of the terms of Section 8.6(d)(i) of the Project Loan Agreement,.

“Project Loan Agreement” has the meaning assigned to such term in the Recitals.

“Punch List Items” means minor construction items to be completed or constructed with respect to the Construction Work which do not materially interfere either with the use and operation of the Project.

“Retainage” has the meaning assigned to such term in Section 4.3(1).

“Unavoidable Delay” means any delay in the Construction Work, if and so long as such delay is caused by (directly or indirectly) natural disaster, fire, earthquake, floods, explosion, actions of the elements, declared or undeclared war, acts of terrorism, riots, mob violence, inability to procure or a general shortage of labor, equipment, facilities, energy, materials or supplies in the open market, failure of transportation, strikes, lockouts not instituted by Borrower, actions of labor unions, condemnation, court orders, laws, rules, regulations or orders of governmental or military authorities or any other similar causes outside of Borrower’s reasonable control; provided, however, (i) “Unavoidable Delay” shall not include lack of or inability to procure monies (other than a Lender’s failure to fund, provided all conditions thereto under the Loan Documents have been satisfied) necessary to fulfill Borrower’s commitments and

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obligations under the Loan Documents, and (ii) under no circumstances shall Unavoidable Delay be in excess of ninety (90) days.

“Unsatisfactory Work” means any Construction Work which the Construction Consultant has reasonably determined has not been substantially completed in a good and workmanlike manner, and, to the extent any Construction Work is not specifically addressed in the construction drawings and specifications, in a manner consistent with sound design principles and/or sound construction practices, or in substantial conformity with the Plans and Specifications, or in accordance with all Applicable Law.

ARTICLE 2LOAN TERMS

Section 2.1The Commitments, Loans and Notes.

(1)Building Loans. Lender agrees, on the terms and conditions of this Agreement, to make loans (each advance of such a loan being a “Building Loan” and collectively, the “Building Loans”) on a non-revolving basis to Borrower in Dollars from time to time in an amount equal to the aggregate amount of Building Loans to be made of such time. The Building Loans shall be advanced from time to time as provided in this Agreement for the payment of all or part of the Cost of Improvement in connection with the construction of the Project and shall be funded and repaid in accordance with this Agreement.

(2)Requests for Building Loan Advances. With respect to each Building Loan, Borrower shall give Lender (and the Construction Consultant) a Request as provided in Section 4.1(2). Upon fulfillment of the applicable conditions referred to in Article 3 and Schedule 4, Lender shall make such funds available to Borrower by depositing the same, in immediately available funds, in an account designated by Borrower by the end of business on the applicable advance date, to be applied in accordance with the terms of this Agreement.

(3)Changes of Commitments.

(a)The Building Loan Commitment shall reduce pro rata automatically by reason of any prepayment of the Building Loans applicable thereto in the amount of any such prepayment.

(b)The Building Loan Commitment, once terminated or reduced, may not be reinstated.

(4)Note. The Building Loans to be made by Lender shall be evidenced by the Building Loan Note, payable to Lender in a principal amount equal to the applicable Building Loans covered by such note.

Section 2.2Interest Rate. Interest shall accrue on the Building Loans at the rate or rates provided for in the Building Loan Note, and shall be paid by Borrower in the amounts and at the times provided for in the Building Loan Note.

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ARTICLE 3

CONDITIONS TO INITIAL DISBURSEMENT

Section 3.1Conditions to Initial Disbursement. Lender’s obligation to disburse a portion of the Building Loan Commitment on the Closing Date is subject to the satisfaction of each of the following conditions precedent on or before the Closing Date:

(1)Project Loan Agreement. All of the conditions set forth in Section 3.1 of the Project Loan Agreement shall have been satisfied.

(2)Schedule of Contractors. A schedule of the identity of all of the Contractors for the Improvements which are engaged as of the Closing Date, and copies of the executed Contracts entered into with such Contractors and all material modifications, amendments and/or supplements with respect thereto, together with a certificate of an Authorized Officer of Borrower certifying that (A) the copies of the Contracts attached to such certificate are true, correct and complete in all material respects; (B) such Contracts attached to such certificate are in full force and effect; and (C) neither Borrower, nor, to Borrower’s knowledge, the Construction Manager nor the applicable Contractor is in default thereunder beyond notice and the expiration of applicable cure periods.

(3)Plans. Receipt, review, and reasonable approval by Lender, and at Lender’s option, the Construction Consultant of the preliminary Plans and Specifications for the Improvements, sealed by the applicable Design Professionals.

(4)Cost Review. The delivery by the Construction Consultant to Lender of the Construction Consultant’s Construction, Cost and Plan Review in form and substance satisfactory to Lender.

(5)Budget. The preliminary Budget as reasonably approved by Lender, which shall include all Project Costs for the Improvements and shall, in Borrower’s reasonable estimation, be sufficient to complete the Improvements and carry the Project through the Maturity Date based on the final Plans and Specifications and the Construction Schedule. To the extent that the Commitments would exceed any of the limits described in this section, they shall be automatically reduced to an amount not in excess of the limits described in this section.

(6)Construction Schedule. The preliminary Construction Schedule, together with (if any Construction Work has been commenced prior to the Effective Date) evidence reasonably satisfactory to Lender that the development of the Construction Work is proceeding in accordance with the Construction Schedule and the Budget.

(7)Other Documents. Lender shall have received and reasonably approved such other documents, materials or information as Lender or its counsel shall reasonably require.

ARTICLE 4FUTURE DISBURSEMENTS OF THE BUILDING LOANS

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Section 4.1General Conditions.

(1)Subject to (a) Borrower’s satisfaction of the applicable conditions precedent set forth in Schedule 4 and (b) Borrower’s compliance with the applicable provisions of this Article 4, Lender shall disburse the proceeds of each Building Loan within twelve (12) Business Days after Lender’s receipt of all of the documents and items to be delivered or received pursuant to Schedule 4 and this Article 4; provided, however, that at no time shall Lender be obligated to:

(a)advance to Borrower more than the amount that Borrower have funded from their own monies or are then required to fund to the party seeking payment or, in the case of reimbursement, to the party seeking reimbursement (subject to Retainage, if applicable

(b)make an advance if the Building Loans are not In-Balance in accordance with Section 4.3 of the Project Loan Agreement,

(c)subject to possible reallocation in accordance with this Agreement and the Project Loan Agreement, advance proceeds of a Building Loan in an amount in excess of the Budget Line Items set forth in the Budget, as the same may be adjusted in accordance with the terms of this Agreement,

(d)except as provided in Section 4.3 hereof, advance any portion of the Retainage,

(e)except as provided in Section 4.4 hereof, make any Building Loans with respect to materials not yet incorporated into the Improvements,

(f)make an advance in connection with any Change Order for which Lender’s approval is required under Section 9.7(2) which has not been approved by Lender in accordance with Section 9.7(2),

(g)make any Building Loans for any contractor until, (A) in the case of a Major Contractor, such Major Contractor has been reasonably approved by Lender in accordance with the provisions of the Project Loan Agreement and has duly executed and delivered to Lender the applicable consent and attornment agreement in substantially the form attached to the General Assignment, and (B) in the case of any Contractor required to be bonded pursuant to the terms hereof or the terms of the Construction Management Agreement, the work to be performed by such Contractor is covered by a Bond; or

(h)make any Building Loans with respect to any sums due a Design Professional, until such Design Professional has duly entered into a contract with Borrower, a copy (certified by an Authorized Officer of Borrower) of such contract has been delivered to Lender, and such Design Professional has duly executed and delivered to Lender the applicable Consent and Agreement in substantially the form attached to the General Assignment.

(2)Notwithstanding anything to the contrary contained in this Agreement, the Lender shall have no obligation to advance any Building Loan unless Lender is, at all times, reasonably satisfied that the Improvements can be constructed Lien free (subject to Permitted

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Encumbrances), substantially in accordance with the Plans and Specifications for the sums set forth in the Budget subject to possible reallocation in accordance with this Agreement and the Project Loan Agreement (or, if more, Borrower has furnished the difference in cash or cash equivalents, subject to the provisions of Sections 4.3, 4.4 and 4.5 of the Project Loan Agreement) by the Completion Date.

Section 4.2Procedure for Making Disbursements of Building Loan Proceeds.

(1)Disbursements shall be made from time to time as construction progresses pursuant to a Request, but no more frequently than once in each calendar month.

(2)Each Request shall (a) be duly executed by an Authorized Officer on behalf of Borrower, (b) be submitted to Lender and the Construction Consultant not less than twelve (12) Business Days prior to the proposed disbursement date for such Building Loans, (c) specify the items to be paid or reimbursed with the proceeds of the requested Building Loans, and (d) include the documentation required to be included therewith under Schedule 4.

(3)All advances of the Building Loans shall be made for the payment of Project Costs in accordance with the Budget upon Borrower’s satisfaction of the applicable conditions set forth in this Article 4 and Schedule 4 – Parts A and B, as applicable.

Section 4.3Retainage.

(1)Disbursement of the available proceeds of each Building Loan with respect only to Hard Costs shall be limited to ninety percent (90%) of the value of the Hard Costs Work set forth in the applicable Request; provided, however, where the retainage percentage amount set forth in any contract or subcontract for such portion of the Improvements is a percentage amount less than ninety percent (90%) of the value of such Hard Costs Work, then such the disbursement of such available proceeds shall be limited to such lower percentage value of such Hard Costs Work. The amounts authorized to be withheld pursuant to this paragraph (1) being collectively referred to herein as the “Retainage.” No Retainage will apply to Soft Costs.

(2)Lender shall advance Building Loans pursuant to a Request to pay portions of the Retainage with respect to each contract (including a Major Contract) prior to Construction Completion, within twelve (12) Business Days after Borrower’s compliance with the following conditions to the satisfaction of Lender with respect to such contracts and leases:

(a)all of the work under such contract is finally completed substantially in accordance with the terms of such contract and the applicable Plans and Specifications, as the case may be, and Lender receives a certification to that effect from an Authorized Officer of Borrower and Borrower’s Architect and at Lender’s option such work has been approved by the Construction Consultant;

(b)the work performed by such Contractor has been approved, to the extent such approval is required, by the Governmental Authorities having jurisdiction over the same and the applicable permits with respect to such work, if any, have been issued;

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(c)the contract provides for such early release of the applicable Retainage;

(d)the applicable Contractor (including the Construction Manager) with respect to which the Retainage is being released delivers to Lender a final and complete release of Lien in form and substance reasonably acceptable to Lender, conditional only upon receipt of payment of such Retainage, with respect to such work;

(e)the applicable surety has delivered a consent and release in connection with any Bonds;

(f)if and as required, Lender shall have received copies of any warranties, guaranties or “as built” drawings relating to the work performed by each such Contractor in connection with the Construction Work; and

(g)all other applicable requirements and conditions with respect to such advance of Building Loan proceeds are satisfied.

Section 4.4Stored Materials; Deposits.

(1)Lender shall advance the proceeds of Building Loans with respect to materials and equipment that are included in the Budget and are not yet incorporated into the Improvements as of the date of the applicable Building Loans, but are temporarily stored at the Project so long as Lender shall have received the following items, each in form and substance reasonably satisfactory to Lender:

(a)evidence that Borrower has an obligation under the applicable contract, subcontract or purchase order to pay for such materials and equipment prior to their installation;

(b)evidence that the ownership of such materials and equipment is vested in Borrower free of any liens and claims of third parties, including, without limitation, bills of sale and conditional lien waivers from the respective Contractor and that such material and equipment are clearly marked to indicate the ownership thereof by Borrower;

(c)evidence that such stored materials are included within the coverages of insurance policies carried by Borrower or proof of other insurance (which shall include a standard mortgagee endorsement or its equivalent to the extent available) which has been reasonably approved by Lender;

(d)evidence acceptable to Lender, and at the Lender’s option, the Construction Consultant, that the stored materials are reasonably protected against vandalism (casualty), theft or damage;

(e)evidence that Building Loans for said materials do not, at any one time, exceed, in the aggregate, $250,000, inclusive of the amount requested;

(f)evidence that Lender has a perfected first security interest in such material prior to or simultaneous with the making of such Building Loans;

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(g)evidence reasonably acceptable to Lender, and at Lender’s option the Construction Consultant, as to the identity, quality and quantity of same; and

(h)evidence that all other applicable requirements and conditions with respect to such advance of Building Loan proceeds have been satisfied.

(2)Unless otherwise approved by Lender, Lender shall not be required to make any Building Loans with respect to any materials or equipment unless and until such materials and equipment are delivered to the Project. Any determination by Lender of whether to make any Building Loans for materials, equipment or parts that are included in the Budget but are temporarily stored at sites other than the Project, shall be conditioned upon, among other things:

(a)satisfaction of the requirements set forth in Section 4.4(1)(a), (b), (d), (g) and (h) with respect to any such materials, equipment and parts;

(b)evidence that upon payment the ownership of such fabricated materials, equipment and parts is vested in Borrower free of any liens and claims of third parties, including, without limitation, bills of sale and conditional lien waivers from the respective supplier and UCC searches with respect to the respective supplier;

(c)evidence that the materials, equipment and parts are under the control of the applicable supplier and are being kept at bonded warehouse sites or otherwise stored in a designated and secured area reasonably satisfactory to Lender, and at Lender’s option the Construction Consultant, in each case in the U.S.A. and reasonably approved by Lender, and at Lender’s option the Construction Consultant; and that such equipment and parts shall have been clearly designated, marked or tagged to indicate ownership by such Borrower and the security interest of Lender therein;

(d)evidence that Lender has a perfected security interest (i.e., Uniform Commercial Code filings or other applicable filings) in such materials, equipment and parts prior to or simultaneous with the making of such Building Loans, which requirement shall, if requested by Lender in connection with the first advance for property stored in the applicable state (and in connection with any other advance in such state when Lender reasonably believes that the collateral is substantially different from the type of collateral covered by the first opinion), be supported by the opinion of a local counsel in the state where the applicable equipment and parts are stored; and

(e)the Construction Consultant and/or Lender shall have the right during normal business hours to inspect such materials, equipment and parts and the locations where such equipment and parts are stored.

(3)Lender shall advance the proceeds of Building Loans with respect to deposits or other advance funding arrangements solely to the extent that such deposit or advance funding arrangement has been approved by Lender in its reasonable discretion.

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Section 4.5Tenant Improvement Costs. Unless otherwise permitted by Lender, advances of the Loan for Tenant Improvement Costs shall be limited to costs actually payable to a contractor or service provider as evidenced by the invoice and payment request from such contractor or service provider. Lender may require, as a condition for the disbursement of any advance of the Loan for Tenant Improvement Costs that the plans and specifications for such tenant improvements be delivered to and reasonably accepted by Lender, and that the construction contract for such tenant improvements be delivered to Lender for its review (if available to Borrower under the terms of the applicable Lease). Lender agrees that its review and approval of the plans and specifications for such tenant improvements and such construction contract will be completed within the time period applicable to Borrower’s review and approval of such items under the terms of the applicable Lease, provided that Lender receives such plans and specifications concurrently with the delivery of such plans and specifications to Borrower.

Section 4.6Unsatisfactory Work. If the Construction Consultant shall in its reasonable discretion determine that a portion of the Construction Work for which Loans are sought is Unsatisfactory Work, Lender shall be entitled to withhold from such Loans amounts sufficient to pay for correction of the Unsatisfactory Work and Lender shall disburse such amounts to Borrower promptly after such Unsatisfactory Work has been rectified. No such action by Lender shall be deemed to affect Borrower’s obligation to complete the Improvements on or before the Completion Date.

Section 4.7Direct Loan Advances by Lender. Lender shall advance all or any part of any particular Building Loan to Borrower for disbursement in accordance with a Request, or during the continuance of an Event of Default, Lender may make such Loan Advances directly to the Construction Manager, a Major Contractor, other Contractor or other party any costs payable to such party, or at Borrower’s expense, to the Title Insurer which shall pay said monies to the parties as so instructed by Lender. In addition, Lender may make Advances as contemplated by Section 4 of the Completion Guaranty (whether the applicable work is being performed by the Guarantor or Lender). The execution of this Agreement by Borrower shall, and hereby does, constitute an irrevocable authorization to Lender to make such direct advances provided for above and no further authorization from Borrower shall be necessary to warrant such direct advances, and all such direct advances shall be secured by the Security Documents as fully as if made directly to Borrower, regardless of the disposition thereof by any party so paid. At Lender’s request, any advance of Building Loan proceeds made by and through the Title Insurer may be made pursuant to the provisions of a construction escrow agreement in the form then in use by such company with such modifications or amendments thereto as are reasonably required by Lender and Borrower. Borrower agrees to join as a party to such escrow agreement and to comply with the requirements set forth therein (which shall be in addition to and not in substitution for the requirements contained in this Agreement) and to pay the reasonable fees and expenses of the Title Insurer charged in connection with the performance of its duties under such construction escrow agreement.

Section 4.8No Waiver or Approval by Reason of Loan Advances. The making of any Building Loans by Lender shall not be deemed an acceptance or approval by Lender (for the benefit of any Borrower or any third party) of the Construction Work or other work theretofore done or constructed or to the Lender’s obligations to make further Building Loans, nor, in the

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event any Borrower is unable to satisfy any condition, shall any such failure to insist upon strict compliance have the effect of precluding Lender from thereafter declaring such inability to be an Event of Default as herein provided. Lender’s waiver of, or failure to enforce, any conditions to or requirements associated with any Building Loans in any one or more circumstances shall not constitute or imply a waiver of such conditions or requirements in any other circumstances.

Section 4.9Construction Consultant. Lender reserves the right to employ the Construction Consultant and any other consultants necessary, in Lender’s reasonable judgment, to review Requests for Loan Advance and inspect all construction and the periodic progress of the same, the reasonable cost therefor to be borne by Borrower as a loan expense. Borrower shall, to the extent in Borrower’s possession or control, make available to Lender and the Construction Consultant on reasonable notice during business hours and to the extent required by the Loan Documents, all documents and other information (including, without limitation, receipts, invoices, lien waivers and other supporting documentation to substantiate the costs to be paid with the proceeds of any Request) which any Contractor or other Person entitled to payment for Construction Work is required to deliver to Borrower and shall use its commercially reasonable efforts to obtain any further documents or information reasonably requested by Lender or the Construction Consultant in connection with any Loan or the administration of this Agreement. Borrower acknowledges and agrees that the Construction Consultant shall have no responsibilities or duties to Borrower, and shall be employed solely for the benefit of Lender. No default of Borrower will be waived merely by an inspection by Lender or the Construction Consultant. In no event will any inspection by Lender or the Construction Consultant be a representation that there has been or will be compliance with the Plans and Specifications or that the Construction Work is free from defective materials or workmanship. Any and all provisions of this Agreement in respect of the Construction Consultant shall be enforceable solely by, and at the option of, Lender, and no Borrower shall be a third-party beneficiary thereof. Any and all reports, advice or other information provided by the Construction Consultant to Lender or otherwise produced by or in the possession of the Construction Consultant shall be confidential, except that Borrower shall have the right to reasonably request and review same from time to time.

Section 4.10Authorization to Make Loan Advances to Cure Borrower’s Defaults. If an Event of Default shall be continuing, Lender (subject to the provisions of Section 14.3 of the Project Loan Agreement) may (but shall not be required to) perform any of such covenants and agreements with respect to which the Event of Default relates. Any amounts expended by Lender in so doing shall constitute a Building Loan and be added to the outstanding principal balance of the Building Loans, and Lender shall make the applicable Building Loans to fund any such disbursements. The authorization hereby granted is irrevocable, and no prior notice to or further direction or authorization from any Borrower is necessary for Lender to make such disbursements.

Section 4.11Reserved.

Section 4.12Lender’s Right to Make Loan Advances in Compliance with the Completion Guaranty. Any Building Loan proceeds disbursed by Lender as contemplated by Section 1.01(c) of the Completion Guaranty (whether the applicable work is being performed by any Guarantor or Lender) shall constitute a Building Loan and be added to the outstanding

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principal balance of the Building Loans, and Lender shall make the applicable Building Loans to fund any such disbursements. The authorization hereby granted is irrevocable and no prior notice to or further direction or authorization from any Borrower is necessary for Lender to make such disbursements.

Section 4.13No Third-Party Benefit. This Agreement is solely for the benefit of the Lender and Borrower and, to the extent set forth in Completion Guaranty, Guarantors. All conditions of the obligations of Lender to make advances hereunder are imposed solely and exclusively for the benefit of Lender and may be freely waived or modified in whole or in part by Lender at any time if in their sole discretion they deem it advisable to do so, and no Person other than Borrower (provided, however, that all conditions have been satisfied) shall have standing to require Lender to make any Building Loan advances or shall be a beneficiary of this Agreement or any advances to be made hereunder.

ARTICLE 5

INSURANCE, CONDEMNATION, AND IMPOUNDS

Section 5.1Insurance, Condemnation, Impounds. Provisions relating to insurance, condemnation and impounds, including, without limitation, the use of casualty and condemnation proceeds shall be subject to the terms of Article V of the Project Loan Agreement, which is hereby incorporated by reference.

ARTICLE 6ENVIRONMENTAL MATTERS

Borrower hereby repeats and agrees to observe all representations, warranties and covenants contained in Article IX of the Project Loan Agreement with the same force and effect as if set forth herein in their entirety.

ARTICLE 7
REPRESENTATIONS AND WARRANTIES

Borrower hereby reaffirms and ratifies the representations and warranties set forth in Article VI of the Project Loan Agreement and elsewhere in the Project Loan Agreement with the same force and effect as if set forth herein in their entirety and each such representation and warranty remains true and correct in all material respects as of the Effective Date (subject to any changes resulting from changed circumstances or facts which do not constitute an Event of Default). Borrower hereby represents and warrants to Lender that, as of the Effective Date:

Section 7.1Cost of Improvement. Each item included in the Budget as part of the “Building Loan” is included within the definition of Cost of Improvement. A true statement under oath, verified by Borrower, in full compliance with Section 22 of the Lien Law is attached hereto as Exhibit B.

Section 7.2Design Professionals’ Certificates. To Borrower’s best knowledge, the certifications set forth in the certificates of the Design Professionals which Borrower have

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furnished are true and correct in all material respects.

ARTICLE 8
FINANCIAL REPORTING

Borrower hereby reaffirms and ratifies the representations and warranties set forth in Article VII of the Project Loan Agreement and elsewhere in the Project Loan Agreement with the same force and effect as if set forth herein in their entirety.

ARTICLE 9
COVENANTS

Borrower hereby repeats and agrees to observe all covenants contained in Article VIII of the Project Loan Agreement with the same force and effect as if set forth herein in their entirety. In addition, Borrower covenants and agrees with Lender that, so long as any Commitment or Loan is outstanding and until payment in full of all amounts payable by Borrower hereunder:

Section 9.1Payment for Labor and Materials. Borrower shall promptly pay when due all invoices and costs for labor, materials, and specifically fabricated materials incurred in connection with the Project and shall, subject to Borrower’s right to contest the same pursuant to the Project Loan Agreement and this Agreement, discharge, by bond or otherwise, any Liens filed against the Project, in no event later than sixty (60) days of the filing thereof (and, to the extent provided for in the Loan Documents, promptly advance funds for such bond or discharge in accordance with the Loan Documents). In addition, Borrower may contest the validity or amount of such invoices and Liens so long as (1) Borrower notify Lender that it intends to contest such claim or demand, (2) Borrower provides Lender with an indemnity, bond or other security reasonably satisfactory to Lender assuring the discharge of Borrower’s obligations for such claims and demands, including interest and penalties, and (3) Borrower shall promptly upon final determination thereof pay the amount of such items, together with all costs, interest and penalties.

Section 9.2Inspection. Borrower shall permit representatives of Lender and the Construction Consultant, at reasonable times and on reasonable advance notice, to examine its books of record and account, to make copies and abstracts therefrom, and to discuss its affairs, finances and accounts with its principal officers, engineers and independent accountants (and by this provision Borrower authorizes said accountants to discuss with such Persons such affairs, finances and accounts, but after prior notice to Borrower of such discussions). Without limiting the foregoing, representatives of the Construction Consultant and Lender shall have the right at reasonable times and on reasonable advance notice to (a) inspect the Project and all materials to be used in connection with the construction of the Improvements from time to time and to witness the construction thereof, (b) to conduct such non-invasive environmental and engineering inspections and studies as Lender may require, (c) to examine all detailed plans and shop drawings in connection with the construction of the Improvements and (d) provided Borrower is presented with the opportunity to be present, meet with the representatives of the Design Professionals, the Construction Manager and the Major Contractors to discuss the status

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and issues relating to the construction of the Improvements (and by this provision Borrower authorizes Borrower’s Architect, the Construction Manager and the Major Contractors to reasonably cooperate and discuss with such Persons such construction matters, but after reasonable prior notice to Borrower of such discussions). Borrower shall at all times cause a complete set of the original plans (and all supplements thereto) relating to the construction of the Project to be maintained at the Project or construction office and available for inspection by such representatives.

Section 9.3Project Construction and Completion.

Subject in all instances to any Unavoidable Delays:

(1)Borrower shall construct the Construction Work in a good and workmanlike manner in accordance with generally accepted engineering and construction practice, the Plans and Specifications, the Construction Schedule and Applicable Law.

(2)Borrower shall cause the Construction Completion to occur prior to the Completion Date (other than Punch List Items which shall be completed by Borrower with diligence following the Completion Date). Borrower shall be required to obtain temporary certificates of occupancy for all aspects of the Project not later than ninety (90) days following Construction Completion.

(3)Borrower shall not commence construction of any Construction Work, or any particular component thereof, until Borrower or any such tenant has obtained all Government Approvals required under Applicable Law for the commencement of construction of such Construction Work or such component thereof, as the case may be. Borrower shall be obligated to obtain the licenses and permits set forth on Schedule 1 attached hereto no later than the date set forth opposite such license or permit on Schedule 1.

(4)Once begun, Borrower shall cause the construction of the Construction Work to be prosecuted with diligence in accordance with the Construction Schedule, subject to Borrower’s right to contest the same, free and clear of Liens or claims for Liens for materials supplied and for labor or services performed in connection with the construction of the applicable Improvements. Subject to Borrower’s right to contest the same, in no event shall Borrower permit or suffer any party, including subcontractors, to commence proceedings to enforce any Lien unless and to the extent that said Lien is fully bonded; provided that such bonding effects the removal of any such Liens or claims.

(5)Borrower shall deliver to Lender, on demand, copies of all contracts, bills of sale, statements, receipted vouchers and agreements under which any Borrower claims title to any materials, fixtures or articles incorporated in the Improvements.

(6)Borrower shall, upon demand of Lender based upon the advice of the Construction Consultant, correct any Unsatisfactory Work; and the advance of any proceeds of any Loan shall not constitute a waiver of Lender’s right to require compliance with this covenant with respect to any such Unsatisfactory Work. None of Lender or the Construction Consultant shall have any affirmative duty to any Borrower or any third party to inspect for Unsatisfactory Work or other defects or to call them to the attention of Borrower or anyone else.

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(7)Borrower shall (and shall cause each Affiliate of Borrower party thereto to):

(a)perform and observe in all material respects all of its material covenants and material agreements contained in the Construction Management Agreement, each Contract, each other Project Document and each Government Approval to which it is a party or by which the Project or any portion thereof is bound;

(b)take all reasonable and necessary action to prevent the termination, in accordance with the terms thereof or otherwise, of the Construction Management Agreement, any Contract, any other material Project Document and any Government Approval;

(c)enforce in accordance with its terms each material covenant or obligation set forth in the Construction Management Agreement, each Contract, each other Project Document and each Government Approval;

(d)promptly give Lender copies of any written notices of material default or material violation or other material notices given by or on behalf of Borrower, or received by or on behalf of Borrower from any other Person under the Construction Management Agreement, any Contract, any other material Project Document or any Government Approval;

(e)to the extent reasonably requested by Lender, promptly replace any materially defaulting Contractor, and Borrower shall promptly deliver all required information and documents to Lender regarding each replacement Contractor;

(f)if the Construction Consultant in its reasonable judgment determines that one or more elements of the Construction Work will not be completed according to the Construction Schedule, or that the Construction Work will not be completed by the Completion Date, reschedule the work of construction to permit timely completion to the extent reasonably possible. Within fifteen (15) days after receiving such a request from Lender, Borrower shall deliver to Lender a revised Construction Schedule showing timely completion of such work; and

(g)take all such commercially reasonable action to achieve the purposes described in clauses (a), (b), (c), (d), (e) and (f) of this Section 9.3(7) as may from time to time be reasonably requested by Lender in writing; provided however that, Borrower shall be permitted, upon Lender’s reasonable approval, to contest the validity or applicability of any requirement under the Construction Management Agreement, the Architect’s Agreement, any Contract or any Project Document.

(8)Borrower shall deliver to Lender and the Construction Consultant copies of all Major Contracts for Lender’s approval in accordance with the provisions of the Project Loan Agreement and all other Contracts for informational purposes entered into for the construction of the Improvements. Within twenty (20) days after receiving a written request from Lender, except to the extent previously delivered, Borrower shall deliver to Lender any and all of the following information and documents that Lender may specify, all in forms reasonably acceptable to Lender: (a) a current, complete and correct list showing the name, address and telephone number of each Contractor engaged in connection with the construction of the

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Improvements, and the total dollar amount of each contract and subcontract (including any changes) together with the amounts paid through the date of the list; (b) true and correct copies of the most current versions of all executed Contracts and subcontracts identified in the list described in clause (a) above, including any changes; (c) a construction progress schedule showing the progress of construction and the projected sequencing and completion times for uncompleted work all as of the date of the schedule; and (d) any update to any item described above, which Borrower may have previously delivered to Lender. Borrower expressly authorize Lender to contact Borrower’s Architect, each Construction Manager, any consulting engineer(s) or any Contractor or Governmental Authority to verify any information disclosed in accordance with this Section.

Section 9.4Proceedings to Enjoin or Prevent Construction. If any proceedings are filed seeking to enjoin or otherwise prevent or declare invalid or unlawful all or any part of the Construction Work, Borrower, at its sole cost and expense, will cause such proceedings to be vigorously contested in good faith, and in the event of an adverse ruling or decision, prosecute all allowable appeals therefrom, and will, without limiting the generality of the foregoing, resist the entry or seek the stay of any temporary or permanent injunction that may be entered, and use its commercially reasonable efforts to bring about a favorable and speedy disposition of all such proceedings.

Section 9.5Lender’s and Construction Consultant’s Actions for their Own Protection Only. The authority herein conferred upon Lender, and/or the Construction Consultant and any action taken by Lender and/or the Construction Consultant in accordance with the provisions of this Agreement in making inspections, procuring sworn statements and waivers of lien, approving Contracts and subcontracts and approving Plans and Specifications will be taken by Lender and the Construction Consultant for their own protection only, and none of Lender or the Construction Consultant shall be deemed to have assumed any responsibility to Borrower or any other party with respect to any such action herein authorized or taken by Lender or the Construction Consultant or with respect to the Construction Work, performance of Contracts by any Contractors, or prevention of claims for mechanics’ liens. Any review, investigation or inspection conducted by Lender, the Construction Consultant or any other architectural or engineering consultants retained by Lender in order to verify independently Borrower’s satisfaction of any conditions precedent to advances under this Agreement, Borrower’s performance of any of the covenants, agreements and obligations of Borrower under this Agreement, or the validity of any representations and warranties made by Borrower hereunder (regardless of whether or not the party conducting such review, investigation or inspection should have discovered that any of such conditions precedent were not satisfied or that any such covenants, agreements or obligations were not performed or that any such representations or warranties were not true), shall not affect (or constitute a waiver by Lender of) (a) any of Borrower’s representations, warranties or obligations under this Agreement or Lender’s reliance thereon or right to require the performance thereof or (b) Lender’s reliance upon any certifications of Borrower or the Design Professionals required under this Agreement or any other facts, information or reports furnished to Lender by Borrower hereunder.

Section 9.6Sign and Publicity. If Lender requests, Borrower shall, to the extent permitted by Applicable Law, erect a sign reasonably approved by Lender on the Project

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in a conspicuous location indicating that the financing for the Project has been provided by the Lender. Borrower shall include in the initial public announcement or media release concerning the acquisition of the Project, a statement that Lender has provided the financing for the Project.

Section 9.7Amendment of Project Documents and Government Approvals; Change Orders.

(1)Borrower shall not, without Lender’s prior consent:

(a)take any action to cancel or terminate any material right under the Construction Management Agreement, any Major Contract, any other Project Document or any Government Approval to which it is a party;

(b)sell, assign, pledge, transfer, mortgage, hypothecate or otherwise dispose of (by operation of law or otherwise) or encumber any part of its interest in the Construction Management Agreement, any Contract, any other Project Document or any Government Approval except in accordance with the provisions of the Project Loan Agreement;

(c)waive any material default under or breach of any material provisions of the Construction Management Agreement, any Major Contract, any other Project Document or any Government Approval, or waive, forgive, release or fail to enforce any material right, interest or entitlement, howsoever arising, under or in respect of any of the foregoing, or vary or agree to the variation in any material way of any of the foregoing or of the performance of any other Person or Governmental Authority thereunder;

(d)materially amend or modify any material provision of, or give any consent under, the Construction Management Agreement, any Major Contract, any other Project Document or any Government Approval (including, without limitation, the Plans and Specifications, the Construction Schedule or the Bonds) except as permitted under this Agreement and the Project Loan Agreement, including, without limitation, any material amendment or modification which, subject to Borrower’s right to make Change Orders pursuant to the provisions of subsection (2) below, would materially increase or change the Budget or any Budget Line Item; or which might materially and adversely affect the value of the security for the Loans; or which, regardless of cost, is a material change in structure, design or function; or which might delay completion of any element of the Construction Work beyond the time allotted for it in the Completion Schedule, unless such delay can be made up in the performance of another element of the Project Work, or completion of the satisfaction of the Project Work Substantial Completion Conditions for the Construction Work beyond the applicable Completion Date therefor;

(e)petition, request or take any other legal or administrative action that seeks, or may reasonably be expected, to rescind, terminate or suspend the Construction Management Agreement, any Major Contract, any other Project Document or any Government Approval or amend or modify all or any material part thereof; or

(f)enter into, or permit the Construction Manager to enter into, any new Major Contract (which consent shall be conditioned upon the delivery by the Major Contractor thereunder of a Consent and Agreement).

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(2)Borrower shall obtain Lender’s and the Construction Consultant’s approval for any Change Order that exceeds $100,000 with respect to any single change or related group or series of changes. At such time as all Change Orders in the aggregate have exceeded $250,000, Borrower shall obtain Lender’s and the Construction Consultant’s reasonable approval in writing for all subsequent Change Orders. With respect to any Change Order approval requested in connection with this paragraph (2) above, Borrower’s initial request for approval shall (A) refer to this Section 9.7(2), (B) clearly set forth that Lender has five (5) Business Days to respond and (C) contain all information as Lender shall reasonably request in connection with such Change Order.

(3)Subject to the provisions of this Section 9.7, Borrower shall from time to time promptly deliver to Lender and the Construction Consultant all Change Orders, pending or executed, along with evidence that all Government Approvals relating thereto have been obtained, together with any documents related thereto, and a written description of the proposed change and related working drawings, a written estimate of the cost of the proposed change and the time necessary to complete it and a written explanation of the reasons therefor.

Section 9.8Lien Law. Borrower, in compliance with Section 13 of the Lien Law covenants that it shall receive and hold the advances of the Building Loans hereunder and the right to receive the same as a trust fund for the purpose of first paying the “cost of the improvement”, as such quoted term is defined in the Lien Law, before using any part thereof for any other purpose.

ARTICLE 10EVENTS OF DEFAULT

Each of the following shall constitute an Event of Default under the Loans:

Section 10.1Project Loan Agreement. An Event of Default shall occur under the Project Loan Agreement or any other Loan Document and is continuing beyond any applicable notice and cure periods.

Section 10.2Access to Project. If Lender or the Construction Consultant or their representatives are denied access to the Project during customary working hours upon reasonable prior notice to Borrower to inspect the Improvements and the construction thereof and all materials, fixtures and articles used or to be used in connection therewith, and, to the extent required pursuant to the Loan Documents, to examine all detailed plans, shop drawings and specifications which relate to the Improvements and such default remains uncured for a period of twenty (20) days after notice thereof from Lender to Borrower; provided, however, that if such default is caused as a result of the Construction Manager or a Major Contractor, such twenty (20) day period shall be extended so long as Borrower are diligently pursuing its rights and remedies to cause compliance by the Construction Manager or such Major Contractor.

Section 10.3Termination of Contracts. If for any reason the Construction Manager or any Major Contract is terminated and not promptly (but in no event later than sixty (60) days

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after any such termination) replaced with a substitute construction management agreement or Major Contract, as the case may be, in each case reasonably acceptable to Lender and from a new construction manager or contractor, as the case may be, approved by Lender.

Section 10.4Unsatisfactory Work. Borrower shall fail to cause any Unsatisfactory Work to be corrected to the satisfaction of Lender and the Construction Consultant within thirty (30) days after notice of such disapproval; provided, however, that if such Unsatisfactory Work cannot reasonably be corrected within such thirty (30) day period, then so long as Borrower shall have commenced to cause the correction of such Unsatisfactory Work within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cause the correction of the same, such thirty (30) day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cause the correction of such Unsatisfactory Work, but in no event beyond the date which is ninety (90) days after the applicable notice of disapproval (subject, in all instances, to Unavoidable Delays).

Section 10.5Construction Work. The Construction Work (a) is not completed on or before the Completion Date, or (b) at any time, is discontinued (subject to Unavoidable Delay) or abandoned for more than thirty (30) consecutive days; provided that no Event of Default shall occur as a result of such failure if Borrower shall have delivered or caused to be delivered to Lender an updated “as is” Appraisal (at Borrower’s expense) evidencing that the Loan-to-Value Ratio does not exceed 70.0%, it being understood that Borrower may prepay the Loan in accordance with the Loan Documents in order to cause compliance with the condition set forth in this proviso.

ARTICLE 11REMEDIES

Upon the occurrence of any Event of Default, Lender may (subject to, and in accordance with, the provisions of Section 14.3 of the Project Loan Agreement) and, upon request of Lender shall, by written notice to Borrower, pursue any one or more of the remedies set forth in the Project Loan Agreement or the other Loan Documents, concurrently or successively, it being the intent hereof that none of such remedies shall be to the exclusion of any other.

WHETHER OR NOT LENDER ELECT TO EMPLOY ANY OR ALL OF THE REMEDIES AVAILABLE TO IT UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, LENDER SHALL BE LIABLE FOR THE CONSTRUCTION OF OR FAILURE TO CONSTRUCT, COMPLETE OR PROTECT THE IMPROVEMENTS OR FOR PAYMENT OF ANY EXPENSES INCURRED IN CONNECTION WITH THE EXERCISE OF ANY REMEDY AVAILABLE TO LENDER OR FOR THE CONSTRUCTION OR COMPLETION OF THE IMPROVEMENTS OR FOR THE PERFORMANCE OR NON-PERFORMANCE OF ANY OTHER OBLIGATION OF BORROWER.

ARTICLE 12
RECOURSE LIABILITY

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Section 12.1Recourse Liability. This Agreement shall be subject to the provisions of Section 2.13 of the Project Loan Agreement, which section is hereby incorporated herein by reference.

ARTICLE 13
MISCELLANEOUS

Section 13.1Incorporation by Reference. The provisions of Article XIV of the Project Loan Agreement are hereby incorporated by reference and shall have the same force and effect as if included herein.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

BORROWER:

210 WEST 31^ST STREET OWNER, LLC,                    a Delaware limited liability company

By:    KBS SOR II 210 WEST 31^ST STREET, LLC,

a Delaware limited liability company,

its sole member

By:    ONYX 31^st STREET, LLC,

a Delaware limited liability company,

its Managing Member

By:     /s/ John A. Saraceno Jr.        

John A. Saraceno, Jr.,

Authorized Signatory

LENDER:

PACIFICCAL PC CORE LENDER, LLC,                    a Delaware limited liability company

By: /s/ Steve Towle                                    Name: Steve Towle                                    Title: Authorized Signatory            

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SCHEDULE 1

LICENSES AND PERMITS

(see attached)

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SCHEDULE 2

TRADE LIST

(see attached)

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SCHEDULE 3

PLANS AND SPECIFICATIONS

(see attached)

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SCHEDULE 4

ADVANCE CONDITIONS

Part A – General Conditions

Part B – Conditions to Final Loans

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Part A. GENERAL CONDITIONS TO ALL BUILDING LOANS

The obligation of Lender to make any Loans shall be subject to Lender’s receipt, review, approval and/or confirmation of the following, each in form and content satisfactory to Lender in its reasonable discretion (such conditions not to be duplicative to the extent they are the same matters required as conditions precedent to the effectiveness of the Acquisition Loans and/or Project Loans that are being advanced concurrently therewith under the Project Loan Agreement):

1.There shall exist no Event of Default in each case both before and after giving effect to the requested advance.

2.The representations and warranties contained in this Agreement and in all other Loan Documents shall be true and correct in all material respects on and as of the date of the making of such Loan with the same force and effect as if made on and as of such date, subject to changes resulting from changed circumstances or facts which do not constitute an Event of Default.

3.Such advance shall be secured by the Building Loan Mortgage and the other Security Documents, subject only to the Permitted Encumbrances, as evidenced by a pending disbursements clause satisfactory to Lender.

4.Borrower shall have paid Lender’s reasonable costs and expenses in connection with such advance (including title and attorneys’ fees and expenses).

5.No proceeding with respect to condemnation, adverse possession, zoning change or usage change proceeding shall have formally commenced against the Project the Project shall not have suffered any damage by fire or other casualty which has not been repaired or is not being restored in accordance with this Agreement; no Applicable Law or injunctive proceeding, restriction, litigation, action, citation or similar proceeding or matter shall have been enacted or adopted by any Governmental Authority, which would have, in Lender’s judgment, a Material Adverse Effect on the Project or Borrower’s ability to perform its obligations under the Loan Documents.

6.The Construction Work (or such part thereof as may have been constructed at the time of any borrowing) shall have been constructed substantially in accordance with the Plans and Specifications (as may have been modified in accordance with this Agreement) and all applicable Government Approvals.

7.If requested by Lender, the Construction Consultant shall have reviewed and approved the disbursement requested in the Request delivered by Borrower with respect to such Loan. Such Request shall include copies of all documents, contracts, invoices, bills, construction records, lien waivers, Change Orders, and drawings, plans and specifications as the Construction Consultant shall reasonably require, to enable the Construction Consultant to timely review each Request.

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8.Borrower shall have provided the Construction Consultant and Lender, or their representatives, prompt and reasonable access to the Project, in order to inspect the Construction Work then completed.

9.Lender shall have received the following items in connection with each Loan:

(a)A Request as provided in Section 4.2 of the Project Loan Agreement duly executed by an Authorized Officer of Borrower, together with the required attachments thereto;

(b)Such invoices, contracts and other supporting data as Lender may reasonably require to evidence that all Project Costs for which disbursement of Building Loans is sought have been incurred and are then due and payable;

(c)Except for Liens insured against pursuant to the Title Policies or liens being contested by Borrower pursuant to the terms of the Loan Documents, (i) sworn unconditional waivers of lien from contractors, subcontractors, materialmen, suppliers and vendors, covering all work for which funds have been advanced pursuant to a prior disbursement and (ii) at Lender’s election, sworn conditional waivers of lien from contractors, subcontractors, materialmen, suppliers and vendors, covering all work of such Persons for which funds are being advanced pursuant to the then current Request, all in compliance with the Lien Law;

(d)Copies of any Change Orders which have not been previously furnished to Lender and the Construction Consultant, all of which shall be subject to Lender’s review and approval in accordance with this Agreement;

(e)Copies of all Contracts, subcontracts and purchase orders which have been executed or Modified since the last Advance, together with (i) any Bonds (to the extent required under this Agreement), (ii) a certificate by an Authorized Officer of Borrower certifying that the delivered items are true, accurate and complete copies of the originals thereof, and (iii) Consents and Agreements in the applicable form attached to the General Assignment from each Major Contractors who has entered into a Major Contract but has not previously delivered a Consent and Agreement;

(f)To the extent not previously delivered to Lender and in the case where an Advance is requested in connection with stored materials, inventory of materials and equipment stored on the Project and evidence that Borrower has complied with all of the requirements of Section 4.8 relating to such stored materials;

(g)Copies of all Government Approvals (to the extent required as of such date) not previously delivered to Lender;

(h)If any material dispute arises between or among Borrower, the Construction Manager or any Major Contractor, a written summary in reasonable detail of the nature of such dispute;

(i)If the Budget shall have been modified, copies of all such modifications, all of which shall be subject to Lender’s review and approval in accordance with this Agreement;

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(j)Copies of any amendments to the Construction Schedule not previously delivered to Lender, all of which shall be subject to Lender’s review and approval in accordance with this Agreement; and

(k)To the extent not previously delivered to Lender, evidence showing compliance with the insurance provisions of Section 3.1.

10.All of the conditions set forth in Article III shall have been satisfied.

11.The Loans shall be In-Balance.

12.Such other documents and items as Lender may reasonably request.

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PART B. CONDITIONS TO THE FINAL BUILDING LOANS FOR CONSTRUCTION WORK

The obligation of Lender to advance Building Loans to Borrower for payment of final construction costs and release of Retainage with respect to the Improvements is subject to the further condition precedent that all of the following requirements (collectively, the “Project Work Substantial Completion Conditions”) shall have been completed to the reasonable satisfaction of Lender:

1.Lender and the Construction Consultant (except in the case of clauses (b) and (h) below) shall have received the following items in connection with the final Loans for such Construction Work:

(a)Evidence of the approval by the applicable Governmental Authorities of such Construction Work for operation to the extent any such approval is a condition of the lawful use of such Construction Work, including, without limitation, valid temporary certificates of occupancy;

(b)A final as-built survey covering such Construction Work and any paving, driveways and exterior improvements, together with endorsements to the Title Policies which are reasonably satisfactory to Lender and which describe the Improvements located on the Project (ALTA 116 series), insure the lien-free completion of the Improvements (ALTA 101 series, as required by Lender), insure that there are no new encroachments or violations of any recorded covenants, conditions or restrictions affecting the Project (ALTA 100 series), that did not exist as of the Loan closing date and amend any survey exception to reflect the final as-built survey;

(c)Intentionally omitted;

(d)Unconditional waivers of lien and sworn statements from all contractors, subcontractors, materialmen, suppliers and vendors with respect to such Construction Work, in each case in compliance with the Lien Law other than Retainage or Punch List Items;

(e)Certificates from the applicable Design Professionals (such certificates, except in the case of Borrower’s Architect, to be limited to the portion of such Construction Work for which the respective Design Professional was responsible) stating that, to the best of such Design Professional’s knowledge, (i) such Construction Work (A) has been substantially completed in accordance with the Plans and Specifications and (B) is available for occupancy and (ii) such Construction Work as so completed complies with all applicable building codes;

(f)Intentionally omitted;

(g)Violation searches, if available and requested by Lender, with Governmental Authorities indicating no notices of violation have been issued with respect to such Construction Work that have not been cured;

(h)Current searches of all Uniform Commercial Code financing statements filed with the Secretary of State of the state of formation/organization of Borrower and the office of Recorder of the City and County of New York, showing that no Uniform Commercial Code

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financing statements are filed or recorded against Borrower in which the collateral is personal property or fixtures located on the Project or used in connection with the Project other than financing statements with respect to the Loans;

(i)A certificate of an Authorized Officer of Borrower certifying that:

(i)Borrower has not received written notice of a condemnation of any portion of the Project or any action which could result in a relocation of any roadways abutting the Project or the denial of access, which, in Lender’s sole judgment, adversely affects the Lender’s security or the operation of the Project, has commenced or, to the best of Borrower’s knowledge, is contemplated by any Governmental Authority;

(ii)all fixtures, attachments and equipment necessary for the operation of the Project have been installed or incorporated into the Project and are operational and in good working order, free from defects; all guaranties and warranties have been transferred/assigned to Borrower; and Borrower as the absolute owner of all of said property free and clear of all Liens; and

(iii)all Project Costs relating to such Construction Work have been paid in full except (A) to the extent covered by the final Loans then being requested, and (B) amounts for Hard Costs which Borrower is disputing in good faith and with due diligence; provided that Lender may, in its sole discretion, hold back an amount equal to (x) 100% of the disputed amount minus (y) any Retainage that Lender is still holding with respect to the applicable Hard Costs, and (C) amounts held by Lender with respect to Punch List Items with respect to the applicable Hard Costs.

(j)Evidence that all of the Government Authorizations required to be obtained have been obtained, and that all actions required to be taken by such time in accordance with the Marketing Plan and Schedule have been completed.

2.Lender shall have received written certification from the Construction Consultant, or to the extent that Construction Consultant will not provide such a certification, Borrower, that (a) such Construction Work has been substantially completed in accordance with the Plans and Specifications, subject to completion of Punch List Items (as to which, if incomplete on the date of the final disbursement of a Loan for Work, Lender may, in its sole discretion, hold back an amount equal to (a) 100% of the estimated cost of completing such Punch List Items from the final disbursement minus (b) any Retainage that Lender is still holding with respect to the applicable Punch List Items, such amount to be advanced to Borrower on completion of such Punch List Items and the satisfaction of the requirements of Section 4.2 with respect to Retainage, which Borrower shall diligently complete) and (b) the deliveries required in paragraphs 1 and 2 above shall have been received and approved by Lender.

3.The Future Equity shall have been fully contributed to the Project in accordance with the terms of the Project Loan Agreement.

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EXHIBIT A

LEGAL DESCRIPTION OF PROJECT

ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, SITUATE, LYING AND BEING IN THE BOROUGH OF MANHATTAN, CITY, COUNTY AND STATE OF NEW YORK, BOUNDED AND DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE SOUTHERLY SIDE OF 31ST STREET, DISTANT 104 FEET 3 INCHES WESTERLY FROM THE CORNER FORMED BY THE INTERSECTION OF SAID SOUTHERLY SIDE OF 31ST STREET WITH THE WESTERLY SIDE OF SEVENTH AVENUE;

RUNNING THENCE SOUTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 37 FEET 9 INCHES;

THENCE WESTERLY PARALLEL WITH THE SOUTHERLY SIDE OF 31ST STREET, 61 FEET 4-1/2 INCHES;

THENCE SOUTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 1 FOOT 11-1/2 INCHES;

THENCE WESTERLY PARALLEL WITH THE SOUTHERLY SIDE OF 31ST STREET, 2 FEET 7 INCHES;

THENCE SOUTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 59 FEET 1/2 INCH;

THENCE WESTERLY PARALLEL WITH THE SOUTHERLY SIDE OF 31ST STREET, 64 FEET 3-1/2 INCHES;

THENCE NORTHERLY PARALLEL WITH THE WESTERLY SIDE OF SEVENTH AVENUE, 98 FEET 9 INCHES TO THE SOUTHERLY SIDE OF 31ST STREET;

THENCE EASTERLY ALONG THE SOUTHERLY SIDE OF 31ST STREET, 128 FEET 3 INCHES TO THE POINT OR PLACE OF BEGINNING.

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EXHIBIT B

SECTION 22 AFFIDAVIT

(see attached)

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EX-21.1

Exhibit 21.1

Subsidiaries of KBS Strategic Opportunity REIT II, Inc. as of February 1, 2017

210 West 31st Street Owner, LLC

IC Myrtle Beach LLC

IC Myrtle Beach Operations LLC

KBS SOR II 210 West 31st Street, LLC

KBS SOR II 210 West 31st Street JV, LLC

KBS SOR II 2200 Paseo Verde, LLC

KBS SOR II Acquisition I, LLC

KBS SOR II Acquisition II, LLC

KBS SOR II Acquisition III, LLC

KBS SOR II Acquisition IV, LLC

KBS SOR II Acquisition V, LLC

KBS SOR II Acquisition VI, LLC

KBS SOR II Debt Holdings II, LLC

KBS SOR II Debt Holdings II X, LLC

KBS SOR II Finance LLC

KBS SOR II IC Myrtle Beach Operations LLC

KBS SOR II IC Myrtle Beach Property LLC

KBS SOR II Investam LLC

KBS SOR II Investam II LLC

KBS SOR II Lincoln Court, LLC

KBS SOR II Lofts at NoHo Commons, LLC

KBS SOR II Lofts at NoHo Commons JV, LLC

KBS SOR II Myrtle Beach JV, LLC

KBS SOR II Myrtle Beach TRS JV, LLC

KBS SOR II Non-US Debt X LLC

KBS SOR II Q&C JV, LLC

KBS SOR II Q&C Operations, LLC

KBS SOR II Q&C Operations JV, LLC

KBS SOR II Q&C Property, LLC

KBS SOR II Q&C Property JV, LLC

KBS SOR II Q&C TRS JV, LLC

KBS SOR II TRS Holdings, LLC

KBS SOR Non-US Properties II LLC

KBS SOR US Properties II LLC

KBS Strategic Opportunity Limited Partnership II

KBS Strategic Opportunity Holdings II LLC

NoHo Commons Pacific Owner 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” in the Post-Effective Amendment No. 8 to the Registration Statement (Form S-11 No. 333-192331) and related Prospectus of KBS Strategic Opportunity REIT II, Inc. for the registration of 180,000,000 shares of its common stock and to the incorporation by reference therein of (i) our report dated March 22, 2016 with respect to the consolidated financial statements and schedule of KBS Strategic Opportunity REIT II, Inc., included in its Annual Report (Form 10-K) as of and for the year ended December 31, 2015, filed with the Securities and Exchange Commission; and (ii) our report dated December 12, 2014 with respect to the carve-out financial statements of Springmaid Beach Resort and Conference Center for the nine months ended September 30, 2014 and year ended December 31, 2013, included in its Current Report (Form 8-K/A), filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Irvine, California

February 2, 2017

EX-23.3

Exhibit 23.3

Consent of Independent Auditors

We consent to the reference to our firm under the caption “Experts” in Post-Effective Amendment No. 8 to the Registration Statement (Form S-11 No. 333-192331) and related Prospectus of KBS Strategic Opportunity REIT II, Inc. for the registration of 180,000,000 shares of its common stock and to the incorporation by reference therein of (i) our report dated November 11, 2015 with respect to the financial statements of AGRE NV Q&C Property Owner, LLC for the nine months ended September 30, 2015 and the year ended December 31, 2014, included in its Current Report (Form 8-K/A); (ii) our report dated July 13, 2016 with respect to the statement of revenues over certain operating expenses of Lincoln Court for the year ended December 31, 2015, included in its Current Report (Form 8-K/A); and (iii) our report dated January 23, 2017 with respect to the statement of revenues over certain operating expenses of the Lofts at NoHo Commons for the year ended December 31, 2016, included in its Current Report (Form 8-K/A), all filed with the Securities and Exchange Commission.

/s/ Squar Milner LLP

Newport Beach, California

February 2, 2017